July 24, 1991

Philippine Petroleum Corporation

156 Valero Street, Salcedo Village
Makati, Metro Manila

Attention : D. L. Mendiola
(Corporate Secretary)

Gentlemen :

This refers to your letter of June 25, 1991, requesting confirmation that
your Corporation can declare cash dividends amounting to P105,399,111.00 out of
the interim income for the year 1991. cdasia

A corporation has a fiscal year in order to determine the results of its

operation during the year, whether it earned profits or incurred losses. Of course,
such results may also be computed monthly, quarterly or semi-annually, but a
summary is always made at the end of the year to determine the performance of
the company for the whole year. Since financial statements are generally prepared
after the end of the fiscal year, dividends are declared as a general rule, after the
fiscal period has ended when surplus profits are shown to exist. (SEC Opinion
dated July 16, 1971 addressed to Rajah Investment & Finance Corporation(1))
However, as an exception, the Commission, in a letter dated January 15, 1986
addressed to SGV & Company(2), opined that dividend declaration out of interim
profits may be allowed, subject to the provisions of Section 43 of the Corporation
Code, and subject further to the following conditions:

1. That the amount of dividends involved would not be impaired

by losses during the remaining period of the year;

2. That projected income statement of the company for the

remaining period of the year as well as the basis and
assumptions used therein shall be submitted to the Commission;
and

3. That should the company sustain losses during the year, cash
dividends distributed to the stockholders of record must be
correspondingly refunded to the company.

In the case of subject corporation, it appears from the supporting unaudited

interim income statements that the company's net income for the first quarter of
1991 and the succeeding two-months period ended May, 1991 amounted to
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P167,472,716 and P245,816,259, respectively. Both appear to be sufficient to
cover the part of the proposed dividend declaration amounting to P105,399,111.
Likewise, the projected net income of P265,000,000 at year ended 1991 may be
considered conservative since the company's net income for the years ended
December 31, 1990 and 1989 amounted to P496,924,208 and P506,765,630,
respectively. cdll

In view of the foregoing, the proposed cash dividend declaration by the

Corporation amounting to P105,399,111 may be allowed subject, however, to the
above-mentioned conditions.

Very truly yours,

(SGD.) ROSARIO N. LOPEZ

Chairman

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 Endnotes

1 (Popup - Popup)

SEC Opinion, dated July 16, 1971, was not available at the time of
publication.

2 (Popup - Popup)

SEC Letter addressed to SGV & Company, dated January 15, 1986, was not
available at the time of publication.

Copyright 1994-2018 CD Technologies Asia, Inc. Securities and Exchange Commission 2018 First Release 3