Mr. Pacifico Sanchez, Jr.

January 22, 2003 SEC OPINION NO. 03-03 Mr. Pacifico Sanchez, Jr. MACTEC Suite 712, 7/F Globe Telecom Plaza, Pioneer St., Mandaluyong City S i r : This refers to your letter dated October 10, 2002 requesting this Commission to comment on the legitimacy of the operations of GOOD HARVEST ORCHARDS MARKETING CORPORATION, with emphasis on the primary issue of whether or not there is a need to secure a secondary license for their operations; and on the secondary issue of whether or not the activities of the said company should be regulated by the HLURB. aATHIE Based on documents submitted with this Commission, the company is said to be engaged in the selling of securities, an activity for which a secondary license or permit to sell securities from this Commission is required. It would appear that the company is issuing Certificates of Ownership in the Good Harvest Farming Business. Under the said contract, a prospective buyer known as "Orchard Business Partner" (OBP) enters into a transaction with the Good Harvest Orchard Marketing Corporation ("the corporation"). The OBP is required to pay an amount of money in consideration for such contract without receiving in return any physical product or property in the form of a separate title issued in the OBP's name. In effect therefore, said OBP merely invests his money in the subject corporation, which could be considered as a "common enterprise" under the definition laid down in SRC Rule 3.1-1. An OBP expects profit in the form of his share in the proceeds from the sale of the fruits from the orchard plot which shall be the result of the efforts of the corporation through its Orchard Management System which shall take care, manage and maintain the orchard. A perusal of the above-mentioned contract would disclose that there exists a participation or interest in a profit-making venture in the nature of an investment contract which is covered in the definition of securities under section 3.1 (b) of the Securities Regulation Code. It appears however that the subject corporation has no pending registration statement nor a permit to sell securities to the public. Anent the second issue of whether or not the said activity should be regulated by any other agency aside from the SEC, such as the Housing and Land Use Regulatory Board (HLURB) , kindly refer the matter to the said agency because only the latter can determine the coverage and extent of its own jurisdiction. Very truly yours, (SGD.) VERNETTE UMALI-PACO General Counsel