PSE Circular for Brokers No. 799-99

April 19, 1999 PSE CIRCULAR FOR BROKERS NO. 799-99 April 16, 1999 Ms. Eileen M. Lacorte Analyst Philippine Stock Exchange, Inc. PSE Center, Exchange Road Ortigas Center, Pasig City Metro Manila Dear Ms. Lacorte : This letter is our compliance with your request for clarification regarding all article which was printed in today's issue of the Philippine Star entitled "Minority stockholders seek audit of Interphil." With respect to the demand of Messrs. Necisto Sytengco and Leovigildo Arellano to inspect the books and records of the company, permit us to state the following: 1. The Interphil management recognizes the right of a shareholder to inspect the books and records of the company. 2. Mr. Sytengco's assertion that the present management has refused to allow his auditors to again access to the company records is totally untrue and bereft of factual basis. In fact, sometime between July and September 1998, Mr. Sytengco caused a comprehensive audit of the company's brooks through Messrs. Banaria and Banaria. The present management exerted every effort to accommodate all the requirements of the auditors relating to this audit. However, it is regrettable that neither the management nor the board was furnished a copy of the results of the audit. The management is convinced that the refusal to share the result of audit was because of the absence of any adverse findings. It is even more regrettable that Mr. Sytengco refused to reimburse Interphil for the personnel costs and other expenses incurred in the conduct of the audit. LexLib 3. In October 1998, Mr. Sytengco for the second time in a short span of time requested Interphil's cooperation in the conduct of an another audit, this time by Messrs. Punongbayan and Araullo. Management made it clear to Mr. Sytengco that it will respect a shareholder's right to inspection provided the same is done in good faith and for a purpose germane to his status as a shareholder. Accordingly and given the fact that a comprehensive audit had just been concluded by his auditors, management made it clear to Mr. Sytengco that a second audit sought merely to gratify his idle curiosity or to assist him in a wild fishing expedition would not be tolerated. 4. On January 19, 1999, Mr. Sytengco confirmed the following things in writing: i. The inspection of the books and records of the Company is to determine (a) the true financial condition and the continuing investment viability of the Company, (b) why the Company's financial performance, particularly the return on investment as it bears to capitalization, has been dismal, (c) if management of the Company may be improved or is otherwise wanting, and (d) how the minority shareholders may be able to contribute to improving the financial condition and profitability of the Company. ii. The management will not be required to re-produce documents which were already delivered to the previous auditors as this procedure would be purely repetitive and wasteful of time and resources. iii. The previous billing representing the reimbursement of out-of-pocket and other expenses shall be paid, albeit under protest. 5. Management has requested Mr. Sytengco to pay the prior bill and to make a deposit for future expenses. This is all that management requires of him as it is totally unfair for the company to foot the bill for what it perceives to be a useless and worthless exercise that is meant to benefit one or two minority shareholders. To summarize management's position, we state for the record that Mr. Sytengco's rights as a minority shareholder had always been respected. However, it is unfortunate that Mr. Sytengco seeks to exercise such rights in a despotic, tyrannical and opportunistic manner which is prejudicial to the other stockholders. aisadc With respect to the other issues raised in the news article, we make the following comments: 1. It is not true that Interphil has been reporting losses. However, in 1998 the company's performance declined on account of the adverse impact of the Asian financial crisis and the general slowdown in the economy which was experienced by all companies in the industry. 2. It is inaccurate to state that Interphil controls 90% of the toll manufacturing of pharmaceutical products in the country. It is estimated that Interphil produces only about 33% of the country's requirement. cdlex We trust that these clarify the issues raised in the newspaper article. Very truly yours, (SGD.) AVELINO M. SEBASTIAN, JR. Counsel to Interphil Laboratories, Inc .