Sinophil Corporation

July 14, 1998 PSE CIRCULAR FOR BROKERS NO. 1623-98 SUBJECT : Sinophil Corporation This refers to the news article captioned " Sinophil, Metroplex dispute settled soon " published in the June 25, 1998 issue of the Manila Times. On June 26, 1998, Sinophil ("SINO") was asked by the Exchange to clarify/confirm the said news article. In a letter dated June 29, 1998, SINO advised the Exchange that "the dispute referred to in the news article . . . is but a report of what already appears in our Annual Report . . ." Upon verification of the Annual Report filed by SINO, the Exchange noted that the said Annual Report contained the following information: On March 5, 1997, the Company together with Belle Corporation (a shareholder) entered into a Share Swap Agreement (Swap Agreement) with Metroplex Berhad and Paxell Limited (collectively referred to as "Metroplex") to acquire 40% of Legend International Resorts (Hong Kong) Limited (LIR-HK), a wholly owned subsidiary of Metroplex. In consideration, the Company issued 3.87 billion of its shares to Metroplex. This transaction was booked by the Company as an investment in LIR-HK amounting to P5.42 billion with a credit to capital stock. Such transaction was approved by the Securities and Exchange Commission on November 20, 1997 and the corresponding shares were listed on the Philippine Stock Exchange on December 8, 1997. At present, there is a dispute between the Company and Metroplex regarding the terms of the Swap Agreement . The terms of the Swap Agreement include, among Others, an unconditional guaranteed by Metroplex that the net income after tax of LIR-HK's wholly-owned subsidiaries for the year ended January 31, 1998 will be at least US$43 Million. Under the equity method of accounting, the Company is entitled to 40% of such net income. prLL However, because of the dispute on the Swap Agreement, Metroplex has refused to provide financial information regarding LIR-HK. Thus, while the Company, with the advice of its legal counsel, believes that it is entitled to the proportionate share in the net income of LIR-HK, management decided to record its investment in LIR-HK at cost . . . In a letter dated July 3, 1998, the Exchange sought clarifications on the items specified hereinbelow. SINO, in its letter of July 9, 1998, responded as follows: (a) On the availability of the Audited/Actual Financial Statements (i.e. Balance Sheet, Income Sheet) of LIR-HK and the US$30-M net income of LIR-HK as stated in the said news article, SINO stated that: " (W)e have requested, but have not received, the Audited/Actual Financial Statements of LIR-HK . Accordingly, we cannot confirm with certainty the US$30-M net income mentioned in said article ." (b) On the reason(s) behind why LIR-HK failed to meet the guaranteed net income after tax, SINO stated that: " (F)or the reason stated in #1, we cannot respond to your item #2 ." (c) On the effects of the difference between the actual and projected income of LIR-HK to SINO, its stockholders and the swap agreement in dispute, and the conversion of the difference between the actual and guaranteed net income into additional equity in favor of SINO, SINO replied: " (F)or like reason stated in #1, we cannot respond to your item #3 ; we cannot confirm how the difference between the actual and guaranteed net income will be treated, if at all there is any ." LLjur (d) (e) On the Plan(s) of LIR-HK, Metroplex and SINO to address said effects, SINO stated that: " (S)hould there be a variance, this certainly would be a subject of a discussion between LIR-HK and ourselves ." (e)(f) On the timetable as to when Metroplex and SINO plan to settle the dispute, SINO stated that: " (I)nsofar as SINO is Concerned, we wish to resolve the matter as soon as possible . We assume that Metroplex is of the same persuasion as we are . However, we are unable to give you a timetable therefor . SINO in its letter likewise assured the Exchange that it will provide the same with the information required as and when they become available to them. For your information and guidance. (SGD.) REYNOLD P. ONG Vice-President, Listings and Disclosure Group