CREATING THE PHILIPPINE SUGAR CORPORATION

WHEREAS, among the export products of the Philippines, sugar
has proven to be one of the biggest and most reliable sources of foreign
exchange earnings, accounting for an industry average of US$450 million annually
for the last ten years;

WHEREAS, many of the obligations of the sugar mills,
refineries and other sugar facilities acquired after the war at heavy financing
cost to rehabilitate the damaged sugar industry remain unpaid and in arrears,
creating an onerous burden not only to their owners but to the local financing
institutions;

WHEREAS, in view of their vital role in our economy, it is
hereby declared as a governmental policy to continue assisting the sugar
industry through a government corporation especially charged and empowered to
design and implement a program for sugar mills, refineries and other sugar
facilities;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the Constitution, hereby
order and decree:

SECTION 1. Philippine Sugar Corporation — There is
hereby created a body corporate to be known as the Philippine Sugar
Corporation.

SEC. 2. Primary Purposes. The primary purposes of
the Corporation shall be as follows:

1. To provide financing in the acquisition, rehabilitation and/or expansion of
   sugar mills, refineries, and other related facilities used in the manufacture,
   packing, storage; distribution, and shipment of sugar and its by-products and
   derivatives;
2. To see to the viability and stability in the operation of the aforesaid
   entities; and
3. To provide for the eventual redemption and/or reacquisition of the aforesaid
   entities by the private sector.

SEC. 3. Functions. — The Corporation shall have the
following functions:

1. To render assistance to sugar mills, refineries, and other related
   facilities either in the form of loans, guarantees, investment in equity,
   outright purchase, lease, management, including other suitable credit
   accommodations or arrangements;
2. To borrow and lend money for itself or for sugar accounts, to issue bonds
   and debentures from time to time as may be necessary and/ or to guarantee
   obligations in accordance with its corporate purposes and functions;
3. To assist in the repayment and/or restructuring of the accounts of sugar
   mills, refineries, and other related facilities used in the manufacture,
   packing, storage, distribution, and shipment of sugar and its by-products and
   derivatives;
4. To provide assistance in the preparation, financing and execution of sugar
   development or expansion programs including the formulation of specific project
   proposals,
5. To acquire during the duration of the indebtedness of each mill through
   importation and/or local purchase of such equipment, machinery, spare parts as
   may be necessary for the development, expansion, and/or rehabilitation of such
   sugar mills, refineries, transport systems, storage facilities and other
   activities in the manufacture, packing, distribution and shipment of sugar and
   hauling or transportation of sugar cane in which Philippine Sugar Corporation
   may have an interest, including agricultural machinery and road construction and
   maintenance equipment to be used in the Mill Districts concerned;
6. To acquire, operate, lease, or manage sugar mills, refineries, and other
   related facilities used in the manufacture, packing, storage, distribution, and
   shipment of sugar and its by-products and derivatives.

SEC. 4. Corporate Powers. — The Corporation is
hereby authorized to enter into contracts or own real and personal property, and
to pledge, encumber, transfer or otherwise dispose of the same; to borrow and
lend money and/or guarantee obligations in accordance with its corporate
purposes and functions; to sue and be sued; and otherwise to do and perform any
and all things that may be necessary or proper to carry out its purposes and
functions as specified in this Decree, or as essential to the proper conduct of
its operations.

SEC. 5. Borrowing and other Miscellaneous Powers. —
In addition to the powers specified elsewhere in this Decree, the Corporation
shall have the power:

1. To borrow funds locally through loans as debtor or guarantor of loans of
   sugar mills, refineries and other related facilities and subsidiaries of the
   Corporation, float bonds and debentures, and avail of other credit
   accommodations and facilities; and in the case of foreign loans, to negotiate
   for itself or as Guarantor, in accordance with Central Bank rules and
   regulations and upon the recommendation of the Minister of Finance and finally
   subject to the approval of the President of the Philippines;
2. To buy and sell securities that the Corporation has issued or guaranteed, or
   those issued by entities in which the Corporation may have an interest;
3. To underwrite or participate in the underwriting of securities issued by any
   domestic entity or enterprises for purposes consistent with the purposes of the
   Corporation;
4. To invest funds not needed in its operations;
5. To exercise such other powers and establish such rules and regulations as
   may be necessary and appropriate in furtherance of its purposes and functions;
6. To have subsidiaries either by investment in existing companies or by
   organizing new companies.

SEC. 6. Operating Guidelines. — The operations of
the Corporation shall be conducted in accordance with the following
guidelines:

1. The Corporation may borrow funds for re-lending, subject to a service
   charge, to sugar mills, refineries, etc. or as an investment in equity.
2. The Corporation may float bonds from time to time up to Six Billion Pesos
   (P6 Billion) under such terms and conditions as may be approved under existing
   procedures.
3. The Corporation may assist the sugar mills, refineries, and sugar facilities
   in obtaining loans from local and foreign sources at advantageous terms, subject
   to the guarantee of the Corporation, if necessary.
4. Where the control of the sugar mills, refineries, or sugar facilities is
   transferred to the Corporation, the management or supervision may be undertaken
   through an affiliate or subsidiary of the Corporation organized as a private
   corporation under the Corporation Law.
5. The Corporation shall at all times be guided by sound business procedures
   and principles in its operations.

SEC. 7. Capital Stock. — The authorized capital
stock of the Corporation shall be Five Billion Pesos (P5,000,000,000.00) of
which P2 Billion shall be initially subscribed by the Philippine Sugar
Commission (65%) and the Philippine National Bank (35%), with an initial paid-in
capital of One Hundred Twenty-Five Million Pesos (P125 Million).

SEC. 8. Board of Directors, Composition. — The
powers and functions of the Corporation shall be exercised by a Board of
Directors, hereinafter referred to as the “Board”, which shall be composed of
Eleven (11) members, as follows:

1. The Chairman of the Philippine Sugar Commission who shall be the Chairman of
   the Board.
2. The President of the Corporation, who shall be the Vice-Chairman of the
   Board, shall assist the Chairman and act in his stead in case of absence or
   incapacity.
3. All the eleven members of the Board shall be appointed by the President of
   the Philippines, seven to be nominated by the Philippine Sugar Commission and
   four by the Philippine National Bank.
4. The members of the Board shall hold office for one year, or until their
   successors have been appointed and qualified.
5. Vacancies in the Board may be temporarily filled by the action of a majority
   of the other members of the Board, if there is a quorum.

SEC. 9. Powers of the Board. — The Board shall have
the authority:

1. To formulate policies to carry out effectively the provisions of this
   Decree;
2. To prepare and issue rules and regulations necessary for the effective
   discharge of the responsibilities and exercise of the powers assigned to the
   Corporation under this Decree;
3. To direct the management, operations and administration of the Corporation;
4. On the recommendation of the President of the Corporation, appoint, fix the
   remunerations and other emoluments, and remove the personnel of the Corporation;

5. To authorize such expenditures by the Corporation as are in the interest of
   the effective administration and operations of the Corporation.

SEC. 10. Meetings. — The Board shall convene as
frequently as is necessary, but meet at least once a month.

Stockholders meetings shall be held annually or as may be fixed by the Board
of Directors.

SEC. 11. President. — The Chief Executive Officer
of the Corporation shall be the President who shall be appointed by the Board.
He shall be assisted by such executive officials as may be necessary for the
efficient operations of the Corporation.

SEC. 12. Powers and Duties of the President. — The
powers and duties of the President of the Corporation shall be:

1. (a) To prepare the agenda for meetings of the Board and lo submit for the
   consideration of the Board the policies and measures which he believes to be
   necessary to carry out the purposes and provisions of this Decree;
2. To execute and administer the policies and measures approved by the Board;
3. To direct and supervise the operations and internal administration of the
   Board. He may delegate certain of his administrative responsibilities to other
   officers of the Corporation, subject to the rules and regulations of the Board;
   and
4. To exercise such other powers as may be vested in him by the
   Board.

SEC. 13. Remuneration of the President. — The
salary of the President of the Corporation shall be fixed by the Board. The
Board may authorize payment of allowances and other emoluments to the President
of the Corporation.

SEC. 14. Other Officials and Employees of the
Corporation. — All officials and employees of the Corporation shall be
appointed and removed by the Board, on recommendation of the President of the
Corporation.

SEC. 15. Auditor. — The Chairman of the Commission
on Audit shall act as the ex-officio Auditor of the Corporation and, as such, he
is empowered and authorized to appoint a representative who shall be the Auditor
of the Corporation and, in accordance with law, fix his salary, and to appoint
and fix the salaries and number of the personnel to assist said representative
in his work, but in all cases subject to the approval of the Board. The salaries
and all other expenses of maintaining the Auditor’s office shall be paid by the
Corporation.

The funds of the Corporation subject to audit shall be limited to the
proceeds of the bond issues and the portion of the accountee-Central/s
remittances earmarked for the bond redemption, exclusive of the service charge
and other income of the Corporation, to the end that such funds are applied to
the specific purposes herein prescribed. The accountee-Central/s shall continue
to function as purely private business corporations and shall not be subject to
government audit.

SEC. 16. Effectivity Clause. — This Decree shall
take effect immediately.

Done in the City of Manila, this 14th day of November, in the year of our
Lord, nineteen hundred and eighty-three.