PSE Circular for Brokers No. 2586-98

November 13, 1998 PSE CIRCULAR FOR BROKERS NO. 2586-98 November 12, 1998 Philippine Stock Exchange, Inc. Disclosure Department Listings & Disclosure Group 4th Floor, Phil. Stock Exchange Centre PSE Center, Exchange Road Ortigas Center, Pasig City Attention: Mr . Reynold Ong Vice President Gentlemen : We are enclosing a copy of our Press Release entitled "Nestle Sale Okayed; SMC By-Laws Amended" which we will release to the press this afternoon. Very truly yours, (SGD.) FRANCIS H. JARDELEZA Senior Vice President-General Counsel & Assistant Corporate Secretary November 12, 1998 NESTLE SALE OKAYED, SMC BY-LAWS AMENDED Stockholders of San Miguel Corporation (SMC) approved in a special meeting Thursday (November 12) the sale of the company's 45% interest in Nestle Philippines Inc. and two amendments to SMC'S by-laws to give its Management better capability to pursue business opportunities quickly. Exactly 97.87% of total votes cast or 78.45% of SMC's outstanding shares of stock were in favor of the Nestle deal, which is substantially more than the two-thirds vote needed to ratify the sale. The ratification is viewed as a clear mandate and vote of confidence on Eduardo Cojuangco Jr., SMC chairman, who initiated these moves in line with Management efforts to reverse the company's declining profitability, strengthen its financial position base its debt burden, maximize asset utilization and cultivate strong strategic alliances. The Nestle transaction will yield for SMC a total of $599.5 million in addition to the P2.8 billion proceeds from the sale of San Miguel's 60% interest in Rizalag Land Company Inc. which owns the land where Nestle's plants are located except the property on Aurora Blvd. Quezon City. The total amount includes interest on escrow accounts where the payments were placed pending stockholders' approval of the sale. LexLib Strong broad-based support was also indicated in the ratification of the amendment deleting the provision in SMC's by-laws which requires approval by two-thirds of the company's outstanding shares of stock for any sale of disposition of its interest in subsidiaries and affiliates if the transaction value exceeds 10% of SMC's total assets. A total of 91.77% of votes cast or 73.56% of the Company's outstanding shares of stocks were in favor of this amendment, while a total of 93.26% of votes cast or 74.76% of SMC's total outstanding shares were in favor of the amendment deleting the provision which requires approval by two-thirds of SMC's outstanding shares of stock for investments beyond the primary business of the Company. Amendments to corporate by-laws require a majority vote. The sale of the Nestle stake and the amendments are critical during this time of economic difficulty and uncertainty, Mr. Cojuangco said in his remarks to stockholders. "An environment such as this requires building a strong financial position that will enable us to effectively weather the adverse business climate and seize new opportunities." The sale of SMC's interest in Nestle Philippines unlocks the real value of this investment, he said. Proceeds from the sale "will strengthen the company's financial standing by bolstering its cash position, reducing financial charges and improving leverage ratios," Mr. Cojuangco said. He noted that although profitable and within the scope of San Miguel's core business, Nestle is a passive investment that offers little to SMC's businesses in terms of technology transfer or synergy. With the P23.3 billion proceeds from the earlier sale of SMC's shares in Coca-Cola Beverages, the Nestle Transaction brings San Miguel to a net cash position, and moves it from vulnerability to a position of financial strength. Cojuangco added that the cash raised from these two transactions provides a hedge against San Miguel's debt and will allow the company to aggressively pursue new opportunities within its core businesses. "In the meantime, the interest income this money generates will offset interest expense," he said. Even with the amendment of the by-laws, Mr. Cojuangco said that disposition of all or substantially all of the assets of the corporation and investments to non-allied undertaking will still require stockholders' approval as provided by the Corporation Code. The two amendments put SMC on an equal footing with other Philippine public companies that are bound only by the provisions of the Code, he said.