Republic of the Philippines Deparment of Finance Securities and Exchange Commission OFFICE OF THE GENERAL COUNSEL 20 December 2018 SEC-OGC Opinion No. 18-24 Re: Nationality Requirement of Third Telco ROMULO MABANTA BUENAVENTURA SAYOC & DE LOS ANGELES 21° Floor, Philamlife Tower 8767 Paseo de Roxas Makati City, 1226, Philippines Attention: Atty. Ronaldo Modesto J. Ventura Dear Atty. Ventura: This pertains to your letter dated 29 November 2018 requesting from the Commission its Opinion on whether the terms of the binding Bidding Agreement dated 06 November 2018 entered into by Udenna Corporation (Udenna), Chelsea Logistics Holdings Corp. (Chelsea), China Telecommunications Corporation (CT) and Mindanao Islamic Telephone Company, Inc. (Mislatel) (Bidding Agreement) comply with the relevant tules on foreign ownership applicable to the telecommunications business. This is in connection with the requirement under Section 10.1 (b) of NTC Memorandum Circular 09-09-2018 or the Rules and Regulations on the Selection Process for a New Major Player (NMP) in the Philippine Telecommunications Market (NTC Bidding Rules) which states: “SEC. 10. ISSUANCE OF CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY (CPCN) AND TERM XxxPage 2 of 18 b. Compliance by NMP of Paid Capital of at _least_P_10B and implementation of the relevant provisions of the Bidding Agreement, if applicable to a Participant which has been selected as NMP, accompanied by an SEC clearance that th jevant_rules_ on (Emphasis and underscoring supplied). siding limitation of forei, moply wi ui nership. It was further disclosed that Mislatel was recently declared and confirmed by the National Telecommunications Commission (NTC) as the NMP of the Philippine Telecommunications Marke 1. BACKGROUND te. Under the Bidding Agreement, Mislatel shall be the sole entity to be declared as the NMP and the recipient of the CPCN and related pert t's and licenses. On the other hand, Udenna, Chelsea and CT agree to invest the necessary capital to Mislatel for the purpose of raising its paid-up capital to enable the latter to comply with the capitalization requirements of an NMP, which was set at Ten Billion Pesos (Php 10,000,000,000.00).? Based on the disclosures and Mislatel’s 2018 General Information Sheet (GIS), Mislatel currently has an authorized capital stock amounting to Php 200,000,000.00 divided into 200,000,000 common shares with a par value of Php 1.00 per share. Out of the 200,000,000 common shares, only 50,003,000 common shares have been subscribed and only Php 32,503,000.00 are paid-up as follows: No.of | TotalParValueof | pag y, | Percentage | shareholder's Name shares | sharessubseribed |, ,f3i4-UP | “Topyor _ subscribed (Php) Ownership Marte L. Lascano (Filipino) 3,750,000 3,750,000.00 3,750,000.00 7.50% Romeo V. Sabilio (Filipino) | 3.750,000 3.750,000.00 3.750,000.00 | 7.50% _ Howard U. Evangelista (Filipina) | 3,000,000 3,000,000.00 3,000,000.00 | 6.00% — Winsberg L. Austria (Filipino) 3,000,000.00 3,000,000.00- | 6.00% Mariano Pamintuan, J. (Filipino) | —1. 7,500,000.00 1,500,000.00_ | 3.00% NicanorL, Escalante (Filipino) | 5,834,334 | _5,834,334,00 | 2.917,667.00 | 11.67% Danilo M. Cortez (Filipino) | 5.834.333, 5,834,333.00 2,917,666.50_| 11.67% Levitico €. Toquero (Filipino) | 5.634.333, 5.834,333.00 | 2.917,666.50 | 11.67% CTE Vector Holdings Ie. 17499999 | 17,499,999.00 | 8,749,999.00 {Mabelle Grace A. Palay (Filipino) iz 1.00 i { Total 30,003,000 | 50,003,000,00 | | In this connection, pursuant to the Bidding Agreement, Mislatel will apply for an increase in authorized capital stock with the Commission. As stated in the letter, the 2 NTC Memorandum Circular No. 09-09-2018, Rules and Regulations on the Selection Process for 3 New Major Player inthe Philippine ‘Telecommunications Market. 2 Section 22 (b}- NTC Memorandum Circular 09-09-2018,d_increase only consist mon_shares_wi Accordingly, Udenna, Chelsea, and CT will subscribe to common shares of Mislatel, all of which will be entitled to vote. It was clarified that no preferred shares or other class of shares will be created pursuant to the increase. As stated in the Bidding Agreement: “Description of Financial Investment and Financial Plan. a, The investment to be financed consists of equity investment in MISLATEL for the purpose of raising its paid-up capital to enable MISLATEL to comply with the capitalization requirements of an NMP, which is currently set at PESOS: TEN BILLION (Php 10,000,000,000.00). For the avoidance of doubt, the obligations of the Parties as provided in this Section would only arise upon the issuance by the NTC En Banc of the Confirmation Order in favor of MISLATEL as the selected NMP. b. Within the period required in the TOR, MISLATEL shall: (i) cause the increase of its existing capitalization to: ‘No. of Shares ‘Amount (1 ‘Authorized Capital Stock 10,200,000,000 | Php 10,200,000,000 Subscribed Capital Stock | 10,050,003,000__| Php 10,050,003,000 Paid-up Capital Stock 10,032,503,000 | Php 10,032,503,000 From MISLATEL’s increase in authorized capital stock, the Parties agree as follows: i Udenna shall invest the amount of PESOS: THREE BILLION FIVE HUNDRED MILLION (Php 3,500,000,000.00), in MISLATEL, by subscribing and paying for in full in Pesos, at the subscription share price of PESOS: THREE BILLION FIVE HUNDRED MILLION (Php 3,500,000,000.00) for PESOS: ONE (Php 1.00) per share, representing THREE BILLION FIVE HUNDRED MILLION SHARES (Php 3,500,000,000) with par value of ONE Peso only (Php 1.00) each. (Emphasis ours.) ii, Chelsea shall invest the amount of PESOS: TWO BILLION FIVE HUNDRED MILLION (Php 2,500,000,000.00), in MISLATEL, by subscribing and paying for in full in Pesos, at the subscription share price of PESOS: TWO BILLION FIVE HUDNRED MILLION (Php 2,500,000,000.00) for PESOS: ONE (Php 1.00) per share, representing TWO BILLION FIVE HUNDRED MILLION. shares (2,500,000,000) with par value of ONE Peso only (Php 1.00) each. (Emphasis ours.)Page #0f 18 CT shall invest the amount of PESOS: FOUR BILLION (Php 4,000,000,000.00), in MISLATEL, by subscribing and paying for in full in Pesos, at the subscription share price of PESOS: FOUR BILLION (Php 4,000,000,000.00) for PESOS: ONE (Php 1.00) per share, representing FOUR BILLION shares (4,000,000,000) with par value of ONE Peso only (Php 1.00) each. 4. Upon the increase in MISLATEL’S capitalization, the shareholding structure of MISLATEL shall be as follows: | SiiaRe-—_[___—sunscntnep _ PAUP % nowpens _[("NovefShares “Amount ‘No: of Shares “Amount OWNERSHIP — Php Php 2 35001000000 | ;500,000.00000 | #00-000.000 | 3 500,000,000.00 34.93% Php 1 Php chelsea | 2:500,000,000 | PF onono00 | 2500000.000 | EP 555 00000 24.0056 Php Php 7 4000.000.000 | 4 000,000.000.00 | #909.000.000 _| .990,000,000.00 ae Siam |__s0003000 | rrp 000200000 | 32503000 | Pypazscz00n00 | nan In this regard, the Opinion of the Commission is now being sought on whether the proposed ownership structure in the Bidding Agreement is compliant with the foreign ownership limitation on the NMP pursuant to the Constitution and prevailing laws as required by Section 10.1 (b) of NTC Bidding Rules. IL RULES ON CORPORATE NATIONALITY Section 11, Article XII of the 1987 Philippine Constitution mandates that a franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted only to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty percent of whose capital is owned by such citizens, to wit “SECTION 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or a ion: nized_under th laws of the Philippines at Jeast sixty per centum of whose capital is owned hy such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a Jonger period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers ofPage 5 of 18 such corporation or association must be citizens of the Philippines.” (Emphasis and underscoring supplied). Under the Public Service Act, entities engaged in telecommunications are deemed operators of public utility, to wit: ‘Section 13. xxx (b) The term "public service” includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, x wire or wireless communications system, wire or wireless broadcasting stations and other similar public services xxx"? (Emphasis and underscoring supplied). Thus, entities engaged in telecommunications are covered by the Constitutional restriction on foreign equity. Public utilities were placed under List A, Item 18 of the 11" Foreign Investment Negative List (FINL)*, wherein only up to 40% foreign equity is allowed. As mandated in RA. No, 7042 or the Foreign Investments Act of 1991 (FIA), the FINL shall compile and identify all investment areas or activities which are fully or partially open to foreign investors and/or reserved to Filipino nationals according to foreign equity restrictions imposed by the Constitution and laws. With respect to corporations, the FIA deems one to be a “Philippine national’ if itis organized under the laws of the Philippines of which at least 60% of the capital stock ing and entitled to vote is owned and held by citizens or the Philippines. Further, FIA provides that where a corporation and its non-Filipino stockholders own stocks in a SEC registered enterprise, at least 60% of the capital stocks outstanding and entitled to vote of both corporations must be owned and held by Filipino citizens and at least 60% of the members of the Board of Directors of both corporations must be Filipino citizens, in order that the corporations shall be considered Philippine nationals.> AB f 0% -40% Filipino/Foreign 0 iu uri and SEC Memorandum Circular No. 8, Series of 2013 In the case of Gamboa vs. Teves, * the Supreme Court ruled that the “term ‘capital’ in Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, and not to the total outstanding capital stock (common and non-voting preferred shares).’7 > Commonwealth Act No. 146, An Act to Reorganize the Public Service Commission, Prescribe its Pawers and Duties, Define and Regulate Public Services, Provide and Fix the Rates and Quota of Expenses tobe Paid by the Some, nd for Other Purposes + Executive Order No. 65, Promulgating the Eleventh Regular Foreign Investment Negative List, 5 Section 3, Republic Act No. 7042, Foreign Investments Act Approved on 13 june 1991. © Heirs of Gamboa v. Teves, GR. No.176579, 28 June 2011. "bi.Page 6of 18 Pursuant to this, the Commission issued SEC Memorandum Circular No. 8, series of 2013 (SEC-MC No. 8) which uses the two-tiered test in determining compliance with the required percentage of Filipino ownership (two-tiered test). Under the two-tiered test, the 60% required Filipino ownership shall be applied to BOTH: (a) the total number of outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors. In Roy v. Herbosa’ the Supreme Court affirmed SEC-MC No. 8 and ruled that it adheres to the Gamboa v. Teves 2011 Decision and 2012 Resolution,’ to wit: “Section 2 of SEC-MC No. 8 clearly incorporates the Voting Control Test or the controlling interest requirement. In fact, Section 2 goes beyond requiring a 60- 40 ratio in favour of Filipino nationals in the voting stocks; it moreover requires the 60-40 percentage ownership in the total number of outstanding shares of stock, whether voting or not. The SEC formulated SEC-MC No. 8 to adhere to the Court's unambiguous pronouncement that “full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights is required.” B. Control Test vs. le In the Philippines, there are two acknowledged tests in determining the nationality of a corporation which has corporate stockholders: (i) the Control Test and (ii) the Grandfather Rule. The Control Test states that shares belonging to corporations at least sixty percent (60%) of the capital of which is owned by Filipino citizens shall be considered as of Philippine nationality. See ea ee ee On the other hand, the Grandfather Rule is “the method by which the percentage of Filipino equity in a corporation engaged in nationalized and/or partly nationalized areas of activities, provided for under the Constitution and other nationalization laws, is computed, in cases where corporate shareholders are present, by attributing the nationality of the second or even subsequent tier of ownership to determine the nationality of the corporate * Jose M. Roy Il. Choirperson Teresita Herbosa, GR No. 207246, 22 November 2016. * Gamboa v, Teves, GR. No. 176573, 09 October 2012 °© Narra Nicke! Mining and Development Corporation, et av. Redmont Consolidated Mines Corporation, GR. No. 195580, 21 April 2014 citing DO} Opinion No. 020, series of 2005,Page 7 0f 18 corporation and ino ownership. shareholder." Under this Rule, the Filipino ownership of the investi the investee corporation are combined to determine the percentage of F e note that \dfather Rule is_onh i en the 60-40 reign_equit shi “doubt.” For instance when the investing corporation has less than 60% Filipino stockholdings and the investee corporation has either 60-40% Filipino-foreign ownership ratio or has 59% or less Filipino shareholdings." “Doubt”, however, is not limited to these circumstances. ‘The Supreme Court, in its Resolution in Narra Nickel Mining and Development Corporation v. Redmont Consolidated Mines, Corp, et al,3 explained that even if the 60-40 Filipino to Foreign equity ratio is apparently met by the investing or investee corporation, a resort to the Grandfather Rule is necessary if doubt exists as to the locus of the “beneficial ownership” and “control.” The “doubt” refers to, “various indicia that the ‘beneficial ownership’ and ‘control’ of the corporation do not in fact reside in Filipino shareholders but in foreign stakeholders.”!* II DISCUSSION: _ USING THE TWO-TIERED TEST OF SEC-MC NO. 8 AND/OR THE CONTROL TEST OR GRANDFATHER RULE To illustrate, the proposed structure of Mislatel shall be as follows: Cm In order to determine whether the proposed ownership structure of Mislatel in the Bidding Agreement conforms to the foreign ownership rules, the nationality of the above- % Narra Nickel Mining and Development Corporation, et. l. vs Redmont Consolidated Mines Corporation, GR. No. 195580, 28 January 2015, citing Villanueva, Cesar Lape, Philippine Corporate Law (2003) p. 54 3244, at Note 10. 31, at Note 11 3d, at Note 11Udenna, Chelsea, CT and “Other Shareholders”) must first be mentioned stockholders determined, A. Nationality of Udenna As disclosed, the authorized capital stock of Udenna amounts to Php 2,000,000,000.00 divided into 2,000,000,000 common shares with a par value of Php 1.00 per share.'5 In this regard, since all shares are common shares (i. shares with voting rights), which therefore comprise the totality of the Outstanding Capital Stock, it is sufficient to base the 60-40% requirement on the same to determine the nationality. As disclosed, all stockholders of Udenna are natural persons and are declared to be Filipino citizens. 16 Since the voting shares are 100% owned by individual Filipino citizens, Udenna is a Philippine National. Consequently, its 34.83% direct shareholding in Mislatel is entirely Filipino, B. Nationality of Chelsea With respect to Chelsea, it was disclosed that its authorized capital stock is Php 2,000,000,000.00 divided into two classes of shares: (1) 1,990,000,000 common shares with a total par value of Php 1,990,000,000.00 and (2) 10,000,000 preferred shares with a total par value of Php 10,000,000.00. It was further disclosed that only the common shares of Chelsea are presently subscribed. Chelsea is a company listed in the Philippine Stock Exchange where a minimum 10% public float is required.” Public float represents the percentage of shares of a listed corporation that were bought and owned by public investors (local and foreign). “This is consistent with Mislate's 2018 General Information Sheet (GIS) Ww attached as Annex A isthe list ofthe shareholders of Udenna you disclosed to this Commission, © SEC Memorandum Circular No. 13, Series of 2017 in connection with PSE Supplemental Rule + PSE Memorandum No. 2010-050 dated 28 October 2010 re: Rule on Minimum Public Ownership: Supplemental Rule 1 ~ PSE Memorandum CN No. 2012-003 dated 3 January 2012 re: Amended Rule on Minimum Public Ownership.Page 9 of 18 Hence, the following is the corporate structure of Chelsea'®: (Finns Since only the voting shares of Chelsea are subscribed, it is sufficient to base the computation of the 60-40 requirement on the same, to determine compliance with SEC MC No. 8. To reiterate, Udenna is already established as a Philippine National. Hence, its 70% interest in Chelsea is considered Filipino. Since more than 60%, or 70% to be exact, of Chelsea is held by the Filipino investing corporation Udenna, then, at the onset, there is no “doubt”. Further, based on your letters, Udenna has fully paid its subscribed shares in Chelsea and plans to do the same in Mislatel; thus, the “indicia” of doubt laid out in Narra Nickel is absent in this case, considering that majority of the funds in Chelsea and Mislatel came from Udenna. Absent any other “indicia of doubt’, the Control Test, not the Grandfather Rule, will be applied. Using the Control Test, Chelsea is a Philippine national, hence, its 24.88% shareholding in Mislatel should be considered Filipit C. Nationality of Other Shareholders The “Other Shareholders” mentioned in the proposed ownership structure of Mislatel refers to the current stockholders of Mislatel, to wit: ‘Total Par Value of , Shareholder’s Name/ Nationality | NESISIMNSS | Shares Subscribed | Path Amount Marte, Lascano (Filipino) 750,000 370,000 — Romeo V Sabillo (Fipino) 3,750,000 3,750,000.00 ‘Howard U. Evangelista (Filipino) | __3,000,000 3,000,000.00 | __ Winsberg L- Austria(Flpino) 3,000,000, 3,000,000.00 3,000,000.00 Mariano Pamintuan, J. (Filipino) | 1,500,000 1,500,000.00 1,500,000.00 Nicanor L. Escalante (Filipino) 5,834,334 | _5,834,334.00 2,917,667.00 Danilo M.Corter (Filipina) | _5,834.333 5,834.335.00 2, 917,666.50 Tevitico€ Toguero (Filipino) 5534333 534,533.00 | 2,917,666.50 ETE Vector Holdings ne (Filipino) | 17,499,999 17,499,999.00 8749 999.00 Mabelle Grace A. Palay (Filipino) _ 1 1.00 —_1.00 Attached as Annex B isthe detailed list ofthe stockholders of Chelsea and thelr shares.Page 10 0f 18 Based on the table, apart from CTE Vector Holdings, Inc. (CTE Vector), all other shareholders are natural persons and declared to be Filipinos. With respect to CTE Vector, as disclosed all its shareholders are all natural persons who are Filipinos.?_ Though the letter is silent on the classes of shares, based on the Articles of Incorporation filed the Commission, the entire outstanding shares of stock of CTE Vector is composed of common shares.2° Since all the voting shares of CTE Vector are 100% owned by Filipino citizens, CTE Vector in turn is a Philippine National. Collectively, therefore, the “Other Shareholders” are 100% Filipinos. D. Nationality of Mislatel under the Bidding Agreement It can be recalled that the following shall be the proposed ownership structure of Mislatel under the Bidding Agreement?!: Chelsea 24.88% Udenna 34.83% Similar to Udenna, since all shares of Mislatel are common shares (i.e. shares with voting rights), which comprise the totality of its Outstanding Capital Stock, it is sufficient to base the 60-40% requirement on the same to determine the nationality. Applying the Control Test and the SEC-MC No. 8, therefore, the foreign equity and Filipino equity in Mislatel shall be computed as follows: Foreign Equity (voting shares) CT = 39.80% See Annex. Section 6, Corporation Code of Philippines, Batas Pambansa Blg. 68, Approved on May 1, 1980. » attached as Annex D isthe detailed list of stockholders of Mislatel under the Bidding Agreement.Filipino Equity (voting shares Udenna Chelsea Marte L Lascano Romeo V. Sabillo Howard U. Evangelista Winsberg L. Austria Mariano Pamintuan, Jr. Nicanor L. Escalante Danilo M. Cortez Levitico C. Toquero Mabelle Grace A. Palay CTE Vector Holdings, Inc. TOTAL 34.83% 24.88% 0.037% 0.037% 0.030% 0.030% 0.010% 0.060% 0.060% 0.060% 0.000% 00.170% 60.204% Page 11 of 18 Assuming, for the sake of argument, that “doubt” warranting the use of the Grandfather Rule exists, the Filipino and Foreign ownership of Mislatel shall be computed as follows Tien 31.83% {Filipino} FED Nominee Corporation * 2 NOTE: PCD Nominee Corporation (PCNC) Is “a wholly owned subsidiary of the Philippine Central Depository, a corporation established to improve operations in securities transactions and to provide a fast, safe and highly efficient system for securities settlement in the Philippines. PENC acts as trustee-nomince for al shares lodged in the PCD system, where trades effected on the Philippine Stock Exchange are finaly settled with the PCD. Persons who opt to trade using the PCD do not receive stock certificates as an Indicator of ownership as trading using the PCD is completely paperless. PCNC serves as one of the largest shareholders if not the largest shareholder, in many Phlippine corporations. For example, PCNC isthe second largest shareholder in Banco de Oro, the Philippines’ largest bank, with the corporation owning approximately 25% of BDO stock below SM Investments Corporation, which owns approximately 29% of BDO as of March 31, 2009. lowever, while it may appear that PNC Is the actual shareholder in the said company, shares held by PCNC do not grant voting powers to It as beneficial ownership ofthe shares stil remain with the lodging stockholder. By policy, PCNC does not vote the shares it was entrusted with in ts name, Additionally the PCNC is owner of 4996 of IPVG Corporation, a major hitp://enacademiccom /dicnst/enwiki/11084088) Philippines” (Source:Page 12 of 18 Using the Grandfather Rule, the computation shall be as follows: A. Shares which Fili {Jl Directly and Indirect Hold Udenna (100% Filipino 34.83% 17.42% Shares Udenna will directly hold Shares Udenna will indirectly hold (24.88% x 70%) ‘TOTAL shares Udenna will directly and indirectly hold 52.3% Shares it will indirectly hold (24.88% x 29.12%) = 7.24% Individual Shareholders of Chelsea (Filipino) Shares they will indirectly hold (24.88% x 0.06%) = 0.01% ‘Other Shareholders” of Mislatel Shares they will directly hold : 0.49% ‘TOTAL FILIPINO SHARES _ cna B. Shares Non-Filipinos will Directly and Indirectly Hold PCD Nominee Corporation (Non-Filipino) Shares it will indirectly hold (24.88% x 0.8%)? = 0.20% CT (Non-Filipino) Shares it will directly hold = 39.80% ‘TOTAL NON-FILIPINO SHARES = 40% Using the Grandfather Rule, 60% of Mislatel shares will be directly and indirectly held by Filipinos while 40% will be directly and indirectly held by Non-Filipinos. Under the Grandfather Rule, the proposed ownership structure in the Bidding Agreement is still compliant with the foreign ownership limitation for NMP. © NOTE: Assuming thatthe Grandfather Rule is applicable, it is most prudent ta closely monitor the trading of these shares at the stock exchange and to ensure that foreign ownership ofthese shares doesnot exceed these levels, otherwise the total non-Filipino shares will, breach the 4096 limit.Page 13 018, In closing, please be mindful of the requirement of dispersal of ownership under Section 16 of the R.A. No. 8627 or the Act Granting Mislatel its Legislative Franchise, "Section 16. Dispersal of Ownership. - In accordance with the constitutional provisions to encourage public participation in the public utilities, the grantee shall offer at least thirty percentum (30%) of its outstanding capital stock or a higher percentage that may hereafter be provided by law in any securities exchange in the Philippines within five (5) years from the commencement of its operations. Noncompliance therewith shail render the franchise ipso facto revoked.” Based on the foregoing, Mislatel shall offer at least 30% of its outstanding capital stock in any securities exchange. Please note, however, that per SEC’s records, Mislatel is not yet a publicly listed corporation and cannot, therefore, offer and sell to the public a portion of their outstanding capital stock in any securities exchange. It should be noted, however, that should Mislatel sell its shares to the public, or list in an exchange in compliance with R.A. No. 8627, it must conform to the requirements of the Securities Regulation Code (“SRC”) and SEC rules. Most importantly, any transfer of ownership pursuant to such dispersal of ownership requirement should not exceed the foreign ownership limitation. Also, please take note of the limitation in the Board composition under the Anti- Dummy Law, which confines the number of foreign directors in proportion to their allowable participation or share in the capital. Lastly, it shall be understood, that the foregoing opinion is rendered based solely on the facts and circumstances disclosed and relevant solely to the particular issue raised therein, It shall not be used in the nature of a standing rule binding upon the Commission in other cases or upon the courts whether of similar or dissimilar circumstances. If, upon further inquiry or investigation, it will be disclosed that the facts relied upon are different, this opinion shall be rendered void. Please be guided accordingly. By authority of the Commission En Banc tide rctrtetda General Counsel 2 Under Rule 3.1.16 ofthe Implementing Rules and Regulation ofthe SRC, a Public Company is defined as “any corporation with class of ‘equity securities listed on an Exchange or with assets in excess of Fifty Millio Pesos (P50,000,000.00) and has two hundred (200) or ‘more holders each holding at least one hundred (100) shares ofa class ofits equity securities” 25 Commonwealth Act No. 108, amending Presidential Decree No. 715. 28SEC Memorandum Circular 2003-15, No?Page 14 of 18 Annex A UDENNA’S OWNERSHIP STRUCUTRE As disclosed, the current authorized capital stock of Udenna amounts to Php 2,000,000,000.00, divided into 2,000,000,000 common shares with a par value of Php 1.00 per share. The shares of Udenna are subscribed to by the following shareholders: Shareholder’s | Capaciy | No-ofshares | Goma Ne | paid-Up Amount | Percentage () Name subscribed (Phy of Ownershiy : Php) cy i Dennis A-Uy | Beneficial | 1 400,000,000 | 1400,000,000.00 | 1,400,000.00000| 70.00% Cherylyn C. Uy | Beneficial | 599 999,993 599,999,993.00 | 599,999,993.00 30.00% Chipine) —_| Owner Chrys Alfonsus | Trustee of | V.Damuy | Cheryiyn 1 10 10 0.00% (iipino) uy | ‘Trustee of TgpaclaS Braga | Cheryiyn 1 Lo 10 0.00% ( 10) U Trustee of ~ ~ Meldin Afonso | Eitay tenn | up | 10 | 10 0.00% TeandroE | Trustee of Abarquez, Cherylyn 1 | 1.0 10 0.00% Clipino) | u | Ma. Concepcion | Trustee of F.DeClaro | Cheryiyn 1 10 10 0.00% (Filipino) uy. Raymundo Trustee of | Martin : Escalona Cherviym 1 1.0 1.0 0.00% (Filipino) y Wilfredo A. | Trastee of Placino | Cherylyn | 1 10 ; 10 0.00% (Filipino) uy. TOTAL 2,000,000,000 | 2,000,000,000.00 | 2,000,000,000.00 | 100.00%%Annex B CHELSEA’S OWNERSHIP STRUCTURE Page 1S of 18 As disclosed that the authorized capital stock of Chelsea is Php 2,000,000,000.00 and divided into two classes of shares: (1) 1,990,000,000 common shares with a total par value of Php 1,990,000,000.00 and (2) 10,000,000 preferred shares with a total par palue of Php 10,000,000.00. only the common shares of Chelsea are presently subscribed. 2018 Ne. tal Par Value of | | Percentage] Shareholder's No.of shares Paid-Up Amount ae Capacity Shares Subscribed aaa (6) of (Php) # Ownership Taenna Corporation | Penefical | 4 275 394,606 | 1,275,384,60600 | 1275,388,60600 | 70.00% (Filipino) PCD Nominee Corporation: 530,552,872, 530,552,872.00 530,552,872.00 23.12% (Filipino) _“ | PCD Nominee Corporation 14751220 | 14,751,22000 | 14,751,220.00 0.8% | (Non-Filipino) _ Caroline G; Taojo nee 800,000 800,000.00 800,000.00 0.04% | (Filipino) _| Noe B. Taojo} Beneficial tra ee 400,000 | 40000000 | 40000000 | 902% MyraP. Villanueva | Beneficial 9,300 9,300.00 9,300.00 0.00% (an Milagros P. Villanueva | Beneficial 7,300 7,300.00 7,300.00 0.00% | Geiipino) Myrna P ; Villanueva} Beneficial 7,300 7,300.00 7,300.00 0.00% {__ @itipino) a Marietta V. Cabrezn | Beneficial 5,000 5,000.00 5,000.00 0.00% (uipino) | _ Lapasaran Lim/or Mary | Beneficial 60,000 60,000.00 60,000.00 0.00% Hope Lim Filipino) _ | Cherylyn C. Uy, Beneficial Filipino) Owner Z aod oy coe Owen “a, - Nathaniels | Beneficial 10 10.00 10.00 | 0.00% AU ITF: Li |Page 16 0f18 Marcus AU Clipino) EfrenE.Uy / Beneficial 1 1.00 1.00 0.00% Cilipino) Owner Arhur KenathL-sy | Beneficial 1 100 100 0.0% (Filipino) Eduardo A. “1 Beneficial Bangayan aa 1 1.00 1.00 0.00% (Filipino) “ominguer | Beneficial 1 100 1.00 0.00% (Filipino) sl Jesus 8. ; Guevarrant | Beneficial 1 1.00 1.00 0.00% Owner (Filipino) Gener Beneficial Mendoza Owner u a nD oe TOTAL 1,821,977,645 | 1,821,977,615.00 | 1,821,977,615.00 | 100.00%Annex C CTE VECTOR As disclosed, the following are the shareholders of CTE Vector: Page 17 of18 Shareholder’s | Capacity | No. of shares | Total Par Value of | Paid-Up Percentage Name subscribed | Shares Subscribed | Amount (Php) | (%) of L (Php) Ownership Nicanor [| Beneficial Escalante Owner 8,330,000 8,330,000.00 8,330,000.00 33.32% | (Filipino) E Danilo Mi. | Beneficial Cortez Owner 8,330,000 8,330,000.00 8,330,000.00 33.32% (Filipino) Levitico C.} Beneficial Toquero Owner 8,330,000 8,330,000.00 8,330,000.00 33.32% (Filipino) _ Alfredo V. | Beneficial ” Bacolod owner 5,000 5,000.00 5,000.00 0.02% | (Filipino) | _ Mabelle Grace | Beneficial A Palay | Owner 5,000 5,000.00 5,000.00 0.02% | (Filipino) _ 7 TOTAL 25,000,000 25,000,000.00 | 25,000,000.00 | 10.00%Page 18 of18, Annex D DETAILED LIST OF PROPOSED STOCKHOLDERS AND THEIR PERCENTAGE OF OWNERSHIP UNDER THE BIDDING AGREEMENT 1g Agreement, below are the detailed list of the stockholders with their calculated percentage of ownershii ‘SHAREHOL | NATION | TYPE OF | “SUBSCRIBED PAID-UP__ ‘owneR- | -DERS | -ALITY | SHARES | No.ofShares | Amount (Php) | No.of Shares ‘Amount, SHIP Udenna | Filipino | Common | 3,500,000,000 | 3,500,000,000.00 | 3,500,000,000 | 3,500,000,000.00 | 44 4, Chelsea Filipino Cr 2,500,000,000 | 2,500,000,000.00 | 2,500,000,000 | 2,500,000,000.00 24.88% cr Filpiie Common | 4,000,000,000 | 4,000,000,000.00 | 4,000,000,000 | 4,000,000,000.00 | 39.80% |" Marte L a 7 [_taseane | Fino | Common | 3.750.000 | 3:750.00000 | 3,750,000 | 375000000 | 0.037% poms: Filipino comme 3,750,000 3,750,000.00 3,750,000 3,750,000.00 0.037% Sabillo 7 ‘ Howard U. : Evangelista | Filipino | Common | 3,000,000 | 3,000,00000 | 3,000,000 | 3,000,00000 | 0.030% REE | Fino | common | 3,000,000 | 300000000 | 3,000,000 | 3,000,00000 | 0.030% Mariano. — ~ Pamintuan, | Filipino: common 1,500,000 1,500,000.00 1,500,000 1,500,000.00, 0.010% Je | Nicanor L, 5 Escalante | pine | Common | 583434 | 583433400 | 5934324 | 2917,66700 | 0.060% Danilo M. at aniloM- | Filipino | Common | 5,834,333 sas4ssz00 | sassa3 | 2,917.66650 | 0.060% tewiico | riipino [C™m™” | sesasaa_ | saasaazo0 | 53433 | 2,917,66650 | 0.060% Mabelle - ~ | ~ Grace A. | Filipino | common 1 1.00 1 1.00 0.000% Palay | CTE Vector | Holdings, | Filipino | common | 17,499,999 | 17,499,999.00 | 17,499,999 | 9,749,999.00 | 00.70% Ine. ic I {