Emerald Headway Distributors Inc.

September 30, 2003 SEC OPINION NO. 47-03 Emerald Headway Distributors Inc. C/o Picazo Buyco Tan Fider & Santos 17th, 18th & 19th Floors, Liberty Center, 104 H.V. De la Costa Street Salcedo Village, Makati City Attention: Atty. Gemma Santos Gentlemen : This refers to your letter dated 16 September 2003 requesting confirmation of your opinion that the term "paid-in equity, capital" under Republic Act No. 7042 (as amended by R.A. 8179) otherwise known as the Foreign Investments Act of 1991 (FIA), includes the additional paid-in capital (APIC) for the purpose of determining whether an enterprise has met the minimum required paid-in equity capital of US$200,000.00 for domestic market enterprise. This is in connection with the application of your client, Emerald Headway Distributors Inc. (EHDI), for registration under FIA. You opine that the APIC of EHDI amounting to P63,500,000.00 should be included in the computation of the paid-in equity capital of the corporation. Under Rule I, Section 1(p) of the Implementing Rules and Regulations of R.A. 7042, the term "paid-in equity capital" is defined as "the total investment in a business that has been paid-in in a corporation or partnership or investment in a single proprietorship, which may be in cash or property. It shall refer to inward remittance or assigned capital in the case of foreign corporations." Further, pursuant to Rule I, Section 1(d) of the abovementioned Rules, the term "Investment" refers to "equity participation in any enterprise organized or existing under the laws of the Philippines. It includes both original and additional investments, whether made directly as in stock subscription, or indirectly through the transfer of equity from one investor to another as in stock purchase. Ownership of bonds (including income bonds),debentures, notes or other evidences of indebtedness does not qualify as investment." The Commission, in its Executive Meeting on April 16, 1991, resolved as a matter of policy, to construe paid-in capital as used under Sec. 43 of the Corporation Code, to include payment on subscriptions in excess of par. (SEC Opinion dated April 23, 1991, addressed to Atty. Ma. Melva Evangelista-Valdez) AacDHE In the case of your client, its APIC amounting to P63,500,000.00 should be included in the computation of its paid-in equity capital. Based on your representations, it thus appears that your client corporation complies with the required minimum paid-in equity capital under R.A. 7042, as amended and its Implementing Rules and Regulations. EcTCAD Very truly yours, (SGD.) VERNETTE UMALI-PACO General Counsel