PSE Circular for Brokers No. 1251-98

June 5, 1998 PSE CIRCULAR FOR BROKERS NO. 1251-98 June 4, 1998 Philippine Stock Exchange PSE Center, Exchange Road Ortigas Center, Pasig City Gentlemen: With regard to your FAX dated 01 June 1998 regarding the Philippine Star news article "Gov't to Audit 10 Big Corporate Taxpayers" please find below the reason for the drop in the income tax payment of Manila Electric Company. The payment in question in the Philippine Star article is the final payment of income taxes for the calendar year 1997. Meralco's net taxable income for 1997 was P28.6M lower compared to 1996, therefore the income tax due for the same year was also P10.0M lower. However, during the first three quarters of 1997 Meralco remitted income taxes in the amount of P2,182.4M, higher by P238.3M than the P1,944.1M income taxes paid during the same period in 1996. Thus, the balance of the net income tax due for 1997 remitted in the first quarter of 1998 was P248.3M below the previous year's payment. Due to the voluminous records and transactions of the Company, it took us a few days to respond to your request. Very truly yours (SGD.) ATILANO S. GUEVARRA, JR. Assistant Corporate Secretary