MALACAANG Manila PRESIDENTIAL DECREE No.

129 February 15, 1973 GOVERNING THE ESTABLISHMENT, OPERATION AND REGULATION OF INVESTMENT HOUSES WHEREAS, there were pending before Congress, prior to the promulgation of Proclamation No. 1081, dated September 21, 1972, urgent measures proposing the regulation of the so-called investment banks; WHEREAS, an extensive survey and study of the Philippine financial system had been undertaken in order to determine its adequacy in Philippine economic development, and an integrated set of recommendations were submitted; WHEREAS, the recommendations, as endorsed with modifications by the monetary authorities and made the basis of this Decree, advocated the enactment of the statutory framework within which the underwriting of securities may be governed and, to the extent that these entities perform quasi-banking functions, to harmonize their operations with national monetary goals. NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated September 22, 1972, as amended, and in order to effect the desired changes and reforms in the social, economic, and political structure of our society, do hereby order and decree and make part of the law of the land the following: Section 1. Title. This Decree shall be known as "The Investment Houses Law". Section 2. Scope. Any enterprise which engages in the underwriting of securities of other corporations shall be considered an "Investment House" and shall be subject to the provisions of this Decree and of other pertinent laws. Nothing in this Decree shall be understood to preclude other enterprises from engaging in the mere buying and selling of short-term securities of other persons or enterprises. Section 3. Definitions. For the purpose of this Decree, unless the context otherwise indicates, the following definition of terms are hereby adopted: (a) "Underwriting" is the act or process of guaranteeing the distribution and sale of securities of any kind issued by another corporation. (b) "Securities" are written evidences of ownership, interest, or participation, in an enterprise, or written evidences of indebtedness of a person or enterprise. It includes, but is not limited to the instruments enumerated in Section 2 of the Securities Act (Commonwealth Act No. 83, as amended). Section 4. Organization and registration. Investment Houses shall be organized in the form of stock corporations. The Securities and Exchange Commission shall not register the articles of incorporation of any Investment House, or any amendment thereto, unless it is satisfied from the evidence submitted to it: (a) That all the requirements of this Decree and of existing laws or regulations to engage in the business have been complied with; (b) That the proposed enterprise will not be in conflict with public interest and economic growth; (c) That the amount of capital, the proposed organization, direction and administration, as well as the integrity, experience and expertise of the organizers and the proposed managerial staff, provide reasonable assurance that the enterprise will be conducted with financial prudence. In determining compliance with the provisions of subsections (b) and (c) above, the Securities and Exchange Commission shall consult the Monetary Board of the Central Bank of the Philippines. All applications for registration of the articles of incorporation of Investment Houses shall be accompanied by: 1. At least three copies of the proposed articles of incorporation; lawphi1.net 2. A statement under oath of the educational background and experience of the organizers, directors, and the proposed managerial staff, as well as in information on any position concurrently held by them in other financial or banking institutions, if any; 3. A projected statement of assets and liabilities of the proposed Investment House; 4. A tentative program of operation for one year, including its investment direction and volume; and 5. Such other information as the Securities and Exchange Commission may require in support of the application and to enable the Commission to determine the justifiability of establishing the proposed enterprise. Any enterprise already in operation and exercising the powers of an Investment House prior to the effectivity of this Decree shall, within six months therefrom, file an information sheet with the Securities and Exchange Commission in such form and containing such data as the Securities and Exchange Commission may, at its discretion, require, to enable the Commission to determine, in consultation with the Monetary Board, whether the enterprise meets the requirements of this Decree. Section 5. Citizenship requirements. The majority of the voting stock of any Investment House shall be owned by citizens of the Philippines. In determining the percentage of foreign-owned voting stocks in Investment Houses, the basis for the computation shall be the citizenship of each stockholder, and, with respect to corporate owners of voting stock, the citizenship of the individual owners of voting stock in the corporation holding shares in that Investment House. The majority of the members of the Board shall be citizens of the Philippines. Section 6. Prohibitions. Except as may be authorized by the Monetary Board, no director or officer of an Investment House shall concurrently be a director or officer of a bank, as defined in Section 2 of the Republic Act No. 337, as amended: Provided, however, That in no event can a person be authorized to be concurrently an officer of an Investment House and of a bank. No Investment House shall engage in banking operations as defined in Section 2 of Republic Act No. 337, as amended. Section 7. Powers. In addition to the powers granted to corporations in general, an Investment House is authorized to do the following: 1. Arrange to distribute on a guaranteed basis securities of other corporations and of the Government or its instrumentalities; 2. Participate in a syndicate undertaking to purchase and sell, distribute or arrange to distribute on a guaranteed basis securities of other corporations and of the Government or its instrumentalities;

3. Arrange to distribute or participate in a syndicate undertaking to purchase and sell on a best-efforts basis securities of other corporations and of the Government or its instrumentalities; 4. Participate as soliciting dealer or selling group member in tender offers, block sales, or exchange offering or securities; deal in options, rights or warrants relating to securities and such other powers which a dealer may exercise under the Securities Act (Act No. 83, as amended); 5. Promote, sponsor, or otherwise assist and implement ventures, projects and programs that contribute to the economy's development; 6. Act as financial consultant, investment adviser, or broker; 7. Act as porfolio manager, and/or financial agent, but not as trustee of a trust fund or trust property as provided for in Chapter VII of Republic Act No. 337, as amended; 8. Encourage companies to go public, and initiate and/or promote, whenever warranted, the formation, merger, consolidation, reorganization, or recapitalization of productive enterprises, by providing assistance or participation in the form of debt or equity financing or through the extension of financial or technical advice or service; 9. Undertake or contract for researches, studies and surveys on such matters as business and economic conditions of various countries, the structure of financial markets, the institutional arrangements for mobilizing investments; 10. Acquire, own, hold, lease or obtain an interest in real and/or personal property as may be necessary or appropriate to carry on its objectives and purposes; 11. Design pension, profit-sharing and other employee benefits plans; and 12. Such other activities or business ventures as are directly or indirectly related to the dealing in securities and other commercial papers, unless otherwise governed or prohibited by special laws, in which case the special law shall apply. Nothing in this section shall preclude other enterprises not covered by this Decree from engaging in the activities listed under subsections (3) to (11) of this section, except as may otherwise be governed by special laws. Section 8. Capital. The minimum initial paid-in-capital of any Investment House shall be twenty million (P20,000,000) pesos. Section 9. Credit policies. Investment Houses shall coordinate their credit policies with the general credit policies of the Monetary Board of the Central Bank. Section 10. Reports. Investment Houses shall submit to the Securities and Exchange Commission and to the Central Bank a semi-annual report of operations and financial condition, signed under oath by its chief accountant and verified by its president. The Securities and Exchange Commission may, at its discretion, require Investment Houses to include their underwriting commitments as contingent accounts in their financial statements. Section 11. Regulations. Within six months after the approval of this Decree, the Securities and Exchange Commission, in coordination with the Central Bank, shall promulgate the necessary rules and regulations implementing the provisions of this Decree. Section 12. Central Bank regulatory powers. Investment Houses shall be subject to such regulations of the Central Bank or non-bank financial intermediaries as may be promulgated pursuant to Section 2-B of Republic Act No. 337, as amended. The regulations which may include, but need not be limited to (a) minimum size of fund acceptance or receipt, (b) methods of marketing and distribution, (c) terms of placement and maturities, and (d) uses of funds may be modified by the Monetary Board insofar as they apply to Investment Houses. The Monetary Board may, at its discretion, determine whether Investment Houses may be permitted to perform quasi- banking functions as defined in Section 2-D, subsection (b) of Republic Act No. 337, as amended. The Monetary Board is hereby authorized, at its discretion, to require any enterprise which is engaged or proposes to engage in quasi-banking functions to incorporate as an Investment House. If the Monetary Board decides to permit Investment Houses to engage in quasi-banking functions, the Board may require as a condition precedent the obtaining of a certificate of authority for the purpose from the Monetary Board. Whenever the Monetary Board authorizes an Investment House to engage in quasibanking functions, in accordance with the provisions of this section, the Board may subject Investment Houses to further regulations, pursuant to Republic Act 337, as amended, which may include but need not necessarily be limited to (a) liquidity reserve requirements; (b) capital-to-risk assets ratios; (c) interest rate ceilings; and (d) such other constraints as the Board may deem necessary. In the exercise of its authority in this section, the Monetary Board may, whenever, it determines that the circumstances so warrant subject an Investment House to special examination. Whenever on the basis of the reports submitted by, or upon examination of the books and records of, an Investment House, the Central Bank finds that the Investment House is not complying with the provisions of this section, with the pertinent provisions of this Decree, of other laws, or of orders, instructions, rules or regulations issued by the Monetary Board pertaining non-bank financial intermediaries and quasi-banking activities, said Board shall forthwith issue a ceaseand-desist order upon the Investment House concerned. Failure on the part of an Investment House to comply with the cease-and-desist order shall subject said Investment House to a fine not exceeding two hundred (P200) pesos for every day the order is violated, to be imposed by the Monetary Board, without prejudice to the penalties provided in Section 16 of this Decree. Section 13. Applicability of Securities Act. An Investment House may engage in the business of a dealer or a broker under the Securities Act without obtaining a separate license for the purpose as required in Section 14 of the Securities Act (C.A. No. 83, as amended). Section 14. Applicability of Corporation Law. The provisions of the Corporation Law (Act No. 1459, as amended) insofar as they are not in conflict or inconsistent with the provisions of this Decree shall apply to Investment Houses. Section 15. Transitory provisions. Existing enterprises which are operating as Investment Houses shall, within one year following the approval of this Decree, comply with the requirements hereof, except with respect to the filing of an information sheet which shall be complied with within six months as provided in the last paragraph of Section 4 of this Decree. Section 16. Penalties for violation. Upon proof that an Investment House is violating or not complying with the provisions of this Decree, of other pertinent laws, of the terms or conditions of its certificate of registration or charter, or of orders, decisions,

rulings or regulations issued by the Securities and Exchange Commission or by the Central Bank of the Philippines, the Securities and Exchange Commission shall impose upon the Investment House and collect a fine not exceeding two hundred (P200) pesos per day for every day during which such violation or non-compliance continues, and/or suspend its certificate of registration. The officer or director of the Investment House who ordered or authorized the violation or non-compliance shall be solidarily liable. The fine so imposed shall be paid to the Government of the Philippines through the Securities and Exchange Commission. Without prejudice to the provisions of the preceding paragraph any person, or any director or officer of an Investment House who violates or does not comply with the provisions of this Decree, of other pertinent laws, of the terms or conditions of its certificate of registration or charter, or of orders, decisions, rulings or regulations issued by the Securities and Exchange Commission or by the Central Bank of the Philippines, shall be punished by a fine of not more than twenty thousand (P20,000) pesos, or an imprisonment of not more than five years or both, at the discretion of the Court. Section 17. Separability clause. The provisions of this Decree are hereby declared separable, and if any clause, sentence, provision or section hereof, or its application to any person or circumstance should be declared invalid, such invalidity shall not affect the other provisions of this Decree which can be given force and effect without the provisions which have been declared invalid. Section 18. Repeal. REPUBLIC ACT NO. 8366 AN ACT LIBERALIZING THE PHILIPPINE INVESTMENT HOUSE INDUSTRY, AMENDING CERTAIN SECTIONS OF PRESIDENTIAL DECREE NO. 129, AS AMENDED, OTHERWISE KNOWN AS THE INVESTMENT HOUSES LAW SECTION 1. Declaration of policy. It is the policy of the State to expand and strengthen the capital base of the economy in order to ensure sustained economic growth and development. Toward this end, the Philippine investment house industry is hereby liberalized, increasing foreign equity participation and raising the minimum capitalization of investment houses to enable them to meet the present and future demands of the market. SECTION 2. Section 5 of Presidential Decree No. 129, as amended, otherwise known as the Investment Houses Law, is hereby further amended, to read as follows: "SEC. 5. Citizenship requirements. At least forty percent (40%) of the voting stock of any Investment House shall be owned by citizens of the Philippines. In determining the percentage of foreign-owned voting stocks in Investment Houses, the basis for the computation shall be the citizenship of each stockholder, and, if the stockholder is a corporation, the citizenship of the individual stockholders holding voting shares in that corporation. In approving foreign equity applications in Investment Houses, the Securities and Exchange Commission shall approve such applications only if the same or similar rights are enjoyed by Philippine nationals in the applicant's country. "Foreign nationals may become members of the board of directors to the extent of the foreign participation in the equity of said enterprise." SECTION 3. Section 8 of the same Decree is hereby amended to read as follows: "SEC. 8. Capital requirements. In the case of newly-organized Investment Houses, the minimum paid-in capital shall be Three hundred million pesos (P300,000,000). The minimum paid-in capital of the existing Investment Houses shall be Three hundred million pesos (P300,000,000) to be built up in two (2) years after the effectivity of this Act in the following manner: Two hundred million pesos (P200,000,000) after the effectivity of this Act and an additional Fifty million pesos (P50,000,000) for every year thereafter until the minimum capitalization is attained. The Monetary Board may prescribe a higher minimum capitalization in order to promote and ensure the stability of the Philippine capital market and the competitiveness of the investment house industry in line with the national economic goals. The Monetary Board shall, within six (6) months, prescribe a risk assets to capital ratio and other capital adequacy ratios in order to provide broader protection to the investing public." SECTION 4. This Act shall take effect fifteen (15) days from its publication in a newspaper of general circulation. Approved: October 21, 1997 Section 19. Effectivity. This Decree shall take effect immediately. Done in the City of Manila, this 15th day of February, in the year of Our Lord, nineteen hundred and seventy-three. SB No. 63: Real Estate Investment Trust Act

shareholders. REIT will also benefit from the documentary stamp tax exemption on its original issuance of shares of stock. Please note however that in order to qualify for the tax exemption, a REIT must meet the following conditions:

It must be listed in the Philippine Stock Exchange (PSE) and must distribute dividends of at least 90% of its net income (before extraordinary item, depreciation and amortization) to its shareholders. It must invest only in real estate and real estate-related assets (i.e., debt securities and listed shares issued by property companies or other funds and assets, including personal property, incidental to the ownership of real estate); debt securities and listed shares issued by local and foreign non-property corporations; government securities; and cash and cash equivalent items. It must invest at least 70% of its total assets. For newly-organized REITs, at least 70% of the total assets should be real estate and real estate-related assets. Moreover, not more than 15% of its assets must be invested in personal property. It must not undertake property development activities nor invest in unlisted property development companies, unless it intends to hold the developed property upon completion. It must invest at least 35% of its total assets in real estate. Not more than 5% of its investments in listed or unlisted debt securities and listed shares of or issued by property and non-property corporations (local or foreign) and other locally-registered REIT should be invested in any one issuers securities or any one managers funds. When investing in real estate as a joint owner, the REIT should acquire shares or interests in an unlisted special purpose vehicle (SPV) constituted to hold/own the real estate and the REIT should have freedom to dispose of such investment. The joint venture agreement, memorandum and articles of association and/or other constitutive document of the special purpose vehicle should provide for a minimum percentage of distributable profits of the SPV that will be distributed and grant the REIT veto rights over key operational issue of the SPV. Total borrowings and deferred paym ents should not exceed 35% of its deposited property. Provided, however, that the total borrowings and deferred payments of a REIT that has a credit rating of A or higher, or a similar rating, by any rating agency recognized by the Philippine Securities and Exchange Commission may exceed 35% but not more than 60% of its deposited property. A full disclosure on the identity of the parties and the transaction should be made to the PSE if it acquires assets from or sells assets to interested parties or invests in securities of or issued by interested parties. Interested parties include the REIT sponsor or promoter, adviser, REIT Manager, director of the sponsor/promoter, adviser, REIT Manager and related corporation or partnership as may be defined by the Philippine SEC. It must conduct a full valuation of a REIT at least once a year. It must comply with the applicable minimum public ownership requirement of the Philippine SEC.

SB No. 63: Real Estate Investment Trust Act SB No. 63: Real Estate Investment Trust Act by Catherine C. Dela Cruz Senate Bill No. 63 known as The Real Estate Investment Trust Act of 2007 (REIT) has been recently referred to the Senates Committee on Banks, Financial Institutions and Currencies and the Committee on Ways and Means. Over the past few years, REIT was introduced in the US, as well as in other countries in Europe and Asia as more countries discover the benefits of REITs. As explained in the bill, institutionalization of the REITs would allow the Philippines to participate in the globalization of the real estate investment markets thus contributing to the growth and development not only of the capital market but also the national economy through increased investment activities. The proposed bill is timely as we are experiencing yet another boom in the real estate industry and the playing field is now open to all kinds of investors. But first, what is a REIT? A REIT is a corporation that derives most of its revenue from owning or managing real estate. The REIT structure was designed to provide a framework for investment in real estate in the same way that mutual funds provide for investment in stocks. Likewise, the bill defined REIT as a stock corporation formed for the sole purpose of investing in income-producing real estate assets. Income producing properties include apartment buildings, office buildings, warehouses, medical facilities, hospitals, mixed industrial/office buildings and other commercial and residential properties. The bill proposes several incentives for establishing REITs. Among these are income tax exemptions on their revenue as well as on the dividends to be paid to its

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In addition, to qualify for the exemption of taxes imposed on the transfer or sale of assets, REIT must retain or hold the assets sold or transferred for a period of five years from the date of sale or transfer to the REIT. Otherwise, all of taxes shall be due and payable and subject to all interest and surcharges. The conditions for the availment of tax-free treatment are exhaustive. However, these should be further evaluated by the legislative body in the light of its impact on existing similar businesses which are not covered by this Act. This Act, promising as it is, should not only consider the incentives and opportunities it offers the investors but should be taken with caution as it may impact other existing similar industries and the fiscal position of the government. After all, a favorable investment opportunity should always create a balance between the fiscal requirements of the government, the interest of the investors and its effect on similar existing industries. (The author is a senior tax manager at Punongbayan & Araullo, member of Grant Thornton International. For comments and inquiries, please e-mail the author or call 886-5511.) THE Bureau of Internal Revenue (BIR) issued Revenue Regulations 13-2011 implementing the Tax Provisions of Republic Act No. 9856 also known as the Real Estate Investment Trust Act of 2009. A Real Estate Investment Trust (REIT) is a stock corporation established in accordance with the Corporation Code of the Philippines principally for the purpose of owning income-generating real estate assets. A corporation becomes a REIT and qualified to avail of the incentives and privileges of the REIT law when its REIT Plan is rendered effective by the Securities and Exchange Commission (SEC) and its listing as a REIT is approved by the Exchange. A REIT shall be taxable on all income derived from sources within and without the Philippines at the applicable income tax rate of 30 percent as provided under Section 27(A) of the Tax Code on its taxable net income. In no case, shall a REIT be subject to a minimum corporate income tax. In computing the income tax due of a REIT, the following formula is to be used: Gross Income Less Allowable Deductions and Dividends Paid. The Dividends allowed as deductions during the taxable year shall pertain to dividends actually distributed out of the REITs distributable income at any time after the close of but not later than the last date of the 5th month from the close of the taxable year. Any dividend distributed within this prescribed period shall be considered as paid on the last day of REITs taxable year. The REIT shall be required to place in escrow in favor of the BIR with an Authorized Agent Bank acceptable to the BIR the income tax collectible from the REIT on the dividend it declared and deducted from its taxable income for the first and second year of the REIT prior to its attaining the minimum ownership of 67 percent had it been disallowed.

The escrowed income tax amount shall be released to the REIT only upon showing of proof of compliance to the increase of minimum ownership to 67 percent within three years from its listing, otherwise, it shall be released in favor of the government. *** You may contact the author at rester.nonato@yahoo.com. PhilippinesurgedtoimplementREITsystem Property sector may see inflow of $500M in new capital By: Daxim L. Lucas Philippine Daily Inquirer 10:32 pm | Thursday, May 17th, 2012 share75 28 The Philippine property scene may experience the inflow of as much as $500 million in fresh foreign capital within one year if the real estate investment trust (REIT) system is implemented in the local financial market. Simon Treacy, group CEO of property investment fund MGPA, said that based on his experience closely working in Malaysiathe latest nation to allow REITs in Asia investments into the country could easily hit $2.5 billion in two years. He stressed, however, that for the Philippines to benefit from these foreign investments, policymakers and the private sector would have to restart stalled talks on the local issuance of REITs, which have faltered due to the Department of Finances opposition to the tax-exempt status granted to it by law. The Philippines is now the most overlooked, undervalued real estate market in Asia, Treacy said. Both sides [of the debate] should come back to the table to talk about this. REITs are tradable securities whose underlying assets are property portfolios that earn from either real estate sales or rent. They are issued by property developers and sold to investors whose funds are then reinvested into new property developments. Treacy, whose MGPA fund is one of the largest investors in REITs in Singapore, Malaysia and Poland, said that the Philippines is now in a unique situation to draw in more foreign investments if this novel scheme is allowed. He noted thatapart from the advanced Singaporean financial system policymakers in Japan and Malaysia were in the past also hesitant to introduce REITs in their country because of the misconception that the government would forego valuable tax revenues with the entry of these tax-exempt securities. He pointed out, however, that both Japan and Malaysia are now reaping the benefits of massive inflows of foreign capital into their real estate sectors, helping keep their property markets buoyant and helping create jobs for their citizens. Malaysia, which started the system in 2009, now has 11 REITs, he said. Treacy made his comments during a recent talk before the local chapter of the Urban Land Institute, where proposed urban planning improvements were discussed by representatives of the public and private sectors. In particular, the group noted that Metro Manila is the worlds fifth-largest urban area and, as the countrys political and economic center, can be improved with a more sustainable approach to city development. S No 2639 H No 6379 Republic of the Philippines Congress of the Philippines Metro Manila Fourteenth Congress Third Regular Session Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand nine. [ REPUBLIC ACT No. 9856 ] AN ACT PROVIDING THE LEGAL FRAMEWORK FOR REAL ESTATE INVESTMENT TRUST AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: ARTICLE I GENERAL PROVISIONS SECTION 1. Short Title. This Act shall be known as The Real Estate Investment Trust (REIT) Act of 2009. SEC. 2. Declaration of Policy.- It ii the policy of the State to promote the development of the capital market, democratize wealth by broadening the participation of Filipinos in the ownership of real estate in the Philippines, use the capital market as an instrument to help finance and develop infrastructure projects, and protect the investing public by providing an enabling regulatory framework and environment under which real estate investment trusts, through certain incentives granted herein, may assist in achieving the objectives of this policy. SEC. 3. Definition of Terms. For the purposes of this Act, the term: (a) Adviser means a lawyer, accountant, auditor, financial or business consultant, and such other persons rendering professional advisory services to the real estate investment trust. (b) Affiliate means a corporation that directly or indirectly, through one or more intermediaries, is controlled by, or is under the common control of another corporation, which thereby becomes its parent corporation. (c) Associate of a person includes: i. Any relative of such person within the fourth (4th) degree of consanguinity or affinity; and ii. Any company in which he/she and his/her relative within the fourth (4th) degree of consanguinity or affinity, directly or indirectly, has an interest of twenty-five percent (25%) or more. (d) Cash Equivalent Items means instruments or investments that are highly liquid and marketable and are considered good as cash as determined in accordance with the rules and regulations prescribed by the Commission. (e) Commission or SEC means the Securities and Exchange Commission of the Philippines. (f) Constitutive Documents means the articles of incorporation and bylaws of a REIT. (g) Control exists in favor of a parent corporation when it has the power to direct or govern the financial and operating policies of an enterprise so as to obtain benefits from Its activities. Control is presumed to exist when the parent owns, directly or indirectly, through subsidiaries, more than one-half (1/2) of the voting power of an enterprise, unless in exceptional circumstances, it can clearly be demonstrated that such ownership does not constitute control. Control also exists even when the parent owns one-half (1/2) or less of the voting power of an enterprise when there is power:

i. Over more than one-half (1/2) of the voting nights by virtue of an agreement with investors; Ii. To direct or govern the financial and operating policies of the enterprise under a statute or an agreement; iii. To appoint or remove the majority of the members of the board of directors or equivalent governing body; or iv. To cast the majority votes at meetings of the board of directors of equivalent governing body. (h) Corporation Code refers to Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines. (i) Deposited Property means the total value of the REITs assets based on the latest valuation determined in accordance with the rules and regulations promulgated by the Commission. (j) Distributable Income means net income as adjusted for unrealized gains and losses/expenses and impairment losses and other items in accordance with internationally accepted accounting standards. Distributable income excludes proceeds from the sale of the REITs assets that are re-invested in the REIT within one (1) year from the date of the sale. (k) Exchange means any entity registered with the Commission as a stock exchange pursuant to the Securities Regulation Code. (l) Fund Manager refers to the person responsible for the allocation of the deposited property to the allowable investment outlets and selection of incomegenerating real estate. It shall execute investment strategies for the REIT and oversee and coordinate all of the following activities: property acquisition; property management; leasing; operational and financial reporting (including operating budgets); appraisals; audits; market review; accounting and reporting procedures, as well as refinancing and asset disposition plans. For clarity, a fund manager is considered independent from the REIT and its sponsors/promoters under this Act if it is in compliance with the independence, corporate governance (including the fit and proper rule) and other requirements prescribed by this Act, its implementing rules and regulations and the Commission. (m) Income-generating Real Estate means real property which is held for the purpose of generating a regular stream of income such as rentals, toll fees, users fees and the like, as may be further defined and identified by the Commission. The Commission may promulgate rules to include real rights over real property, provided they generate interest or other regular payments to the REIT. (n) Independent Director means a director who has the qualifications and none of the disqualifications of an independent director specified in the Securities Regulation Code and its implementing rules and regulations. (o) IRR refers to the Implementing rules and regulations promulgated to implement the provisions of this Act. (p) Investible Funds refer to funds of the REIT that can be placed in investment vehicles other than income- generating real estate such as real estate-related assets, managed funds, government securities, and cash and cash equivalents. (q) Investor means the owner of investor securities or investor shares. (r) Investor Securities or Investor Shares mean shares of stock issued by a REIT or derivatives thereof. (s) Managed Funds mean any arrangement whereby funds are solicited from the investing public and pooled for the purpose of Investing in securities duly registered with and/or approved by the appropriate regulatory agency of the government for investment by the REIT. (t) Material Contract refers to an agreement or arrangement where the amount involved is at least five percent (5%) of the deposited property of the REIT or which is not entered into in the ordinary course of business of the REIT: Provided, however, That the following shall be deemed a material contract regardless of the amount: i. Related party transactions under Section 8.11 hereof; ii. Contract between the REIT and fund manager; iii. Agreement between the REIT and property manager; iv. Agreements between and among shareholders such as voting trust agreements, pooling agreements, joint venture agreements or other shareholder agreements as may be determined by the Commission; v. Any acquisition or disposition of real estate by the REIT; vi. Contracts relating to investments of the REIT under Section 8.3 hereof; vii. Any contract creating mortgages, encumbrances, liens or rights on the real estate of the REIT; viii. Contract of any nature that limits the declaration or distribution of dividends by the REIT; ix. Any contract relating to joint venture, spin-off, consolidation or merger involving the REIT; and x. Any contract that may be expected to materially affect the market activity and/or the price of the investor securities issued by the REIT as may be determined by the Commission. (u) Net Asset Value or NAV means the total assets less total liabilities as determined by the implementing rules and regulations (IRR) of the Commission. (v) Net Income means net income as determined under the Philippine Financial Reporting Standards (PFRS). (w) Overseas Filipino Investor refers to an individual citizen of the Philippines who is working abroad, including one who has retained or reacquired his Philippine citizenship under Republic Act No. 9225, otherwise known as the Citizenship Retention and Re-acquisition Act of 2003. (x) Parent means a corporation which has control over another corporation, directly or indirectly, through one or more intermediaries. (y) Principal Officer means the chairman of the board of directors, president, chief executive officer, chief operating officer, treasurer, chief financial officer, corporate secretary, vice president, their equivalent positions, or such other officers occupying positions of significant influence in a company as may be determined by the Commission. (z) Principal Stockholder means a stockholder who is directly or indirectly the beneficial owner of more than ten percent (10%) of any class of security of the REIT. (aa) Public Shareholder means a shareholder of a REIT other than the following persons (non-public shareholders): i. The sponsor/promoter of the REIT; ii. A director, principal officer or principal shareholder of the sponsor/promoter of the REIT; iii. A director, principal officer or principal shareholder of the REIT; iv. An associate of a director, principal officer or principal shareholder of the REIT or its sponsor/promoter; v. A related corporation to the REIT or Its sponsor/promoter; and

vi. Any person who holds legal title to the shares of stock of the REIT for the benefit of another for the purpose of circumventing the provisions of this Act. (bb) Property Manager refers to a professional administrator of real properties who is engaged by the REIT to provide property management services, lease management services, marketing services, project management services, including rent collection, tenant services, care of the physical plant, security, leasing, marketing of the property to outside prospects, and other similar services pertaining to the property under administration. For clarity, a property manager is considered independent from the REIT and Its sponsor(s)/promoter(s) under this Act if it is in compliance with the independence, corporate governance (including the fit and proper rule) and other requirements prescribed by this Act, its IRR and the Commission. (cc) Real Estate Investment Trust or REIT is a stock corporation established in accordance with the Corporation Code of the Philippines and the rules and regulations promulgated by the Commission principally for the purpose of owning income-generating real estate assets. For purposes of clarity, a REIT, although designated as a trust, does not have the same technical meaning as trust under existing laws and regUlations but is used herein for the sole purpose of adopting the internationally accepted description of the company in accordance with global best practices. (dd) Real Property shall have the same definition as Immovable Property under Article 415 of the Civil Code of the Philippines. Real estate, when used in this Act, shall have the same meaning as real property. (ee) REIT Plan refers to the plan, including its amendments, of the REIT registered with the Commission. (ff) Real Estate-Related Assets mean: i. Debt securities and listed shares issued by listed property companies; or Ii. Other funds and assets, including personal property, incidental to the ownership of real estate. (gg) Related Corporation means the parent, subsidiary or affiliate of the REIT. (hh) Related Party includes: i. The director, officer or principal stockholder of the REIT or associate of such persons; ii. The sponsor/promoter of the REIT; iii. The fund manager of the REIT; iv. The adviser of the REIT; v. The property manager of the REIT; vi. A director, principal shareholder or principal officer of the sponsor/promoter of the REIT, REITs fund manager or property manager, or associate of any such persons; and vii. Related corporation to the REIT. (ii) Securities Regulation Code or SRC refers to the Securities Regulation Code of 2000 and its implementing rules and regulations. (jj) Sponsor/Promoter means any person who, acting alone or in conjunction with one or more other persons, directly or indirectly, contributes cash or property in incorporating a REIT. (kk) Subsidiary means a corporation more than fifty percent (50%) of the voting stock of which is owned or controlled, directly or indirectly, through one or more intermediaries, by another corporation, which thereby becomes its parent corporation. (ll) Synthetic Investment Products are derivatives and other securities created exclusively out of one or more financial instruments to simulate the returns of the underlying financial instruments, such as credit-linked notes, collateralized debt obligations, total return swaps, credit spread options, credit default options, and similar products determined by the Commission. (mm) Taxable Net Income means the pertinent items of gross income specified in Section 32 of the National Internal Revenue Code of 1997, as amended, less all allowable deductions enumerated in Section 34 of the National Internal Revenue Code of 1997, as amended, less the dividends distributed by a REIT out of its distributable income as of the end of the taxable year as: (a) dividends to owners of the common shares; and (b) dividends to owners of the preferred shares pursuant to their rights and limitations specified in thearticles of incorporation of the REIT. ARTICLE II REAL ESTATE INVESTMENT TRUST SEC. 4. Investment in the REIT. Investment in the REIT shall be by way of subscription to or purchase of shares of stock of the REIT. No shares of stock of the REIT shall be offered for subscription or sale except in accordance with a REIT plan and other requirements and restrictions as may be prescribed by the Commission. SEC. 5. Registration and Listing. The shares of stock of the REIT must be registered with the Commission and listed in accordance with the rules of the Exchange. SEC. 6. Nationality Requirement. A REIT that owns land located in the Philippines must comply with foreign ownership limitations imposed under Philippine law. SEC. 7. Dividend Distribution. A REIT must distribute annually at least ninety percent (90%) of its distributable income as dividends to its shareholders not later than the last day of the fifth (5) month following the close of the fiscal year of the REIT. Subject to the provisions of this Act, the dividends shall be payable only from out of the unrestricted retained earnings of the REIT as provided for under Section 43 of the Corporation Code of the Philippines. The percentage of dividends received by the public shareholders to the total dividends distributed by the REIT from out of its distributable income must not be less than such percentage of their aggregate ownership of the total outstanding shares of the REIT. Any structure, arrangement or provision which would have the effect of diminishing or circumventing in any form this entitlement to dividends shall be void and of no force and effect. Distributable income excludes proceeds from the sale of the REITs assets that are re-invested by the REIT within one (1) year from the date of the sale. SEC. 8. Requirements. Unless the Commission provides otherwise and after public hearing, taking into account public interest, the need to protect investors and develop the countrys real estate investment industry to make it globally competitive, the following requirements shall apply: 8.1 Minimum Public Ownership A REIT must be a public company and to be considered as such, a REIT, must: (a) maintain its status as a listed company; and (b) upon and after listing, have at least one thousand (1,000) public shareholders each owning at least fifty (50) shares of any class of shares who in the aggregate own at least one-third (1/3) of the outstanding capital stock of the REIT. The Commission shall prescribe a recording and monitoring system that will effectively ensure that the shares of the public shareholders are traceable to their

names and for their own benefit and not for the benefit of any of the non-public shareholders mentioned above. Compliance With the minimum public ownership requirement under this section must be duly certified by a responsible person designated by the Commission upon listing, as of record date for any dividend declaration or any corporate action requiring shareholder approval and other relevant times as may be required by the IRR of this Act. 8.2 Capitalization A REIT must have a minimum paid- up capital of Three hundred million pesos (Php300,000.000.00). 8.3 Allowable Investments A REIT may only invest in: i. Real estate, whether freehold or leasehold, located In the Philippines. A REIT may invest in income-generating real estate located outside of the Philippines:Provided, That such investment does not exceed forty percent (40%) of its deposited property and only upon special authority from the Commission. The Commission in issuing such authority shall consider, among others, satisfactory proof that the valuation of assets is fair and reasonable. An investment in real estate may be by way of direct ownership or a shareholding in an unlisted special purpose vehicle constituted to hold/own real estate; ii. Real estate-related assets, wherever the issuers, assets, or securities are incorporated, located, issued, or traded; iii. Managed funds, debt securities and listed shares issued by local or foreign nonproperty corporations; iv. Government securities issued on behalf of the Philippine government or governments of other countries and securities issued by multilateral agencies; v. Cash and cash equivalent items; and vi. Such other similar investment outlets as the Commission may allow. 8.4 Investment in Synthetic Investment Products A REIT may invest not more than five percent (5%) of its investible funds in synthetic investment products such as, but not limited to, credit default swaps, credit-linked notes, collateralized debt obligations, total return swaps, credit spread options, and credit default options, and only upon special authority from the appropriate regulatory authority. 8.5 Income-generating Real Estate At least seventy-five percent (75%) of the deposited property of the REIT must be invested in, or consist of, income-generating real estate. 8.6 Property Development A REIT must not undertake property development activities whether on its own, in a joint venture with others, or by investing in unlisted property development companies, unless it intends to hold the developed property upon completion. The total contract value of property development activities undertaken and investments in uncompleted property developments should not exceed ten percent (10%) of the deposited property of the REIT. 8.7 Single Entity Limit Not more than fifteen percent (15%) of investible funds of the REIT may be invested in any one issuers securities or anyone managed fund, except with respect to government securities where the limit is twenty-five percent (25%). 8.8 Foreign Assets A REIT may invest in local or foreign, assets, subject to the terms of its articles of incorporation. Where an investment in a foreign real estate asset is made, the REIT should ensure that the investment complies with all the applicable laws and requirements in that foreign country such as, but not limited to, foreign ownership restrictions, if any, and requisites of having good and valid title to that real estate. 8.9 Joint Venture When investing in real estate as a joint owner, the RElT should make such investment by acquiring shares or interests in an unlisted special purpose vehicle constituted to hold/own the real estate and the REIT should have freedom to dispose of such investment. The joint venture agreement, memorandum and articles of association or other constitutive documents of the special purpose vehicle should provide for a minimum percentage of distributable profits of the special purpose vehicle that will be distributed and grant the REIT veto rights over key operational issues of the special purpose vehicle. 8.10 Aggregate Leverage Limit The total borrowings and deferred payments of a REIT should not exceed, thirty-five percent (35%) of its deposited property:Provided, however, That the total borrowings and deferred payments of a REIT that has a publicly disclosed investment grade credit rating by a duly accredited or internationally recognized rating agency may exceed thirty-five percent (35%) but not more than seventy percent (70%) of its deposited property. 8.11 Related Party Transactions Any contract or amendment thereto, between the REIT and related parties, including contracts involving the acquisition or lease of assets and contracts for services, must comply with the following minimum requirements: i. Full, fair, timely and accurate disclosures on the identity of the parties. their relationship with the REIT, and other important details of the transaction have been made to the Exchange and the Commission; ii. Be on fair and reasonable terms, including the contract price; iii. Approved by at least a majority of the entire membership of the board of directors, including the unanimous vote of all independent directors of the REIT; iv. Accompanied by a fairness opinion by an independent appraiser done in accordance with the valuation methodology prescribed by the Commission, in the case of an acquisition or disposition of real estate assets and property or share swaps or similar transactions; and v. Any other matter that may be materially relevant to a prospective investor in deciding whether or not to invest in the REIT. 8.12 Valuation A full valuation of a REITs assets must be conducted by an independent appraisal company, duly accredited by the Commission, at least once a year In accordance with the applicable rules of asset valuation and valuation methodology as prescribed by the Commission. 8.13 Fund Manager A REIT must appoint a fund manager that is independent from the REIT and its sponsor(s)/promoter(s) and shall be subject to the following minimum requirements: i. It must be a corporation duly organized under the laws of the Republic of the Philippines or a foreign corporation engaged in the business of fund management with proven track record and duly licensed to do business in the Philippines by the appropriate regulatory agency; ii. It must have a minimum paid-up capital stock or assigned capital of Ten million pesos (10,000,000.00), unless the Commission provides otherwise; iii. Its office in the Philippines must have a meaningful role in its business activities and must perform accounting, compliance and investor relations services in the Philippines; iv. It must comply with the requirements of the relevant law or appropriate regulatory authority on the number of independent directors;

v. It must comply with the corporate, governance requirements, including the fit and proper rule, prescribed by this Act and its IRR; vi. It must adopt measures as may be prescribed by the IRR of this Act to avoid conflicts of interest in the discharge of its duties as fund manager for the REIT; and vii. It must employ a resident chief executive officer and at least two (2) full-time professional employees who have a track record and experience in financial management as well as experience in the real estate industry. 8.14 REIT Property Manager The. REIT must appoint a REIT property manager who shall be responsible for managing the real estate assets such as apartment buildings, office buildings, warehouses, hospital buildings, medical facilities, hotel buildings, resort facilities, manufacturing plants and other physical assets of the REIT. The contract between the REIT and the property manager must comply with the disclosure and other requirements prescribed for related party transactions. The REIT property manager shall be independent from the REIT and its sponsor/promoter and possess the qualifications and be subject to such functions and responsibilities, restrictions and other requirements prescribed by the Commission. The property manager must comply with the following minimum qualifications: i. It must comply with the requirement of the SRC or the Commission on the number of independent directors; ii. It must comply with the corporate governance requirements, including the fit and proper rule, prescribed by this Act and its IRR; and iii. It must adopt measures as may be prescribed by the IRR of this Act to avoid conflicts of interest in the discharge of its duties as property manager for the REIT. 8.15 Independent Directors At least one-third (1/3) of the board of directors of a REIT must be independent directors. 8.16 Fit and Proper Rule To maintain the quality of management of the REIT and afford better protection to REIT investors, the Commission, or the concerned regulatory agency, shall prescribe or pass upon and review the qualifications and disqualifications of individuals elected or appointed as directors or officers of the REIT, REIT fund managers, REIT property managers, distributors and other REIT participants and disqualify those found unfit. The appropriate regulatory agency may disqualify, suspend or remove any director or officer who commits or omits an act which renders him unfit for the position. In determining whether an individual is fit and proper to hold the position, regard shall be given to his integrity, experience, education, training, and competence:Provided, however, That the following persons shall in no case be allowed to serve or act in the capacity of officer, director or consultant of any REIT, REIT fund manager, or REIT property manager: i. Any person convicted of any crime involving any security or financial product; ii. Any person convicted of an offense involving fraud or embezzlement, theft, estafa or other fraudulent acts or transactions; iii. Any person who, by reason of any misconduct, is enjoined by order, judgment, or decree by any court, quasi-judicial body or administrative agency of competent jurisdiction from acting as a director, officer, employee, consultant, or agent occupying any fiduciary position; iv. Any person found by the appropriate regulatory agency to have violated, or aided, abetted, counseled, commanded, induced, or procured the violation of this Act, the Corporation Code, the General Banking Law, the Insurance Code, the SRC, or any related laws and any rules, regulations or orders thereunder; v. Any person judicially declared to be insolvent, or incapacitated to contract; and vi. Any person found guilty by a foreign court, regulatory authority or government agency of the, acts or violations similar to any of the acts or misconduct enumerated in the foregoing paragraphs. A conviction in the first instance shall be considered sufficient ground for disqualification. 8.17 Executive Compensation - The total annual compensation of all executive officers of the REIT shall not exceed such percentage of the net income before regular corporate income tax of the REIT during the immediately preceding taxable year, as may be provided in the IRR of this Act and shall be governed by the provisions on related party transactions. 8.18 Fund Manager and Property Manager Fees Fees received by the REIT fund manager and the REIT property manager from the REIT shall not exceed one percent (1%) of the net asset value of the assets under management. SEC. 9. Reportorial and Disclosure Requirements. 9.1 Requirements The REIT shall comply with the reportorial and disclosure requirements prescribed by the Corporation Code, the SRC and the Exchange. At the minimum, the REIT shall disclose the following information: i. Material contracts as defined under Section 3 of this Act ii. Allowable investments of the REIT under Section 8.3 hereof; iii. Related party transactions under Section 8.11 hereof; iv. Contracts between the REIT and fund manager or the property manager, including the identity of the parties, contract price, fees and the other basic terms of the contract; v. Valuation of the real estate properties of the REIT, including the valuation methodology used therefore; vi. Material changes in the income stream of the REIT; vii. Any fee received by any party relating to the acquisition or disposition of the real estate of the REIT; viii. Merger, consolidation, joint venture, takeover or spin-off involving the REIT; IX. Any modification of the rights of the holders of any class of securities issued by the REIT and the corresponding effect of such modification upon the rights of the holders; x. Any declaration of cash dividend, stock dividend, property dividend and preemptive rights by the REIT; xi. Appointment of a receiver or liquidator for the REIT; xii. Change in control of the REIT; xiii. Losses or potential losses which amount to at least five percent (5%) of the deposited property of the REIT; xiv. Occurrence of any event of dissolution with details in respect thereto; xv. Acts or facts that might seriously impair the business activities of the REIT; xvi. Creation of mortgages, pledges or liens on the properties of the REIT; xvii. Any development activity undertaken by the REIT, including the essential details thereof; xviil. Direct and indirect ownership of directors and principal officers in the securities of the REIT; xix. Any amendment to the articles of incorporation and bylaws of the REIT; and xx. Any planned acquisition of outstanding shares or disposition of treasury shares of the REIT.

9.2 Special Quarterly and Annual Reports In addition to the quarterly and annual reportorial and disclosure requirements prescribed for public and listed companies, the REIT shall make a report on and disclose the following to the Commission and the Exchange: i. Summary of all real estate transactions entered into during the period, including the identity of the parties, the contract price, and their valuations, including the methods used to value the assets; ii. Summary of all the REITs real estate assets, including the location of such assets, their purchase prices and the latest valuations, rentals received and occupancy rates, and/or the remaining terms of the REITs leasehold properties; iii. Comparative summary of the financial performance of the REIT covering various time periods (e.g. quarterly, one (1)-year, three (3)-year, five (5)-year or (10)-year). 9.3 REIT Plan The REIT plan or prospectus shall comply with the requirements of the SRC and disclose the risks specific to investing in REITs. 9.4 Failure of Compliance Failure to comply with reportorial and disclosure requirements shall subject the REIT to the applicable penalties under the SRC and the rules of the Exchange, without prejudice to the filing of the appropriate administrative, civil or criminal action under this Act or existing laws. ARTICLE III TAXES AND OTHER RELATED ISSUES SEC. 10. Income Taxation of REITs. A REIT shall be subject to income tax under Chapter IV, Title II of the National Internal Revenue Code of 1997, as amended, on its taxable net income as defined in this Act: Provided, That in no case shall a REIT be subject to the minimum corporate income tax, as provided under Section 27(E) and Section 28(A)(2) of the same Code: Provided, further, That for purposes of computing the taxable net income of a REIT, dividends distributed by a REIT from its distributable income after the close of a taxable year and on or before the last day of the fifth (5) month following the close of the taxable year shall be considered as paid on the last day of such taxable year. A REIT shall be subject to the income tax on its taxable net income as defined in Chapter V, Title II of the National Internal Revenue Code of 1997, as amended, instead of its taxable net income as defined in this Act, upon the occurrence of any of the following events subject to such curing period as may be prescribed in the IRR of this Act: i. Failure to maintain its status as a public company as defined in Section 8.1 of this Act; ii. Failure to maintain the listed status of the investor securities on the Exchange and the registration of the investor securities by the Commission; and/or iii. Failure to distribute at least ninety percent (90%) of its distributable income required under Section 7 of this Act. SEC. 11. Creditable Withholding Tax. Income payments to a REIT shall be subject to a lower creditable withholding tax of one percent (1%). SEC. 12. Transfer of Real Property. Any existing, law to the contrary notwithstanding, the sale or transfer of real property to REITs, which includes the sale or transfer of any and all security interest thereto, shall be subject to fifty percent (50%) of the applicable Documentary Stamp Tax (DST) imposed under Title VII of the National Internal Revenue Code of 1997, as amended. All applicable registration and annotation fees to be paid, related or incidental to the transfer of assets or the security interest thereto, shall be fifty percent (50%) of the applicable registration and annotation fees. The incentives granted under this section can be availed of by an unlisted REIT, provided it is listed with an Exchange not later than two (2) years from the date of the initial availment of the incentives. The fifty percent (50%) of the applicable DST shall nevertheless be due and demandable together with the applicable surcharge, penalties, and interest thereon reckoned from the date such taxes should have been paid upon the occurrence of any of the following events subject to such curing period as may be prescribed in the IRR i of this Act: i. Failure to list with an Exchange within the period prescribed in this section; ii. Failure to maintain its status as a public company as defined in Section 8.1 of this Act; iii. Failure to maintain the listed status of the investor securities on the Exchange and the registration of the investor securities by the Commission; and/or iv. Failure to distribute at least ninety percent (90%) of its distributable income required under Section 7 of this SEC. 13. Issuance and Transfer of Investor Securities. The following rules shall apply: i. The original Issuance of investor securities shall be subject to DST under Title VII of the National Internal Revenue Code of 1997, as amended; ii. Any sale, barter, exchange or other disposition of listed investor securities through the Exchange, including block sales or cross sales with prior approval from the Exchange, shall be subject to the stock transaction tax imposed under Section 127(a) of the National Internal Revenue Code of 1997, as amended; iii. Any sale, barter or exchange or other disposition of listed investor securities through the Exchange, including block sales or cross sales with prior approval from the Exchange, shall be exempt from the DST prescribed under Title VII of the National Internal Revenue Code of 1997, as amended; and iv. Any initial public offering and secondary offering of investor securities shall be exempt from the tax imposed under Section 127(b) of the National Internal Revenue Code of 1997, as amended SEC. 14. Dividends Paid by REITs. Cash or property dividends paid by a REIT shall be subject to a final tax of ten percent (10%), unless: (a) the dividends are received by a nonresident alien individual or a nonresident foreign corporation entitled to claim a preferential withholding tax rate of less than ten percent (10%) pursuant to an applicable tax treaty; or (b) the dividends are received by a domestic corporation or resident foreign corporation, or an overseas Filipino investor in which case, they are exempt from income tax or any withholding tax: Provided, That in the case of overseas Filipino investors, they are exempt from the dividends tax for seven (7) years from the effectivity of the tax regulations implementing this Act. SEC. 15. VAT on Gross Sales or Gross Receipts of REITs. A REIT shall be subject to value-added tax (VAT) imposed under Title IV of the National Internal Revenue Code of 1997, as amended, on its gross sales from any disposal of real property, and on its gross receipts from the rental of such real property. A REIT shall not be considered as a dealer in securities and shall not be subject to VAT on its sale, exchange or transfer of securities forming part of its real estate-related assets. SEC. 16. General Application of the National Internal Revenue Code of 1997, as amended. Unless otherwise provided under this Act, the internal revenue taxes under the National Internal Revenue Code of 1997, as amended, shall apply.

SEC. 17. Delisting of REITs. In the event the REIT is delisted from the Exchange, whether voluntarily or involuntarily, for failure to comply with the provisions of this Act or rules of the Exchange, the tax incentives granted under this Act shall be ipso factorevoked and withdrawn as of the date the delisting becomes final and executory and any tax incentives that may have been availed of by the REIT thereafter shall immediately be refunded to the Government and the surcharge and penalty prescribed by Section 19 hereof shall apply. If the delisting is for causes highly prejudicial to the interest of the investing public such as violation of the disclosure and related party provisions of this Act or insolvency of the REIT due to mismanagement or misappropriation, conversion, wastage or dissipation of its corporate assets, the responsible persons shall refund to its investors at the time of final delisting the value of their shares. ARTICLE IV PENAL PROVISIONS SEC. 18. Revocation of Registration. If the Commission finds out that the REIT was established so as to seek the benefits of this Act without a true, intention to carry out its provisions and/or the IRR, the Commission shall revoke or cancel the registration of the securities of the REIT. The REIT shal1 pay the applicable taxes plus interests and surcharges under the National Internal Revenue Code of 1997, as amended. SEC. 19. Penalties. A fine of not less than Two hundred thousand pesos (Php200,000.00) nor more than Five million pesos (Php5,000,000.00) or imprisonment of not less than six (6) years and one (1) day nor more than twentyone (21) years, or both at the discretion of the court, shall be imposed upon any person, association, partnership or corporation, its officer, employee or agent, who, acting alone or in connivance with others, shall: i. Understate or overstate the financial statements of the ii. Cause any loss, conversion, misappropriation of the assets, securities or income of the REIT; iii. Use another person to hold the legal title of the shares of the REIT for his benefit for the purpose of circumventing the minimum public ownership prescribed in Section 8.1 of this Act; iv. Allow himself to be used by another person to hold legal title to the shares of the REIT for the purpose of circumventing the minimum public ownership prescribed in Section 8.1 of this Act; v. Submit false or misleading certification on the minimum public ownership required by this Act; or vi. Violate any of the provisions of this Act, or the rules and regulations promulgated under authority hereof. If the offender is a corporation, partnership or association or other juridical entity, the penalty may, at the discretion of the court, be imposed upon such juridical entity and/or upon the officer or officers of the corporation, partnership, association or entity responsible for the violation, and if such officer is an alien, he shall in addition to the penalties prescribed, be deported without further proceedings after service of sentence. The prosecution and conviction of the offender under this Act and the imposition of the above penalties shall be without prejudice to the administrative, civil and criminal liabilities of the offender under the SRC. ARTICLE V MISCELLANEOUS PROVISIONS SEC. 20. Corporate Governance. The REIT property manager and the REIT fund manager shall be subject to the principles of corporate governance adopted by the proper regulatory body. SEC. 21. Use of Registration Fees. To carry out the purposes of this Act, the. Commission shall retain and use fifty percent (50%) of all fees paid to it, relative to the establishment of REITs and the registration of their securities in addition to its annual budget. SEC. 22. Implementing Rules and Regulations. Within ninety (90) days from the effectivity of this Act; the Commission, in coordination with the Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DOF) and in consultation with other stakeholders such as the Philippine Stock Exchange. and the real estate industry shall promulgate the implementing rules and regulations of the provisions of this Act: Provided, That the Commission, the BSP and the DOF may continue to issue separate regulations that will apply exclusively to the institutions under their respective jurisdiction, consistent with the implementing rules and regulations: Provided, further, That ,the Commissioner of the Bureau of Internal Revenue shall issue the lRR regarding all tax provisions of this Act (Tax Regulations), subject to the review of the Secretary of Finance, in accordance with Section 4 of the National Internal Revenue Code, as amended, after full and complete consultation with all sectors concerned. SEC. 23. Separability Clause. If, for any reason, any article or provision of this Act or any portion therefore or application of such article, provision or portion thereof to any person, group or circumstance is declared invalid or unconstitutional, the remainder of this Act shall not be affected by such decision. SEC. 24. Repealing Clause. All laws, executive orders, rules and regulations and parts thereof which are inconsistent With this Act are hereby repealed or amended accordingly. SEC. 25. Effectivity Clause. This Act shall take effectfifteen (15) days after its complete publication in the Official Gazette or in at least two (2) newspapers of general circulation in the Philippines. Approved, (Sgd.) PROSPERO C. NOGRALES (Sgd.) JUAN PONCE ENRILE Speaker of the house of Representatives President of the Senate This Act which IS a consolidation of Senate Bin No. 2639 and House Bill No. 6379 was finally approved by the Senate and the House of Representatives on September 29, 2009 and September 30, 2009, respectively (Sgd.) MARILYN B. BARUA-YAP (Sgd.) EMMA LIRIO-REYES Secretary General House of Secretary of the Senate Representatives Approved: GLORIA MACAPAGAL-ARROYO President of the Philippines *Lapsed into law on DEC 17 2009 without the signature of the President Click here if you want to download a PDF copy of Republic Act No. 9856 Republic Act No. 9856 Implementing Rules and Regulations The Securities and Exchange Commission (SEC) released just last Monday, April 19, 2010, the draft Implementing Rules and Regulations or IRR for comments until April 26, 2010. The draft REIT Philippines IRR is now available for viewing and can

be accessed here: Draft REIT Act of 2009 Implementing rules and regulations (IRR) released by the SEC. To our financial freedom! Jay Castillo Real Estate Investor Real Estate Broker License #: 20056 Blog: http://www.foreclosurephilippines.com Follow me in twitter:http://twitter.com/jay_castillo Become a Fan in Facebook:Foreclosure Philippines fan page Text by Jay Castillo. Copyright 2010 All rights reserved. PS. Are you a new visitor? Click here NOW to start learning more about foreclosure investing in the Philippines and dont forget to subscribe to e-mail alerts and get notified of new listings of bank foreclosed properties, public auction schedules, and real estate investing tips. Inbox getting full? Subscribe through my RSS Feed instead! PPS.Do you know anyone who is either an investor or a home buyer looking for a property? Please refer them to our Buy a property form to enter their property requirements. If you need to sell a property fast, please use our Sell a property form to enter details of the property you are selling. If it fits our needs, we just might buy it. Lastly, if know anyone who wants to make 10-15% return on their money, refer them through our Investors form. Thanks a million! A post by Cherry Castillo I have come across many comments from OFWs who want to invest in real estate in the Philippines but have no one to rely on to do the legwork in the country choosing a property, collecting rents, etc. There are also those who want to invest in real estate but are more conservative or risk-averse, or those who only have a small amount set aside for investment. For the beginning real estate investor or the OFW investor, one solution is to invest in a Real Estate Investment Trust (REIT). Please continue reading about REITs below What is a REIT? A Real Estate Investment Trust or REIT is a stock corporation established principally for the purpose of owning income-generating real estate assets. A corporation becomes a REIT and qualified to avail of the incentives and privileges of the REIT Act when its REIT Plan is rendered effective by the Commission and its listing as a REIT is approved by the stock exchange. REIT Law and Regulations Republic Act (R.A.) No. 9856 An Act Providing the Legal Framework for Real Estate Investment Trust and For Other Purposes lapsed into law on December 17, 2009. It was published in two newspapers of general circulation on January 25, 2010. Thus, its effectivity is on February 9, 2010 or fifteen (15) days from such publication. Please click on this link for a copy of the full text of R.A. No. 9856. Many investors were excited with the passage of R.A. No. 9856 but everybody had to wait first for its Implementing Rules and Regulations (IRR). Definitely, the release will be very soon as the Securities and Exchange Commission (SEC) released just last Monday, April 19, 2010, the draft (IRR) for comments until April 26, 2010 (a copy of the draft REIT IRR is now available here: Draft REIT Act of 2009 Implementing rules and regulations (IRR) released by the SEC ). A summary of the salient features of the RA 9856 IRR was prepared by Businessworld, in its article entitled Draft REIT rules issued by regulator which can be accessed at http://www.bworldonline.com/main/content.php?id=9485. Philippine REITs SM Prime Holdings, Inc., the countrys largest mall operator, and property giant Ayala Land, Inc. (ALI) are looking at raising $300 million each through a REIT. [Seehttp://www.smprime.com/smprime/index.php?p=587&type=2&sec=49&aid=5466 andhttp://www.ayalaland.com.ph/article/ayala_land_to_raise for more information on the plans of SM Prime and ALI.] This early, the countrys real estate giants have already set their sights on the REIT and have engaged financial advisers to guide them with their plans. This is a clear sign that the REIT is bound to be a gold mine. Why invest in a REIT? A REIT is entitled to several tax incentives, so much so that the Department of Finance has warned that the government stands to lose billions of pesos due to the passing of the REIT Act and IRR. Of course, as investors, we want to pay the least tax as legally possible. Based on the draft IRR, the following are some of the incentives of REITs:

A REIT shall be subject to regular corporate income tax but not minimum corporate income tax (MCIT); Any sale or transfer of real property to a REIT, including the sale or transfer of any and all security interest thereto shall be subject to fifty (50%) percent of the applicable DST; All applicable registration and annotation fees relative or incidental thereto shall be fifty (50%) of the applicable registration and annotation fees; Any sale, barter, exchange or other disposition of listed investor securities through the Exchange, including cross or block sales with prior approval from the Exchange shall be exempt from DST; Any initial public and secondary offering of investor securities shall be exempt from the IPO tax imposed under the NIRC; The gross sales from any disposal of real property or gross receipts from the rental of such real property shall be subject to VAT; A REIT shall not be considered as a dealer of securities and shall not be subject to VAT on its sale, exchange or transfer of securities forming part of its real estate-related assets. Also, a REIT shall be required to distribute at least ninety (90%) percent of its distributable income every year so investors get regular dividends. In addition this is good news for OFWs overseas Filipino investors are exempt from the dividends tax for seven (7) years from the effectivity of the tax regulations implementing the Act. If a domestic corporation is the REIT investor, the dividends will be exempt from tax. Aside from dividends of course, you also stand to gain if the shares appreciate. I think that REIT is a marriage of real estate and stocks two of the best investment vehicles that would produce the most wealth. If you look at the worlds or the countrys wealthiest persons, you will see that many grew their wealth from real estate (think Henry Sy, the Ayala family) or stocks (think Warren Buffet). So, no need to think which one between real estate and stocksis better!

How do we invest in a REIT? You may invest in a REIT by subscribing to or purchasing shares of stock of the REIT. The investment amount may be affordable to most people, and you can purchase a blue chip REIT in the Philippines like that of Ayala Land, Inc. or SM Prime Holdings, Inc. You may even choose to put your monthly savings in a REIT instead of banks which earn very little interest. Comments about REIT? If you have any comments on the draft IRR, please send them to the SEC. On my part, Im planning to invest my monthly savings in Ayala and SM prime REITs (after I finish paying off my debts to my husband, tsk tsk). I wish to buy REIT stocks on the first day and watch them skyrocket later! *crosses fingers* I also hope to be part of the team advising REITs as I think its really the next wave, so to speak. REITs are also all the rage in other countries. So Ill let you know once the IRR is finalized. Till then, lets chew on the draft and envision the endless possibilities like a Foreclosure Philippines or RYP Realty REIT right up there with Ayala and SM Prime! That would be awesome! The P300 million minimum capitalization is doable if you break it up into small amounts just around P100k for each subscriber of Foreclosure Philippines! Cherry Castillo Cherry is my wife. She is a certified public accountant (CPA) and lawyer. To our success and financial freedom! Jay Castillo Real Estate Investor