Securities and Exchange Commission Sec Form 11-C Current Report Under Section 11 of The Revised Securities Act (RSA) and RSA Rule 11(a)-l(b)(3) Thereunder

September 28, 1999 PSE CIRCULAR FOR BROKERS NO. 2437-99 SECURITIES AND EXCHANGE COMMISSION SEC FORM 11-C CURRENT REPORT UNDER SECTION 11 OF THE REVISED SECURITIES ACT (RSA) AND RSA RULE 11(a)-1(b)(3) THEREUNDER 1. September 28, 1999 Date of Report 2. SEC Identification No. PW 55 3. BIR Tax Identification No. 000-488-793 4. Philippine Long Distance Telephone Company Exact name of registrant as specified in its charter 5. Philippines Province, Country or other jurisdiction of incorporation or organization 6. (SEC use only) Industry Classification Code 7. Makati Avenue, Makati City Address of principle office 8. (632) 816-8714 Registrant's telephone number including area code 9. Not Applicable Former name, former address and former fiscal year, if changed since last year 10. Securities registered pursuant to Sections 4 and 8 of the Revised Securities Act Title of Each Class Number of Shares of Stock Outstanding 11. Indicate the item numbers reported herein: Items 2 and 9 In compliance with the disclosure requirement of the Securities and Exchange Commission, we submit the following documents: 1. DISCLOSURE TO SECURITIES AND EXCHANGE COMMISSION dated September 28, 1999, regarding the Stock Purchase and Strategic Investment Agreement entered into by the Company in connection with the purchase of the outstanding shares in Smart Communications, Inc. by the Company and the subscription for common shares of the Company by NTT Communications Corporation; LexLib 2. Press Release entitled "PLDT SIGNS FINAL AGREEMENT TO ACQUIRE SMART, CREATE STRATEGICAL ALLIANCE WITH JAPAN'S NTT", dated September 28, 1999; 3. Print Advertisement captioned "Team Up" In addition to the matters disclosed in the first mentioned document, we further disclose that at the meeting of the Board of Directors held on September 27, 1999, the following corporate actions were authorized by the Board: 1. the increase in the authorized capital stock of the Company from PHP8.5 billion to PHP9.395 billion divided into 234,000,000 shares of common stock, each with a par value of PHP5.00 and 822,500,000 shares of preferred stock, each with a par value of PHP10.00, and the corresponding amendment of the Seventh Article of the Articles of Incorporation of the Company. 2. the amendment of the Seventh Article, Sub-division B(4) of the Articles of Incorporation of the Company, denying the pre-emptive rights of owners of common stock to subscribe for any issue of up to 12,198,462 common shares of the Company to NTT Communications Corporation, for cash, and any issue of up to 1.298,745 common shares pursuant to the Stock Option Plan approved by the Board of Directors of the Company on April 27, 1999. 3. the change in principal office of the Company from Makati City to Metro Manila and the corresponding amendment to the Third Article of the Articles of Incorporation of the Company; and 4. the increase in the number of directors of the Company from 11 to 13 and the corresponding amendment of the Sixth Article of the Articles of Incorporation of the Company. cdlex The foregoing matters will be submitted to the stockholders for their consideration and approval at a special meeting to be convened on December 10, 1999. The Board has fixed October 11, 1999, as the record date for the purpose of determining the stockholders entitled to notice of, and to vote at, said meeting. SIGNATURE Pursuant to the requirements of the Revised Securities Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized. PHILIPPINE LONG DISTANCE TELEPHONE COMPANY (SGD.) MA. LOURDES C. RAUSA-CHAN Corporate Secretary September 28, 1999 DISCLOSURE TO SECURITIES & EXCHANGE COMMISSION Agreement in relation to (1) the purchase of shares in SMART Communications, Inc., ("SMART") by Philippine Long Distance Telephone Company ("PLDT") and (2) subscription for new common shares of PLDT by NTT Communications Corporation ("NTT Communications"). Further to the non-binding memorandum of understanding it entered into on 4th June, 1999 and its announcement on the same day, the board of directors of PLDT now announces that it has entered into a Stock Purchase and Strategic Investment Agreement ("Stock Purchase Agreement") with NTT Communications and First Pacific Company Limited and certain of its Philippine affiliates (together the "First Pacific Group") on 28th September, 1999 under which it has been agreed that PLDT will acquire all the issued and outstanding shares of SMART held by NTT Communications and the First Pacific Group. The First Pacific Group also agrees under the Stock Purchase Agreement to use its reasonable efforts to procure the sale by the remaining shareholders of SMART (the "Minority Shareholders") of their shares in SMART to PLDT. The aggregate consideration for the sale of such shares of SMART, which constitutes the entire issued share capital of SMART, of Pesos 37.9 billion will be satisfied by the issue of 35.1 million new common shares of PLDT. In addition, NTT Communications will subscribe for 12.2 million additional new common shares of PLDT for an aggregate price of approximately Pesos 14.7 billion. On completion of this transaction, First Pacific Group will hold an attributable 22.8 per cent economic interest, and a 31.4 per cent voting interest, in PLDT and NTT Communications will hold a 15.0 per cent economic and voting interest in PLDT. cdll The board of directors has called a Special Meeting of Stockholders on 10th December, 1999 to seek various approvals required from stockholders and has fixed 11th October, 1999 as the record date for the purpose of determining the stockholders entitled to notice of, and to vote at, said meeting. Introduction PLDT refers to its announcement dated 4th June, 1999 (the "MOU Announcement") regarding the entering into of a non-binding Memorandum of Understanding among PLDT, First Pacific and NTT in relation to (1) the acquisition of shares in SMART by PLDT and (2) the subscription for new common shares of PLDT by NTT Communications. PLDT now announces that. it entered into a legally binding Stock Purchase and Strategic Investment Agreement on 28th September, 1999. The Parties 1. PLDT, the leading fixed-line telecommunications service provider in the Philippines. 2. Members of the First Pacific Group including Metro Pacific, First Pacific's Philippine flagship. The First Pacific Group currently has a 17.5 per cent economic interest in PLDT. 3. NTT Communications, a wholly owned subsidiary of NTT that engages in international telecommunications business. Principal Terms Under the Stock Purchase Agreement, PLDT, First Pacific and NTT Communications have agreed: 1. (a) First Pacific Group will sell its 56.4 per cent shareholding in SMART to PLDT for an aggregate consideration of Pesos 21.3 billion. The total purchase price to be paid to the First Pacific Group will be satisfied by the issue of 19.7 million fully paid new common shares in PLDT at an issue price of Pesos 1,080 per share. The issue price of Pesos 1,080 per share represented a 2.4 per cent. premium over PLDT's closing share price of Pesos 1,055 on the Philippine Stock Exchange on 4th June, 1999, the date of the MOU-Announcement, and a 23.4 per cent. premium over PLDT's closing share price on the Philippine Stock Exchange of Pesos 875 on 27th September, 1999; and (b) NTT Communications will sell its 37.2 per cent. shareholding in SMART to PLDT for a consideration of Pesos 14.1 billion which will be satisfied by the issue of 13.1 million fully paid new common shares at an issue price of Pesos 1,080 per share. First Pacific Group will use all reasonable efforts to procure the sale of the 6.4 per cent. interest in SMART held by the Minority Shareholders to PLDT on the same basis. This will result in the issue of up to 2.3 million new common shares at an issue price of Pesos 1,080 per share to the Minority Shareholders. These transactions (collectively referred to as the "Exchange Transaction") value SMART at Pesos 37.9 billion. 2. NTT Communications will subscribe for 12.2 million additional new common shares of PLDT at an aggregate price of Pesos 14.7 billion, which is equivalent to an issue price of Pesos 1,202 per share, representing a 13.9 per cent premium over PLDT's closing share price of Pesos 1,055 on the Philippine Stock Exchange on 4th June, 1999 being the date of the MOU Announcement, and a 37.4 per cent. premium over PLDT's closing share price on the Philippine Stock Exchange of Pesos 875 on 27th September, 1999. The above-mentioned subscription by NTT Communications of additional common shares of PLDT is referred to as the "NTT Cash Subscription;" and together with the Exchange Transaction, as the "Transactions." In connection with the Transactions, PLDT will issue in aggregate 47.3 million new common shares, representing 28.1 per cent. of PLDT's enlarged issued share capital. Following completion of these transactions and taking into account the First Pacific Group's existing 17.5 per cent. attributable economic interest in PLDT, the First Pacific Group will hold an attributable economic interest in the enlarged common share capital of PLDT of 22.8 per cent. (and members of the First Pacific Group will have the ability to exercise voting rights representing 31.4 per cent of the enlarged issued and outstanding common share capital of PLDT) and NTT Communications will hold an economic and voting interest in the enlarged issued and outstanding common share capital of PLDT of 15.0 per cent. prcd Shareholders' Agreement Simultaneous with the closing under the Stock Purchase Agreement, NTT Communications and First Pacific, together with certain of its subsidiaries and Philippine affiliates which will then hold, directly or indirectly, common shares of PLDT (the "Party Shareholders") will enter into a Shareholders' Agreement. The PLDT board of directors will be enlarged to comprise 13 directors. The Party Shareholders will support the nomination of two directors to the PLDT board of directors by NTT Communications. Save as aforesaid, the PLDT board of directors will remain the same and Manuel V. Pangilinan will remain as President and Chief Executive Officer of PLDT. NTT Communications also may nominate board and committee representatives at the subsidiaries of PLDT. The Shareholders' Agreement will also provide that the Party Shareholders will use reasonable endeavors to procure that PLDT will not take certain corporate actions without the unanimous consent of the Party Shareholders, and will also provide for rights of first offer and certain other restrictions on the transfer of the PLDT common shares held by the Party Shareholders. Commercial Agreements PLDT will also enter into a series of commercial agreements under which (i) NTT Communications and PLDT will enter into arrangements in relation to international telecommunications traffic, (ii) NTT Communications will provide certain transport capacity and services in relation to the Internet, (iii) PLDT will be appointed as a service provider in respect of Arcstar services provided through a subsidiary of NTT, and (iv) NTT will provide certain technical advisors to PLDT . cdlex Conditions for Completion of the Transactions Completion of the Transactions is subject to satisfaction of various conditions precedent, including: 1. The following- actions required for implementation of the Transactions being approved by the relevant majorities of the stockholders of PLDT as shown below voting at the Special Meeting of Stockholders referred to below: Action Approval Required (a) The increase in PLDT's Two-thirds of the total outstanding authorized capital stock to Pesos common and preferred shares 9.395 billion; voting as a single class (b) The issuances of common shares Two-thirds of the outstanding of PLDT for the acquisition of the common shares as a single shares of SMART and the cash class and two-thirds of the total subscription by NTT outstanding common and Communications pursuant preferred shares voting as a single to the Transactions; class (c) The denial of pre-emptive rights Two-thirds of the outstanding of the common stockholders of common shares voting as a single PLDT regarding the issue of class and two-thirds of the total common shares of PLDT to NTT outstanding common and Communications pursuant preferred shares voting as a single to the NTT Cash Subscription through class an amendment of the Articles of Incorporation of PLDT; and (d) The increase in the number of Two-thirds of the total outstanding directors of PLDT to 13; common and preferred shares voting as a single class 2. The Stock Purchase Agreement and all of the documents envisaged thereunder to which any member of the First Pacific Group will be a party, being approved by the board of directors and, where necessary, the stockholders, of the relevant member of the First Pacific Group; 3. The proposed increase in the authorized capital stock of PLDT under paragraph 1 (a) above being endorsed by the Philippine National Telecommunications Commission to the Philippine Securities and Exchange Commission; 4. The transfer of the controlling interest in SMART to PLDT being approved by the Philippine National Telecommunications Commission; 5. All consents which are required under the loan or financing documentation of SMART to implement the transactions envisaged under the Stock Purchase Agreement having been obtained; 6. Piltel having entered into a memorandum of understanding or other similar document with Piltel's principal creditors relating to the restructuring of Piltel's obligations on terms satisfactory to PLDT, the First Pacific Group and NTT Communications; 7. A written plan and set of parameters relating to the operational integration of the businesses .of Piltel and PLDT together with its subsidiaries being approved by PLDT, the First Pacific Group and NTT Communications; 8. The matters set out in paragraphs 1(a) to (d) above being approved by the Philippine Securities and Exchange Commission; 9. The Philippine Stock Exchange approving the listing of the common shares to be issued by PLDT pursuant to the Transactions, 10. The following not having occurred: (i) any general suspension of trading in, or limitation on prices for, securities on the Philippine Stock Exchange (with certain exceptions); (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the Philippines; (iii) a war directly involving Japan or the Philippines; or (iv) any limitation by any Philippine governmental authority on the extension of credit by banks or other financial institutions operating in the Philippines which would have a material adverse effect on the business or operations of SMART and the subsidiaries of SMART, taken as a whole, or PLDT and the subsidiaries of PLDT, taken as a whole; llcd 11. The entering into of commercial agreements by PLDT and NTT Communications and/or its subsidiaries; and 12. The entering into of the Shareholders' Agreement by the Party Shareholders. Fairness Option The board of directors of PLDT created a Special Committee of the Board to review the Transactions, and Morgan Stanley Dean Witter has been engaged to advise, and provide a financial opinion letter to, the Special Committee with respect to the consideration to be paid by PLDT in the Exchange Transaction. Special Meeting of Stockholders The board of directors of PLDT has resolved to call a Special Meeting of Stockholders to seek the approvals of stockholders required as set out above. The Special Meeting of Stockholders will be held on 10th December, 1999. The record date for the purpose of determining stockholders' entitlement to notice of, and to vote at, the Special Meeting of Stockholders will be 11th October, 1999. A proxy statement, explanatory memorandum and proxy form are expected to be sent to each PLDT stockholder in October 1999 . LexLib Definitions In this Announcement, the following terms and expressions have the following meanings: "First Pacific" First Pacific Company Limited, a company incorporated in Bermuda and listed on the Stock Exchange of HongKong; "First Pacific Group" First Pacific and certain of its Philippine affiliates, including Metro Pacific; "Metro Pacific" Metro Pacific Corporation, a Philippine company listed on the Philippine Stock Exchange, in which the First Pacific Group has an aggregate direct and indirect attributable economic interest of approximately 81.8 per cent.; "NTT" Nippon Telegraph and Telephone Corporation, a publicly listed company in Japan, currently holding 37.2 per cent. of the issued share capital of SMART; "NTT Communications NTT Communications Corporation, a wholly owned subsidiary of NTT; "Party Shareholders" NTT Communications and the members of the First Pacific Group and certain affiliated entities that will hold common shares of PLDT following the Transactions; "Pesos" Philippine Pesos, the lawful currency of the Republic of the Philippines; "Piltel" Pilipino Telephone Corporation, a subsidiary of PLDT, whose shares are listed on the Philippine Stock Exchange; and "PLDT" Philippine Long Distance Telephone Company, a Philippine company whose shares of common stock and shares of preferred stock are listed and traded on the Philippine Stock Exchange and whose common stock as represented by American Depositary Shares are listed and traded on the New York Stock Exchange and the Pacific Exchange, San Francisco, California. PLDT SIGNS FINAL AGREEMENT TO ACQUIRE SMART, CREATE STRATEGIC ALLIANCE WITH JAPAN'S NTT PLDT, the Philippines' leading fixed-line telephone company, signed a formal agreement today to acquire SMART Communications, Inc., the country's leading cellular company, by issuing 35.1 million new common shares to SMART's shareholders at a value of Pesos 37.9 billion, and to forge a strategic alliance with Japan's NTT Communications Corporation (NTT). The transactions, which were preliminarily agreed to in the form of a non-binding memorandum of understanding in early June, will enable PLDT to offer a growing number of customers across the Philippines fully integrated, high-quality telecommunications services, ranging from traditional fixed-line and cellular phone networks to high-technology Internet access and broadband data transmission. They will also lead to significant cost savings by combining overlapping operations in such areas as marketing, information technology and customer service. Contracts covering the transactions were signed today following their formal, separate approval by the boards of PLDT, NTT, First Pacific and Metro Pacific. Completion of the transactions is subject to various regulatory, third party and shareholder approvals. At its meeting yesterday, PLDT's Board of Directors resolved to call a Special Meeting of Stockholders to be held on 10th December, 1999 to approve various proposals in connection with the transactions. Documentation explaining the transactions in detail, including a Proxy Form for those shareholders unable to attend the meeting in person, is expected to be sent to PLDT's stockholders in October. As previously announced. PLDT intends to issue 35.1 million new common shares to acquire 100% of SMART - which is currently held as to 56.4% by the First Pacific Group and as to 37.2% by NTT. In addition, NTT will subscribe for a further 12.2 million new PLDT common shares at a price of P1,202 each for a total of P14.7 billion to be injected into PLDT. As a result, the First Pacific Group's economic interest in PLDT will increase to approximately 22.8%. NTT will own 15.0% of the Company. The enlarged PLDT combining its own activities along with those of its Pilipino Telephone Corporation (Piltel) subsidiary, and SMART - will initially have more than 1.85 million fixed-line customers and approximately 1.34 million cellular customers. PLDT's President and CEO, Manuel V. Pangilinan, said: "These transactions reflect the consolidation in the worldwide telecommunications industry and will create a stronger, more efficient PLDT. They will enable us to deliver a better, wider range of services to more customers, faster than ever before. As a world leader in telecommunications services and technological innovation, we expect NTT to assist PLDT in improving service levels and overall operations, leading to reduced capital expenditure and enhanced long-term profitability." llcd He added that PLDT also expects NTT to be an active contributor to PLDTs future performance, with the company harnessing NTTs international experience of operating fixed-line networks in Sri Lanka and Indonesia and its development of a state-of-the art network in Singapore. Benefits of NTT Alliance Through the strategic alliance, NTT will provide PLDT access to world-class standards of technology, products and services. Among the benefits that NTT is expected to bring to PLDT are: Co-operation in addressing the convergence of telecommunications services in such areas as data communications, multimedia, Internet Protocol and third-generation mobile services. The contribution of NTT's best practice engineering and network development to PLDT's on-going efforts to improve service quality and reduce capital expenditure requirements. The addition of NTT's "Arcstar" range of managed data services to PLDT's portfolio of products for corporate customers, as well as its experience meeting the communications needs of multinational corporations. The routing through PLDT's network of additional traffic generated from within the NTT network. Further enhanced relationships with suppliers, equipment manufacturers, consultants and other telecom service providers. The contracts between PLDT, NTT and the First Pacific Group stipulate that two NTT representatives will be nominated to PLDT's expanded 13-member Board, and a number of NTT employees will hold technical advisory positions in key operating departments of PLDT to promote the exchange of technical expertise. The contracts also stipulate that PLDT will market managed data and other services under NTT's Arcstar brand to its corporate customers in the Philippines; that PLDT and NTT will enter into co-operative arrangements for conventional international telecommunications services to enhance their respective international businesses; and that PLDT and NTT will co-ordinate their plans for deploying and utilizing Internet Protocol transport capacity, and developing and promoting Internet-related and other value-added services. PLDT Reorganization Following the completion of the transactions, PLDT intends to establish separate fixed line and mobile business segments. In the fixed-line business, PLDT will integrate its own operations with those of SMART and Piltel. In the cellular area, PLDT will have access to SMART's 915,000 subscribers on its analogue STACS system and digital GSM service, and Piltel's 423,000 subscribers on its analogue AMPS system and digital CDMA service. An integration task force has been established to advise PLDT's Board of Directors on the final form of the reorganization. It is anticipated that the main benefits of this integration will include: The ability to offer customers a broader range of integrated products and services, leading to the creation of a "one-stop shop" for all fixed-line and cellular telephony, Internet and data requirements. The ability to bundle different telecoms services, providing customers with tailor-made communications solutions. The potential integration of sales, distribution and customer care functions, as well as the ability to combine administration, IT and other corporate functions, resulting in the elimination of duplication. The opportunity to achieve economies of scale in network planning and development, allowing better network utilization. The potential to improve PLDTs marketing, advertising and customer service functions as a result of SMART's expertise in such areas. PLDT is being advised by ABN AMRO in connection with the acquisition of SMART and the introduction of NTT as PLDT's strategic partner. First Pacific, Metro Pacific and other companies in the First Pacific Group are being advised by ING Barings. NTT is being advised by Credit Suisse First Boston. In addition, PLDT's Board has formed an independent special committee to review the acquisition, and Morgan Stanley Dean Witter has been engaged to advise, and provide a financial opinion letter to, the special committee with respect to the consideration to be paid by PLDT in the acquisition. PLDT's President and CEO, Manuel V. Pangilinan, will hold a press conference at 3:00 p.m. today in Manila to discuss these transactions. cdlex For Further Information, Please Contact: PLDT Manuel V. Pangilinan Ph: (632) 817 5096 President & Chief Executive Officer Antonio Samson Executive Vice President, Corporate Services Ph: (632) 816 8731 Anabelle Lim-Chua Treasurer and First Vice President Ph: (632) 816 8213 First Pacific Robert Sherbin Ph: (852) 2842 4380 Executive Vice President, Group Corporate Communications Metro Pacific Cora Guidote Ph: (632) 811 0367 Group Vice President, Corporate Communications and Investor Relations Team up In today's increasing competitive arena, successful companies are building up their teams to provide customers with improved product services. This is why PLDT is proposing to acquire SMART Communications and to form an alliance with NTT Communications By establishing a stronger, more efficient company. PLDT will provide long term benefits to customers and stockholders giving Filipinos the quality and range of telecom services they truly deserve.