PSE Circular for Brokers No. 1717-98

July 24, 1998 PSE CIRCULAR FOR BROKERS NO. 1717-98 July 21, 1998 Dear Shareholder, We are pleased to inform you that Holderbank Financiere Glaris. Ltd., the biggest cement producer in the world, has agreed to join Bacnotan Consolidated Industries, Inc. (BCII) as a joint venture partner in Union Cement Corporation (UCC). For your Company and its cement and non-cement subsidiaries, the benefits will be significant and far-reaching. Holderbank, based in Switzerland, has operations in 56 countries. It has a cement production capacity of 78.9 million metric tons a year. In 1997 it had a turnover of US$7.769 billion. cdt UCC is the holding company for BCII's interests in three cement manufacturing subsidiaries, namely, Bacnotan Cement Corporation, Davao Union Cement Corporation, and Hi Cement Corporation, including shares in HCC held through BCII's 53%-owned subsidiary, Atlas Cement Corporation. Holderbank is investing a total of US$210 million or approximately P8.7 billion in UCC. This will consist of US$168 million in shares of stock representing 40% of UCC, and US$42 million in convertible bonds that UCC will issue. As of today, Holderbank has made an initial deposit in UCC equivalent to about P872 million. Completion of the US$210 million investment is scheduled for September of this year. For its shares in the three cement manufacturing subsidiaries, BCII will receive shares of UCC and will be paid US$90 million or approximately P3.7 billion in cash. Your Company plans to use these funds to reduce debt, complete its funding of investment commitments and strengthen its overall liquidity position. The total value of the cash and UCC shares that BCII will receive, directly and indirectly, is approximately P9.8B. Approximately US$120 million will be available to the three manufacturing subsidiaries for a reduction in their debt burden, which has risen dramatically since the onset of the financial turmoil in the Philippines in July 1997. The financial impact of the above cash infusions on BCII and its cement manufacturing subsidiaries will amount to about P1.2 billion per year. Holderbank's investment results from their valuation of our cement manufacturing subsidiaries as follows: P19.00 per share of Bacnotan Cement Corporation P4.50 per share of Davao Union Cement Corporation P14.00 per share of Hi Cement Corporation. In addition to its equity contribution, Holderbank is also expected to provide its technical support to the BCII cement group. It will contribute its standards of best practice and new product research, and thereby upgrade significantly BCII's cement products. aisadc Your Company's combination with the world's largest cement producer should strengthen the leadership position of the BCII group of companies in the Philippine cement market. We look forward to working closely with Holderbank to achieve this objective. A significant investment by a world industry leader in a BCII subsidiary reflects confidence not only in the Bacnotan group of companies but also in the Philippine economy and the future of our country. When the construction materials market is revitalized, we foresee enhanced strength for the BCII group and a return to its strong growth mode. It is important and encouraging to note that Holderbank has expressed the highest regard for the quality of our people and organization. It believes that our people have the competence, capability and potential to meet their own high standards of performance. Let us welcome our new global partner, and look forward to a new era for Bacnotan Consolidated Industries, Inc. (SGD.) RAMON V. DEL ROSARIO, SR. (SGD.) OSCAR J. HILADO Chairman of the Board President