PSE Circular for Brokers No. 1277-98

June 9, 1998 PSE CIRCULAR FOR BROKERS NO. 1277-98 June 8, 1998 Philippine Stock Exchange Disclosure Department Listings and Disclosure Group 4/F Philippine Stock Exchange Center PSE Center, Exchange Road Ortigas Center, Pasig City Attention: Mr . Reynold P . Ong Vice-President, Listings & Disclosure Group Gentlemen : Metro Pacific previously announced its intention to conduct capital raising exercise for an amount of Pesos 14-20 billion pursuant to the Board's approval to increase the Company's capital. Extensive discussions have, therefore, been held with both domestic and international underwriters regarding the terms and structure of such an issue. Approval was also sought and obtained from the Company's shareholders at a special meeting held on 8 April 1998 for an increase in its authorized share capital from Pesos 10 billion to Pesos 30 billion, from which any new shares will be issued. At a meeting of the Board of Directors held earlier today, the following matters were approved: 1. The Board accepted a subscription in respect of Pesos 14 billion of new shares from Philippine affiliate of First Pacific Company Limited. The new shares will be issued at Pesos 1.30 per share, representing a discount of five per cent to the closing price for the previous five trading days. Under the terms of the subscription agreement, the funds will be received on or before 30 June 1998. 2. The Board of Directors is cognizant of and welcomes the support from all of its local and foreign shareholders to subscribe to new shares. Whilst it has been necessary to arrange for an initial subscription to obtain approval for the increase in capital, the Company also wishes to provide an opportunity for other shareholders to subscribe to new shares. In this connection, the Board has approved in principle, subject to regulatory approval, a warrants offering. The creation of the warrants will require prior approval from the shareholders, following which regulatory approval will be sought for the offering. In view of the time required to obtain these approval, it is expected that the warrants offering will be conducted no earlier than the fourth quarter of the year. The Board has recommended that each shareholder be entitled to subscribe to approximately 2.5 such warrants for every Metro Pacific share held at that time. Very truly yours, (SGD.) CHRISTOPHER H. YOUNG Director METRO PACIFIC CORPORATION [ LOGO ] The Board of Directors of Metro Pacific Corporation ("Metro Pacific" or the "Company") earlier this year approved in principle arrangements to increase the capital of the Company. The purpose of this announcement is to advise shareholders of certain resolutions approved by the Board of Directors on 8 June 1998 in connection with such an increase. CAPITAL INCREASE Metro Pacific previously announced its intention to conduct a rights offering for an amount of Pesos 14-20 billion pursuant to the Board's mandate to increase the Company's capital. Extensive discussions have, therefore, been held with both the domestic and international underwriters regarding the terms and structure of such an issue. Approval was also sought and obtained from the Company's shareholders at a special meeting held on 8 April 1998 for an increase in its authorized share capital from Pesos 10 billion to Pesos 30 billion, from which any new shares will be issued. Under prevailing regulations, an application to the relevant authorities for an increase in capital needs to be supported by the prior receipt of a certain portion of the subscription proceeds. As it is not possible to determine the time required for regulatory approval to be obtained for the increase in capital, any offering will require shareholders to subscribe without any certainty regarding the timing of availability of the shares. The Company is pleased to note that the proposed capital raising has generated considerable interest and strong support from the investment community. In light of the volatility in the general stock markets, however, the underwriters have advised the Company that an indeterminate delay in issuing new shares would affect significantly demand for an offering. In the circumstances, certain significant Philippine shareholders have been approached directly by the Company to seek their support for a subscription to new shares. Following discussions with such shareholders, including Philippine affiliates of First Pacific Company Limited, agreement was reached, and approved by the Board of Directors, on 8 June 1998 for the Company to accept a subscription in respect of Pesos 14 billion of new shares (the "Subscription"). The new shares will be issued at Pesos 1.30 per share, representing a discount of five per cent to the closing price for the previous five trading days. Under the terms of the subscription agreement, the funds will be received on or before 30 June 1998. USE OF PROCEEDS The Subscription is part of the Company's strategy of reducing its level of indebtedness. Substantially all of the funds from the Subscription will, therefore, be used to repay existing borrowings, and primarily those denominated in foreign currencies. PROPOSED FURTHER OFFERING The Board of Directors is cognizant of and welcomes the support from all of its local and foreign shareholders to subscribe to new shares. Whilst it has been necessary to arrange for an initial subscription to obtain approval for the increase in capital, the Company also wishes to provide an opportunity for other shareholders to subscribe to new shares. In this connection, the Board has approved in principle, subject to regulatory approval, a warrants offering. The warrants offering is intended to provide a similar opportunity to participate in the Company's capital raising as offered to the shareholder involved in the current Subscription. It is, therefore, the intention for the exercise price to be at least equal to the present subscription price, as adjusted for an appropriate interest cost in respect of the intervening period and other relevant matters. It is also the intention that shareholders be permitted to elect (if they wish to do so) to immediately exercise the warrants to take up new shares under the offering. In the circumstances, the shareholders to whom the Subscription of Pesos 14 billion will be made have expressed their intention not to subscribe to such an offering. The creation of the warrants will require prior approval from the shareholders, following which regulatory approval will be sought for the offering. In view of the time required to obtain these approval, it is expected that the warrants offering will be conducted no earlier than the fourth quarter of the year. The Board has recommended that each shareholder be entitled to subscribe to 2.5 such warrants for every Metro Pacific share held at that time. PRO-FORMA FINANCIAL POSITION A summary of the unaudited consolidated balance sheet as of 31 March 1998 is set out below and, to illustrate the effects of the Subscription, the balance sheet has been restated as if the Subscription were to have occurred on that date and been used in its entirety to retire long-term debt. 31 March 1998 Figures in Peso Thousands unaudited As reported Subscription Pro-forma Current assets 23,272,954 23,273,954 Development properties 67,261,147 67,261,147 Property, plant and equipment 25,633,987 25,633,987 Other long-term assets 18,878,935 18,878,935 135,047,023 135,047,023 ========= ========= Current liabilities 23,243,936 23,243,936 Long-term debts 32,531,016 <14,000,000> 18,531,016 Other long-term liabilities and provisions 24,116,841 24,116,841 Total equity 55,155,230 14,000,000 69,155,230 135,047,023 135,047,023 ========= ========= Total interest bearing debt to equity .80 .44 ========= =========