Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

scafHFTRENTH CONGRES:
Second Regular Session

HOUSE BILLNO. __ 5070):

Introduced by REPRESENTATIVE LORENZO R. TANADA LIL

EXPLANATORY NOTE

in 1973, then President Marcos issued Presidential Decree 276, imposing a levy of

lograms of copra resecada or its equivalent in other coconut products on every
1 sale beginning August 20, 1973. ‘The tax was supposed to contribute towards the
Coconut Consumers Stabilization Fund, which was an intended subsidy for the domestic
consumption of coconut-based commodities—ostensibly to cushion against an impending
crisis brought about by exorbitant prices in the warld market for fats and oils.

Over the succeeding decade since the levy’s imposition, the charge was hiked to as
anich as P100 per 100 kilos of copra, depending upon prevailing export prices, to average
sound P6o, This amount was shouldered by all the coconut farmers as their contributions,
based on existing levy rates, were deducted from the price of their copra sales. Other
presidential decrees soon followed amending PD 276, and eventually the primary purpose of
the CSI was transformed into a supposed “investment for coconut farmers.” Thus began
the jong and harrowing odyssey of coconut farmers in attempting to reclaim the CCSF, now
kneavn as the Coco Levy Fund.

The Coco Luvy has since been the subjcet of numerous court cases. A number of these
court eases resulted into definitive conclusions by the Supreme Court and the
Sandiganbayan, to wit:

Supreme Court categorically stated in Presidential Commission on Good
Government (PCGG) vs. Philippine Coconut Producers Federation, Inc. (COCOFED),
G.R, Nos, 147062-64 December 14, 2001, pp.24-25, that:

“To avoid misunderstanding and canfusion, this Court will even be
more categorical and positive than its earlier pronouncements: the
coconut levy funds are not only affected with public interest; they are
in fuct, prima facie public funds.

The Supreme Couct further stated in the above quoted decision that:

6, Laws Governing Coconut Levies Recognize Their Public


Nature,

Finally and tellingly, the very laws governing the coconut levies recognize
their publie character. Thus, the third Whereas clause of PD No. 276 treats
them as special funds for a specific public purpose. Furthermore, PD No. 711
transferred to the general funds of the State all existing special and fiduciary
funds including the CCSF. On the other hand, PD No. 1234 specifically
declared the CCS¥ as a special fund for a special purpose, which should be
rreated as a special account in the National Treasury.

On Deceinher 28, 2004, the Sandiganbayan passed a resolution denying the motion
for reconsideration filed by Eduardo M. Cojuangco, Jr, et al last May 25, 2004 and
the motion for reconsideration filed by COCOFED, et al. and Ballares et al. last May
26, 2004 on the graft court's decision last May 7, 2004 on the SMC shares of stoc!
further stating that;

“Ht is high time that the real beneficiaries of the coconut levy funds,
the covonut farmers who contributed to it, and the entire coconut
industry be given a chance to reap the benefits that are due them.”

‘The Sandiganbayan previously decided oa May 7, 2004 that:

“The CHF Companies namely: Southern Luzon Coconut Oil Mills
(SOLCOM); Cagayan de Oro Oil Co., Ine, (CAGOIL); Higan Coconut
industries, inc, (LLICOCO); San Pablo Manufacturing Corp. (SPMC);
Granex Manufacturing Corp. (GRANEX); and Legaspi Oil Co., Inc.
CLFGOIL), as well as the 14 Holding Companies, namely: Soriano
Shares, Ine.; ASC Investors, Inc.; Roxas Shares, Ine.; Arc Investors,
dne.; Toda Holding, Inc.; AP Holdings, Inc.; Fernandez Holdings,
inc,; SMC Officers Corps, Inc.; Te Deum Resources, Inc.; Angio
Ventures, Inc.; Randy Allied Ventures, Inc.; Rock Steel Resources,
inc.; Vathatia Properties Ltd., Inc; and First Meridian Development,
Inc., and the CHF Block of San Miguel Corporation (SMC) shares of
stock totaling 33,133,266 shares as of 1983, together with all
dividends declared, paid and issued thereon as well as any
increments thereto arising from, but not limited to, exercise of pre-
emptive rights are declared owned by the government in trust for all
the coconut farmers and ordered reconveyed to the government.
(Republic of the Philippines us. Cojuangeo et al, Civil Case No. 0033-
F, May 7, 2004)

‘The Sandiganbayan further clarified in the same ruling that:

“The UCPB shares of stock of the alleged fronts, nominees and
dummies of defendant Eduardo M. Cojuangeo, Jr. which form part of
the 72.7% shares of the FUB/UCPB paid for by the PCA with public
funds later charged to the coconut levy finds, particularly the CCSF,
belong to the plaintiff Republic of the Philippines as their true and
beneficial owner.”


The Sandiganbayan ruling on Civil Case No. 0033-A (Republic of the Philippines vs.
Eduardo M, Cojuangeo, Jr., et al.} dated July 11, 2003 stated that:

“The so-called “Farmers’ UCPB shares” covered by 64.98% of the
UCPB shares of stock, which formed part of the 72.2% of the shares of
stock of the former FUB and now of the UCPB, the entire
consideration of which was charged by PCA to the CCSF, are hereby
declared conclusively owned by the Plaintiff Republic of the
Philippines.”

Partial Summary Judgments in Civil Case Nos. 33-A, 33-B, and 33-K (27% CLL¥-SMC.
shares) had found finality in the Sandiganbayan in 2007. However, until today there had
been no significant and actual gain by the coconut farmers/farmworkers or the industry in
general. With every change in the country’s leadership the real benefit of coconut farmers
and the industry mere gets entangled in political controversies.

This bill is intended to put a rest to the controversy once and for all, first, by enacting
a positive law on the matter of the CLF block of shares in the San Miguel Corporation
widely accepted to have been obtained with the Coco Levy fund; and second, by taking,
concrete steps towards the attainment of the original purpose of the fund, which was.
provide coconut farmers with much-needed assistance and buttress the coconut industry
against the vagaries of the export markets. To cite a 2004 Sandiganbayan decision on the
matter, “It is high time that the real beneficiaries of the coconut levy funds, the coconut,
farmers who contributed to it, and the entire coconut industry be given a chance to reap the
benefits that are due them.”

This measure intends to make that time now, by creating the Coconut Farmers Trust
Fund for the development of the coconut industry and the betterment of all Filipino coconut
farmers. In order to immediately address the problems besetting the coconut industry and
alleviate the socio-economic well being of the coconut farmers, the rationalization of the use
and disposition of the coconut levy funds, including the UCPB shares and CLL’ SMC shares,
through the creation of assistance to the coconut farmers and the coconut industry, would
effectively prevent further deterioration of the coconut industry and at the same time,
provide relief to the continuing hardships experienced by the coconut farmers.

Re 5 ctoc
Lol R. TANADA TIL
‘Representative

at” District, Quezon


Republic of the Philippines.
HOUSE OF REPRESENTATIVES
Quezon City

RFTEENTH CONGRESS
Second Regular Session

HOUSE BILL Nt

5070

Introduced by REPRESENTATIVE LORENZO R. TANADA LL

AN ACT
ESTABLISHING THE COCONUT FARMERS’ TRUST FUND
TO PROVIDE ADEQUATE FINANCIAL PROTECLION
TO THE COCONUT INDUSTRY AND ITS WORKERS,
PROVIDING FOR THE MANAGEMENT THEREOF,
AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines
in Congress assembled:

Section 1. Short Title. This act shall be known as the “Coconut Facmers’ Trust Fund
Act of 2011".

Section 2. Declaration of Policy. It is hereby declared the policy of the State to
consolidate the benefits due to coconut farmers, especially the poor and marginalized,
under various statutes and to expedite the dclivery thercof in order to attain a balanced,
equitable, integrated and sustainable growth and development of the coconut industry.

Section 3. Constitution of the Coconut Farmers Trust Fund. Pursuant to the
provisions of the Presidential Decrees and other issuances creating the coconut levy
trust fund and in line with the decisions of the courts affirming the trust character of the
d, there is hereby constituted an irrevocable trust fund, to be known as the Coconut
Farmers Trust Fund (herein referred to as the “Trust Fund”), which shall be capitalized,
managed, utilized and accounted for in the manner hereinafter provided.

Section 4. Purpose of the Trust Fund. The Fund shall be established for the
development of the coconut industry for the ultimate benefit of the small coconut
farmers and farm workers. Its purpose shall include the financing of programs or
assistance for the benefit of the coconut farmers, for increased productivity of the
‘coconut industry, and for development of coconut-based enterprises and promotion of


anti-poverty programs.

Section 5. Capitalization of the Trust Fund. The 27 percent CHK SMC Shares and
all other available funds shall form the jal capital of the Trust Fund. For this
purpose, the CITF shall convey the aforesaid CIIF SMC Shares to the Trust Fund
Committee as provided in Section 6 hereof, under such terms and conditions not
inconsistent with this Act. ‘The CIF shall assign, execute and deliver such documents,
deed or contract not inconsistent with this Act, as may be necessary or desirable to
implement the provisions of this Act.

Nothing in this Act shall be understood to prevent or prohibit any person, group
or entity from conveying to the Committee other properties and/or additional assets
which shall form part of the Trust Fund.

In order to insure the enduring character of the Fund, the principal thereof shall
be augmented from time to time by grants, donations and other lawful transfers by
public or private entities, the disposition of the ineome from which shall be governed by
the terms and conditions hereinafter specified, as well as the rules and regulations
promulgated by the Committee pursuant to Section 7 hereof;

(@) The Trust Fund shall be perpetually maintained and preserved to
ensure the full implementation and realization of the objectives
identified and sought to be attained under this ;

(b) In the event any property or assct of the Trust Fund (or aay portion
hereof, as the case may be) is subsequently sold, alienated or disposed
of, the proceeds and revenues arising out of and realized from such
sale, alienation or dispositions, shall form part of the ‘Trust Fund;

(c) Only the income, interest, earnings and monetary benefit realized by
and accruing on the Trust Fund shall be used and disposed of by the
Committee for such purposes and endeavors specific under the
provision of this .

The Trust Fund shall be managed and administered so as to maximize its
carnings in a prudent manner consistent with its character as a perpetual fund.

Section 6. Extent of the Trust Fund. The Trust Fund shali be composed of the
following:

(a) The CIIF SMC Shares consisting of approximately 27% of the
outstanding capital stock of SMC, including all accrued cash and stock
dividends; and

(b) Such other properties and/or assets intended for the purpose herein


stated, and conveyed or transferred to the Committee emanating from
all coco levy recovered assets.

Section 7. Designation of Trustee Bank/s. The Committee shall designate
reputable depository bank/s of the ‘Trust Fund, which shall:

(i) Manage, utilize and account for the Trust Fund or a portion thereof in the
manner hereinafter provided by the Committee, and

(i) Exercise the tasks, functions and duties determined and established by the
Committee created under the provisions of this Act, to the extent allowed under
applicable laws.

Section 8. ‘The Coconut Farmers Trust Fund Committee. A Coconut Farmers
‘Trust Fund Committee is hereby created for the administration of the trust fund and the
disposition and the utilization of the earnings and incomes thereof for the rehabilitation
and development of the coconut industry and for the ultimate benefit of the smull
coconut farmers and farm workers.

The Coconut Farmers Trust Fund Committee (herein referred to as the
“Committee”) shall be composed of the President of the Philippines sitting as its
chairperson, and twelve (12) other members, as follows:

(a) Two (2) representatives from the government, who shall be the
Secretary of Agriculture and the Secretary of Finance;

(b) Three (3) representatives from the finance and banking sector, who
must have extensive experience and proven cxpertise in finance,
banking, avd trust management;

(c) Five (5) representatives from coconut farmers’ organizations; and,
(d) Two (2) representatives from the CIIF group;

The members of the Committee shall be appointed by the President and shall
serve for a term of three (3) years.

All trustees, with the exception of the Chairperson, shall serve for maximum of
two consecutive terms of office.

Section 9. Functions and Responsibilities of the Committee. To ensure that
the benefits and gains arising out of the Trust Fund directly redound to, and are
received by, the small coconut farmers and farm workers, the Committee shall:

a) decide on the disposition, utilization and allocation of the said funds
and assets for the foregoing special purpose;

b) set the investment policy of the ‘Trust Fund in consideration of all


existing coconut industry development studies and plans; provided
that this will not be inconsistent with the following objectives:
i. poverty alleviation and socia} equity;

fi, increase in the productivity of small coconut farmers
through sustainable means;

iii, full scale rehabilitation of the coconut industry and
Promotion of coconut-based farm systems;

iv. modernization of the coconut industry towards global
competitiveness;

v. protection of small coconut farmers and farm workers
from unfair competition; and,

vi. medical and/or health and life insurance serviees for
small coconut farmers and farm workers.

¢) establish priorities for the preferential assistance to small coconut
farmers and farm workers, which shall be reviewed periodically and
revised as necessary in accordance with changing conditions;

d) formulate the rules and regulations governing the allocation, utilization
and disbursements of the Fund;

¢) formulate the Implementing Rules and Guidelines of this Act; and,

#} perform such other acts and things as may be necessary, proper or
conducive to attain the purposes of the Fund.

Section to. Use and Disposition of the Trust Income. The Committee, on an
annual basis, shalt determine and establish an amount comprising the Trust Income.
After such determination, the Committee shall determine the utilization of the Trust
Income.

Section 11, Couperation with the Committee. The Committee may call upon any
department, bureau, office, agency and instrumentality of the government of the
Republic of the Philippines, including government-owned and controlled corporations,
for such assistance as it may desire and need, in pursuit of the purpose and abjectives of
the Trust Fund, and in the discharge of its functions and responsibilitics.



Section 12. Meetings of the Committee, The Committee shall meet at least once a
month. or as often as deemed necessary by the Chairperson.

Section 13. Accounting. The Committee shall maintain appropriate records and
accounts of all investments, receipts, disbursements and other transactions relating to
the management, administration and disposition of the Trust Fund and Trust Income.

The Trust Fund shall be audited annually by the Commission on Audit,

Section 14. Implementation. The Presidential Commission on Good Goveram
the Office of the Solicitor General and other appropriale government instrumentalities
are hereby directed to take all the necessary steps to implement the purpose and
objectives of this Act,

Section 13. Repeating Clause. This Act repeals Executive Order Number 312 dated
3 November 2000, and Executive Order Number 313 dated 8 November 2000
respectively. All laws, Presidential Decrees, ordinances, rules and regulations
inconsistent herewith’ are hereby revoked, amended, revised and superseded
accordingly.

Section 14. Effectivity, his Act shall take effect after fifteen (15) days following its
complete publication in at least two (2) national newspapers of general circulation,

Approved,