Manila Broadcasting Company

October 13, 1998 PSE CIRCULAR FOR BROKERS NO. 2348-98 SUBJECT : Manila Broadcasting Company Further to Circular No. 1904-98 dated August 17, 1998 in connection with Manila Broadcasting Company's ("MBC") Asset-for-Share swap transaction with Cebu Broadcasting Company ("CBC"), Philippine Broadcasting Company ("PBC") and Pacific Broadcasting Systems, Inc. ("PBSI"), attached herewith is a comprehensive corporate disclosure from MBC on the following: I. Description of the proposed restructuring of MBC; II. Discussion of the Asset-for-Share Swap transaction (the "transaction"); III. Discussion of the initial and long-run effects of the transaction on MBC; and IV. Company background of the following entities: a. Cebu Broadcasting Company b. Philippine Broadcasting Company c. Pacific Broadcasting Systems, Inc. Lastly, copies of the financial statements and appraisal reports of CBC, PBC and PBSI are available for reference at the PSE library. For your information. (SGD.) JOSE LUIS U. YULO, JR. President and Chief Executive Officer COMPREHENSIVE CORPORATE DISCLOSURE OF MANILA BROADCASTING COMPANY ("MBC") ON THE ASSET FOR STOCK SWAP TRANSACTION WITH CEBU BROADCASTING COMPANY ("CBC"), PHILIPPINE BROADCASTING COMPANY ("PBC") AND PACIFIC BROADCASTING SYSTEMS, INC. ("PBSI") I. Description of the proposed restructuring of MBC with plans and proposals The proposal entails the acquisition of MBC of fourteen (14) prime radio stations of CBC, PBC and PBSI in exchange for MBC shares. MBC's plans and strategy is to expand the network in strategic areas with high growth potential to sustain its thrust of increasing market share in the radio broadcast industry. II. Discussion of the Asset-for-Share Swap transaction (the "transaction"): 1. Reason/purpose of the transaction The plan will consolidate MBC's position as the largest radio broadcasting network in the country in terms of number of stations revenue market share. Synergies shall be achieved in the scheme particularly in terms of better marketing leverage, lower cost of operations and better delivery of broadcast services to the public. 2. Different Agreements The document that will evidence this transaction is a Deed of Assignment executed between MBC, CBC, PBC and PBSI. A copy of this document is no yet available at this time considering that stockholders' approval was only secured yesterday, 5 October 1998. We will provide PSE with a copy of the document as soon as the same has been executed and notarized. cdll 3. Terms of the deal Cebu Broadcasting Philippine Broadcasting Pacific Broadcasting Company (CBC) Company (PBC) Systems, Inc. (PBSI ) DZMB-FM Manila DYMB-FM Iloilo DWST-FM nationwide DXBM-FM Davao DWIL-FM Laoag DWID-FM Dagupan DWYN-FM Naga DXKS-FM Cagayan de Oro DWLW-FM Lucena DXWK-FM General Santos DXCM-FM Zamboanga DYRC-AM Cebu DWIP-FM Santiago DZNL-AM La Union The table above shows the radio stations and the location of each station to be exchanged by CBC, PBC and PBSI for MBC stocks. The following table shows the value of each station as determined by Cuervo Appraisers, Inc. and the number of shares that each station will be exchanged for. CBC COST NO. OF SHARES DZMB-FM Manila P259,817,224.00 259,817,224 DXBM-FM Davao P29,618,012.00 29,618,012 DWYN-FM Naga P12,389,728.00 12,389,728 DXWK-FM General Santos P24,486,183.00 24,486,183 DYRC-AM Cebu P22,423,676.00 22,423,676 Total P348,734,823.00 348,734,823.00 PBC COST NO. OF SHARES DYMB-FM Iloilo P29,618,012.00 29,618,012 DWIL-FM Laoag P10,019,311.00 10,019,311 DXKS-FM Cagayan de Oro P15,151,141.00 15,151,141 DXCM-FM Zamboanga P30,106,758.00 30,106,758 DWIP-FM Santiago P15,444,388.00 15,444,388 DZNL-AM La Union P19,843,099.00 19,843,099 Total P120,182,709.00 120,182,709 PBSI COST NO. OF SHARES DWST-FM Nationwide P199,701,506.00 199,701,506 DWID-FM Dagupan P24,608,369.00 24,608,369 DWLW-FM Lucena P10,434,745.00 10,434,745 Total P234,744,620.00 234,744,620 The issued price per share of MBC is at par value of P1.00. The shares shall be issued upon approval of the transaction by the Securities and Exchange Commission and the payment of appropriate documentary stamp tax covering the transaction. 4. Valuation of MBC shares The Board of Directors and the Stockholders agreed that MBC shares to be exchanged shall be issued at par value of P1.00 per share. Although the current market price of the shares is pegged at P0.60, they deemed that this is not reflective of the company's true value. Moreover, in order to minimize dilution on the existing stockholders, par value was deemed the most appropriate value to be used. LibLex The table below will show the number of shares and the percentage holdings of each of the companies upon their entry into MBC. Cebu Broadcasting Company 348,734,823 36.47% Pacific Broadcasting Systems, Inc. 234,744,620 24.55% Philippine Broadcasting Company 120,182,709 12.57% MBC's issue price for this transaction is at par value of P1.00 per share. MBC's market price based on the last transaction on the exchange is P0.60 per share. MBC's book value is P1.11 per share. 5. Valuation of assets subject of the transaction Enclosed is the appraisal report done by Cuervo Appraisers, Inc. as approved by the directors and stockholders which is self-explanatory. 6. Effects of the transaction: a. Ownership structure of MBC before and after the transaction (with percentage holdings) Name No. of Shares Before After 1 CEBU BROADCASTING COMPANY 348,734,823.00 36.47 2 PACIFIC BROADCASTING SYSTEM INC. 234,744,620.00 24.55 3 PHILIPPINE BROADCASTING COMPANY 120,182,709.00 12.57 4 ELIZALDE LAND. INC. 120,000,000.00 47.49% 12.55 5 ROMULO, MABANTA, BUENAVENTURA, SAYOC & DELOS ANGELES 69,910,993.25 27.67% 7.31 6 ELIZALDE HOLDINGS CORPORATION 39,448,304.00 15.61% 4.12 7 RENATO T. DE GUZMAN 12,600,523.00 4.99% 1.32 8 MARIA FE ILIGAN 1,686,528.50 0.67% 0.18 9 TANSENGCO UY & CO., INC. 659,892.00 0.26% 0.07 10 ALLEN CHAM 632,549.00 0.25% 0.07 11 MYRON C. PAPA, SA OF ESTATE OF ANGELA BUTTE 627,254.00 0.25% 0.07 12 LUIS M. ALBERTO &/OR MANUEL C. ALBERTO 553,368.00 0.22% 0.06 13 PACIFICO DE OCAMPO 551,819.00 0.22% 0.06 14 CHRISTINA KNECHT 527,070.00 0.21% 0.06 15 ESTATE OF EDUARDO L. MONTILLA 490,361.00 0.19% 0.05 16 L.V.N. PICTURES, INC. 447,961.00 0.18% 0.05 17 A. &/OR J.O. DEL ROSARIO 363,592.00 0.14% 0.04 18 ISABEL CARO 184,408.00 0.07% 0.02 19 RUPERTO S. NICDAO, JR. 127,201.00 0.05% 0.01 20 ERNESTINA U. DE GARCIA 122,338.00 0.05% 0.01 b. MBC's capital structure Capital Structure Before After Authorized Capital Stock P1,000,000,000.00 P2,000,000,000.00 Par Value P1.00 per share P1.00 per share Paid-Up Capital P252,682,989.25 P956,345,141.25 c. Board of Directors and Principal Officers Directors/Executive Officers Position Fred J. Elizalde Director/Chairman of the Board Ruperto S. Nicdao, Jr. Director/President Eduardo G. Cordova Director/SVP-Finance Renato T. de Guzman Director George T. Goduco Director/VP-Treasurer Felix D. Carao, Jr. Director/SVP-Legal Rudolph E. Jularbal Director/VP-Legal, Corp.Sec. Hadrian V. Arroyo Director/VP-FM Leoncio J. Galang Director/VP-AM Marvel K. Tan VP-Finance Rodolfo Arce VP-Administration Joel B. Navoa VP-Marketing Edgardo C. del Rosario VP-Purchasing Juan Manuel Elizalde VP-Comnet Jose M. Taruc VP-DZRH Wilfredo A. Fernandez VP-Engineering Elpidio Macalma AVP-News Director Gil M. Torres Personnel d. Earnings per share (prior to and after the transaction) Base on 1997 audited financial statements, earnings per share is P0.08 centavos. After this transaction, earnings per share is computed at P0.13 centavos. 7. Timetable for the effectivity of the transaction and issuance of shares The transaction shall be considered effective upon approval of the Securities and Exchange Commission. The shares will then be issued upon their approval and after payment of the documentary stamp tax. However, it will only by considered listed upon approval of the application by PSE. III. Discussion of the initial and long-run effects of the transaction on MBC (advantage and disadvantages) Inasmuch as the station being acquired have good ratings in good markets, MBC will immediately increase its revenue base and its profitability. In the long run, this will definitely improve its market share as the revenues of these stations outpace industry standards. Moreover, MBC can use these stations to leverage its existing weaker stations among advertising clients. IV. Company background of CBC, PBC and PBSI A. CEBU BROADCASTING COMPANY Nature of Business Cebu Broadcasting Company is a radio broadcasting company affiliated with Manila Broadcasting Company. It was incorporated in 28 August 1947. Capital Structure Authorized Capital Stock P1,500,000.00 Subscribed Capital Stock 760,000.00 Paid-up Capital Stock 760,000.00 Key Officers and Members of the Board of Directors Hadrian V. Arroyo Chairman/President Ruperto S. Nicdao, Jr. Director Marvel K. Tan Director/Treasurer Gil M. Torres Director Rudolph E. Jularbal Director/Corporate Secretary Ownership Structure Stockholders Class of No. of %age of Nature of Shares Shareholdings Ownership Ownership Elizalde Holdings Corporation Common 75,995 99.99% Hadrian V. Arroyo Common 1 0.00% Nominee Ruperto S. Nicdao, Jr. Common 1 0.00% Nominee Marvel K. Tan Common 1 0.00% Nominee Gil M. Torres Common 1 0.00% Nominee Rudolph E. Jularbal Common 1 0.00% Nominee B. Philippine Broadcasting Company Nature of Business Philippine Broadcasting Company is a radio broadcasting company affiliated with Manila Broadcasting Company. It Was incorporated in 4 June 1946. Capital Structure Authorized Capital Stock 125,000 shares/no par Subscribed Capital Stock 544,795.00 Paid-Up Capital Stock 544,795.00 Key Officers and Members of the Board of Directors Eduardo G. Cordova Chairman/President Edgardo C. del Rosario Director Marvel K. Tan Director/Treasurer Rodolfo Arce Director Ely Buyco Director Rudolph E. Jularbal Corporate Secretary Ownership Structure Stockholders Class of No. of %age of Nature of Shares Shareholdings Ownership Ownership Elizalde Holdings Corporation Common 108,614 99.68% Ramon Zosa Common 100 0.09% Tereso Duman Common 100 0.09% Juan Pastrano Common 40 0.03% Horacio Guiterrez Common 40 0.03% Luis Garcia Common 20 0.01% Catalino Magno Common 20 0.01% Vicente Torres Common 20 0.01% Eduardo G. Cordova Common 1 0.00% Nominee Edgardo C. del Rosario Common 1 0.00% Nominee Marvel K. Tan Common 1 0.00% Nominee Rodolfo Arce Common 1 0.00% Nominee Ely Buyco Common 1 0.00% Nominee C. Pacific Broadcasting System, Inc . Nature of Business Pacific Broadcasting System, Inc. is a radio broadcasting company affiliated with Manila Broadcasting Company. It was incorporated in 4 March 1959. Capital Structure Authorized Capital Stock P10,000,000.00 Subscribed Capital Stock 2,642,000.00 Paid-Up Capital Stock 2,517,900.00 Key Officers and Members of the Board of Directors Edgardo C. del Rosario Chairman/President Eduardo G. Cordova Director/Treasurer George T. Goduco Director/ Rodinil D. Bugay Director/ Rudolph E. Jularbal Director/Corporate Secretary Ownership Structure Stockholders Class of No. of %age of Nature of Shares Shareholdings Ownership Ownership Elizalde Holdings Corporation Common 26,269 99.43% Edgardo C. del Rosario Common 1 0.00% Nominee Eduardo G. Cordova Common 1 0.00% Nominee George T. Goduco Common 1 0.00% Nominee Rodinil D. Bugay Common 1 0.00% Nominee Rudolph E. Jularbal Common 1 0.00% Nominee Leticia Andrews Common 146 0.55% Financial Statements Copies of the Financial Statements of Cebu Broadcasting Company, Philippine Broadcasting Company and Pacific Broadcasting System, Inc. are attached herewith. (SGD.) ATTY. RUDOLPH E. JURALBAL Corporate Secretary