PSE Circular for Brokers No. 2907-99

November 15, 1999 PSE CIRCULAR FOR BROKERS NO. 2907-99 OBJECTIVE OF THE REALIGNMENT OF THE GROUP'S BUSINESSES The Keppel Philippines Group carried out a reorganization of its shipyard and property-related businesses in 1998. The Group restructuring exercise involved the transfer of Cebu shipyard operations from Keppel Philippines Properties, Inc. (KPPI, formerly Cebu Shipyard and Engineering Works) to a newly formed company Keppel Cebu Shipyard, Inc. (KCSI) on October 1, 1998. Further to that, on December 29, 1998, Keppel Philippines Marine, Inc. (KPM, formerly Kepphil Shipyard, Inc.) acquired KCSI, KPPI acquired a 15% stake in SM Keppel Land, Inc. (SMKL), and KPH enlarged its holdings in KPM. By the end of 1998 and as a result of the exercise, the Group consolidated the shipbuilding and shiprepair businesses under one of the publicly listed companies of the Keppel Philippines Group, i.e., KPM, and KPPI took its first step in housing the property-related investments of the Group. To date, KPPI continues to own some five percent (5%) of Subic Shipyard and Engineering, Inc. (SSEI) represented by 62,635,751 shares. It also continues to own 159,242,289 shares in KPM. On the other hand, KPH still has substantial ownership of KPPI shares in its books and Keppel Land/Swansville continues to own 250,000 shares of SMKL representing 255 ownership in the company. The objective of this succeeding round of realignment/restructuring is for shares in the marine businesses to be housed under KPM, for the property-related investments to be owned by KPPI, and for the locally listed KPPI shares to be owned substantially by Keppel Land/Swansville. In this manner, group activity is further rationalized, allocation of resources more focused, tracking of earnings facilitated, and, hopefully, shareholder values more easily enhanced/defended. ELEMENTS OF THE REALIGNMENT PLAN The realignment of businesses within the Keppel Group will involve: Transfer of the ownership by KPPI in Subic Shipyard and Engineering, Inc. (SSEI) and Consort Land, Inc.(CLI) to KPM in exchange for shares of KPM. Transfer of KPM shares owned by KPPI to KPH in exchange for KPPI shares, which shares shall thereafter be transmitted to KL/Swansville; and Transfer of ownership by KL/Swansville in SMKL to KPPI in exchange for the KPPI shares (from KPH) mentioned above, as well as for new KPPI shares. cdlex The following are the actions and approvals made by the Board of Directors of KEPPEL PHILIPPINES PROPERTIES, INC. (KPPI) in its meeting held at its principal office on 7 October 1999. Item 2. ACQUISITION OR DISPOSITION OF ASSETS 1. Exchange of Keppel Philippines Properties, Inc.'s (KPPI) shareholdings in Subic Shipyard and Engineering, Inc. (SSEI) and Consort Land, Inc. (CLI) with Keppel Philippines Marine, Inc. (KPM) cdll KPPI will transfer its 62,635,751 SSEI shares (valued at P139,114,425.00) and 656,838 CLI shares (valued at P656,838.00) to KPM. In exchange, KPM will issue out of its unissued capital stock 100,508,087 shares to KPHI. The SSEI shares shall be transferred at its gross carrying value of P2.22 per share while the CLI shares will be transferred at par. 2. Exchange of KPPI's shareholdings in KPM for Keppel Philippines Holdings, Inc.'s (KPHI) shareholdings in KPPI. KPPI will transfer its 159,242,289 KPM shares (valued at P143,318,060.10) to KPHI. In exchange, KPHI shall transfer its shareholdings of 65,666,492 shares (valued at P233,772,711.52) in KPPI to Keppel Land Ltd. The basis of the exchange shall be on the following valuations: (a) 12 times average 3 years earnings for KPM; and (b) Discount of 40% of Net Asset Value (NAV) of property related assets of KPPI. Using the said bases of valuation, the proportion of the transfer shall be 3.9556 KPM shares for each KPPI share. 3. Purchase of Keppel Land Ltd. /Swansville Pte. Ltd. /Keppel Land/Swansville) shareholdings and advances in SM Keppel Land, Inc. with Issuance of KPPI shares. cdll KPPI will acquire Keppel Land/Swansville's shareholdings of 250,000 shares and advances of P284,212,500.00 (with an aggregate value of P507,135,000.00) in SM Keppel Land, Inc. In exchange, KPPI shall issue out of its capital stock 76,787,158 shares (valued at P273,362,282.48) to Keppel Land/Swansville. The proportion of the said share-for-share swap shall be 569.8146 KPPI shares for each SMKL share and corresponding advances. llcd