Implementing Rules and Regulations (IRR)

RULES AND REGULATIONS Implementing Provincial Ordinance No. 12, as amended (Investment Incentives Code) Pursuant to Section 5 of Provincial Ordinance No. 12, Series of 1998, otherwise known as the Agusan del Sur Investment Incentives Code of 1998, the following rules and regulations are hereby promulgated to implement the intent and provisions of this code. Part I GENERAL PROVISIONS RULE I. DEFINITIONS AND BASIC GUIDELINES Section 1. For purposes of these rules and regulations: a.) Board - The Provincial Board of Investment b.) Province - comprises the fourteen (14) municipalities and the three hundred eighteen (318) barangays of the province of Agusan del Sur and others that may hereafter be duly constituted c.) Long-term investment - projects operating in the Province of Agusan del Sur and contributes to the economic improvement thru the provision of employment of Agusan del Sur residents and pays taxes for national and local government units for at least ten (10) years d.) Juridical Person - is a person, who by operation of law has acquired status and rights to operate a legitimate business, can sue and be sued e.) Registered Enterprises - are establishments, which are registered with the appropriate government agencies and acquired rights and privileges to operate business within the jurisdiction of the province of Agusan del Sur f.) CDA - the Cooperative Development Authority g.) DTI - the Department of Trade and Industry h.) SEC - the Securities and Exchange Commission i.) Grantee - refers to the recipient of the incentives and privileges this Rules and Regulations j.) Doing Business shall be any act or the combination of the following acts: 1. Soliciting orders, purchases (sales), concrete and specific solicitations by a foreign firm or by an agent of such foreign firm, not acting independently of the foreign firm, amounting to negotiations or fixing of the terms and conditions of sales, regardless of where the contracts are actually executed in writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the province. The arrangements agreed upon as to manner, time and terms are immaterial. 2. Appointing a representative or distributor who resides in the province, unless said representative or distributor has an independent status i.e. it transacts business in its name and for its own account, and not in the name or for the account of a principal. 3. Opening offices, whether called liaison offices, agencies or branches, unless proven otherwise. 4. Establishing a factory, workshop or processing plant. 5. Undertaking building construction or erection project. 6. Opening a store, whether wholesale or retail, without prejudice to the provisions of the Retail Trade Act. 7. Maintaining or operating a warehouse for business purposes, including the storage, display or delivery of its own products.

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k.) New Investment - the investment made after the approval of the application for incentives by either new or existing business. RULE II. POLICY DECLARATION AND THRUSTS Section 1. Policy - It is hereby declared as policy to encourage, attract, promote and welcome long term investments into activities, which will significantly contribute to the provincial socio-economic development and industrialization of Agusan del Sur. Investment shall be encouraged in enterprises that significantly promote livelihood and employment opportunities for Agusanons, enhance economic value of farm products, promote the welfare of the consumers, transfer relevant technologies in agriculture, industry and support services, and/or expand the scope, quality and volume of exports produced in the province. Section 2. Exclusion - It is also the policy of the provincial government to ensure that all ordinances relative to business operation shall be an accountability of the business concern in relation to environmental preservation, maintenance and development as well as human and ecological security. Large scale mining in the province shall therefore be excluded from these incentives. Responsibility - It is likewise a policy that the business that is established should not only enjoy the tax exemption as provided herein, but shall include in its responsibility to act and respond to calls necessary and essential for the enrichment of our culture, the promotion of health safety, social justice and general welfare, and maintenance of peace and order, and the preservation of comfort and convenience of the inhabitants. PART II INCENTIVES Rule III. QUALIFICATION FOR APPLICANTS Section 1. Qualifications - Every applicant for registration must possess the following qualifications as prescribed in the code: 1. Shall either be natural or juridical person or persons not disqualified by the Philippine Laws from doing business in the country. 2. Any form of organization may avail this incentives. 3. Duly registered or accredited with the SEC, DTI, CDA or any appropriate government agency. Section 2. Specific Requirements 1. Formal request to register as a business enterprise under the Code and avail of its incentives shall contain the following initial information: a. Type of business b. Product lines c. Proprietor/manager of the business d. Estimated total workforce e. Initial capital 2. Certificate of Business Name for single proprietorship. 3. SEC or CDA Certificate of registration for partnership, corporation or cooperative. 4. The application for registration (PBI Form No. 2) 5. Simplified Feasibility Study

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RULE IV. APPLICATION FOR REGISTRATION Section 1. Filing of Application - Applications for Registration shall be filed with the Board through the ASERBAC. The application is considered officially accepted upon being recorded in the Registration Book of the PBI. Documents - The specific requirements in Rule III, Section 2 should be completed with the application for registration duly notarized. Incomplete Papers - Within 24 hours from receipt of application, the Board shall notify the applicant of all pertinent requirements not complied with. Upon completion of the deficiencies, the application shall be officially accepted immediately. Automatic Approval - Within twenty (20) working days from official acceptance thereof the Board shall act on the application, otherwise the same shall be considered automatically approved.

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RULE V. REGISTRATION AND FILING FEES Section 1. Filing Fee - FIVE HUNDRED PESOS (P500.00) is collected as a filing fee, upon filing of application for registration. This amount is not refundable in case the subject is denied.

RULE VI. EVALUATION OF APPLICANTS Section 1. Criteria for Evaluation - To qualify, any applicant should meet the initial capitalization in new investment of not less than ONE MILLION PESOS (P1,000,000.00), provided that the said amount is deposited in any bank of the applicant's choice in Agusan del Sur. The manpower requirement of Ten (10) as provided in Section 6.2 of the Code shall be complied with. RULE VII. INCENTIVES TO REGISTERED ENTERPRISES Section 1. Incentives - All registered enterprises shall be granted the following incentives: REAL PROPERTY TAX HOLIDAY. For three (3) years from the date of registration, registered firms shall be fully exempt from Real Property Taxes for properties acquired and actually used for its business operations. TRANSFER OF REAL PROPERTY TAX. For three (3) years from commercial operation, registered and expanding firms are exempt from the payment of transfer fees for real properties. (i.e., Brokering, real estate business) FRANCISE TAX. For three (3) years from the date of registration firms are exempt the payment of franchise tax levied by the provincial government. PROVINCIAL GOVERNOR'S FEES. For three (3) years from the date of registration, firms are exempt from the payment of provincial governor's fees and other charges.

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Subject to the adoption of the local Sangguniang Bayan concerned, qualified investors are exempt from the payment of fees relative to the issuance of buildings or fencing permits. This applies only to buildings and other structures that are directly and actually used for business operations. This paragraph does not apply in case where the investor's business is for housing or building houses for a profit. Subject to the adoption of the local Sangguniang Bayan concerned, qualified investors shall also enjoy discounts on all local fees and other charges relative to the issuance of local permits during the first three (3) years of operation, to wit: First year of operation . . . . . . . 35% Second year of operation . . . . 25% Third year of operation . . . . . . 15% Agusan del Sur resident professionals who are hired on full time basis by the successful applicants to this investment program either as officers, executives, consultants or as mere employees, by virtue of this Ordinance shall enjoy a fifty percent (50%) discount per year on professional fees levied by the provincial government. Enjoy other incentives or entitlements as provided under the Philippine Omnibus Investment Code of 1987, and those being offered by the host Local Government Unit within the province, whichever is more advantageous to the investors. RULE VIII. THE PROVINCIAL BOARD OF INVESTMENTS Section 1. Composition - The Provincial Board of Investment shall be composed of the following: Chairman Vice- Chairman Members Section 2. The Provincial Governor The President or the duly elected representative of the Agusan del Sur Chamber of Commerce and Industry Foundation, Inc. Chairman, Committee on Budget, Finance and Appropriations of the Sangguniang Panlalawigan Representative from Department of Trade and Industry Provincial Office, who shall be permanently designated by the agency. President or the duly elected representative of the Agusan del Sur Bankers Association. A member of the Sangguniang Panlalawigan of Agusan del Sur duly elected by the majority of the SP members. Representative of a duly accredited Non-Government Organization (NGO) in Agusan del Sur. President of Mayor's League in the province. The Provincial Budget Officer.

Terms of Office - The members of the Board shall hold a term of two (2) years. Any member who is a career executive and/or is employed by the government is required to submit the official designation from their chief of office as a member of the PBI. Executive Committee - The Executive Committee shall be composed of any of

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the three PBI members. It shall study and review the recommendations of the working committee and therefore shall meet as often as needed. The membership to this committee is to be decided by the Board and for a term not to exceed four months. The membership shall be rotated among all members of the Board. RULE IX. BOARD ACTION Section 1. Board Decision, Notice to Applicant. The Board shall render its decision within twenty (20) working days after official acceptance of the application. The decision of the Board on every application for registration as well as the terms and conditions of registration shall be communicated in writing to the applicant. Where the board does not act upon an application for registration within the said period of time, the same shall be considered automatically approved without prejudice to the Board imposing the usual normal conditions as well as additional specific terms and conditions. From the date of receipt of said notice, the applicant shall have thirty (30) calendar days within which to submit its acceptance and comply with the pre-registration requirements, if any. Failure to accept or comply with the requirements within the said period may be construed as a rejection of the proposed registration or abandonment, and the Board approval will be accordingly withdrawn. No right to any incentive is vested in an enterprise unless the Certificate or Registration is finally issued.

RULE X. CERTIFICATE OF REGISTRATION Section 1. Issuance of Certificate - Before the issuance of the certificate of registration, the applicant shall affix his/her signature on said certificate indicating his conformity to the terms and conditions of the registration. 1. Letter, or if a corporation, resolution of the applicant's board of directors formally accepting the proposed terms and conditions of registration; 2. Sworn of Statement authorized by the Board of Directors/partners or by the individual adopting and/or affirming all representations and commitments made by the applicant to the Board, and stating that with the exemption of those which the Board has been duly advised in writing, all information and data hereto submitted by it to the Board are still correct; and 3. All pre-registration requirements, if any, imposed by the Board. RULE XI. OBLIGATIONS OF GRANTEES Section 1. Compliance with Obligation - The enterprise shall observe and abide by the provisions of the Code and its implementing rules and regulations, and take adequate measures to ensure that its obligations there under as well as those of its officers, employees, and stockholders are faithfully discharged. Visitorial Powers - The Enterprise shall allow the duly authorized representatives of the Board to inspect pertinent records and documents to ascertain compliance with the code and its implementing rules and regulations, and the terms and conditions of its registration. Submission of Reports and Other Documents - Every registered enterprise shall, for each preferred area of investment, submit to the Board the following reports and/or documents within the time herein prescribed: Page 5

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a. Amendment of article of incorporation or by-laws within thirty (30) calendar days from the date of registration of said amendments within the Securities and Exchange Commission; b. Replacement of any director or other principal officers, with and indication of the nationality of each new officer, and accompanied by a copy of his certificate of citizenship, if naturalized Filipino, within thirty (30) calendar days after said replacement; c. List of alien officers and employees, their nationalities and positions, together with a copy of its plantilla within the month of January every year; d. If the enterprise has alien employees discharging supervisory, technical or advisory functions, its program for training Filipinos in said functions-within thirty (30) calendar days from the registration of the enterprise; e. Report on the Implementation of the above-training program within the month of June every year; f. Change of address or principal place of business within ten (10) calendar days after such change. h. Notice of the date the enterprise began operation within ten (10) calendar days from said date; i. Income tax returns thirty (30) calendar days from the filing thereof; j. Audited annual financial statement, viz: 1) Profit and Loss Statement; and 2) Balance Sheet one (1) month from date of filing with the Bureau of Internal Revenue of the annual income tax return for the preceding calendar/fiscal year. PART III PENAL PROVISIONS RULE XII. PENALTIES AND CANCELLATION Section 1. Cancellation - Wilful violation committed by the investors or any of their duly authorized representatives on any provision of this Code shall be a ground to withdraw the privileges as may be determined by the PBI. Notice of Withdrawal - Whenever a registered enterprise decides to withdraw from business, or suspend its operations in the preferred area for at least six (6) months, a written notice hereof shall be sent to the Board before the decision is implemented. Withdrawal - Withdrawal from business operations in the preferred area shall automatically cancel the certificate of registration, which shall then be turned over to the Board. Upon such withdrawals, the enterprises and its stockholders shall cease to be entitled to the incentives provided in the Code. The effect of withdrawal or suspension of operations in the preferred area shall, in each particular instance, be determine by the Board, taking into account the reasons therefore and the condition of the enterprise concerned. The Board may, in appropriate cases, require refund of incentives in whole or in part, with or without interest of penalties. Section 4. Non-Implementation of Project Timetable - A delay of one (1) year in the implementation of the project timetable as set by the Board shall be a ground for cancellation of the registration.

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PART IV FINAL PROVISIONS RULE XIII. SCOPE OF THESE RULES Section 1. RULE XIV. Exception - This Rule does not apply to financing or banking institutions, which are governed, by the Central Bank and other special laws. EFFECTIVITY. approval. These Rules and Regulations shall take effect upon its

Certified Correct: ALEXANDER C. ALAAN Head PBI Secretariat Date: June 15, 1999 Approved: EDILBERTO E. BERNAL President, Agusan del Sur Chamber of Commerce Vice Chairman, PBI LOLITA I. DORADO Provincial Director, DTI Member, PBI WILFREDO P. ALAVA President, Agusan del Sur Banker's Association Member, PBI HILARION P. SUSARNO NGO Representative Member, PBI SANTIAGO B. CANE, JR. SP Member Member, PBI

ADOLPH EDWARD G. PLAZA SP Member Member, PBI ISAIAS C. MASENDO President, Mayor's League Member, PBI

CRISTOBAL A. CELLAN, JR. Acting Provincial Budget Officer Member, PBI

VALENTINA G. PLAZA Provincial Governor Chairperson, PBI

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