Mondragon Favored in Clark Rental Dispute

March 13, 1998 PSE CIRCULAR FOR BROKERS NO. 361-98 March 12, 1998 PHILIPPINE STOCK EXCHANGE, INC. PSE Centre, Exchange road Ortigas Center, Pasig City Attention: Ms . Ma . Isabel T . Garcia Head, Listing Department RE : Mondragon Favored in Clark Rental Dispute Gentlemen : Since 1994, the Clark Development Corporation (CDC) has claimed that Mondragon Leisure and Resorts Corporation (MLRC), a wholly owned subsidiary of Mondragon International could not avail of a tax holiday that had been promised to the winning bidder. MLRC disagreed and the matter was referred to the Office of the Government Corporate Counsel (OGCC) for an opinion: The OGCC concluded in Mondragon's favor, and the CDC Board advised their management to accept this and move on. CDC management however insisted MLRC had no right to deduct the amount due to the BIR, called a 5% levy on Gross Income Earned (GIE), claiming this levy was not a tax and Mondragon owed rentals in full. A publicity campaign was launched which adversely affected Mondragon's share price in the Exchange, in a similar way that the PAGCOR controversy had negatively impacted investor's confidence. It should be pointed out that Mondragon recently was judged unanimously by a Presidential Oversight committee to have not violated as PAGCOR claimed it had. cdlex President Ramos also appointed a 3-person Legal Review Committee to review and submit their expert opinion on the issue. This committee has completed its review of the above and declared that the 5% on GIE levy is a tax, that Mondragon was indeed promised a tax holiday and that CDC was contractually bound to grant the same, but if it could not that MLRC was justified in substracting this tax from rentals and that the previous OGCC opinion was correct. We trust that the CDC management will now accept the above and respond accordingly unlike PAGCOR which still refuses to concede that its position was untenable. PAGCOR now alleges new unprovable violations and claims it will not submit any dispute to arbitration, contrary to what its contract with Mondragon calls for. As a result, MLRC has been forced to file a lawsuit against PAGCOR to compel PAGCOR to submit to arbitration and to discharge its obligation under its contract. We wish to inform the PSE of the above before any press releases are issued that may be adversarial to the factual information above. Sincerely, (SGD.) JOSE ANTONIO U. GONZALEZ Chairman and CEO