MBf, Inc.

February 17, 2000 PSE CIRCULAR FOR BROKERS NO. 388-00 SUBJECT : MBf, Inc . MBf, Inc. ("MBf") furnished the Exchange a copy of its Amended SEC Form 11-Q/Quarterly Report for the quarter ended September 30, 1999, providing explanations on the following items: "1. Negative receivables of P55,272,589 reflected in the asset side of the balance sheet. The booking of negative receivables arose from the following circumstances: MBf Card, Inc. (MBf) entered into a Card Affinity Agreement with Unitrust Development Bank (UDB) whereby MBf will issue credit cards and UDB will extend financing to the cardholders; Grogram Limited (GL), parent company of MBf, Inc. undertook to buy back from UDB the card receivables which become past due for more than 120 days; In the course of time, some of the receivables became delinquent. These delinquent receivables were sold to MBf by UDB. This resulted in a situation where the regular receivables stayed in the books of UDB while the delinquent receivables were transferred to MBf; Over the years, the level of delinquent receivables kept on growing. Due to its own financial difficulties, MBf was unable to repurchase the bad receivables from UDB. When these receivables are eventually transferred to MBf, MBf would have to provide for losses. But while these receivables remain with UDB, it is UDB who is booking such provision. For practical purposes, MBf ought to book a contingent liability in view of the buy back arrangement. But since it is Grogram and not MBf who is contractually bound to buy the bad receivables, there is no legal basis for MBf to take up such contingent liability. (This is apart from the fact that the booking of such liability will be an implicit admission of a DOSRI relationship when UDB extended credit to cardholders). While legally, MBf cannot book a contingent liability, it was our auditor's opinion that its balance sheet would not truly reflect its financial condition unless it recognizes a provision for losses that it expects to absorb when the bad receivables are eventually transferred by UDB to MBf. The losses were initially charged against existing receivables. As the anticipated losses became bigger, the losses turned out to be greater than the existing receivables, thus, resulting in the booking of "negative" receivables. We thought that spreading out the losses over time is a more prudent way of booking the anticipated losses instead of booking them one time when the receivables are eventually transferred to MBf. 2. Apparent discrepancy in the recording of current assets (Submitted a revised Consolidated Statement of Cash Flows for the Nine Months Period ended September 30, 1999)" A copy of MBf's Amended SEC Form 11-Q as well as its Consolidated Statement of Cash Flows for the Nine Months Period ended September 30, 1999 is available for reference at the PSE-Centre and PSE-Plaza Libraries. For your information. (SGD.) MARIA ISABEL T. GARCIA OIC, Listings & Disclosure Group