Pasig City

March 16. 1999 PSE CIRCULAR FOR BROKERS NO. 497-99 March 15, 1999 THE PHILIPPINE STOCK EXCHANGE Exchange Road, Ortigas Center Pasig City Attention: Mr . Reynold P . Ong Vice President Listing and Disclosure Group Gentlemen : This is to inform you of the 1998 results of operations of William, Gothong & Aboitiz, Inc. and subsidiary (WG&A). WG&A generated consolidated net revenues of P4,711 million in 1998, slightly lower than last year's P4,854 million. This is mainly due to the lower freight volume in line with the contraction of the total market. The fall of the peso against the dollar curtailed consumer spending and forced manufacturers to cut down production, while the El Nio phenomenon has adversely affected agricultural outputs, both big sources of cargo volume. Operating expenses increased from P4,589 million in 1998 from P4,467 million in 1997 mainly due to dollar-denominated expenses. Due to difficulties of integrating activities of the merged company, the Company also incurred further losses on integration amounting to P710 million. This includes higher provision for receivable accounts, lost inventory, lost containers and trailers, and further decline in market value of tied-up ships. Because of the economic crunch and merger difficulties, WG&A sustained a net loss of P798 million in 1998, more than double the double the P345 million figure in 1997. Despite the negative results of operations, the Company's financial position remains sound at a flow debt-to-equity ratio of 41:59 as of December 31, 1998. Cash flow generation in 1998 remained healthy. The Company curtailed capital expenditures to P229 million compared to the 1997 figure of P1,101 million. Cash flow generated from operations were used to trim down bank loans to P2,373 million as of year-end 1998 from P2,572 million in 1997 resulting in lower interest expenses. cdlex On the bright side. WG&A maintained its leadership of both the passage and freight markets. It is likewise at the forefront In safety and technology as six more of its ships received international Safety Management Code (ISM) certification, the first in the Philippine shipping Industry. SuperFerries 1,2,3,9,10, and 12 have already been ISO-9002 accredited, and the rest of the fleet will follow in the first quarter of 1999 - well ahead of the schedule prescribed by the Maritime Industry Authority. In 1998, WG&A also redesigned its Passage Business System to improve customer service. the project is expected to be completed by the third quarter of 1999. On the other hand, Project Planet, a program that will allow freight customer to book the track shipments electronically, though it absorbed a slight delay, will be constream by the second quarter of 1999. WG&A is confident the Project Planet will become a source of competitive advantage to the company, and to clients who will use it. Very truly yours, (SGD.) GEORGE H. TAN Chief Finance Officer