Asian Pacific Equity Corporation

August 13, 1999 PSE CIRCULAR FOR BROKERS NO. 2018-99 SUBJECT : Asian Pacific Equity Corporation With reference to Circular No. 1685-99 dated July 9, 1999 relative to Asian Pacific Equity Corporation's ("APEC") acquisition of Twin Ace Holdings Corporation, attached is a copy of the company's letter to the Securities and Exchange Commission (SEC) in clarification of the said transaction. LexLib For your information. (SGD.) JOSE LUIS U. YULO, JR. President and CEO 6 August 1999 Securities and Exchange Commission SEC Building, EDSA, Greenhills City of Mandaluyong, Metro Manila Attention: Ms . Gisela P . Abugan Chief, SE Specialist SERD 1 Gentlemen : We reply to your letter dated 16 July 1999. 1. Information required by Item 2, 11-C Form: Anent your instruction to complete the information required by Item 2 of SEC Form 11-C, please note that the information required therein need only be furnished "[i]f the registrant . . . has acquired . . . of a significant amount of assets, otherwise than in the ordinary course of business . . .". The registrant Corporation herein is duly organized and registered as a holding company. As such, its acquisition of the entire capital stock of Twin Ace Holdings Corporation is well within its legitimate operations as stated in its primary purpose. Hence, it is most respectfully submitted that the transaction does not fall within the purview of the aforecited rule. Undersigned Corporation should not be required to comply with the same. cd 2. Exhibits required by par. (f) of Item 2, 11-C Form: For the same reasons stated above, undersigned Corporation is also not required to submit the financial statements and exhibits listed in Item 2. Notably, paragraph (f) of Item 2 makes reference to Item 10 which in turn, states as follows: "For any business acquisition required to be described in answer to Item 2 above, financial statements of the business acquired shall be filed . . .." As already explained in the foregoing paragraph, the acquisition of the entire capital stock of Twin Ace is pursuant to the Corporation's operations as a holding company. As such, said acquisition need not be described is required in Item 2 and consequently, the financial statements and exhibits described in Item 10 is likewise not applicable. 3. Impact on registrant's current or future operations: The intended acquisition of Twin Ace would require the registrant to increase its authorized capital from the present P1 Billion divided into 1,000,000,000 shares with a par value of One Peso (P1.00) per share to P5 Billion divided into 5,000,000,000 shares with a par value of One Peso (P1.00) per share. In consideration of the entire capital stock of Twin Ace, registrant shall issue shares of stock with a total par value of P3 Billion out of the increase in capital. Hence, upon conclusion of the transaction, registrant shall have an authorized capital of P5 Billion of which P3,257,500,000.00 worth of shares shall have been subscribed and fully paid. In terms of operations, registrant as a holding company shall continue to maintain its fixed income from money market placements plus enjoy a share in the income of its wholly owned subsidiary, Twin Ace, from effective date of acquisition. 4. Information required by Rule 3-3 Registrant was incorporated on 27 May 1937 originally under the corporate name "Manila Wine Merchants, Inc.", a trading firm, which name and purpose was later amended to "Asian Pacific Equity Corporation" in 1986 engaged as a holding company. It has not undertaken any bankruptcy, receivership or other similar proceeding. Nor has registrant had in the last three (3) years, any material reclassification of its shares or otherwise undertaken a merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business. In its meeting held on 8 July 1999, registrant's Board of Directors approved the acquisition of the entire capital stock of Twin Ace, subject to approval by shareholders of an increase in capital of the Corporation. It is registrant's first significant acquisition as a holding company in its bid to become a major market player. The decision to acquire Twin-Ace was prompted by the strong historical performance of Twin Ace's products in the market. Twin Ace was incorporated on 10 May 1988. It is the manufacturer of alcoholic products, primarily rhum, under the brandname/tradename, Tanduay, among others. It has not undertaken any bankruptcy, receivership or other similar proceeding. Neither has the same undertaken any reclassification of shares, or undergone merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of its business in the last three (3) years. The Tanduay products were first introduced into the Philippine market in 1854 under the stewardship of the Elizalde Family. Its operations were acquired by Twin Ace in 1988. Tanduay is currently the second largest producer of liquor in the Philippines with an estimated market share of forty percent (40%). It dominates the colored liquor segment of the market with a share of approximately ninety percent (90%). Sales volume of Tanduay in 1998 grew by eighteen percent (18%) to 12.7 million cases due to aggressive marketing efforts. Sales revenue likewise increased at a higher rate of thirty one percent (31%) to P4.0 Billion as a result of price increases implemented during the year. In addition, tight control over costs and expenses produced a significant increase in net profit from P14 Million in 1997 to P102 Million in 1998. 5. RSA Rule 36(a)-1(a)(2) The reported event, i.e. the acquisition of the entire capital stock of Twin Ace, was disclosed immediately after securing Board approval for the same, in compliance with the Full Disclosure Rules of the SEC. It is to be noted, however, that to effect such acquisition, registrant should increase its capital stock to such an amount as may be appropriate to issue to Twin Ace shareholder Tangent Holdings Corp., the number of shares equivalent to the agreed consideration for the Twin Ace shares. Such increase in capital will require shareholder approval. Hence, the implementation of said acquisition is subject to the approval by shareholders representing at least 2/3 of the outstanding capital stock of the same of the increase in capital of the Corporation. At present, the parties executed, immediately upon securing Board approval for the transaction, a mere Agreement To Subscribe to Additional Shares. As soon as the increase in capital is approved by shareholders of registrant, the parties shall execute the Deed of Exchange (of registrant's shares for Twin Ace shares). Only upon execution of the same will Tangent Holdings Corporation file Form 36B to report its increased shareholdings in registrant corporation. 6. RSA Section 32 Based on the foregoing discussion, Tangent will likewise comply with the provisions of RSA Section 32 once the registrant has issued in its favor additional shares in exchange for its Twin Ace shares. We trust that we have sufficiently addressed your queries. Should you wish further clarification on the matter, please let us know. Very truly yours, (SGD.) MA. CECILIA L. PESAYCO Corporate Secretary