Solid Group, Inc.

June 29, 1998 PSE CIRCULAR FOR BROKERS NO. 1473-98 SUBJECT : Solid Group, Inc . Further to Circular No. 924-98 dated May 5, 1998 pertaining to Solid Group, Inc.'s ("SGI") investment in Destiny, Inc., attached herewith is SGI's letter to the Exchange in reply to our request for additional information on said transaction. LibLex For your information. (SGD.) REYNOLD P. ONG Vice-President, Listings and Disclosure Group June 24, 1998 PHILIPPINE STOCK EXCHANGE, INC. Philippine Stock Exchange Center Exchange Road, Ortigas Center Pasig City, Metro Manila Attention: Mr . Reynaldo P . Ong Vice President, Listing & Disclosure Group Dear Mr. Ong : This has reference to your letter dated May 26, 1998, requesting for additional information on the proposed investment of Solid Group Inc. ("SGI") in Destiny, Inc. ("Destiny"). At the outset, we would like to point out that the agreements between SGI and Destiny have not yet been finalized, and that the information hereafter contained, particularly on the values of the swap, is tentative only and may be subject to change: 1. Shareholdings percentages of Destiny, Inc . before and after the share swap Destiny is presently owned 100% by the Lim family. After the issuance of the Destiny shares at par to SGI in exchange for the SGI assets and the conversion of the advances of the Lim family to Destiny and assuming that all figures will be validated, the equity sharing is expected to be approximately 73% by SGI and 27% by the Lim family. 2. Amount of consideration to be paid by SGI for shares of Destiny, Inc . The amount to the paid by SGI are the assets to be transferred to Destiny, to be valued at their book value as of December 31, 1997, which is estimated to be about P2.69 Billion. 3. Description of electronics-related assets to be exchanged for shares of Destiny, Inc . The assets to be transferred are the shares presently owned by SGI in the following companies: SOLID CORPORATION Solid Corporation is a manufacturer of SONY products in the Philippines. The company's facility produces SONY colour televisions and VCRs. It is estimated that the facility has a monthly capacity of approximately 10,000 colour Televisions, 10,000 VCRs and 3,000 black and white televisions (assuming a single shift of eight hours a day and 300 working days per annum). The facility is situated in Valenzuela, Metro Manila with a floor area of approximately 2 hectares and a site area of approximately 1.5 hectares. Solid Corporation, a wholly-owned subsidiary of SGI, was incorporated on May 3, 1965 and commenced commercial operations on May 5, 1965. SOLID LAGUNA CORPORATION Solid Laguna Corporation also produces SONY colour televisions and VCRs. It also produces colour televisions for Destiny Cable, Inc. It is estimated that the company's facility has a capacity of approximately 20,000 colour television and 15,000 VCR units a month (assuming a single shift of eight hours a day and 300 working days per annum). The facility is situated in the Laguna International Industrial Park, and has a floor area of 1.65 hectares with a site area of approximately 7.35 hectares. SGI owns the freehold title to the property. Solid Laguna Corporation, a wholly-owned subsidiary of SGI, was incorporated on May 15, 1995 and commenced commercial operations on September 1, 1995. SSEC, INC . SSEC, Inc. is 67.5% owned by SGI and 32.5% owned by Sony Corporation. It produces SONY audio products, principally, portable radios, mini and midi hi-fi components systems and karaoke machines. It is estimated that this facility has a monthly capacity of approximately 20,000 units (assuming a single shift of eight hours a day and 300 working days per annum). The facility is situated in Balintawak, Quezon City, Metro Manila with a floor area of approximately 1 hectare and a site area of approximately 3 hectares. SGI owns the freehold title to the property. SSEC, Inc. was incorporated on November 17, 1989 and commenced commercial operations on July 1, 1992. KITA CORPORATION Kita Corporation produces colour televisions under the AIWA brand name. It is estimated that this facility has a monthly capacity of approximately 90,000 units (assuming a single shift of eight hours a day and 300 working days per annum). It is currently operating one eight-hour shift a day. Kita Corporation has ordered additional machinery to expand its production capacity and expects this new capacity to be available in the fourth quarter of 1998. The facility is situated in Clark Special Economic Zone, Pampanga, with a floor area of approximately 10 hectares. SGI has a 25-year lease for this property from Clark Development Corporation, a government-owned entity, which will expire on March 2019. Kita Corporation, a wholly-owned subsidiary of SGI, was incorporated on April 6, 1993 and commenced commercial operations on October 1, 1994. SOLID CITY INDUSTRIAL & COMMERCIAL CORPORATION Solid City Industrial & Commercial Corporation operates a plastic injection factory producing cabinets for televisions, audio products and other plastic products. It supplies the production facilities of the SGI group and sells plastic goods to other parties. Solid City Industrial & Commercial Corporation, a wholly-owned subsidiary of SGI, was incorporated on November 10, 1989 and commenced commercial operations on January 1, 1994. CLARK PLASTICS MANUFACTURING CORPORATION Clark Plastics Manufacturing Corporation operates a plastic injection factory inside the Clark Special Economic Zone which produces cabinets for television principally for Kita Corporation. Clark Plastics Manufacturing Corporation, a wholly-owned subsidiary of SGI, was incorporated on August 17, 1995 and commenced commercial operations on November 2, 1995. SOLID DISTRIBUTORS, INC . Solid Distributors, Inc. provides warehousing and distribution facilities for SONY products nationwide. Solid Distributors, Inc., a wholly-owned subsidiary of SGI, was incorporated and commenced commercial operations on March 20, 1972. ASCOP, INC . ASCOP, Inc. is the distributor of AIWA audio and video products in the Philippines. The company also owns and operates AIWA repair and service centers nationwide. ASCOP, Inc., a wholly-owned subsidiary of SGI, was incorporated and commenced commercial operations on April 5, 1990. SOLID ELECTRONICS CORPORATION Solid Electronics Corporation owns and operates SONY repair and service centers in Metro Manila. Solid Electronics Corporation, a wholly-owned subsidiary of SGI was incorporated and commenced commercial operations on August 9, 1982. AA ELECTRONICS CORPORATION AA Electronics Corporation provides repair capability and service support for SONY audio products and owns and operates a SONY repair and service center. AA Electronics Corporation, a wholly-owned subsidiary of SGI, was incorporated and commenced commercial operations on July 26, 1985. SOLID ELECTRONICS SERVICES, INC . Solid Electronics Services, Inc. owns and operates SONY repair and service centers in the provinces outside Metro Manila. Solid Electronics Services, Inc., a wholly-owned subsidiary of SGI, was incorporated on January 25, 1991 and commenced commercial operations on May 1, 1991. SOLID VIDEO CORPORATION Solid Video Corporation distributes SONY professional video equipment, accessories and supplies for broadcast networks and film production houses and other companies. LexLib Solid Video Corporation, a wholly-owned subsidiary of SGI, was incorporated and commenced commercial operations on October 12, 1984. 4. List of directors and officers of Destiny, Inc . and their existing shareholdings Name Designation % of shareholdings Elena S. Lim Chairman of the Board 26% David S. Lim Director/President & CEO 30% Susan L. Tan Director 8% Jason S. Lim Director 8% Vincent S. Lim Director/VP-Finance & Treasurer 28% Irineo D. Tubio, Jr. Corporate Secretary 5. List of companies where each of Destiny, Inc.'s directors hold a directorship Please refer to Annex "A" 6. Current and targeted number of subscribers of Destiny's cable services Current No. of Subscribers as of May 31, 1998 21,018 Targeted No. of Subscribers: Year 1998 58,917 1999 80,000 2000 100,000 2001 120,000 2002 150,000 7. Areas being serviced by Destiny Cable, Inc. Areas currently serviced by Destiny Cable, Inc.: Makati Mandaluyong San Juan Manila (partial) Quezon City (partial) Pasay Pateros Areas to be cabled in 1998: Manila (full) Quezon City (full) Paraaque Las Pias Muntinlupa Pasig Caloocan Valenzuela Mandaue, Cebu Mactan, Cebu 8. Existing valid permits/licenses or franchises of Destiny Cable, Inc . issued by governmental authorities (A) Congressional Franchise under R.A. No. 8195 (B) NTC Permits and/or Pending Applications Please refer to Annex "B" 9. Nature of Management Contracts with Destiny, Inc . after the share swap Not yet determined. To be negotiated if parties agree to enter into a management contract We hope that the foregoing complies with your requirements. prLL Very truly yours, (SGD.) IRINEO D. TUBIO Chief Accounting Officer ANNEX A 5. List of companies where each of Destiny, Inc . 's directors hold a directorship ELENA S. LIM DAVID S. LIM SUSAN L. TAN JASON S. LIM VINCENT S. LIM 1 AA Electronics AA Electronics AA Electronics ASCOP, Inc. AA Electronics Corporation Corporation Corporation Corporation 2 ASCOP, Inc. ASCOP, Inc. ASCOP, Inc. Clark Plastics Manu- ASCOP, Inc. facturing Corporation 3 Kita Corporation Kita Corporation Kita Corporation Solid City Industrial & Kita Corporation Commercial Corp. 4 Solid Corporation Solid Corporation Solid Corporation Interstar Holdings Co., Solid Corporation Inc. 5 Solid Distributors, Solid Distributors, Solid Distributors, Skyworld Corporation Solid Distributors, Inc. Inc. Inc. Inc. 6 Solid Electronics Solid Electronics Solid Electronics SSEC, Inc. Solid Electronics Corporation Corporation Corporation Corporation 7 Solid Laguna Solid Laguna Solid Laguna Destiny Asia, Inc. Solid Laguna Corporation Corporation Corporation Corporation 8 Solid Manila Solid Manila Solid Manila Destiny, Inc. Solid Manila Corporation Corporation Corporation Corporation Corporation 9 Solid Video Corporation Solid Video Corporation Solid Video Destiny Cable, Inc. Solid Video Corporation Corporation 10 Clark Plastics Manufacturing Interstar Holdings Clark Plastics Manu- AA Aqua-Agri Corpo- Clark Plastics Manu- Corp. Co., Inc. facturing Corp. ration facturing Corp. 11 Solid City Industrial & Laguna International Solid City Industrial & AA Commercial, Inc. Solid City Industrial & Commercial Corp. Industrial Park, Inc. Commercial Corp. Commercial Corp. 12 Interstar Holdings Skyworld Corporation Solid Electronics Avid Sales Corporation Interstar Holdings Co., Inc. Services, Inc. Co., Inc. 13 Laguna International Starworld Corporation SSEC, Inc. AV Value Sales Skyworld Corporation Industrial Park, Inc. Corporation 14 Skyworld Corporation SSEC, Inc. Destiny Asia, Inc. CPD Access Corporation SSEC, Inc. 15 Starworld Corporation Solid Electronics Destiny, Inc. Mabuhay Electronics Starworld Corporation Services, Inc. Corporation 16 Solid Electronics Destiny, Inc. Destiny Cable, Inc. Response, Inc. Destiny Asia, Inc. Services, Inc. 17 SSEC, inc. Destiny Cable, Inc. AA Aqua-Agri Samsung Mabuhay Destiny, Inc. Corporation Corporation 18 Destiny, Inc. Destiny Asia, Inc. AA Commercial, Inc. Solid Educational Destiny Cable, Inc. Systems, Inc. 19 Destiny Cable, Inc. AA Aqua-Agri Avid Sales Corpo- Tristar Electronics AA Aqua-Agri Corporation ration Corporation 20 Solid Educational AA Commercial, Inc. AV Value Sales Omni Logistics AA Commercial, Inc. Systems, Inc. Corporation Corporation 21 Mabuhay Electronics Avid Sales Corporation CPD Access Omni Distribution Avid Sales Corporation Corporation Corporation Services, Inc. 22 AA Commercial, Inc. AV Value Sales Response, Inc. AV Value Sales Corporation Corporation 23 AA Aqua-Agri CPD Access Solid Educational CPD Access Corporation Corporation Systems, Inc. Corporation 24 AA Export & Import Mabuhay Electronics Sony Philippines, Inc. Response, Inc. Corporation Corporation 25 AA Marine Development Response, Inc. Omni Logistics Solid Educational Corporation Corporation Systems, Inc. 26 Sanyo Marketing Samsung Mabuhay Omni Distribution Sanyo Philippines, Inc. Corporation Corporation Services, Inc. 27 Asian Carmakers Solid Educational Omni Logistics Corporation Systems, Inc. Corporation 28 Columbian Autocar Omni Logistics Omni Distribution Corporation Corporation Services, Inc. 29 Sony Philippines, Inc. Omni Distribution Services, Inc. 30 Omni Logistics Corporation 31 Omni Distribution Services, Inc. ANNEX B (B) NTC Permits and/or Pending Applications Areas PA Date Status National Capital Region 1 NTC CASE NO. 95-171 (Makati) 8-Nov-95 Certificate of Authority for 10 years 2 NTC CASE NO. 95-171 (Mandaluyong) 8-Nov-95 Certificate of Authority for 10 years 3 NTC CASE NO. 95-188 (Valenzuela) 16-Feb-96 For renewal of PA 4 NTC CASE NO. 95-219 (Pasay City) 2-Apr-96 For renewal of PA 5 NTC CASE NO. 95-405 (Pateros) 7-Jun-96 For renewal of PA 6 NTC CASE NO. 95-405 (San Juan) 7-Jun-96 For renewal of PA 7 NTC CASE NO. 95-404 (Manila) 26-Sep-96 For renewal of PA 8 NTC CASE NO. 96-159 (Quezon City) 15-Mar-97 9 NTC CASE NO. 96-307 (Kaloocan) 15-Dec-97 10 NTC CASE NO. 96-232 (Muntinlupa) 24-Feb-98 11 NTC CASE NO. 96-262 (Paraaque) 17-Mar-98 12 NTC CASE NO. 96-233 (Las Pias) 2-Apr-98 13 NTC CASE NO. 96-255 (Pasig City) 8-May-98 14 NTC CASE NO. 96-253 (Marikina) 18-May-98 15 NTC CASE NO. 96-254 (Taguig) 3rd week of June For Technical & Financial evaluation 16 NTC CASE NO. 96-256 (Malabon) 4th week of June For Technical & Financial evaluation 17 NTC CASE NO. 96-251 (San Pedro) 1st week of July For Technical & Financial evaluation 18 NTC CASE NO. 96-304 (Cainta) 2nd week of July For Technical & Financial evaluation 19 NTC CASE NO. 97-185 (Antipolo) 2nd week of July For Technical & Financial evaluation 20 NTC CASE NO. 95-404 (Navotas) NEGROS ORIENTAL 22 NTC CASE NO. 97-375 (Dumaguete City) Archived 23 NTC CASE NO. 97-347 (Bais and San Jose) * Archived 24 NTC CASE NO. 97-377 (Sibulon and Amlan) Archived BOHOL 25 NTC CASE NO. 97-378 (Tagbilaran City) * Archived 26 NTC CASE NO. 97-376 (Bocayon and Coralya) Archived PALAWAN 27 NTC CASE NO. 97-360 (Puerto Princesa) w/in this year CEBU 28 NTC CASE NO. 97-373 (Cebu City) ** Still pending for Financial Cross Examination (Municipality of Consolacion, Cebu) LAGUNA 29 NTC CASE NO. 97-381 (Cabuyao) Still pending for Financial Cross Examination 30 NTC CASE NO. 97-372 (Calamba) Still pending for Technical Cross Examination 31 NTC CASE NO. 97-369 (Sta. Rosa) ** Still pending for Financial Cross Examination 32 NTC CASE NO. 97-374 (Bian) Still pending for Financial Cross Examination RIZAL 33 NTC CASE NO. 97-371 (Taytay) For Financial & Technical witness presentation 34 NTC CASE NO. 97-370 (Binangonan) Still pending for Technical Cross Examination CAVITE 35 NTC CASE NO. 97-354 (Carmona) Still pending for Financial Cross Examination 36 NTC CASE NO. 97-355 (Rosario) * 37 NTC CASE NO. 97-356 (Gen. Tries) w/in this year 38 NTC CASE NO. 97-357 (Bacoor) Still pending for Technical Cross Examination 39 NTC CASE NO. 97-358 (Dasmarinas) Still pending for Financial Cross Examination 40 NTC CASE NO. 97-359 (Imus) Still pending for Technical Cross Examination 41 NTC CASE NO. 97-363 (Tagaytay City) w/in this year 42 NTC CASE NO. 97-362 (Nombolo) * Still pending for Technical Cross Examination 43 NTC CASE NO. 97-366 (Kawit) * Still pending for Financial Cross Examination 44 NTC CASE NO. 97-365 (Silang) w/in this year 45 NTC CASE NO. 97-364 (Cavite City) 46 NTC CASE NO. 97-344 (Tanza) BULACAN 47 NTC CASE NO. 97-428 (San Jose del Monte, Bulacan) For Financial & Technical witness presentation 48 NTC CASE NO. 97-416 (Sta. Maria, Bulacan) w/in this year 49 NTC CASE NO. 97-415 (Malolos, Bulacan) For Financial & Technical witness presentation 50 NTC CASE NO. 97-412 (Baliuag, Bulacan) Still pending for Technical Cross Examination 51 NTC CASE NO. 97-414 (Meycauayan, Bulacan) Still pending for Technical Cross Examination 52 NTC CASE NO. 97-413 (San Miguel, Bulacan) For Financial & Technical witness presentation PAMPANGA 53 NTC CASE NO. 97-429 (Angeles, Pampanga) For Financial & Technical witness presentation 54 NTC CASE NO. 97-424 (Lubao, Pampanga) For Financial & Technical witness presentation 55 NTC CASE NO. 97-422 (San Fernando, Pampanga) For Financial & Technical witness presentation 56 NTC CASE NO. 97-423 (Mabalacat, Pampanga) For Financial & Technical witness presentation TARLAC 57 NTC CASE NO. 97-426 (Porac, Tarlac) For Financial & Technical witness presentation 58 NTC CASE NO. 97-427 (Capas, Tarlac) For Financial & Technical witness presentation 59 NTC CASE NO. 97-425 (Tarlac, Tarlac) For Financial & Technical witness presentation 60 NTC CASE NO. 97-421 (Concepcion, Tarlac) For Financial & Technical witness presentation 61 NTC CASE NO. 97-417 (Carmona, Tarlac) For Financial & Technical witness presentation