METRO PACIFIC INVESTMENTS CORPORATION SECURITIES

METRO PACIFIC INVESTMENTS CORPORATION

April 30, 2015

SECURITIES & EXCHANGE COMMISSION Corporate Governance & Finance Department S.E.C. Building, EDSA Mandaluyong City PHILIPPINE STOCK EXCHANGE Disclosure Department 3/F PSE Plaza Ayala Triangle Ayala Avenue, Makati City Attention: DIR VICENTE GRACIANO P. FELIZMENIO, JR. Market and Securities Regulation Department MS. JANET ENCARNACION Head, Disclosure Department In respect of the Annual General Meeting of the Stockholders of Metro Pacific Investments Corporation (“MPIC”) scheduled on May 29, 2015, MPIC submits the SEC Form 20 – Definitive Information Statement. The following page pertains to the specific revisions requested by the Commission and the corresponding corrections by MPIC.

Very truly yours,

MELODY M. DEL ROSARIO

Vice President

PR and Corporate Communications

MPIC PIS filed April 20, 2015 Remarks of SEC on PIS as of April 27, 2015

MPIC Definitive Information Statement

1. Item 5. Directors and Executive Officers

Submit a certification that none of the named directors and officers work in the government

See Annex A of the DIS

2. (A)(1) Identify Directors, including Independent Directors and Executive Officers

1)Submit updated Certification on the Qualifications and Disqualification of Independent Directors 2)The company is reminded of SEC Memorandum Circular No 9, Series of 2011 re: Term Limits for Independent Directors 3)Identify the person/s who nominated the candidates for Independent Director and their relationship, if any

The signed and notarized certifications of the independent directors may be found in Annex B of the DIS. On page 19 of the DIS, Ms. Flordeliza Anibigno has been identified as the person who nominated the candidates for Independent Director. The excerpt of which may be found below: The four (4) independent directors, Ms. Lydia B. Echauz and Messrs. Edward S. Go, Washington Z. SyCip and Artemio V. Panganiban, were nominated by Flordeliza Anibigno, a registered shareholder of the Company who is not a director, officer or substantial shareholder of the Company.

3. (D)(1) Certain Relationships and related transactions

1)Item 1, a – e 2)Item 2 3)Brief description of transaction in which securities are to be issued including sub items 1 and 2 4) If public offering for cash, state reasons for the proposed authorization or issuance and general effect upon rights 5) Furnish information required by Item II(a) of the form. If matter to be acted upon falls under item 1 or 2

(1) Note 21 to the 2014

Audited Financial Statements included in the 17A covers all related party transaction disclosure including the business purpose, names of related parties, prices, whether the transactions are at arms length.

(2) There are no transactions with non-related parties in which transactions were negotiated under terms not available to others.

4. Management Report Management Report – Disclose the Company’s and its majority owned subsidiaries’ top 5 KPIs.

(a) Full fiscal years

(b) Interim period

Management Report

with disclosure of KPIs were provided under Item 6 of the 17A for 2014.

Management Report covering the Interim Period of March 31, 2015 shall be included in the Company’s filing

of the 1st quarter 17Q which is not due until 45 days after quarter end close (i.e. May 14, 2015). The Company will file the 17Q with the SEC and Philippine Stock Exchange on or before May 14, 2015. And in compliance with the recent SEC circular, we shall make the 17Q available in the Company’s website 5 working days before the Annual General Meeting. We’ll await for the SEC Circular to ensure full compliance. A notice to the public will be published in two (2) major broadsheets of general circulation as soon as we secure the relevant information from the SEC. The draft notice may be found in Annex C of the DIS.

5. Market Information Delete information for 2012 Provided in Item 5 (page 17) of the 17A of 2014 While the requirement of Annex C is information within the last two fiscal years only, we have provided additional year to be consistent with the periods presented in the financial statements of the Company. This is also consistent with the periods presented by other registrants in their 17A for similar information. We will however take note of this in future submissions/filings of the 17A.

6. Holders Include names of Top 20 Preferred Shareholders

Provided in Item 5 (of page 18) of the 17A of 2014 Further, in page 8 of the DIS, Security ownership of Record and Beneficial Owners of at least 5% of the Parent Company's Securities, Metro Pacific Holdings Inc. has been identified as the sole holder of the Class A Preferred Shares amounting to 5,000,000,000.


NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Please be advised that the Annual Meeting of the stockholders of METRO PACIFIC INVESTMENTS CORPORATION will be held on Friday, 29th day of May 2015, 11 a.m. at The Ballroom, New World Makati Hotel, Esperanza St, Makati, Metro Manila, Philippines, for the following purposes:

1. To approve the minutes of the meeting of the Annual Stockholders' Meeting of the Company held last May 30, 2014

2. To consider and approve the President’s Report and the Annual Report for the year 2014

3. To consider and adopt the Audited Financial Statements for the year ended 31st

December 2014 contained in the Annual Report

4. To ratify all acts of the Board of Directors and Management for the year 2014

5. To approve the reclassification of a total of 150 million Class B preferred shares with par value of Php1 per share into 15 billion Class A preferred shares with par value of Php 0.01 per share, thereby decreasing the number of Class B preferred shares from 1.5 billion to 1.35 billion and correspondingly increasing the number of Class A preferred shares from 5 billion to 20 billion

6. To approve the increase of the authorized capital stock from Php30.05 billion up to

Php40.05 billion divided into 38.5 billion common shares with a par value of Php1.00 per share and 20 billion Class A preferred shares with a par value of Php0.01 per share and 1.35 billion Class B preferred shares with a par value of Php1 per share

7. To approve the issuance of common shares whether out of the increase in the authorized capital stock or the unissued capital stock in favor of an investor or investors that the Board of Directors, acting as a body, may identify and determine and the corresponding listing of the such issued common shares in the Philippine Stock Exchange

8. To approve the listing on the Philippine Stock Exchange of a total of 1,812,000,000

common shares issued by the Company to Metro Pacific Holdings, Inc. on February 9, 2014, in accordance with current PSE rules and regulations for a placing and subscription transaction

9. To elect the Directors and Independent Directors of the Company for the ensuing year 10. To appoint the external auditor of the Company for the year 2015 11. To transact such other business as may properly come before the meeting and at any

adjournment thereof. The Board of Directors has fixed the close of business on the 29th day of April 2015, as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Stockholders’ Meeting. Very truly yours,

ANTONIO A. PICAZO Corporate Secretary Makati City


2015 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

AND INFORMATION STATEMENT

SEC FORM 20-IS

SECURITIES AND EXCHANGE COMMISSION SEC FORM 20-IS

INFORMATION STATEMENT PURSUANT TO SECTION 20 OF THE SECURITIES REGULATION CODE

1. Check the appropriate box:

[ ] Preliminary Information Statement [X] Definitive Information Statement

2. Name of Registrant as specified in its charter METRO PACIFIC INVESTMENTS CORPORATION 3. PHILIPPINES Province, country or other jurisdiction of incorporation or organization 4. SEC Identification Number CS200604494 5. BIR Tax Identification Code 244-520-457-000 6. 10th Floor, MGO Building, Legazpi corner Dela Rosa Streets, Legaspi Village, Makati City

1200 Philippines Address of principal office and postal Code

7. Registrant’s telephone number, including area code (63) 2 888-0888 8. Date, time and place of the meeting of security holders: 29th of May 2015, 11 a.m. at The

Ballroom, New World Makati Hotel, Esperanza St, Makati, Metro Manila, Philippines

9. 4th May 2015

Approximate date on which the Information Statement is first to be sent or given to security holders

10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA

(information on number of shares and amount of debt is applicable only to corporate registrants):

Title of Each Class Number of Shares of Common Stock Outstanding or Amount of Debt Outstanding

Common Shares

26,046,270,752*

*1 Reported by the stock transfer agent as of 31st March 2015.

11. Are any or all of registrant's securities listed in a Stock Exchange? Yes [ ] No [ X ]

The Registrant’s common shares are listed on the Philippine Stock Exchange.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

A. GENERAL INFORMATION Item 1. Date, time and place of meeting of security holders. The Annual Meeting of the stockholders of Metro Pacific Investments Corporation (the “Company”) will be held on Friday, 29th day of May 2015, 11 a.m at the The Ballroom, New World Makati Hotel, Esperanza St, Makati, Metro Manila, Philippines. The mailing address of the Company is at the 10th Floor, Makati General Office Building, Legazpi corner Dela Rosa Streets, Legazpi Village, Makati City, 0721 Philippines. This Information Statement will be first sent or given to security holders on or around the 4th day of May 2015.

Item 2. Dissenters' Right of Appraisal Under Section 81 of the Corporation Code, the following are the instances when a stockholder may exercise his appraisal right: 1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence; 2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets of the Company; and 3. In case of merger or consolidation. In order that a dissenting stockholder may exercise his appraisal right, such dissenting stockholder must have voted against the proposed corporate action at the annual meeting. Within thirty (30) days after the date of the annual meeting at which meeting such stockholder voted against the corporate action, the dissenting stockholder shall make a written demand on the Company for the fair value of his shares which shall be agreed upon by the dissenting stockholder and the Company. If the proposed corporate action is implemented, the Company shall pay the dissenting stockholder upon surrendering the certificates of stock representing his shares, the fair value of said shares on the day prior to the date on which the vote was taken. If the dissenting stockholder and the Company cannot agree on the fair value of the shares within sixty (60) days from the date of stockholders’ approval of the corporate action, then the determination of the fair value of the shares shall be determined by three (3) disinterested persons, one (1) of whom shall be named by the dissenting stockholder, one (1) by the Company and a third to be named by the two (2) already chosen. The findings of the majority of the appraisers shall be final and their award shall be paid by the Company within thirty (30) days after such award is made. The procedure to be followed in exercising the appraisal right shall be in accordance with Sections 81 to 86 of the Corporation Code. None of the matters that are proposed to be taken up during the meeting gives a dissenter a right of appraisal.

Item 3. Interest of Certain Persons In or Opposition to Matters to be Acted Upon None of the directors or officers or any of their respective associates has any substantial interest, direct or indirect, in any of the matters to be acted upon in the stockholders’ meeting. None of the directors of the Company has informed the Company that he intends to oppose any action to be taken by the Company at the stockholders’ meeting. B. CONTROL AND COMPENSATION INFORMATION Item 4. Voting Securities and Principal Holders Thereof As of the 31 March 2015, the following shares of common and preferred stock of the Company were outstanding:

Class Number of

Outstanding Shares

Common

27,866,795,752

Class A Preferred Shares 5,000,000,000

Of the total outstanding common capital stock, 18,303,348,101 shares or 65.83 percent are owned by Filipino citizens, while 9,522,836,211 shares or 34.17 percent are owned by foreigners. All Class A Preferred shares are owned by Filipino citizens. Each common and Class A Preferred share of stock of the Company is entitled to one (1) vote as described below. The record date for the purpose of determining the stockholders entitled to vote is 29th April 2015. Holders of common and Class A Preferred shares of stock of the Company are entitled to vote on all matters to be voted upon by the stockholders. Stockholders entitled to vote are also entitled to cumulative voting in the election of directors. Section 24 of the Corporation Code provides, in part, that: “….in stock corporations, every stockholder entitled to vote shall have the right to vote in person or by proxy the number of shares of stock standing, at the time fixed in the by-laws, in his own name on the stock books of the corporation, or where the by-laws are silent, at the time of the election; and said stockholder may vote such number of shares for as many persons as there are directors to be elected, or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit….” As of 31 March 2015, the stock transfer agent of the Company reported that there are 1,336 holders of common shares of the Company. The top 20 stockholders, the number of common shares held and the percentage of the common shares outstanding and held by each as of 31st March 2015 are as follows: Rank STOCKHOLDER NAME

Number of Common Shares

Percent

1 Metro Pacific Holdings, Inc. 14,522,948,170 52.12%

2 PCD Nominee Corporation (Non-Filipino) 9,522,836,211 34.17%

3 PCD Nominee Corporation (Filipino) 3,780,399,931 13.57%

4 Albert F. del Rosario &/OR Margaret Gretchen V. del Rosario

6,500,000 0.02%

5 Albert F. del Rosario 5,016,624 0.02%

Rank STOCKHOLDER NAME

Number of Common Shares

Percent

6 Lucio W. Yan and/or Clara Y. Yan 2,850,000 0.01%

7 Amado R. Santiago III 2,500,001 0.01%

8 Randolph T. Estrellado 2,500,000 0.01%

9 Alberto B. Carlos 1,000,000 0.00%

10 Raul L. Ignacio 1,000,000 0.00%

11 Ferdinand G. Inacay 1,000,000 0.00%

12 Tessa G. Acosta 1,000,000 0.00%

13 Baby Lea M. Wong 1,000,000 0.00%

14 Nicolas G. Manalo 1,000,000 0.00%

15 Roberto V. Bonita 1,000,000 0.00%

16 First Life Financial Co., Inc. 830,000 0.00%

17 Berck Y. Cheng 650,000 0.00%

18 J. Luigi L. Bautista 650,000 0.00%

19 Edwin U. Lim 600,000 0.00%

20 Eric U. Lim 500,000 0.00%

Security Ownership of Record and Beneficial Owners of at least 5% of the Company’s Securities as of 31 March 2015.

Security ownership of Record and Beneficial Owners of at least 5% of the Parent Company's Securities Type of Class

Name and address of record owner and relationship with

Issuer

Citizenship Name of Beneficial Owner &

Relationship with Record

Owner

No. of Shares Held

Percent of class

Common Shares

Metro Pacific Holdings, Inc. (“MPHI”) 17/F Liberty Centre Bldg. 104 H.V. dela Costa, Salcedo Vill., Makati City

Filipino

MPHI is both record and beneficial owner. Mr. Manuel V. Pangilinan is usually designated as its representative, with authority to vote its shares, at meetings of shareholders.

14,522,948,170

52.12%

Common PCD Nominee Corporation*

Foreign

Public ownership 9,522,836,211 34.17%

Common

PCD Nominee Corporation*

Filipino Public ownership

3,780,399,931 13.57%

Class A Preferred

Metro Pacific Holdings, Inc.

Filipino Metro Pacific Holdings, Inc. is

5,000,000,000 100%

Shares 17/F Liberty Centre Bldg. 104 H.V. dela Costa,

Salcedo Vill., Makati City

both record and beneficial owner. Mr. Manuel V. Pangilinan is usually designated as its representative, with authority to vote its shares, at meetings of shareholders.

*PCD Nominee Corporation is the registered owner of shares beneficially owned by participants in the Philippine Central Depositary, Inc. (PCD), a private company organized to implement an automated book entry system of handling securities transactions in the Philippines. Under the PCD procedures, when an issuer of a PCD-eligible issue will hold a stockholders’ meeting, the PCD shall execute a pro-forma proxy in favor of its participants for the total number of shares in their respective principal securities account as well as for the total number of shares in their client securities account. For the shares held in the principal securities account, the participant concerned is appointed as proxy with full voting rights and powers as registered owner of such shares. For the shares held in the client securities account, the participant concerned is appointed as proxy, with the obligation to constitute a sub-proxy in favor of its clients with full voting and other rights for the number of shares beneficially owned by such clients. As at March 31, Deutsche Bank Manila – Clients Acct., and The Hongkong and Shanghai Banking Corp. Ltd. – Clients Acct., participants of PCD, beneficially own 4,791,364,315 or 17.19%,and 2,510,357,668 or 9.01% , respectively, of the Company’s total outstanding shares.

Other than the abovementioned, the Company has no knowledge of any person who, as of 31st March 2015, was directly or indirectly the beneficial owner of, or who has voting power or investment power (pursuant to a voting trust or other similar agreement) with respect to, shares comprising more than five percent (5%) of the Company’s outstanding common shares of stock. Security Ownership of Management as of 31 March 2015 The following are the number of common shares of stock owned of record and/or beneficially by the directors and officers of the Company, and the percentage of shareholdings of each, as of 31 March 2015:

Type of Class

Name and Address of Owner

Amount and nature of Beneficial ownership

Citizenship

Percent of class

Direct Indirect

Common

Manuel V. Pangilinan 7/F Ramon Cojuangco Bldg. Makati Avenue, Makati City

Nil*

0

Filipino

0.00%

Common

Jose Ma. K. Lim 10/F MGO Bldg., Legazpi corner dela Rosa Streets, Legazpi Village, Makati

11,000,001**

0

Filipino

0.04%

Common David J. Nicol 10/F MGO Bldg., Legazpi corner dela Rosa Streets, Legazpi Village, Makati

7,250,001**

0

Australian 0.03%

Common

Lydia B. Echauz Far Eastern University N. Reyes St., Sampaloc, Manila

30,000**

0

Filipino

0.00%

Common

Ray C. Espinosa 5/F Locsin Building, Ayala Avenue Cor Makati Avenue, Makati City

Nil*

0

Filipino 0.00%

Common

Ramoncito S. Fernandez 10/F MGO Bldg., Legazpi corner dela

5,862,001**

0

Filipino

0.02%

Type of Class

Name and Address of Owner

Amount and nature of Beneficial ownership

Citizenship

Percent of class

Direct Indirect

Rosa Streets, Legazpi Village, Makati

Common

Edward S. Go Unit 16-A Pacific Plaza Tower Fort Bonifacio, Bonifacio Global City Taguig, Metro Manila

500,000

0

Filipino

0.00%

Common

Robert C. Nicholson 24/F Two Exchange Square, 8 Connaught Place Central, Hong Kong

Nil*

0

British

0.00%

Common

Augusto P. Palisoc, Jr. 10/F MGO Bldg., Legazpi corner dela Rosa Streets, Legazpi Village, Makati

10,000,001**

0

Filipino 0.04%

Common

Artemio V. Panganiban 1203 Acacia, Dasmarinas Village, Makati City

250,001**

0

Filipino

0.00%

Common

Antonio A. Picazo 19/F Liberty Center 104 H.V. dela Costa Street Salcedo Village, Makati City

1,001**

0

Filipino

0.00%

Common

Amado R. Santiago III Room 114 Ortigas Building Ortigas Avenue, Pasig City

2,500,001**

0

Filipino

0.01%

Common Edward A. Tortorici 10/F MGO Bldg., Legazpi corner dela Rosa Streets, Legazpi Village, Makati

10,729,596**

0

American

0.04%

Common

Victorico P. Vargas Maynilad Water Services, Inc MWSS Complex, Katipunan Road, Balara, Quezon City

3,500,001**

0 Filipino 0.00%

Common Washington Z. SyCip**** 6760 Ayala Avenue, 1226 Makati City

Nil* 0 Filipino-

American 0.00%

Common

Cristina S. Palma Gil-Fernandez 19/F Liberty Center 104 H.V. dela Costa Street Salcedo Village, Makati City

Nil

0

Filipino

0.00%

Aggregate for above named officers and directors

51,622,609 0

*In addition, each of these directors is the registered owner of at least one (1) qualifying share. ** Includes shares under the PCD

Changes in Control The Company is not aware of any voting trust agreements or any other similar agreements which may result in a change in control of the Company. No change in control of the Company has occurred since the beginning of its last fiscal year.

Item 5. Directors and Executive Officers Term of Office Directors shall hold office for a period of one (1) year until their successors shall have been elected and qualified during the succeeding annual meeting of the stockholders, except in case of death, resignation, disqualification or removal from office. The term of office of the officers is coterminous with that of the Directors that elected or appointed them unless such officers are sooner removed for cause. Background Information Directors The following are the names, ages, citizenship and periods of service of the incumbent directors/independent directors of the Company, all of whom have been nominated for re-election at the Annual Meeting:

Name Age Citizenship

Period during which individual has served as such

Manuel V. Pangilinan 67 Filipino March 2006 up to present

Jose Ma. K. Lim 62 Filipino March 2006 up to present

David J. Nicol 55 Australian May 2010 up to present

Edward S. Go* 76 Filipino July 2006 up to present

Augusto P. Palisoc, Jr. 57 Filipino March 2006 up to present

Antonio A. Picazo 73 Filipino March 2006 up to present

Amado R. Santiago, III 47 Filipino July 2006 up to present

Artemio V. Panganiban* 78 Filipino August 2007 up to present

Ramoncito S. Fernandez 58 Filipino June 2009 up to present

Lydia B. Echauz* 67 Filipino November 2009 up to present

Edward A Tortorici 75 American November 2009 up to present

Ray C. Espinosa 58 Filipino November 2009 up to present

Robert C. Nicholson 59 British November 2009 up to present

Victorico P. Vargas 63 Filipino May 2011 to present

Washington Z. SyCip* 93 Filipino August 2011 to present

* Independent Directors

Officers and Advisors

The following are the names, ages, positions, citizenship and periods of service of the incumbent officers and advisors of the Company:

Name

Age

Position

Citizenship

Period during which individual has served

as such

Name

Age

Position

Citizenship


as such

Manuel V. Pangilinan 67 Chairman Filipino March 2006 up to present

Jose Ma. K. Lim 62 President & CEO Filipino March 2006 up to present

David J. Nicol 55 Chief Finance Officer Australian April 2010 up to present

Edward A. Tortorici 75 Executive Advisor American March 2006 up to present

Augusto P. Palisoc, Jr. 57 Executive Director Filipino March 2006 up to present

Antonio A. Picazo 73 Corporate Secretary Filipino March 2006 up to present

Cristina S. Palma Gil-Fernandez

46 Assistant Corporate Secretary

Filipino May 2013 up to present

Melody M. del Rosario 50 Vice President - Media and Corporate Communications

Filipino March 2006 up to present

Jose Noel de la Paz (a)

58 Director for Corporate Development

Filipino July 2007 up to December 2014

Robin Michael L. Velasco(e)

44 Vice President - Group Human Resources

Filipino July 2009 up to April 2015

Albert W. L. Pulido 43 Vice President - Investor Relations

Filipino July 2009 up to present

Maida B. Bruce 41 Vice President - Group Controller

Filipino November 2009 up to present

Reymundo S. Cochangco(a)

48 Chief Finance Officer Hospital Group

Filipino January 2010 up to December 2014

Jose Jesus G. Laurel 60 Vice President -Legal/General Counsel and Compliance Officer


Ferdinand G. Inacay(b) 49 Vice President - Business Development

Filipino November 2009 up to December 2014

Mabini F. Pablo(c) 65 Senior Advisor Filipino January 2011 up to December 2014

Karim G. Garcia(b) 47 Vice President – Business Development

Filipino January 2015 to present

Santhea V. delos Santos

37 Assistant Vice President - Chief Risk Officer

Filipino February 2014 to present

Loudette Anne M. Zoilo 38 Assistant Vice-President - Human Resources


Name

Age

Position

Citizenship


as such

Celso Bernard G. Lopez

41 Assistant Vice-President - Business Development

Filipino January 2014 to present

Ricardo M. Pilares(d) 33 Assistant Vice President – Legal


Melanie G. Bendijo(d) 41 Assistant Vice President – Treasury


(a)Messrs. de la Paz and Cochangco have transferred to Metro Pacific Hospital Holdings, Inc. effective January 2015. (b)Mr. Inacay has transferred to another company and has been replaced by Mr. Karim Garcia effective January 2015 (d)Mr. Pablo retired on December 31, 2014 (c) Atty. Pilares and Ms. Bendijo have recently been appointed as Assistant Vice Presidents effective in the year 2015 (e) Mr. Velasco has resigned from the company effective April 15, 2015

Business Experience and Other Directorships Directors The business experience of each of the incumbent directors of the Company for the last five (5) years is as follows:

Manuel V. Pangilinan Born in the Philippines in July 1946, Mr. Pangilinan graduated cum laude in 1966 from the Ateneo de Manila University, the Philippines, with a Bachelor of Arts degree in Economics. He received his MBA degree in 1968 from the Wharton School of Finance and Commerce at the University of Pennsylvania, where he was a Procter & Gamble Fellow. After graduating from Wharton, he worked in Manila for Philippine Investment Management Consultants Inc. (the PHINMA Group) and in Hong Kong with Bancom International Limited and American Express Bank, and thereafter with First Pacific Company Limited. Mr. Pangilinan founded First Pacific in 1981 and served as Managing Director until 1999. He was appointed Executive Chairman until June 2003, when he was named as CEO and Managing Director. Within the First Pacific Group, he holds the positions of President Commissioner of P.T. Indofood Sukses Makmur Tbk, the largest food company in Indonesia. In the Philippines, he is the Chairman of Philippine Long Distance Telephone Company (PLDT), the country's dominant telecom company after serving as its President and CEO until February 2004. He also serves as Chairman of Smart Communications Incorporated - the largest mobile phone operator in the Philippines - PLDT Communications and Energy Ventures Incorporated (formerly Piltel), Beacon Electric Asset Holdings Incorporated, Metro Pacific Investments Corporation, Landco Pacific Corporation, Medical Doctors Incorporated, Colinas Verdes Corporation (operating the Makati Medical Center and Cardinal Santos Medical Center, respectively), Davao Doctors Incorporated, Riverside Medical Center Incorporated in Bacolod City, Our Lady of Lourdes Hospital, Asian Hospital, Incorporated, Maynilad Water Services Corporation (Maynilad), Mediaquest Incorporated, Associated Broadcasting Corporation (TV5), Philex Mining Corporation, and Manila North Tollways Corporation. On May 2009, he became a member of the Board of Directors of the Manila Electric Company (Meralco) and recently became its Chairman after serving as its President and CEO from July 2010 to May 2012.

Outside the First Pacific Group, Mr. Pangilinan was a member of the Board of Overseers of The Wharton School, University of Pennsylvania in the United States. He was Chairman of the Board of Trustees of the Ateneo de Manila University. He is currently the Chairman of the Board of Trustees of the San Beda College. He also serves as Chairman of the Hong Kong Bayanihan Trust, a non-stock, nonprofit foundation which provides vocational, social and cultural activities for Hong Kong's foreign domestic helpers. On February 5, 2007, Mr Pangilinan was named the President of the Samahang Basketbol Ng Pilipinas (SBP), a national sport association for basketball. Effective January 2009, MVP assumed the Chairman of the Amateur Boxing Association of the Philippines (ABAP), a governing body of the amateur boxers in the country. In October 2009, Mr. Pangilinan was appointed as Chairman of the Philippine Disaster Recovery Foundation, Incorporated (PDRF), a non-stock, non-profit foundation established to formulate and implement a reconstruction strategy to rehabilitate and rebuild areas devastated by recent floods and other calamities. Mr. Pangilinan is Chairman of Philippine Business for Social Progress (PBSP), a social action organization made up of the country's largest corporations, Vice Chairman of the Foundation for Crime Prevention, a private sector group organized to assist the government with crime prevention, a member of the Board of Trustees of Caritas Manila and Radio Veritas-Global Broadcasting Systems, Inc., a former Commissioner of the Pasig River Rehabilitation Commission, and a former Governor of the Philippine Stock Exchange. In June 2012, he was appointed as Co-Chairman of the newly organized US-Philippines Business Society, a non-profit society which seeks to broaden the relationship between the United States and the Philippines in the areas of trade, investment, education, foreign and security policies and culture. Mr. Pangilinan has been awarded the Ten Outstanding Young Men of the Philippines (TOYM) for International Finance (1983), the Presidential Pamana ng Pilipino Award by the Office of the President of the Philippines (1996), Best CEO in the Philippines by Institutional Investor (2004), CEO of the Year (Philippines) by Biz News Asia (2004), People of the Year by People Asia Magazine (2004)Distinguished World Class Businessman Award by the Association of Makati Industries, Inc. (2005), Man of the Year by BizNewsAsia (2005), and Management Man of the Year by the Management Association of the Philippines (2005). In May 2006, the Office of the President of the Republic of the Philippines awarded him the Order of Lakandula, rank of a Komandante in recognition of his contributions to the country. On December 2008, BizNewsAsia magazine awarded to Mr. Pangilinan the Business Icon Gold Award "for having greatly contributed to the Philippine economy through achievements in business and society." In February 2010, the Philippine Sportswriters Association (PSA), the country's oldest media organization, named him the Sports Patron of the Year for his invaluable contributions to the Philippine Sports. In November 2010, Mr. Pangilinan was chosen by the Asia CEO Awards as the Global Filipino Executive of the Year for 2010. In June 2012, FinanceAsia awarded Mr. Pangilinan as the Philippines Best CEO for 2012. Just recently in January 2014, Mr. Pangilinan received another recognition from the Philippine Sportswriters Association (PSA) with the Executive of the Year award. Mr. Pangilinan has been awarded four Honorary Doctorate in Humanities (Honoris Causa). First to confer him was San Beda College in 2002. Second was the Xavier University in 2007. Holy Angel University in Angeles, Pampanga awarded him his third degree in 2009. In April 2010, Far Eastern University awarded him his fourth. Jose Ma. K. Lim Born in the Philippines in April 1952, Mr. Lim graduated from the Ateneo de Manila University, with a Bachelor of Arts degree in Philosophy. He received his MBA degree in 1978 from the Asian Institute of Management. After graduating from the Asian Institute of Management in Manila, he managed a family-owned steel fabrication business until 1987 when he joined the National Development Company as a Manager in the Privatization Unit, a task force created by and reporting to the Department of Trade and Industry.

Mr. Lim then worked as a senior officer for various local and foreign banking institutions from 1988 to 1995. He was Director for Investment Banking of the First National Bank of Boston from 1994 to 1995, and prior to that, Vice President of Equitable Banking Corporation. In 1995, Mr Lim joined Fort Bonifacio Development Corporation (FBDC) as Treasury Vice President and eventually was appointed Chief Finance Officer in 2000. With the onset of the Asian financial crisis and the subsequent divestment of controlling interest in FBDC, Mr. Lim assumed the position of Group Vice President and Chief Finance Officer of FBDC’s parent company, Metro Pacific Corporation (MPC) on a concurrent basis from 2001 to 2003. He was then elected President & CEO of MPC in June 2003. In 2006, some of MPC's businesses were reorganized into Metro Pacific Investments Corporation (MPIC), where he continues to serve as President & CEO. Aside from MPIC he is also currently a Director in the following MPIC subsidiary and affiliate companies: Beacon Electric Asset Holdings Inc.. Manila Electric Company Metro Pacific Tollways Corporation, Manila North Tollways Corporation, Tollways Management Corporation, Maynilad Water Services, Inc., Indra Philippines Inc., Medical Doctors, Inc. (owner and operator of Makati Medical Center), Cardinal Santos Medical Center (Colinas Verdes Hospital Managers Corporation) and Our Lady of Lourdes Hospital. He serves as Chairman of Davao Doctors Hospital (Clinica Hilario) Inc., Asian Hospital and Riverside Medical Center in Bacolod. Mr. Lim is also President of the Metro Strategic Infrastructure Holdings, Inc. (MSIHI) which holds a minority ownership in Citra Metro Manila Tollways Corp. (Skyway). He is active in the Management Association of the Philippines and has served as Vice-Chair of the Good Governance Committee from 2007 to 2009. He is a founding member and Treasurer of the Shareholders Association of the Philippines. David J. Nicol Accomplished and versatile business leader having successfully held CEO and CFO positions in a wide range of industries in Europe and Asia. Voted by Institutional Investor as the top Conglomerate CFO all Asia in 2012 and 2013. Mr. Nicol began his career with PricewaterhouseCoopers where he served for 10 years in London, New York and Hong Kong. He joined First Pacific Company Limited in 1991 and in 1994 moved to their Thai affiliate Berli Jucker PCL where he served as CFO until 1998 and then as Group CEO until 2002 when First Pacific exited Thailand. From 2002 until 2010 when Mr. Nicol joined MPIC, he held positions as CEO Europe and Asia for SIRVA, Inc., CEO of Pinnacle Regeneration group and as a director of Reconomy Limited in the UK’s waste and recycling sector. He has a consistent record of building shareholder value through operational improvement, restructuring, mergers and acquisitions and entering new markets. Edward A. Tortorici Age 75, born in the United States. Mr. Tortorici received a Bachelor of Science degree from New York University and a Master of Science degree from Fairfield University. Mr. Tortorici has served in a variety of senior and executive management positions, including Corporate Vice President for Crocker Bank and Managing Director positions at Olivetti Corporation of America and Fairchild Semiconductor Corporation. Mr. Tortorici subsequently founded EA Edwards Associates, an international management and consulting firm specializing in strategy formulation and productivity improvement with offices in USA, Europe and Middle East. In 1987, Mr. Tortorici joined First Pacific as an Executive Director for strategic planning and corporate restructuring, and launched the Group’s entry into the telecommunications and technology sectors. Presently, he oversees corporate strategy for First

Pacific and guides the Group’s strategic planning and corporate development activities. Mr. Tortorici serves as a Commissioner of PT Indofood Sukses Makmur Tbk and as Director of Metro Pacific Investments Corporation, Philex Mining Corporation, Maynilad Water Services, Inc., FEC Resources Inc. of Canada and AIM-listed Forum Energy Plc. Mr. Tortorici serves as a Trustee of the Asia Society Philippines and is on the Board of Advisors of the Southeast Asia Division of the Center for Strategic and International Studies, a Washington D.C. non-partisan think tank. He also served as a Commissioner of the U.S. ASEAN Strategy Commission. Robert C. Nicholson Mr. Nicholson is a graduate of the University of Kent, qualified as a solicitor in England and Wales and in Hong Kong. He is an Executive Chairman of Forum Energy Plc, a Chairman of Goodman Fielder Limited (since March 2015), a Commissioner of PT Indofood Sukses Makmur Tbk and a Director of MPIC, Philex Mining Corporation and Philex Petroleum Corporation. Mr. Nicholson is also an Independent Non- Executive Director of Pacific Basin Shipping Limited and Lifestyle Properties Development Limited. Previously, he was a senior partner of Reed Smith Richards Butler from 1985 to 2001 where he established the corporate and commercial department, and was also a senior advisor to the board of directors of PCCW Limited between August 2001 and September 2003. Mr. Nicholson has wide experience in corporate finance and cross-border transactions, including mergers and acquisitions, regional telecommunications, debt and equity capital markets, corporate reorganizations and privatization in China. Mr. Nicholson joined First Pacific’s Board in 2003. Augusto P. Palisoc Jr. Augusto P. Palisoc Jr. has been with the First Pacific group of companies for 31 years. He is currently an Executive Director of MPIC and is the President & Chief Executive Officer of Metro Pacific Hospital Holdings Inc, which is the group’s holding company for all hospital and healthcare investments. He is a Director of Medical Doctors, Inc. (owner and operator of the Makati Medical Center), Davao Doctors Hospital (Clinica Hilario) Inc. and Davao Doctors College, Inc., Colinas Verdes Hospital Managers Corporation (operator of the Cardinal Santos Medical Center), Riverside Medical Center Inc. and Riverside College Inc. in Bacolod, and Asian Hospital Inc., while he is Chairman of East Manila Hospital Managers Corporation (operator of the Our Lady of Lourdes Hospital), De los Santos Medical Center, MegaClinic Inc., and Central Luzon Doctors Hospital in Tarlac. Prior to joining MPIC, he was the Executive Vice President of Berli Jucker Public Company Limited in Thailand from 1998 to 2001. Mr. Palisoc served as President and CEO of Steniel Manufacturing Corporation in the Philippines from 1997 to 1998. He has held various positions within the First Pacific group as Group Vice President for Corporate Development of First Pacific Company Limited in Hong Kong, and Group Managing Director of FP Marketing (Malaysia) Sdn. Bhd. in Malaysia. Before he joined First Pacific in 1983, he was Vice President of Monte Real Investors, Inc. in the Philippines. Mr. Palisoc earned his Bachelor of Arts Degree, Major in Economics (with Honors) from De La Salle University, and his Master’s in Business Management (MBM) Degree from the Asian Institute of Management. Mr. Palisoc was born in January 1958. Ramoncito S. Fernandez Ramoncito S. Fernandez is the President & Chief Executive Officer of Metro Pacific Tollways Corp. (MPTC) and Tollways Management Corporation (TMC) under Metro Pacific Investments Corporation (MPIC). He holds directorships in Metro Pacific Investments Corporation (MPIC), Metro Pacific Tollways Corporation (MPTC), Manila North Tollways Corporation (MNTC), Tollways Management Corporation (TMC), Cavitex Infrastructure Corp., and some subsidiaries of PLDT including PLDT Subic Telecom, Inc., PLDT Clark Telecom, Inc., Pacific Global One Aviation Company, Inc., Tahanan Mutual Building and Loan Association, Inc. (“TMBLA”) and Easytrip Services Corporation.

He is the 2009 PISM GAWAD SINOP Awardee, the highest award conferred by the Foundation of the Society of Fellows in Supply Management and the Philippine Institute for Supply Management to outstanding achievers in the field of supply management. Mr. Fernandez has varied experiences in international carrier business, administration and materials management, industrial marketing and sales. He was the Head of International and Carrier Business of PLDT and Smart and Global Access Group of Smart from 2007 until December 31, 2008. He was the Administration and Materials Management Head of Smart from 2000, and of PLDT from 2004, until December 31, 2007. He was the Executive Vice President in charge of marketing, sales and logistics of Starpack Philippines, Inc. until June 2000. Mr. Fernandez obtained his Bachelor of Science Degree in Industrial Management Engineering from the De La Salle University and Master's Degree in Business Management from the Asian Institute of Management. Victorico P. Vargas Mr. Victorico P. Vargas is the President and CEO of Maynilad. He formally took over the position in August 2010. He is a director of Metro Pacific Investments Corporation, Metropac Water Investments Corporation, and director and Chairman of Philippine Hydro, Inc., a member of the Executive Committee of the First Pacific Leadership Academy, trustee of the MVP Sports Foundation, Inc. and trustee of IdeaSpace Foundation, Inc. Prior to his appointment, Mr. Vargas was the Senior Vice President for the Human Resources Group and Head of the Business Transformation Office of the Philippine Long Distance Telephone Company (PLDT), the nation’s no. 1 telecommunications entity. Mr. Vargas was also designated to head the International & Carrier Business Group (ICBG) of PLDT in 2007, managing the business relations with foreign and domestic carriers and other telecom entities. He was responsible for reviewing the overall business environment in foreign and domestic telecom markets and determining strategic areas and initiatives to optimize business potentials. He managed the formulation, development, alignment and implementation of the company’s strategies to address customer requirements of international and domestic carriers. In 2003, he was also appointed supervision over Asset Protection and Management Group responsible for Property Management, Risk Management (Insurance) and Facilities Management. Before joining PLDT in 2000, he had 12 years of experience in the banking industry – Citibank; 13 years in other consumer multinational companies, notably Colgate- Palmolive Philippines, Union Carbide and Pepsi Cola. In the field of sports, he currently holds the position of President for the Amateur Boxing Association of the Philippines, appointed as Honorary Vice President of the Asian Boxing Confederation (ASBC). He was elected Vice-Chairman for the Samahang Basketbol ng Pilipinas, Inc., the national sports association for the Philippine Basketball, a member of the Philippine Olympic Commission and International Basketball Federation. He holds the position of Alternate Governor of the Philippine Basketball Association, the nation’s professional basketball league. Antonio A. Picazo Antonio A. Picazo is currently a Senior Partner of Picazo Buyco Tan Fider & Santos Law Offices. He serves as a Director and/or Corporate Secretary of several large Philippine corporations, including Metro Pacific Investments Corporation, a position he has held since 2006. Mr. Picazo was born in Manila in August of 1941 and obtained his Bachelor of Laws degree from the University of the Philippines. He passed the 1964 Philippine Bar Examinations with the 5th highest rating. In 1967, he obtained a Master of Laws degree, Major in Taxation from the University of Pennsylvania. In 1976, he also completed the Management Development Program

course at the Asian Institute of Management. He is currently also a member of the Board of the PGH Medical Foundation, Haribon Foundation and the Gerry Roxas Foundation. Ray C. Espinosa Age 58, born in the Philippines. Mr. Espinosa has a Master of Laws degree from the University of Michigan Law School and is a member of the Integrated Bar of the Philippines. He was a partner of SyCip Salazar Hernandez & Gatmaitan from 1982 to 2000, a foreign associate at Covington and Burling (Washington, D.C., USA) from 1987 to 1988, and a law lecturer at the Ateneo de Manila School of Law from 1983 to 1985 and 1989. He ranked first in the 1982 Philippine Bar examination. He is a director of Philippine Long Distance Telephone Company (PLDT), Manila Electric Company (MERALCO), Metro Pacific Investment, Corporation, Roxas Holdings, Inc., and also an independent director of Lepanto Consolidated Mining Company "Lepanto"). He is a director of Meralco PowerGen Corporation, Mediaquest Holdings, Inc., TV5 Network, Inc., and Mediascape, Inc. (Cignal TV). He is the chairman of the Philstar Daily, Inc. and BusinessWorld Publishing Corporation, chairman of the Finance Committee of MERALCO, and chairman of the Audit Committee of Lepanto. He is the General Counsel of MERALCO and Head of PLDT’s Regulatory Affairs and Policy Office. He is also a trustee of the Beneficial Trust Fund of PLDT. Mr. Espinosa joined First Pacific in June 2013. He is First Pacific Group’s Head of Government and Regulatory Affairs and Head of Communications Bureau for the Philippines. Amado R. Santiago III Amado R. Santiago III is the Managing Partner of the Santiago & Santiago Law Offices and is engaged in the general practice of law. He specializes in corporate litigation, which includes corporate rehabilitation proceedings under the Securities and Exchange Commission Rules on Corporate Recovery, Interim Rules of Procedure on Corporate Rehabilitation and the Rules of Procedure on Corporate Rehabilitation, as well as taxation law. He acts as director, corporate secretary, and/or corporate counsel of various corporate clients. He graduated from the Ateneo de Manila School of Law in 1992 and passed the Philippines Bar Examinations given in the same year. He received his degree of Bachelor of Science in Legal Management in 1988 from the Ateneo de Manila University. Edward S. Go (Independent Director) Edward S. Go currently serves as Chairman of the Board of Hyundai Asia Resources, Inc. and of ASA Philippines Foundation. He is an Independent Director of Metro Pacific Investments Corporation, PLDT Communications and Energy Ventures, Inc. (PCEV) and Filipino Fund Inc. He is also Chairman of the PLDT Beneficial Trust Fund and member of the Board of BTF Holdings Inc, Mediaquest Holdings, Inc., TV5 Network, Inc., Cignal TV, Inc., BusinessWorld Publishing Corporation, PhilSTAR Daily, Inc., AB Capital Investment Corporation, Vicsal Investment Corporation, Union Galvasteel Corporation and Trans-Asia Petroleum Corporation. He has over 40 years of management experience in banking and finance, starting as Executive Trainee with Citibank N.A. and became President of Philippine Bank of Communications in 1974 and Chairman and Chief Executive Officer of Chinabank in 1985. Mr. Go is also Chairman of the Audit Committee of MPIC and PCEV. He obtained his Bachelor of Arts Degree, magna cum laude, and underwent postgraduate studies at the Ateneo de Manila University, where he served as member of the Board of Trustees from 2008 until he stepped down February. He was Chairman of the Board of Trustees during the last four years. Chief Justice Artemio V. Panganiban (Independent Director) A consistent scholar, retired Chief Justice Panganiban obtained his Associate in Arts “With Highest Honors” and later his Bachelor of Laws with “Cum Laude” and “Most Outstanding Student” honors. He placed sixth among 4,200 candidates who took the 1960 bar examinations.

A well-known campus leader, he founded and headed the National Union of Students of the Philippines. He is also the recipient of several honorary doctoral degrees. In 1995, he was appointed Justice of the Supreme Court, and in 2005, Chief Justice of the Philippines. Aside from being a prodigious decision writer, he also authored eleven books while serving on the highest court of the land. His judicial philosophy is “Liberty and Prosperity Under the Rule of Law.” He believes that the legal profession and the judiciary must not only safeguard the liberty of our people but must also nurture their prosperity and economic well-being. To him, justice and jobs, ethics and economics, democracy and development, nay, liberty and prosperity must always go together; one is useless without the other. On his retirement on 7 December 2006, his colleagues acclaimed him unanimously as the “Renaissance Jurist of the 21st Century.” Prior to entering public service, Chief Justice Panganiban was a prominent practicing lawyer, law professor, business entrepreneur, civic leader and Catholic lay worker. He was the only Filipino appointed by the late Pope John Paul II to be a member of the Vatican-based Pontifical Council for the Laity for the 1996-2001 term. At present, he is a much sought-after independent director and adviser of business firms, and writes a column in the Philippine Daily Inquirer. Lydia Balatbat-Echauz (Independent Director) Lydia Echauz is retired from academe. She was for ten years President of Far Eastern University and its three other affiliate schools. Prior to joining FEU in 2002, she served as Dean of De La Salle University Graduate School of Business, Associate Director of the MBA program of the Ateneo de Manila University Graduate School of Business, and Associate Professor of the University of the East, College of Business Administration. She is currently a member of the Board of a few organizations, life member and former governor of the Management Association of the Philippines, and past President of the Association of Southeast Asian Institutions of Higher Learning, RP Council. She has been awarded most outstanding Filipino and most distinguished alumna of ADMU, DLSU, and St. Theresa's College. Washington Z. SyCip (Independent Director) Mr. Washington SyCip is the founder of the SGV Group. He is the Chairman Emeritus of the Board of Trustees and Board of Governors of the Asian Institute of Management, Philippines and a member of the Board of Overseers of the Columbia University Graduate School of Business, New York. He is a counselor in the Conference Board, a member of the International Advisory Board, Council on Foreign Relations (1995-2010) and an Honorary Life Trustee of The Asia Society-all in New York. He is a member of the Board of Directors of a number of major corporations in the Philippines and other parts of the world.

The Company has complied with the guidelines on the nomination and election of independent directors set forth in Rule 38 of the Amended Implementing Rules and Regulations of the Securities Regulation Code. The four (4) independent directors, Ms. Lydia B. Echauz and Messrs. Edward S. Go, Washington Z. SyCip and Artemio V. Panganiban, were nominated by Flordeliza Anibigno, a registered shareholder of the Company who is not a director, officer or substantial shareholder of the Company. Mrs. Anibigno signed the recommendations and Ms. Lydia B. Echauz, Mr. Edward S. Go, Mr. Washington Z. SyCip and Mr. Artemio V. Panganiban accepted their nominations. Mrs. Anibigno is not related to any of Ms. Lydia B. Echauz, Mr. Edward S. Go, Mr. Washington Z. SyCip and Mr. Artemio V. Panganiban. The qualifications of all nominated directors including the nominated independent directors have been pre-screened in accordance with the rules of the Company Only the nominees whose names appear on the Final List of Candidates are eligible for election as directors (independent or otherwise). No other nominations were entertained after the preparation of the Final List of Candidates and no further nominations shall be entertained or allowed during the annual stockholders’ meeting.

Officers

The business experience of each of the officers and executives of the Company for the last five (5) years is as follows.

Maida B. Bruce Ms. Bruce joined MPIC in November 2009 and is responsible for strengthening and overseeing the Financial Reporting, Budgeting & Forecasting and System enhancements processes. Prior to joining MPIC, Maida held a CFO role with the top real estate company in the Philippines. She was responsible for overseeing the financials of Ayala Lands’s Strategic Landbank Management Group including its other subsidiaries. She has more than thirteen years of extensive experience in the banking industry under Citigroup Australia and Manila. She was VP for Special Purpose Vehicles under the Financial Control Department of Citigroup Australia and has handled several roles and responsibilities also in Citibank Manila. She was part of a pioneer team that implemented, supported and continuously upgraded a proprietary global financial reporting system to multiple countries in the Asia-Pacific region. Robin Michael L. Velasco Mr. Velasco joined the company in July 2009 and is responsible for ensuring that MPIC's subsidiaries and future acquisitions have the right People Strategies to support the growth required to achieve business plans. He led the creation of an HR Council which is an organization of all HR Heads in the First Pacific Group. He brings with him 24 years of management experience garnered from Global Multinationals such as Procter & Gamble, Johnson & Johnson and Synovate. He has been exposed to various facets of management which includes Finance, Supply Chain, Manufacturing, Research & Development, Technical Services, Market Research, Quality Assurance and HR Management. He spent the last 5 years of his career prior to MPIC in Singapore as HR Director for Asia Pacific, Talent Management for Johnson & Johnson, and then as HR Director for Asia for Synovate, leading 12 Asian countries in all HR aspects. He has also spent 6 years of his career as a Professor of the Graduate School of Business and the Business Management Dept. of La Salle where he taught Strategic Management, Ethics, Stock Market Trading, Production Management and HR Management. Melody M. del Rosario Ms. Del Rosario has been with the Metro Pacific Group since 1993, and has over 21 years of experience heading MPIC's public and media relations, corporate communications, advertising and corporate social responsibility (CSR). In these various capacities, Ms. del Rosario is in charge of strengthening the credibility and corporate public image of MPIC by planning and overseeing the implementation of strategic corporate communication programs, handling reputation and crisis management, as well as working closely with the corporate communication teams and CSR heads of the group. Ms. del Rosario is also the Corporate Information Officer of MPIC for the Philippine Stock Exchange and is a Trustee of the MPIC Foundation where she actively implements institutional programs on education, economic empowerment and environmental awareness. Albert W. L. Pulido Albert has managed the Investor Relations function at Metro Pacific Investments Corporation since the middle of 2009. In that span of time he and his team have managed the transition - from an IR perspective - to a truly public company via a public share re-launch in September 2009, increased the number of analysts covering the stock from 3 to 16, managed updates to investors on a primary share issuance of US$200 million in July 2011, US$150 million in January 2013 and US$200 million in February 2015, and coordinated over 500 investor meetings over the past two years. Prior to MPIC, Albert was with the NY offices of Lehman Brothers (now Barclays Capital) from 2003 to 2008 in various capacities including: Creditor Relations, Financial Planning & Analysis, Rating Agency Relationships and Consumer Deposit Platform Development. Before this, he

served as a business development officer for a couple of Philippine banks originating corporate clients. He has an MBA from Erasmus University and is a graduate of De La Salle University with a Bachelor of Science degree. Atty. Jose Jesus G. Laurel Prior to joining MPIC, Atty. Laurel was Vice President for Legal and External Affairs, General Counsel and Corporate Secretary for Petron Corporation and concurrently President of Petron Foundation. Before working for Petron, he was Vice President for Corporate Services of Energy Development Corporation (EDC) where he headed Legal, HR, Purchasing, Planning and Finance. Prior to EDC, he served at the Securities and Exchange Commission (SEC) for 9 years as securities analyst, prosecutor, hearing officer and as deputy executive director (General Counsel). Concurrent with the above positions, he also served as Law Dean of Lyceum of the Philippines and law professor for 27 years at Ateneo de Manila Law School. He graduated from Ateneo de Manila with degrees in A.B. Economics and Law. He placed 6th in the 1981 bar. He also has a Masters of Laws from Yale University. Karim G. Garcia Karim G. Garcia joined MPIC in January 2015. As Vice President for Business Development, he is responsible for new business expansion and integration into MPIC’s businesses. His mandate is to increase MPIC’s competitive advantage, by actively searching and developing new business ventures, and executing M&A and RFP transactions, especially those with synergies to existing business. Within the energy industry, Karim has over a decade worth of experience. Initially, he was an oil trader for Chemoil Corporation, one of the largest independent fuel oil bunker service companies. He then moved to Houston, Texas and joined Enron Development Corp, where he managed several international green field power development projects, with a combined generation capacity of close to 1000MW, from concept to financial close. In addition, within energy venture capital subsidiary, Enron Global Investments, he led Enron’s Mergers & Acquisitions efforts in South East Asia. Also prior to MPIC, Karim was Vice President for Strategic Planning for Trans Asia Oil and Energy Development Corporation, a Phinma Company. He was responsible for the development of greenfield power projects, and the acquisition of energy assets. He also led Trans-Asia’s foray in to Liquefied Natural Gas and combined cycle gas turbine power generation. Karim Garcia holds a Bachelor’s of Science in Business Administration, from Boston University and obtained a Masters of Business Administration from the Marshall School of Business at the University of Southern California. Santhea V. delos Santos Ms. Delos Santos joined the Company in February 2007 and has performed functions like financial and management reporting, planning, analysis and budget. In 2013, she was also designated as the Company’s Chief Risk Officer. She has over 15 years of experience in finance and audit where she was exposed to diverse industries including utilities, telecommunication, media, power and shared services. She was part of a team who successfully shadowed and backfilled one of the most critical reporting processes in an integrated power company in North America and migrated these processes to the Philippines. She worked as well with a group of companies where she implemented process improvements in its consolidation and reporting system, migrated their accounting system and helped in getting ISO certification for processes of a holding company. She also worked with SGV and Co. where she gained her audit experience. With her diverse and extensive experience in Finance, she has been involved in helping senior management craft investment and funding strategies for the Company. She holds a Bachelor of Science with a degree in Accountancy and is a Certified Public Accountant Loudette M. Zoilo Ms. Maliksi-Zoilo joined MPIC in September 2009. She currently heads MPIC HR and has been instrumental in managing and improving the MPIC organization's People related Organizational Strategies. She brings with her 18 years of Human Resources experience, gained from PricewaterhouseCoopers where she was a Manager of the Global Human Resources Solutions team, an HR Consulting team of the firm which services a vast array of industries including but

not limited to, Utilities, Consumer, Banking, Government, NGOs and others. Her project exposure included HR Consulting, Risk Management and Process Improvement projects. She was also part of the management team of Corporate Human Resources Group of Philamlife who oversaw the HR function of almost 21 affiliates where she instituted improvements in policies and procedures of the group. Prior to joining MPIC, she was the HR Head of Jollibee Worldwide Services, a shared-service organization of the Jollibee Group of Companies. Celso G. Lopez Mr. Lopez joined MPIC in June 2012. He is currently seconded to Automated Fare Collection Services, Inc. the incorporated vehicle of the First Pacific Group and Ayala Group Consortium. He is helping out AFCS with its strategies and operation as he performs the role of Chief Operating Officer. His responsibilities include Business Development beyond the Rail Concession, Operations for Card Issuance & Merchant Acquisition and the Maintenance of the Fare Collection System for the LRT1, LRT2 and MRT3 Lines. Before his secondment, he was responsible for Business Development and Project Management for the MPIC Hospital Group. Prior to this he also did Project Management for Special Projects under the Office of the President & CEO and was involved in strategic planning by driving the implementation and monitoring of corporate strategies. He coordinated with the various Operating Companies to monitor for the CEO their alignment with agreed key action plans and monitored their performance versus set metrics. Mr. Lopez had 16 years of banking experience before joining MPIC. Up to June 2010 he was Executive Vice President of EastWest Banking Corporation. Prior to that he spent 7 years in Security Bank Corporation and was First Vice President in charge of setting up the Fixed Income Securities Division. In 2003, he completed his Executive MBA from the Asian Institute of Management and graduated with Distinction. Ricardo M. Pilares III Mr. Pilares is the Assistant Vice President for Legal of Metro Pacific Investments Corporation. He graduated Valedictorian from the Ateneo Law School in 2006 and passed the Philippine Bar Examinations in 2007 with the second highest ranking. Before joining Metro Pacific Investments Corporation in 2010, Mr. Pilares was an associate in ACCRA Law Offices, and subsequently in Puno and Puno Law Offices, where he handled litigation cases and special corporate projects for various clients. He also acts as legal counsel of the various subsidiaries of MPIC. He is also a member of the faculty of the Ateneo Law School. Melanie G. Bendijo Ms. Bendijo has been with Metro Pacific Group since 2004 and has over 13 years of experience in the field of Treasury and Fund Management. She is responsible for the Company’s overall Treasury Operations and Controls. She has been instrumental in various fund raising activities of the Company’s major investments, including securing a foreign loan to support our Don Muang Tollway investment. Antonio A. Picazo (See business experience above) Cristina S. Palma Gil-Fernandez Cristina S. Palma Gil-Fernandez was appointed to the position of Assistant Corporate Secretary of MPIC in May 2013. Atty. Palma Gil-Fernandez graduated with a Bachelor of Arts degree, Major in History (Honors) from the University of San Francisco in 1989, and with a Juris Doctor degree, second honors, from the Ateneo de Manila University in 1995. She is currently a Partner at Picazo Buyco Tan Fider & Santos Law Offices and has 20 years of experience in corporate and commercial law, with emphasis on the practice areas of banking, securities and capital markets (equity and debt), corporate reorganizations and restructurings and real estate.

The Company has no other significant employee other than its Executive Officers. None of the aforementioned Directors or Executive Officers or persons nominated or chosen by the Company to

become Directors or Executive Officers is related to the others by consanguinity or affinity within the fourth civil degree. No Director has resigned or declined to stand for re-election to the Board of Directors since the date of the last annual stockholders’ meeting due to disagreement with the Company on any matter relating to the Company’s operations, policies or practices. None of the aforementioned Directors or Executive Officers is or has been involved in any criminal or bankruptcy proceeding, or is or has been subject to any judgment of a competent court barring or otherwise limiting his involvement in any type of business, or has been found to have violated any securities laws during the past five (5) years and up to the latest date. Except as described below, the Company has not had any transaction during the last two (2) years in which any Director or Executive Officer or any of their immediate family members had a direct or indirect interest. The incumbent members of the various committees of the Board of Directors are as follows: A. Nominations Committee Chairman: Edward S. Go Members: Lydia B. Echauz Robert C. Nicholson Jose Ma. K. Lim (non-voting member) Jose Jesus G. Laurel (Committee Secretary) B. Audit and Risk Management Committee Chairman: Edward S. Go Members: Lydia Echauz Amado R. Santiago III Santhea V. Delos Santos (Committee Secretary) C. Compensation Committee: Chairman: Lydia B. Echauz Members: Edward S. Go Manuel V. Pangilinan Loudette M. Zoilo (Committee Secretary) D. Corporate Governance Committee Chairman: Artemio V. Panganiban Members: Amado R. Santiago III Edward S. Go Jose Jesus G. Laurel (Committee Secretary) Except as disclosed in Item 6 below, none of the aforementioned Directors and Executive Officers is covered by a special compensatory plan or arrangement, nor do any of them hold any outstanding warrants or options in respect of the Company or its shares.

Item 6. Compensation of Directors and Executive Officers The aggregate compensation paid in 2013 and 2014 and estimated to be paid in 2015, to the officers of the Company is set out below:

Names Position Year Salary Bonus Others

Manuel V. Pangilinan Jose Ma. K. Lim David J. Nicol Augusto P. Palisoc Jr. Robin Michael Velasco

Chairman President & CEO Chief Finance Officer Executive Director, President & CEO VP Human Resources

Aggregate for above named officers

2013 2014 2015 (est.)

90,530,980 97,864,529 92,000,000

65,920,634

107,715,641 70,000,000

171,680,201

- -

All Other Directors and Officers as a group excluding the above-named officers

2013 2014 2015 (est.)

72,759,567 78,550,519 70,000,000

47,757,501 87,167,959 53,000,000

103,025,146

- -

The above executive officers are covered by standard employment contracts and employees’ retirement plan and can be terminated upon appropriate notice. Non-executive Directors are entitled to a per diem allowance of Php 50,000 for each attendance in MPIC’s Regular Board meetings.

The Company’s By Laws provide that, additionally, an amount equivalent to 1 percent of net profit after tax shall be allocated and distributed amongst the directors of the Company who are not officers thereof or of any of its subsidiaries or affiliates, in such manner as the Board may deem proper. The amount paid to the directors in 2014 and estimated amount to be paid in the ensuing year are included in the above tabulation. There are no other special arrangements pursuant to which any director was compensated. The aggregate number of options awarded to the Directors and Executive Officers are set out below:

Names Position Amount of

Options

Date of

Grant of

the

Options

Exercise

Price

Market

Price

on the

Date of

Grant

Expiration Date

Manuel V. Pangilinan

Jose Ma. K. Lim

David J. Nicol

Edward A. Tortorici

Augusto P. Palisoc, Jr.

Antonio A. Picazo

Edward S. Go

Artemio V. Panganiban

Washington Z. SyCip

Lydia B. Echauz

Amado R. Santiago, III

Ramoncito S. Fernandez

Chairman

President/CEO

CFO / Director

Executive Director

Executive Director

Director/Corp. Sec.

Ind Director

Ind Director

Ind Director

Ind Director

Director

Executive Director

Robert C. Nicholson

Ray C. Espinosa

Victorico P. Vargas

Jose Noel C. dela Paz

Maida B. Bruce

Robin L. Velasco

Melody M. del Rosario

Albert L. Pulido

Jose Jesus G. Laurel

Ferdinand G. Inacay

Reymundo S. Cochangco

Mabini F. Pablo


Celso Bernard Lopez

Loudette M. Zoilo

Director

Director

Executive Director

Vice President

Vice President

Vice President

Vice President

Vice President

Vice President

Vice President

Vice President

Senior Advisor

Asst. Vice President



Aggregate for above

named directors/officers

43,500,000

43,500,000

59,500,000

10,000,000

3,000,000

109,500,000

12/09/08

03/10/09

07/02/10

12/21/10

04/12/11

10/14/14

P= 2.12

P= 2.73

P= 2.73

P= 3.50

P= 3.66

P= 4.60

P=2.10

P=2.70

P=2.65

P=3.47

P=3.70

P= 4.59

January 2, 2013

March 10, 2013

July 2, 2015

Dec. 21, 2015

April 14, 2016

October 14, 2018

Others 17,500,000

19,425,245

34,800,000

1,000,000

2,500,000

12/09/08

03/10/09

07/02/10

03/08/11

10/14/14

P= 2.12

P= 2.73

P= 2.73

P= 3.53

P= 4.60

P=2.10

P=2.70

P=2.65

P=3.53

P= 4.59

January 2, 2013

March 10, 2013

July 2, 2015

March 8, 2016

October 14, 2018

Under the terms of the first grant, fifty percent (50%) of the first tranche granted (61,000,000 option

shares) vested on January 2, 2009 and the remaining fifty percent (50%) of said first tranche vested

on the first (1st ) anniversary of the initial vesting date for such tranche or January 2, 2010. On the

other hand, fifty percent (50%) of the second tranche granted (62,925,245 option shares) vested on

March 10, 2009 and the remaining fifty percent (50%) of said second tranche vested on the first (1st )

anniversary of the initial vesting date for such tranche or March 10, 2010. Grantees of said options

may exercise in whole or in part their respective options at any time after vesting but prior to the

expiration of three (3) years after all of the option shares for such tranche have vested. As of Record

Date, options granted under these two (2) tranches have expired.

A second grant was issued on July 2, 2010 covering a total of 94,300,000 options, of which

62,500,000 options were granted to MPIC directors and officers while 31,800,000 were granted to

certain key personnel of MPIC’s subsidiaries and affiliates. Of the 62,500,000 options granted, 50%

vested on January 1, 2011 and the remaining 50% vested on January 1, 2012. Of the 31,800,000

granted, 30% vested on July 2, 2011, 35% vested on July 2, 2012 and the remaining 35% will vest on

July 2, 2013. Options granted under this grant may be exercised at any time after vesting but prior to

expiration on July 2, 2015.

Subsequently, additional options were issued as part of the second grant on the following dates: (a)

10,000,000 option shares were granted to an executive officer of an MPIC subsidiary which vested as

follows: (i) 30% on August 1, 2011, (ii) 35% on August 1, 2012 and (iii) 35% on August 1, 2013; (b)

1,000,000 option shares were granted to a senior management officer of an MPIC subsidiary which

vested as follows: (i) 30% on March 8, 2012, (ii) 35% on March 8, 2013 and (iii) 35% on March 8,

2014; and (c) 3,000,000 option shares were granted to an MPIC officer which vested as follows: (i)

50% on April 14, 2012 and (ii) the remaining 50% on April14, 2013. These options may be exercised

at any time after vesting but prior to expiration of a period of five (5) years from grant date.

A third grant was issued on October 14, 2013 covering a total of 112,000,000 options, of which


certain key personnel of MPIC’s subsidiaries and affiliates. Of the total 112,000,000 options granted,

50% vested on October 14, 2014 and the remaining 50% will vest on October 14, 2015. Options

granted under this grant may be exercised at any time after vesting but prior to expiration on October

14, 2018.

The foregoing options were granted pursuant to, and subject to the terms and conditions provided in,

the Executive Stock Option Plan of the Parent Company, as amended (the “Plan”). The procedure for

the exercise of such options is as set forth in the Plan.

Long-term Incentive Plan (LTIP) Certain of the Company’s employees are eligible for long-term employee benefits under a long-term incentive plan. The liability recognized on the LTIP comprises the present value of the defined benefit obligation and was determined using the projected unit credit method. Each LTIP performance cycle generally covers 3 years (e.g., 2013 to 2015 and 2010 to 2012 for MPIC’s LTIP, 2013 to 2015 for Maynilad's LTIP and 2012 to 2014 for MPTC’s LTIP) with payment intended to be made at the end of the each cycle (without interim payments) and is contingent upon the achievement of an approved target core income of the Company by the end of the performance cycle. Each LTIP performance cycle, upon endorsement of the Compensation Committee, is approved by the respective board of directors of the entities of the Company. On October 7, 2011, MPIC entered into an IMA with a Trustee Bank to fund the 2010-2012 LTIP program. The LTIP fund will be expected to continue accumulating for the LTIP target payout. The investment portfolio of IMA is limited to the following: securities issued, directly or indirectly, or guaranteed by the government; and time deposit and money market placements issued by any of the top 10 banks in the Philippines. As at December 31, 2014, the LTIP fund balance for the 2013-2015 LTIP program amounted to P345 million LTIP expense for the years ended December 31, 2014, 2013 and 2012 amounted to P441 million, P411 million and P165 million, respectively, and presented as “Personnel costs” under “General and administrative expenses” in the accompanying consolidated statements of comprehensive income. LTIP liability as at December 31, 2014 and 2013 amounted to P850 million and P455 million, respectively, and is presented under “Accounts payable and other current liabilities” and “Deferred credits and other long-term liabilities” account in the accompanying consolidated statements of financial position.

Item 7. Independent Public Accountants The auditing firm of SGV & Company is being recommended for re-appointment as external auditor for the current year.

Representatives of the said firm are expected to be present at the annual stockholders’ meeting and will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

During the Company’s three most recent fiscal years or any subsequent interim periods, there was no instance where the Company’s public accountants resigned or indicated that they decline to stand for re-election or were dismissed nor was there any instance where the Company had any disagreement with its public accountants on any accounting or financial disclosure issue.

The 2014 audit of the Company is in compliance with paragraph (3)(b)(ix) of the Securities Regulation Code Rule 68, as amended, which provides that the external auditor should be rotated, or the handling partner changed, every five (5) years or earlier. C. ISSUANCE AND EXCHANGE OF SECURITIES Item 9. Authorization or Issuance of Securities Other than for Exchange Issuance of Common Shares Approval will be sought to issue additional common shares (“Additional Shares”), either out of the increase in the authorized capital stock or the unissued capital stock in favor of an investor or investors that the Board of Directors, acting as a body, may identify and determine and the corresponding listing of the such issued common shares in the Philippine Stock Exchange. The Additional Shares shall have the same rights and privileges as the common shares of the Company currently outstanding. The number of Additional Shares to be issued, its issue price, and the resulting proceeds of the issuance to be received by the Company shall depend on the business exigencies and market conditions at the time of issuance. The authority to issue the Additional Shares is sought to enable the Company to carry out equity fund raising in a timely manner for the Company's investments, including, without limit, in the infrastructure, utilities and healthcare sectors, and general corporate purposes. The issuance of Additional Shares is not expected to substantially impact the rights of existing security holders and will be disclosed as required under applicable laws and regulations. Item 10. Modification or Exchange of Securities Reclassification of Class B preferred shares to Class A Preferred Shares Approval will be sought for the reclassification of a total of 150 million Class B preferred shares with par value of Php1 per share into 15 billion Class A preferred shares with par value of Php 0.01 per share, thereby decreasing the number of Class B preferred shares from 1.5 billion to 1.35 billion and correspondingly increasing the number of Class A preferred shares from 5 billion to 20 billion, and the consequent Amendment of the Articles of Incorporation of the Company. The basis for the ratio of the shares reclassified is their respective par values. Under the Articles of Incorporation of the Company, Class A Preferred shares and Class B Preferred shares generally share the same features, their only difference being their respective par value and that Class B Preferred shares are convertible to common shares of the Company, while Class A Preferred shares are not convertible. [The purpose of the reclassification is to broadly maintain the historical ratio of preference shares relative to each class and the common shares of the Company following recent capital raising exercises, as well as reduce the number of outstanding preferred shares that are convertible to the common shares. The reclassification of shares is not expected to substantially impact the rights of existing security holders. D. OTHER MATTERS Action with Respect to Reports The following reports/minutes of meeting will be submitted for approval by the stockholders:

1. President's Report and the Annual Report for the year 2014 2. Audited Financial Statements for the year 2014. 3. Minutes of the Annual Meeting of the Stockholders held on 30 May 2014, which records the

approval and/or ratification by the stockholders of the following matters: (i) Management’s Report and the Annual Report of the Company for the year 2013; (ii) the audited financial statements as of 31 December 2013; (iii) the ratification of acts of the Board of Directors and Management during the year 2013; (iv) the election of the members of the Board of Directors (including the Independent Directors) of the Company; and the appointment of the external auditor. A copy of said minutes is annexed to this Information Statement as Annex "A".

Other Proposed Actions 1. Ratification of all acts and resolutions of the Board of Directors and Management for the year

2014 as set forth in the minutes of the meetings of the Board of Directors held during the same period and in the disclosures that have been duly filed with the SEC and the PSE. These include, without limit, resolutions approving: (i) the reorganization of Neptune Stroika Holdings, Inc. and the investment by the Government

of Singapore Investment Corporation ("GIC") in the hospitals business of the Company; (ii) in relation to the entry of GIC in the hospitals business of the Company, the issuance of an

Exchangeable Bond (“Exchangeable Bond”) in favor of Arran Investment Private Limited (“Arran”) with a principal amount of about Php 6.5 billion. The Exchangeable Bond issued to Arran is exchangeable for 158,137,590 fully paid Class A Shares of Metro Pacific Hospital Holdings, Inc. (“MPHHI”) (formerly, Neptune Stroika Holdings, Inc.), with a par value of Php 10.00 per share, owned and held by the Company (the “Underlying Shares”), as well as the pledge constituted on the Underlying Shares to secure the obligations of the Company under (i) the Exchangeable Bond Instrument and (ii) the terms and conditions of the Exchangeable Bond set forth under the Exchangeable Bond Instrument. The Underlying Shares represent 25.51% of the outstanding capital stock of MPHHI as of a specified reference date.

(iii) the sale of 1,161,930 shares of stock of NE Pacific Shopping Centers Corporation owned by the Company;

(iv) the declaration and distribution of dividends during the year 2014; (v) the purchase of First Pacific’s 22.1% interest in Don Muang Tollway by the Company’s

offshare holding company, MPIC Infrastructure Holding Ltd.; (vi) the purchase of 5% shares of Manila Electric Company from Beacon Electric Assets

Holdings, Inc., (vii) the purchase of additional shares of stock in Metro Pacific Tollways Corporation from Mr.

Jose K. Limoanco; (viii) the Company’s investment in MetroPac Water Investments Corporation; (ix) the purchase of 24.95% of Indra Philippines from Manila Electric Company; (x) the restructuring of the Company’s investment in Landco Pacific Corporation; and (xi) other resolutions related to the operations of the Company, such as, participations in

biddings for infrastructure and other projects with the government, the purchase and sale of vehicles, opening of bank accounts, availment of bank facilities and services and designation of authorized signatories for various transactions.

2. Approval of the reclassification of a total of 150 million Class B preferred shares with par value of

Php1 per share into 15 billion Class A preferred shares with par value of Php 0.01 per share, thereby decreasing the number of Class B preferred shares from 1.5 billion to 1.35 billion and correspondingly increasing the number of Class A preferred shares from 5 billion to 20 billion, and

the consequent Amendment of the Articles of Incorporation of the Company. (See Item 10. Modification or Exchange of Securities)

3. Approval of the increase of the authorized capital stock from Php30.05 billion up to Php40.05

billion divided into 38.5 billion common shares with a par value of Php1.00 per share and 20 billion Class A preferred shares with a par value of Php0.01 per share and 1.35 billion Class B preferred shares with a par value of Php1 per share and the consequent Amendment of the Articles of Incorporation of the Company.

4. Approval of the issuance of common shares whether out of the increase in the authorized capital

stock or the unissued capital stock in favor of an investor or investors that the Board of Directors, acting as a body, may identify and determine and the corresponding listing of the such issued common shares in the Philippine Stock Exchange (See Item 9. Authorization or Issuance of Securities Other than for Exchange)

5. Approval of the listing on the Philippine Stock Exchange of a total of 1,812,000,000 common

shares issued by the Company to Metro Pacific Holdings, Inc. on February 9, 2014, in accordance with current PSE rules and regulations for a placing and subscription transaction

The said issuance is a result of the equity fund raising through a placing and subscription transaction is structured in two concurrent stages:

(i) The offer and sale by Metro Pacific Holdings, Inc. (“MPHI”), the Company’s principal

shareholder, of 1,812,000,000 of MPHI’s existing listed shares in the Company: (a) primarily offshore by way of marketed placing to investors outside the United States in reliance on Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and within the United States to qualified institutional buyers as defined in, and in reliance on, Rules 144A under the Securities Act or another exemption from registration under the Securities Act; and (b) to a limited extent domestically to persons who are “qualified buyers” pursuant to Section 10(l) of the Philippine Securities Regulation Code (“SRC”) (the “Placing Tranche”); and

(ii) The subscription by MPHI, and the issuance by the Company to MPHI, of new common

shares in the same number and at the same price as the shares to be sold in the Placing Tranche (“Subscription Tranche”), with such new common shares being listed as soon as practicable thereafter.

The conduct of an equity fund raising through the placing and subscription transaction allows the Company to raise equity funds in a most expeditious and efficient manner, with the least cost to the Company, for use in its debt repayments, expansion and acquisition projects. The transaction was also intended to strengthen and broaden the capital base of the Company, as well as to promote a wider dispersion of the common shares of the Company to a broad spectrum of public institutional investors.

6. Election of the members of the Board of Directors, including the Independent Directors, for the ensuing calendar year.

7. Election of External Auditor.

Amendment of Charter, By-Laws or Other Documents Upon approval and ratification by the stockholders, the Amended Articles of Incorporation of the Company will be further amended to reflect the increase in the authorized capital stock of the Company, as well as the reclassification of a portion of Class B Preferred Shares into Class A

Preferred Shares. As a result, the new authorized capital stock of the Company will be Php40.05 billion divided into 38.5 billion common shares with a par value of Php1.00 per share, 20 billion Class A preferred shares, with a par value of Php0.01 per share and 1.35 billion Class B preferred shares, with a par value of Php1.00 per share. The increase in authorized capital stock of the company will enable the Company to carry out further equity fund raising. Voting Procedures Manner of voting

In all items for approval, except in the election of directors, each share of stock entitles its registered owner to one vote.

For the purpose of electing directors, a stockholder may vote such number of his shares for as many persons as there are directors to be elected or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them in the same principle among as many candidates as he shall see fit.

Unless required by law, or demanded by a stockholder present or represented at the meeting and entitled to vote thereat, voting need not be by ballot and will be done by show of hands. The Corporate Secretary will be responsible for counting votes based on the number of shares entitled to vote owned by the stockholders who are present or represented by proxies Voting requirements

(a) With respect to the election of directors, candidates who received the highest number of

votes shall be declared elected. (b) With respect to the adoption of the Audited Financial Statements for the year ended 31

December 2014, as well as the approval or ratification of the other actions set forth under the heading “Other Proposed Actions” above (other than the actions requiring the amendment of the articles of incorporation of the Company), the vote of majority of the outstanding capital stock entitled to vote and represented in the meeting is required to approve such matters.

(c) With respect to the approval of the reclassification of Class B preferred shares into Class A preferred shares, approval of the increase in the authorized capital stock, and the corresponding amendment of Article Seventh of the Amended Articles of Incorporation, of the Company, the vote of at least two-thirds of the outstanding capital stock is required to approve such matter.

Method of counting votes The Corporate Secretary will be responsible for counting votes based on the number of shares entitled to vote owned by the stockholders who are present or represented by proxies at the Annual Meeting of the stockholders.

Unless required by law, or demanded by a stockholder present or represented at the meeting and entitled to vote thereat, voting need not be by ballot and will be done by show of hands.

E. FINANCIAL AND OTHER INFORMATION Financial Statements The audited consolidated financial statements of the Company as of 31 December 2014 are annexed to this Information Statement as Annex “B” hereof. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of the Financial Condition and Results of Operation of the Company as of 31 December 2014 are likewise annexed to this Information Statement as Annex “C” hereof. Required Schedules The Schedules required under Part IV(c) of SRC Rule 68 will be included in the Annual Report (Form 17-A) of the Company.

UPON THE WRITTEN REQUEST OF A STOCKHOLDER, THE COMPANY UNDERTAKES TO FURNISH SAID STOCKHOLDER A COPY OF SEC FORM 17-A FREE OF CHARGE, EXCEPT FOR EXHIBITS ATTACHED THERETO WHICH SHALL BE CHARGED AT COST. ANY WRITTEN REQUEST FOR A COPY OF SEC FORM 17-A SHALL BE ADDRESSED AS FOLLOWS:

Metro Pacific Investments Corporation 10th Floor, MGO Building, Legazpi corner

Dela Rosa Streets, Legazpi Village, Makati City, 0721 Philippines

Attention: MELODY M. DEL ROSARIO

SIGNATURE PAGE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this report is true, complete and correct. This report is signed in the City of Makati on the 30th day of April 2015.


By:

_____________________________

JOSE MA. K. LIM President and Chief Executive Officer


2015

SEC FORM 20-IS ANNEX

METRO PACIFIC INVESTMENTS CORPORATION 2015 SEC FORM 20-IS

ANNEX A


ANNEX A


ANNEX B


ANNEX B


ANNEX B


ANNEX B


ANNEX B


ANNEX C

Please be advised that Metro Pacific Investments Corporation will file its SEC Form 17-Q or the Quarterly Report pursuant to Section 17 of the Securities Regulation Code and SRC Rule 17(2)(b), with the Securities and Exchange Commission and the Philippine Stock Exchange on or before May 14, 2015.

In compliance with the recent SEC circular ______, we shall make the SEC Form 17-Q available in the Company’s website, http://www.mpic.com.ph, five (5) working days before the Annual General Meeting.

Further, shareholders will be furnished with printed copies on May 29, 2015 or the day of the Annual Shareholders Meeting.

METRO PACIFIC

INVESTMENTS

CORPORATION

SEC FORM 17-A

December 31, 2014

12. Check whether the registrant:

a) has filed all reports to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11 (1)-1 thereunder and Sections 26 and 141 of the Corporation Code of the Philippines during the preceding 12 months (or for such shorter period that the registrant was required to file such reports);

Yes [ x ] No [ ] b) has been subject to such filing requirements for the past 90 days. Yes [ x ] No [ ]

13. State the aggregate market value of the voting stock held by non-affiliates of the registrant. The

aggregate market value shall be computed by reference to the price at which the stock was sold; or the average bid and asked price of such stock, as of a specified date within sixty (60) days prior to the date of filing. If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided the assumptions are set forth in the Form.

The aggregate market value of voting stocks held by non-affiliates representing 44.0% of outstanding common shares is P=61,942 million, computed on the basis of the closing price as at February 28, 2015 of P=5.40 per share.

TABLE OF CONTENTS

PART I – BUSINESS AND GENERAL INFORMATION

Item 1. Description of Business ........................................................................................ 1

Item 2. Description of Properties .................................................................................... 15

Item 3. Legal Proceedings............................................................................................... 16

Item 4. Submission of Matters to a Vote of Security Holders ........................................ 16

PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters ...... 17

Item 6. Management’s Discussion and Analysis of Financial Condition and Results of

Operations (MD & A)

Financial Highlights and Key Performance Indicators ....................................... 20

Operational Review ............................................................................................ 22

I - MPIC Consolidated .................................................................................. 22

II - Operating Segments of the Group........................................................... 26

MPIC Consolidated Statement of Financial Position ......................................... 35

Liquidity and Capital Resources ......................................................................... 39

Comparison of Other Financial Years ................................................................ 42

Item 7. Consolidated Financial Statements ..................................................................... 52

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosures ...................................................................................................................... 52

PART III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer ................................................... 53

Item 10. Executive Compensation ................................................................................. 64

Item 11. Security Ownership of Certain Record and Beneficial Owners and

Management .................................................................................................................... 67

Item 12. Certain Relationships and Related Party Transactions ..................................... 69

PART IV – CORPORATE GOVERNANCE

Item 13. Part IV - Corporate Governance portion of the Annual Report ....................... 69

PART V – EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C (Current Reports) ........................... 70

Item 15. Signatures ......................................................................................................... 71

Item 16. Index to Financial Statements and Supplementary Schedules ......................... 72

i. Exhibit I - 2013 Audited Financial Statements

ii. Exhibit II - Supplementary Schedules

iii. Exhibit III - Annual Corporate Governance Report

1

PART I – BUSINESS AND GENERAL INFORMATION

Item 1. Description of Business

(A) Business Development

Metro Pacific Investments Corporation (the Parent Company or MPIC) was incorporated in the

Philippines and registered with the Philippine Securities and Exchange Commission (SEC) on

March 20, 2006 as an investment holding company. MPIC’s common shares of stock are listed in

and traded through the Philippine Stock Exchange (PSE). On August 6, 2012, MPIC launched

Sponsored Level 1 American Depositary Receipt (ADR) Program with Deutsche Bank as the

appointed depositary bank in line with the Parent Company’s thrust to widen the availability of its

shares to investors in the United States.

MPIC is 55.8% owned by Metro Pacific Holdings, Inc. (MPHI) as at December 31, 2014 and

2013. MPHI’s economic interest in MPIC is reduced from 55.8% to 52.1% as at

February 26, 2015 as a result of the overnight placement on February 9, 2015 (see Note 39 of the

attached 2014 Audited Consolidated Financial Statements).

MPHI is a Philippine corporation whose stockholders are Enterprise Investment Holdings, Inc.

(EIH), Intalink B.V. and First Pacific International Limited (FPIL). First Pacific Company

Limited (FPC), a company incorporated in Bermuda and listed in Hong Kong, through its

subsidiaries Intalink B.V, and FPIL, holds 40.0% equity interest in EIH and investment financing

which under Hong Kong Generally Accepted Accounting Principles, require FPC to account for

the results and assets and liabilities of EIH and its subsidiaries as part of FPC group of companies

in Hong Kong.

MPIC is a leading infrastructure holding company in the Philippines. MPIC’s intention is to

maintain and continue to develop a diverse set of infrastructure assets through its investments in

water utilities, toll roads, electricity distribution, healthcare services and light rail. MPIC is

therefore committed to investing through acquisitions and strategic partnerships in prime

infrastructure assets with the potential to provide synergies with its existing operations.

The list of MPIC’s subsidiaries is contained in Note 2 of the attached 2014 Audited Consolidated

Financial Statements.

(B) Business of the Issuer

For management purposes, the Company is organized into the following segments based on

services and products:

Water utilities, which relate to the provision of water and sewerage services by Maynilad

Water Holding Company, Inc. (MWHCI) and its subsidiaries Maynilad Water Services, Inc.

(Maynilad) and Philippine Hydro, Inc. (PHI), and bulk water services by MetroPac Water

Investments Corporation (MPWIC).

Toll operations, which primarily relate to operations and maintenance of toll facilities by

Metro Pacific Tollways Corporation (MPTC) and its subsidiaries Manila North Tollways

Corporation (MNTC) and Cavitex Infrastructure Corporation (CIC), and an associate,

Tollways Management Corporation (TMC), and MPIC's associate, Don Muang Tollway

Public Ltd (DMT).

2

Power distribution, which primarily relates to the operations of Manila Electric Company

(MERALCO) in relation to the distribution and supply of electricity. The investment in

MERALCO is held primarily through a joint venture, Beacon Electric Holdings, Inc. (Beacon

Electric).

Healthcare, which primarily relates to operations and management of hospitals, nursing and

medical schools and such other enterprises that have similar undertakings.

Rail, which primarily relates to operations and maintenance of the Light Rail Transit (LRT)

and construction of the extension by Light Rail Manila Corporation (LRMC) and ticketing

services by Automated Fare Collection Services, Inc (AFCSI).

Others, which represent holding companies and operations of subsidiaries involved in real

estate and provision of services.

The following table shows the breakdown of the Group’s revenues, core income and reported net

income by major segment:

Year Ended December 31, 2014 (in Php Millions)

Water

Utilities

Toll

Operations

Healthcare

Power

Distribution Rail Total

HO Expense

and Interest Consolidated

Total revenue from external sales 18,363 8,641 6,828 - - 33,832 - 33,832

MPIC's share in the Core Income 4,376 2,239 465 3,027 (28) 10,079 (1,571) 8,508

Operating companies contribution (%) 43% 22% 5% 30% 0% 100% - -

Non-recurring income (charges) (278) (92) (33) (55) (52) (510) (58) (568)

Segment Income (Loss) 4,098 2,147 432 2,972 (80) 9,570 (1,629) 7,940

The revenues of the Group were primarily derived from sales within the Philippines.

In 2013, MPIC made its first offshore investment, through its wholly owned subsidiary MPIC

Infrastructure Holdings Limited (MIHL), by acquiring a 25% ownership in FPM Infrastructure

Holdings Limited (FPM Infra) which holds a 29.45% stake in a Thai toll road operator, DMT. In

2014, MPIC acquired, through MIHL, from FPC the remaining 75% ownership in FPM Infra.

Accumulated equity in net earnings in DMT amounted to ₱83.9 million as at December 31, 2014.

Except as stated in the succeeding paragraphs and in the discussion for each of the MPIC’s

significant subsidiaries, there has been no other business development such as bankruptcy,

receivership or similar proceeding not in the ordinary course of business that affected the

registrant for the past three years.

(B.1) Water Utilities

Business Development

MPIC operates its water utilities business through MWHCI. MWHCI’s main activity is the

holding of controlling shares in Maynilad which holds the exclusive concession granted by the

Metropolitan Waterworks and Sewerage System (MWSS), on behalf of the Philippine

Government, to provide water and sewerage services in the West Service Area of Metro Manila.

MPIC’s effective ownership in Maynilad was at 56.80% as at December 31, 2012 and at 52.80%

as at December 31, 2013 and 2014. The reduction in effective ownership in Maynilad resulted

from MCNK JV Corporation’s (MCNK) entry as investor in MWHCI. On February 13, 2013,

MCNK completed and fully paid its total subscription of 678,470,727 common shares of stock of

MWHCI at a total subscription price of ₱10,400.0 million giving it 21.54% equity interest in

3

MWHCI. MCNK is 90.0% owned by Marubeni Corporation, a company incorporated in Japan

and 10% owned by MAPL Holdings B.V., a company incorporated in the Netherlands.

Maynilad’s subsidiaries are PHI and Amayi Water Solutions, Inc. (Amayi). PHI, which was

acquired by Maynilad on August 3, 2012 through a Share Purchase Agreement (SPA) with a third

party, is engaged in waterworks construction, engineering and engineering consulting services.

PHI has 25-year Bulk Water Supply Agreements with various provincial municipalities outside

the West Service Area and a Memorandum of Agreement with certain provincial municipality for

the construction and operation of water treatment facilities for water distribution services. Amayi,

incorporated on July 18, 2012, was established for the purpose of operating, managing,

maintaining and rehabilitating waterworks, sewerage and sanitation system and services outside

the Concession Area.

MPIC’s bulk water supply services are operated through its wholly owned subsidiary, MPWIC.

MPWIC has an effective interest of 20% in Cebu Manila Water Development, Inc. (CMWD)

through its direct ownership of 39% in Manila Water Consortium Inc. (MWCI). In 2013, CMWD

signed a 20-year Water Purchase Agreement (WPA) for the supply of 18 million liters per day for

the first year and 35 million liters per day of water for the second to 20th year. CMWD made its

initial delivery of water in January 2015.

Patents, Trademarks, Licenses, Franchises, Concessions or Labor Contract

In February 1997, Maynilad entered into a concession agreement with MWSS, with respect to the

MWSS West Service Area. Under the concession agreement, MWSS grants Maynilad, the sole

right to manage, operate, repair, decommission and refurbish all fixed and movable assets

required to provide water and sewerage services in the West Service Area for 25 years ending in

2022. In September 2009, MWSS approved an extension of its concession agreement with

Maynilad for another 15 years to 2037.

Maynilad’s subsidiary, PHI, is granted the sole right to distribute water in certain part of Bulacan

under concession agreements granted by the Philippine government for 25 years to 2035.

Dependence on Licenses and Government Approval

Necessary government approvals in relation to the operation of the water business have been

secured and documented in the related concession agreements.

Under Maynilad’s concession agreement with the Philippine Government (see Note 13 of the

2014 Audited Consolidated Financial Statements), Maynilad may request tariff rate adjustments

based on movements in the Philippine consumer price index, foreign exchange currency

differentials, a rate rebasing process scheduled to be conducted every five years (Rate Rebasing)

and certain extraordinary events. Any rate adjustment requires approval by MWSS and the

Regulatory Office (RO). Any tariff adjustments that are not granted, in a timely manner, in full or

at all, could have a material adverse effect on the Company’s results of operations and financial

condition.

Effect of Existing or Probable Governmental Regulations on the Business

The decision of the Appeals panel to settle Maynilad’s tariff dispute with the MWSS dated

December 29, 2014, upheld the alternative rebasing adjustment of Maynilad. This would, if

implemented immediately, result in a 9.8% increase in the 2013 average basic water charge of

₱31.28/cu.m., inclusive of the ₱1.00 Currency Exchange Rate Adjustment which the MWSS has

now incorporated into the basic charge (the “Award”). The Award translates to an average

increase of ₱3.06/cu.m. for the basic water charge. While there has been a two (2)-year delay in

implementing an adjustment in the average basic water charge - the Concession Agreement

between MWSS and Maynilad expressly provides for a one-time implementation of a positive

4

rebasing adjustment - Maynilad is willing to implement the increase on a staggered basis in order

to mitigate the impact of the Award on its customers in the West Zone of Metro Manila subject to

approval of the MWSS.

The MWSS has not yet acted on the arbitration award and Maynilad has formally reminded them

of the indemnity undertaking of the Republic of the Philippines regarding delays in tariff

implementation.

Customers

The water business of the Company enjoys a sole concession of Metro Manila’s West Service

Area. This segment is mass-based such that the loss of a few customers would not have a

material adverse effect on MPIC and its subsidiaries taken as a whole. There is also no single

customer that accounts for twenty percent (20%) or more of the segment’s sales.

Distribution

Water is distributed through Maynilad’s network of pipelines, pumping stations and mini-

boosters. As at December 31, 2014, Maynilad's network consisted of around 7,458 kms of total

pipeline.

Competition

Maynilad has no direct competition given that it has sole right to provide water and sewerage

services to the West Service Area under its concession agreement with the Philippine

Government.

Under Maynilad’s Concession Agreement, MWSS grants Maynilad (as contractor to perform

certain functions and as agent for the exercise of certain rights and powers under the Charter), the

sole right to manage, operate, repair, decommission and refurbish all fixed and movable assets

required (except certain retained assets of MWSS) to provide water and sewerage services in the

West Service Area up to 2037.

Source and availability of raw materials

Under Maynilad’s Concession Agreement, MWSS supplies raw water to Maynilad’s distribution

system and is required to supply a minimum quantity of raw water. Maynilad currently receives

substantially all of its water from MWSS.

Maynilad has some supply side risk in that: (i) it secures most of its supply from a single source –

the Angat dam; and (ii) this water source is shared by another water concessionaire, a

hydroelectric plant, and the needs of farmers for irrigation. A water usage protocol is in place to

ensure all users receive water as expected within the constraints of available supply. Following

significant water supply disruption in late 2009 arising indirectly from typhoons, the business

entered 2010 with less water supply available than allowed for in its concession. Maynilad has

worked to moderate its reliance on Angat by developing the Putatan Water Treatment Plant while

continuing to reduce leakage and theft rates.

Transactions with related parties

Maynilad, entered into certain construction contracts with D.M. Consunji, Inc., a subsidiary

company of DMCI Holdings, Inc. (DMCI, a non-controlling shareholder in MWHCI), in relation

to the provision of engineering, procurement and construction services to Maynilad. Refer to

Note 21 of the 2014 Audited Consolidated Financial Statements for further details.

5

Costs and effects of compliance with environmental laws

Maynilad’s wastewater facilities are required to be maintained in compliance with environmental

standards set primarily by the Department of Environment and Natural Resources (DENR)

regarding effluent quality. All projects are assessed for their environmental impacts, and, where

applicable, must obtain an Environmental Compliance Certificate from the DENR prior to

construction or expansion. Subsequent to construction, effluents from facilities, such as sewage

and septage treatment plants, are routinely sampled and tested against DENR standards using

international quality sampling and testing procedures.

Maynilad has made efforts to meet and exceed all statutory and regulatory standards. The

Company’s regular maintenance procedures involve regular disinfection of service reservoirs and

mains and replacement of corroded pipes. The Company believes all wastewater treatment

processes and effluents meet the current standards of the DENR.

Maynilad’s Dagat-Dagatan Sewage and Septage Treatment Plant in Caloocan is the first facility

of its kind in the Asia-Pacific Region to attain triple international standard accreditations on

Quality Management (ISO 9001:2008) and Environmental Management (ISO 14001:2004) in

January 2007, and Occupational Safety and Health Management (OHSAS 18001:2007).

(B.2) Toll Operations


The Company holds the majority of its toll road assets through MPTC. MPTC holds a 75.60%

effective interest in MNTC, which holds the concession rights to construct, operate and maintain

the North Luzon Expressway (NLEX). Beginning 2013, MPTC also consolidates Cavitex

Infrastructure Corporation (CIC), which holds the concession rights for the operation and

maintenance of the Manila-Cavite Toll Expressway (CAVITEX). MPTC consolidates CIC by

virtue of a Management Letter-Agreement dated December 27, 2012, for the management of CIC

by MPTC. Under the Management Letter-Agreement, management of CIC by MPTC commenced

on January 2, 2013 and will continue until the issuance of the New CIC Shares in favor of MPTC.


MNTC and CIC’s concession comprise of the rights, interests and privileges to finance, design,

construct, operate and maintain toll roads, toll facilities and other facilities generating toll-related

and non-toll related income (see Note 13 to the 2014 Audited Consolidated Financial Statements).

MNTC holds the concession for the largest toll road in the Philippines, the NLEX Project. The

NLEX currently spans approximately 84 kilometers and services an average of 185,000 vehicles

per day. The NLEX is the main infrastructure backbone that connects Metro Manila to 15 million

people in Central and Northern Luzon. MNTC has been in commercial operations since

February 2005 and has since established the NLEX brand as the standard for toll road operations

and management excellence in the Philippines.

CIC holds the concession for the operation and maintenance of the CAVITEX. The CAVITEX is

a 14-km long toll road built in two segments running from Parañaque to Cavite. The concession

period extends to 2033 for the originally built road and to 2046 for a subsequent extension.

6


Necessary government approvals in relation to the operation of the toll roads have been secured

and documented in the related concession agreements. However, the following toll projects are

still in the process of obtaining necessary Philippine Government approvals:

Subic-Clark-Tarlac Expressway (SCTEX) Concession Agreement. On February 9, 2015,

MNTC, received the Notice of Award from the Bases Conversion and Development

Authority (BCDA) for the management, operation and maintenance of the SCTEX subject to

compliance with specific conditions. The Notice of Award was issued by BCDA following

the results of the Price Challenge held last January 30, 2015. On February 26, 2015, MNTC

and BCDA signed the Business Agreement (BA), marking the culmination of BCDA’s effort

to privatize the management, operation and maintenance of the SCTEX. The BA binds

MNTC and BCDA to a contract for the management, operation and maintenance of SCTEX

until the end of the SCTEX concession period (October 30, 2043). The privatization provides

the opportunity to realize MNTC’s vision of integrating the operation of NLEX with SCTEX,

thereby offering seamless expressway travel to motorists. The effectivity of the BA is subject

to conditions precedent, among which is the TRB approval and signing of the Supplemental

Toll Operation Agreement (STOA). On February 26, 2015, the Business Operating

Agreement was signed with full takeover of the SCTEX operation expected by second quarter

of 2015.

NLEX-SLEX Connector Road Project. The Connector Road Project was approved by the

National Economic and Development Authority (NEDA) Board on February 20, 2015 as an

unsolicited proposal under the Build-Operate-Transfer Law. This is expected to trigger the

commencement of the Swiss Challenge within 2nd quarter of 2015. MPTDC is still awaiting

Philippine Government information on the implementation mode of the Connector Road

Project..


There are no anticipated changes to government regulations that will significantly affect the toll

business of the Group. However, the main variable affecting the extent or likelihood of earnings

growth at MPIC is the ability of the toll road businesses to secure the tariff adjustments under the

concession agreements that govern their concessions.

The concession agreements establish a toll rate formula and adjustment procedure for setting the

appropriate toll rate. Subject to the Toll Regulatory Board validating the calculation of the toll

rate adjustment in accordance with the formula, toll rate adjustment is scheduled every two

calendar years for the NLEX and every three calendar years for the CAVITEX.

As at February 26, 2015, MPTC continues to await approval by the Government of toll rate

adjustments for R1 of CAVITEX and NLEX, which should have been effective from

January 1, 2012 and January 1, 2013, respectively and January 2015 for both.

Customers

The toll road business of the Company enjoys sole concession as provided for in the concession

agreements. Moreover, this segment is mass-based such that the loss of a few customers would

not have a material adverse effect on MPIC and its subsidiaries taken as a whole. There is also no

single customer that accounts for twenty percent (20%) or more of the segment’s sales.

Distribution

Tollroads revenues are from manual toll fee payment, electronic toll collection and badges/cards

for buses, trucks and jeepneys.

7

Competition

While MNTC and CIC were granted sole right to operate and maintain toll roads under their

respective concession agreements with the Philippine Government (see Note 13 to the 2013

Audited Consolidated Financial Statements for further information on the concession

agreements), alternative routes and roads are the toll roads’ competitors:

NLEX. A viable alternative road to North Luzon is the MacArthur Highway, a road extending

from Manila to Pangasinan that passes through small towns. The NLEX has historically

served as the main artery between Metro Manila and Central and Northern Luzon and as such,

it has a long and stable track record of traffic volume. Further, the NLEX has a stable service

area, which is characterized by the lack of comparable competing traffic routes and the

resilience of the user profile.

CAVITEX. The free alternative routes to the R1 Expressway and R1 Extension are Quirino

Avenue, Aguinaldo Highway, Tirona Highway and Evangelista Road. While these roads are

complementary to the R1 Expressway and R1 Extension, they do not offer the same direct

and contiguous route from northern Cavite to Metro Manila and vice-versa. The roads have

limited capacity and narrow lanes. They are controlled by traffic lights and stop signs and are

heavily congested at peak times.

Traffic volumes on the tollroads are likewise affected by competition from alternative modes of

transportation and there can be no assurance that existing modes of transport will not significantly

improve their services.

The Company continues to promote traffic growth on these tollroads by providing more entry and

exit points along the expressway. Likewise, the Company continues to boost the value

proposition of the NLEX and CAVITEX by implementing measures to enhance customer

satisfaction, safety, and convenience.


The Operation & Maintenance (O&M) of the NLEX and Segment 7 is undertaken by TMC

pursuant to the O&M Agreement between MNTC and TMC. This agreement shall be effective

for the entire concession period. TMC, of which MPTC owns 46%, oversees the day-to-day

operations of the NLEX, including securing toll collection, depositing of funds to MNTC’s

accounts, facilitating smooth and uninterrupted flow of traffic, carrying out of routine

maintenance, ensuring effective and safe responses to emergency situations. In exchange for

performing its duties, TMC receives an O&M fee based on a base fee plus a variable fee.

On December 5, 2007, MNTC engaged the services of Easytrip Services Corporation (ESC) to

assist MNTC in increasing the usage of the electronic toll collection facility along the NLEX.

ESC became a related party of the Company beginning July 2014 when MPTDC acquired equity

interest equivalent to 50% plus one share of the capital stock of ESC. Under the agreement with

ESC, MNTC will pay ESC an annual fixed fee, which are to be maintained and escalated every

year for labor index and consumer price index plus variable fee per transaction (see details under

Note 21 to the 2014 Audited Consolidated Financial Statements).

Costs and effects of compliance with environmental laws

Prior to the commencement of construction activities, the grantee must obtain an environmental

compliance certificate (ECC) from the Department of Environment and Natural Resources. An

ECC typically requires the grantee to submit its proposed policies for, among others,

(1) relocation and compensation of individuals and families who are affected by the toll road

8

project, (2) mitigation of the effects of the toll road project on the natural environment,

(3) environmental monitoring, and (4) public information and education regarding the toll road

project. In addition, the ECC typically requires the grantee to submit a quarterly report of its

environmental monitoring activities.

MNTC has a dedicated team that regularly monitors compliance with its ECCs and ensures

measurement of significant environmental metrics for purposes of compliance with the reporting

requirements under its loan agreements. Quarterly air quality sampling is conducted to measure

the level of pollutants and harmful particulates along the toll roads. A solid and hazardous waste

management system is also in place to ensure proper waste disposal and compliance with the

Ecological Solid Waste Management Act of 2001 and Toxic Substances and Hazardous Wastes

Control Act of 1990. All required areas for reclamation and re-vegetation are regularly monitored

and maintained to prevent soil erosion and scouring along river banks and slope areas. MNTC

submits an annual safety and health report to its creditors detailing the activities and monitoring

results, as well as other significant related, undertaken throughout each year in relation to

MNTC’s compliance with legal and statutory environmental requirements.

Status of any publicly announced product or services

Construction continues on the first stage of the 8-km NLEX Harbour Link connecting the NLEX

to the North Manila Port in two segments (Segments 9 and 10) and is expected to have its first

stage open in first quarter of 2015.

The NLEX Harbour Link and Citilink projects, together with expansion of the CAVITEX, would

see MPTC invest approximately ₱31 billion over the next few years to complete construction of

this vital road infrastructure. MPTC and MPIC would fund this sum using internal resources and

external debt.

In January 2015, MPTC, procured original proponent status for the proposed Cebu-Cordova

Bridge Project from Cebu City and the Municipality of Cordova. Negotiations with both Cebu

City and the Municipality of Cordova are on-going and once done, a Swiss Challenge will have to

be conducted before awarding of the contract. This project spanning 8.3 kilometers will link the

island of Mactan to mainland Cebu through the Municipality of Cordova. The total construction

cost of the Cebu-Cordova Bridge Project is estimated at ₱17.0 billion with completion date by

2020 assuming that awards and approvals are secured during the first half of 2015.

Thailand:

On July 31, 2014, First Pacific transferred its 75% shareholding in FPM Infra to MPIC for a

consideration of approximately US$101.25 million. FPM Infra became wholly-owned subsidiary

of MPIC and its sole asset is a 29.45% interest in DMT. DMT is a major toll road operator in

Bangkok, Thailand. The concession for DMT runs until 2034 for the operation of a 21.9-

kilometer six-lane elevated toll road from central Bangkok to Don Muang International Airport

and further to the National Monument in the north of Bangkok. On December 22, 2014 DMT

secured tollrate increases of 17% and 20% on its Original road and Northern extension,

respectively.

Vietnam:

On January 14, 2015, MPIC through MPTC further expanded its regional footprint through an

equity investment and financing transaction with Ho Chi Minh City Infrastructure Investment

Joint Stock Co. (CII). The investment of approximately ₱4.0 billion will result in MPTC holding a

45% minority equity interest in CII Bridges and Roads Investment Joint Stock Co. (CII B&R) and

is due to settle in March 2015 upon completion of the closing conditions and deliverables.

9

(B.3) Power Distribution


Investment in MERALCO is primarily held through Beacon Electric, a special purpose company

jointly owned with MPIC and PLDT Communications and Energy Ventures, Inc. As at

December 31, 2013, Beacon Electric owns approximately 49.96% of MERALCO. However, in

June 2014, MPIC entered into a Share Purchase Agreement with Beacon Electric for the sale of

the latter’s 56.35 million shares, comprising approximately 5%, in MERALCO for an aggregate

consideration of ₱13.24 billion. Thus, the Company’s aggregate effective interest in MERALCO

after this transaction increased from 24.98% to 27.48%.


MERALCO holds a congressional franchise under Republic Act (RA) No. 9209 effective

June 28, 2003. RA No. 9209 grants MERALCO a 25-year franchise valid through June 28, 2028

to construct, operate, and maintain the electric distribution system in the cities and municipalities

of Bulacan, Cavite, Metro Manila, and Rizal and certain cities, municipalities, and barangays in

the provinces of Batangas, Laguna, Pampanga, and Quezon. On October 20, 2008, the ERC,

granted MERALCO a consolidated Certificate of Public Convenience and Necessity for the

operation of electric service within its franchise coverage, effective until the expiration of

MERALCO’s congressional franchise. MERALCO has a unit for its participation in retail

electricity supply or RES. The MERALCO local Retail Electricity Supplier, otherwise known as

MPower, is a business unit within Meralco.


MERALCO was among the first entrants to the Performance-Based Regulation (PBR). Rate-

setting under PBR is governed by the Rules for Setting Distribution Wheeling Rates (RDWR).

The PBR scheme sets tariffs based on the regulated asset base of the Distribution Utility (DU),

and the required operating and capital expenditures once every regulatory period (RP), to meet

operational performance and service level requirements responsive to the need for adequate,

reliable and quality power, efficient service, growth of all customer classes in the in the franchise

area as approved by the Energy Regulatory Commission (ERC). PBR also employs a mechanism

that penalizes or rewards a DU depending on its network and service performance. Rate filings

and setting are done every regulatory period (RP) where one RP consists of four regulatory years.

A regulatory year (RY) begins on July 1 and ends on June 30 of the following year. The third RP

is from July 1, 2011 to June 30, 2015.

MERALCO also files with the ERC its applications for recoveries of advances for pass-through

costs. These advances consist mainly of unrecovered or differential generation and transmission

charges technically referred to as under-recoveries, which are recoverable from the customers, as

allowed by law.

Customers

This segment is mass-based such that the loss of a few customers would not have a material

adverse effect on MPIC and its subsidiaries taken as a whole. There is also no single customer

that accounts for twenty percent (20%) or more of the segment’s sales.

Competition

Distribution of electricity at its usable voltage to end-consumers is performed by investor-owned

electric utilities, notably Meralco and, its subsidiary, Clark Electric Distribution Corporation

(CEDC), a few local government-owned utilities and numerous electric cooperatives which sell to

households as well as commercial and industrial enterprises located within their franchise areas at

retail rates regulated by the ERC. Given that distributors are assigned franchise areas, as well as

10

the significant investment involved in the setting-up of a distribution network, MERALCO and

CEDC have no significant competition in their franchise areas.

As MERALCO broadens the scope of its activities to encompass power generation and retail

electricity sales it will become increasingly exposed to market competition.

Distribution

Power is distributed through network facilities which consists of substations, circuits and

distribution transformers.

Source and availability of raw materials

The principal sources of power (in MWh) of Meralco and CEDC and their relative contribution in

2014 are as follows:

First Gas Power Corporation (Sta. Rita) and FGP

Corp.(San Lorenzo) – Natural Gas 28.47%

South Premiere Power Corporation (Ilijan) – Natural Gas 22.79% San Miguel Energy Corporation (Sual) – Coal 9.19% AES Philippines (Masinloc) – Coal 9.19% Quezon Power Philippines Limited Co. – Coal 8.88% SEM-Calaca Power Corporation (Calaca) – Coal 8.71% Therma Luzon, Inc. (Pagbilao) – Coal 7.02% Philippine Electricity Market Corporation 2.81% Others – Various 2.94% Total 100.00%

(B.4) Healthcare


MPIC’s Hospital group comprises eight full-service hospitals and is the largest private provider of

premier hospital services in the Philippines. It delivers medical services including diagnostic,

therapeutic and preventive medicine services in all three major island groupings in the country.

This division comprises five hospitals in Metro Manila, and one in each of Central Luzon,

Bacolod City and Davao City.

In addition to the traditional hospital services, MPIC in 2013 made its first investment in a non-

hospital-based diagnostic center, Megaclinic at SM Megamall in Metro Manila.

AHI received on December 9, 2013 the Joint Commission International (JCI) accreditation,

validating AHI’s commitment to provide world-class patient-centered health care services. AHI

focused its efforts in pursuing the Gold Seal of Approval of the JCI, the world’s most prestigious

accreditation body for health care institutions. The Joint Commission helps organizations all over

the world in delivering the highest quality of care and achieve maximum performance by

providing strict standards and continuous patient care and patient safety solutions.

On May 16, 2014, MPIC and GIC Private Limited (GIC) entered into a partnership agreement to

facilitate the further expansion of the hospital group of MPIC. GIC, through its affiliates, invested

₱3.7 billion for a 14.4% stake in MPIC's hospital holding company Metro Pacific Hospital

Holdings, Inc. (MPHHI, formerly Neptune Stroika Holdings, Inc.). The partnership with GIC will

help the Company grow not only in hospitals but also in other health-related fields, in the

Philippines and possibly abroad. GIC also advanced to MPIC ₱6.5 billion by way of an

Exchangeable Bond which will be exchanged into a 25.5% stake in MPHHI in the future, subject

11

to certain conditions. The proceeds from the bond will be used by MPIC for continuing

investments in infrastructure projects.

Customers

The Hospital Group currently consists of eight (8) full-service hospitals with approximately 2,150

beds in total – Makati Medical Center, Cardinal Santos Medical Center, Our Lady of Lourdes

Hospital, Asian Hospital & Medical Center and De Los Santos Medical Center in Metro Manila;

Central Luzon Doctors' Hospital in Tarlac; Riverside Medical Center in the Visayas; and Davao

Doctors Hospital in Mindanao – MegaClinic, its first mall-based diagnostic and ambulatory care

center located in Metro Manila.

This segment is mass-based such that the loss of a few customers would not have a material

adverse effect on MPIC and its subsidiaries taken as a whole. There is also no single customer

that accounts for twenty percent (20%) or more of the segment’s sales.

Competition

Major competitors in the healthcare business include tertiary hospitals located in major cities and

regions where the hospitals operate: (a) MMC in Makati, Metro Manila; (b) CSMC in San Juan,

Metro Manila; (c) OLLH in Sta. Mesa, Manila; (d) AHI in Southern Manila; (e) DLSMC in

Quezon City, Metro Manila; (f) CLDH in Tarlac Central Luzon; (g) RMCI in Bacolod City; and

(h) DDH in Mindanao. However, increasing health awareness creates unsatisfied demand in the

industry.

The Company uses its skill as a corporate manager to enhance operating efficiency and streamline

the business models of its hospitals. Additionally, the Company continues to realize economies of

scale through group purchasing and the sharing of technical and human resources.


On April 13, 2012, Colinas Verdes Hospital Managers Corp. (CVHMC) entered into a

Memorandum of Agreement (MOA) with Meralco for the operation and management of the

Meralco Corporate Wellness Center (Wellness Center), an outpatient diagnostic and consultation

center for its employees and their dependents. In accord of the contract, CVHMC agreed to take

steps to improve healthcare services, expand diagnostic services, enhance customer services

levels, increase operational efficiencies, rationalize equipment upgrade and renovate and improve

infrastructure. Income recognized for this arrangement in 2014 and 2013 amounted to a total of

₱42.7 million and ₱41.1 million included under the hospital revenue account. The total revenue

comprises a retainer’s fee, pharmacy handling and manpower and administrative reimbursement

plus margin.

(B.5) Rail


The rail segment is a new segment beginning 2014. Companies under this segment, LRMH,

LRMC and AFCSI are still under the pre-operating stage.


On March 31, 2014, Automated Fare Collection Systems, Inc. (AFCS), in which MPIC has a 20%

shareholding, signed a 10-year concession agreement with the Department of Transportation and

Communications (DOTC) to build and implement a new Automated Fare Collection System

project for the LRT and MRT lines in Metro Manila. This project will offer a revolutionary new

solution for the mass transit lines and enable the creation of a new form of electronic payment

12

similar to the Octopus card in Hong Kong or the EZ link system in Singapore. The payment

system has the potential to move into toll roads and parking facilities, creating an integrated

solution for Metro Manila’s commuters and eventually an electronic payments ecosystem for the

country. AFCS targets to deliver the new electronic payment system initially for LRT Lines 1, 2

and the MRT Line 3 by the second half of 2015.

On October 2, 2014, LRMC, in which MPIC effectively has a 55% shareholding, signed together

with the DOTC and the Light Rail Transit Authority (LRTA) the 32-year Concession Agreement

for the ₱65-billion Light Rail Transit Line 1 Cavite Extension and Operations & Maintenance

Project. LRMC was formally awarded the project by the DOTC and LRTA following the

submission of a lone bid with a premium of ₱9.35 billion.


The concession agreement for the LRT Line 1 Project sets out the terms and conditions on how

the Grantor will regulate the operations and maintenance activities of the Concessionaire

throughout the concession period. Likewise, the fare to be charged to the users of the LRT 1 Line

must be approved by the Grantors (or other Government Authority having jurisdiction over fare

levels).


The tariff increase announced by Government in January 2015 is insufficient to reach the opening

fare in the LRT Line 1 Concession Agreement. This increases risks to achieving financial close

and hence formal handover.

(B.6) Others

Neo Oracle Holdings, Inc. (NOHI) and its subsidiaries are engaged in the business of real estate

investments and property development, investment holding and management services.

On July 18, 2012, the stockholders and BOD of NOHI resolved to amend its Article of

Incorporation to reflect the change in name from Metro Pacific Corporation to Neo Oracle

Holdings, Inc., shortened corporate life until December 31, 2013 and reduce its BOD members

from 11 to 5. Hence, NOHI is deemed dissolved as at December 31, 2013 and can no longer

conduct business except with respect to transactions in furtherance of its liquidation. With the

shortening of the corporate life, NOHI is not currently active but holds investments in lands and

properties. NOHI continues to implement measures geared towards generating liquidity to meet

maturing obligations which include settlement of the remaining third party debts via debt-for-

asset swap arrangements, negotiation for discounts on principal and waiver of interests and

penalties.

(C) Registrant’s present employees

As at December 31, 2014, the Parent Company has a total headcount of 56 employees

(Administrative: 45, Clerical: 11), who are neither unionized nor covered by special incentive

arrangements. The Parent Company expects to decrease its headcount to 50 in the next twelve months

with the transfer of the hospital management and finance team to MPIC's hospital holding company,

MPHHI.

13

(D) Registrant’s Major risks

As an investment and management company, MPIC undertakes risk management at a number of

distinct levels:

(D.1) On entering new investments

MPIC has taken steps to increase its presence in Southeast Asia through its equity investments in

Thailand's DMT and Vietnam's CII B&R, while remaining committed to its core busienss in the

Philippines. MPIC’s geographic focus remains to be predominantly the Philippines within which

its management team has extensive experience.

Prior to making a new investment, any business to be acquired is subject to an extensive due

diligence including financial, operational, regulatory and risk management. Risks to investment

returns are then calibrated and specific measures to manage these risks are determined. The

Company is highly selective in the investment opportunities it examines. Due diligence is

conducted on a phased basis to minimize costs of evaluating opportunities that may ultimately not

be pursued.

MPIC’s investments involve - to varying degrees - a partnership approach with MPIC taking a

controlling position and key operating partners providing operational and technological input and

thereby mitigating risks associated with investing in new business areas. These partners are equity

partners - and having co-invested with the Company in a particular opportunity, they will

participate in the risks and rewards of the business alongside MPIC.

Financing for new investments is through a combination of debt and/or equity by reference to the

underlying strength of the cash flow of the target business and the overall financing position of

MPIC itself.

(D.2) On ongoing Management of the Financial Stability of the Holding Company

MPIC does not guarantee the borrowings of its investee companies and there are no cross default

provisions from one investee company to another. Financial stability of the holding company,

including its dividend commitment to shareholders, is managed by reference to the ability of the

investee companies to remit dividends to MPIC to cover operating costs and service borrowings.

We avoid currency and investment cycle mismatches by borrowing only in Pesos using primarily

long term instruments with fixed rates.

The Company sets the level of debt on its own Statement of Financial Position so as to withstand

variability of dividend receipts from its operating companies associated with regulatory and other

risks described below.

(D.3) Risk Management within the Operating Companies

o Operational risks. Each of the operating companies has a full management team which is

responsible for having their own plan to manage risk which is reviewed annually by the MPIC

Audit and Risk Management Committee, together with MPIC’s designated Chief Risk

Officer, and each of the respective operating companies’ board of directors.

o Regulatory. The majority of our invested capital is deployed into businesses which are

directly regulated by arms of the state: electricity distribution; water supply and distribution

along with sewage treatment; tollroads; and rail. Each of these businesses has concession or

franchise agreement which involve a degree of operating performance obligation in order to

14

retain our rights and earn our expected returns. In some cases, these agreements provide for

retrospective assessment of the extent of our overall operational and financial performance

sometimes over a period of years.

o Risks arising from these types of businesses include the potential for differences with

regulators involving interpretation of the relevant agreements – either during the period in

question or in retrospect. To manage these risks, the investee companies have established

dedicated regulatory management groups with experienced personnel. Their duty is to

manage the relationship with regulators, keep management up-to-date on the status of the

relationship and ensure companies are well prepared for any forthcoming regulatory changes

or challenges.

o Competition and Market. Competitive and market-driven demand risks are most pronounced

in Meralco, MPTC and the Healthcare group.

o Meralco carries a degree of market risk and its returns in the short term may be

impacted by consumers who elect to self-generate and disconnect from the

distribution grid. MPIC is mitigating that risk by improving efficiencies to the point

that makes it largely uneconomic to self-generate. With the move to Open Access

from June 2013, Meralco will take on risks associated with buying and selling power

on its own account instead of on a pass through basis. Meralco has long prepared for

this and has an experienced management team already in place to lead this new

business. Meralco is now also invested in power generation with attendant demand

volume and price risks and fuel source price and supply risks. The primary mitigants

are contracting to match demand and supply side volumes where possible and

employing highly experienced power market professionals to manage any open

positions by trading in the market.

o At MPTC, MPIC sets tariff on new road projects based on traffic projections agreed

with the regulator. Rising fuel prices, alternative means of transport and existing or

prospective alternative routes are all factors that can affect the number of vehicles

that use our roads.

MPIC alleviate this risk by choosing our projects carefully. Existing high traffic

density, difficulty in securing competing routes, a high potential for growth given

demographic changes and conservative growth estimates, even with the prior factors

included in the assessment, are the important variables we consider when committing

to traffic projections with the regulator.

o For the Hospitals group, investment is taking place to enable more qualified

personnel to better serve patients more efficiently and effectively in upgraded

facilities and with better equipment.

The primary risk is that investment runs ahead of demand and patient ability or

willingness to pay. MPIC mitigate this risk by ensuring MPIC knows our target

market and scale our improvements to their ability to pay. The pace of medical

innovation is accelerating requiring increased management of the risks that costly

equipment may become out of date before its cost is fully recovered and traditional

healthcare delivery models may be disrupted.

The water company has some supply side risk in that: (i) it secures almost all of its supply

from a single source – the Angat dam; and (ii) this water source is shared by another water

concessionaire, a hydroelectric plant, and the needs of farmers for irrigation. A water usage

15

protocol is in place to ensure all users receive water as expected within the constraints of

available supply. Following significant water supply disruptions in the past arising indirectly

from typhoons, the business has experienced periods of lower water supply than allowed for

in its concession. MPIC have worked to moderate our reliance on Angat by developing the

Putatan Water Treatment Plant. However, our regulator does not now wish us to invest further

in alternative water sources and this means the logical way to mitigate our supply side risk is

now largely prohibited to us.

(D.4) Financial Risk Management

MPIC’s investee companies’ financial risks are primarily: interest rate risk, foreign currency risk,

liquidity risk, credit risk and equity price risk (see Note 35 to the 2014 Audited Consolidated

Financial Statements). The Board of Directors of each company reviews and approves policies for

managing each of these risks as follows:

Interest Rate Risk. Interest rate exposure is managed by using a mix of fixed and variable rate

debt.

Foreign Currency Risk. In general the investee companies will place some degree of reliance

on their regulated return mechanisms to pass through foreign currency risk. The current

liquidity and depth of the Philippine credit market is such that there should be little need for

raising new borrowings in foreign currency.

Maynilad has some foreign currency borrowing but there is a mechanism in place wherein it

can recover currency fluctuations as approved by its Regulator.

Liquidity Risk. Each business monitors its cash position using a cash forecasting system

wherein all expected collections, disbursements and other payments are determined in detail.

Credit Risk. Credit risk is managed by setting limits on the amount of risk a business is

willing to accept for individual counterparties and by monitoring exposures in relation to such

limits.

Equity Price Risk. The Company's investee companies are generally not faced with equity

price risk beyond that normal for any listed company, where relevant. MPIC’s investment in

Meralco, through Beacon Electric, is partly financed by borrowings which require a certain

security cover based on the price of Meralco’s shares on the PSE on a volume weighted 30

trading day average calculation. Meralco’s share price would have to decline by 54.35% from

its price as at December 31, 2014 before Beacon Electric would be required to top-up

collateral with cash or pay-down debt.

Item 2. Description of Properties

Toll Roads Segment. MNTC and CIC, owns their head office buildings in Balintawak, Caloocan City

and Paranaque City, respectively. Other equipment, which is relatively insignificant, consists of

transportation equipment and office equipment primarily located in their respective head offices.

MNTC and CIC do not own the parcels of land over which the toll roads have been built as these are

owned by the Republic of the Philippines.

Water Utilities Segment. Maynilad is tasked to manage, operate, repair, decommission and refurbish

certain specified MWSS facilities in the West Service Area. The legal title to these assets remains

with MWSS. The legal title to all property, plant and equipment contributed to the existing MWSS

16

system by Maynilad during the concession period remains with Maynilad until the expiration date (or

on early termination date) at which time, all rights, titles and interest in such assets will automatically

vest to MWSS.

Maynilad leases the office space and branches where service outlets are located, equipments and

service vehicles, renewable under certain terms and conditions to be agreed upon by the parties.

Refer to Note 33 to the 2014 Audited Consolidated Financial Statements.

Healthcare Segment. The Company is developing the Philippines’ first nationwide chain of leading

hospitals to deliver comprehensive in-patient and out-patient hospital services, including medical and

surgical services, diagnostic, therapeutic intensive care, research and training facilities in strategic

locations in the Philippines:

Makati Medical Center is a multi-specialty tertiary medical centre situated in the central

business district of Makati, Metro Manila.

Asian Hospital and Medical Center is a hospital located in Alabang, Muntinlupa in Southern

Metro Manila.

De Los Santos Medical Center is a mid-market teaching and training hospital in Quezon City,

the largest city in Metro Manila.

Davao Doctors Hospital is considered to be the largest and one of the best medical facilities

offering modern diagnostic, therapeutic and intensive care services in Southern Philippines.

Riverside Medical Center, also known as Dr Pablo O. Torre Memorial Hospital, is the largest

and a leading medical facility in Bacolod in the island of Negros, Western Visayas.

Central Luzon Doctors Hospital is the largest tertiary hospital in Tarlac.

MegaClinic is a mall-based diagnostic and ambulatory care center located in Metro Manila.

Lease Arrangements. East Manila Hospital Managers Corp. (EMHMC) and CVHMC entered into

lease agreements with Servants of the Holy Spirit, Inc. and Roman Catholic Archbishop of Manila for

the management and operation of OLLH and CSMC, respectively. Each of these lease agreements is

for a period of 20 years, renewable for successive periods of 10 years upon the mutual consent of both

parties. As consideration for the lease agreement, EMHMC and CVHMC pay fixed and variable

monthly rates, where the variable rate is based on the prior year’s net revenues. The schedule of fixed

and variable monthly rent is provided for in Note 33 to the 2013 Audited Consolidated Financial

Statements.

Please refer to Note 14 in the accompanying 2014 Audited Consolidated Financial Statements for the

carrying values of the property and equipment of the Group.

Item 3. Legal Proceedings

The Group is a party to various legal matters and claims arising in the ordinary course of business.

These various legal proceedings are properly disclosed in Note 32 to the 2014 Audited Consolidated

Financial Statements attached hereto.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal

year covered by this report.

17

PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder

Matters

(1) Market information

The Registrant’s common shares are listed on the PSE. The high and low sales prices of such

shares for the last quarter of the year 2012, 2013, 2014 and the 1st quarter of 2015 are set out

below. The share price as at the close of business on February 28, 2015 was P=5.40.

Quarter Low High

2012

1st 3.48 4.34

2nd

3.85 4.60

3rd

4.06 4.32

4th

4.00 4.58

2013

1st 4.43 5.64

2nd

4.60 6.33

3rd

4.40 5.69

4th

4.24 4.95

2014

1st 4.06 4.77

2nd

4.70 5.40

3rd

4.77 5.32

4th

4.22 5.24

2015

1st

4.59 5.53

18

(2) Holders

The total number of stockholders as at February 28, 2015 is 1,333

Top 20 Stockholders as at February 28, 2015

Rank Stockholder Name Number of

Shares Percent

1 Metro Pacific Holdings, Inc. 14,522,948,170 52.13%

2 PCD Nominee Corporation (Non-Filipino) 9,431,034,166 33.85%

3 PCD Nominee Corporation (Filipino) 3,868,205,726 13.88%

4 Albert F. Del Rosario and/or Margaret

Gretchen V. Del Rosario 6,500,000 0.02%

5 Albert F. Del Rosario 5,016,624 0.02%

6 Victorico Paredes Vargas 3,500,001 0.01%

7 Lucio W. Yan and/or Clara Y. Yan 2,850,000 0.01%

8 Amado R. Santiago III 2,500,001 0.01%

9 Alberto B. Carlos 1,000,000 0.00%

10 Raul L. Ignacio 1,000,000 0.00%

11 Ferdinand G. Inacay 1,000,000 0.00%

12 Tessa G. Acosta 1,000,000 0.00%

13 Baby Lea M. Wong 1,000,000 0.00%

14 First Life Financial Co., Inc. 830,000 0.00%

15 Berck Y. Cheng 650,000 0.00%

16 J. Luigi L. Bautista 650,000 0.00%

17 Edwin U. Lim 600,000 0.00%

18 Ronaldo C. Padua 600,000 0.00%

19 Aurora Canape 500,000 0.00%

20 Eric U. Lim 500,000 0.00%

Marjorie Ann Lim Lee 500,000 0.00%

Helen S. Uy 500,000 0.00%

19

(3) Dividends

Apart from cash restrictions and retained deficit position of the Parent Company, it may not

declare or pay cash dividends to its stockholders or retain, retire, purchase or otherwise

acquire any claims of its capital stock or make any other capital or asset distribution to its

stockholders if, at the time of such declaration: (i) its Debt-to-Equity Ratio exceeds 70:30;

(ii) its Debt Service Coverage Ratio is below 1.5x; and (iii) the funds in deposit in the Debt

Service Account do not meet the required Debt Service Account balance.

Following are the cash dividends declared by MPIC’s board of directors in favor of MPIC

common and preferred shares for the past three years ended December 2012, 2013 and 2014:

Year Rate per

Common Share Preferred

Dividends Record Date Payable Date

2012 P=0.015 P=0.012

P=1.8 million P=2.5 million

3/16/2012 8/28/2012

4/16/2012 9/21/2012

2013 P=0.020 P=0.015

P=2.5 million P=2.5 million

3/18/2013 8/28/2013

4/16/2013 9/20/2013

2014 P=0.022 P=0.026 P=0.040*

P=2.5 million P=2.5 million P=1.3 million

4/8/2014 8/29/2014 12/2/2014

4/30/2014 9/24/2014

12/18/2014 *Special one-off dividend

On February 26, 2015, the BOD approved the declaration of the cash dividends of P=0.037 per

common share in favor of the Parent Company’s shareholders of record as at March 25, 2015

with payment date of April 17, 2015. On the same date, the BOD approved the declaration of

cash dividends amounting to P=1.25 million in favor of the preferred shareholders.

(4) Recent Sales of Unregistered or exempt Securities

During the last three years, MPIC issued the following shares (either via private placements

and/or conversion of debt to equity) for which exemptions from registration were claimed and

notices of exempt transactions were accordingly filed with the Philippine SEC:

1. MPIC, together with its principal shareholder, MPHI entered into a placement agreement

with UBS AG, Hong Kong Branch on February 9, 2015, in respect of the offer and sale

(the “Offer”) by MPHI of 1,812,000,000 common shares of MPIC at the Offer Price of

₱4.90 per share. Closing of the Offer is conditioned, among others, on MPHI subscribing

(or agreeing to subscribe) to the same number of shares at the offer price or a total of

approximately ₱8.9 billion.

2. On January 23, 2013, MPIC raised P=6.12 billion in an overnight placement of 1.33 billion

in new MPIC shares worth P=4.60 apiece. The shares came from the shareholdings of

MPHI. As a result of this transaction, MPHI’s interest in MPIC was reduced from 59.0%

as at December 31, 2012 to 55.8% as at December 31, 2013.

20

The abovementioned notices of exempt transactions were made on the basis of:

1. Section 10.1(e) of the Securities Regulation Code (SRC) – The sale of capital stock of a

corporation to its own stockholders exclusively, where no commission or other

remuneration is paid or given directly or indirectly in connection with the sale of such

capital stock.

The abovementioned issuances were issued by MPIC to MPHI, its majority stockholder,

exclusively and no commission or other remuneration was paid or given directly or

indirectly in connection with such issuances.

2. Section 10.1 (k) of the SRC – The sale of securities by an issuer to fewer than twenty (20)

persons in the Philippines during any twelve-month period.

MPIC issued securities to fewer than twenty (20) persons in the Philippines during any

twelve-month period.

The above described request for exemption from registration was made on the basis of

Section 10.1 of the SRC. MPIC averred that by reason of the relative small amount and

limited character of the aforesaid issuance, registration is not necessary for the public

interest and for the protection of prospective investors who are employees of MPIC

and/or its subsidiaries and affiliates and are in the position to know the present affairs of

MPIC and the risks of investing therein.

Item 6. Management’s Discussion and Analysis of Financial Condition and Results of

Operations (MD & A)

Financial Highlights and Key Performance Indicators

The following discussion and analysis of the Group’s financial condition and results of operations

should be read in conjunction with the accompanying audited consolidated financial statements and

the related notes and as at December 31, 2014 and 2013 and for the years ended December 31, 2014,

2013, and 2012 included in this Report. Key performance indicators of the Group are as follows:

2014 2013 Increase

(Decrease)

Audited Amount %

(in Php Millions) Operating Revenues 33,832 30,877 2,955 10

Income before income tax 13,782 12,072 1,710 14

Net income attributable to owners of the Parent

Company 7,940 7,209 731 10

Core EBITDA 19,188 17,264 1,924 11

Core income 8,508 7,229 1,279 18

Non-recurring income (expense) (568) (20) 548 >100

Core EBITDA margin 57% 56% 1% 2

21

Overview

Highlights for 2014 which had significant impact on the financial results of the Group are as follows:

Benefit from new/increase in investments. The Company benefitted from the following

acquisitions and increase in ownership interest:

o Increase in equity ownership in MNTC. On January 10, 2014, MPTDC acquired 3.9% of

MNTC from Egis Projects, SA (Egis) for P=1.5 billion; and on July 18, 2014, entered into an

agreement to acquire an additional economic interest of 4.6% from Egis and Egis Investment

Partners Philippines Inc. (EIP) for P=1.7 billion. MPIC’s effective economic interest in MNTC

is now 75.65% from 67.00%.

o Increase in effective ownership interest in Meralco. On June 24, 2014, MPIC entered into a

Share Purchase Agreement with Beacon Electric for the sale of the latter’s 56.35 million

shares, comprising approximately 5%, in Meralco for an aggregate consideration of P=13.24

billion. This transaction resulted to an effective increase in ownership in Meralco of 2.5%.

o Acquisition of FPM Infrastructure. On July 31, 2014, MPIC acquired its 75% shareholding in

FPM Infra from FPC for a consideration of approximately US$101.25 million. FPM Infra

became a wholly-owned subsidiary of MPIC and its sole asset is a 29.45% interest in DMT, a

major toll road operator in Bangkok, Thailand. Prior to the acquisition , MPIC’s equity

effective ownership interest in DMT was at 7.36%. Share in equity in net earnings in DMT

amounted to P=210.0 million for the year ended December 31, 2014.

Impact of change in accounting policy. Beginning January 1, 2014, the service concession asset

of MNTC is amortized on a units of production (UOP) basis. MPTC determined that it is more

appropriate to use the UOP basis for amortizing the service concession asset as the economic

benefit of this asset is more closely aligned with the traffic volume and kilometers travelled for

the segments of the toll road using an “open toll collection system” and “closed toll collection

system”, respectively. The change in the method of amortization is also consistent with the toll

segments’ move to unify the accounting policies of its subsidiaries. This change in accounting

policy resulted in a decrease in amortization expense by P=131.0 million of the service concession

asset for the period ended December 31, 2014.

Maynilad’s Redundancy and Right Sizing Program. In line with its strategic goal to improve

operational efficiency, Maynilad offered a Special Opportunity Program (SOP), a redundancy and

right-sizing program in 2014. This program offered a separation package based on the number of

years, or fractions thereof, on a pro-rated basis, of service with Maynilad plus monetary

equivalent of some benefits. Total estimated severance for the separated employees amounted to

P=524.0 million, of which, P=263.0 million is paid out of Maynilad’s funds while the remaining was

paid out of Maynilad’s retirement plan asset. The reduction in the number of employees resulted

in a curtailment gain of P=257.3 million.

GIC’s Investment in the Hospital Group. Although the hospital segment results improved, the

segment’s contribution to MPIC’s core income declined with the entry of GIC as an investor in

MPHHI beginning of July 2014. Hospital group’s contribution to MPIC’s core income amounted

to P=465.0 million for the period ended December 31, 2014, from last year’s P=581.0 million

22

Adoption of New Standards and Interpretations

The Company's accounting policies are consistent with those followed in the preparation of the

Company’s most recent annual consolidated financial statements, taking into account the changes in

accounting policies and the adoption of the new and amended Philippine Accounting Standards

(PAS), Philippine Financial Reporting Standards (PFRS) and Philippine Interpretations of the

International Financial Reporting Interpretations Committee (IFRIC), which became effective on

January 1, 2014. Adoption of new standards did not have a material impact on the Company’s

financial results. Please refer to Note 2 to the 2014 Audited Consolidated Financial Statements.

Description of Operating Segments of the Group

As discussed under Item 1 – B. Business of Issuer, the Group is organized into six major business

segments based on services and products namely water utilities, toll operations, power distribution,

healthcare, rail and others.

Operational Review

I - MPIC Consolidated

The Company’s chief operating decision maker is the BOD. The BOD monitors the operating results

of each business unit separately for the purpose of making decisions about resource allocation and

performance assessment. Segment performance is evaluated based on: consolidated net income for

the year; earnings before interest, taxes and depreciation and amortization, or Core EBITDA; Core

EBITDA margin; and core income. Net income for the year is measured consistent with consolidated

net income in the consolidated financial statements.

Core EBITDA is measured as net income excluding depreciation and amortization of property and

equipment and intangible assets, asset impairment on noncurrent assets, financing costs, interest

income, equity in net earnings (losses) of associates and joint ventures, net foreign exchange gains

(losses), net gains (losses) on derivative financial instruments, provision for (benefit from) income tax

and other non-recurring gains (losses). Core EBITDA margin pertains to Core EBITDA divided by

service revenues.

Performance of the operating segments is also assessed based on a measure of recurring profit or core

income. Core income is measured as net income attributable to owners of the Company excluding the

effects of foreign exchange and derivative gains or losses and non-recurring items (NRI), net of tax

effect of aforementioned. NRI represent gains or losses that, through occurrence or size, are not

considered usual operating items.

The following section includes discussion of the Company’s results of its operations as presented in

its consolidated financial statements as well as management’s assessments of the performance of the

Group which is translated to core (or recurring) profit and non-core (or non-recurring) profit.

23

2014 versus 2013

MPIC Consolidated Statements of Income

2014 2013 Increase

(Decrease)

Audited Amount %

(in Php Millions) Operating Revenues 33,832 30,877 2,955 10

Cost of Sales and Services 13,082 11,845 1,237 10

General and administrative expenses 6,823 6,261 562 9

Interest expense 4,301 4,001 300 7

Share in net earnings of associates and a joint

venture 3,167 2,286 881 39

Interest income 385 462 (77) (17)

Other income (expense) - net 604 554 50 9

Provision for income tax 1,208 593 615 >100

Net income attributable to owners of the Parent

Company 7,940 7,209 731 10

Other comprehensive income (loss) (76) 384 (460) (>100)

Total comprehensive income attributable to

owners of the Parent Company 7,849 7,550 299 4

Core income 8,508 7,229 1,279 18

Non-recurring income (expense) (568) (20) (548) >100

Revenues

The Company’s revenues increased by 10% to P=33,832 million in 2014, reflecting improved

performance of the Company’s major operating subsidiaries, Maynilad and MPTC. Maynilad posted

a 9% increase in revenues brought about by 4% billed volume growth coupled with 4% inflationary

increase in average effective tariff as a result of improved cash collections. MPTC likewise posted 6%

higher revenues mainly due to 7% and 8% higher average daily vehicle entries in NLEX and

CAVITEX, respectively. Hospital revenues also increased by 17% mainly driven by increasing

number of patients served at CVHMC and AHI and consolidation of full year results of DLSMC and

CLDH which were acquired during the 2nd

half of 2013.

Cost of Sales and Services

Cost of sales and services increased by 10% to P=13,082 million in 2014. Salaries, wages and benefits

increased by 17% due to increase in headcount, inflationary increase in annual salary and full year

effect of the consolidation of DLSMC and CLDH. In addition, operators fee increased by 10% due to

the increase in base rate in accordance with Operation and Maintenance Agreement between MNTC

and TMC. Amortization expense also increased in relation to the increase in volume sold in Maynilad

which uses the UOP method in amortizing its service concession asset.

General and administrative expenses

General and administrative expenses increased by 9% to P=6,823 million in 2014 due to increases in

personnel costs, taxes & licenses and depreciation & amortization driven by full year consolidation

impact of DLSMC and CLDH. Annual salary increases and expanded headcount caused the increase

24

in personnel cost while continuing capital expenditure program caused the increase in depreciation

and amortization cost. Increase in professional fees is due to expenses incurred by Maynilad in

relation to the arbitration proceedings.

Interest expense

Interest expense increased by 7% to P=4,301 million in 2014 mainly due to additional loans –

(a) debt in AIF of THB2.1 billion which was used to partially fund the acquisition of additional

effective interest in DMT and (b) P=3.3 billion in MPTC which was used to finance acquisition of the

additional 8.5% effective ownership in MNTC.

Share in net earnings of associates and a joint venture

Increase in MPIC’s share in the cumulative net earnings of associates and joint venture in 2014 due to

the increase ownership in Meralco and DMT and increases in operational performance at Meralco,

TMC, MDI and DDH.

Interest income

Interest income decreased by 17% to P=385 million in 2014 mainly due to lower average level of

placements in 2014 as compared with 2013.

Other income and expenses

Other income (net of other expenses) increased by 9% to P=604 million mainly due to the realized gain

on sale of AFS investment on February 28, 2014.

Provision for income tax

Provision for income tax increased by 104% to P=1,208 million from prior year’s provision of

P=593 million. The increase in provision for income tax resulted from the decline in the deferred tax

benefit recognized by CIC and Maynilad. In 2013, CIC recognized P=201.1 million of deferred tax

benefit from its previously unrecognized benefit from NOLCO of P=670.3 million. Maynilad also

recognized consolidated deferred tax benefit of P=409.5 million in 2013 as compared with current

year’s benefit of only P=30.7 million, resulting from the reversal of deferred tax asset arising from

application of IFRIC 12 accounting.

Consolidated net income attributable to equity holders of the Parent Company

The 10% increase from P=7,209 million to P=7,940 million for the period is attributable mainly to the

strong growth in profit contribution of the major businesses. In summary: increase in Maynilad’s

contribution due mainly to higher billed volume and tariff; increased traffic volume for NLEX and

CAVITEX; and increase in effective ownership in DMT and Meralco. The increase was slightly

dampened by the dilution effect in hospital segment with the entry of GIC as minority investor.

Other comprehensive income (loss)

The Company recognized other comprehensive income of P=384 million in 2013 as compared with the

loss of P=76 million recognized in 2014. The other comprehensive income in 2013 included

P=199 million of unrealized gain from the remeasurement of Available for Sale Financial Assets (AFS)

which was recycled to profit or loss when the Company sold its investment in NEPSCC in 2014. The

Company also recognized higher actuarial gain from defined benefit plan of its subsidiaries and equity

25

method investees at an aggregate of P=506 million in 2013 as compared with current year’s aggregate

actuarial loss of P=53 million in 2014.

Core Income attributable to equity holders of the Parent Company

MPIC’s share in the consolidated core income increased by 18% from P=7,229 million in 2013 to

P=8,508 million in 2014 mainly reflecting the following:

15% increase in contribution from Maynilad from P=3,789 million in 2013 to P=4,376 million in

2014 due to all-in effective tariff increase of 4% and increase in billed volume of 4%.

19% increase in contribution from Toll Roads segment from P=1,874 million in 2013 to

P=2,239 million in 2014 due to strong traffic growth, increase in effective interest in MNTC

and contribution from DMT.

30% increase in contribution from Beacon Electric/Meralco from P=2,333 million in 2013 to

P=3,027 million in 2014 mainly due to the 2.5% increase in effective ownership in Meralco

coupled with improvement in Meralco’s operating performance with higher volume sold.

A 20% decrease in contribution from Healthcare group from P=581 million in 2013 to

P=465 million in 2014 mainly due to lower effective ownership with the entry of GIC in July

2014.

These represent MPIC’s share in the stand-alone core income of the operating companies, net of

consolidation adjustments.

Maynilad, Beacon Electric/Meralco, MPTC/DMT and Healthcare accounted for 43%, 30%, 22% and

5%, respectively of MPIC’s share of operating income.

Non-recurring expenses

Non-recurring expenses amounted to P=568 million and P=20 million in 2014 and 2013, respectively.

Non-recurring expenses recognized in 2014 comprise of project expenses, taxes incurred on the

reorganization of the hospital group and one-time separation expenses and arbitration costs at

Maynilad.

26

II - Operating Segments of the Group

Water utilities

Maynilad Water Services, Inc. 2014 2013 Increase

(Decrease)

Audited Amount %

(in Php Millions)

Consolidated Statements of Income

Revenues 18,363 16,895 1,468 9

Costs and Expenses 7,414 7,147 267 4

Interest income (expense) - net (2,082) (2,480) (398) (16)

Other income (expense) - net (640) (739) (99) (13)

Benefit from (Provision for) income tax 28 407 (379) (93)

Core Income 8,777 7,530 1,247 17

Non-recurring income (expense) (522) (594) (72) (12)

Reported Net Income 8,255 6,936 1,319 19

Core EBITDA 12,857 11,083 1,774 16


Capital Expenditure 4,345 5,558 (1,213) (22)

Key Performance Indicators

Increase

(Decrease)

2014 2013 Amount %

Volume of water supplied (MCM) 701.0 724.2 (23.2) (3)

Volume of water billed (MCM) 463.2 443.8 19.4 4

Volume of water billed (MCM) - Consolidated 473.4 453.3 20.1 4

Non revenue water % (average) 33.9% 38.7% (4.8%) (12)

Non revenue water % (period end) 32.9% 35.4% (2.5%) (7)

Billed customers (period end) 1,190,062 1,129,497 60,565 5

Customer mix (% based on billed volume)

Domestic (residential and semi-business) 80.1% 79.7% 0.3% 0

Non-domestic (commercial and industrial) 19.9% 20.3% (0.3%) (2)

Operational highlights

Maynilad, the biggest water utility in the Philippines, achieved a 4% increase in the volume of water

sold in its concession area in 2014 even as it managed to draw 3% less water from the Angat Dam.

The number of water connections (or billed customers) rose 5% to 1,190,062 by the end of December

2014 from 1,129,497 a year earlier.

Selling more water while drawing less was made possible by reductions in leaks and theft, otherwise

known as Non-Revenue Water (NRW), which fell to 32.9% as at the end of December 2014 from

35.4% a year earlier. The improvement was achieved on the strength of Maynilad’s continuing pipe

27

replacement program, which saw 36,967 leaks repaired in 2014. It will be recalled that when MPIC

invested in Maynilad in 2007, NRW stood at 68%.

Maynilad now delivers 24-hour water supply to 99.89% of its customers, while 99.97% of customers

also receive water pressure of seven pounds per square inch - the minimum pressure necessary to

pump water upstairs from the ground floor. The year earlier percentages were 97.79% and 99.90%,

respectively.

Maynilad’s capital spending during 2014 stood at P=4.3 billion, down from P=5.6 billion a year earlier

due to delays in the acquisition of land for building sewage treatment plants and delays in other

planned projects involving the rehabilitation or accelerated replacement of pipes affected by

Department of Public Works and Highways projects.

Maynilad committed rather than expended P=16.2 billion in new CAPEX projects in 2014. This

includes the construction of several sewage and septage treatment plants and conveyance systems in

Muntinlupa, Paranaque, Pasay, and Valenzuela:

In line with Maynilad’s commitment to improving public health in the West Zone,

P=10.0 billion was allocated in setting up and rehabilitation of waste water system.

Maynilad is accelerating its wastewater projects to protect the health of its customers and

the environment and to meet its service obligations under the Concession Agreement term

extension plan.

Around P=4.2 billion was allocated for service expansion programs which includes

pipelaying of primary lines in Bacoor and Imus, Cavite and in Las Piñas, Muntinlupa and

Pasay and construction; automation of boosters and reservoirs; and rehabiliation of

Maynilad's water network facilities, offices and warehouses.

P=2.0 billion was spent in NRW reduction program through pipe replacement projects,

metered management projects, establishment of smaller District Metered Areas, leak

repairs and diagnostic activities. This resulted in the recovery of over 117.4 million liters

per day of water.

The decision of the Appeals panel to settle Maynilad’s tariff dispute with the MWSS dated

December 29, 2014, upheld the alternative rebasing adjustment of Maynilad. This would, if

implemented immediately, result in a 9.8% increase in the 2013 average basic water charge of

P=31.28/cu.m., inclusive of the P=1.00 Currency Exchange Rate Adjustment which the MWSS has now

incorporated into the basic charge (the “Award”). The Award translates to an average increase of

P=3.06/cu.m. While there has been a two (2)-year delay in implementing an adjustment in the average

basic water charge - the Concession Agreement between MWSS and Maynilad expressly provides for

a one-time implementation of a positive rebasing adjustment - Maynilad is willing to implement the

increase on a staggered basis in order to mitigate the impact of the Award on its customers in the West

Zone of Metro Manila subject to approval of the MWSS.

The MWSS has not yet acted on the arbitration award and Maynilad has formally reminded them of

the indemnity undertaking of the Republic of the Philippines regarding delays in tariff

implementation.

MPIC’s wholly owned subsidiary, MetroPac Water Investments Corporation (MPWIC), which

effectively owns 19.9% in Cebu Manila Water Development, Inc. (CMWD) continues exploring

investment opportunities in water distribution. CMWD holds a 20-year concession for the bulk supply

of water to the Metropolitan Cebu Water District with the initial delivery of water made in January

2015.

28

Revenues

2014 2013 Increase

(Decrease)

Audited Amount %

(in Php Millions)

Water Services 14,645 13,587 1,058 8

Sewer Services 3,294 2,909 385 13

Other Contract & Services 424 399 25 6

Total Revenues 18,363 16,895 1,468 9

Total revenues for the year rose 9% to P=18,363 million from P=16,895 million in 2013 due to the

combined effect of the increase in billed volume and reduced provisioning for regularly unpaid bills,

reflecting better collections. Consolidated billed volume for Maynilad and its subsidiary PHI was up

by 4% to 473.4 MCM. Percentage increases in the components of Maynilad’s revenues are set out

above.

Costs and Expenses

Increased by 4% from P=7,147 million to P=7,414 million attributable to increases in amortization

expense with the increase in volume sold using UOP method, utilities and repairs and maintenance

due to increased network pumping activities in order to deliver water to new customers in the south

and operation of new sewage treatment plants (STPs) and outside services related to arbitration cost

expense. The increase was offset by lower provisions for doubtful accounts driven by improved

collection.

Core income

Maynilad’s core income increased by 17% to P=8,777 million in 2014 from P=7,530 million last year

due to increased billed volume and higher average tariff as discussed above.

Non-recurring income (expense)

Non-recurring items in 2014 includes one-time separation expenses and arbitration costs which

together were lower than the refinancing costs incurred in 2013.

Reported Net Income

Slightly higher Reported Net Income growth of 19% in 2014 as compared with core income due to the

impact of lower non-recurring expense in 2014.

29

Toll Roads

2014 2013 Increase

(Decrease)

Metro Pacific Tollways Corporation Audited Amount %

(in Php Millions)


Net toll revenues 8,641 8,154 487 6

Cost of Services 3,533 3,305 228 7

Operating expenses 819 730 89 12

Interest income (expense) - net (1,114) (944) 170 18

Share in earnings of an associate 290 247 43 17


Provision for income tax 952 731 221 30

Core Income 2,154 1,963 191 10

Non-recurring income (expense) (92) 38 (130) (>100)

Reported net income 2,779 2,784 (5) (0)

Reported net income attributable to equity holders

of MPTC 2,062 2,001 61 3

Core EBITDA 5,788 5,540 248 4

Core EBITDA margin 67% 68% (1%) (1)

Capital Expenditure 2,592 401 2,191 >100


Increase

(Decrease)

2014 2013 Amount %

Average Daily Vehicle Entries - NLEX 185,297 173,067 12,230 7

Average Daily Vehicle Entries - CAVITEX 110,393 102,280 8,113 8

Average Kilometers Travelled - NLEX 3,505,833 3,272,638 233,195 7

Average Daily Vehicle Entries - DMT 80,698 76,842 3,856 5


MPTC’s Core Net Income of P=2.2 billion for the period was 10% higher than a year earlier as a result

of strong traffic growth and increased shareholding in the NLEX. Average daily entries rose 7% on

the NLEX and 8% on the CAVITEX from a year earlier.

MPTC increased its shareholding in MNTC through a 3.9% direct acquisition for P=1.5 billion in

January 2014 and additional effective shareholding of 4.6% for P=1.7 billion in July 2014.

Philippines:

Construction continues on the first stage of the 8-km NLEX Harbour Link connecting the NLEX to

the North Manila Port in two segments (Segments 9 and 10) and is expected to have its first stage

open in first quarter of 2015. However, MPTC continues to await approval of toll rate adjustments on

R1 of CAVITEX (an increase of 19%) which should have been effective from January 1, 2012 and for

NLEX (an increase of 11%) which was to be effective from January 1, 2013. These delays and

30

additional issues surrounding the tariff regime for the Harbour Link are constraining continued and

needed expenditure on our road construction.

The NLEX Harbour Link and Citilink projects, together with expansion of the CAVITEX, would see

MPTC invest approximately P=31 billion over the next few years to complete construction of this vital

road infrastructure. It is therefore important that overdue tariff increases be implemented. MPTC and

MPIC would fund this sum using internal resources and external debt.

With regard to MNTC's proposal to build an elevated expressway to connect the Northern and

Southern toll road systems (the "Connector" project), at the recommendation of the National

Economic and Development Authority, MNTC and Philippine National Construction Corporation

created a joint venture to build the Connector which would serve the public well by shortening

journey times and significantly decongesting the city. However, in July 2014, the Department of

Justice opined that the joint venture approach did not meet the relevant legal tests, and ordered the

project to undergo a competitive challenge. On December 22, 2014, the Investment Coordination

Committee - Cabinet Committee reapproved the Connector back to Department of Public Works and

Highways as an unsolicited proposal subject to NEDA Board confirmation.

In a separate matter, on February 9, 2015, MNTC received the Notice of Award from the BCDA for

the management, operation and maintenance of the 94-kilometer SCTEX subject to compliance with

specific conditions. The Notice of Award was issued by BCDA following the results of the Price

Challenge held last January 30, 2015. MNTC plans to invest P=400 million to integrate SCTEX with

NLEX to facilitate seamless travel between the two expressways.

In January 2015, MPTC, procured original proponent status for the proposed Cebu-Cordova Bridge

Project from Cebu City and the Municipality of Cordova. Negotiations with both Cebu City and the

Municipality of Cordova are on-going and once done, a Swiss Challenge will have to be conducted

before awarding of the contract. This project spanning 8.3 kilometers will link the island of Mactan to

mainland Cebu through the Municipality of Cordova. The total construction cost of the Cebu-

Cordova Bridge Project is estimated at P=17.0 billion with completion date by 2020 assuming that

awards and approvals are secured during the first half of 2015.

Thailand:

On July 31, 2014, MPIC acquired its 75% shareholding in FPM Infra from First Pacific for a

consideration of approximately US$101.25 million. FPM Infra became a wholly-owned subsidiary of

MPIC and its sole asset is a 29.45% interest in DMT. DMT is a major toll road operator in Bangkok,

Thailand. The concession for DMT runs until 2034 for the operation of a 21.9-kilometer six-lane

elevated toll road from central Bangkok to Don Muang International Airport and further to the

National Monument in the north of Bangkok. On December 22, 2014 DMT secured tollrate increases

of 17% and 20% on its Original road and Northern extension, respectively.

Vietnam:

On January 14, 2015, MPIC through MPTC further expanded its regional footprint through an equity

investment and financing transaction with Ho Chi Minh City Infrastructure Investment Joint Stock

Co. (CII). The investment of approximately P=4 billion will result in MPTC holding a 45% minority

equity interest in CII Bridges and Roads Investment Joint Stock Co. (CII B&R) and is due to settle in

March 2015 upon completion of the closing conditions and deliverables.

31

Net Toll Revenues

Net toll revenues amounted to P=8,641 million, 6% higher year-on-year, mainly due to traffic volume

growth in 2014. Average daily traffic grew by 7% and 8% along NLEX and CAVITEX, respectively.

Costs of services and Operating expenses

Total cost and expenses increased by 8% to P=4,352 million from P=4,035 million mainly due to higher

Operator’s fee driven by the increase in base rate in accordance with the Operations and Maintenance

Agreement between MNTC and TMC. Toll operation and maintenance costs increased by

P=338 million in 2014. The increase in toll O&M costs is partially offset by the decrease in

amortization of service concession assets from P=757 million in 2013 to P=646 million in 2014. The

decrease in amortization expense resulted from MNTC’s change in the method of amortizing the

service concession asset from straight-line to UOP method. This change in accounting policy resulted

in a decrease in amortization expense of P=121 million at MPTC's level, for the period ended

December 31, 2014.

Interest expense - net

Financing cost increased by 18% or P=170 million mainly due to the P=3.3 billion debt drawdown by

MPTDC which was used to finance acquisition of additional 8.5% effective interest in MNTC.

Core income

Core income increased by 10% to P=2,154 million mainly due to the 8.5% increased shareholding in

MNTC and lower amortization of Concession asset from change in amortization method to units-of-

production dampened by increase in interest expense as discussed above.


Non-recurring expense in 2014 mainly includes project expenses while 2013 non-recurring income

includes forex gain from CIC's dollar loans.

Reported Net income attributable to equity holders of MPTC

Reported Net income increased by 3% in 2014 mainly due to increase in toll revenues from higher

traffic.

32

Power

2014 2013 Increase

(Decrease)

Manila Electric Company Audited Amount %

(in Php Millions)

Revenues 266,336 298,636 (32,300) (11)

Expenses 240,190 274,846 (34,656) (13)

Core Income 18,128 17,023 1,105 6 Reported net income attributable to equity holders

of MERALCO 18,053 17,211 842 5

Capital Expenditure 12,350 10,187 2,163 21


Increase

(Decrease)

2014 2013 Amount %

Volume Sold (in mln kwh) 35,160 34,084 1,076 3

System Loss (12-month moving average) 6.49% 6.92% (0.43%) (6)

Average Distribution Revenue per kWh YTD 1.60 1.65 (0.05) (3)


MERALCO’s Core Net Income for 2014 rose 6% to P=18.1 billion compared with 2013. This was

driven mainly by a 3% increase in energy sales to 35,160 gigawatt hours (GWh) due to higher

demand from the commercial and industrial segments, which both grew by 4%. Revenues also reflect

the lower distribution tariff commencing July 2014 with the implementation of the 4th Regulatory

Year Maximum Average Price of P=1.5562 per kilowatt hour.

Capital expenditures for 2014, including those for new load requirements and system reliability,

amounted to P=12.4 billion up from P=10.2 billion in 2013.

MERALCO’s capex commitment continues to deliver strong returns. The 12-month moving average

system loss fell to just 6.5% at the end of December 2014. This level is 2 percentage points lower than

the regulatory cap of 8.5% which translates to savings for MERALCO's customers of P=4.6 billion in

2014.

In May 2014, MERALCO signed a Lease Concession Agreement with the Philippine Economic Zone

Authority (PEZA) to operate, maintain and improve the Cavite Economic Zone (CEZ) distribution

system. CEZ covers 332 hectares of prime distribution area with aggregate consumption of 473 GWh.

In November 2014, the PEZA approved MERALCO's application for registration as an Economic

Zone Utilities Enterprise within PEZA-CEZ.

MPower, MERALCO’s Retail Electricity Supply unit, with its customer-centric product and price

offerings, have created significant value for its customers. It is serving 60% of the total 347 qualified

and registered contestable customers.

MERALCO PowerGen Corporation (MGen) is fast-tracking investment in new generation capacity to

avert or mitigate looming power supply gaps notwithstanding earlier legal delays.

33

San Buenaventura Power Limited (“SBPL”), in which MGen has a 49% interest with a right to

nominate a preferred investor for an additional 2%, is in advanced stages in developing a new

455 MW (net) supercritical coal-fired power plant in Mauban, Quezon. SBPL, a joint venture with

Electricity Generating Public Company Limited of Thailand, has filed the Power Sales Agreement

with the Electricity Regulatory Commission and is currently awaiting decision to proceed. The plant

is scheduled to begin commercial operation in the second half of 2018.

Following the Supreme Court’s clearance to proceed with the project, MGen’s Redondo Peninsula

Energy, Inc. joint venture aims to complete the 2x300 MW coal-fired powered power plant within

four years.

Global Business Power Corporation, in which MERALCO has a 22% interest, commenced operations

of subsidiary Toledo Power Company's 82 MW coal-fired power plant in December 2014. Another

150 MW coal-fired power plant is being built in Iloilo City through Panay Energy Development

Corporation. Equity in this project has been fully funded and commercial operation is expected to

start in the third quarter of 2016.

With the increase in effective ownership in MERALCO from 24.98% to 27.48% beginning

June 26, 2014 and the benefit of lower interest costs reflecting debt refinancing undertaken last year,

the segment’s contribution to MPIC for the period rose 30% to ₱3.0 billion.

Healthcare

2014 2013 Increase

(Decrease)

Healthcare Group Audited Amount %

(in Php Millions)

Gross Revenues 14,096 12,493 1,603 13

Expenses 11,382 10,144 1,238 12

Core EBITDA 2,946 2,656 290 11

Core Income 1,007 879 128 15

Reported Net Income 1,011 886 125 14


Increase

(Decrease)

2014 2013 Amount %

Occupancy rate (%) - Standard Beds 67% 72% (5%) (7)

Total beds available 2,134 2,021 113 6

No. of Patients – In patient 124,467 115,570 8,897 8

No. of Patients – Out patient 1,849,301 1,626,017 223,284 14

No. of Accredited Doctors 5,367 5,418 (51) (1)

No. of Enrollees (schools) - average YTD 4,228 3,897 331 8

Aggregate Core Net Income for the Hospital Group rose 15% to P=1.0 billion in 2014 compared with

2013 as a result of increasing patient revenues, gains from completed capital expenditure programs,

savings from group synergy projects and contributions from DLSMC, CLDH and MegaClinic, which

were invested in during the second half of 2013. While the aggregate core net income from the

Hospital Group increased, contribution to MPIC’s core income decreased from P=581 million in 2013

34

to P=465 million this year reflecting dilution in the effective ownership in the hospitals with the entry

of GIC as described below.

On May 16, 2014, MPIC and GIC entered into a partnership agreement to facilitate the further

expansion of the hospital group of MPIC. GIC, through its affiliates, invested P=3.7 billion for a 14.4%

stake in MPIC’s hospital holding company MPHHI. The partnership with GIC will help the Company

grow not only in hospitals but also in other health-related fields, in the Philippines and possibly

abroad. GIC also advanced to MPIC P=6.5 billion by way of an Exchangeable Bond which will be

exchanged into a 25.5% stake in MPHHI in the future, subject to certain conditions.

The Hospital Group currently consists of eight (8) full-service hospitals with approximately 2,150

beds in total – Makati Medical Center, Cardinal Santos Medical Center, Our Lady of Lourdes

Hospital, Asian Hospital & Medical Center and De Los Santos Medical Center in Metro Manila;

Central Luzon Doctors' Hospital in Tarlac; Riverside Medical Center in the Visayas; and Davao

Doctors Hospital in Mindanao – MegaClinic, its first mall-based diagnostic and ambulatory care

center located in SM Megamall and 2 healthcare colleges, Riverside College Inc. in the Visayas and

Davao Doctors College in Mindanao. MPIC operates the largest private hospital group in the country,

with hospitals in all three major island groupings of the Philippines.

35

MPIC Consolidated Statement of Financial Position

Assets

The following table summarizes the individual increase (decrease) of consolidated asset accounts.

Audited

Audited Increase

(Decrease)

2014 % 2013 % Amount %

(in Php Millions)

ASSETS

Current assets

Cash and cash equivalents and short-term

deposits 25,758 72 15,263 61 10,495 69

Restricted cash 2,367 7 1,827 7 540 30

Receivables 3,676 10 3,749 15 (73) (2)

Due from related parties 140 - 229 1 (89) (39)

Other current assets 2,458 7 3,821 16 (1,363) (36)

34,399 96 24,889 100 9,510 38

Asset held for sale 1,370 4 - - - -

35,769 100 24,889 100 9,510 38

Noncurrent Assets

Restricted cash 889 - - - 889 100

Receivables 263 - 593 - (330) (56)

Due from related parties - - 65 - (65) (100)

Available for sale financial assets 2,162 1 2,770 2 (608) (22)

Investments and advances 65,175 33 48,854 29 16,321 33

Goodwill 18,308 9 18,308 9 - -

Service concession assets 98,260 50 94,540 54 3,720 4

Property use rights 608 - 649 - (41) (6)

Property and equipment 7,368 4 6,859 4 509 7

Other noncurrent assets 5,210 3 3,057 2 2,153 70

198,243 100 175,695 100 22,548 13

Cash and cash equivalents and short-term deposits – (Increase) Mainly due to the proceeds from

MNTC's P=7.0 billion Bond offering and from GIC’s equity infusion into MPPHI of P=3.7 billion

for a 14.4% stake in MPHHI. In addition, GIC also advanced to MPIC P=6.5 billion as

consideration for the exchangeable bond that can be exchanged into a 25.5% stake in MPHHI in

the future.

Restricted Cash (Current) – (Increase) Represents amount set aside to cover semi-annual

principal and interest payments of certain long-term debt.

Receivables – current portion and non-current portions – (Decrease) Following the restructuring

of Landco in preparation for its eventual sale, MPIC classified all interests in Landco as Assets

36

Held for Sale. Interests in Landco comprise of common shares in Landco, receivable from

Landco and ABHC and preferred shares (previously classified as Receivables) that were

converted to Landco’s common shares in 2014 (see Note 33 to the 2014 Audited Consolidated

Financial Statements).

Due from related parties – current portion and non-current portions – (Decrease) Settlement of

intercompany advances for the period.

Other current assets – (Decrease) The decrease is mainly due to the reclassification of

investments in UITF from Available-for-sale financial assets to short-term deposits account. As

at December 31, 2014, the fund comprises of extremely short-term money market securities, time

and special deposit accounts with average maturity of less than 30 days.

Available-for-sale financial assets – (Decrease) Mainly due to the sale of AFS financial asset

(NEPSCC) in January 2014 and reclassification of the 19% Landco investment to Assets held for

sale.

Restricted Cash (Noncurrent) – (Increase) Restricted cash classified as part of noncurrent assets

pertains to cash held in escrow account in relation with the construction contract for the NLEX

Segment 10 (see Note 33 to the 2014 Audited Consolidated Financial Statements).

Investments and advances – (Increase) Increase substantially relates to the acquisition of

additional interests in Meralco and DMT. MPIC acquired 5% of direct interest in Meralco from

Beacon Electric for a gross consideration of P=13.2 billion. MPIC also increased its effective

ownership interest in DMT from 7.36% to 29.45% by acquiring 75% interest in FPM Infra for a

total purchase cost of approximately P=4.3 billion.

Service concession assets – (Increase) Mainly due to the additional capital expenditure for the

year, net of amortization. Additions to toll service concession asset included civil works

construction on MNTC’s Segments 9 and 10 and CAVITEX’s Modified Zapote Interchange and

fixed operating equipment design, supply and installation for the toll collection system migration.

Additions in 2014 also include pre-construction costs of Segment 8.2 of Phase II of the NLEX

and capitalized borrowing costs amounting to P=335.9 million. Additions to the water service

concession assets for substantially relate cost of rehabilitation, additional constructions and to the

additional concession fees pertaining to the drawn portion of the MWSS loans relating to new

projects.

Property use rights – (Decrease) Represents the intangible asset of CVHMC and EMHMC

acquired through business combinations where the legal forms of the arrangements are leases.

Decrease pertains to amortization for 2014.

Property and equipment, net – (Increase) Increase pertains to additional property and equipment

for the year, net of depreciation.

Other noncurrent assets – (Increase) Mainly due to the capitalized deferred project cost incurred

for the service concession relating to the LRT Line 1 Project. As at December 31, 2014, the

deferred project costs included P=105.0 million of transaction advisory fee paid to Development

Bank of the Philippines and International Finance Corporation and P=935.0 million as 10% of the

total bid amount for the project (see Note 33 to the 2014 Audited Consolidated Financial

Statements).

37

Liabilities and Equity

The following table summarizes the individual increase (decrease) of consolidated liability and equity

accounts.

Audited

Audited Increase

(Decrease)

2014 % 2013 % Amount %

(in Php millions)

Current Liabilities

Accounts payable and other current liabilities 12,049 41 13,476 59 (1,427) (11)

Income tax payable 254 1 260 1 (6) (2)

Due to related parties 7,279 25 93 - 7,186 >100

Current portion of:

Provisions 5,545 19 4,677 21 868 19

Service concession fees payable 500 2 603 3 (103) (17)

Long-term debts 3,573 12 3,512 16 61 2

29,200 100 22,621 100 6,579 29

Noncurrent Liabilities

Noncurrent portion of:

Provisions 228 - 312 - (84) (27)

Service concession fees payable 7,271 10 7,909 12 (638) (8)

Long-term debts 57,494 76 47,536 74 9,958 21

Other long-term liabilities 6,019 8 5,152 8 867 17

Deferred tax liabilities 4,228 6 3,774 6 454 12

75,240 100 64,683 100 10,557 16

Equity

Capital stock 26,096 25 26,076 28 20 -

Additional paid-in capital 42,993 41 42,933 45 60 -

Equity reserves 6,245 6 2,643 3 3,602 >100

Retained earnings 27,525 27 21,882 23 5,643 26

Other comprehensive income reserve 836 1 927 1 (91) (10) Total equity attributable to owners of the

Parent Company 103,695 100 94,461 100 9,234 10

Non-controlling interest 25,877 18,819 7,058 38

Accounts payable and other current liabilities - (Decrease) Due to lower trade payables in MPTC

and Maynilad and lower accrued construction cost as Maynilad experienced delays in the progress

of its capital expenditure due to right of way issues and difficulty in acquiring land for sewage

treatment plants.

Due to related parties – (Increase) Included the remaining payable to Beacon Electric amounting

to P=7.2 billion as at December 31, 2014 for the acquisition of a 5% direct interest in Meralco.

38

Provisions – current and noncurrent portions – (Increase) Increase resulted from recognition of

additional provisions and MPTC’s periodic provision for heavy maintenance partially offset by

payments made during the period (see Notes 17 and 33 to the 2014 Audited Consolidated

Financial Statements).

Service concession fees payable – current and noncurrent portions – (Decrease) Decrease

represents actual payment of Maynilad’s concession fees.

Long-term debt – current and noncurrent portions – (Increase) Mainly due to MNTC’s

P=7.0 billion Bond issuance in March 2014, MPTDC’s P=3.3 billion debt for the acquisition of

additional 8.5% effective interest in MNTC and AIF's debt drawdown of Baht 2.1 billion loan

used to partially finance acquisition of 75% shareholding in FPM Infrastructure.

Other long-term liabilities – (Increase) Mainly due to the unpaid subscription to AFCS amounting

to P=203.2 million and interest payable amounting to P=143.0 million which represents the present

value of the interest due on the Exchangeable Bond issued to GIC.

Deferred tax liabilities – (Increase) Increase pertains to deferred tax liabilities arising from

business combination and concession asset accounting.

Capital stock and Additional paid-in capital – (Increase) Minimal increase resulting from

employees' exercise of their stock options under the ESOP.

Equity reserves – (Increase) Increase is attributable to gain on dilution of interest in MPHHI

partially offset by the premium on acquisition of additional interest in MNTC.

Retained earnings – (Increase) Attributable to the net income earned for the period, net of

dividends declared in 2014.

Other comprehensive income reserves – (Decrease) Due to the recycling of the unrealized fair

value gain on AFS financial asset from equity to net income as the Company realized the gain

arising from the sale of NEPSCC shares in 2014.

Non-controlling interest – (Increase) Resulted mainly from adjustment made in the non-

controlling interest with the entry of GIC as investor in MPHHI.

39

Liquidity and Capital Resources

The following table shows a summary of the Group’s audited statements of cash flows for the years

ended 2014 and 2013 as well as the consolidated capitalization as at December 31, 2014 and 2013:

Audited Increase (Decrease)

2014 2013 Amount %

(in Php Millions)

Cash Flows

Net cash provided by operating activities 15,185 15,871 (686) (4)

Net cash used in investing activities (19,027) (14,521) 4,506 31

Net cash provided by financing activities 9,931 1,181 8,750 (>100)

Net increase in cash and cash equivalents 6,089 2,531 3,558 141

Capital expenditures 8,186 7,138 1,048 15

Capitalization

Long-term debt net of current portion 57,494 47,536 9,958 21

Current portion of long-term debt 3,573 3,512 61 2

Total 61,067 51,048 10,019 20

Non-controlling interest 25,877 18,819 7,058 38 Total equity attributable to owners of the Parent

Company 103,695 94,461 9,234 10

Cash and cash equivalents 17,725 11,636 6,089 52

Short-term deposits 8,033 3,627 4,406 >100

As at December 31, 2014, MPIC’s consolidated cash and cash equivalents and short-term investments

totaled P=25,758 million, an increase of P=10,495 million from P=15,263 million as at

December 31, 2013.

Principal sources of the consolidated cash and cash equivalents in 2014 were cash inflows from

operating activities amounting to P=15,185 million and financing activities amounting to

P=9,931 million. Further details are provided below.

Operating Activities

MPIC’s consolidated net operating cash flow in 2014 posted a 4% decrease from P=15,871 million to

P=15,185 million due to net outflow in working capital with the settlement of current liabilities. The

decrease in operating cash flows by 4% was experienced despite the improvement in net income.

Improvement in net income does not necessarily translate to improvement in operating cash flow as

the consolidated net income included share in net earnings of the associates and joint ventures. While

the share in equity in net earnings of the associates and joint venture increased by P=881 million,

dividends received amounted to P=533 million.

A large portion of the Group’s cash flow from operating activities is generated by the water utility

which accounted for 54% and 55% of the Group’s total revenues in 2014 and 2013, respectively.

Revenues from the toll roads business accounted for 26% in 2014 and 2013. Hospital business

accounts for the remaining 20% and 19% in 2014 and 2013, respectively.

40

Investing activities

Net cash used by investing activities amounted to P=19,027 million. Aside from the additional

investments in short-term deposits and AFS, below are the significant investing activities made during

2014:

Investments in equity method investees (associate and joint venture) - The Company invested

in the following entities during 2014 (see Note 11 to the 2014 Audited Consolidated Financial

Statements):

AFCSI - MPIC's investment in AFCSI paid for in cash, amounted to P=300.0 million,

representing capital infusion in 2014.

Easytrip Services Corporation (ESC) - On June 30, 2014, MPTDC acquired equity

interest equivalent to 50% plus one share of the capital stock of ESC through a

combination of subscription to a total of 87,000 new shares of ESC and purchase of

13,001 shares from Egis Easytrip Services SA (ESSA). The total consideration is P=103.0

million.

Meralco - On June 24, 2014, MPIC entered into a Share Purchase Agreement with

Beacon Electric for the sale of the latter's 56.35 million shares, comprising approximately

5% in Meralco at an aggregate consideration of P=13.24 billion with P=6.0 billion payable

immediately. Of P=6.0 billion payable immediately, only P=1.55 billion was settled in cash

while the remaining P=4.45 billion is through offsetting with MPIC’s share of dividends

declared by Beacon Electric.

DMT - On July 31, 2014 MPIC acquired its 75% shareholding in FPM Infra from First

Pacific for a consideration of approximately US$ 101.25 million (or approximately

P=4.3 billion). After the acquisition, MPIC's effective ownership interest in DMT

increased from 7.36% to 29.45%.

Capital expenditures. The Group’s capital expenditures amounted to P=8,186 million in 2014,

compared with P=7,138 million in 2013. Capital expenditures in 2014 comprised additions to

service concession assets of Maynilad and MPTC and continuous improvements for the

Hospitals.

Financing Activities

The Company’s consolidated cash inflows from financing activities increased from P=1,181 million in

2013 to P=9,931 million in 2014.

Below are the significant sources of cash inflow during 2014:

Proceeds from long-term debt. The Company availed of the following debt:

Fixed-rate Bonds of up to P=7,000 million due 2021 and 2024. On February 7, 2014,

MNTC filed a registration statement with the SEC for the offering of fixed rate bonds

with aggregate principal amount of up to P=7,000.0 million comprising of 7-year fixed rate

bonds due in 2021 and 10-year fixed rate bonds due in 2024. The proceeds are intended

to partially fund the 5.65 km Segment 10 of the NLEX Project which will connect the

MacArthur Highway in Valenzuela City to C-3 Road in Caloocan City.

41

Term Loan Facility Agreement with BDO. On January 9, 2014, MPTDC entered into

Term Loan Facility Agreement with BDO for up to P=3,250 million loan due 2024 for the

purpose of financing its acquisition of approximately 8.5% of the total issued and

outstanding capital stock of MNTC from EGIS Projects SA (Egis) and for other corporate

purposes.

Term Loan Facility Agreement with Thanachart Bank Public Company Limited

(Thanachart). On August 1, 2014, AIF Toll Road Holdings (Thailand) Limited (AIF), a

100% owned subsidiary of FPM Infra, entered into Term Loan Facility Agreement with

Thanachart, a bank incorporated under the laws of Thailand, of up to Baht 2,100 million

(or approximately US$65 million) loan for the purpose of reorganizing AIF's capital

structure. AIF availed of the full amount of the facility on August 6, 2014. The proceeds

of this loan was used to finance MPIC’s step-up increase in the effective ownership

interest in DMT.

Dilution in interest in MPHHI. On July 2, 2014, GIC, through its affiliates, invested

P=3.7 billion for a 14.4% stake in MPHHI. GIC also advanced to MPIC P=6.5 billion by way of

an Exchangeable Bond which can be exchanged into a 25.5% stake in MPHHI in the future,

subject to certain conditions. Proceeds from the bond will be used by MPIC for continuing

investments in infrastructure projects.

Aside from scheduled payment of debt (including interest) and service concession fees of Maynilad,

below are the significant financing activities made during the period:

Acquisition of Non-Controlling Interest in MNTC. On January 10, 2014, MPTDC acquired

3.9% of MNTC from Egis Projects, SA (Egis) for P=1.5 billion; and on July 18, 2014, entered

into an agreement to acquire an additional interest of 4.6% from Egis and Egis Investment

Partners Philippines Inc. (EIP) for P=1.7 billion. MPTDC's economic interest in MNTC is now

at 75.6%.

Dividends Paid to owners of the Parent Company. the BOD approved the declaration of the

following cash dividends:

Rate per Common

Share Preferred Dividends Record Date Payable Date

P=0.022 P=0.026 P=0.040*

P=2.5 million P=2.5 million P=1.3 million

4/8/2014 8/29/2014 12/2/2014

4/30/2014 9/24/2014 12/18/2014

*special one-off dividends

Dividends Paid to non-controlling shareholders. Dividends paid to non-controlling

shareholders amounted to P=1,178 million, significant portion of which is attributable to share

in the dividends of the non-controlling shareholders of MNTC and MWHCI.

42

Comparison of Other Financial Years

2013 versus 2012

MPIC Consolidated Statements of Income

Audited Increase

(Decrease)

in Php Millions 2013 2012 Amount %

Operating Revenues 30,877 27,807 3,070 11

Cost of Sales and Services 11,845 11,168 677 6

General and administrative expenses 6,261 5,384 877 16

Interest expense 4,001 3,679 322 9 Share in net earnings of associates and a joint

venture 2,286 1,765 521 30

Interest income 462 652 (190) (29)

Other income (expense) - net 554 876 (322) (37)

Provision for income tax 593 1,662 (1,069) (64) Net income attributable to owners of the Parent

Company 7,209 5,907 1,302 22

Other comprehensive income (loss) 384 602 (218) (36) Total comprehensive income attributable to

owners of the Parent Company 7,550 6,485 1,065 16

Core income 7,229 6,564 665 10

Non-recurring expense (20) (657) (637) (97)

Revenues

The Company’s revenues increased by 11% to P=30,877 million in 2013, reflecting improved

performance of the Company’s major operating subsidiaries, Maynilad and MPTC. Maynilad posted

a 6% increase in revenues brought about by 4% billed volume growth coupled with 3% inflationary

increase in average effective tariff. MPTC likewise posted 20% higher revenues mainly due to 6%

higher average daily vehicle entries in NLEX and consolidation of CIC starting January 2, 2013

through Management-Letter Agreement. Hospital revenues also increased by 10% mainly driven by

increasing number of patients served at MMC and AHI and consolidation of DLSMC and CLDH.

Cost of Sales and Services

Cost of sales and services increased by 6% to P=11,845 million in 2013. Salaries, wages and benefits

increased by 21% due to increase in headcount and annual salary. In addition, operators fee and

provision for heavy maintenance increased by 14% and 56%, respectively, due to consolidation of

CIC. The increases in these items of cost of sales and services were offset by the lower amortization

of service concession asset driven by the change in Maynilad’s amortization method from straight line

to units-of-production (UOP).

General and administrative expenses

General and administrative expenses increased by 16% to P=6,261 million in 2013 due to increases in

personnel costs, professional fees and depreciation & amortization driven by consolidation of CIC,

DLSMC and CLDH. Annual salary increases and expanded headcount caused the increase in

43

personnel cost while continuing capital expenditure program caused the increase in depreciation and

amortization cost. Increase in professional fees is due to the Company’s project bidding expenses.

Interest expense

Interest expense increased by 9% to P=4,001 million in 2013 mainly due to consolidation of CIC’s own

loan and interest from the P=4.7 billion loan to fund the acquisition of CAVITEX.

Share in net earnings of associates and a joint venture

Increase in MPIC’s share in the cumulative net earnings of associates and joint venture in 2013 was

due to increases in operational performance at Meralco, TMC, MDI. and DDH plus increase in

ownership in Meralco which was partially held back by Meralco’s recognition of gain from recovery

of Local Franchise Tax in 2012.

Interest income

Interest income decreased by 29% to P=462 million in 2013 mainly due to lower level of placements in

2013 as compared with 2012. The proceeds from the equity placement in January 2013 were

subsequently used to pay the P=4.7 billion loan due in March 2013.

Other income and expenses

Other income and expenses decreased by 37% to P=554 million with income from reversal of certain

provisions recognized in 2012 in relation to the prescription of the Transitional and Clarificatory

Agreement and Maynilad's offer to fully settle claim of MWSS. (see Notes 3 and 20 to the 2013

Audited Consolidated Financial Statements)

Provision for income tax

Provision for income tax decreased by 64% to P=593 million due to Maynilad’s higher deferred tax

benefit from IFRIC 12, lower current tax due to MNTC’s election of the Optional Standard Deduction

(OSD) for taxable year 2013 and recognition of deferred tax asset from reassessment of recoverability

of NOLCO of CIC.

Consolidated net income attributable to equity holders of the Parent Company

The 22% increase from P=5,907 million to P=7,209 million for the period is attributable mainly to the

strong growth in profit contribution of the major businesses. In summary: increase in Maynilad’s

contribution due mainly to higher billed volume and tariff; increased traffic volume and additional

contribution from acquisition of CIC; and increase in hospital revenue and effective cost management

in Healthcare group.

Other comprehensive income

Other comprehensive income of P=384 million is mainly composed of recognition of unrealized gain

on fair value change in available for sale financial assets and the Company’s share in the other

comprehensive income (loss) of Beacon Electric which includes actuarial gain on defined benefit plan

of Meralco offset by the loss on fair value change in Beacon Electric's cash flow hedge.

44

Core Income attributable to equity holders of the Parent Company

MPIC’s share in the consolidated core income increased by 10% from P=6,564 million in 2012 to

P=7,229 million in 2013 mainly reflecting the following:

7% increase in contribution from Maynilad from P=3,548 million in 2012 to P=3,789 million in

2013 due to all-in effective tariff increase of 3%, lower amortization of concession asset and

4% increase in billed volume.

19% increase in contribution from MPTC from P=1,570 million in 2012 to P=1,874 million in

2013 mainly due to contribution from CIC, strong traffic growth and benefit from lower tax

rate due to election of OSD by MNTC.

5% increase in contribution from Beacon Electric/Meralco from P=2,213 million in 2012 to

P=2,333 million in 2013 due to higher energy sold and increase in average ownership.

15% increase in contribution from Healthcare group from P=507 million in 2012 to

P=581 million in 2013 mainly due to hospital revenue growth, lower operating expenses and

consolidation of DLSMC.

These represent MPIC’s share in the stand-alone core income of the operating companies, net of

consolidation adjustments.

Maynilad, Beacon Electric/Meralco, MPTC and Healthcare accounted for 44%, 27%, 22% and 7%,

respectively of MPIC’s share of operating income.

Non-recurring expenses

Non-recurring expenses amounted to P=20 million and P=657 million in 2013 and 2012, respectively.

Non-recurring expenses are mainly composed of debt refinancing costs of Maynilad, MPIC and

Beacon Electric in 2012.

45

Water utilities

Maynilad Water Services, Inc. Audited Increase

(Decrease)

in Php Millions 2013 2012 Amount %


Revenues 16,895 15,883 1,012 6

Costs and Expenses 7,147 6,814 333 5

Interest income (expense) - net (2,480) (2,340) 140 6

Other income (expense) - net (739) (223) 516 231

Benefit from (Provision for) income tax 407 (126) 533 423

Reported Net Income 6,936 6,380 557 9

Core Income 7,530 6,800 730 11

Non-recurring income (expense) (594) (420) 174 41

Core EBITDA 11,083 10,456 627 6


Capital Expenditure 5,558 6,989 (1,431) (20)

Key Performance Indicators 2013 2012 Increase

(Decrease)

Volume of water supplied (MCM) 724.2 757.9 (33.7) (4)

Volume of water billed (MCM) 443.8 428.4 15.4 4

Non revenue water % (average) 38.7% 43.5% (4.8%) (11)

Non revenue water % (period end) 35.4% 41.0% (5.6%) (14)

Billed customers (period end) 1,129,497 1,073,508 55,989 5

Customer mix (% based on billed volume)

Domestic (residential and semi-business) 79.7% 79.1% 0.6% 1

Non-domestic (commercial and industrial) 20.3% 20.9% (0.6%) (3)


Maynilad, the biggest water utility in the Philippines, saw a 4% increase in the volume of water sold

in its concession area in 2013, a rate of growth held back by ongoing project delays in Cavite. The

increase in water sold was achieved even as Maynilad managed to draw 4% less water from the Angat

Dam.

Selling more water while drawing less was made possible by reductions in leaks and theft, otherwise

known as non-revenue water (“NRW”), which fell to 35.4% as at the end of December 2013 from

41.0% a year earlier. The improvement was achieved on the strength of Maynilad’s continuing leak

repair program, which saw 41,171 leaks repaired in 2013.

The program, coupled with pipe rehabilitation and more efficient management of water pressure and

supply, has resulted in the recovery of over 138 million liters per day of water. Maynilad continues to

push forward with its ambitious NRW reduction program by allocating P=1.7 billion in 2013 for NRW

diagnostics, leak repairs and the establishment and maintenance of District Metered Areas.

Maynilad now delivers 24-hour water supply to 97.8% of its customers, while 99.9% of customers

also receive water pressure of at least seven pounds per square inch, the minimum pressure necessary

46

to pump water to the second floor. The year-earlier percentages were 96.0% and 99.8%, respectively.

The number of billed customers rose 5% to 1,129,497 by the end of December 2013 from 1,073,508 a

year earlier.

Revenues

Audited Increase

(Decrease)

2013 2012 Amount %

Water Services 13,587 12,538 1,049 8

Sewer Services 2,909 2,907 2 0

Other Contract & Services 399 438 (39) (9)

Total Revenues 16,895 15,883 1,012 6

Revenues for the period grew 6% to P=16,895 million from P=15,883 million last year due to the

combined effect of a 4% increase in billed volume coupled with the inflationary basic tariff increase

of 3.2% in January 2013. Percentage increases in the components of Maynilad’s revenues are set out

above.

Costs and Expenses

Increased by 5% from P=6,814 million to P=7,147 million attributable to increases in personnel cost,

utilities and outside services due to increased network pumping activities in order to deliver water to

new customers in the south and operation of new sewage treatment plants (STPs). The Increase was

offset by lower amortization expense driven by the change in the amortization method of the service

concession asset from straight line to units of production.

Reported Net Income

Reported Net Income increased by 9% in 2013 due to the cost of refinancing fixed rate loans despite

higher core income at 11%.

Core income

Maynilad’s core income increased by 11% to P=7,530 million in 2013 from P=6,800 million last year

due to increased billed volume and higher average tariff as discussed above plus impact of lower

amortization of concession assets due to change in amortization method to UOP.


Non-recurring items include foreign exchange loss from US dollar transactions and refinancing cost

of fixed rate loans.

47

Toll Roads

Metro Pacific Tollways Corporation Audited Increase

(Decrease)

2013 2012 Amount %

(in Php Millions, unless otherwise stated)


Net toll revenues 8,154 6,784 1,370 20

Cost of Services 3,305 2,767 538 19

Operating expenses 730 703 27 4

Interest income (expense) - net (944) (549) 395 72

Share in earnings of an associate 247 228 19 8


Provision for income tax 731 854 (123) (14)

Core Income 1,963 1,575 388 25

Non-recurring income (expense) 38 (101) 139 >100

Reported net income 2,784 2,116 668 (32) Reported net income attributable to equity

holders of MPTC 2,001 1,474 527 36

Core EBITDA 5,540 4,438 1,102 25


Capital Expenditure 401 264 137 52


(Decrease)

Average Daily Vehicle Entries - NLEX 173,067 163,362 9,705 6

Average Daily Vehicle Entries - CAVITEX 102,280 93,700 8,580 9

Average Kilometers Travelled - NLEX 3,272,638 3,125,065 147,573 5


MPTC’s Core Net Income of P=2.0 billion for 2013 was 25% higher than a year earlier as a result of

strong traffic growth and lower tax rates, interest and operating costs on the NLEX as well as the first

contribution from CAVITEX, beginning on January 2, 2013. Average daily entries rose 6% on the

NLEX and 9% on the CAVITEX in 2013 from a year earlier.

Construction continues on the first stage of the NLEX Harbour Link extension following a ground-

breaking ceremony last year. The 8-kilometer road to link NLEX to the North Manila Port will see its

first stage open as soon as the second quarter of next year.

MNTC signed a Joint Venture Agreement with PNCC to build an elevated expressway to connect the

Northern and Southern toll road systems. The “Metro Expressway Link” Project is a planned four-

lane elevated expressway to connect the Harbour Link to Southern Luzon. MPTC expects the

Connector Road to increase traffic on existing Northern and Southern toll road systems by enabling

commercial vehicles to traverse Metro Manila without violating a daytime truck ban and by slashing

travel time between the two road systems to as little as 20 minutes from over an hour or more today.

CAVITEX is a 14-kilometer toll road built in two segments running from Parañaque to Cavite with

average traffic of 100,000 vehicle entries a day. The road offers significant expansion prospects as a

48

result of the Ninoy Aquino International Airport 2 and Cavite-Laguna expressway projects which aim

to connect to CAVITEX, as well as from the recently opened Ternate-Nasugbu tunnel which will

substantially reduce the journey time between Batangas and Manila.

The NLEX Harbour Link, Citilink and Metro Expressway Link projects together with expansion of

the CAVITEX will see MPTC invest approximately P=41 billion over the next few years to complete

construction of this vital road infrastructure. MPTC and MPIC intend to fund this sum using internal

resources and external debt.

As negotiations with the Government approach their fourth year without resolution, MNTC continues

to await the turning-over of management of the SCTEX from the BCDA. MNTC plans to invest

P=400 million to integrate SCTEX with NLEX to facilitate seamless travel between the two

expressways but cannot move forward until this basic question is settled.

In addition, MPTC continues to await approval of toll rate adjustments which are overdue by over two

years for R1 of CAVITEX, which should have been effective from January 1, 2012 and more than one

year for NLEX, which was to be effective from January 1, 2013.

Net Toll Revenues

Net toll revenues amounted to P=8,154 million, 20% higher year-on-year, mainly due to contribution

from CIC and traffic volume growth in 2013. Average daily traffic along NLEX reached 173,067

vehicle entries in 2013, 6% higher than in 2012.

Costs of services and Operating expenses

Total cost and expenses increased primarily on account of consolidation of CIC starting January 2,

2013 which contributed P=439 million of the total expenses. Excluding the effect of CIC, total cost and

expenses increased by 3% largely due to NLEX’s operators fee.

Interest expense - net

Financing cost increased by 72% or P=395 million mainly due to consolidation of CIC with interest

expense on its long term debt amounting to P=457 million. This was partly offset by lower interest

expense from MNTC due to pre-termination of PNB interest rate swap agreement which also

decreased the interest rate from 6.01% to 1.44%.

Core income

Core income increased by 25% to P=1,963 million mainly due to contribution from CIC plus higher

traffic volume, lower operating cost and interest expense in NLEX.

Non-recurring income

Non-recurring items include forex gain from CIC's dollar loans and business development expenses.

Reported Net income attributable to equity holders of MPTC

Reported Net income increased by 36% in 2013 mainly due to contribution from CIC and higher toll

revenues.

49

Power

Audited Increase

(Decrease)

Manila Electric Company 2013 2012 Amount %


Revenues 298,636 285,270 13,366 5

Expenses 274,846 266,162 8,684 3 Reported net income attributable to equity

holders of MERALCO 17,211 17,117 94 1

Capital Expenditure 10,187 10,321 (134) (1)


(Decrease)

Volume Sold (in mln kwh) 34,084 32,771 1,313 4

System Loss (12-month moving average) 6.92% 7.04% (0.12%) (2)


Meralco's Reported Net Income for 2013 was broadly flat at P=17.2 billion. Core Net Income for 2013

rose marginally to P=17.0 billion on the strength of a 4% increase in energy sales to 34,084 gigawatt

hours and a slightly improved distribution tariff. The volume growth was buoyed by sustained healthy

demand from the commercial and residential segments, which grew by 4.3% and 4.7%, respectively,

followed by growth of 3.0% in industrial electricity consumption.

Capital expenditures for 2013 declined to P=10.2 billion from P=10.3 billion a year earlier, and was

invested mainly in new substations designed to decongest critical loads, provide additional capacity

for load growth and improve network reliability.

Meralco's capex commitment is delivering strong returns. The 12-month moving average system loss

fell to just 6.92% as at the end of December 2013. This level is 1.58 percentage points lower than the

regulatory cap of 8.5%, and marks the best performance in MERALCO's 110-year history. Gains

achieved from such system loss accrue to MERALCO’s customers – for 2013, alone, the decline in

System loss translated to customers’ benefit of P=3.9 billion.

Meralco continues to build out businesses crucial to its growth.

Meralco's goal of participating in power generation in the Philippines moved forward on

August 29, 2013, when MGen signed a Joint Development Agreement with a wholly-owned

subsidiary of EGCO of Thailand for the development of a new 460 MW supercritical coal-fired power

plant in Mauban, Quezon. MGen's equity in the joint venture company will be 49% with a right to

nominate a preferred investor for an additional 2%. Together with EGCO, MGen is selecting a

financial advisor for project financing and tendering the Engineering, Procurement and Construction

contract for the project.

On October 22, 2013, MGen and FMIC announced that they had signed a SHA to complete the sale of

FMIC's 20% stake in Global Business Power Corporation (GBPC) to MGen for a consideration of

P=7.15 billion. GBPC is one of the largest power producers in the Visayas with nine coal and diesel

power plants amounting to a total installed capacity of 627 MW with two more projects on the way,

an 82 MW plant in Toledo City and a 150 MW expansion in Panay.

50

In Singapore, PacificLight Power in which Meralco holds a 28% effective economic interest,

completed commissioning of both its power generating units by January 2014.

In the meantime, MGen’s project to build a 2x300MW coal-fired plant in Subic Bay continues to be

held back by regulatory and legal constraints, despite efforts to implement it for over three years.

On June 26, 2013, Retail Competition and Open Access commenced on a voluntary basis, allowing

major electricity consumers to shop for the lowest electricity prices. Out of 782 qualified customers in

the Meralco franchise area, 287 customers opted for immediate contestability and of those, 167 signed

up with Meralco's Retail Electricity Supply unit MPower. This testifies to the competitiveness of

Meralco's pricing and its commitment to its customers.

Healthcare

Audited Increase

(Decrease)

Healthcare Group 2013 2012 Amount %


Gross Revenues 12,493 11,329 1,164 10

Expenses 10,144 9,135 1,009 11

Core EBITDA 2,656 2,328 328 14

Core Income 879 720 159 22

Reported Net Income 886 712 174 24


(Decrease)

Occupancy rate (%) - Standard Beds 65% 71% (6%) (8)

Total beds available 2,021 1,696 325 19

No. of Accredited Doctors 5,418 4,546 872 19

No. of Enrollees (schools) - average YTD 3,897 3,291 606 18

Aggregate Core Net Income for the Hospital Group rose 22% to P=879 million in 2013 from

P=720 million a year earlier as a result of increasing patient revenues, gains from completed capital

expenditure programs and savings from group synergy projects.

MPIC's Hospital Group now comprises eight (8) full-service hospitals with approximately 2,150 beds

in total: MMC, CSMC, OLLH, AHI and DLSMC in Metro Manila; CLDH in central Luzon; RMCI in

the Visayas; and DDH in Mindanao – MegaClinic, its first mall-based diagnostic and ambulatory care

center located in SM Megamall and 2 healthcare colleges, Riverside College Inc. in the Visayas and

Davao Doctors College in Mindanao. MPIC operates the largest private hospital group in the country

with hospitals in all three major island groupings of the Philippines.

51

Other matters:

i. Events that will trigger direct or contingent financial obligation that is material to the

company, including any default or acceleration of an obligation

There are various outstanding contingent liabilities which are not reflected in the

accompanying consolidated financial statements. Please refer to Note 32 – Contingencies and

Note 33 – Significant Contracts, Agreements and Commitments to the 2014 Audited

Consolidated Financial Statements for the updates on the Company’s financial obligations.

ii. All material off-balance sheet transactions, arrangements, obligations (including contingent

obligations), and other relationships of the company with unconsolidated entities or other

persons created during the reporting periods

The Company has not yet recorded the unpaid concession fee payable relating to the LRT

Line 1 concession agreement amounting to P=8.4 billion (nominal amount) as at

December 31, 2014. The present value of the concession fee payable shall be recognized

upon effective date as set forth in the concession agreement. For further details and other

transactions relating to off-balance sheet transactions and obligations, please refer to Note 33

– Significant Contracts, Agreements and Commitments and Note 21 – Related Party

Transactions to the 2014 Audited Consolidated Financial Statements.

iii. Description of any material commitments for capital expenditures, general purpose of such

commitments, expected sources of funds for such expenditures

Please refer to Note 33 – Significant Contracts, Agreements and Commitments to the 2014

Audited Consolidated Financial Statements.

iv. Any known trends, events or uncertainties that have had or that are reasonably expected to

have a material favorable or unfavorable impact on net sales or revenues or income from

continuing operations

Please refer to Note 5 – Operating Segment Information to the 2014 Audited Consolidated


v. Any seasonal aspects that had a material effect on the financial condition or results of

operations

The Company’s toll road operations are a seasonal business, with comparatively higher

revenues during the period from December to April and comparatively lower revenues during

the period from June to September. The Company’s water utilities business is also seasonal,

with comparatively lower revenues during the rainy season in the Philippines. For the power

distribution segment, electricity sales exhibit a degree of quarterly seasonality with the first

quarter having lower than the average electricity sales as this period is characterized by cooler

temperature and softer consumer demand following heightened consumer spending in the last

quarter of the year. The second quarter is marked by higher than average electricity sales.

The fourth quarter performance is about the average of the year.

52

Item 7. Consolidated Financial Statements

Please see Exhibit I - 2014 Audited Consolidated Financial Statements

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosures

Information of Independent Accountant and Other Related Matters

1. External Audit Fees and Services

Type of Service Nature of Service 2014 2013 2012 Audit and Audit

related fees i. Audit and

review of registrant’s

annual / interim

financial statements

Audit of registrant’s

annual financial

statements and review

of quarterly results

P=23,140,875 P=23,140,875 P=21,550,000

The individual audit committees of the registrant and subsidiaries review and approve the

audit plan and scope of work for the above services and ensure that the rates are competitive

as compared to the fees charged by other equally competent external auditors performing

similar nature and volume of activities.

2. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The auditing firm of SGV & Co. is MPIC’s independent public accountant since 2006.

Representatives of the said firm are expected to be present at the annual stockholders’

meeting and will have the opportunity to make a statement if they desire to do so, and are

expected to be available to respond to appropriate questions.

During the Parent Company’s three most recent years or any subsequent interim periods,

there was no instance when the Parent Company’s public accountants have resigned or have

indicated that they decline to stand for re-election or have been dismissed or where the Parent

Company had any disagreement with its public accountants or financial disclosure issue.

The 2014 audit of the Company is in compliance with paragraph (3)(b)(ix) of the Securities

Regulation Code Rule 68, as amended, which provides that the external auditor should be

rotated, or the handling partner changed, every five (5) years or earlier.

SGV is willing to stand for re-election as external auditor of MPIC for the ensuing year.

53

PART III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer

Directors

The following are the names, ages, citizenship and periods of service of the incumbent

directors/independent directors of the Parent Company, all of whom have been nominated for re-

election at the Annual Meeting:

Name Age Citizenship Period during which

individual has served as such Manuel V. Pangilinan 67 Filipino March 2006 up to present Jose Ma. K. Lim 62 Filipino March 2006 up to present David J. Nicol 55 Australian May 2010 up to present Edward S. Go* 76 Filipino July 2006 up to present Augusto P. Palisoc, Jr. 57 Filipino March 2006 up to present Antonio A. Picazo 73 Filipino March 2006 up to present Amado R. Santiago, III 47 Filipino July 2006 up to present Artemio V. Panganiban* 78 Filipino August 2007 up to present Ramoncito S. Fernandez 58 Filipino June 2009 up to present Lydia B. Echauz* 67 Filipino November 2009 up to present Edward A Tortorici 75 American November 2009 up to present Ray C. Espinosa 58 Filipino November 2009 up to present Robert C. Nicholson 59 British November 2009 up to present Victorico P. Vargas 63 Filipino May 2011 to present Washington Z. SyCip* 93 Filipino August 2011 to present

* Independent Directors

Officers and Advisors

The following are the names, ages, positions, citizenship and periods of service of the incumbent

officers and advisors of the Parent Company:

Name

Age

Position

Citizenship

Period during which

individual has served as

such Manuel V. Pangilinan 67 Chairman Filipino March 2006 up to present

Jose Ma. K. Lim 62 President & CEO Filipino March 2006 up to present

David J. Nicol 55 Chief Finance Officer Australian April 2010 up to present

Edward A. Tortorici 75 Executive Advisor American March 2006 up to present

Augusto P. Palisoc, Jr. 57 Executive Director Filipino March 2006 up to present

Antonio A. Picazo 73 Corporate Secretary Filipino March 2006 up to present

Cristina S. Palma Gil-

Fernandez 46 Assistant Corporate

Secretary Filipino May 2013 up to present

Melody M. del Rosario 50 Vice President - Media

and Corporate

Communications

Filipino March 2006 up to present

54

Name

Age

Position

Citizenship

Period during which

individual has served as

such

Jose Noel de la Paz (a)

58 Director for Corporate

Development Filipino July 2007 up to

December 2014

Robin Velasco 44 Vice President - Group

Human Resources Filipino July 2009 up to present

Albert W. L. Pulido 43 Vice President - Investor

Relations Filipino July 2009 up to present

Maida B. Bruce 41 Vice President - Group

Controller Filipino November 2009 up to

present

Reymundo Cochangco (a) 48 Chief Finance Officer

Hospital Group Filipino January 2010 up to

December 2014 Jose Jesus G. Laurel 60 Vice President -

Legal/General Counsel

and Compliance Officer


Ferdinand G. Inacay (b) 49 Vice President -

Business Development Filipino November 2009 up to

December 2014 Mabini Pablo

(c) 65 Senior Advisor Filipino January 2011 up to December 2014

Karim G. Garcia (b) 47 Vice President –

Business Development Filipino January 2015 to present

Santhea V. delos Santos 37 Assistant Vice President

- Chief Risk Officer Filipino February 2014 to present

Loudette Anne M. Zoilo 38 Assistant Vice-President

- Human Resources Filipino February 2012 to present

Celso Bernard G. Lopez 41 Assistant Vice-President

- Business Development Filipino January 2014 to present

Ricardo M. Pilares (d) 33 Assistant Vice President

– Legal Filipino February 2015 to present

Melanie G. Bendijo (d) 41 Assistant Vice President

– Treasury Filipino February 2015 to present

(a)Mr. de la Paz andMr. Cochangco has transferred to Metro Pacific Hospital Holdings, Inc. effective January 2015.

(b)Mr. Inacay has transferred to another company and has been replaced by Mr. Karim Garcia effective January 2015.

(d)Mr. Pablo retired on December 31, 2014.

(c) Atty. Pilares and Ms. Bendijo have recently been appointed as Assistant Vice Presidents in the year 2015.

Business Experience and Other Directorships

The business experience of each of the directors of the Parent Company is as follows:


Born in the Philippines in July 1946, Mr. Pangilinan graduated cum laude in 1966 from the Ateneo de

Manila University, the Philippines, with a Bachelor of Arts degree in Economics. He received his

MBA degree in 1968 from the Wharton School of Finance and Commerce at the University of

Pennsylvania, where he was a Procter & Gamble Fellow.

After graduating from Wharton, he worked in Manila for Philippine Investment Management

Consultants Inc. (the PHINMA Group) and in Hong Kong with Bancom International Limited and

American Express Bank, and thereafter with First Pacific Company Limited.

Mr. Pangilinan founded First Pacific in 1981 and served as Managing Director until 1999. He was

appointed Executive Chairman until June 2003, when he was named as CEO and Managing Director.

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Within the First Pacific Group, he holds the positions of President Commissioner of P.T. Indofood

Sukses Makmur Tbk, the largest food company in Indonesia.

In the Philippines, he is the Chairman of Philippine Long Distance Telephone Company (PLDT), the

country's dominant telecom company after serving as its President and CEO until February 2004. He

also serves as Chairman of Smart Communications Incorporated - the largest mobile phone operator

in the Philippines - PLDT Communications and Energy Ventures Incorporated (formerly Piltel),

Beacon Electric Asset Holdings Incorporated, Metro Pacific Investments Corporation, Landco Pacific

Corporation, Medical Doctors Incorporated, Colinas Verdes Corporation (operating the Makati

Medical Center and Cardinal Santos Medical Center, respectively), Davao Doctors Incorporated,

Riverside Medical Center Incorporated in Bacolod City, Our Lady of Lourdes Hospital, Asian

Hospital, Incorporated, Maynilad Water Services Corporation (Maynilad), Mediaquest Incorporated,

Associated Broadcasting Corporation (TV5), Philex Mining Corporation, and Manila North Tollways

Corporation. On May 2009, he became a member of the Board of Directors of the Manila Electric

Company (Meralco) and recently became its Chairman after serving as its President and CEO from

July 2010 to May 2012.

Outside the First Pacific Group, Mr. Pangilinan was a member of the Board of Overseers of The

Wharton School, University of Pennsylvania in the United States. He was Chairman of the Board of

Trustees of the Ateneo de Manila University. He is currently the Chairman of the Board of Trustees of

the San Beda College. He also serves as Chairman of the Hong Kong Bayanihan Trust, a non-stock,

nonprofit foundation which provides vocational, social and cultural activities for Hong Kong's foreign

domestic helpers. On February 5, 2007, Mr Pangilinan was named the President of the Samahang

Basketbol Ng Pilipinas (SBP), a national sport association for basketball. Effective January 2009,

MVP assumed the Chairman of the Amateur Boxing Association of the Philippines (ABAP), a

governing body of the amateur boxers in the country. In October 2009, Mr. Pangilinan has been

appointed as Chairman of the Philippine Disaster Recovery Foundation, Incorporated (PDRF), a non-

stock, non-profit foundation established to formulate and implement a reconstruction strategy to

rehabilitate and rebuild areas devastated by recent floods and other calamities. Mr. Pangilinan is

Chairman of Philippine Business for Social Progress (PBSP), a social action organization made up of

the country's largest corporations, Vice Chairman of the Foundation for Crime Prevention, a private

sector group organized to assist the government with crime prevention, a member of the Board of

Trustees of Caritas Manila and Radio Veritas-Global Broadcasting Systems, Inc., a former

Commissioner of the Pasig River Rehabilitation Commission, and a former Governor of the

Philippine Stock Exchange. In June 2012, he was appointed as Co-Chairman of the newly organized

US-Philippines Business Society, a non-profit society which seeks to broaden the relationship

between the United States and the Philippines in the areas of trade, investment, education, foreign and

security policies and culture.

Mr. Pangilinan has been awarded the Ten Outstanding Young Men of the Philippines (TOYM) for

International Finance (1983), the Presidential Pamana ng Pilipino Award by the Office of the

President of the Philippines (1996), Best CEO in the Philippines by Institutional Investor (2004), CEO

of the Year (Philippines) by Biz News Asia (2004), People of the Year by People Asia Magazine

(2004)Distinguished World Class Businessman Award by the Association of Makati Industries, Inc.

(2005), Man of the Year by BizNewsAsia (2005), and Management Man of the Year by the

Management Association of the Philippines (2005). In May 2006, the Office of the President of the

Republic of the Philippines awarded him the Order of Lakandula, rank of a Komandante in

recognition of his contributions to the country. On December 2008, BizNewsAsia magazine awarded

to Mr. Pangilinan the Business Icon Gold Award "for having greatly contributed to the Philippine

economy through achievements in business and society." In February 2010, the Philippine

Sportswriters Association (PSA), the country's oldest media organization, named him the Sports

Patron of the Year for his invaluable contributions to the Philippine Sports. In November 2010, Mr.

Pangilinan was chosen by the Asia CEO Awards as the Global Filipino Executive of the Year for

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2010. In June 2012, FinanceAsia awarded Mr. Pangilinan as the Philippines Best CEO for 2012. Just

recently in January 2014, Mr. Pangilinan received another recognition from the Philippine

Sportswriters Association (PSA) with the Executive of the Year award.

Mr. Pangilinan has been awarded four Honorary Doctorate in Humanities (Honoris Causa). First to

confer him was San Beda College in 2002. Second was the Xavier University in 2007. Holy Angel

University in Angeles, Pampanga awarded him his third degree in 2009. In April 2010, Far Eastern

University awarded him his fourth.

Jose Ma. K. Lim

Born in the Philippines in April 1952, Mr. Lim graduated from the Ateneo de Manila University, with

a Bachelor of Arts degree in Philosophy. He received his MBA degree in 1978 from the Asian

Institute of Management.

After graduating from the Asian Institute of Management in Manila, he managed a family-owned steel

fabrication business until 1987 when he joined the National Development Company as a Manager in

the Privatization Unit, a task force created by and reporting to the Department of Trade and Industry.

Mr. Lim then worked as a senior officer for various local and foreign banking institutions from 1988

to 1995. He was Director for Investment Banking of the First National Bank of Boston from 1994 to

1995, and prior to that, Vice President of Equitable Banking Corporation. In 1995, Mr Lim joined

Fort Bonifacio Development Corporation (FBDC) as Treasury Vice President and eventually was

appointed Chief Finance Officer in 2000.

With the onset of the Asian financial crisis and the subsequent divestment of controlling interest in

FBDC, Mr. Lim assumed the position of Group Vice President and Chief Finance Officer of FBDC’s

parent company, Metro Pacific Corporation (MPC) on a concurrent basis from 2001 to 2003. He was

then elected President & CEO of MPC in June 2003.

In 2006, MPC was reorganized into Metro Pacific Investments Corporation (MPIC), where he

continues to serve as President & CEO. Aside from MPIC he is also currently a Director in the

following MPIC subsidiary and affiliate companies: Beacon Electric Asset Holdings Inc.; Manila

Electric Company Metro Pacific Tollways Corporation; Manila North Tollways Corporation,

Tollways Management Corporation, Maynilad Water Services, Inc., Indra Philippines Inc. Medical

Doctors, Inc. (owner and operator of Makati Medical Center), Cardinal Santos Medical Center

(Colinas Verdes Hospital Managers Corporation) Our Lady of Lourdes Hospital. He serves as

Chairman of Davao Doctors Hospital (Clinica Hilario) Inc., Asian Hospital and Riverside Medical

Center in Bacolod. Mr. Lim is also President of the Metro Strategic Infrastructure Holdings, Inc.

(MSIHI) which holds a minority ownership in Citra Metro Manila Tollways Corp. (Skyway).

He is active in the Management Association of the Philippines and has served as Vice-Chair of the

Good Governance Committee from 2007 to 2009. He is a founding member and Treasurer of the

Shareholders Association of the Philippines.

David J. Nicol

Accomplished and versatile business leader having successfully held CEO and CFO positions in a

wide range of industries in Europe and Asia. Voted by Institutional Investor as the top Conglomerate

CFO all Asia in 2012 and 2013.

Mr. Nicol began his career with PricewaterhouseCoopers where he served for 10 years in London,

New York and Hong Kong. He joined First Pacific Company Limited in 1991 and in 1994 moved to

their Thai affiliate Berli Jucker PCL where he served as CFO until 1998 and then as Group CEO until

2002 when First Pacific exited Thailand.

57

From 2002 until 2010 when Mr. Nicol joined MPIC, he held positions as CEO Europe and Asia for

SIRVA, Inc., CEO of Pinnacle Regeneration group and as a director of Reconomy Limited in the

UK’s waste and recycling sector. He has a consistent record of building shareholder value through

operational improvement, restructuring, mergers and acquisitions and entering new markets.

Edward A. Tortorici

Age 75, born in the United States. Mr. Tortorici received a Bachelor of Science from New York

University and a Master of Science from Fairfield University. Mr. Tortorici has served in a variety of

senior and executive management positions, including Corporate Vice President for Crocker Bank and

Managing Director positions at Olivetti Corporation of America and Fairchild Semiconductor

Corporation.

Mr. Tortorici subsequently founded EA Edwards Associates, an international management and

consulting firm specializing in strategy formulation and productivity improvement with offices in

USA, Europe and Middle East. In 1987, Mr. Tortorici joined First Pacific as an Executive Director for

strategic planning and corporate restructuring, and launched the Group’s entry into the

telecommunications and technology sectors. Presently, he oversees corporate strategy for First Pacific

and guides the Group’s strategic planning and corporate development activities. Mr. Tortorici serves

as a Commissioner of PT Indofood Sukses Makmur Tbk and as Director of Metro Pacific Investments

Corporation, Philex Mining Corporation, Maynilad Water Services, Inc., FEC Resources Inc. of

Canada and AIM-listed Forum Energy Plc.

Mr. Tortorici serves as a Trustee of the Asia Society Philippines and is on the Board of Advisors of

the Southeast Asia Division of the Center for Strategic and International Studies, a Washington D.C.

non-partisan think tank. He also served as a Commissioner of the U.S. ASEAN Strategy Commission.

Robert C. Nicholson

Mr. Nicholson is a graduate of the University of Kent, qualified as a solicitor in England and Wales

and in Hong Kong. He is an Executive Chairman of Forum Energy Plc, a Chairman of Goodman

Fielder Limited (since March 2015), a Commissioner of PT Indofood Sukses Makmur Tbk and a

Director of MPIC, Philex Mining Corporation and Philex Petroleum Corporation. Mr. Nicholson is

also an Independent Non- Executive Director of Pacific Basin Shipping Limited and Lifestyle

Properties Development Limited. Previously, he was a senior partner of Reed Smith Richards Butler

from 1985 to 2001 where he established the corporate and commercial department, and was also a

senior advisor to the board of directors of PCCW Limited between August 2001 and September 2003.

Mr. Nicholson has wide experience in corporate finance and cross-border transactions, including

mergers and acquisitions, regional telecommunications, debt and equity capital markets, corporate

reorganizations and privatization in China. Mr. Nicholson joined First Pacific’s Board in 2003.

Augusto P. Palisoc Jr.

Augusto P. Palisoc Jr. has been with the First Pacific group of companies for 31 years. He is currently

an Executive Director of MPIC and is the President & Chief Executive Officer of Metro Pacific

Hospital Holdings Inc, which is the group’s holding company for all hospital and healthcare

investments. He is a Director of Medical Doctors, Inc. (owner and operator of the Makati Medical

Center), Davao Doctors Hospital (Clinica Hilario) Inc. and Davao Doctors College, Inc., Colinas

Verdes Hospital Managers Corporation (operator of the Cardinal Santos Medical Center), Riverside

Medical Center Inc. and Riverside College Inc. in Bacolod, and Asian Hospital Inc., while he is

Chairman of East Manila Hospital Managers Corporation (operator of the Our Lady of Lourdes

Hospital), De los Santos Medical Center, MegaClinic Inc., and Central Luzon Doctors Hospital in

Tarlac. Prior to joining MPIC, he was the Executive Vice President of Berli Jucker Public Company

Limited in Thailand from 1998 to 2001. Mr. Palisoc served as President and CEO of Steniel

Manufacturing Corporation in the Philippines from 1997 to 1998. He has held various positions

58

within the First Pacific group as Group Vice President for Corporate Development of First Pacific

Company Limited in Hong Kong, and Group Managing Director of FP Marketing (Malaysia) Sdn.

Bhd. in Malaysia. Before he joined First Pacific in 1983, he was Vice President of Monte Real

Investors, Inc. in the Philippines. Mr. Palisoc earned his Bachelor of Arts Degree, Major in

Economics (with Honors) from De La Salle University, and his Master’s in Business Management

(MBM) Degree from the Asian Institute of Management. Mr. Palisoc was born in January 1958.


Ramoncito S. Fernandez is the President & Chief Executive Officer of Metro Pacific Tollways Corp.

(MPTC) and Tollways Management Corporation (TMC) under Metro Pacific Investments

Corporation (MPIC). He holds directorships in Metro Pacific Investments Corporation (MPIC),

Metro Pacific Tollways Corporation (MPTC), Manila North Tollways Corporation (MNTC),

Tollways Management Corporation (TMC), Cavitex Infrastructure Corp., and some subsidiaries of

PLDT including PLDT Subic Telecom, Inc., PLDT Clark Telecom, Inc., Pacific Global One Aviation

Company, Inc., Tahanan Mutual Building and Loan Association, Inc. (“TMBLA”) and Easytrip

Services Corporation.

He is the 2009 PISM GAWAD SINOP Awardee, the highest award conferred by the Foundation of

the Society of Fellows in Supply Management and the Philippine Institute for Supply Management to

outstanding achievers in the field of supply management.

Mr. Fernandez has varied experiences in international carrier business, administration and materials

management, industrial marketing and sales. He was the Head of International and Carrier Business

of PLDT and Smart and Global Access Group of Smart from 2007 until December 31, 2008. He was

the Administration and Materials Management Head of Smart from 2000, and of PLDT from 2004,

until December 31, 2007. He was the Executive Vice President in charge of marketing, sales and

logistics of Starpack Philippines, Inc. until June 2000. Mr. Fernandez obtained his Bachelor of

Science Degree in Industrial Management Engineering from the De La Salle University and Master's

Degree in Business Management from the Asian Institute of Management.

Victorico P. Vargas

Mr. Victorico P. Vargas is the President and CEO of Maynilad. He formally took over the position in

August 2010. He is a director of Metro Pacific Investments Corporation, Metropac Water Investments

Corporation, and director and Chairman of Philippine Hydro, Inc., member of the Executive

Committee of the First Pacific Leadership Academy, trustee of the MVP Sports Foundation, Inc. and

trustee of IdeaSpace Foundation, Inc.

Prior to his appointment, Mr. Vargas was the Senior Vice President for the Human Resources Group

and Head of the Business Transformation Office of the Philippine Long Distance Telephone

Company (PLDT), the nation’s no. 1 telecommunications entity.

Mr. Vargas was also designated to head the International & Carrier Business Group (ICBG) of PLDT

in 2007, managing the business relations with foreign and domestic carriers and other telecom

entities. He was responsible for reviewing the overall business environment in foreign and domestic

telecom markets and determining strategic areas and initiatives to optimize business potentials. He

managed the formulation, development, alignment and implementation of the company’s strategies to

address customer requirements of international and domestic carriers.

In 2003, he was also appointed supervision over Asset Protection and Management Group responsible

for Property Management, Risk Management (Insurance) and Facilities Management.

59

Before joining PLDT in 2000, he had 12 years of experience in the banking industry – Citibank; 13

years in other consumer multinational companies, notably Colgate- Palmolive Philippines, Union

Carbide and Pepsi Cola.

In the field of sports, he currently holds the position of President for the Amateur Boxing Association

of the Philippines, appointed as Honorary Vice President of the Asian Boxing Confederation (ASBC).

He was elected Vice-Chairman for the Samahang Basketbol ng Pilipinas, Inc., the national sports

association for the Philippine Basketball, a member of the Philippine Olympic Commission and

International Basketball Federation. He holds the position of Alternate Governor of the Philippine

Basketball Association, the nation’s professional basketball league.

Antonio A. Picazo

Antonio A. Picazo is currently the Senior Partner of Picazo Buyco Tan Fider & Santos Law Offices.

He serves as a Director and/or Corporate Secretary of several large Philippine corporations, including

Metro Pacific Investments Corporation, a position he has held since 2006. Mr. Picazo was born in

Manila in August of 1941 and obtained his Bachelor of Laws degree from the University of the

Philippines. He passed the 1964 Philippine Bar Examinations with the 5th highest rating. In 1967, he

obtained a Master of Laws degree, Major in Taxation from the University of Pennsylvania. In 1976,

he also completed the Management Development Program course at the Asian Institute of

Management. He is currently also a member of the Board of the PGH Medical Foundation, Haribon

Foundation and the Gerry Roxas Foundation.

Ray C. Espinosa

Age 58, born in the Philippines. Mr. Espinosa has a Master of Laws degree from the University of

Michigan Law School and is a member of the Integrated Bar of the Philippines. He was a partner of

SyCip Salazar Hernandez & Gatmaitan from 1982 to 2000, a foreign associate at Covington and

Burling (Washington, D.C., USA) from 1987 to 1988, and a law lecturer at the Ateneo de Manila

School of Law from 1983 to 1985 and 1989. He ranked first in the 1982 Philippine Bar examination.

He is a director of Philippine Long Distance Telephone Company (PLDT), Manila Electric Company

(MERALCO), Metro Pacific Investment, Corporation, Roxas Holdings, Inc., and also an independent

director of Lepanto Consolidated Mining Company "Lepanto"). He is a director of Meralco PowerGen

Corporation, Mediaquest Holdings, Inc., TV5 Network, Inc., and Mediascape, Inc. (Cignal TV). He

is the chairman of the Philstar Daily, Inc. and BusinessWorld Publishing Corporation, chairman of the

Finance Committee of MERALCO, and chairman of the Audit Committee of Lepanto. He is the

General Counsel of MERALCO and Head of PLDT’s Regulatory Affairs and Policy Office. He is

also a trustee of the Beneficial Trust Fund of PLDT.

Mr. Espinosa joined First Pacific in June 2013. He is First Pacific Group’s Head of Government and

Regulatory Affairs and Head of Communications Bureau for the Philippines.

Amado R. Santiago III

Amado R. Santiago III is the Managing Partner of the Santiago & Santiago Law Offices and is

engaged in the general practice of law. He specializes in corporate litigation, which includes corporate

rehabilitation proceedings under the Securities and Exchange Commission Rules on Corporate

Recovery, Interim Rules of Procedure on Corporate Rehabilitation and the Rules of Procedure on

Corporate Rehabilitation, as well as taxation law. He acts as director, corporate secretary, and/or

corporate counsel of various corporate clients. He graduated from the Ateneo de Manila School of

Law in 1992 and passed the Philippines Bar Examinations given in the same year. He received his

degree of Bachelor of Science in Legal Management in 1988 from the Ateneo de Manila University.

Edward S. Go (Independent Director)

Edward S. Go currently serves as Chairman of the Board of Hyundai Asia Resources, Inc. and of

ASA Philippines Foundation. He is an Independent Director of Metro Pacific Investments

60

Corporation, PLDT Communications and Energy Ventures, Inc. (PCEV) and Filipino Fund Inc. He is

also Chairman of the PLDT Beneficial Trust Fund and member of the Board of BTF Holdings Inc,

Mediaquest Holdings, Inc., TV5 Network, Inc., Cignal TV, Inc., BusinessWorld Publishing

Corporation, PhilSTAR Daily, Inc., AB Capital Investment Corporation, Vicsal Investment

Corporation, Union Galvasteel Corporation and Trans-Asia Petroleum Corporation. He has over 40

years of management experience in banking and finance, starting as Executive Trainee with Citibank

N.A. and became President of Philippine Bank of Communications in 1974 and Chairman and Chief

Executive Officer of Chinabank in 1985. Mr. Go is also Chairman of the Audit Committee of MPIC

and PCEV. He obtained his Bachelor of Arts Degree, magna cum laude, and underwent postgraduate

studies at the Ateneo de Manila University, where he served as member of the Board of Trustees from

2008 until he stepped down February. He was Chairman of the Board of Trustees during the last four

years.

Chief Justice Artemio V. Panganiban (Independent Director)

A consistent scholar, retired Chief Justice Panganiban obtained his Associate in Arts “With Highest

Honors” and later his Bachelor of Laws with “Cum Laude” and “Most Outstanding Student” honors.

He placed sixth among 4,200 candidates who took the 1960 bar examinations. A well-known campus

leader, he founded and headed the National Union of Students of the Philippines. He is also the

recipient of several honorary doctoral degrees.

In 1995, he was appointed Justice of the Supreme Court, and in 2005, Chief Justice of the Philippines.

Aside from being a prodigious decision writer, he also authored eleven books while serving on the

highest court of the land. His judicial philosophy is “Liberty and Prosperity Under the Rule of Law.”

He believes that the legal profession and the judiciary must not only safeguard the liberty of our

people but must also nurture their prosperity and economic well-being. To him, justice and jobs,

ethics and economics, democracy and development, nay, liberty and prosperity must always go

together; one is useless without the other. On his retirement on 7 December 2006, his colleagues

acclaimed him unanimously as the “Renaissance Jurist of the 21st Century.”

Prior to entering public service, Chief Justice Panganiban was a prominent practicing lawyer, law

professor, business entrepreneur, civic leader and Catholic lay worker. He was the only Filipino

appointed by the late Pope John Paul II to be a member of the Vatican-based Pontifical Council for

the Laity for the 1996-2001 term. At present, he is a much sought-after independent director and

adviser of business firms, and writes a column in the Philippine Daily Inquirer.

Lydia Balatbat-Echauz (Independent Director)

Lydia Echauz is retired from academe. She was for ten years President of Far Eastern University and

its three other affiliate schools. Prior to joining FEU in 2002, she served as Dean of De La Salle

University Graduate School of Business, Associate Director of the MBA program of the Ateneo de

Manila University Graduate School of Business, and Associate Professor of the University of the

East, College of Business Administration. She is currently a member of the Board of a few

organizations, life member and former governor of the Management Association of the Philippines,

and past President of the Association of Southeast Asian Institutions of Higher Learning, RP Council.

She has been awarded most outstanding Filipino and most distinguished alumna of ADMU, DLSU,

and St. Theresa's College.

Washington Z. SyCip (Independent Director)

Mr. Washington SyCip is the founder of the SGV Group. He is the Chairman Emeritus of the Board

of Trustees and Board of Governors of the Asian Institute of Management, Philippines and a member

of the Board of Overseers of the Columbia University Graduate School of Business, New York. He is

a counselor in the Conference Board, a member of the International Advisory Board, Council on

Foreign Relations (1995-2010) and an Honorary Life Trustee of The Asia Society-all in New York.

61

He is a member of the Board of Directors of a number of major corporations in the Philippines and

other parts of the world.

All of the incumbent Directors named above have a one year term of office.

Philippine Long Distance Telephone Company, Manila Electric Company and Philex Mining

Corporation are listed companies in the Philippines.

Officers

The business experience of each of the officers and executives of the Parent Company is as follows:

Maida B. Bruce

Ms. Bruce joined MPIC in November 2009 and is responsible for strengthening and overseeing the

Financial Reporting, Budgeting & Forecasting and System enhancements processes. Prior to joining

MPIC, Maida held a CFO role with the top real estate company in the Philippines. She was

responsible for overseeing the financials of Ayala Lands’s Strategic Landbank Management Group

including its other subsidiaries. She has more than thirteen years of extensive experience in the

banking industry under Citigroup Australia and Manila. She was VP for Special Purpose Vehicles

under the Financial Control Department of Citigroup Australia and has handled several roles and

responsibilities also in Citibank Manila. She was part of a pioneer team that implemented, supported

and continuously upgraded a proprietary global financial reporting system to multiple countries in the

Asia-Pacific region.

Robin Michael L. Velasco

Mr. Velasco joined the company in July 2009 and is responsible for ensuring that MPIC's subsidiaries

and future acquisitions have the right People Strategies to support the growth required to achieve

business plans. He led the creation of an HR Council which is an organization of all HR Heads in the

First Pacific Group. He brings with him 24 years of management experience garnered from Global

Multinationals such as Procter & Gamble, Johnson & Johnson and Synovate. He has been exposed to

various facets of management which includes Finance, Supply Chain, Manufacturing, Research &

Development, Technical Services, Market Research, Quality Assurance and HR Management. He

spent the last 5 years of his career prior to MPIC in Singapore as HR Director for Asia Pacific, Talent

Management for Johnson & Johnson, and then as HR Director for Asia for Synovate, leading 12

Asian countries in all HR aspects. He has also spent 6 years of his career as a Professor of the

Graduate School of Business and the Business Management Dept. of La Salle where he taught

Strategic Management, Ethics, Stock Market Trading, Production Management and HR Management.


Ms. Del Rosario has been with the Metro Pacific Group since 1993, and has over 21 years of

experience heading MPIC's public and media relations, corporate communications, advertising and

corporate social responsibility (CSR). In these various capacities, Ms. del Rosario is in charge of

strengthening the credibility and corporate public image of MPIC by planning and overseeing the

implementation of strategic corporate communication programs, handling reputation and crisis

management, as well as working closely with the corporate communication teams and CSR heads of

the group. Ms. del Rosario is also the Corporate Information Officer of MPIC for the Philippine Stock

Exchange and is a Trustee of the MPIC Foundation where she actively implements institutional

programs on education, economic empowerment and environmental awareness.

62

Albert W. L. Pulido

Albert has managed the Investor Relations function at Metro Pacific Investments Corporation since

the middle of 2009. In that span of time he and his team have managed the transition - from an IR

perspective - to a truly public company via a public share re-launch in September 2009, increased the

number of analysts covering the stock from 3 to 16, managed updates to investors on a primary share

issuance of US$200 million in July 2011, US$150 million in January 2013 and US$200 in February

2015, and coordinated over 500 investor meetings over the past two years.

Prior to MPIC, Albert was with the NY offices of Lehman Brothers (now Barclays Capital) from 2003

to 2008 in various capacities including: Creditor Relations, Financial Planning & Analysis, Rating

Agency Relationships and Consumer Deposit Platform Development. Before this, he served as a

business development officer for a couple of Philippine banks originating corporate clients. He has an

MBA from Erasmus University and is a graduate of De La Salle University with a Bachelor of

Science degree.

Atty. Jose Jesus G. Laurel

Prior to joining MPIC, Atty. Laurel was Vice President for Legal and External Affairs, General

Counsel and Corporate Secretary for Petron Corporation and concurrently President of Petron

Foundation. Before working for Petron, he was Vice President for Corporate Services of Energy

Development Corporation (EDC) where he headed Legal, HR, Purchasing, Planning and Finance.

Prior to EDC, he served at the Securities and Exchange Commission (SEC) for 9 years as securities

analyst, prosecutor, hearing officer and as deputy executive director (General Counsel). Concurrent

with the above positions, he also served as Law Dean of Lyceum of the Philippines and law professor

for 27 years at Ateneo de Manila Law School. He graduated from Ateneo de Manila with degrees in

A.B. Economics and Law. He placed 6th in the the 1981 bar. He also has a Masters of Laws from

Yale University.

Karim G. Garcia

Karim G. Garcia joined MPIC in January, 2015. As Vice President for Business Development, he is

responsible for new business expansion and integration into MPIC’s businesses. His mandate is to

increase MPIC’s competitive advantage, by actively searching and developing new business ventures,

and executing M&A and RFP transactions, especially those with synergies to existing business.

Within the energy industry, Karim has over a decade worth of experience. Initially, he was an oil

trader for Chemoil Corporation, one of the largest independent fuel oil bunker service companies. He

then moved to Houston, Texas and joined Enron Development Corp, where he managed several

international green field power development projects, with a combined generation capacity of close to

1000MW, from concept to financial close. In addition, within energy venture capital subsidiary,

Enron Global Investments, he led Enron’s Mergers & Acquisitions efforts in South East Asia. Also

prior to MPIC, Karim was Vice President for Strategic Planning for Trans Asia Oil and Energy

Development Corporation, a Phinma Company. He was responsible for the development of

greenfield power projects, and the acquisition of energy assets. He also led Trans-Asia’s foray in to

Liquefied Natural Gas and combined cycle gas turbine power generation. Karim Garcia holds a

Bachelor’s of Science in Business Administration, from Boston University and obtained a Masters of

Business Administration from the Marshall School of Business at the University of Southern

California.


Ms. Delos Santos joined the Company in February 2007 and has performed functions like financial

and management reporting, planning, analysis and budget. She is currently designated as the Chief

Risk Officer. She has over 15 years of experience in finance and audit where she was exposed to

diverse industries including utilities, telecommunication, media, power and shared services. She was

part of a team who successfully shadowed and backfilled one of the most critical reporting processes

in an integrated power company in North America and migrated these processes to the Philippines.

63

She worked as well with a group of companies where she implemented process improvements in its

consolidation and reporting system, migrated their accounting system and helped in getting ISO

certification for processes of a holding company. She also worked with SGV and Co. where she

gained her audit experience. With her diverse and extensive experience in Finance, she has been

involved in helping senior management craft investment and funding strategies for the Company. She

holds a Bachelor of Science with a degree in Accountancy and is a Certified Public Accountant.

Loudette M. Zoilo

Ms. Maliksi-Zoilo joined MPIC in September 2009. She currently heads MPIC HR and has been

instrumental in managing and improving the MPIC organization's People related Organizational

Strategies. She brings with her 18 years of Human Resources experience, gained from

PricewaterhouseCoopers where she was a Manager of the Global Human Resources Solutions team,

an HR Consulting team of the firm which services a vast array of industries including but not limited

to, Utilities, Consumer, Banking, Government, NGOs and others. Her project exposure included HR

Consulting, Risk Management and Process Improvement projects. She was also part of the

management team of Corporate Human Resources Group of Philamlife who oversaw the HR function

of almost 21 affiliates where she instituted improvements in policies and procedures of the group.

Prior to joining MPIC, she was the HR Head of Jollibee Worldwide Services, a shared-service

organization of the Jollibee Group of Companies.

Celso G. Lopez

Mr. Lopez joined MPIC in June 2012. He is currently seconded to Automated Fare Collection

Services, Inc. the incorporated vehicle of the First Pacific Group and Ayala Group Consortium. He is

helping out AFCS with its strategies and operation as he performs the role of Chief Operating Officer.

His responsibilities include Business Development beyond the Rail Concession, Operations for Card

Issuance & Merchant Acquisition and the Maintenance of the Fare Collection System for the LRT1,

LRT2 and MRT3 Lines. Before his secondment, he was responsible for Business Development and

Project Management for the MPIC Hospital Group. Prior to this he also did Project Management for

Special Projects under the Office of the President & CEO and was involved in strategic planning by

driving the implementation and monitoring of corporate strategies. He coordinated with the various

Operating Companies to monitor for the CEO their alignment with agreed key action plans and

monitored their performance versus set metrics. Mr. Lopez had 16 years of banking experience before

joining MPIC. Up to June 2010 he was Executive Vice President of EastWest Banking Corporation.

Prior to that he spent 7 years in Security Bank Corporation and was First Vice President in charge of

setting up the Fixed Income Securities Division. In 2003, he completed his Executive MBA from the

Asian Institute of Management and graduated with Distinction.

Ricardo M. Pilares III

Mr. Pilares is the Assistant Vice President for Legal of Metro Pacific Investments Corporation. He

graduated Valedictorian from the Ateneo Law School in 2006 and passed the Philippine Bar

Examinations in 2007 with the second highest ranking. Before joining Metro Pacific Investments

Corporation in 2010, Mr. Pilares was an associate in ACCRA Law Offices, and subsequently in Puno

and Puno Law Offices, where he handled litigation cases and special corporate projects for various

clients. He also acts as legal counsel of the various subsidiaries of MPIC. He is also a member of the

faculty of the Ateneo Law School.

Melanie G. Bendijo

Ms. Bendijo has been with Metro Pacific Group since 2004 and has over 13 years of experience in the

field of Treasury and Fund Management. She is responsible for the Company’s overall Treasury

Operations and Controls. She has been instrumental in various fund raising activities of the

Company’s major investments, including securing a foreign loan to support our Don Muang Tollway

investment.

64

Antonio A. Picazo

(See business experience above)

Cristina S. Palma Gil-Fernandez

Cristina S. Palma Gil-Fernandez assumed the position of Assistant Corporate Secretary of MPIC in

May 2013. Atty. Palma Gil-Fernandez graduated with a Bachelor of Arts degree, Major in History

(Honors) from the University of San Francisco in 1989, and with a Juris Doctor degree, second

honors, from the Ateneo de Manila University in 1995. She is currently a Partner at Picazo Buyco Tan

Fider & Santos Law Offices and has over 18 years of experience in corporate and commercial law,

with emphasis on the practice areas of banking, securities and capital markets (equity and debt),

corporate reorganizations and restructurings and real estate.

The Company has no other significant employee other than its Executive Officers. None of the

aforementioned Directors or Executive Officers or persons nominated or chosen by the Company to

become Directors or Executive Officers is related to the others by consanguinity or affinity within the

fourth civil degree.

No Director has resigned or declined to stand for re-election to the Board of Directors since the date

of the last annual stockholders’ meeting due to disagreement with the Company on any matter relating

to the Company’s operations, policies or practices.

None of the aforementioned Directors or Executive Officers is or has been involved in any criminal or

bankruptcy proceeding, or is or has been subject to any judgment of a competent court barring or

otherwise limiting his involvement in any type of business, or has been found to have violated any

securities laws during the past five (5) years and up to the latest date.

Item 10. Executive Compensation

The aggregate compensation paid in 2013 and 2014 and estimated to be paid in 2015, to the officers

of the Parent Company is set out below:

Names Position Year Salary Bonus Others

Manuel V. Pangilinan Chairman

Jose Ma. K. Lim President & CEO

David J. Nicol Chief Finance Officer

Augusto P. Palisoc Jr. Executive Director,

President & CEO

Hospital Group

Robin Michael L. Velasco VP Human Resources

Aggregate for above-

named officers

2013

2014

2015 (est.)

90,530,980

97,864,529

92,000,000

65,920,634

107,715,641

70,000,000

171,680,201

-

-

All Other Directors and

Officers as a group

excluding the above-

named officers

2013

2014

2015 (est.)

72,759,567

78,550,519

70,000,000

47,757,501

87,167,959

53,000,000

103,025,146

-

-

The above executive officers are covered by standard employment contracts and employees’

retirement plan and can be terminated upon appropriate notice.

Non-executive Directors are entitled to a per diem allowance of P=50,000 for each attendance in

MPIC’s Regular Board meetings.

65

The Parent Company’s By Laws provide that, additionally, an amount equivalent to 1 percent of net

profit after tax shall be allocated and distributed amongst the directors of the Parent Company who are

not officers of MPIC or its subsidiaries and affiliates, in such manner as the Board may deem proper.

The amount paid to the directors in 2014 and estimated amount to be paid in the ensuing year are

included in the above tabulation. There are no other special arrangements pursuant to which any

director was compensated.

The aggregate number of options awarded to the Directors and Executive Officers are set out below:

Names Position Amount of

Options

Date of

Grant of

the Options

Exercise

Price

Market

Price

on the

Date of

Grant

Expiration Date


Jose Ma. K. Lim

David J. Nicol

Edward A. Tortorici



Victorico P. Vargas

Antonio A. Picazo

Edward S. Go


Lydia B. Echauz

Washington Z. SyCip

Amado R. Santiago, III

Robert C. Nicholson

Ray C. Espinosa

Jose Noel C. dela Paz

Maida B. Bruce

Robin L. Velasco


Albert L. Pulido

Jose Jesus G. Laurel

Ferdinand G. Inacay

Reymundo S. Cochangco

Mabini F. Pablo


Celso Bernard Lopez

Loudette M. Zoilo

Chairman

President/CEO

CFO / Director

Executive Advisor

Executive Director

Executive Director

Executive Director

Director/Corp. Sec.

Ind Director

Ind Director

Ind Director

Ind Director

Director

Director

Director

Vice President

Vice President

Vice President

Vice President

Vice President

Vice President

Vice President

Vice President

Senior Advisor




Aggregate for above

named directors/officers

43,500,000

43,500,000

59,500,000

10,000,000

3,000,000

109,500,000

12/09/08

03/10/09

07/02/10

12/21/10

04/12/11

10/14/14

P=2.12

P=2.73

P=2.73

P=3.50

P=3.66

P=4.60

P=2.10

P=2.70

P=2.65

P=3.47

P=3.70

P=4.59

Jan. 2, 2013

March 10, 2013

July 2, 2015

Dec. 21, 2015

April 14, 2016

October 14, 2018

Others 17,500,000

19,425,245

34,800,000

1,000,000

2,500,000

12/09/08

03/10/09

07/02/10

03/08/11

10/14/14

P=2.12

P=2.73

P=2.73

P=3.53

P=4.60

P=2.10

P=2.70

P=2.65

P=3.53

P=4.59

Jan. 2, 2013

March 10, 2013

July 2, 2015

March 8, 2016

October 14, 2018

Under the terms of the first grant, fifty percent (50%) of the first tranche granted (61,000,000 option

shares) vested on January 2, 2009 and the remaining fifty percent (50%) of said first tranche vested

on the first (1st

) anniversary of the initial vesting date for such tranche or January 2, 2010. On the

66

on the first (1st

) anniversary of the initial vesting date for such tranche or January 2, 2010. On the

other hand, fifty percent (50%) of the second tranche granted (62,925,245 option shares) vested on

March 10, 2009 and the remaining fifty percent (50%) of said second tranche likewise vested on the

first (1st

) anniversary of the initial vesting date for such tranche or March 10, 2010. Grantees of said

options may exercise in whole or in part their respective options at any time after vesting but prior to

the expiration of three (3) years after all of the option shares for such tranche have vested.

A second grant was issued on July 2, 2010 covering a total of 94,300,000 options, of which


certain key personnel of MPIC’s subsidiaries and affiliates. Of the 62,500,000 options granted, 50%

vested on January 1, 2011 and the remaining 50% vested on January 1, 2012. Of the 31,800,000

granted, 30% vested on July 2, 2011, 35% will vest on July 2, 2012 and the remaining 35% will vest

on July 2, 2013. Options granted under this grant may be exercised at any time after vesting but prior

to expiration on July 2, 2015.

A third grant was subsequently issued on the following dates: (a) 10,000,000 option shares was

granted to an executive officer of an MPIC subsidiary of which 30% vested on August 1, 2011, 35%

will vest on August 1, 2012 and 35% will vest on August 1, 2013; (b) 1,000,000 option shares was

granted to senior management of an MPIC subsidiary of which 30% vested on March 8, 2012, 35%

will vest on March 8, 2013 and 35% will vest on March 8, 2014; and (c) 3,000,000 option shares was

granted to an MPIC officer of which 50% will vest on April 14, 2012 and the remaining 50% will vest

on April14, 2013. Options granted under this tranche may be exercised at any time after vesting but

prior to expiration of a period of five years from grant date.

A fourth grant was issued on October 14, 2013 covering a total of 112,000,000 options, of which


certain key personnel of MPIC’s subsidiaries and affiliates. Of the total 112,000,000 options granted,

50% will vest on October 14, 2014 and the remaining 50% will vest on October 14, 2015. Options

granted under this grant may be exercised at any time after vesting but prior to expiration on October

14, 2018.

The foregoing options were granted pursuant to, and subject to the terms and conditions provided in,

the Executive Stock Option Plan of the Parent Company, as amended (the “Plan”). The procedure for

the exercise of such options is as set forth in the Plan.

Long-term Incentive Plan (LTIP)

Certain of the Company’s employees are eligible for long-term employee benefits under a long-term

incentive plan. The liability recognized on the LTIP comprises the present value of the defined

benefit obligation and was determined using the projected unit credit method. Each LTIP

performance cycle generally covers 3 years (e.g., 2013 to 2015 and 2010 to 2012 for MPIC’s LTIP,

2013 to 2015 for Maynilad's LTIP and 2012 to 2014 for MPTC’s LTIP) with payment intended to be

made at the end of the each cycle (without interim payments) and is contingent upon the achievement

of an approved target core income of the Company by the end of the performance cycle. Each LTIP

performance cycle, upon endorsement of the Compensation Committee, is approved by the respective

board of directors of the entities of the Company.

On October 7, 2011, MPIC entered into an IMA with a Trustee Bank to fund the 2010-2012 LTIP

program. The LTIP fund will be expected to continue accumulating for the LTIP target payout. The

investment portfolio of IMA is limited to the following: securities issued, directly or indirectly, or

guaranteed by the government; and time deposit and money market placements issued by any of the

top 10 banks in the Philippines. As at December 31, 2014, the LTIP fund balance for the 2013-2015

LTIP program amounted to P=345 million

67

LTIP expense for the years ended December 31, 2014, 2013 and 2012 amounted to P=441 million,

P=411 million and P=165 million, respectively, and presented as “Personnel costs” under “General and

administrative expenses” in the accompanying consolidated statements of comprehensive income.

LTIP liability as at December 31, 2014 and 2013 amounted to P=850 million and P=455 million,

respectively, and is presented under “Accounts payable and other current liabilities” and “Deferred

credits and other long-term liabilities” account in the accompanying consolidated statements of

financial position.

Please see Notes 25 in the 2014 Audited Consolidated Financial Statements.

Item 11. Security Ownership of Certain Record and Beneficial Owners and Management

Security Ownership of Record and Beneficial Owners of at least 5% of the Parent Company’s

Securities as at February 28, 2015.

Type of

Class

Name and address of

record owner and

relationship with Issuer

Citizenship

Name of Beneficial

Owner &

Relationship with

Record Owner

No. of Shares

Held

Percent

of class

Common

Shares


17/F Liberty Centre Bldg.

104 H.V. dela Costa,


Filipino

MPHI is both record

and beneficial owner.

Mr. Manuel V.

Pangilinan is usually

designated as its

representative, with

authority to vote its

shares, at meetings of

shareholders.

14,522,948,170 52.13%

Common PCD Nominee Corporation* Foreign

Public ownership 9,431,034,166 33.85%

Common

PCD Nominee Corporation* Filipino Public ownership

3,868,205,726 13.88%

Class "A"

Preferred

Shares


17/F Liberty Centre Bldg.

104 H.V. dela Costa,


Filipino MPHI is both record

and beneficial owner.

Mr. Manuel V.

Pangilinan is usually

designated as its

representative, with

authority to vote its

shares, at meetings of

shareholders.

5,000,000,000 100.00%

*PCD Nominee Corporation is the registered owner of shares beneficially owned by participants in the Philippine Central Depositary, Inc.

(PCD), a private company organized to implement an automated book entry system of handling securities transactions in the Philippines. Under the PCD procedures, when an issuer of a PCD-eligible issue will hold a stockholders’ meeting, the PCD shall execute a pro-forma

proxy in favor of its participants for the total number of shares in their respective principal securities account as well as for the total number

of shares in their client securities account. For the shares held in the principal securities account, the participant concerned is appointed as proxy with full voting rights and powers as registered owner of such shares. For the shares held in the client securities account, the

participant concerned is appointed as proxy, with the obligation to constitute a sub-proxy in favor of its clients with full voting a nd other rights for the number of shares beneficially owned by such clients. As at February 23, Deutsche Bank Manila – Clients Acct., and The

Hongkong and Shanghai Banking Corp. Ltd. – Clients Acct., participants of PCD, beneficially own 4,682,040,415 or 16.80%,and

3,100,804,253 or 11.13% , respectively, of the Company’s total outstanding shares.

Other than the abovementioned, MPIC has no knowledge of any person who, as at February 28, 2014,

was directly or indirectly the beneficial owner of, or who has voting power or investment power

68

(pursuant to a voting trust or other similar agreement) with respect to, shares comprising more than

five percent (5%) of MPIC’s outstanding common shares of stock.

Security Ownership of Management as at February 28, 2015

Type

of Class Name and Address of Owner

Amount and

nature of

Beneficial

ownership

Citizenship Percent

of class

Common


7/F Ramon Cojuangco Bldg.

Makati Avenue, Makati City

1 Filipino 0.00%

Common

Jose Ma. K. Lim

10/F MGO Bldg., Legazpi corner dela Rosa Streets,

Legazpi Village, Makati

11,000,001 Filipino 0.04%

Common

David J. Nicol



7,250,001 Australian 0.03%

Common




10,000,001 Filipino

0.04%

Common

Edward A. Tortorici



10,729,596 American 0. 04%

Common

Alfred A. Xerez-Burgos, Jr.

Landco Asset Management, Inc. 2/F Center Mall

Building President’s Avenue, BF Homes, Paranaque

1 Filipino 0.00%

Common

Edward S. Go

Unit 16-A Pacific Plaza Tower

Fort Bonifacio, Bonifacio Global City

Taguig, Metro Manila

500,000 Filipino 0.00%

Common

Lydia B. Echauz

Far Eastern University

N. Reyes St., Sampaloc, Manila

30,000 Filipino 0.00%

Common


1203 Acacia, Dasmarinas Village,

Makati City

250,001 Filipino 0.00%

Common

Antonio A. Picazo

19/F Liberty Center

104 H.V. dela Costa Street

Salcedo Village, Makati City

1,001 Filipino 0.00%

Common

Amado R. Santiago III

Room 114 Ortigas Building

Ortigas Avenue, Pasig City

2,500,001 Filipino 0.01%

Common

Ray C. Espinosa

5/F Locsin Building, Ayala Avenue

Cor Makati Avenue, Makati City

1 Filipino 0.00%

Common




5,862,001 Filipino

0.02%

Common

Robert C. Nicholson

24/F Two Exchange Square, 8 Connaught Place

Central, Hong Kong

1 British

0.00%

69

Type

of Class Name and Address of Owner

Amount and

nature of

Beneficial

ownership

Citizenship Percent

of class

Common

Victorico P. Vargas

Maynilad Water Services, Inc

MWSS Complex, Katipunan Road,

Balara, Quezon City

4,500,001 Filipino 0.00%

Common Washington Z. SyCip

6760 Ayala Avenue, 1226 Makati City 1

Filipino-

American 0.00%

Aggregate for above named officers and directors 52,622,609

Changes in Control

MPIC is not aware of any voting trust agreements or any other similar agreements which may result in

a change in control of the Parent Company. No change in control of the Parent Company has

occurred since the beginning of last year.

Item 12. Certain Relationships and Related Party Transactions

Refer to Note 21 in the 2014 Audited Consolidated Financial Statements.

PART IV – CORPORATE GOVERNANCE

Item 13. Part IV - Corporate Governance portion of the Annual Report

The Manual on Corporate Governance of the Parent Company details the standards by which it

conducts sound corporate governance that are coherent and consistent with relevant laws and

regulatory rules, and constantly strives to create value for its shareholders.

Please refer to Exhibit III - Annual Corporate Governance Report filed on January 12, 2015.

70

PART V – EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C (Current Reports)

MPIC reported the following items on SEC Form 17-C for the year 2014:

Items Reported Date Filed

1 JV Agreement between MPTDC and PNCC for Segment 10.2 January 22

2 AF Consortium Receives Notice of Award to Design and Construct P1.72B

AFCS project

February 3

3 AF Consortium Completes Post-Award Requirements for the AFCS Project February 20

4 Sale of NE Pacific Shopping Centers Corporation shares to Cosco Capital

Inc.

March 3

5 AFCS Concession Agreement signing with DOTC March 31

6 Bond issuance and listing by Manila North Tollways Corporation, a

subsidiary of Metro Pacific Investments Corporation

March 31

7 GIC Invests in Minority Stake to Expand MPIC Hospital Group May 16

8 Light Rail Manila Consortium submitted its pre-qualification documents,

technical proposal and financial bid for the Manila LRT 1 South Extension

Project

May 29

9 FPC sells Don Muang Tollway stake to MPIC May 30

10 MPIC and MPTC join hands with SharePHIL to educate investors, Promote

Shareholder activism

June 16

11 MPIC takes 5% direct shareholding in Meralco through acquisition from

Beacon Electric

June 24

12 DOTC awards LRT 1 to Metro Pacific - Ayala Consortium September 15

13 LRT Line 1 Cavite Extension and Operations & Maintenance Project

Concession Agreement Signed

October 2

14 Material information pertaining to Manila North Tollways Corporation:

SCTEX Price Challenge

December 11

15 Restructuring of Landco Pacific Corporation December 22

16 Execution of operations and maintenance agreement by Metropac Water

Investments Corporation

December 23

72

INDEX TO FINANCIAL

STATEMENTS AND

SUPPLEMENTARY SCHEDULES

Item 16. Index to Financial Statements and Supplementary Schedules

i. Exhibit I - 2013 Audited Financial Statements

ii. Exhibit II - Supplementary Schedules

iii. Exhibit III - Annual Corporate Governance Report

SEC Form 17- A 2014 Index to Financial Statements and Supplementary Schedules

METRO PACIFIC INVESTMENTS CORPORATION INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY

SCHEDULES

FORM 17-A, Item 16

CONTENTS

Exhibit I - Audited Financial Statements

Statement of Management Responsibility for Financial Statements

Report of Independent Auditors

Consolidated Statements of Financial Position as at

December 31, 2014 and 2013

Consolidated Statements of Comprehensive Income for the years ended

December 31, 2014, 2013, and 2012

Consolidated Statements of Changes in Equity for the years ended

December 31, 2014, 2013, and 2012

Consolidated Statements of Cash Flows for the years ended

December 31, 2014, 2013, and 2012

Notes to Consolidated Financial Statements

Exhibit II - Supplementary Schedules

Report of Independent Auditors on Supplementary Schedules

Schedule I. List of Philippine Financial Reporting Standards (PFRSs) effective as at

December 31, 2014 and List of New and Amended Standards and Interpretations and

Improvements to PFRS that became effective as at January 1, 2015

Schedule II. Financial Soundness Indicators

Schedule III. Retained Earnings Available for Dividend Declaration *

Schedule IV. Supplementary Schedules Required by Paragraph 6D, Part II

Under SRC Rule 68, As Amended (2011)

A. Financial Assets

B. Amounts Receivable from Directors, Officers, Employees, Related Parties

and Principal stockholders (Other than Related Parties)

C. Amounts Receivable from Related Parties which are Eliminated during the

Consolidation of Financial Statements

D. Intangible Assets- Other Assets

E. Long-term Debt

F. Indebtedness to Related Parties (Long-term Loans

from Related Companies)

G. Guarantees of Securities of Other Issuers

H. Capital Stock

Schedule V. MPIC Group Structure as of December 31, 2014

Exhibit III - Annual Corporate Governance Report

*In compliance with SEC Memorandum Circular 11, Series of 2008


EXHIBIT I

2014 AUDITED FINANCIAL

STATEMENTS

Metro Pacific Investments Corporation andSubsidiaries

Consolidated Financial StatementsDecember 31, 2014 and 2013and Years Ended December 31, 2014, 2013 and 2012

and

Independent Auditors’ Report

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INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsMetro Pacific Investments Corporation

We have audited the accompanying consolidated financial statements of Metro Pacific InvestmentsCorporation and Subsidiaries, which comprise the consolidated statements of financial position as atDecember 31, 2014 and 2013, and the consolidated statements of comprehensive income, statementsof changes in equity and statements of cash flows for each of the three years in the period endedDecember 31, 2014, and a summary of significant accounting policies and other explanatoryinformation.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with Philippine Financial Reporting Standards, and for such internal controlas management determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits. We conducted our audits in accordance with Philippine Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounrets and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 28, 2012, valid until December 31, 2015SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015

A member firm of Ernst & Young Global Limited

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Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of Metro Pacific Investments Corporation and Subsidiaries as at December 31, 2014and 2013, and their financial performance and their cash flows for each of the three years in the periodended December 31, 2014 in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Julie Christine O. MateoPartnerCPA Certificate No. 93542SEC Accreditation No. 0780-AR-1 (Group A), February 2, 2012, valid until March 31, 2015Tax Identification No. 198-819-116BIR Accreditation No. 08-001998-68-2012, April 11, 2012, valid until April 10, 2015PTR No. 4751308, January 5, 2015, Makati City

February 26, 2015

A member firm of Ernst & Young Global Limited

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December 312014 2013

Noncurrent LiabilitiesNoncurrent portion of: Provisions (Note 17) P=228 P=312 Service concession fees payable (Notes 18, 35 and 36) 7,271 7,909 Long-term debt (Notes 19, 35 and 36) 57,494 47,536Deferred tax liabilities (Note 29) 4,228 3,774Other long-term liabilities (Notes 20, 35 and 36) 6,019 5,152 Total Noncurrent Liabilities 75,240 64,683

Total Liabilities 104,440 87,304

Equity (Note 22)Owners of the Parent Company: Capital stock 26,096 26,076 Additional paid-in capital 42,993 42,933 Equity reserves 6,245 2,643 Retained earnings 27,525 21,882 Other comprehensive income reserve 836 927 Total equity attributable to owners of the Parent Company 103,695 94,461Non-controlling interest 25,877 18,819 Total Equity 129,572 113,280

P=234,012 P=200,584

See accompanying Notes to Consolidated Financial Statements.

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METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Amounts in Millions, Except Earnings Per Share Figures)

Years Ended December 312014 2013 2012

OPERATING REVENUESWater and sewerage services revenue P=18,363 P=16,895 P=15,883Toll fees 8,641 8,154 6,784Hospital revenue 6,677 5,700 5,034School revenue 151 128 106

33,832 30,877 27,807COST OF SALES AND SERVICES (Note 23) (13,082) (11,845) (11,168)GROSS PROFIT 20,750 19,032 16,639General and administrative expenses (Note 24) (6,823) (6,261) (5,384)Interest expense (Note 26) (4,301) (4,001) (3,679)Share in net earnings of equity method investees

(Note 11) 3,167 2,286 1,765Interest income (Note 26) 385 462 652Construction revenue and other income (Note 27) 8,491 8,113 10,115Construction costs and other expenses (Note 27) (7,887) (7,559) (9,239)INCOME BEFORE INCOME TAX 13,782 12,072 10,869PROVISION FOR (BENEFIT FROM) INCOME TAX (Note 29)Current 1,160 1,061 1,097Deferred 48 (468) 565

1,208 593 1,662NET INCOME 12,574 11,479 9,207OTHER COMPREHENSIVE INCOME (OCI) (Note 28)Net OCI to be reclassified to profit or loss in subsequent periods (24) (14) 21Net OCI not being reclassified to profit or loss in subsequent periods (52) 398 581

(76) 384 602TOTAL COMPREHENSIVE INCOME P=12,498 P=11,863 P=9,809Net income attributable to:Owners of the Parent Company P=7,940 P=7,209 P=5,907Non-controlling interest 4,634 4,270 3,300

P=12,574 P=11,479 P=9,207Total comprehensive income attributable to:Owners of the Parent Company P=7,849 P=7,550 P=6,485Non-controlling interest 4,649 4,313 3,324

P=12,498 P=11,863 P=9,809EARNINGS PER SHARE (Note 30)Basic Earnings Per Common Share, Attributable to

Owners of the Parent Company P=0.305 P=0.278 P=0.240Diluted Earnings Per Common Share, Attributable to

Owners of the Parent Company P=0.304 P=0.277 P=0.239


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METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012(Amounts in Millions)

Year Ended December 31, 2014Attributable to Owners of the Parent Company

Capital Stock(Note 22)

AdditionalPaid-inCapital

(Note 22)

EquityReserves(Note 22)

RetainedEarnings(Note 22)

OtherComprehensiveIncome Reserve

(Note 22) Total

Non-controllingInterest (NCI)

(Note 22) Total EquityAt January 1, 2014 P=26,076 P=42,933 P=2,643 P=21,882 P=927 P=94,461 P=18,819 P=113,280Total comprehensive income for the period: Net income – – – 7,940 – 7,940 4,634 12,574 Other comprehensive income (Note 28) – – – – (91) (91) 15 (76)Total comprehensive income – – – 7,940 (91) 7,849 4,649 12,498Executive Stock Option Plan (ESOP) (Note 31): Exercise of stock option 20 60 (21) – – 59 – 59 Cost of ESOP – – 64 – – 64 – 64Gain on sale to NCI (Note 22) – – 5,967 – – 5,967 3,509 9,476Acquisition of NCI (Note 22) – – (2,408) – – (2,408) (787) (3,195)Cash dividends declared (Note 22) – – – (2,297) – (2,297) – (2,297)Dividends declared to non-controlling stockholders (Note 6) – – – – – – (1,045) (1,045)Other changes in NCI (Note 33) – – – – – – 732 732At December 31, 2014 P=26,096 P=42,993 P=6,245 P=27,525 P=836 P=103,695 P=25,877 P=129,572

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(Note 22)




(Note 22) Total


(Note 22) Total EquityAt January 1, 2013 P=24,664 P=38,097 P=707 P=15,688 P=487 P=79,643 P=14,747 P=94,390Total comprehensive income for the period: Net income – – – 7,209 – 7,209 4,270 11,479 Other comprehensive income (Note 28) – – – – 341 341 43 384Total comprehensive income – – – 7,209 341 7,550 4,313 11,863Executive Stock Option Plan (ESOP) (Note 31): Exercise of stock option 82 188 (46) – – 224 – 224 Cost of ESOP – – 18 – – 18 – 18Equity raising (Note 22) 1,330 4,648 – – – 5,978 – 5,978Gain on equity transfer and others (Note 22) – – 1,964 (100) 99 1,963 1,583 3,546Cash dividends declared (Note 22) – – – (915) – (915) – (915)Dividends declared to non-controlling stockholders (Note 6) – – – – – – (2,107) (2,107)NCI in a business combination (Note 4) – – – – – – 283 283At December 31, 2013 P=26,076 P=42,933 P=2,643 P=21,882 P=927 P=94,461 P=18,819 P=113,280

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(Note 22)




(Note 22) Total


(Note 22) Total EquityAt January 1, 2012 P=24,643 P=38,056 P=706 P=10,449 (P=91) P=73,763 P=12,667 P=86,430Total comprehensive income for the period: Net income – – – 5,907 – 5,907 3,300 9,207 Other comprehensive income (Note 28) – – – – 578 578 24 602Total comprehensive income – – – 5,907 578 6,485 3,324 9,809Executive Stock Option Plan (ESOP) (Note 31): Exercise of stock option 21 41 (12) – – 50 – 50 Cost of ESOP – – 13 – – 13 – 13Cash dividends declared (Note 22) – – – (668) – (668) – (668)Dividends declared to non-controlling stockholders (Note 6) – – – – – – (1,470) (1,470)Other changes in NCI – – – – – – 226 226At December 31, 2012 P=24,664 P=38,097 P=707 P=15,688 P=487 P=79,643 P=14,747 P=94,390


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METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Millions)


CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax P=13,782 P=12,072 P=10,869Adjustments for: Interest expense (Note 26) 4,301 4,001 3,679 Amortization of service concession assets (Note 23) 2,958 2,818 3,073 Depreciation and amortization (Notes 23 and 24) 1,049 947 772 Share in net earnings of equity method investees

(Note 11) (3,167) (2,286) (1,765) Dividend income (Note 27) (471) (405) (561) Interest income (Note 26) (385) (462) (652) Gain on sale of AFS financial asset (Note 27) (222) – – Unrealized foreign exchange loss (gain) - net (230) 159 201 Gain on bargain purchase (Notes 4 and 27) – (22) – Reversal of contingent liabilities (Note 27) – – (687) Reversal of accrued interest payable to MWSS (Note 27) – – (378)

Adjustment to amortized cost due to change inexpected cash flows (Note 27) – – 374

Refinancing costs and others 472 569 522Operating income before working capital changes 18,087 17,391 15,447Decrease (increase) in: Restricted cash (540) (467) 556 Receivables (934) 359 (598) Due from related parties 154 (83) 93 Other current assets (377) (257) 267Increase (decrease) in: Accounts payable and other current liabilities (1,532) (1,375) 587 Provisions 784 833 477 Accrued retirement cost 106 121 27Net cash generated from operations 15,748 16,522 16,856Income taxes paid (1,166) (984) (990)Interest received 603 333 561Net cash from operating activities 15,185 15,871 16,427CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of subsidiaries, net of cash acquired (Note 4) – 808 (208)Decrease (increase) in short-term deposits 633 (3,613) 9Increase in other noncurrent assets (1,270) (311) (64)Dividends received from: Equity method investees (Note 11) 533 327 276 Beacon Electric’s preferred shares (Note 11) 405 405 561 AFS financial asset (Note 10) 66 – –Collection of or proceeds from sale/disposal of: Available-for-sale financial assets (Note 10) 1,320 1,151 – Property and equipment (Note 14) 21 20 12 Notes receivable (Notes 8) – – 954

(Forward)

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Additions to/issuance of: Service concession assets (Note 13) (P=6,678) (P=5,780) (P=6,752) Investments in equity method investees (Note 11) (6,329) (1,846) (6,262) Available-for-sale financial assets (Note 10) (4,351) (4,238) (50) Deferred project cost (Note 15) (1,869) – – Property and equipment (Note 14) (1,508) (1,343) (825) Notes receivable (Notes 4 and 8) – (101) (6,797)Net cash used in investing activities (19,027) (14,521) (19,146)CASH FLOWS FROM FINANCING ACTIVITIESReceipt of or proceeds from: Notes payable and long-term debt (Note 19) 13,905 41,254 5,030 Sale to non-controlling stockholders (Note 22) 10,108 3,533 – Contribution from non-controlling stockholders and

other movements (Note 33) 698 4 – Issuance of shares (Notes 22 and 31) 61 6,343 49 Due to related parties – – 6Payments of/for: Interest and other financing charges (3,215) (4,871) (3,059) Notes payable and long-term debt (Note 19) (3,677) (40,573) (1,588) Service concession fees payable (Note 18) (1,184) (1,266) (1,116) Due to related parties (12) (4) (5) Acquisition of non-controlling interests (Note 4) (3,116) – (696) Transaction costs on issuance of shares – (140) – Debt issuance cost (162) (199) – Dividends paid to owners of the Parent Company

(Note 22) (2,297) (915) (668) Dividends paid to non-controlling stockholders

(Notes 6 and 22) (1,178) (1,985) (1,231)Net cash from (used in) financing activities 9,931 1,181 (3,278)NET (DECREASE) INCREASE IN CASH

AND CASH EQUIVALENTS 6,089 2,531 (5,997)CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 11,636 9,105 15,102CASH AND CASH EQUIVALENTS

AT END OF YEAR (Note 7) P=17,725 P=11,636 P=9,105


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METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Metro Pacific Investments Corporation (the Parent Company or MPIC) was incorporated in thePhilippines and registered with the Philippines Securities and Exchange Commission (SEC) onMarch 20, 2006 as an investment holding company. MPIC’s common shares of stock are listed inand traded through the Philippine Stock Exchange (PSE). On August 6, 2012, MPIC launchedSponsored Level 1 American Depositary Receipt (ADR) Program with Deutsche Bank as theappointed depositary bank in line with the Parent Company’s thrust to widen the availability of itsshares to investors in the United States.

The principal activities of the Parent Company’s subsidiaries and equity method investees aredescribed in Notes 2 and 11, respectively.

MPIC is 55.8% owned by Metro Pacific Holdings, Inc. (MPHI) as at December 31, 2014 and2013. MPHI’s economic interest in MPIC is reduced from 55.8% to 52.1% as at February 26,2015 as a result of the overnight placement on February 9, 2015 (see Note 39).

MPHI is a Philippine corporation whose stockholders are Enterprise Investment Holdings, Inc.(EIH; 60.0% interest), Intalink B.V. (26.7% interest) and First Pacific International Limited (FPIL;13.3% interest). First Pacific Company Limited (FPC), a company incorporated in Bermuda andlisted in Hong Kong, through its subsidiaries, Intalink B.V. and FPIL, holds 40.0% equity interestin EIH and investment financing which under Hong Kong Generally Accepted AccountingPrinciples, require FPC to account for the results and assets and liabilities of EIH and itssubsidiaries as part of FPC group of companies in Hong Kong.

The registered office address of the Parent Company is 10th Floor, MGO Building, Legaspi cornerDela Rosa Streets, Legaspi Village, Makati City.

The accompanying consolidated financial statements as at December 31, 2014 and 2013 and foreach of the three years in the period ended December 31, 2014 were approved and authorized forissuance by the Board of Directors (BOD) on February 26, 2015.

2. Summary of Significant Accounting Policies

Basis of PreparationThe consolidated financial statements are prepared on a historical cost basis, except for derivativesand certain available-for-sale (AFS) financial assets that are measured at fair value. Theconsolidated financial statements are presented in Philippine Peso, which is MPIC’s functionaland presentation currency, and all values are rounded to the nearest million peso (P=000,000)except when otherwise indicated.

The consolidated financial statements provide comparative information with respect to theprevious periods.

Statement of ComplianceThe consolidated financial statements are prepared in compliance with Philippine FinancialReporting Standards (PFRS).

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Basis of ConsolidationThe consolidated financial statements of the Company include the accounts of the ParentCompany and its subsidiaries. Control is achieved when the Company is exposed, or has rights, tovariable returns from its involvement with the investee and has the ability to affect those returnsthrough its power over the investee. Specifically, the Company controls an investee if and only ifthe Company has:

§ Power over the investee (i.e., existing rights that give it the current ability to direct therelevant activities of the investee);

§ Exposure, or rights, to variable returns from its involvement with the investee; and§ The ability to use its power over the investee to affect its returns.

When the Company has less than a majority of the voting or similar rights of an investee, theCompany considers all relevant facts and circumstances in assessing whether it has power over aninvestee, including:

§ The contractual arrangement with the other vote holders of the investee§ Rights arising from other contractual arrangements§ The Company’s voting rights and potential voting rights

The Company re-assesses whether or not it controls an investee if facts and circumstances indicatethat there are changes to one or more of the three elements of control.

Subsidiaries of the Company also included structured entities that were set-up for the benefit ofthe Company. Based on contractual terms, the Company assessed that the voting rights in thesestructured entities are not the dominant factor in deciding who controls these structured entities.Thus, these entities were assessed to be structured entities and controlled by the Company underPFRS 10, Consolidated Financial Statements. The voting shares of the third-party stockholders inthese structured entities are accounted for as non-controlling interest. The Company does not haveinterests in unconsolidated structured entities.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary andceases when the Company loses control of the subsidiary. Assets, liabilities, income and expensesof a subsidiary acquired or disposed of during the year are included in the consolidated statementof comprehensive income from the date the Company gains control until the date the Companyceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to theequity holders of the Parent Company and to the non-controlling interests (NCIs), even if thisresults in the NCIs having a deficit balance. When necessary, adjustments are made to thefinancial statements of subsidiaries to bring their accounting policies in line with the Company’saccounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flowsrelating to transactions between members of the Company are eliminated in full on consolidation.

NCI represents the portion of profit or loss and the net assets not held by owners of the ParentCompany and are presented separately in the consolidated statement of comprehensive incomeand within equity in the consolidated statement of financial position, separately from total equityattributable to owners of the Parent Company.

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A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as anequity transaction. If the Company loses control over a subsidiary, it:

· Derecognizes the assets (including goodwill) and liabilities of the subsidiary· Derecognizes the carrying amount of any NCI· Derecognizes the related OCI· Recognizes the fair value of the consideration received· Recognizes the fair value of any investment retained· Recognizes any surplus or deficit in profit or loss· Reclassifies the Parent Company’s share of components previously recognized in OCI to

profit or loss or retained earnings, as appropriate, as would be required if the Company haddirectly disposed of the related assets or liabilities

The consolidated subsidiaries of MPIC are as follows:

December 31, 2014 December 31, 2013

Name of SubsidiaryPlace ofIncorporation Principal Activity

MPICDirect

Interest

DirectInterest ofSubsidiary

MPICEffectiveInterest

MPICDirect

Interest


MPICEffective

Interest(In %) (In %)

MPIC SubsidiariesMetro Pacific Tollways Corporation (MPTC) Philippines Investment holding 99.88 – 99.88 99.88 – 99.88Maynilad Water Holding Company, Inc. (MWHC) (a) Philippines Investment holding 51.27 – 51.27 51.27 – 51.27Metro Pacific Light Rail Corp. (MPLRC) Philippines Investment holding 100.00 – 100.00 100.00 – 100.00Porrovia Corporation (b) Philippines Investment holding 50.00 50.00 100.00 50.00 50.00 100.00MetroPac Water Investments Corporation (MPWIC) Philippines Investment holding 100.00 – 100.00 100.00 – 100.00Metro Pacific Hospital Holdings, Inc. (MPHHI)(c) Philippines Investment holding 85.62 – 85.62 100.00 – 100.00MPIC-JGS Airport Holdings, Inc. (MPIC-JGS) (d) Philippines Investment holding 58.75 – 58.75 58.75 – 58.75Fragrant Cedar Holdings, Inc. (FCHI) Philippines Real Estate 100.00 – 100.00 100.00 – 100.00Neo Oracle Holdings, Inc (NOHI) (e) Philippines Investment holding

and Real estate 96.60 – 96.60 96.60 – 96.60MPIC Infrastructure Holdings Limited (f) (MIHL) BVI Investment holding 100.00 – 100.00 100.00 – 100.00Metro Global Green Waste, Inc. (g) Philippines Investment holding 70.00 – 70.00 – – –

MPTC SubsidiariesOperating SubsidiariesMetro Pacific Tollways Development Corporation

(MPTDC) Philippines Investment holding – 100.00 99.88 – 100.00 99.88Manila North Tollways Corporation (MNTC)(h) Philippines Tollway operations – 75.60 75.50 – 67.10 67.00Cavitex Infrastructure Corporation (CIC) and

subsidiaries (i) Philippines Tollway operations – 100.00 100.00 – 100.00 100.00Metro Strategic Infrastructure Holdings, Inc. (MSIHI) Philippines Investment holding – 57.00 95.55 – 57.00 95.55Dormant SubsidiariesLuzon Tollways Corporation (LTC) Philippines Tollway operations – 100.00 99.85 – 100.00 99.85Collared Wren Holdings, Inc. (CWHI) (j) Philippines Investment holding – 99.99 99.97 – 99.99 99.97Larkwing Holdings, Inc. (LHI) (j) Philippines Investment holding – 99.99 99.97 – 99.99 99.97MPCALA Holdings, Inc. (MHI) (j) Philippines Investment holding – 51.00 99.97 – 51.00 99.97

MIHL Subsidiaries (f)

FPM Infrastructure Holdings Limited (FPM Infra) BVI Investment holding – 100.00 100.00 – – –FPM Tollway Holdings Limited BVI Investment holding – 100.00 100.00 – – –FPM Tollway (Thailand) Limited Hong Kong Investment holding – 100.00 100.00 – – –AIF Toll Road Holdings (Thailand) Co., Ltd (AIF) Thailand Investment holding – 100.00 100.00 – – –

MWHC Subsidiary (a)

Maynilad Water Services, Inc. (Maynilad) Philippines Water and sewerageservices 5.19 92.85 52.80 5.19 92.85 52.80

Maynilad SubsidiariesAmayi Water Solutions, Inc. (AWSI) Philippines Water and sewerage

services – 100.00 52.80 – 100.00 52.80Philippine Hydro, Inc. (PHI) Philippines Water and sewerage

services – 100.00 52.80 – 100.00 52.80

MPHHI Subsidiaries (c)

Riverside Medical Center, Inc (RMCI)(c) Philippines Hospital operation – 57.50 43.67 51.00 – 51.00East Manila Hospital Managers Corp. (EMHMC) (c) Philippines Hospital operation – 100.00 85.62 100.00 – 100.00Asian Hospital Inc. (AHI) (c) Philippines Hospital operation – 85.56 73.26 5.66 79.90 85.56Colinas Verdes Hospital Managers Corp. (CVHMC) (c) Philippines Hospital operation – 100.00 85.62 100.00 – 100.00Bumrungrad International Philippines Inc. (BIPI) (c) Philippines Investment holding – 100.00 85.62 100.00 – 100.00De Los Santos Medical Center Inc. (DLSMC) Philippines Hospital operation – 51.00 43.67 – 51.00 51.00The Megaclinic, Inc. (Megaclinic) (k) Philippines Clinic Management – 51.00 43.67 – 51.00 51.00Central Luzon Doctors’ Hospital, Inc. (CLDH) Philippines Hospital operation – 51.00 43.67 – 51.00 51.00

RMCI SubsidiaryRiverside College, Inc. (RCI) Philippines School operations – 100.00 43.67 – 100.00 51.00

CVHMC SubsidiaryColinas Healthcare, Inc. Philippines Clinic Management – 100.00 85.62 – 100.00 100.00

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December 31, 2014 December 31, 2013

Name of SubsidiaryPlace ofIncorporation Principal Activity

MPICDirect

Interest


MPICEffectiveInterest

MPICDirect

Interest


MPICEffective

Interest(In %) (In %)

MPLRC SubsidiariesLight Rail Manila Holdings Inc.(LRMHI) (l) Philippines Investment holding – 50.00 50.00 – – –Light Rail Manila Corporation (LRMC) (l) Philippines Rail operations – 55.00 55.00 – – –Light Rail Manila Holdings 2, Inc. (LRMH2) (m) Philippines Investment holding – 50.00 50.00 – – –

NOHI SubsidiariesOperating SubsidiariesFirst Pacific Bancshares Philippines, Inc. Philippines Investment holding – 100.00 96.60 – 100.00 96.60Metro Pacific Management Services, Inc. Philippines Management services – 100.00 96.60 – 100.00 96.60First Pacific Realty Partners Corporation (FPRPC) Philippines Investment holding – 50.00 48.30 – 50.00 48.30Preoperating SubsidiaryMetro Tagaytay Land Co., Inc. (MTLCI) Philippines Real estate – 100.00 96.60 – 100.00 96.60Dormant SubsidiariesPacific Plaza Towers Management Services, Inc. Philippines Management services – 100.00 96.60 – 100.00 96.60Philippine International Paper Corporation Philippines Investment holding – 100.00 96.60 – 100.00 96.60Pollux Realty Development Corporation Philippines Investment holding – 100.00 96.60 – 100.00 96.60Metro Asia Link Holdings, Inc. (MALHI) Philippines Investment holding – 60.00 57.96 – 60.00 57.96

(a) Effective February 2014, DMCI-MPIC Water Company, Inc. changed its corporate name to Maynilad Water Holding Company, Inc.(b) Effective June 2014, Light Rail Manila Corporation changed its corporate name to Porrovia Corporation.(c) Effective February 2015, Neptune Stroika Holdings, Inc. (NSHI) changed its corporate name to MPHHI. The non-controlling shareholder of MPHHI also holds an

Exchangeable Bond issued by MPIC which can be exchanged into a 25.51% stake in MPHHI in the future, subject to certain conditions. With the Exchangeable Bond, the non-controlling shareholder is entitled to 39.89% effective ownership interest in MPHHI (see Note 22). Prior to the entry of the non-controlling shareholder, MPIC restructured itsinvestments in the hospital companies by transferring all directly owned hospitals to MPHHI.

(d) On March 11, 2013, the Company and JG Summit Holdings, Inc. (JG Summit) formed MPIC-JGS to bid for airport projects that will be rolled out by the Government in thefuture.

(e) Formerly Metro Pacific Corporation (MPC). NOHI’s corporate life ended December 31, 2013 and is currently under the process of liquidation.(f) On July 31, 2014, FPC transferred its 75% shareholding in FPM Infra to MPIC through MIHL. Prior to the transfer, MPIC effectively held 25% in FPM Infra (see Note 11).(g) Incorporated on November 7, 2014 as an investment holding company for the Company’s waste-to-energy projects (see Note 33).(h) See Note 4 - Acquisition of Non-Controlling Interest in MNTC.(i) Interest in CIC is held through a Management Letter Agreement.(j) These companies were incorporated in September 2013 to bid for toll road projects that will be rolled out by the Government in the future.(k) Effective October 29, 2014, DLS-STI Megaclinic, Inc. changed its corporate name to The Megaclinic, Inc.(l) Incorporated in 2014 in relation to the Concession Agreement for the ₱65-billion Light Rail Transit Line 1 Cavite Extension and Operations & Maintenance Project

(see Note 33).(m) On November 19, 2014, MPIC and AC Infrastructure Holdings Corporation (AC Infra) incorporated LRMH2 to bid for the operation and maintenance contract of the Light Rail

Transit Line 2. Actual bidding for the project is targeted for the third quarter of 2015.

Changes in Accounting Policies and DisclosuresThe accounting policies adopted are consistent with those of the previous financial year, except forthe following voluntary changes in accounting policies and adoption of new and amended PFRSand Philippine interpretations effective January 1, 2014.

Voluntary change in accounting policies - Change in amortization method of the serviceconcession asset of MNTC — Beginning January 1, 2014, the service concession asset of MNTCis amortized on a unit of production (UOP) basis. MPTC determined that it is more appropriate touse the UOP basis for amortizing the service concession asset as the economic benefit of this assetis more closely aligned with the traffic volume and kilometers travelled for the segments of thetoll road using an “open toll collection system” and “closed toll collection system”, respectively.The change in the method of amortization is also consistent with the toll segments’ move to unifythe accounting policies of its subsidiaries. This change in accounting policy resulted in a decreasein amortization expense by P=131.0 million of the service concession asset for the year endedDecember 31, 2014.

Under the UOP basis, the amortization expense is expected to decrease in the earlier period andincrease in the later period of the concession term compared with the straight-line method ofamortization. The calculation of the UOP amortization is subject to other variables such asadditional capital expenditures and re-estimation of projected traffic, and actual traffic volumeduring the year. Given that the projected and actual traffic volume fluctuate, it is not practicableto estimate the impact for the succeeding periods.

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Adoption of new and amended standards and interpretations

§ PAS 32, Offsetting Financial Assets and Financial Liabilities (Amendments) — Theseamendments clarify the meaning of “currently has a legally enforceable right to set-off” andthe criteria for non-simultaneous settlement mechanisms of clearing houses to qualify foroffsetting. These amendments affected the presentation only and had no impact on theCompany’s financial position or performance.

§ Annual Improvements to PFRSs (2010-2012 Cycle) – PFRS 13, Fair Value Measurement –Short-term Receivables and Payables — This amendment clarifies that short-term receivablesand payables with no stated interest rates can be held at invoice amounts when the effect ofdiscounting is immaterial. This amendment had no material impact on the Company’sfinancial position or performance.

The following standards were also adopted but did not have any impact on the Company’sconsolidated financial statements:

§ PFRS 10, PFRS 12 and PAS 27, Investment Entities (Amendments) — These amendmentsprovide an exception to the consolidation requirement for entities that meet the definition ofan investment entity under PFRS 10, Consolidated Financial Statements. The exception toconsolidation requires investment entities to account for subsidiaries at fair value throughprofit or loss.

§ PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives andContinuation of Hedge Accounting (Amendments) — These amendments provide relief fromdiscontinuing hedge accounting when novation of a derivative designated as a hedginginstrument meets certain criteria. The Company has not novated any of its derivatives duringthe current period. However, these amendments would be considered for any futurenovations.

§ Philippine Interpretation IFRIC 21, Levies — IFRIC 21 is effective for annual periodsbeginning on or after January 1, 2014 and is applied retrospectively. It is applicable to alllevies imposed by governments under legislation, other than outflows that are within the scopeof other standards (e.g., PAS 12, Income Taxes) and fines or other penalties for breaches oflegislation. The interpretation clarifies that an entity recognizes a liability for a levy no earlierthan when the activity that triggers payment, as identified by the relevant legislation, occurs.It also clarifies that a levy liability is accrued progressively only if the activity that triggerspayment occurs over a period of time, in accordance with the relevant legislation. For a levythat is triggered upon reaching a minimum threshold, no liability is recognized before thespecified minimum threshold is reached.

§ Annual Improvements to PFRSs (2011-2013 Cycle) – PFRS 1, First-time Adoption of PFRS –Meaning of “Effective PFRS” — This amendment clarifies that an entity may choose to applyeither a current standard or a new standard that is not yet mandatory, but that permits earlyapplication, provided either standard is applied consistently throughout the periods presentedin the entity’s first PFRS financial statements.

The principal accounting and financial reporting policies adopted in preparing the Company’sconsolidated financial statements are as follows:

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Business Combinations and GoodwillBusiness combinations are accounted for using the acquisition method. The cost of an acquisitionis measured as the aggregate of the consideration transferred measured at acquisition date fairvalue and the amount of any NCI in the acquiree. For each business combination, the Companyelects whether to measure the NCIs in the acquiree at fair value or at the proportionate share of theacquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in generaland administrative expenses.

When the Company acquires a business, it assesses the financial assets and liabilities assumed forappropriate classification and designation in accordance with the contractual terms, economiccircumstances and pertinent conditions as of the acquisition date. This includes the separation ofembedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognized in profit orloss. It is then considered in the determination of goodwill.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value atthe acquisition date. Contingent consideration classified as an asset or liability that is a financialinstrument and within the scope of PAS 39, Financial Instruments: Recognition andMeasurement, is measured at fair value with changes in fair value recognized either in profit orloss or as a change to OCI. If the contingent consideration is not within the scope of PAS 39, it ismeasured in accordance with the appropriate PFRS. Contingent consideration that is classified asequity is not re-measured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the considerationtransferred and the amount recognized for NCI, and any previous interest held, over the netidentifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is inexcess of the aggregate consideration transferred, the Company re-assesses whether it hascorrectly identified all of the assets acquired and all of the liabilities assumed and reviews theprocedures used to measure the amounts to be recognized at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregateconsideration transferred, then the gain is recognized immediately in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.For the purpose of impairment testing, goodwill acquired in a business combination is, from theacquisition date, allocated to each of the Company’s cash-generating units (CGUs) that areexpected to benefit from the combination, irrespective of whether other assets or liabilities of theacquiree are assigned to those units.

Where goodwill has been allocated to a CGU and part of the operation within that unit is disposedof, the goodwill associated with the disposed operation is included in the carrying amount of theoperation when determining the gain or loss on disposal. Goodwill disposed in thesecircumstances is measured based on the relative values of the disposed operation and the portionof the CGU retained.

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If the initial accounting for business combination can be determined only provisionally by the endof the period by which the combination is effected because the fair values to be assigned to theacquiree’s identifiable assets and liabilities can be determined only provisionally, the Companyaccounts for the combination using provisional values. Adjustments to those provisional values asa result of completing the initial accounting shall be made within twelve (12) months from theacquisition date. The carrying amount of an identifiable asset, liability or contingent liability thatis recognized as a result of completing the initial accounting shall be calculated as if its fair valueat the acquisition date had been recognized from that date. Goodwill or any gain recognized shallbe adjusted from the acquisition date by an amount equal to the adjustment to the fair value at theacquisition date of the identifiable asset, liability or contingent liability being recognized oradjusted.

Equity Method InvesteesEquity method investees consist of the Company’s investments in associates and joint ventures.

An associate is an entity over which the Company has significant influence. Significant influenceis the power to participate in the financial and operating policy decisions of the investee, but is notcontrol or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of thearrangement have rights to the net assets of the joint venture. Joint control is the contractuallyagreed sharing of control of an arrangement, which exists only when decisions about the relevantactivities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to thosenecessary to determine control over subsidiaries.

The Company’s investments in its associate and joint ventures are accounted for using the equitymethod.

Under the equity method, the investment in an associate or a joint venture is initially recognized atcost. The carrying amount of the investment is adjusted to recognize changes in the Company’sshare of net assets of the associate or joint venture since the acquisition date. Goodwill relating tothe associate or joint venture is included in the carrying amount of the investment and is neitheramortized nor individually tested for impairment.

The Company’s share of the results of operations of the associate or joint venture is included inprofit or loss. Any change in OCI of those investees is presented as part of the Company’s OCI.In addition, when there has been a change recognized directly in the equity of the associate or jointventure, the Company recognizes its share of any changes, when applicable, in the consolidatedstatement of changes in equity. Unrealized gains and losses resulting from transactions betweenthe Company and the associate or joint venture are eliminated to the extent of the interest in theassociate or joint venture.

The aggregate of the Company’s share of profit or loss of an associate and a joint venture is shownon the face of the consolidated statement of comprehensive income outside operating profit andrepresents profit or loss after tax and NCI in the subsidiaries of the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reportingperiod as the Company. When necessary, adjustments are made to bring the accounting policies inline with those of the Company.

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After application of the equity method, the Company determines whether it is necessary torecognize an impairment loss on its investment in its associate or joint venture. At each reportingdate, the Company determines whether there is objective evidence that the investment in theassociate or joint venture is impaired. If there is such evidence, the Company calculates theamount of impairment as the difference between the recoverable amount of the associate or jointventure and its carrying value, then recognizes the loss as ‘Share in net earnings of equity methodinvestees’ in the consolidated statement of comprehensive income.

Upon loss of significant influence over the associate or joint control over the joint venture, theCompany measures and recognizes any retained investment at its fair value. Any differencebetween the carrying amount of the associate or joint venture upon loss of significant influence orjoint control and the fair value of the retained investment and proceeds from disposal is recognizedin profit or loss.

Current Versus Non-current ClassificationThe Company presents assets and liabilities in the consolidated statement of financial positionbased on current/non-current classification.

An asset is current when it is:§ Expected to be realized or intended to be sold or consumed in the normal operating cycle§ Held primarily for the purpose of trading§ Expected to be realized within twelve months after the reporting period, or§ Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for

at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:§ It is expected to be settled in the normal operating cycle§ It is held primarily for the purpose of trading§ It is due to be settled within twelve months after the reporting period, or§ There is no unconditional right to defer the settlement of the liability for at least twelve

months after the reporting period.

The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities areclassified as non-current assets and liabilities, respectively.

Fair Value MeasurementThe Company measures derivatives at fair value at each reporting date and, for purposes ofimpairment testing, uses fair value less costs of disposal or value in use to determine therecoverable amount of some of its non-financial assets. Also, fair values of financial instrumentsmeasured at amortized cost are disclosed in Note 37.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:

§ In the principal market for the asset or liability; or§ In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Company.

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The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest. A fair value measurement of a non-financial asset takes into account amarket participant’s ability to generate economic benefits by using the asset in its highest and bestuse or by selling it to another market participant that would use the asset in its highest and bestuse.

The fair value for financial instruments traded in active markets at the reporting date is based ontheir quoted price or binding dealer price quotations (bid price for long positions and ask price forshort positions), without any deduction for transaction costs. Securities defined in these accountsas ‘listed’ are traded in an active market. Where the Company has financial assets and financialliabilities with offsetting positions in market risks or counterparty credit risk, it has elected to usethe measurement exception to measure the fair value of its net risk exposure by applying the bid orask price to the net open position as appropriate. For all other financial instruments not traded inan active market, the fair value is determined by using valuation techniques deemed to beappropriate in the circumstances. Valuation techniques include the market approach (i.e., usingrecent arm’s length market transactions adjusted as necessary and reference to the current marketvalue of another instrument that is substantially the same) and the income approach (i.e.,discounted cash flow analysis and option pricing models making as much use of available andsupportable market data as possible).

The Company uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs. All assets and liabilities for which fairvalue is measured or disclosed in the financial statements are categorized within the fair valuehierarchy described as follows based on the lowest-level input that is significant to the fair valuemeasurement as a whole:

§ Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

§ Level 2 — Valuation techniques for which the lowest-level input that is significant to the fair value measurement is directly or indirectly observable

§ Level 3 — Valuation techniques for which the lowest-level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the consolidated financial statements on a recurringbasis, the Company determines whether transfers have occurred between levels in the hierarchy byreassessing categorization (based on the lowest-level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

The Company determines the policies and procedures for both recurring fair value measurement,such as derivatives, and non-recurring measurement, such as impairment tests. At each reportingdate, the finance team, with the assistance of the respective finance teams of the ParentCompany’s subsidiaries, analyzes the movements in the values of assets and liabilities which arerequired to be re-measured or reassessed as per the Company’s accounting policies. For thisanalysis, the finance team verifies the major inputs applied in the latest valuation by agreeing theinformation in the valuation computation to contracts, counterparty assessment and other relevantdocuments.

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The finance team also compares the changes in the fair value of each asset and liability withrelevant external sources to determine whether the change is reasonable. On an interim basis, thefinance team presents the valuation results to the Company’s top management for review. Thisincludes a discussion of the major assumptions used in the valuations.

For the purpose of fair value disclosures, the Company has determined classes of assets andliabilities based on the nature, characteristics and risks of the asset or liability and the level of thefair value hierarchy as explained above (see Note 37).

Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents are short-term, highly liquidinvestments that are readily convertible to known amounts of cash with original maturities of threemonths or less from acquisition date and that are subject to an insignificant risk of changes invalue.

Restricted Cash and Short-term DepositsRestricted cash represents cash in banks earmarked for long-term debt principal and interestrepayment maintained in compliance with the loan agreement. Short-term deposits, other thanthose classified as AFS, are highly liquid money market placements with maturities of more thanthree months but less than one year from dates of acquisition.

Financial InstrumentsThe Company recognizes a financial asset or a financial liability in the consolidated statement offinancial position when it becomes a party to the contractual provisions of the instrument. Allregular way purchases and sales of financial assets are recognized on the settlement date. Regularway purchases and sales are purchases or sales of financial assets that require delivery of assetswithin the period generally established by regulation or convention in the marketplace.Derivatives are recognized on a trade date basis.

Initial Recognition. Financial instruments are recognized initially at fair value, which is the fairvalue of the consideration given (in case of an asset) or received (in case of a liability). The fairvalue of the consideration given or received is determined by reference to the transaction price orother market prices. If such market prices are not reliably determinable, the fair value of theconsideration is estimated as the sum of all future cash payments or receipts, discounted using theprevailing market interest rates for similar instruments with similar maturities. The initialmeasurement of financial instruments, except for financial instruments at fair value through profitor loss (FVPL), includes transaction costs.

The Company classifies its financial instruments in the following categories: financial assets atFVPL, held-to-maturity (HTM) investments, loans and receivables, AFS financial assets, financialliabilities at FVPL and other financial liabilities.

The classification depends on the purpose for which the financial instruments were acquired orliabilities were incurred and whether they are quoted in an active market. Management determinesthe classification of its instruments at initial recognition and, where allowed and appropriate, re-evaluates such classification at every reporting date.

Financial instruments are classified as liabilities or equity in accordance with the substance of thecontractual arrangement. Interest, dividend, gains and losses relating to a financial liability or acomponent that is a financial liability, are reported as expense or income. Distributions to holdersof financial instruments classified as equity are charged directly to equity, net of related incometax benefits.

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‘Day 1’ Profit or LossWhere the transaction price in a non-active market is different from the fair value of otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Company recognizes the differencebetween the transaction price and fair value (a ‘Day 1’ profit or loss) in profit or loss unless itqualifies for recognition as some other type of asset or liability. In cases where the data is notobservable, the difference between the transaction price and model value is only recognized inprofit or loss when the inputs become observable or when the instrument is derecognized. Foreach transaction, the Company determines the appropriate method of recognizing the ‘Day 1’profit or loss amount.

Amortized CostAmortized cost is computed using the effective interest method less any allowance for impairmentand principal repayment or reduction. The calculation takes into account any premium or discounton acquisition and includes transaction costs and fees that are integral part of the effective interestrate.

Subsequent Measurement. The subsequent measurement of financial assets and financialliabilities depends on their classification discussed as follows:

Financial Assets and Liabilities at FVPL. Financial assets and liabilities at FVPL includefinancial assets and liabilities held for trading and those designated upon initial recognition as atFVPL. Financial assets and liabilities are classified as held for trading if they are acquired for thepurpose of selling or repurchasing in the near term. Derivatives are also classified as held fortrading unless they are designated as effective hedging instruments. Financial assets and liabilitiesclassified as at FPVL are carried at fair value in the consolidated statement of financial position,with any gains or losses being recognized in the profit or loss. Interests earned on holdingfinancial assets at FVPL are reported as interest income using the effective interest rate.Dividends earned on holding financial assets at FVPL are recognized in profit or loss when theright to payment had been established.

Financial assets and liabilities may be designated at initial recognition as at FVPL if any of thefollowing criteria are met:

§ The designation eliminates or significantly reduces the inconsistent treatment that wouldotherwise arise from measuring the financial assets or liabilities or recognizing gains or losseson them on different bases; or

§ The assets are part of a group of financial assets, financial liabilities or both which aremanaged and their performance evaluated on a fair value basis, in accordance with adocumented risk management or investment strategy; or

§ The financial instrument contains an embedded derivative, unless the embedded derivativedoes not significantly modify the cash flows or it is clear, with little or no analysis, that itwould not be separately recorded.

The Company accounts for its derivatives (including embedded derivatives) under this categorywith fair value changes being reported directly in profit or loss, except when the derivative isdesignated in an effective hedging relationship. In that case, the fair value change is eitherreported in profit or loss with the corresponding adjustment to the hedged item (fair value hedge)or deferred in equity (cash flow hedge) presented as “Fair value changes on cash flow hedges”under “Other comprehensive income reserve” account.

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The Company’s financial asset at FVPL as at December 31, 2013 consisted of bifurcatedderivatives only, which derivative asset was derecognized in 2014 (see Note 36).

The interest rate swap entered in 2011 constituting the Company’s financial liability at FVPL as atDecember 31, 2011 was preterminated on December 15, 2012 (see Note 19).

Loans and Receivables. Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They are not entered into with theintention of immediate or short-term resale and are not classified as financial assets at FVPL,HTM investments or AFS financial assets. After initial measurement, loans and receivables aresubsequently measured at amortized cost using the effective interest rate method, less anyimpairment. The amortization is included as part of interest income in profit or loss. Lossesarising from impairment are recognized in profit or loss. Loans and receivables are included incurrent assets if maturity is within 12 months after the end of reporting period, otherwise these areclassified as noncurrent assets.

Loans and receivables include cash and cash equivalents, short-term deposits (excluding UnitInvestment Trust Fund presented as short-term deposits but classified as AFS financial assets) andlong-term deposits, receivables, investments in preferred shares with mandatory redemptionfeature, restricted cash and other deposits, and due from related parties (see Notes 7, 8, 9, and 21).

HTM Investments. HTM investments are quoted non-derivative financial assets with fixed ordeterminable payments and fixed maturities for which the Company’s management has thepositive intention and ability to hold to maturity. Investments intended to be held for an undefinedperiod are not included in this classification. When the Company sells or reclassifies other than aninsignificant amount of HTM investments, the entire category would be tainted for 2 years andreclassified as AFS financial assets.

After initial measurement, these investments are subsequently measured at amortized cost. Theamortization is included as part of interest income in profit or loss. Gains and losses arerecognized in profit or loss when the HTM investments are derecognized and impaired, as well asthrough the amortization process. The losses arising from impairment of such investments and theeffects of restatement on foreign currency denominated HTM investments are also recognized inprofit or loss. Assets under this category are classified as current assets if maturity is within 12months from the reporting date and as noncurrent assets if maturity is more than a year from thereporting date.

The Company has investments in fixed rate retail treasury bonds of the Republic of the Philippines(ROP) that were previously classified as HTM investments prior to 2010. In view of thepretermination of the HTM investments in 2010, the fixed rate retail treasury bonds werereclassified to AFS financial assets and continues to be presented as such (see Notes 10 and 36).

AFS Financial Assets. AFS financial assets are non-derivative financial assets that are designatedas such or not classified in any of the other categories. AFS financial assets include equity anddebt securities. They are purchased and held indefinitely and may be sold in response to liquidityrequirements or changes in market conditions.

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After initial measurement, AFS financial assets that are quoted are subsequently measured at fairvalue. The unrealized gains and losses arising from the change in fair value of AFS financialassets are recognized and included in the “Other comprehensive income” until the investment isderecognized or determined to be impaired, at which time the cumulative gains or losses arereclassified to profit or loss. When the Company holds more than one investment in the samesecurity, these are deemed to be disposed of on an average costing method basis. Interest earnedon holding AFS debt financial assets are reported as interest income using the effective interestrate method. Dividends earned on holding AFS equity financial assets are recognized in profit orloss when the right of payment has been established. AFS equity financial assets that areunquoted and for which fair values cannot be reliably determined are carried at cost less anyimpairment in value.

As at December 31, 2014 and 2013, this category includes investments in quoted and unquotedcommon shares and preferred shares, Unit Investment Trust Fund, investments in golf shares andinvestments in bonds (see Notes 7, 10 and 11).

Other Financial Liabilities. This category pertains to financial liabilities that are not held fortrading or not designated as at FVPL upon the inception of the liability. These include liabilitiesarising from operations and borrowings.

Other financial liabilities are recognized initially at fair value and are subsequently carried atamortized cost, taking into account the impact of applying the effective interest method ofamortization (or accretion) for any related premium, discount and any directly attributabletransaction cost. Any effect of restatement of foreign currency-denominated liabilities arerecognized in profit or loss.

All of the Company’s financial liabilities, except for derivative liabilities, are classified as otherfinancial liabilities which include the following, among others:

a. Loans and Borrowings

All loans and borrowings are initially recognized at fair value of the consideration receivedless directly attributable transaction costs (referred to as “debt issue costs”). Debt issue costsare amortized over the life of the debt instrument using the effective interest method. Afterinitial recognition, interest bearing loans and borrowings are subsequently measured atamortized cost using the effective interest method. Gains and losses are recognized in profitor loss when the liabilities are derecognized, as well as through the amortization process. Thiscategory generally includes short-term and long-term debt.

b. Financial Guarantee Contracts

Financial guarantee contracts issued by the Company are those contracts that require apayment to be made to reimburse the holder for a loss it incurs because the specified debtorfails to make a payment when due in accordance with the terms of a debt instrument.Financial guarantee contracts are recognized initially as a liability at fair value, adjusted fortransaction costs that are directly attributable to the issuance of the guarantee. Subsequently,the liability is measured at the higher of the best estimate of the expenditure required to settlethe present obligation at the end of reporting period and the amount recognized lesscumulative amortization. This category generally includes financial guarantee obligation.

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Derivatives and Hedge AccountingFreestanding and separated embedded derivatives are classified as financial assets or financialliabilities at FVPL unless they are designated as effective hedging instruments. The Companyuses derivative financial instruments, such as cross-currency swaps and interest rate swaps, tohedge its foreign currency risks and interest rate risks, respectively. Derivative instruments areinitially recognized at fair value on the date in which a derivative transaction is entered into orbifurcated, and are subsequently remeasured at fair value. Derivatives are carried as assets whenthe fair value is positive and as liabilities when the fair value is negative. Consequently, gains andlosses from changes in fair value of derivatives not designated as effective accounting hedges arerecognized immediately in profit or loss.

For the purpose of hedge accounting, hedges are classified primarily as: (a) a hedge of the fairvalue of a recognized asset or liability or an unrecognized firm commitment except for foreigncurrency risk (fair value hedge); or (b) a hedge of the exposure to variability in cash flowsattributable to a recognized asset or liability or a highly probable forecasted transaction or foreigncurrency risk in an unrecognized firm commitment (cash flow hedge); or (c) hedge of a netinvestment in a foreign operation. The Company has no derivatives in 2013 designated as fairvalue hedges or hedges of a net investment in a foreign operation as at December 31, 2013.The Company has no derivatives as at December 31, 2014.

At the inception of a hedge relationship, the Company formally designates and documents thehedge relationship to which the Company wishes to apply hedge accounting and the riskmanagement objective and strategy for undertaking the hedge. The documentation includesidentifying the hedging instrument, the hedged item or transaction, the nature of the risk beinghedged and how the entity will assess the hedging instrument’s effectiveness in offsetting theexposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.Such hedges are assessed on an ongoing basis to determine that they actually have been highlyeffective throughout the financial reporting periods for which they were designated.

In cash flow hedges, changes in the fair value of a hedging instrument that qualifies as a highlyeffective cash flow hedge are included in equity, net of related deferred tax, and presented as “Fairvalue changes on cash flow hedges” under “Other comprehensive income reserve” account in theconsolidated statement of financial position. The ineffective portion is immediately recognized inprofit or loss.

If the hedged cash flow results in the recognition of an asset or a liability, gains and losses initiallyrecognized in equity are transferred from equity to net income in the same period during which thehedged forecasted transaction or recognized asset or liability affects profit or loss.

When the hedge ceases to be highly effective, hedge accounting is discontinued prospectively. Inthis case, the cumulative gain or loss on the hedging instrument that had been recognized in othercomprehensive income reserve is retained as such until the forecasted transaction occurs. Whenthe forecasted transaction is no longer expected to occur, any net cumulative gain or losspreviously reported in other comprehensive income reserve is credited or charged immediately toprofit or loss.

For derivatives that are not designated as effective accounting hedges, any gains or losses arisingfrom changes in fair value are recognized directly in profit or loss.

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Embedded Derivatives. An embedded derivative is separated from the host contract andaccounted for as derivative if all the following conditions are met:

§ The economic characteristics and risks of the embedded derivative are not clearly and closelyrelated to the economic characteristics of the host contract;

§ A separate instrument with the same terms as the embedded derivative would meet thedefinition of the derivative; and

§ The hybrid or combined instrument is not recognized as at FVPL.

Embedded derivatives that are bifurcated from the host contracts are accounted for as financialassets or liabilities at FVPL. Changes in fair values are recognized in profit or loss. Derivativesare carried as assets when the fair value is positive and as liabilities when the fair value isnegative.

The Company assesses whether an embedded derivative is required to be separated from the hostcontract and accounted for as a derivative when the entity first becomes a party to the contract.Subsequent reassessment is prohibited unless there is a change in the terms of the contract thatsignificantly modifies the cash flows that otherwise would be required under the contract, in whichcase reassessment is required. The Company determines whether a modification to cash flows issignificant by considering the extent to which the expected future cash flows associated with theembedded derivative, the host contract or both have changed and whether the change is significantrelative to the previously expected cash flows on the contract.

Current Versus Noncurrent Classification of DerivativesDerivative instruments that are not designated and considered as effective hedging instruments areclassified as current or noncurrent or separated into a current and noncurrent portion based on anassessment of the facts and circumstances (i.e., the underlying contracted cash flows).

§ If the Company holds a derivative for trading purposes, irrespective of the timing of futurecash flows, it is classified as current.

§ Where the Company holds a derivative as an economic hedge (and does not apply hedgeaccounting), for period beyond 12 months after the end of reporting period, the derivative isclassified as noncurrent (or separated into current and noncurrent portions) consistent with theclassification of the underlying item.

§ Embedded derivatives that are not closely related to the host contract are classified consistentwith the cash flows of the host contract.

Derivative instruments that are designated as, and are considered effective hedging instruments,are classified consistent with the classification of the underlying hedged item. The derivativeinstrument is separated into a current portion and noncurrent portion only if a reliable allocationcan be made.

Classification of Financial Instruments Between Liability and EquityA financial instrument is classified as a liability if it provides for a contractual obligation to:

§ Deliver cash or another financial asset to another entity; or§ Exchange financial assets or financial liabilities with another entity under conditions that are

potentially unfavorable to the Company; or§ Satisfy the obligation other than by the exchange of a fixed amount of cash or another

financial asset for a fixed number of own equity shares.

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If the Company does not have an unconditional right to avoid delivering cash or another financialasset to settle its contractual obligation, the obligation meets the definition of a financial liability.The components of issued financial instruments that contain both liability and equity elements areaccounted for separately, with the equity component being assigned the residual amount afterdeducting from the instrument as a whole the amount separately determined as the fair value of theliability component on the date of issue.

Impairment of Financial AssetsThe Company assesses at each end of reporting period whether a financial asset or group offinancial assets is impaired. If any such evidence exists, the Company applies the relevantimpairment policies by measurement type of financial asset to determine the amount of anyimpairment loss. A financial asset or a group of financial assets is deemed to be impaired if, andonly if, there is objective evidence of impairment as a result of one or more events that haveoccurred after the initial recognition of the asset (an incurred “loss event”) and that loss event (orevents) has an impact on the estimated future cash flows of the financial asset or the group offinancial assets that can be reliably estimated. Objective evidence of impairment may includeindications that the borrower or a group of borrowers is experiencing significant financialdifficulty, default or delinquency in interest or principal payments, the probability that they willenter bankruptcy or other financial reorganization, and where observable data indicate that there ismeasurable decrease in the estimated future cash flows, such as changes in arrears or economicconditions that correlate with defaults.

Assets Carried at Amortized Cost. The Company first assesses whether objective evidence (suchas the probability of insolvency or significant financial difficulties of the debtor) of impairmentexists individually for financial assets that are individually significant, and individually orcollectively for financial assets that are not individually significant. If it is determined that noobjective evidence of impairment exists for an individually assessed financial asset, whethersignificant or not, the asset is included in a group of financial assets with similar credit riskcharacteristics and that group of financial assets is collectively assessed for impairment. Assetsthat are individually assessed for impairment and for which an impairment loss is or continues tobe recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on assets carried at amortized cost had beenincurred, the amount of the loss is measured as the difference between the asset’s carrying amountand the present value of estimated future cash flows (excluding future credit losses that have notbeen incurred) discounted at the financial asset’s original effective interest rate (i.e., the effectiveinterest rate computed at initial recognition). The carrying amount of the asset is reduced throughthe use of an allowance account and the amount of the loss is recognized in profit or loss. Theassets and the associated allowance are written off when there is no realistic prospect of futurerecovery, and all collateral had been realized or had been transferred to the Company. If a write-off is later recovered, the recovery is credited to profit or loss.

If, in a subsequent year, the amount of the impairment loss decreases because of an eventoccurring after the impairment was recognized, the previously recognized impairment loss isreversed. Any subsequent reversal of an impairment loss is recognized in profit or loss, to theextent that the carrying value of the asset does not exceed what the amortized cost would havebeen had the impairment not been recognized at the date impairment is reversed. The amount ofthe reversal shall be recognized in profit or loss.

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Assets Carried at Cost. If there is objective evidence that an impairment loss had been incurredon an unquoted equity instrument that is not carried at fair value because its fair value cannot bereliably measured, the amount of the loss is measured as the difference between the asset’scarrying amount and the present value of estimated future cash flows discounted at the currentmarket rate of return for a similar financial asset.

The carrying amount of the asset is reduced through the use of an allowance account and theamount of the loss is recognized in profit or loss. The asset together with the associated allowanceare written off when there is no realistic prospect of future recovery and all collateral had beenrealized or had been transferred to the Company.

AFS Financial Assets. For AFS financial assets, the Company assesses at each end of reportingperiod whether there is objective evidence that a financial asset or group of financial assets isimpaired.

In the case of equity investments classified as AFS financial assets, this would include asignificant or prolonged decline in the fair value of the investments below their cost. Where thereis evidence of impairment, the cumulative loss measured as the difference between the acquisitioncost and the current fair value, less any impairment loss on that financial asset previouslyrecognized in profit or loss, is removed from other comprehensive income reserve and recognizedin profit or loss. Impairment losses on equity investments are not reversed through profit or loss.Increases in fair value after impairment are recognized directly in other comprehensive incomereserve.

In the case of debt instruments classified as AFS financial assets, impairment is assessed based onthe same criteria as financial assets carried at amortized cost. However, the amount recorded forimpairment is the cumulative loss measured as the difference between the amortized cost and thecurrent fair value, less any impairment loss on that investment previously recognized in profit orloss. Future interest income continues to be accrued based on the reduced carrying amount of theasset, using the rate of interest used to discount future cash flows for the purpose of measuring theimpairment loss. Such accrual is recorded as part of “Interest income” in profit or loss. If, insubsequent year, the fair value of a debt instrument increases and the increase can be objectivelyrelated to an event occurring after the impairment loss was recognized in profit or loss, theimpairment loss is reversed through profit or loss.

Derecognition of Financial Instruments

Financial Asset. A financial asset (or, where applicable, a part of a financial asset or part of agroup of similar financial assets) is derecognized when:

§ The Company’s rights to receive cash flows from the asset have expired;§ The Company retains the right to receive cash flows from the asset, but has assumed an

obligation to pay them in full without material delay to a third party under a “pass-through”arrangement; or

§ The Company has transferred its rights to receive cash flows from the asset and either (a) hastransferred substantially all the risks and rewards of the asset, or (b) has neither transferred norretained substantially all the risks and rewards of the asset, but has transferred control of theasset.

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Where the Company has transferred its rights to receive cash flows from an asset or has enteredinto a pass-through arrangement, and has neither transferred nor retained substantially all the risksand rewards of the asset nor transferred control of the asset, the asset is recognized to the extent ofthe Company’s continuing involvement in the asset. In that case, the Company also recognizes anassociated liability. The transferred asset and the associated liability are measured on a basis thatreflects the rights and obligations that the Company has retained. Continuing involvement thattakes the form of a guarantee over the transferred asset is measured at the lower of the originalcarrying amount of the asset and the maximum amount of consideration that the Company couldbe required to repay.

Financial Liabilities. A financial liability is derecognized when the obligation under the liabilityis discharged, cancelled or has expired. Where an existing financial liability is replaced byanother from the same lender on substantially different terms, or the terms of an existing liabilityare substantially modified, such an exchange or modification is treated as a derecognition of theoriginal liability and the recognition of a new liability, and the difference in the respectivecarrying amounts and any costs or fees incurred are recognized in the profit or loss.

Offsetting of Financial InstrumentsFinancial assets and liabilities are offset and the net amount reported in the consolidated statementof financial position if, and only if, there is a currently enforceable right to offset the recognizedamounts and there is intention to settle on a net basis, or to realize the asset and settle the liabilitysimultaneously. This is not generally the case with master netting agreements, and the relatedassets and liabilities are presented at gross amounts in the consolidated statement of financialposition.

InventoriesInventories, which are included as part of “Other current assets” in the consolidated statement offinancial position, are valued at the lower of cost and net realizable value (NRV).

Cost includes purchase price and import duties incurred in bringing each item of inventory to itspresent location and condition. Cost is determined using the moving average method for thehealthcare segment; weighted average method for the tollways and the water segment. Inventoriesand NRV basis for each of the segment are enumerated below:

Segment Inventories NRV basisWater & Tollways Spare parts, materials and supplies Current replacement costTollways Transponders and magnetic cards Estimated selling price in the ordinary course of business less

estimated costs necessary to make the sale

Healthcare Medicines and hospital supplies Estimated selling price in the ordinary course of business lessdirect cost to sell

Real Estate for SaleReal estate for sale, which is included as part of “Other current assets” in the consolidatedstatement of financial position, is carried at the lower of cost and NRV. Cost includes theacquisition cost of the land plus all costs directly attributable to the acquisition for projects wherethe Company is the landowner, and includes actual development costs incurred up to end ofreporting period for projects where the Company is both the landowner and developer. Where theCompany is only a developer, the cost of real estate for sale pertains only to the actualdevelopment costs. NRV is the selling price in the ordinary course of business less estimatedcosts to complete and make the sale.

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Advances to Contractors and ConsultantsAdvances to contractors and consultants which is included as part of “Other current assets” in theconsolidated statement of financial position, represent advance payments for mobilization of thecontractors and consultants. These are stated at costs less any impairment in value. Theseamounts are reduced upon receipt of the equivalent amount of services rendered by the contractorsand consultants.

Service Concession ArrangementsThe Company accounts for its service concession arrangements in accordance with PhilippineInterpretation IFRIC 12 under the intangible asset model as it receives the right (license) to chargeusers of public service (see Note 13).

Revenue and Cost Recognition. The Company recognizes and measures revenue and cost inaccordance with PAS 11, Construction Contracts and PAS 18, Revenue for the services itperforms. When the Company provides construction or upgrade services, the considerationreceived or receivable by the Company is recognized at its fair value. The revenue and cost fromthese services are recognized based on the percentage of completion measured principally on thebasis of estimated completion of a physical proportion of the contract works, and by reference tothe actual costs incurred to date over the estimated total cost of the project.

Contractual Obligations. The Company recognizes its contractual obligations to restore the tollroads to a specified level of serviceability in accordance with PAS 37, Provisions, ContingentLiabilities and Contingent Assets, as the obligations arises which is as a consequence of the use ofthe toll roads and is proportional to the number of vehicles using the toll roads and increasing inmeasurable annual increments (see Note 17).

Service Concession Assets. The service concession assets acquired through business combinationsare recognized initially at the fair value of the concession agreement using multi-period excessearnings method. Additions subsequent to business combinations are initially measured at presentvalue of any additional estimated future concession fee payments pursuant to the concessionagreement (see Notes 13 and 18) and/or the costs of rehabilitation works incurred or additionalconstructions. Following initial recognition, the service concession assets are carried at cost lessaccumulated amortization and any impairment losses.

Following are the methods used to amortize the service concession assets:

Method CompanyUOP Maynilad, CIC and MNTC (a)

Straight-line PHI(a) Prior to 2014, MNTC used the straight-line method of amortization (see Note 2 – Changes in Accounting Policies)

The amortization period and method for an intangible asset with a finite useful life is reviewed ateach financial year-end. Changes in the expected useful life or the expected pattern ofconsumption of future economic benefits embodied in the service concession asset is accountedfor by changing the amortization period or method, as appropriate, and are treated as changes inaccounting estimates. The amortization expense is recognized under the “Cost of sales andservices” account in the consolidated statement of comprehensive income.

The service concession assets will be derecognized upon turnover to the Grantor. There will be nogain or loss upon derecognition as the service concession assets, which is expected to be fullyamortized by then, will be handed over to the Grantor with no consideration.

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Deferred Project Costs. Costs directly attributable to the acquisition of a service concession arerecorded as Deferred Project Costs until commencement of the concession term, whereupon thecosts are transferred either to Service Concession Asset or Financial Asset depending if theconcession arrangement is under an intangible asset and financial asset model, respectively.

Property and EquipmentProperty and equipment, except land, are carried at cost, excluding day-to-day servicing, lessaccumulated depreciation and any impairment loss. The initial cost of property and equipmentcomprises its purchase price, including import duties and non-refundable purchase taxes and anydirectly attributable costs of bringing the property and equipment to its working condition andlocation for its intended use. Such cost includes the cost of replacing part of such property andequipment and borrowing costs for long-term construction projects when the recognition criteriaare met. When significant parts of property and equipment are required to be replaced at intervals,the Company recognizes such parts as individual assets with specific useful lives and depreciation.Likewise, when major repairs are performed, its cost is recognized in the carrying amount of theproperty and equipment as a replacement if the recognition criteria are satisfied. Land is stated atcost less any impairment loss.

Expenditures incurred after the property and equipment have been put into operation, such asrepairs and maintenance, are normally recognized as expense in the period such costs are incurred.In situations where it can be clearly demonstrated that the expenditures have resulted in anincrease in the future economic benefits expected to be obtained from the use of an item ofproperty and equipment beyond its originally assessed standard of performance, the expendituresare capitalized as additional cost of the property and equipment.

Depreciation commences once the property and equipment are available for use and is computedon a straight-line basis over the estimated useful lives of the assets:

Leasehold improvements 2–5 years or lease termwhichever is shorter

Land improvements 5 yearsBuilding and building improvements 5–30 yearsOffice and other equipment, furniture and fixtures 2–5 yearsTransportation equipment 2–5 yearsInstruments, tools and other equipment 2–5 yearsLibrary books 3–5 years

The assets’ residual values, useful lives and depreciation method are reviewed, and adjusted ifappropriate, at each reporting date.

An item of property and equipment is derecognized upon disposal or when no future economicbenefits are expected from its use or disposal. Any gain or loss arising on derecognition of theasset (calculated as the difference between the net disposal proceeds and the carrying amount ofthe item) is included in profit or loss in the year the asset is derecognized.

Construction in progress is stated at cost less any impairment in value. This includes cost ofconstruction and other direct costs. Construction in progress is not depreciated until such time thatthe relevant assets are completed and available for its intended use.

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Intangible AssetsIntangible assets, other than concession assets, acquired separately are measured on initialrecognition at cost. The costs of intangible assets acquired in a business combination are their fairvalue as at the date of acquisition. Following initial recognition, intangible assets are carried atcost less any accumulated amortization and accumulated impairment losses. Internally generatedintangible assets, excluding capitalized development costs, are not capitalized and expenditure isreflected in profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over their estimated useful lives and assessed forimpairment whenever there is an indication that an intangible asset may be impaired. Theamortization period and the amortization method for an intangible asset with a finite useful life arereviewed at least at the end of each reporting period. Changes in the expected useful life or theexpected pattern of consumption of future economic benefits embodied in the asset is accountedfor by changing the amortization period or method, as appropriate, and are treated as changes inaccounting estimates. The amortization expense on intangible assets with finite lives is recognizedin profit or loss in the expense category consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairmentannually, either individually or at the CGU level (see Note 15). The assessment of indefinite life isreviewed annually to determine whether the indefinite life continues to be supportable. If nolonger supportable, the change in useful life from indefinite to finite is made on a prospectivebasis.

Gains or losses arising from derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset and are recognized inprofit or loss when the asset is derecognized.

Property Use Rights. Property use rights are made up of land and building use rights that arosefrom transactions that qualified as business combinations, for which contracts are originally andlegally in the form of lease. Property use rights are initially recognized at fair value at the date ofbusiness combination and subsequently amortized on a straight-line basis over the term of thelease (see Notes 14 and 33) and assessed for impairment whenever there is an indication that theseare impaired.

Software Cost. Software cost (included as part of “Other noncurrent assets” account in theconsolidated statement of financial position) includes the cost of software purchased from a thirdparty, and other direct costs incurred in the software configuration and interface, coding andinstallation of hardware, including parallel processing and data conversion. Software cost isamortized on a straight-line basis over the estimated useful life of five years. The carrying cost isreviewed for impairment whenever there is an indication that software cost may be impaired.

Impairment of Nonfinancial AssetsThe Company assesses at each reporting date whether there is an indication that an asset may beimpaired. If any such indication exists, or when annual impairment testing for an asset is required,the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is thehigher of an asset’s or CGU’s fair value less costs of disposal and its value in use (VIU) and isdetermined for an individual asset, unless the asset does not generate cash inflows that are largelyindependent of those from other assets or groups of assets. Where the carrying amount of an assetexceeds its recoverable amount, the asset is considered impaired and is written down to itsrecoverable amount. In assessing VIU, the estimated future cash flows are discounted to their

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present value using a pre-tax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. In determining fair value less costs of disposal,recent market transactions are taken into account, if available. If no such transactions can beidentified, an appropriate valuation model is used. These calculations are corroborated byvaluation multiples, quoted share prices for publicly traded subsidiaries or other available fairvalue indicators. Impairment losses are recognized in profit or loss.

The Company bases its impairment calculation on detailed budgets and forecast calculationswhich are prepared separately for each of the Company’s CGUs to which the individual assets areallocated. These budgets and forecast calculations are generally covering a period of five years.For longer periods, a long term growth rate is calculated and applied to project future cash flowsafter the fifth year.

Impairment losses, including impairment on inventories, are recognized in profit or loss in thoseexpense categories consistent with the function of the impaired asset.

For nonfinancial assets excluding goodwill, an assessment is made at each reporting date todetermine whether there is an indication that previously recognized impairment losses no longerexist or have decreased. If such indication exists, the Company estimates the asset’s or CGU’srecoverable amount. A previously recognized impairment loss is reversed only if there has been achange in the assumptions used to determine the asset’s recoverable amount since the lastimpairment loss was recognized. The reversal is limited so that the carrying amount of the assetdoes not exceed its recoverable amount, nor exceed the carrying amount that would have beendetermined, net of depreciation, had no impairment loss been recognized for the asset in prioryears. Such reversal is recognized in profit or loss unless the asset is carried at a revalued amount,in which case, the reversal is treated as a revaluation increase. After such a reversal, thedepreciation (in case of property and equipment) and amortization (in case of property use rights,service concession assets and software cost) charges are adjusted in future periods to allocate theasset’s revised carrying amount, less any residual value, on a systematic basis over its remaininguseful life.

Goodwill. Goodwill is reviewed for impairment annually or more frequently if events or changesin circumstances indicate that the carrying amount may be impaired. Impairment is determinedfor goodwill by assessing the recoverable amount of the CGU, or group of CGUs, to which thegoodwill relates. Where the recoverable amount of the CGU, or group of CGUs, is less than thecarrying amount of the CGU or group of CGUs, to which goodwill had been allocated, animpairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in futureperiods.

Assets Held For SaleAssets are classified as assets held for sale when their carrying amount is to be recoveredprincipally through a sale transaction and a sale is considered highly probable. They are stated atthe lower of carrying amount and fair value less costs to sell and are presented as current assets inthe statement of financial position.

Customers’ Guaranty DepositsCustomers’ guaranty deposits (included as part of “Deferred credits and other long-termliabilities” account in the consolidated statement of financial position) are initially measured at fairvalue. After initial recognition, these deposits are subsequently measured at amortized cost usingthe effective interest method. The discount is amortized over the remaining concession periodusing the effective interest method.

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Assets Held in TrustAssets that are owned by Metropolitan Waterworks and Sewerage System (MWSS) but are usedin the operations of Maynilad under the Concession Agreement, are not reflected in theconsolidated statement of financial position but treated as Assets Held in Trust, except for certainassets transferred to Maynilad as mentioned in Note 34.

Equity Attributable to Owners of the Parent Company

Common Stocks. Common stocks are classified as equity and are measured at par value for allshares issued. Proceeds and/or fair value of consideration received in excess of par value arerecognized as additional paid-in capital. Incremental costs directly attributable to the issue ofordinary shares and share options are recognized as a deduction from equity, net of any tax effects.

Preferred Shares. Preferred share is classified as equity if it is non-redeemable, or redeemableonly at the Company’s option, and any dividends are discretionary. Dividends thereon arerecognized as distributions within equity upon approval by the Company’s BOD.

Preferred share is classified as a liability if it is redeemable on a specific date or at the option ofthe shareholders, or if dividend payments are not discretionary. Dividends thereon are recognizedas interest expense in profit or loss as accrued.

Retained Earnings. Retained earnings represent accumulated earnings net of cumulativedividends declared, adjusted for the effects of equity restructuring and transactions with NCI andthe effects of changes in accounting policies as may be required by the standards’ transitionalprovisions.

Cash Dividend. The Company recognizes a liability to distribute cash to equity holders of theParent Company when the distribution is authorized and the distribution is no longer at thediscretion of the Company. As per the corporate laws in the Philippines, a distribution isauthorized when it is approved by the Board of Directors. A corresponding amount is recognizeddirectly in equity.

Equity Reserves. Equity reserves are made up of equity transactions other than capitalcontributions such as equity component of a convertible financial instrument, transactions withNCI and share-based payment transactions or Executive Stock Option Plan (ESOP).

Other Comprehensive Income Reserve. OCI reserve comprises items of income and expenses thatare recognized directly in equity. Certain OCI items are to be reclassified to profit or loss insubsequent periods.

Borrowing CostsBorrowing costs are capitalized if they are directly attributable to the acquisition, construction orproduction of a qualifying asset. To the extent that funds are borrowed specifically for thepurpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalizationon that asset shall be determined as the actual borrowing costs incurred on that borrowing duringthe period less any investment income on the temporary investment of those borrowings. To theextent that funds are borrowed generally, the amount of borrowing costs eligible for capitalizationshall be determined by applying a capitalization rate to the expenditures on that asset. Thecapitalization rate shall be the weighted average of the borrowing costs applicable to theborrowings of the Company that are outstanding during the period, other than borrowings madespecifically for the purpose of obtaining a qualifying asset. The amount of borrowing costscapitalized during a period shall not exceed the amount of borrowing costs incurred during thatperiod.

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Capitalization of borrowing costs commences when the activities necessary to prepare the asset forintended use are in progress and expenditures and borrowing costs are being incurred. Borrowingcosts are capitalized until the asset is available for their intended use. If the resulting carryingamount of the asset exceeds its recoverable amount, an impairment loss is recognized. Borrowingcosts include interest charges and other costs incurred in connection with the borrowing of funds,as well as exchange differences arising from foreign currency borrowings used to finance theseprojects, to the extent that they are regarded as an adjustment to interest costs.

All other borrowing costs are expensed as incurred.

Provisions and Contingencies

General. Provisions are recognized when the Company has a present obligation (legal orconstructive) as a result of a past event, it is probable that an outflow of resources embodyingeconomic benefits will be required to settle the obligation and a reliable estimate can be made ofthe amount of the obligation. Where the Company expects some or all of a provision to bereimbursed, for example under an insurance contract, the reimbursement is recognized as aseparate asset but only when the reimbursement is virtually certain. The expense relating to anyprovision is presented in profit or loss, net of any reimbursement. If the effect of the time value ofmoney is material, provisions are discounted using a current pre-tax rate that reflects, whereappropriate, the risks specific to the liability. Where discounting is used, the increase in theprovision due to the passage of time is recognized as an interest expense.

Warranties and Guarantees. Provision relates to estimated expenses of concluded and ongoingdebt settlement negotiations and certain warranties extended in relation to debt for asset swaparrangements entered in prior years. The amount of provision is recognized upon entering intosuch arrangement and is based on historical experience or best estimate as a result of ongoingnegotiations.

Provision for Heavy Maintenance. Provision for heavy maintenance pertains to the present valueof the estimated contractual obligations of the Company to restore the service concession assets ortoll roads to a specified level of serviceability during the service concession term and to maintainthe same assets in good condition prior to turnover of the assets to the Philippine Government.The amount of provision is accrued every year and presented in profit or loss and is reduced by theactual obligations paid for heavy maintenance of the service concession.

Contingent Liabilities. Contingent liabilities are not recognized in the consolidated financialstatements but are disclosed in the notes to consolidated financial statements unless the possibilityof an outflow of resources embodying economic benefits is remote. Contingent assets are notrecognized in the consolidated financial statements but are disclosed in the notes to consolidatedfinancial statements when an inflow of economic benefits is probable.

Contingent Liabilities Recognized in a Business Combination. A contingent liability recognized ina business combination is initially measured at its fair value. Subsequently, it is measured at thehigher of the amount that would be recognized in accordance with the requirements for provisionsabove or the amount initially recognized less, when appropriate, cumulative amortizationrecognized in accordance with the requirements for revenue recognition.

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Revenue and Income RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theCompany and the revenue can be reliably measured, regardless of when the payment is beingmade. Revenue is measured at the fair value of the consideration received or receivable, takinginto account contractually defined terms of payment, excluding discounts, rebates and sales taxesor duty. The Company assesses its revenue arrangements against specific criteria in order todetermine if it is acting as principal or agent. The Company has concluded that it is acting as aprincipal in all of its revenue arrangements. The following specific recognition criteria must alsobe met before revenue is recognized:

Revenue and income stream recognized under “Operating Revenues”:

§ Water and Sewerage Services Revenue. Revenues from water and sewerage services arerecognized upon supply of water to the customers. Billings to customers consist of water,environmental and sewerage charges.

§ Toll Fees. Revenue from toll fees is recognized upon sale of toll tickets. Toll fees received inadvance, through transponders or magnetic cards, is recognized as income upon the holders’availment of the toll road services, net of sales discounts. The unused portion of toll feesreceived in advance is reflected in “Unearned revenue and other deposits” under “Accountspayable and other current liabilities” account in the consolidated statement of financialposition.

§ Hospital Revenue. Revenue is recognized upon rendering of medical services and sale ofmedicines and other pharmaceutical products.

§ School Revenue - Tuition and Other School Fees. Tuition and other school fees arerecognized as income over the corresponding school term. Tuition and other school feesrelated to the succeeding school term which are collected in advance are presented in“Unearned revenue and other deposits” under “Accounts payable and other current liabilities”in the consolidated statement of financial position.

Other revenue and income stream recognized under “Other income”:

§ Construction Revenue. See accounting policy under “Service Concession Arrangements:Revenue and cost recognition”.

§ Interest Income. Interest income is recognized as it accrues, using the effective interestmethod.

§ Dividend Income. Revenue is recognized when the right to receive the payment is establishedwhich is upon the declaration date.

§ Guarantee Fees. Guarantee fees are recognized in accordance with the terms of theagreement.

§ Sale of Investments. Gain or loss is recognized when risk and rewards of ownership had beentransferred to the buyer.

§ Management Fees. Fees are recognized when services are rendered.

§ Others. Other income is recognized when there are incidental economic benefits, other thanthe usual business operations, that will flow to the Company and can be measured reliably.

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Cost and Expenses RecognitionCost and expenses are recognized in profit or loss when a decrease in future economic benefitrelated to a decrease of an asset or an increase of a liability has arisen that can be measuredreliably. Cost and expenses are recognized in profit or loss on the basis of systematic and rationalallocation procedures when economic benefits are expected to arise over several accountingperiods and the association with income can only be broadly or indirectly determined; orimmediately when expenditure produces no future economic benefits or when, and to the extentthat, future economic benefits do not qualify or cease to qualify, for recognition in the Company’sconsolidated statement of financial position as an asset.

LeasesThe determination of whether an arrangement is or contains a lease is based on the substance ofthe arrangement at inception date of whether the fulfillment of the arrangement is dependent onthe use of a specific asset or assets and the arrangement conveys a right to use the asset. Areassessment is made after inception of the lease only if one of the following applies:

a. There is a change in contractual terms, other than a renewal or extension of the agreement;b. A renewal option is exercised or extension granted, unless the term of the renewal or

extension was initially included in the lease term;c. There is a change in the determination of whether the fulfillment is dependent on a specified

asset; ord. There is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) and the date ofrenewal or extension period for scenario (b).

Leases where the lessor retains substantially all the risks and benefits of ownership of the assetsare classified as operating leases. Initial direct costs incurred in negotiating operating leases areadded to the carrying amount of the leased asset and recognized over the lease term on the samebasis as rental income. Contingent rents are recognized as revenue in the period in which they areearned.

Operating lease payments, net of aggregate of benefit of lease incentives, are recognized asincome in profit or loss on a straight-line basis over the lease term.

Retirement and Other Benefits

Defined Contribution Plan. The Parent Company and MPTC each maintain a defined contributionplan that covers all regular full-time employees. Under the defined contribution plan, fixedcontributions by the employer are based on the employees’ monthly salaries. However, the ParentCompany, MPTC and MPTDC, being entities operating in the Philippines, are covered underRepublic Act (RA) No. 7641, The Philippine Retirement Law, which provides for qualifiedemployees a defined benefit minimum guarantee. The defined benefit minimum guarantee isequivalent to a certain percentage of the monthly salary payable to an employee at normalretirement age with the required credited years of service based on the provisions of RA 7641.

Accordingly, the Parent Company, MPTC and MPTDC account for the retirement obligationunder the higher of the defined benefit obligation relating to the minimum guarantee and theobligation arising from the defined contribution plan.

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For the defined benefit minimum guarantee plan, the liability is determined based on the presentvalue of the excess of the projected defined benefit obligation over the projected definedcontribution plan obligation at the end of the reporting period. The defined benefit obligation iscalculated annually by a qualified independent actuary using the projected unit credit method. TheCompany determines the net interest expense (income) on the net defined benefit liability (asset)for the period by applying the discount rate used to measure the defined benefit obligation at thebeginning of the annual period to the then net defined benefit liability (asset), taking into accountany changes in the net defined benefit liability (asset) during the period as a result of contributionsand benefit payments. Net interest expense and other expenses related to the defined benefit planare recognized in profit or loss.

The defined contribution liability, on the other hand, is measured at the fair value of the definedcontribution assets upon which the defined contribution benefits depend, with an adjustment formargin on asset returns, if any, where this is reflected in the defined contribution benefits.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, thereturn on plan assets (excluding interest) and the effect of the asset ceiling (if any, excludinginterest), are recognized immediately in other comprehensive income.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefitthat relates to past service or the gain or loss on curtailment is recognized immediately in profit orloss. The Company recognizes gains or losses on the settlement of a defined benefit plan when thesettlement occurs.

Defined Benefit Plan. MPIC’s subsidiaries have funded, noncontributory retirement benefit planscovering all their eligible regular employees. The net defined benefit liability or asset is theaggregate of the present value of the defined benefit obligation at the end of the reporting periodreduced by the fair value of plan assets (if any), adjusted for any effect of limiting a net definedbenefit asset to the asset ceiling. The asset ceiling is the present value of any economic benefitsavailable in the form of refunds from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

Defined benefit costs comprise the following: (a) service cost; (b) net interest on the net definedbenefit liability or asset; and (c) remeasurements of net defined benefit liability or asset.

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognizedwhen plan amendment or curtailment occurs. These amounts are calculated periodically byindependent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined byapplying the discount rate based on government bonds to the net defined benefit liability or asset.Net interest on the net defined benefit liability or asset is recognized as expense or income inprofit or loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change inthe effect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in other comprehensive income in the period in which they arise. Theseremeasurements are not reclassified to profit or loss in subsequent periods.

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Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Company, nor can they be paiddirectly to the Company. Fair value of plan assets is based on market price information. When nomarket price is available, the fair value of plan assets is estimated by discounting expected futurecash flows using a discount rate that reflects both the risk associated with the plan assets and thematurity or expected disposal date of those assets (or, if they have no maturity, the expectedperiod until the settlement of the related obligations). If the fair value of the plan assets is higherthan the present value of the defined benefit obligation, the measurement of the resulting definedbenefit asset is limited to the present value of economic benefits available in the form of refundsfrom the plan or reductions in future contributions to the plan.

The Company’s right to be reimbursed of some or all of the expenditure required to settle adefined benefit obligation is recognized as a separate asset at fair value when and only whenreimbursement is virtually certain.

Termination benefit. Termination benefits are employee benefits provided in exchange for thetermination of an employee’s employment as a result of either an entity’s decision to terminate anemployee’s employment before the normal retirement date or an employee’s decision to accept anoffer of benefits in exchange for the termination of employment.

A liability and expense for a termination benefit is recognized at the earlier of when the entity canno longer withdraw the offer of those benefits and when the entity recognizes related restructuringcosts. Initial recognition and subsequent changes to termination benefits are measured inaccordance with the nature of the employee benefit, as either post-employment benefits, short-term employee benefits, or other long-term employee benefits.

Employee leave entitlement. Employee entitlements to annual leave are recognized as a liabilitywhen they are accrued to the employees. This is measured based on undiscounted amount ofliability for leave expected to be settled wholly before twelve months after the end of the annualreporting period in which the employees rendered the related services.

Share-based PaymentThe Company has an ESOP for eligible executives to receive remuneration in the form of share-based payment transactions, whereby executives render services in exchange for the share option.

The cost of equity-settled transactions with employees is measured by reference to the fair valueof the stock options at the date at which they are granted. Fair value is determined using anoption-pricing model, further details of which are set forth in Note 31. In valuing equity-settledtransactions, no account is taken of any performance conditions, other than conditions linked tothe share price of the Parent Company (“market conditions”).

The cost of equity-settled transactions is recognized, together with a corresponding increase inequity, over the period in which the performance and/or service conditions are fulfilled, ending onthe date on which the relevant employees become fully entitled to the award (“vesting date”). Thecumulative expense recognized for equity-settled transactions at each end of reporting period untilthe vesting date reflects the extent to which the vesting period has expired and the Company’s bestestimate at that date of the number of awards that will ultimately vest. The profit or loss credit orexpense for a period represents the movement in cumulative expense recognized as at thebeginning and end of that period and is recognized as employee benefits.

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No expense is recognized for awards that do not ultimately vest, except for awards where vestingis conditional upon a market condition, which are treated as vesting irrespective of whether or notthe market condition is satisfied, provided that all other performance and/or service conditions aresatisfied.

Where the terms of an equity-settled award are modified, the minimum expense recognized is theexpense as if the terms had not been modified, if the original terms of the award are met. If themodification increases the fair value of the equity instruments granted, as measured immediatelybefore and after the modification, the entity shall include the incremental fair value granted in themeasurement of the amount recognized for services received as consideration for the equityinstruments granted. The incremental fair value granted is the difference between the fair value ofthe modified equity instrument and that of the original equity instrument, both estimated as at thedate of the modification. If the modification occurs during the vesting period, the incremental fairvalue granted is included in the measurement of the amount recognized for services received overthe period from the modification date until the date when the modified equity instruments vest, inaddition to the amount based on the grant date fair value of the original equity instruments, whichis recognized over the remainder of the original vesting period. If the modification occurs aftervesting date, the incremental fair value granted is recognized immediately, or over the vestingperiod if the employee is required to complete an additional period of service before becomingunconditionally entitled to those modified equity instruments.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date ofcancellation, and any expense not yet recognized for the award is recognized immediately. Thisincludes any award where non-vesting conditions within the control of either the entity or thecounterparty are not met. However, if a new award is substituted for the cancelled award, anddesignated as a replacement award on the date that it is granted, the cancelled and new awards aretreated as if they were modifications of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in thecomputation of earnings per share.

Long-term Employee BenefitsThe Company’s Long-Term Incentives Plan (LTIP) grants cash incentives to eligible keyexecutives of the Parent Company and certain subsidiaries. Liability under the LTIP is determinedusing the projected unit credit method. Employee benefit costs include current service costs,interest cost, actuarial gains and losses, and past service costs. Past service costs and actuarialgains and losses are recognized immediately in profit or loss.

Foreign Currency-Denominated Transactions and TranslationsThe consolidated financial statements are presented in Philippine Peso, which is the ParentCompany’s functional and presentation currency. All subsidiaries and associates evaluate theirprimary economic and operating environment and determine their functional currency. Itemsincluded in the consolidated financial statements of each entity are initially measured using thatfunctional currency.

Transactions and balances. Transactions in foreign currencies are initially recorded in thefunctional currency rate of exchange ruling at the date of transaction. Monetary assets andliabilities denominated in foreign currencies are translated at the functional currency rate ofexchange ruling at the end of reporting period. All differences are taken to profit or loss exceptwhen qualified as adjustment to borrowing costs, and as discussed below for Maynilad.

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Foreign exchange differentials relating to the restatement of concession fees payable are deferredin view of the automatic reimbursement mechanism as approved by the MWSS Board of Trusteesunder Amendment No. 1 of the Concession Agreement of Maynilad. Net foreign exchange lossesare recognized as deferred Foreign Currency Differential Adjustments (FCDA) and net foreignexchange gains are recognized as deferred credits in the consolidated statement of financialposition. The write-off of the deferred FCDA or reversal of deferred credits will be made upondetermination of the new base foreign exchange rate as approved by the Regulatory Office duringevery Rate Rebasing exercise, unless indication of impairment of the deferred FCDA would beevident at an earlier date.

Foreign exchange differentials arising from other foreign currency-denominated transactions arecredited or charged to operations.

Group companies. On consolidation, the assets and liabilities of foreign operations are translatedinto Philippine Peso at the rate of exchange prevailing at the reporting date and their statements ofcomprehensive income are translated at exchange rates prevailing at the dates of the transactions.The exchange differences arising on translation for consolidation are recognized in OCI. Ondisposal of a foreign operation, the component of OCI relating to that particular foreign operationis recognized in profit or loss.

Income Taxes

Current Tax. Current tax assets and liabilities for the current and prior periods are measured at theamount expected to be recovered from or paid to the tax authority. The tax rates and tax laws usedto compute the amount are those that are enacted or substantively enacted, at the reporting datewhere the Company operates and generates taxable income.

Current income tax relating to items recognized directly in equity is recognized in equity and notin profit or loss. Management periodically evaluates positions taken in the tax returns with respectto situations in which applicable tax regulations are subject to interpretation and establishesprovisions where appropriate.

Deferred Tax. Deferred tax is provided using the liability method on temporary differencesbetween the tax bases of assets and liabilities and their carrying amounts for financial reportingpurposes at the reporting date.

Deferred tax liabilities are recognized for all taxable temporary differences, except (a) where thedeferred tax liability arises from the initial recognition of goodwill or of an asset or liability in atransaction that is not a business combination and, at the time of the transaction, affects neither theaccounting income nor taxable income; and (b) in respect of taxable temporary differencesassociated with investments in subsidiaries, associates and joint ventures, where the timing of thereversal of the temporary differences can be controlled and it is probable that the temporarydifferences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carryforward benefitsof unused tax credits from excess minimum corporate income tax (MCIT) over the regularcorporate income tax (RCIT) and unused net operating loss carryover (NOLCO), to the extent thatit is probable that taxable income will be available against which the deductible temporarydifferences and carryforward benefits of unused tax credits from MCIT and NOLCO can beutilized. Deferred tax, however, is not recognized when (a) it arises from the initial recognition ofan asset or liability in a transaction that is not a business combination and, at the time of thetransaction, affects neither the accounting income nor taxable income or loss; and (b) in respect ofdeductible temporary differences associated with investments in subsidiaries, associates and

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interest in joint ventures, deferred tax assets are recognized only to the extent that it is probablethat the temporary differences will reverse in the foreseeable future and taxable income will beavailable against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each end of reporting period andreduced to the extent that it is no longer probable that sufficient taxable income will be availableto allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets arereassessed at each end of reporting period and are recognized to the extent that it has becomeprobable that future taxable income will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to theyear when the asset is realized or the liability is settled, based on tax rates and tax laws that havebeen enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.Deferred tax items are recognized in correlation to the underlying transaction either in OCI ordirectly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists tooffset current tax assets against current tax liabilities and the deferred taxes relate to the sametaxable entity and the same tax authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separaterecognition at that date, are recognized subsequently if new information about facts andcircumstances change. The adjustment is either treated as a reduction in goodwill (as long as itdoes not exceed goodwill) if it was incurred during the measurement period or recognized in profitor loss.

Sales TaxRevenues, expenses and assets are recognized net of the amount of sales tax (commonly referredto as value-added tax), except:

§ Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxauthority, in which case the sales tax is recognized as part of the cost of acquisition of theasset or as part of the expense item, as applicable

§ Receivables and payables that are stated with the amount of sales tax included

The net amount of sales tax recoverable from, or payable to, the taxation authority is included aspart of other current assets and accounts payable and other current liabilities in the consolidatedstatement of financial position.

Earnings Per ShareBasic earnings per share is calculated by dividing the net income for the year attributable to theowners of the Parent Company by the weighted average number of common shares outstandingduring the year, after considering the retroactive effect of stock dividend declaration, if any.

Diluted earnings per share attributable to owners of the Parent Company is calculated in the samemanner assuming that, the weighted average number of common shares outstanding is adjusted forpotential common shares from the assumed exercise of ESOP and other dilutive instruments.

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Events after the Reporting PeriodPost year-end events that provide additional information about the Company’s financial position atthe reporting date (adjusting events), if any, are reflected in the consolidated financial statements.Post year-end events that are not adjusting events are disclosed in the notes to consolidatedfinancial statements when material.

3. Management’s Use of Judgments and Estimates

The preparation of the consolidated financial statements in compliance with PFRS requiresmanagement to make judgments and estimates that affect the reported amounts of revenues,expenses, assets and liabilities, the disclosure of contingent liabilities and other significantdisclosures. Uncertainty about these assumptions and estimates could result in outcomes thatrequire a material adjustment to the carrying amount of assets or liabilities affected in futureperiods.

JudgmentsIn the process of applying the Company’s accounting policies, management has made the followingjudgments, apart from those involving estimations, which have the most significant effect on theamounts recognized in the consolidated financial statements.

Determination of Functional Currency. Based on the economic substance of the underlyingcircumstances relevant to the Parent Company, the functional currency of the Parent Company hasbeen determined to be the Philippine Peso. The Philippine Peso is the currency of the primaryeconomic environment in which the Parent Company operates. It is the currency that mainlyinfluences revenue and expenses.

On the same manner of assessment, the functional currency of each of the Company’s subsidiariesare determined individually, which is either similar or different from the functional currency of theParent Company but are translated to the presentation currency for purposes of the consolidatedfinancial statements.

Consolidation of CIC. While presently not owning any of CIC’s common voting shares, theCompany, through MPTC, considers that it controls CIC by virtue of the Management Letter-Agreement (MLA) (see Note 4). Under the MLA, MPTC has the power to solely direct the entireoperations, including the capital expenditure and expansion plans of CIC. MPTC shall thenreceive all the financial benefits from CIC’s operations and all losses incurred by CIC are to beborne by MPTC.

Consolidation of structured entities. Subsidiaries included structured entities that were set-up forthe benefit of the Company. Based on contractual terms, the Company assessed that the votingrights in these structured entities are not the dominant factor in deciding who controls thesestructured entities. Thus, these entities were assessed to be structured entities under PFRS 10 and,that the Company controls these structured entities. The voting shares of the third-partystockholders in these structured entities are accounted for as non-controlling interest in theconsolidated financial statements.

Dilution in interest in a subsidiary as equity transaction. On July 2, 2014, GIC Private Limited(GIC), through Arran Investment Private Limited, invested P=3.7 billion for a 14.4% stake inMPIC’s subsidiary, MPHHI and paid P=6.5 billion as consideration for an Exchangeable Bondwhich can be exchanged into a 25.5% stake in MPHHI in the future. The Exchangeable Bond isan instrument that, at a certain time in the future, converts into a fixed number of shares of

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MPHHI. Moreover, the principal of Exchangeable Bond is in Philippine Peso, the same currencyas the functional currency of MPIC as the issuing entity. Thus, the Exchangeable Bond qualifiesas an equity instrument such that the proceeds from the Exchangeable Bond together with theshare subscription of GIC in MPHHI, were considered as equity transactions with a non-controlling shareholder (see Note 22).

Power to exercise significant influence. Where the Company holds less than 20% of voting rightsin an investee but the Company has the power to exercise significant influence, such aninvestment is treated as an associate. In an opposite situation, where the Company holds over20% of voting rights of an investee (but not over 50%) and the Company does not exercisesignificant influence, the investment is treated as an AFS investment. However, for the followingentities, the Company applied the following judgment to determine proper investmentclassification:

§ Costa de Madera Corporation (Costa de Madera). Despite ownership interest of 62%,accounted for as an associate as control and management rest with the other shareholders(see Note 11).

§ NE Pacific Shopping Center Corporation (NEPSCC). Despite the Company havingrepresentation in the board of directors, interest in this entity was classified as AFS financialasset consistent with management’s intention to sell this investment in line with strategicbusiness review and decision to focus on infrastructure since 2008. MPIC subsequently soldall of its shares in NEPSCC on February 28, 2014 (see Note 10).

§ Pacific Global One Aviation Company, Inc. (PGOACI). Despite having representation in theboard of directors, the interest in this entity is classified as AFS financial asset becausemanagement and operations are accorded to the other incorporators. Interest in this entity issolely to have ready access to aircraft transportation services which is necessary for aerialsurveys and other related emergencies and uses (see Note 10).

Interests in Landco. Prior to December 2014, the Parent Company classified its 19% interest inLandco’s common shares as investment in AFS Financial Asset. Following the restructuring planof Landco in preparation for its eventual sale, management classified and presented its interests inLandco, including the receivables from Landco and ABHC as “Assets held for sale”. The ParentCompany is committed to the plan to sell its interests in Landco and has initiated actions to locatea buyer. No impairment loss was recognized on the reclassification of the interests in Landco as atDecember 31, 2014 as management expects that the fair value (estimated based on enterprisevalue) less costs to sell is higher than the carrying amount (see Note 33).

Investment in Beacon Electric Asset Holdings, Inc. (Beacon Electric). The Company hasinvestments in Beacon Electric’s common shares and preferred shares and made the followingjudgments with respect to these investments:

§ Investments in Beacon Electric’s common shares. For all joint arrangements structured inseparate vehicles, the Company must assess the substance of the joint arrangement indetermining whether it is classified as a joint venture or joint operation. This assessmentrequires the Company to consider whether it has rights to the joint arrangement’s net assets (inwhich case it is classified as a joint venture), or rights to and obligations for specific assets,liabilities, expenses, and revenues (in which case it is classified as a joint operation). Factorsthe Company considers include: structure, legal form, contractual agreement, and other factsand circumstances. Upon consideration of these factors, the Company has determined that itsjoint arrangement, structured through Beacon Electric as a separate vehicle, gives it rights to

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the net assets of Beacon Electric, and therefore classified its investment in Beacon Electric’scommon shares, as a joint venture. The Company has 50% ownership interest in BeaconElectric through the common shares. The other 50% is held by PLDT Communications andEnergy Ventures, Inc. (PCEV).

§ Investment in Beacon Electric’s preferred shares. In determining the appropriate accountingpolicy for the Company’s investment in financial instruments, factors that the Companyconsider included the following: contractual characteristics of the financial instrument; thepurpose for which the instrument is held, for example, trading or long-term investment; andthe accounting policy choice of the reporting entity. In applying the factors, the Company hasmade a judgment that PAS 39 is the appropriate accounting for its investment in preferredshares of Beacon Electric because: the preferred shares are non-voting and as such, would notprovide the Company with control, joint control or significant influence over Beacon Electric;the Company intends to hold the investment indefinitely; and the Company may decide to sellthe instruments anytime at its discretion.

§ Investment in Meralco directly and through Beacon Electric. Beacon Electric has 44.96% and49.96% interest in Meralco as at December 31, 2014 and 2013, respectively. Beacon Electric,PCEV and MPIC have agreed, under the Omnibus Investment Agreement, on certaincorporate governance matters, including Board composition, election of officers, shareholders'action, representation to the Meralco Board, nomination of the Meralco Board Committees,and nomination of Meralco officers. In substance, Beacon Electric is a special purposevehicle which PCEV and MPIC created for the main purpose of holding and investing inMeralco using the same Meralco shares as collateral for funding such investment. In applyingPFRS 10, the Company has made a judgment that the decision making power of BeaconElectric over the Meralco shares is effectively delegated to the shareholders, PCEV andMPIC, and that Beacon Electric does not exercise any discretion over the vote to be taken inrespect of the Meralco shares but is obligated to vote the Meralco shares strictly in accordancewith the instructions of the two shareholders (see Note 11). Thus, MPIC has significantinfluence over Meralco and accounts for its direct interest and indirect interest in Meralcothrough Beacon Electric using the equity method.

Service Concession Arrangements. In applying Philippine Interpretation IFRIC 12, the Companyhas made a judgment that the service concession arrangements of the Company’s water (Mayniladand PHI), tollway (MNTC and CIC) and rail (LRMC) businesses qualify under the intangible assetmodel as these companies receive the right to charge users of public service. Details of theCompany’s accounting policy in respect of the service concession arrangements are set out inNote 2 to the consolidated financial statements. Other significant judgment and estimates made inrelation to concession arrangements are as follows:

§ Service Concession Assets. The methods of amortization that the Company use depends onwhich method best reflect the pattern of consumption of the concession assets. BeginningJanuary 1, 2014, MNTC uses the UOP method for amortizing its service concession assets asit determined that the economic benefit of these assets are more closely aligned with trafficvolume and kilometers travelled (see Note 2). The Company annually reviews the billablewater volume, in the case of the water concession and the traffic volume/kilometers travelled,in the case of the toll concession, based on factors that include market conditions such aspopulation growth and consumption of water/usage of the toll facility, and the status of theCompany’s projects. It is possible that future results of operations could be materially affectedby changes in the Company’s estimates brought about by changes in the aforementionedfactors.

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The total carrying values of service concession assets amounted to P=98,259.7 million andP=94,539.9 million as at December 31, 2014 and 2013, respectively (see Note 13).

§ Construction revenue and costs. The Company recognizes construction revenues and costs inaccordance with PAS 11 (see Note 2). Given that the rehabilitation works have beensubcontracted to outside contractors (excluding the cost of some materials for somecontractors), the recognized construction revenue substantially approximates the relatedconstruction cost. Construction revenue recognized in the consolidated statements ofcomprehensive income amounted to P=6,669.6 million, P=5,557.0 million and P=6,730.7 millionfor the years ended December 31, 2014, 2013 and 2012, respectively. Construction costsrecognized in the consolidated statements of comprehensive income amounted toP=6,500.5 million, P=5,432.0 million and P=6,608.0 million for the years endedDecember 31, 2014, 2013 and 2012, respectively (see Note 27).

§ Provision for heavy maintenance. The Company also recognizes its contractual obligations torestore the toll roads to a specified level of serviceability. MNTC and CIC recognizeprovision following PAS 37 as the obligation arises which is a consequence of the use of thetoll roads and therefore it is proportional to the number of vehicles using the roads andincreasing in measurable annual increments. Provision for heavy maintenance amounted toP=272.4 million and P=433.0 million as at December 31, 2014 and 2013, respectively, and theseare presented under “Provisions” account in the consolidated statements of financial position(see Note 17).

Lease Agreement Qualifying as Business Combination. CVHMC and EMHMC entered into leaseagreements with the Roman Catholic Archbishop of Manila (RCAM), and Our Lady of LourdesHospital, Inc. (OLLHI) and Servants of the Holy Spirit, Inc. (SSps), respectively. The Companyhas assessed that the lease agreements meet the definition of a business combination, particularlysince EMHMC and CVHMC have obtained control over the operations and management ofhospitals, hence, both lease agreements qualify as acquisitions of businesses and were accountedfor in accordance with PFRS 3, resulting in the recognition of property use rights (see Note 14).

Transitional and Clarificatory Agreement (TCA). On August 9, 2007, Maynilad entered into a TCAwith MWSS to prescribe the procedures for the resolution of their dispute (see Note 32).Pending resolution of the dispute, the disputed amounts of P=5.0 billion and P=4.9 billion as atDecember 31, 2014 and 2013, respectively, are considered contingent liabilities. Prior to 2012, noreversal of accrued interest payable was made pending resolution of the matter in accordance with thedispute requirements of the TCA. However, with the prescription of the TCA and in light ofMaynilad’s current negotiations and outstanding offer of US$14 million to fully settle the claim ofMWSS, Maynilad reversed a portion of the accrued interest payable amounting to P=378.1 million toother income in 2012. Likewise, the Company reassessed and derecognized the contingent liabilityamounting to P=686.6 million recognized in the Company’s consolidated financial statements as aresult of the application of the accounting for business combinations when the Company acquiredcontrol of Maynilad (see Note 27).

EstimatesThe key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that have a significant risk of causing a material adjustment to the carrying amounts ofassets and liabilities within the next financial year, are described below. The Company based itsassumptions and estimates on parameters available when the consolidated financial statements wereprepared. Existing circumstances and assumptions about future developments, however, may changedue to market changes or circumstances arising beyond the control of the Company. Such changesare reflected in the assumptions when they occur.

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Determination of Fair Value of Financial Instruments. The Company initially records allfinancial instruments at fair value and subsequently carries certain financial assets and financialliabilities at fair value, which requires extensive use of accounting estimates and judgment.Valuation techniques are used particularly for financial assets and financial liabilities that are notquoted in an active market. Where valuation techniques are used to determine fair values(e.g., discounted cash flow and option pricing models), they are periodically reviewed by qualifiedpersonnel who are independent of the persons that initiated the transactions. All models arecalibrated to ensure that outputs reflect actual data and comparative market prices. To the extentpracticable, models use only observable data as valuation inputs. However, other inputs such ascredit risk (whether that of the Company or the counterparties), forward prices, volatilities andcorrelations, require management to develop estimates or make adjustments to observable data ofcomparable instruments. The amount of changes in fair values would differ if the Company usesdifferent valuation assumptions or other acceptable methodologies. Any change in fair value ofthese financial instruments would affect either the consolidated statement of comprehensiveincome or consolidated statement of changes in equity.

Fair values of financial assets and financial liabilities are presented in Note 37.

Purchase Price Allocation in Business Combinations, Goodwill and Gain on Bargain Purchase.The Company accounts for the acquired businesses using the acquisition method which requiresextensive use of accounting judgments and estimates to allocate the purchase price to the fairmarket values of the acquiree’s identifiable assets and liabilities and contingent liabilities, if any,at the acquisition date. Any difference in the purchase price and the fair values of the net assetsacquired is recorded as either goodwill in the consolidated statement of financial position or gainon bargain purchase in profit or loss. Thus, the numerous judgments made in estimating the fairvalue to be assigned to the acquiree’s assets and liabilities can materially affect the Company’sfinancial position and performance.

The Company’s acquisitions of certain subsidiaries have resulted in recognition of goodwill. Thecarrying value of goodwill amounted to P=18,308.2 million as at December 31, 2014 and 2013(see Note 12). The acquisition of CLDH in 2013 resulted in a gain on bargain purchase ofP=22.1 million based on the purchase price allocation (see Notes 4 and 27).

Impairment of Loans and Receivables. The Company estimates the allowance for doubtful accountsrelated to receivables using a combination of specific and collective assessments. The amountscalculated in each level of impairment assessment are combined to determine the total amount ofallowance for doubtful accounts. First, the Company evaluates specific accounts that are consideredindividually significant for any objective evidence that certain customers are unable to meet theirfinancial obligations. In these cases, the Company uses judgment, based on the best available factsand circumstances, including but not limited to, the length of its relationship with the customer andthe customer’s current credit status based on third party credit reports and known market factors. Theallowance provided is based on the difference between the present value of cash flows of thereceivable that the Company expects to collect, discounted at the receivables’ original effectiveinterest rate, and the carrying amount of the receivable. These specific allowances are re-evaluatedand adjusted as additional information received affects the amounts estimated. If no impairment lossis determined for an individually assessed receivable, the receivable is included in a group ofreceivables with similar credit risk characteristics and is collectively assessed for impairment. Theprovision under collective assessment is based on historical collection and write-off experience andchange in customer payment terms. Impairment assessment is performed on a continuous basisthroughout the year.

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The carrying values of receivables, net of allowance for doubtful accounts, amounted toP=3,939.3 million and P=4,342.0 million as at December 31, 2014 and 2013, respectively. Allowancefor doubtful accounts amounted to P=879.0 million and P=866.7 million as at December 31, 2014 and2013, respectively (see Notes 8 and 36).

Impairment of AFS Financial Assets. The Company treats an AFS equity financial asset asimpaired when there had been a significant or prolonged decline in the fair value below itsacquisition cost or where other objective evidence of impairment exists. The determination ofwhat is “significant” or “prolonged” requires judgment. The Company treats “significant”generally as 20.0% or more and “prolonged” as greater than 12 months for quoted equitysecurities. In addition, the Company evaluates other factors, including normal volatility in shareprice for quoted equities and the future cash flows and the discount factors for unquoted equities.

For debt instruments classified as AFS financial assets, the Company considers loss events thathas an impact on the estimated future cash flows of the financial asset, among others, the issuer isexperiencing significant financial difficulty, default or delinquency in interest or principalpayments, the probability that they will enter bankruptcy or other financial reorganization. Otherobservable data may indicate that there is a measurable decrease in the estimated future cashflows, such as changes in arrears or economic conditions that correlate with defaults.

Impairment loss was recognized for AFS financial asset amounting to P=100.2 million for the yearended December 31, 2014 while there was no impairment loss for the years ended December 31,2013 and 2012. The carrying value of AFS financial assets, including UITF classified as short-term deposits (see Note 10) and investments in Beacon Electric preferred shares (see Note 11),amounted to P=19,076.1 million and P=16,385.3 million as at December 31, 2014 and 2013,respectively (see Notes 9, 10, 11 and 36).

Impairment of Goodwill. Goodwill is subject to annual impairment test. This requires anestimation of the value in use of CGUs to which the goodwill is allocated. Estimating the value inuse requires the Company to estimate the expected future cash flows from the CGU and to choosea suitable discount rate in order to calculate the present value of those cash flows. No impairmentof goodwill was recognized for each of the three years in the period ended December 31, 2014.The carrying value of goodwill amounted to P=18,308.2 million as at December 31, 2014 and 2013(see Note 12).

Impairment of Nonfinancial Assets. Impairment review is performed when certain impairmentindicators are present. Determining the fair value of assets requires the estimation of cash flowsexpected to be generated from the continued use and ultimate disposition of such assets.

While it is believed that the assumptions used in the estimation of fair values reflected in theconsolidated financial statements are appropriate and reasonable, significant changes in theseassumptions may materially affect the assessment of recoverable values and any resultingimpairment loss could have a material adverse impact on the results of operations.

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The carrying values of non-financial assets subject to impairment review when impairment indicatorsare present are as follows:

2014 2013(In Millions)

Service concession assets (see Note 13) P=98,260 P=94,540Equity method investees (see Note 11) 52,846 36,525Property and equipment (see Note 14) 7,368 6,859Deferred project costs (see Note 15) 1,869 –Property use rights (see Note 14) 608 649Software costs (see Note 15) 67 73

There were no impairment losses recognized on other non-financial assets for each of the three yearsin the period ended December 31, 2014.

Estimated Useful Lives of Property and Equipment, Property Use Rights and Software Costs. Theuseful lives of each of the item of the Company’s property and equipment, property use rights, andsoftware costs, are estimated based on the period over which the asset is expected to be available foruse. Such estimation is based on a collective assessment of similar businesses, internal technicalevaluation and experience with similar assets. The estimated useful life of each asset is reviewed ateach financial year-end and updated if expectations differ from previous estimates due to physicalwear and tear, technical or commercial obsolescence and legal or other limits on the use of the asset.It is possible, however, that future results of operations could be materially affected by changes in theamounts and timing of recorded expenses brought about by changes in the factors mentioned above.A reduction in the estimated useful life of any item of property and equipment, property use rights andsoftware costs would increase the recorded depreciation and amortization expense and decrease thecarrying values of service concession assets, property and equipment and software costs.

There was no change in the estimated useful lives of the property use rights, property and equipment,and software costs for all the periods presented.

Taxes. Uncertainties exist with respect to the interpretation of complex tax regulations, changes in taxlaws, and the amount and timing of future taxable income. Given the diversity of the Company’sbusinesses and the long-term nature and complexity of existing contractual agreements or the natureof the business itself, changes in differences arising between the actual results and the assumptionsmade, or future changes to such assumptions, could necessitate future adjustments to tax income andexpense already recorded. The Company establishes provisions, based on reasonable estimates, forpossible consequences of audits by the tax authorities in which the Company operates. The amountof such provisions is based on various factors, such as experience of previous tax audits and differinginterpretations of tax regulations by the taxable entity and the responsible tax authority. Suchdifferences in interpretation may arise for a wide variety of issues depending on the conditionsprevailing in the respective domicile or to the operations of the Company.

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxableprofit will be available against which the losses can be utilized. Significant management judgement isrequired to determine the amount of deferred tax assets that can be recognized, based upon the likelytiming and the level of future taxable profits together with future tax planning strategies. The carryingamount of deferred tax assets is reviewed at each end of the reporting period and reduced to the extentthat it is no longer probable that sufficient taxable income will be available to allow all or part of thedeferred tax assets to be utilized. The Company performs an annual evaluation of the realizability ofdeferred income tax assets in determining the portion of deferred tax assets which should berecognized. The Company’s assessment on the recognition of deferred income tax assets ondeductible temporary differences is based on the forecasted taxable income of the following period.

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This forecast is based on the Company’s past results and future expectations on revenue andexpenses.

Maynilad recognized deferred tax assets on deductible temporary differences expected to reverse afterthe income tax holiday period, while deferred taxes on deductible temporary differences expected toreverse during the income tax holiday and to items where doubt exists as to the tax benefits they willbring in the future, are not recognized (see Note 29).

Net recognized deferred tax assets amounted to P=1,163.6 million and P=1,218.2 million as atDecember 31, 2014 and 2013, respectively. The Company’s deductible temporary difference, unusedNOLCO and MCIT for which no deferred tax assets have been recognized amounted toP=6,122.7 million and P=5,181.9 million as at December 31, 2014 and 2013, respectively(see Notes 15 and 29).

Deferred FCDA and Deferred Credits. Maynilad is entitled to recover (refund) foreign exchangelosses (gains) arising from restatement and payments of concession fees payable. For the unrealizedforeign exchange losses, Maynilad recognized deferred FCDA as an asset since this is a resourcecontrolled by Maynilad as a result of past events and from which future economic benefits areexpected to flow to Maynilad. Unrealized foreign exchange gains, however, which will be refundedto the customers, are presented as deferred credits.

In accordance with MWSS-RO Resolution No. 2009-069, the new base foreign exchange rate waschanged from P=51.86 to P=48.04 effective May 4, 2009.

Net deferred credits pertaining to these foreign exchange gains amounted to P=602.4 million andP=478.2 million as at December 31, 2014 and 2013, respectively (see Note 20).

Retirement Costs. The cost of the defined benefit pension plan and the present value of the pensionobligation are determined using actuarial valuations. An actuarial valuation involves making variousassumptions that may differ from actual developments in the future. These include the determinationof the discount rate, future salary increases, mortality rates and future pension increases. Due to thecomplexities involved in the valuation and its long-term nature, a defined benefit obligation is highlysensitive to changes in these assumptions. All assumptions, described in Note 25, are reviewed ateach reporting date.

Accrued retirement liability under the defined benefit plan amounted to P=439.5 million andP=333.2 million as at December 31, 2014 and 2013, respectively (see Notes 20 and 25).

Share-based Payments. The Company measures the cost of equity-settled transactions withemployees by reference to the fair value of the equity instruments at the date at which they aregranted. Estimating fair value for share-based payments requires determining the mostappropriate valuation model for a grant of equity instruments, which is dependent on the terms andconditions of the grant. This also requires determining the most appropriate inputs to thevaluation model including the expected life of the option, volatility and dividend yield, andmaking assumptions about them. The assumptions and models used for estimating fair value forshare-based payments are disclosed in Note 31. The Company recognizes expenses based on theestimated number of grants that will ultimately vest and will require settlement. The Company’saverage turnover rate over the past few years is used to determine the attrition rate in computingthe benefit expense and the estimated liability.

Equity-based compensation expense recognized in 2014, 2013 and 2012 amounted toP=64.0 million, P=18.2 million and P=13.4 million, respectively (see Notes 25 and 31).

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Long-Term Incentives Plan (LTIP). The LTIP for key executives of MPIC and certain subsidiarieswas approved by the Compensation Committee and the BOD and is based on profit targets for thecovered performance cycle. The cost of LTIP is determined using the projected unit credit methodbased on prevailing discount rates and profit targets. While management’s assumptions arebelieved to be reasonable and appropriate, significant differences in actual results or changes inassumptions may materially affect the Company’s other long-term incentive benefits.

LTIP expense for the years ended December 31, 2014, 2013 and 2012 amounted toP=440.2 million, P=411.0 million and P=164.9 million, respectively, and presented as “Personnelcosts” under “General and administrative expenses” in the consolidated statements ofcomprehensive income. LTIP liability as at December 31, 2014 and 2013 amounted toP=850.3 million and P=455.2 million, respectively, and is presented under “Accounts payable andother current liabilities” and “Deferred credits and other long-term liabilities” account in theconsolidated statements of financial position (see Notes 16, 20 and 25).

Provisions. The Company recognizes provisions based on estimates of whether it is probable thatan outflow of resources will be required to settle an obligation. Where the final outcome of thesematters is different from the amounts that were initially recognized, such differences will impactthe financial performance in the current period in which such determination is made.

Provisions mainly consist of provision for estimated expenses related to the concluded and ongoingdebt settlement negotiations and certain warranties and guarantees, claims and potential claimsagainst the Company, and provision for heavy maintenance. The provisions for the heavymaintenance requires an estimation of the periodic cost, generally estimated to be every five to sevenyears or the expected heavy maintenance dates, to restore the assets to a level of serviceability duringthe concession term and in good condition before turnover to the Grantor. This is based on the bestestimate of management to be the amount expected to be incurred to settle the obligation at everyheavy maintenance dates discounted using a pre-tax rate that reflects the current market assessment ofthe time value of money and the risk specific to the liability.

Additional provisions, excluding accretion, for the years ended December 31, 2014, 2013 and 2012amounted to P=1,392.0 million, P=1,467.7 million and P=982.1 million, respectively. Cumulativeprovisions amounted to P=5,773.0 million and P=4,988.7 million as at December 31, 2014 and 2013,respectively (see Note 17).

Contingencies. Certain subsidiaries of the Company are parties to certain lawsuits or claimsarising from the ordinary course of business. However, the Company’s management and legalcounsel believe that the eventual liabilities under these lawsuits or claims, if any, will not have amaterial effect on the consolidated financial statements (see Note 32).

4. Business Combinations and Acquisition of Non-controlling Interests

The Company’s intention is to maintain and continue to develop a diverse set of infrastructureassets through its investments in water utilities, toll roads, power distribution and health careservices and rail. The Company is therefore committed to investing through acquisitions andstrategic partnerships in prime infrastructure assets with the potential to provide synergies with itsexisting operations. Accordingly, the following acquisitions were made in 2014 and 2013.

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With the exception of the acquisition of NCI in MNTC and Megaclinic, the acquisitions belowwere accounted for as business combinations using the acquisition method:

Acquisitions in 2014There were no business combinations in 2014. However, there was an acquisition of non-controlling interest in MNTC as disclosed below.

Acquisition of NCI in MNTCOn December 23, 2013, MPTDC and Egis Projects, SA (Egis) entered into a Share PurchaseAgreement for the sale and transfer of common shares of MNTC, representing 3.9% of the totalissued and outstanding capital stock of MNTC, held by Egis to MPTDC on January 10, 2014(closing date). The purchase price is P=2,056.68 per common share or a total considerationof P=1.5 billion, inclusive of the dividends allocable to the purchased shares amounting toP=48.5 million declared by MNTC on December 18, 2013 with payment date of January 31, 2014.

On July 18, 2014, MPTDC, Egis and Egis Investment Partners Philippines Inc. (EIP) entered intoa Share Purchase Agreement for EIP’s acquisition of 10% of the issued and outstanding shares ofMNTC held by Egis. Egis’ receivable from EIP as a result of the sale of the MNTC sharesamounted to P=3,652.7 million (“Egis Receivable”) or P=2,056.68 per share. EIP, which is ownedby MPTDC at 46% and by Egis at 54%, was incorporated for the sole purpose of holding theacquired MNTC shares. This transaction effectively provided MPTDC an additional 4.6%economic interest in MNTC for a total consideration of P=1.7 billion representing substantially theamount paid for the assignment by Egis of 46% of the Egis’ Receivable to MPTDC.

After the abovementioned transactions, MPTDC’s effective economic ownership in MNTCincreased from 67.10% to 75.6%. The increase in effective ownership in MNTC is accounted foras an equity transaction with the premium of P=2,374.9 million recognized in equity (see Note 22).The premium represents the difference between the carrying value of the additional interestacquired and the total consideration paid.

Cash consideration paid to NCI P=3,116MNTC’s net assets acquired (8.5%) (741)Difference recognized in equity reserve P=2,375

Acquisitions in 2013

Acquisition of CIC

In relation to the Convertible Note Agreement executed by and between MPTC and CavitexHoldings Inc. (CHI), MPTC, CHI with the conformity of its then subsidiary CIC, executed aManagement Letter-Agreement dated December 27, 2012, for the management of CIC by MPTC.Under the Management Letter-Agreement, management of CIC by MPTC commenced onJanuary 2, 2013 and will continue until the issuance of the New CIC Shares in favor of MPTC as aresult of the conversion into or exchange of the CHI Preferred Shares for the said New CIC Shares(“Management Period”). Also under the Management-Letter Agreement, MPTC shall receive allthe financial benefits from CIC’s operations and all losses incurred by CIC shall be borne byMPTC. Thus, by virtue of the Management Letter-Agreement, MPTC acquired control over CICeffective January 2, 2013.

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CIC holds the concession for the operation and maintenance of the Manila-Cavite TollExpressway (“CAVITEX”). The CAVITEX is a 14-km long toll road built in two segmentsrunning from Parañaque to Cavite. The concession period extends to 2033 for the originally builtroad and to 2046 for a subsequent extension.

The allocation of the total cost of acquisition to identifiable assets, liabilities and contingentliabilities using fair values as at January 2, 2013 is shown below:

Final Fair ValuesRecognized on

Acquisition(In Millions)

AssetsCash and cash equivalents P=746Receivables and other current assets 3Concession asset (see Note 13) 9,614Advances to contractors 73Property and equipment (see Note 14) 25Other noncurrent assets 664

11,125LiabilitiesAccrued expenses and other current liabilities 367Due to a related party 420Long-term debt 7,005Provision for heavy maintenance (see Note 17) 228Contingent liability (see Note 20) 1,100Deferred tax liability - net 163Other noncurrent liabilities 6

9,289Total identifiable net assets at fair value 1,836Goodwill arising on acquisition (see Note 12) 4,966Consideration transferred P=6,802

Total consideration transferred consists of the fair values of the Convertible Note and the relatedderivative asset arising from the conversion feature amounting to P=6.6 billion and P=0.2 billion,respectively. No transaction costs were incurred for the business combination.

The fair value and gross amount of the receivables amounted to P=3.0 million. None of thereceivables have been impaired and it is expected that the full contractual amounts will becollected.

A contingent liability at a fair value of P=1,100.1 million was recognized at the acquisition datearising from probable claim from a third party. As at December 31, 2014 and 2013, the contingentliability amounted to P=1,171.7 million and P=1,142.2 million, respectively, with the increase arisingfrom the passage of time. An indemnification asset (included in “Other noncurrent assets”)amounting to P=513.4 million as of acquisition date, was recognized in relation to such probableclaim. As at December 31, 2014 and 2013, the indemnification asset amounted to P=548.3 millionand P=533.0 million, respectively, with the increase arising from passage of time (see Note 15). Nofurther disclosures regarding the contingent liability arising from the probable claim are made byMPTC at this time as MPTC believes that such further disclosures might be prejudicial to itsposition.

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The goodwill of P=4,966.0 million that arose on the acquisition can be attributed to the synergiesexpected to be derived from the business combination, particularly in connection with MPTC’sother existing and planned tollroad projects. None of the goodwill is expected to be deductible fortax purposes.

Net cash outflow on acquisition is as follows:

Amount(In Millions)

Total cash paid on acquisition(a) P=6,772Cash acquired with the subsidiary(b) (746)Net cash outflow P=6,026(a)Cash paid on acquisition represents the cash consideration for the Convertible Notes Receivable.(b)Cash acquired with the subsidiary is included in cash flows from investing activities.

From January 2, 2013 (the date of acquisition) to December 31, 2013, CIC contributedP=1,052.2 million and P=251.8 million to the Company’s consolidated revenue and consolidated netincome, respectively.

Acquisition of DLSMC and CLDH

On June 3, 2013, the Company, through MPHHI, acquired 51% of the voting equity interest inDLSMC, a tertiary teaching and training hospital, by subscribing to 401,942 common shares.Total cash paid as consideration for the acquisition amounted to P=132.9 million. Megaclinic, anambulatory care center in SM Megamall, is a subsidiary of DLSMC as at acquisition date, and theCompany’s first investment in a non-hospital-based diagnostic center.

On October 24, 2013, the Company completed the acquisition of 51% equity ownership in CentralLuzon Doctors’ Hospital, Tarlac’s largest private hospital, for a total nominal consideration ofP=188.8 million to be paid on a deferred arrangement. The fair value of the consideration is atP=149.6 million, of which P=52.1 million remains outstanding as at December 31, 2013. Thefunding will go towards the purchase of major medical equipment and the implementation of aninfrastructure development plan highlighted by the construction of a new building to house newoperating rooms, as well as additional patient beds and doctors’ clinics.

The Company acquired DLSMC and CLDH as part of its strategy to grow its portfolio andincrease the Company’s total bed capacity and to be the largest private hospital group in thePhilippines.

The net assets recognized in the December 31, 2013 financial statements were based on aprovisional assessment of fair value while MPHHI sought an independent valuation for theproperty and equipment owned by DLSMC and CLDH. The valuation had not been completed bythe date the 2013 consolidated financial statements were approved for issue by the BOD.

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In 2014, the valuation was completed and there were no differences between the provisional andfinal fair value of the assets and liabilities. The provisional and final fair values of the identifiableassets and liabilities of DLSMC and CLDH as at the date of acquisition are as follows:

DLSMC CLDH(In Millions)

AssetsCash and cash equivalents P=164 P=128Receivables 95 36Other current assets 43 19Property and equipment (see Note 14) 178 217Other noncurrent assets 26 52

506 452LiabilitiesAccounts payable and accrued expenses 160 70Other current liabilities 11 –Long term debt 64 –Deferred tax liability - net – 25Other noncurrent liabilities 23 24

258 119Total identifiable net assets at fair value 248 333Non-controlling interest (122) (161)Goodwill arising on acquisition (see Note 12) 7 –Bargain purchase – (22)Consideration transferred P=133 P=150

Net cash inflow on acquisition is as follows:

DLSMC CLDH(In Millions)

Cash acquired with the subsidiary(a) P=164 P=128Total cash paid on acquisition (133) (97)Net cash inflow P=31 P=31(a)Cash acquired with the subsidiary is included in cash flows from investing activities.

The fair value and gross amount of DLSMC’s trade receivables amounted to P=95.0 million andP=154.0 million, respectively. The fair value and gross amount of CLDH’s trade receivablesamounted to P=36.0 million and P=56.1 million, respectively. The difference between the fair valueand the gross amount of the receivables represents the portion expected to be uncollectible.

The goodwill arising from the acquisition of DLSMC is primarily attributed to the expectedsynergies and other benefits from combining the assets and activities of DLSMC with those of thehospitals of the Company. The goodwill is not deductible for income tax purposes. Bargainpurchase resulting from the acquisition of CLDH is included in “Construction revenue and otherincome” in the statement of comprehensive income (see Note 27).

The non-controlling interests were recognized as a proportion of net assets acquired.

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From the date of acquisition, DLSMC and CLDH have contributed P=250.4 million andP=61.4 million, respectively, to the consolidated revenue and P=24.9 million of net profit andP=0.4 million of net loss, respectively, to the consolidated net income of the Company. If thecombination had taken place at the beginning of the year, contributions to the consolidatedrevenue and consolidated net income would have been P=388.4 million of revenue andP=16.9 million of net profit for DLSMC and P=356.0 million of revenue and P=5.8 million ofnet loss for CLDH, respectively, for the year ended December 31, 2013.

Total transaction costs of P=5.3 million have been expensed. Of the total transaction costs,P=2.1 million was included in “General and administrative expenses” in the consolidatedstatement of comprehensive income and are part of operating cash flows for the year endedDecember 31, 2013. The remaining P=3.2 million portion of the transaction costs were recognizedin the latter part of 2012.

Acquisition of NCI in MegaclinicAs at June 3, 2013, DLSMC had a 77.24% direct ownership interest in Megaclinic. OnAugust 16, 2013, DLSMC sold its entire ownership in Megaclinic to its shareholders, resulting inthe sale of 51% of its direct ownership interest in Megaclinic to MPHHI for a cash considerationof P=17.3 million. The 11.61% increase in effective ownership in Megaclinic is accounted for as anequity transaction.

5. Operating Segment Information

An operating segment is a component of the Company that engages in business activities fromwhich it may earn revenue and incur expenses, whose operating results are regularly reviewed bythe Company’s chief operating decision maker who makes decisions about how resources are tobe allocated to the segment and assesses its performance, and for which discrete financialinformation is available.

For management purposes, the Company is organized into the following segments based onservices and products:

§ Water utilities, which relate to the provision of water and sewerage services by MWHC and itssubsidiaries Maynilad and PHI, and bulk water supply by MPWIC.

§ Toll operations, which primarily relate to operations and maintenance of toll facilities byMPTC and its subsidiaries MNTC and CIC, and an associate, Tollways ManagementCorporation (TMC), and MPIC’s associate, Don Muang Tollway Public Ltd (DMT).

§ Power distribution, which primarily relates to the operations of Manila Electric Company(Meralco) in relation to the distribution and supply of electricity.

§ Healthcare, which primarily relates to operations and management of hospitals, nursing andmedical school and such other enterprises that have similar undertakings.

§ Rail, which primarily relates to the operations and maintenance of the Light Rail TransitLine 1 (LRT) and construction of the LRT1 south extension by LRMC and ticketing servicesby Automated Fare Collection Services, Inc. (AFCSI).

§ Others, which represent holding companies and operations of subsidiaries involved in realestate and provision of services.

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The rail segment is a new segment beginning 2014. Although the rail segment does not meet thequantitative thresholds required by PFRS 8, Operating Segments for reportable segments as thecompanies are still under the pre-operating stage, management has concluded that this segmentshould be reported as it is closely monitored by the BOD, comprises of significant investments inthe Government’s public-private partnership (PPP) initiatives and is expected to materiallycontribute to the Group’s revenue in the future.

Customer Tariffs. The Company’s results of operations are highly dependent on ability to set andcollect adequate tariffs for its Water Utilities, Toll Operations and Power segments:

MayniladUnder Maynilad’s concession agreement with the Philippine government (see Note 13),Maynilad may request tariff rate adjustments based on movements in the Philippine consumerprice index, foreign exchange currency differentials, a rate rebasing process scheduled to beconducted every five years (‘‘Rate Rebasing’’) and certain extraordinary events. Any rateadjustment requires approval by MWSS and the Regulatory Office (RO). Any tariffadjustments that are not granted, in a timely manner, in full or at all, could have a materialadverse effect on the Company’s results of operations and financial condition.

For the Fourth Rate Rebasing Period, Maynilad submitted the business plan for thedetermination of the Rates Adjustment Limit to be applied to the standard rates for the period2013 to 2017. MWSS released Board of Trustees Resolution No. 2013-100-RO datedSeptember 12, 2013 and RO Resolution No. 13-010-CA dated September 10, 2013 on the raterebasing adjustment for the rate rebasing period 2013 to 2017 reducing Maynilad’s 2012average all-in basic water charge by 4.82% or P=1.46 per cubic meter (cu.m) or P=0.29 per cubicmeter (cu.m) per year over the next five years. Maynilad formally notified its objection andinitiated arbitration proceedings. On October 4, 2013, Maynilad filed its Dispute Noticebefore the Appeals Panel. On December 17, 2013, the RO released Resolution No. 13-011-CA regarding the implementation of a status quo for Maynilad’s Standard Rates and ForeignCurrency Differential Adjustment (FCDA) for any and all its scheduled adjustments until suchtime that the Appeals Panel has issued the Final Award.

In a decision dated December 29, 2014, the Appeals Panel upheld the alternative rebasingadjustment of Maynilad. This will result in a 9.8% increase in the 2013 average basic watercharge of P=31.28 per cu.m., inclusive of the P=1.00 Currency Exchange Rate Adjustment whichthe MWSS has incorporated into the basic charge (the “Award”). The Award translates to anaverage increase of P=3.06/cu.m. For a typical household whose monthly water consumption is20 cu.m., this would mean an increase in the average water charge of P=1.68 per cu.m.

While there has been a two (2)-year delay in implementing an adjustment in the average basicwater charge - the Concession Agreement between MWSS and Maynilad expressly providesfor a one-time implementation of a positive rebasing adjustment - Maynilad is willing toimplement the increase on a staggered basis in order to mitigate the impact of the Award on itscustomers in the West Zone of Metro Manila subject to approval of the MWSS.

In its letter dated February 9, 2015, the MWSS and RO, who received their copy of the Awardon January 7, 2015, informed Maynilad that they have decided to await the final outcome oftheir arbitration with the other concessionaire, Manila Water Company, Inc., before makingany official pronouncements on the applicable resulting water rates for the twoconcessionaires.

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On February 20, 2015, Maynilad wrote the Philippine Government, through the Department ofFinance, with reference to the undertaking which the Republic of the Philippines (the“Republic”) issued in favor of Maynilad on July 31, 1997 and March 17, 2010 (the“Undertaking”). This Undertaking provides, amongst other things, that the Republic shallindemnify Maynilad in respect of any losses occasioned by a delay caused by the Republic orany government-owned agency in implementing any increase in the Standard Rates beyondthe date for its implementation in accordance with the Concession Agreement. Maynilad’scall on the Undertaking comes after the MWSS and its RO, have chosen to defer theimplementation of the Award, despite the Award being final, binding and executory onMWSS, the RO, and Maynilad.

As at February 26, 2015, Maynilad is still awaiting the MWSS Board of Trustees to approvethe 2015 tariff table showing the adjusted rates and the DOF reply.

MNTC and CICMNTC and CIC derive substantially all of their revenues from toll collections from the usersof the toll roads. The concession agreements establish a toll rate formula and adjustmentprocedure for setting the appropriate toll rate. Subject to the Toll Regulatory Board validatingthe calculation of the toll rate adjustment in accordance with the formula, toll rate adjustmentis scheduled every two calendar years for the NLEX and every three calendar years for theCAVITEX.

As at February 26, 2015, MPTC continues to await approval by the Government of toll rateadjustments for Radial Road 1 (R1) of CAVITEX and NLEX, which should have beeneffective from January 1, 2012 and January 1, 2013, respectively.

MeralcoMeralco was among the first entrants to the Performance-Based Regulation (PBR). Rate-setting under PBR is governed by the Rules for Setting Distribution Wheeling Rates (RDWR).The PBR scheme sets tariffs based on the regulated asset base of the Distribution Utility (DU),and the required operating and capital expenditures once every regulatory period (RP), to meetoperational performance and service level requirements responsive to the need for adequate,reliable and quality power, efficient service, growth of all customer classes in the franchisearea as approved by the Energy Regulatory Commission (ERC). PBR also employs amechanism that penalizes or rewards a DU depending on its network and service performance.Rate filings and setting are done every regulatory period (RP) where one RP consists of fourregulatory years. A regulatory year (RY) begins on July 1st and ends on June 30th of thefollowing year. The third RP is from July 1, 2011 to June 30, 2015.

Meralco also files with the ERC its applications for recoveries of advances for pass-throughcosts. These advances consist mainly of unrecovered or differential generation andtransmission charges technically referred to as under-recoveries, which are recoverable fromthe customers, as allowed by law.

Segment performance and monitoring. The Company’s chief operating decision maker is theBOD. The BOD monitors the operating results of each business unit separately for the purpose ofmaking decisions about resource allocation and performance assessment. Segment performance isevaluated based on: consolidated net income for the year; earnings before interest, taxes anddepreciation and amortization, or Core EBITDA; Core EBITDA margin; and core income. Netincome for the year is measured consistent with consolidated net income in the consolidatedfinancial statements.

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Core EBITDA is measured as net income excluding depreciation and amortization of property andequipment and intangible assets, asset impairment on noncurrent assets, financing costs, interestincome, equity in net earnings (losses) of associates and joint ventures, net foreign exchange gains(losses), net gains (losses) on derivative financial instruments, provision for (benefit from) incometax and other non-recurring gains (losses). Core EBITDA margin pertains to Core EBITDAdivided by service revenues.

Performance of the operating segments is also assessed based on a measure of recurring profit orcore income. Core income is measured as net income attributable to owners of the Companyexcluding the effects of foreign exchange and derivative gains or losses and non-recurring items(NRI), net of tax effect of the aforementioned. NRI represent gains or losses that, throughoccurrence or size, are not considered usual operating items.

Segment expenses and segment results exclude transfers or charges between business segments.These transfers are also eliminated for purposes of the consolidated financial statements. For theyears ended December 31, 2014, 2013 and 2012, no revenue transactions with a single customeraccounted for 10% or more of the Company’s consolidated revenues. Except for the equity in netearnings recognized from the Company’s investment in DMT (see Note 11), all revenues of theCompany were primarily derived from within the Philippines.

Segment capital expenditure is the total cost incurred during the period to acquire serviceconcession assets, property and equipment, and intangible assets other than goodwill. For theconsolidated statements of financial position, difference between the combined segment assets andthe consolidated assets consist of adjustments and eliminations comprising of goodwill, deferredtax and derivative assets. Difference between the combined segment liabilities and theconsolidated liabilities largely consist of deferred tax and derivative liabilities.

The following table shows the reconciliations of the Company’s consolidated Core EBITDA toconsolidated net income for the years ended December 31, 2014, 2013 and 2012.

2014 2013 2012(In Millions)

Consolidated Core EBITDA P=19,188 P=17,264 P=15,644Depreciation and amortization (4,007) (3,766) (3,845)Consolidated EBIT 15,181 13,498 11,799Adjustments to reconcile with consolidated net income:

Interest income 385 462 651Share in net earnings of equity

method investees 3,226 2,294 1,993Interest expense (4,290) (3,990) (3,668)Non-recurring gains (losses) - net (850) 50 94Provision for income tax (1,078) (835) (1,662)

Consolidated net income for the year P=12,574 P=11,479 P=9,207

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The following table shows the reconciliations of Company’s consolidated core income to theCompany’s consolidated net income for the years ended December 31, 2014, 2013 and 2012.

2014 2013 2012(In Millions)

Consolidated core income for the year P=8,508 P=7,229 P=6,564Foreign exchange gains (losses) - net 18 70 885Other non-recurring losses (456) (340) (855)Net tax effect of aforementioned adjustments (130) 250 (687)Net income for the year attributable

to owners of the ParentCompany 7,940 7,209 5,907

Net income for the year attributableto non-controlling interest 4,634 4,270 3,300

Consolidated net income for the year P=12,574 P=11,479 P=9,207

The segment revenues, net income for the year, assets, liabilities, and other segment informationof the Company’s reportable operating segments as at and for the years ended December 31, 2014,2013 and 2012 are detailed in the succeeding tables.

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The following table presents consolidated information on core income and certain assets and liabilities regarding business segments for the years endedDecember 31, 2014, 2013 and 2012:

Year Ended December 31, 2014 (In Millions)

Water Utilities Toll Operations HealthcarePower

Distribution Rail Other BusinessesAdjustments/Eliminations Consolidated

Total revenue from external sales P=18,363 P=8,641 P=6,828 P=– P=– P=– P=– P=33,832Cost of sales (5,431) (3,575) (3,912) – – – – (12,918)Gross Margin 12,932 5,066 2,916 – – – – 20,914Operating expenses (2,116) (832) (2,040) – (27) (994) – (6,009)Other income (charges) - net (530) 270 161 405 – (30) – 276Profit before Financing Charges 10,286 4,504 1,037 405 (27) (1,024) – 15,181Interest expense - net (2,007) (1,184) (187) – 2 (529) – (3,905)Profit before NCI and Income Tax 8,279 3,320 850 405 (25) (1,553) – 11,276Non-controlling interest (3,933) (717) (272) – 5 1 – (4,916)Benefit from (provision for) income tax 40 (845) (258) – 4 (19) – (1,078)Contribution from Subsidiaries 4,386 1,758 320 405 (16) (1,571) – 5,282Share in net earnings of equity method investees (10) 481 145 2,622 (12) – – 3,226Contribution from Operations - Core Income 4,376 2,239 465 3,027 (28) (1,571) – 8,508Non-recurring income (charges) (278) (92) (33) (55) (52) (58) – (568)Segment Income (Loss) P=4,098 P=2,147 P=432 P=2,972 (80) (P=1,629) P=– P=7,940

Core EBITDA P=12,841 P=5,240 P=1,709 P=405 (P=27) (P=980) P=– P=19,188Core EBITDA Margin 70% 61% 25% –% –% –% –% 57%

Non-recurring Income (Charges) (P=488) (P=5) (P=29) (P=55) (P=65) (P=78) P=– (P=720)Provision for (benefit from) income tax (33) (92) (2) – – (3) – (130)Non-controlling interest 243 5 (2) – 13 23 – 282Net Non-recurring Income (Charges) (P=278) (P=92) (P=33) (P=55) (P=52) (P=58) P=– (P=568)

Assets and LiabilitiesSegment assets P=84,733 P=42,340 P=13,082 P=– P=1,654 P=7,556 P=19,472 P=168,837Investments and advances 123 6,651 2,382 55,310 488 221 – 65,175Consolidated Total Assets P=84,856 P=48,991 P=15,464 P=55,310 P=2,142 P=7,777 P=19,472 P=234,012

Segment Liabilities P=45,275 P=34,447 P=4,848 P=7,188 P=73 P=8,381 P=4,228 P=104,440

Other Segment InformationCapital expenditures - Service concession assets and property and equipment P=4,701 P=2,569 P=856 P=– P=– P=60 P=– P=8,186Depreciation and amortization 2,555 736 672 – – 44 – 4,007

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Distribution Other BusinessesAdjustments/Eliminations Consolidated

Total revenue from external sales P=16,895 P=8,154 P=5,828 P=– P=– P=– P=30,877Cost of sales (5,145) (3,358) (3,342) – – – (11,845)Gross Margin 11,750 4,796 2,486 – – – 19,032Operating expenses (2,428) (775) (1,645) – (986) – (5,834)Other income (charges) - net (515) 200 149 405 61 – 300Profit before Financing Charges 8,807 4,221 990 405 (925) – 13,498Interest expense - net (1,957) (944) (232) – (395) – (3,528)Profit before NCI and Income Tax 6,850 3,277 758 405 (1,320) – 9,970Non-controlling interest (3,322) (782) (96) – – – (4,200)Benefit from (provision for) income tax 261 (848) (220) – (28) – (835)Contribution from Subsidiaries 3,789 1,647 442 405 (1,348) – 4,935Share in net earnings of equity method investees – 227 139 1,928 – – 2,294Contribution from Operations - Core Income 3,789 1,874 581 2,333 (1,348) – 7,229Non-recurring income (charges) 88 37 28 (9) (164) – (20)Segment Income (Loss) P=3,877 P=1,911 P=609 P=2,324 (P=1,512) P=– P=7,209

Core EBITDA P=11,078 P=5,083 P=1,578 P=405 (P=880) P=– P=17,264Core EBITDA Margin 66% 62% 27% –% –% –% 56%

Non-recurring Income (Charges) P=47 (P=106) P=32 (P=9) (P=156) P=– (P=192)Provision for (benefit from) income tax 119 134 (3) – (8) – 242Non-controlling interest (78) 9 (1) – – – (70)Net Non-recurring Income (Charges) P=88 P=37 P=28 (P=9) (P=164) P=– (P=20)

Assets and LiabilitiesSegment assets P=80,566 P=35,368 P=9,379 P=– P=6,859 P=19,558 P=151,730Investments and advances 134 2,125 2,310 44,087 198 – 48,854Consolidated Total Assets P=80,700 P=37,493 P=11,689 P=44,087 P=7,057 P=19,558 P=200,584

Segment Liabilities P=48,547 P=22,362 P=5,183 P=– P=7,438 P=3,774 P=87,304

Other Segment InformationCapital expenditures - Service concession assets and property and equipment P=5,769 P=474 P=843 P=– P=37 P=– P=7,123Depreciation and amortization 2,272 862 588 – 44 – 3,766

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Distribution Other Businesses Eliminations ConsolidatedTotal revenue from external sales P=15,883 P=6,784 P=5,140 P=– P=– P=– P=27,807Cost of sales (5,375) (2,816) (2,977) – – – (11,168)Gross Margin 10,508 3,968 2,163 – – – 16,639Operating expenses (2,071) (664) (1,471) – (942) – (5,148)Other income (charges) - net (605) 157 154 561 41 – 308Profit before Financing Charges 7,832 3,461 846 561 (901) – 11,799Interest expense - net (1,898) (549) (240) – (329) – (3,016)Profit before NCI and Income Tax 5,934 2,912 606 561 (1,230) – 8,783Non-controlling interest (2,691) (688) (56) – – – (3,435)Benefit from (provision for) income tax 305 (861) (177) – (43) – (776)Contribution from Subsidiaries 3,548 1,363 373 561 (1,273) – 4,572Share in net earnings of equity method investees – 208 134 1,651 – – 1,993Contribution from Operations - Core Income 3,548 1,571 507 2,212 (1,273) – 6,565Non-recurring charges (109) (101) (5) (226) (216) – (657)Segment Income (Loss) P=3,439 P=1,470 P=502 P=1,986 (P=1,489) P=– P=5,908

Core EBITDA P=10,452 P=4,145 P=1,350 P=– (P=303) P=– P=15,644Core EBITDA Margin 66% 61% 26% –% –% –% 56%

Non-recurring Income (Charges) P=719 (P=179) (P=4) (P=226) (P=216) P=– P=94Provision for (benefit from) income tax (911) 26 – – – – (885)Non-controlling interest 83 52 (1) – – – 134Net Non-recurring Charges (P=109) (P=101) (P=5) (P=226) (P=216) P=– (P=657)

Assets and LiabilitiesSegment assets P=74,263 P=28,903 P=8,015 P=– P=3,498 P=13,717 P=128,396Investments and advances – 668 2,259 41,973 184 – 45,084Consolidated Total Assets P=74,263 P=29,571 P=10,274 P=41,973 P=3,682 P=13,717 P=173,480

Segment Liabilities P=45,436 P=11,986 P=2,749 P=– P=15,469 P=3,450 P=79,090

Other Segment InformationCapital expenditures - Service concession assets and property and equipment P=8,076 P=254 P=643 P=– P=76 P=– P=9,049Depreciation and amortization 2,619 685 504 – 37 – 3,845

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The following table shows the analysis and allocation of the consolidated results of operations of the Company to core and NRI, the manner by which the Company reportsand assesses its performance, makes decision and allocates resources, for the years ended December 31, 2014, 2013 and 2012, and is provided to reconcile the precedingconsolidated segment information, amounts and balances with the consolidated statements of income:

2014 2013 2012Core NRI Reclassification Consolidated Core NRI Reclassification Consolidated Core NRI Reclassification Consolidated

(In Millions)

OPERATING REVENUESWater and sewerage services revenue P=18,363 P=– P=– P=18,363 P=16,895 P=– P=– P=16,895 P=15,883 P=– P=– P=15,883Toll fees 8,641 – – 8,641 8,154 – – 8,154 6,784 – – 6,784Hospital revenue 6,677 – – 6,677 5,700 – – 5,700 5,034 – – 5,034School revenue 151 – – 151 128 – – 128 106 – – 106

33,832 – – 33,832 30,877 – – 30,877 27,807 – – 27,807

COST OF SALES AND SERVICES (12,918) (164) – (13,082) (11,845) – – (11,845) (11,168) – – (11,168)

GROSS PROFIT 20,914 (164) – 20,750 19,032 – – 19,032 16,639 – – 16,639General and administrative expenses (6,009) (814) – (6,823) (5,834) (427) – (6,261) (5,148) (236) – (5,384)Interest expense (4,290) (11) – (4,301) (3,990) (11) – (4,001) (3,668) (11) – (3,679)Share in net earnings of equity method investees 3,631 (59) (405) 3,167 2,699 (8) (405) 2,286 2,554 (228) (561) 1,765Interest income 385 – 385 462 – – 462 651 – – 651Other income and expenses (129) 328 405 604 (105) 254 405 554 (253) 569 561 877

INCOME BEFORE INCOME TAX 14,502 (720) – 13,782 12,264 (192) – 12,072 10,775 94 – 10,869

PROVISION FOR (BENEFIT FROM)INCOME TAX

Current 1,155 5 – 1,160 1,050 11 – 1,061 1,099 (2) – 1,097Deferred (77) 125 – 48 (215) (253) – (468) (323) 888 – 565

1,078 130 – 1,208 835 (242) – 593 776 886 – 1,662

NET INCOME P=13,424 (P=850) P=– P=12,574 P=11,429 P=50 P=– P=11,479 P=9,999 (P=792) P=– P=9,207

Net Income Attributable to:Owners of the Parent Company P=8,508 (P=568) P=– P=7,940 P=7,229 (P=20) P=– P=7,209 P=6,564 (P=657) P=– P=5,907NCI 4,916 (282) – 4,634 4,200 70 – 4,270 3,435 (135) – 3,300

P=13,424 (P=850) P=– P=12,574 P=11,429 P=50 P=– P=11,479 P=9,999 (P=792) P=– P=9,207

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6. Material partly-owned subsidiaries

In determining whether an NCI is material to the Company, management employs bothquantitative and qualitative factors to evaluate the nature of, and risks associated with, theCompany’s interests in these entities; and the effects of those interests on the Company’s financialposition. Factors considered include, but not limited to, carrying value of the subsidiary’s NCIrelative to the NCI recognized in the Company’s consolidated financial statements, thesubsidiary’s contribution to the Company’s consolidated revenues and net income, and otherrelevant qualitative risks associated with the subsidiary’s nature, purpose and size of activities.

Based on management’s assessment, the Company has concluded that as at December 31, 2013,MWHC and MNTC are the subsidiaries with NCI that are material to the Company. As atDecember 31, 2014, MPHHI and LRMH are included as subsidiaries with NCI that are material tothe Company with the sell-down of MPIC’s interest in the Hospital group (see Note 22) andawarding of the concession for the LRT Line 1 Cavite Extension and Operations and MaintenanceProject to LRMH’s subsidiary, LRMC (see Note 33).

The ability of these subsidiaries to pay dividends or make other distributions or payments to theirshareholders (including the Company) is subject to applicable laws and other restrictionscontained in financing agreements, shareholder agreements and other agreements that prohibit orlimit the payment of dividends or other transfers of funds. Such applicable restrictions are asfollows:

§ Under the financing agreements as disclosed in Note 19, which include satisfying certainfinancial ratios in order to be able to declare or pay cash dividends;

§ Under Philippine law, a corporation is permitted to declare dividends only to the extent that ithas unrestricted retained earnings that represent the undistributed earnings of the corporationwhich have not been allocated for any managerial, contractual or legal purposes and which arefree for distribution to the shareholders as dividends; and

§ Under MNTC’s shareholders’ agreement, unless otherwise agreed upon by the shareholders,no amounts shall be distributed by way of dividends until Philippine National ConstructionCorporation’s (PNCC) share in the project revenue collection has been repaid in full.

On February 23, 2015, Maynilad’s BOD approved the appropriation of its retained earningsamounting to P=3.5 billion for various water and sewerage projects expected to be implemented inthe next two years.

Total dividends declared to NCI amounted to P=1,045.0 million, P=2,107.4 million andP=1,469.8 million for the years ended December 31, 2014, 2013 and 2012. Of the total dividendsdeclared to NCI, P=1,003.0 million, P=2,087.1 million and P=1,460.0 million were allocable to theNCI in MWHC and MNTC in 2014, 2013 and 2012, respectively. As at December 31, 2014 and2013, MNTC has unpaid dividends to non-controlling shareholders amounting to P=291.2 millionand P=409.0 million, respectively (see Note 16).

Total dividends declared to the NCI at consolidated MPHHI level amounted to P=42 million for theyear ended December 31, 2014. No dividends have been declared to the NCI in LRMC for theyear ended December 31, 2014.

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The summarized financial information are presented before inter-company eliminations but after consolidation adjustments for goodwill, other fair value adjustments onacquisition and adjustments required to apply uniform accounting policies at group level.

December 31, 2014 December 31, 2013 December 31, 2012MWHC MNTC MPHHI* LRMH MWHC MNTC MWHC MNTC

Equity share held by NCI 47.20% 24.50% 39.89% 45.00% 47.20% 33.00% 43.19% 33.00%(In Millions)

Summarized statements of financial position

Current assets P=11,865 P=9,043 P=6,148 P=508 P=10,785 P=4,152 P=8,110 P=3,076Non-current assets** 79,980 26,633 10,148 1,129 77,491 23,639 73,348 23,015Current liabilities 13,420 4,619 2,702 71 15,035 3,164 13,540 2,722Non-current liabilities 33,855 16,831 2,169 – 35,298 10,801 34,308 9,814Total equity 44,570 14,226 11,425 1,566 37,943 13,826 33,610 13,555 Attributable to: Equity holders of MPIC 26,092 12,150 6,238 859 23,334 11,162 21,719 10,981 NCI 18,478 2,076 5,187 707 14,609 2,664 11,891 2,574

Summarized statements of comprehensive incomeRevenues 18,363 7,517 6,828 – 16,895 7,101 15,882 6,784Net income (loss) 7,817 2,536 756 (22) 7,277 2,341 6,305 1,922Total comprehensive income (loss) 7,830 2,567 756 (22) 7,392 2,329 6,053 1,960Net income (loss) attributable to NCI 3,690 679 379 (10) 3,434 772 2,608 634Dividends declared to NCI 472 531 42 – 1,407 680 897 563Dividends paid to NCI 472 648 39 – 1,405 546 897 325

Summarized statements of cash flowsOperating 9,996 3,943 1,513 59 11,073 3,433 12,045 3,474Investing (4,081) (6,518) (1,096) (1,129) (9,626) (3,192) (7,060) (189)Financing (4,593) 4,027 3,352 1,577 (2,474) (1,417) (5,293) (1,728)Net increase (decrease) in cash and cash equivalents 1,322 1,452 3,769 507 (1,027) (1,176) (308) 1,557Cash and cash equivalents at beginning of the year 2,905 1,502 858 – 3,932 2,678 4,240 1,121Cash and cash equivalents at end of the year P=4,227 P=2,954 P=4,627 P=507 P=2,905 P=1,502 P=3,932 P=2,678

*Includes the 25.51% equivalent shares of the Exchangeable bond (see Note 22)**Includes goodwill recognized as at acquisition date (see Note 12)

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7. Cash and Cash Equivalents, Short-term Deposits and Restricted Cash

Cash and Cash Equivalents and Short-term Deposits. This account consists of:


Cash and cash equivalents P=17,725 P=11,636Short-term deposits (see Note 10) 8,033 3,627

P=25,758 P=15,263

Cash and cash equivalents include cash in banks and temporary placements that are made forvarying periods of up to three months depending on the immediate cash requirements of theCompany. Cash in banks and temporary placements earn interest at the prevailing bank andtemporary placements rates, respectively.

Short-term deposits are deposits with original maturities of more than three months to one yearfrom dates of acquisition and earn interest at the prevailing short-term deposits rates. Beginning2014, the short-term deposit account included UITF (see Note 10).

For the purpose of the consolidated statements of cash flows, cash and cash equivalents compriseof the following as at December 31:

2014 2013 2012(In Millions)

Cash on hand and in banks P=3,261 P=2,556 P=1,528Short-term deposits that qualify

as cash equivalents 14,464 9,080 7,577P=17,725 P=11,636 P=9,105

Restricted Cash. Restricted cash classified as part of current assets pertains to sinking fund ordebt service account (DSA) representing amounts set aside for semi-annual principal and interestpayments of certain long-term debt. This DSA is maintained and replenished in accordance withthe provision of the loan agreements. Restricted cash, classified as noncurrent asset and shownseparately in the consolidated statements of financial position pertains to cash held in escrowaccount in relation with the construction contract for the NLEX Segment 10 (see Note 33).

Interest income from the restricted cash is for the account of the Company (see Notes 19 and 26).

Interest earned from cash and cash equivalents, short-term deposits and restricted cash amountedto P=253.0 million, P=295.0 million and P=504.6 million for the years ended December 31, 2014,2013 and 2012, respectively (see Note 26).

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8. Receivables

This account consists of:


Trade receivables (see Note 21) P=3,466 P=2,780Advances to customers 373 441Notes receivable (see Note 21) 150 1,033Advances to affiliates 102 102Advances to officers and employees 73 80Accrued interest receivables 51 285Dividends receivable (see Note 11) 41 28Others 562 460

4,818 5,209Less allowance for doubtful accounts 879 867

3,939 4,342Less current portion 3,676 3,749Noncurrent portion P=263 P=593

Notes Receivable. Notes receivable as at December 31, 2014 and 2013 consist of the following:

Description Terms Maturity 2014 2013(in Millions)

P=164.1 million loan to Landco (a) 12% interest rate per annum December 31, 2014 P=− P=164

P=133.4 million loan to AB HoldingCorporation (ABHC) (a)

10% interest rate per annum August 30, 2015 − 133

P=100.0 million loan to Landco PacificCorporation (Landco) (a)

10% interest per annum March 15, 2017 − 100

Preferred Shares issued by Landco (b) With mandatoryredemption feature

August 2020 − 355

P=101.4 million loan by MetroPac WaterInvestments Corp. (MPWIC) toManila Water Consortium, Inc.(MWCI) (c)

7% interest per annum

Payable within oneyear from issuance − 101

Others (d) Various Various 150 180Total notes receivable P=150 P=1,033

Additional information on the notes receivable as follows:

a. The loans to ABHC and Landco as at December 31, 2013 are secured by a pledge of Landcoshares owned by ABHC. In 2014, following the restructuring plan of Landco in preparationfor its eventual sale, management classified its interests in Landco, including the receivablesin Landco and ABHC, as assets held for sale (see Note 33).

b. In 2014, the carrying value of the preferred shares, including dividends in arrears and thederivative asset arising from the conversion option feature, were classified as common sharesfollowing conversion of the preferred shares to 2,429,504 common shares of Landco.The conversion of the preferred shares to common shares, which is part of the restructuringplan of Landco in preparation for its eventual sale, resulted to an increase in the interest inLandco from 19.0% to 38.1%. Management classified its entire interests in Landco as assetsheld for sale as at December 31, 2014 (see Note 33).

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c. In May 2013, MPWIC and MWCI entered into a loan agreement in relation to the project withCebu Manila Water Development, Inc. (CMWD) amounting to P=70.2 million payable withinone year from issuance (see Note 21). An additional loan of P=31.2 million was made inSeptember 2013. These loans, together with corresponding interest were fully settled inJanuary 2014.

d. Other notes receivable aggregating P=150.0 million and P=180.0 million comprising of defaultedloans are fully provided with allowance as at December 31, 2014 and 2013.

Trade Receivables. Trade receivables mainly include receivables from customers arising from:

§ Water, sewerage services and bulk water supply, which receivables are non-interest bearingand generally have 60-day term;

§ Health care services, which the Company generally provides a 30-day credit term to its self-pay, HMO, international insurance, PhilHealth and corporate accounts.

Advances and Other Receivables. Advances include advances to customers, affiliates and officersand employees and generally collectible within a year. Other receivables mainly representadvances to former subsidiaries and related parties (see Note 21). Certain of these advances toformer subsidiaries and affiliates of the Company are fully provided.

Movements in the allowance of individually and collectively assessed impaired receivables in2014 and 2013 are as follows:

2014Balance atJanuary 1,

2014Provisions

(see Note 24)(Write-off)/

Reclassification

Balance atDecember 31,

2014(In Millions)

Individually impaired:Trade receivables P=5 P=5 P=– P=10Notes receivable 180 – (30) 150Others(a) 8 (7) 1

193 5 (37) 161Collectively impaired:

Trade receivables 662 62 (18) 706Advances to other affiliates 12 – – 12

674 62 (18) 718P=867 P=67 (P=55) P=879


2013Provisions


Reclassification


2013(In Millions)

Individually impaired:Trade receivables P=2 P=5 (P=2) P=5Notes receivable 180 – – 180Others 16 – (8) 8

198 5 (10) 193

(Forward)

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2013Provisions


Reclassification


2013(In Millions)

Collectively impaired:Trade receivables P=536 P=155 (P=29) P=662Advances to other affiliates 12 – – 12

548 155 (29) 674P=746 P=160 (P=39) P=867

9. Other Current Assets

Other current assets consist of the following:


AFS financial assets (see Note 10) P=302 P=2,042Advances to contractors and consultants (a) 560 507Creditable withholding tax (CWT) (b) 517 504Inventories - at cost (c) 453 426Input VAT (see Note 32) 393 137Prepaid expenses (d) 235 223Real estate for sale - at lower of cost or NRV (e) 135 151Miscellaneous deposits and others (f) 198 187

2,793 4,177Less allowance for decline in value (b) 335 356

P=2,458 P=3,821

a. Advances to contractors and consultants mainly represent the advance payments formobilization of the contractors and consultants for various contracts relating to the tollwaysand water operations. These are progressively reduced upon receipt of the equivalent amountof services rendered by the contractors and consultants.

b. This represents amount withheld by counterparty for services rendered by the Company whichcan be claimed as tax credits. Management provided allowance for decline in valuerepresenting CWT recognized in prior years that the Company may no longer be able toutilize.

c. Cost of inventories charged to “Cost of sales and services” account in the consolidatedstatements of comprehensive income amounted to P=2,375.0 million, P=2,033.0 million andP=1,839.0 million for the years ended December 31, 2014, 2013 and 2012, respectively(see Note 23).

d. Prepaid expenses mainly pertains to insurance, premium bond and taxes and licenses.

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e. This account consists of the following as at December 31, 2014 and 2013:


Land P=50 P=50Development costs: Residential resort community and Central

Business District 47 47 Condominium units, including parking lots 38 54

P=135 P=151

Certain condominium units and parking slots were carried at NRV, the cost of whichamounted to P=23.8 million as at December 31, 2014 and 2013. Allowance for impairment lossamounted to P=2.3 million as at December 31, 2014 and 2013.

f. This account mainly consists of advances to suppliers and other miscellaneous deposits.

10. Available-for-Sale Financial Assets



Shares of stock in: Listed P=15 P=15 Unlisted 511 1,282UITFs 5,039 1,995Investment in bonds and notes 1,938 1,520

7,503 4,812Less: UITFs presented as short term deposits

(see Note 7) 5,039 – Current portion (see Note 9) 302 2,042Noncurrent portion P=2,162 P=2,770

The movements in the AFS financial assets are as follows:


Balance at beginning of year P=4,812 P=1,512Additions 4,351 4,238Disposal and maturity (1,120) (1,137)Changes in fair value: Recycled to profit or loss (222) (14) Unrealized fair value changes 44 213Reclassification (see Note 33) (262) –Impairment (100) –Balance at end of year P=7,503 P=4,812

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The movements in the fair value changes of AFS financial assets are as follows:


Balance at beginning of year P=243 P=44Change in fair value during the year (see Note 28) 44 213Reclassification to profit and loss (see Note 28) (222) (14)Balance at end of year P=65 P=243

Quoted shares of stock represent investments in golf clubs shares stated at their fair values.

Unlisted shares of stock represent the Company’s investment in the entities (all incorporated in thePhilippines) enumerated below. These investments in equity instruments are stated at cost, exceptfor NEPSCC shares, as there are no reliable sources and bases for subsequent fair valuedetermination. Management believes that these investments, except Subic Water Sewerage Co.,Inc. (Subic Water), are not impaired since the investee companies continue to report income andshow stable financial conditions.

Ownership Interest AmountsPrincipal Activities 2014 2013 2014 2013

(In %) (In Millions)Citra Metro Manila Tollways Corporation Design, construction and

financing of the Metro ManilaSkyway 2.0 2.0 P=316 P=316

Subic Water (a) Sewerage services 10.0 10.0 111 211Bonifacio Land Corporation (BLC) Real estate Less than 1% 47 47Pacific Global One Aviation Company, Inc. Aircraft transportation services 15.0 15.0 37 37NE Pacific Shopping Center Corporation

(NEPSCC) (b) Leasing properties in mall spaces – 36.9 – 459Landco Pacific Corporation (c) Real estate – 19.0 – 212Total P=511 P=1,282

a. Impairment loss of P=100.2 million was recognized on the Company’s investment in SubicWater.

b. For the year ended December 31, 2014, disposal activity included the sale of all theCompany’s investment in shares of NEPSCC. On February 28, 2014, MPIC sold to CoscoCapital Inc. all of its shares representing 36.89% of the issued and outstanding capital stock ofNEPSCC (see Note 27).

c. In 2014, following the restructuring plan of Landco in preparation for its eventual sale,management classified its interests in Landco, including the receivables in Landco and ABHCas assets held for sale (see Note 33).

Investment in UITF. UITFs are ready-made investments that allow the pooling of funds fromdifferent investors with similar investment objectives. These UITFs are managed by professionalfund managers and may be invested in various financial instruments such as money marketsecurities, bonds and equities, which are normally available to large investors only. A UITF usesthe mark to market method in valuing the fund’s securities. It is a valuation method whichcalculates the Net Asset Value (NAV) based on the estimated fair market value of the assets of thefund based on prices supplied by independent sources. As at December 31, 2014, while the UITFremains to be classified as AFS financial assets, the entire investment in UITF has beenreclassified to short-term deposits account as the fund comprises of short-term money marketsecurities, time and special deposit accounts with average maturity of less than 30 days(see Note 7).

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Investment in bonds and notes. As at December 31, 2014 and 2013, this account consists ofinvestments in ROP retail treasury bonds, fixed rate treasury notes, long-term negotiablecertificate of deposits and corporate bonds, stated at fair value. This account included investmentin Meralco’s corporate notes with maturity of up to 2020 and bear fixed interest rate of 4.38%.Gain on changes in fair value of investment in bonds are recognized in OCI (see Note 28).Interest earned on and maturity profile of these investments are disclosed in Notes 26 and 35. Fairvalues and corresponding principal amounts are disclosed in Note 37.

11. Investments and Advances

The account “Investment and advances” consist of the following:


Equity method investees: Associates P=23,174 P=4,767 Joint ventures 29,672 31,758

52,846 36,525Investment in Beacon Electric’s preferred shares

classified as AFS investments 11,573 11,573Advances to Beacon Electric 756 756

P=65,175 P=48,854

Movements in the “Equity method investees”:


Acquisition costsBalance at beginning of year P=30,569 P=31,196Additions during the period 17,993 1,846Disposal and others – (2,473)Balance at end of year 48,562 30,569Accumulated equity in net earningsBalance at beginning of year 5,905 2,311Share in net earnings 3,167 2,286Disposal and others – 1,640Dividends (4,954) (332)Balance at end of year 4,118 5,905Accumulated share in the investees’ other

comprehensive incomeBalance at beginning of year 725 558Share in investees’ other comprehensive income

(see Note 28) 115 167Balance at end of year 840 725Less allowance for impairment lossBalance at beginning of year 674 1,310Additions – 164Disposal and others – (800)Balance at end of year 674 674

P=52,846 P=36,525

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Equity Method InvesteesInvestments in Equity Method Investees pertain to the Company’s investments in associates andjoint ventures. In determining whether an equity method investee is material to the Company,management employs both quantitative and qualitative factors to evaluate the nature of, and risksassociated with, the Company’s interests in these entities; and the effects of those interest on theCompany’s financial position. Factors considered include, but not limited to, carrying value of theinvestee relative to the total equity method investments recognized in the Company’s consolidatedfinancial statements, the equity investee’s contribution to the Company’s consolidated net income,and other relevant qualitative risks associated with the equity investee’s nature, purpose and sizeof activities.

The carrying value of material and immaterial investments in associates and joint ventures are asfollows:


Associates: Material - Meralco P=13,414 P=– Immaterial 9,760 4,767

23,174 4,767Joint ventures: Material - Beacon Electric 29,566 31,758 Immaterial 106 –

29,672 31,758P=52,846 P=36,525

Individually immaterial investees. The Company has interests in the following individuallyimmaterial investments in associates and a joint venture:

Place of Ownership Interest in %Incorporation Principal Activities 2014 2013

Associates: TMC(a) Philippines Tollways 46.00 46.00 Davao Doctors Hospital, Inc. (DDH) (b) Philippines Hospital 34.85 34.85 Medical Doctors Inc. (b) Philippines Hospital 33.17 33.28 Manila Water Consortium Inc. (MWCI)(c) Philippines Investment holding 39.00 39.00 FPM Infra (d) BVI Investment holding – 25.00 Don Muang Tollway Public Ltd (DMT) (d) Thailand Tollways 29.45 – Automated Fare Collection Services, Inc. (AFCSI) (e) Philippines

Operator of contactlesspayment system 20.00 –

Prime Media Holdings, Inc. (PMHI) (f) Philippines Media holding company 44.60 44.60 First Gen Northern Energy Corp. (FGNEC) Philippines Power generation 33.33 33.33 Costa De Madera (see Note 3) Philippines Real estate 62.00 62.00 Metro Pacific Land Holdings, Inc. Philippines Real estate 49.00 49.00Joint Venture - Easytrip Services Corporation (ESC) (g) Philippines Tollways 50.00 –

a. Pursuant to the Operation and Maintenance Agreement with MNTC, TMC is responsible forthe operation and maintenance of both the North Luzon Expressway Project and Segment 7.TMC also operates and manages the Subic-Clark-Tarlac Expressway, a 94-km tollroad,pursuant to its agreement with the Bases Conversion and Development Authority (BCDA)(see Note 21).

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b. Included as part of the hospitals transferred to MPHHI (see Note 2). Ownership interestsreflected above as at December 31, 2014 are at MPHHI level. MPIC’s effective ownershipinterest in DDH and MDI are 20.95% and 19.94%, respectively, on a fully diluted basis as atDecember 31, 2014.

c. MPWIC, the Company’s wholly-owned subsidiary, acquired 20% effective ownership interestin Cebu Manila Water Development, Inc. (CMWD) through a 39% direct ownership interestin MWCI. The cost of the Company’s investment in MWCI is at P=133.8 million. OnDecember 13, 2013, CMWD received a Notice of Award for the bulk supply of water to theMetropolitan Cebu Water District (MCWD). CMWD and MCWD signed a 20-year WaterPurchase Agreement (WPA) for the supply of 18 million liters of water per day for the firstyear and 35 million liters per day of water for the second to 20th year. CMWD made its initialdelivery of water in January 2015.

d. On November 15, 2013, MPIC and FPC announced a joint venture to spearhead newinfrastructure investments in emerging Asian economies. FPC held 75% of the venture, FPMInfra and MPIC held the remaining 25%, through a wholly owned subsidiary, MIHL. FPMInfra’s sole asset is a 29.45% interest in DMT, held through AIF (see Note 2).

On July 31, 2014, FPC transferred its 75% shareholding in FPM Infra to MPIC for aconsideration of approximately US$101.25 million (or P=4.3 billion). As a result of thetransaction, FPM Infra became a wholly-owned subsidiary of MIHL. The transaction wassettled on August 7, 2014 with the acquisition of 4,875 shares of FPM Infra for US$20,769.23per share. After the acquisition, MPIC’s effective ownership interest in DMT increased from7.36% to 29.45%.

DMT is a major toll road operator in Bangkok, Thailand. The concession for DMT runs until2034 for the operation of a 21.9-kilometer six-lane elevated toll road from central Bangkok toDon Muang International Airport and further to the National Monument, north of Bangkok.

e. On January 30, 2014, the AF Consortium received the Notice of Award from the Departmentof Transportation and Communications declaring it the winning bidder for P=1.72 billioncontactless Automated Fare Collection System (AFCS) Project. The AF Consortium iscomposed of BPI Card Finance Corporation as lead member, Globe Telecom, Inc., ACInfrastructure Holdings Corp., Smart Communications, Inc., Meralco Financial ServicesCorporation, and MPIC. The contactless payment system will facilitate efficient passengertransfer to other rail lines, and enhance fare collection efficiency.

Notice of award for the AFCS Project was received on February 23, 2014 and on March 31,2014, the concession agreement was signed. On February 10, 2014, the AFCSI wasincorporated by the members of the AF Consortium with the Parent Company holding 20% ofthe total shares subscribed.

As at December 31, 2014, investment in AFCSI amounted to P=488.3 million, includingP=203.2 million of unpaid subscription but net of share in accumulated net loss ofP=14.9 million. Since AFCSI is still under pre-operating stage, this investee is assessed to beindividually immaterial to the consolidated results of the Company.

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f. As at December 31, 2012, investment in PMHI (held through NOHI), has been fully providedwith valuation allowance. In 2013, NOHI converted its P=119.7 million advances to PMHIinto equity and subscribed to additional PMHI shares for P=114.6 million with an outstandingsubscription payable of P=69.8 million. The subscription was funded by a loan from a thirdparty and the loan was secured by a pledge over the existing shares owned by NOHI excludingthe newly subscribed shares. On the same year, the third party lender sent a notice to NOHIthat it will foreclose on the pledged PMHI shares due to the default in payment of the loan. Inconnection with the foreclosure proceedings, the Company took out the cost of the sharessubject to the foreclosure and the related accumulated equity in net loss and allowance forimpairment loss included as “disposal and others” in the table above. The Company’sinvestment in PMHI after effecting the foreclosure is at 44.60% with a carrying value ofP=69.8 million net of impairment loss amounting to P=164.5 million. The last trade value onDecember 29, 2014 registered in the PSE was P=1.38 per share or an aggregate market valueamounting to P=433.4 million.

g. On June 30, 2014, MPTDC, Egis Easytrip Services SA (ESSA) and ESC executed a SharePurchase Agreement covering the acquisition of equity interest equivalent to 50% plus oneshare of the capital stock of ESC through a combination of subscription to a total of 87,000new shares of ESC and purchase of 13,001 shares from Egis Easytrip Services SA (ESSA).The total consideration is P=1,030 average price per share or a total of P=103.0 million.Subscription payment for new shares was fully paid on June 30, 2014 while the purchase pricefor acquired shares from ESSA was paid on July 31, 2014, upon completion of the relevantconditions precedent.

ESC, a company incorporated in the Philippines, is primarily engaged in the business ofproviding services related to electronic toll collection (ETC) system to include among others,the implementation of inter-operability of the different toll collection systems of tollways inthe country, account management and funding and management of all electronic pass issued.ESC is the exclusive tag issuer at the NLEX.

The following table analyzes, in aggregate, the Company’s share in the net income and OCI ofthese investees:

2014 2013Joint Venture Associate Associate

(In Millions)

Carrying amount of investment P=106 P=9,760 P=4,767Share in: Net income 3 597 367 OCI – 30 (22) Total comprehensive income 3 627 345

The following table summarizes, in aggregate, the assets and liabilities of these investees:

2014 2013Joint Venture Associate Associate

(In Millions)

Current assets P=507 P=3,952 P=2,976Noncurrent assets 41 27,469 14,881Current liabilities 519 2,421 5,523Noncurrent liabilities 2 11,211 2,090

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Dividend income from these investees amounted to P=504.0 million and P=332.0 million in 2014and 2013, respectively. Cumulative unrecognized share in net losses of these investees amountedto P=412.0 million, P=411.4 million and P=411.5 million as at December 31, 2014, 2013 and 2012,respectively.

Other transactions with these associates are disclosed in Note 21.

Material Associate and Joint Venture. The Company’s investments in material associate and jointventure substantially comprise of MPIC’s investment in Meralco (held directly by MPIC andindirectly through its investment in Beacon Electric) and investment in Beacon Electric,respectively. Meralco is a Philippine corporation with its shares listed on the PSE. It is the largestdistributor of electricity in the Philippines with its franchise valid until June 2028. The Companyhas 50% ownership interest in Beacon Electric, a joint venture. Beacon Electric was organizedwith the sole purpose of holding the respective shareholdings in Meralco of PLDTCommunications and Energy Ventures (PCEV) and the Parent Company and for subsequentacquisitions of Meralco shares.

As at December 31, 2013, Beacon Electric owned 563.12 million Meralco shares, or 49.96% ofthe outstanding shares. On June 24, 2014, MPIC entered into a Share Purchase Agreement withBeacon Electric for the sale of the latter’s 56.35 million shares, comprising approximately 5%, inMeralco at a price of P=235.0 per share for an aggregate consideration of P=13.24 billion. Thus, theCompany’s aggregate effective interest in Meralco after this transaction increased from 24.98% to27.48%. The transaction was completed through a block sale at the Philippine Stock Exchange onJune 26, 2014.

The consideration payable by MPIC to Beacon Electric was settled as to P=3.0 billion immediatelyand the balance due on or before February 2015. MPIC will receive a dividend from BeaconElectric at the same time as it settles payments for this transaction such that MPIC’s net cashinvestment in the transaction will be P=6.6 billion. In accordance with PAS 28, MPIC had notrecognized its share in Beacon Electric’s gain from the partial sale of its investment in Meralco.

As at December 31, 2014, MPIC’s payable to Beacon Electric (included in due to related partiesin the consolidated statement of financial position; see Note 21) related to this transactionamounted to P=7.19 billion (net of impact of discounting amounting to P=55.5 million) afterpayment of P=1.55 billion on transaction date and P=4.45 billion through offsetting with MPIC’sshare of dividends on common shares declared by Beacon Electric on June 24, 2014 andNovember 17, 2014.

The carrying values and fair values of the Meralco shares held indirectly through Beacon Electricand held directly by the Parent Company are as follows:

EffectiveOwnership Interest in

Meralco (in %)Carrying

ValueFair

Value(In Millions)

As of December 31, 2014 Indirect*(a) 22.48 P=56,410 P=64,740Direct 5.00 13,414 14,399

As of December 31, 2013 Indirect*(b) 24.98 62,095 70,644Direct − − −

* Represents MPIC’s proportionate share in Beacon Electric’s investment in Meralco (using equity method andat fair value),which include MPIC’s proportionate share in subsumed goodwill at approximately (a) P=36 billionand (b) P=40 billion.

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Summarized financial information of Meralco and Beacon Electric.

Meralco - AssociateThe summarized financial information is based on Meralco’s December 31, 2014 consolidatedfinancial statements:

Consolidated statement of comprehensive income (In Millions)Revenue P=266,336Income before income tax 26,484Net income 18,131Total comprehensive income 17,940Dividends received by MPIC from 5% common

shares in Meralco −Statements of financial positionCurrent assets 113,743Noncurrent assets 156,170Current liabilities 81,137Noncurrent liabilities 109,302Net assets 79,474Less: Equity attributable to NCI (320)Net assets attributable to common shareholders of

Meralco 79,154MPIC’s direct ownership interest in Meralco 5%MPIC’s 5% share in net assets of Meralco 3,958Provisional goodwill and purchase price allocation

adjustments 9,456Carrying amount of MPIC’s direct investment in Meralco P=13,414

Beacon Electric - Joint VentureThe summarized financial information is based on Beacon Electric’s financial statements using theequity method of accounting for investment in Meralco:

2014 2013 2012(In Millions)

Consolidated statement of comprehensive incomeEquity in net earnings in Meralco P=8,202 P=8,017 P=7,408Interest expense (2,373) (2,459) (2,986)Interest income 205 29 94Income tax expense – – –Net income 6,438 5,451 4,452Total comprehensive income 6,456 5,840 5,391Dividends received by MPIC from Beacon

Electric’s common shares 4,450 – –


Statements of financial position - Beacon ElectricCurrent assets P=10,774 P=686Investment in Meralco 112,819 124,189Current liabilities 4,539 1,206Noncurrent liabilities 35,004 36,533Net assets 84,050 87,136Less: Equity attributable to preferred shareholder (including dividends in arrears) 25,576 24,766Net assets attributable to common shareholders of Beacon Electric 58,474 62,370

(Forward)

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MPIC’s ownership interest in Beacon Electric 50% 50%MPIC’s share in net assets of Beacon Electric 29,237 31,185Unification of accounting policies 431 431Nonrecognition of MPIC’s share on gain on sale of Meralco shares (246) –Purchase price allocation adjustments and others* 144 142Carrying amount of MPIC’s investment in Beacon Electric P=29,566 P=31,758

The above amounts of Beacon Electric’s assets and liabilitiesinclude the following:

Cash and cash equivalents P=3,577 P=683Current financial liabilities** 1,260 936Non-current financial liabilities** 33,935 36,492

*Includes equity in net earnings in Meralco prior to the transfer of investment in Meralco to Beacon Electric**Excluding trade and other payables and provisions

The following facilities entered into by Beacon Electric are secured by a pledge over Meralcoshares held by it and are not guaranteed by the Company. As Beacon Electric is accounted forusing the equity method, these facilities are not included in Company’s consolidated debt. NeitherMPIC nor PCEV guarantees Beacon Electric’s debt.

DescriptionInterest Rate(per annum) Terms 2014 2013

(In Millions)P=17,000.0 Million Corporate Notes: Availed of in 2013; 10 years

with semi-annual interest andprincipal repayments withfinal repayment in March2023

· P=2,285.0 million (Tranche A) 6.00% P=2,233 P=2,268

· P=14,715.0 million (Tranche B) 5.75% for the firstfive years; subjectto repricing on the5th year

14,384 14,605

P=11,000.0 Million Fixed Corporate Notes· P=4,000.0 million (1st Tranche) 8.00% Availed of beginning 2011;

10 years payable in semi-annual interest and principalrepayments and with finalrepayment in May 2021

3,700 3,920

· P=7,000.0 million (2nd Tranche) 7.09% 6,475 6,860

P=9,000.0 Million Corporate Notes:Availed of in 2013;10 years payable with semi-annual interest and principalrepayments with finalrepayment inJuly 2023

· P=2,950.0 million (Tranche A) 6.00% 2,884 2,928

· P=6,050.0 million (Tranche B) 5.50% for the firstfive years; subjectto repricing on the5th year

5,914 6,004

Total 35,590 36,585Less unamortized debt issue cost 395 454

35,195 36,131Less current portion (net of unamortized debt issue cost) 1,260 936Noncurrent portion P=33,935 P=35,195

The proceeds of the P=9,000.0 Million Corporate Notes were used to prepay outstanding debt andpartially finance the acquisition of additional Meralco shares purchased in July 2013. Theproceeds of the P=17,000.0 Million Corporate Notes Facility were used to partially finance theprepayment of outstanding debt in March 2013. As at December 31, 2014 and 2013, BeaconElectric is in compliance with all the requirements stipulated in the loan agreements.

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On May 27, 2013, Beacon Electric entered into a Forward Starting Interest Rate Swap (ForwardStarting IRS) to hedge the interest repricing risk on the outstanding balance of the Tranche B(P=14,715 million) of the P=17,000.0 Million Corporate Notes Facility by the end of the fifth year.The Forward Starting IRS will have a receive leg based on a rate which will be determined onMarch 26, 2018 and pay leg of 6.98% fixed rate that virtually matches the debt’s critical terms(i.e, benchmark rate and fixing date). The hedge is expected to be highly effective and as suchBeacon Electric designates the Forward Starting IRS as a cash flow hedge. The changes in fairvalue of the Forward Starting IRS will be deferred in equity under Beacon Electric’s OtherComprehensive Income (Loss) Reserve account. For the periods ended December 31, 2014 and2013, the Company’s share in the Beacon Electric’s other comprehensive income and loss fromthe Forward Starting IRS amounted to P=134.6 million (income) and P=180.6 million (loss),respectively, recognized as “share in the fair value changes in cash flow hedges of equity methodinvestees” in the Company’s consolidated statement of comprehensive income (see Note 28).

Beacon Electric’s loans are secured by a pledge on Meralco shares owned by Beacon Electric andshall, from the date of the pledge over the Meralco shares, maintain the loan to value ratio at 50%.The loan agreements also contain certain provisions which include the maintenance of a DebtService Account to be used by Beacon Electric to service interest payments and principalrepayments and maintenance of financial ratios such as debt to equity ratio, debt service coverageratio and loan to value ratio.

As at December 31, 2014 and 2013, Beacon Electric is in compliance with all the requirementsstipulated in the loan agreements.

Investment in Beacon Electric’s preferred shares classified as AFS investmentsThe Company owns 50% of the Beacon Electric’s issued preferred shares as atDecember 31, 2014 and 2013. The preferred shares of Beacon Electric are non-voting, non-convertible to common shares or any shares of any class of Beacon, have no pre-emptive rights tosubscribe to any share or convertible debt securities or warrants issued or sold by Beacon Electric.The preference shareholder is entitled to liquidation preference and yearly cumulative dividend atthe rate of 7% of the issue value subject to (a) availability of unrestricted retained earnings; and(b) dividend payment restrictions imposed by Beacon Electric’s bank creditors. For the yearsended December 31, 2014, 2013 and 2012, the Parent Company received dividends from BeaconElectric’s preferred shares amounting to P=405.1 million, P=405.1 million and P=561.4 million,respectively (see Note 27). As at December 31, 2014 and 2013, total cumulative dividends onpreferred shares owned by both MPIC and PCEV not yet declared by Beacon Electric amounted toa total of P=2,430.4 million and P=1,620.3 million, respectively.

Advances to Beacon ElectricAdvances to Beacon Electric are non-interest bearing with no fixed repayment terms. TheCompany views such advances as part of its long-term investment in Beacon Electric as evidenceby its inclusion in its interest in equity method investees.

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12. Goodwill

The movements in the goodwill account as follows:


Balance at beginning of year P=18,308 P=13,155Additions from: Acquisitions (see Note 4) – 4,973 Finalization of purchase price allocation* – 180

P=18,308 P=18,308*PHI acquisition in 2012 with the purchase price allocation finalized in 2013.

The carrying amount of goodwill allocated to each of the CGU (determined to be at thesubsidiary level):


Water utilities: MWHC/Maynilad P=6,803 P=6,803 PHI 288 288Toll operations: MPTC 5,749 5,749 CIC (see Note 4) 4,966 4,966Healthcare: CVHMC 234 234 AHI 192 192 RMCI 69 69 DLSMC (see Note 4) 7 7

P=18,308 P=18,308

The Company performs its annual impairment test close to year-end, after finalizing the annualfinancial budgets and forecasts. The impairment test of goodwill is based on VIU calculations thatuse the discounted cash flow model. Cash flow projections are based on most recent financialbudgets and forecast. Discount rates applied are based on market weighted average cost of capitalwith estimated premium over cost of equity. The key assumptions used to determine therecoverable amount for the different CGUs are discussed below.

Based on the impairment tests performed for each of the CGUs, management did not identifyimpairment losses for these CGUs. Management also believes that no reasonably possible changein any of the key assumptions would cause the carrying values of the CGUs to materially exceedtheir respective recoverable amounts.

Water utilities and toll operations segments

December 31, 2014 December 31, 2013CGUs of the water utilities segment

Maynilad PHI Maynilad PHIVolume growth rate (a) 3.0% 2.0% 3.0% 3.0%Average forecast period 23 years 21 years 24 years 22 yearsDiscount rate 8.7% 8.7% 8.6% 9.2%

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December 31, 2014 December 31, 2013CGUs of the toll operations segment

MPTC CIC MPTC CICAverage growth (a, b) 1.6% 3.4% up to 2033

and 5.3%afterwards

1.6% 3.0% up to 2033and 4.9%

afterwardsAverage forecast period 23 years 19 and 31 years 24 years 20 and 32 yearsDiscount rate 8.1% 8.1% 7.3% 7.3%

(a) Average growth represents average of year-over-year growth during the entire concession period.(b) Traffic volume for the Open system and Journey for the Closed system.

The forecasted period for Maynilad and PHI is greater than five (5) years as management canreliably estimate the cash flow for the entire duration of Maynilad’s and PHI’s concession period.The average forecast period is consistent with the period covered by the concession agreements(see Note 13).

MPTC’s cash flows reflect cash flows from the NLEX and CIC’s from the CAVITEX. Theforecasted period is greater than five (5) years as management can reliably estimate the cash flowfor the entire duration of these CGUs’ concession periods. The average forecast period isconsistent with the period covered by the concession agreements (see Note 13).

Healthcare segment

December 31, 2014 December 31, 2013RMCI CVHMC AHI DLSMC RMCI CVHMC AHI

Average occupancy rate 83.0% 73.0% 56.0% 60.0% 87.0% 77.0% 56.0%Discount rate 12.4% 12.4% 12.4% 12.4% 11.2% 11.2% 11.2%

Average forecast period for purposes of goodwill impairment testing for DLSMC, RMCI and AHIis at 5 years with terminal value computed based on a zero-growth assumption for forecastsbeyond the 5 year period. The length of the projection for CVHMC is consistent with theremaining lease term of its agreement with RCAM (see Note 33). Goodwill acquired from theCompany’s acquisition of DLSMC in 2013 is based on provisional values (see Note 4) andtherefore the amount of goodwill has yet to be allocated to specific CGUs. Impairment testingcommenced in 2014 after finalization of the purchase price allocation.

13. Service Concession Assets

The movements in the service concession assets follow:

2014Toll Operations Water Utilities Total

(In Millions)

Cost:Balance at beginning of year P=29,071 P=80,713 P=109,784Additions 2,507 4,171 6,678Balance at end of year 31,578 84,884 116,462

Accumulated amortization:Balance at beginning of year 3,369 11,875 15,244Additions (see Note 23) 688 2,270 2,958Balance at end of year 4,057 14,145 18,202

P=27,521 P=70,739 P=98,260

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2013Toll Operations Water Utilities Total

(In Millions)

Cost:Balance at beginning of year P=19,046 P=75,243 P=94,289From business combinations

(see Note 4) 9,614 101 9,715Additions and reclassifications 411 5,369 5,780Balance at end of year 29,071 80,713 109,784

Accumulated amortization:Balance at beginning of year 2,561 9,858 12,419Additions and reclassifications

(see Note 23) 808 2,017 2,825Balance at end of year 3,369 11,875 15,244

P=25,702 P=68,838 P=94,540

Service Concession Assets – Toll Operations. This represents MNTC’s and CIC’s concessioncomprising the rights, interests and privileges to finance, design, construct, operate and maintain tollroads, toll facilities and other facilities generating toll-related and non-toll related income.

§ MNTC. In August 1995, First Philippine Infrastructure Development Corporation (FPIDC),the then parent company of MNTC, entered into a joint venture agreement with PNCC, inwhich PNCC assigned its rights, interests and privileges under its franchise to construct,operate and maintain toll facilities in the NLEX and its extensions, stretches, linkages anddiversions in favor of MNTC, including the design, funding, construction, rehabilitation,refurbishing and modernization and selection and installation of an appropriate toll collectionsystem therein during the concession period subject to prior approval by the President of thePhilippines. In April 1998, the Philippine government, acting by and through the TollRegulatory Board (TRB) as the grantor, PNCC as the franchisee and MNTC as theconcessionaire executed a Supplemental Toll Operation Agreement (STOA) whereby thePhilippine government recognized and accepted the assignment by PNCC of its usufructuaryrights, interests and privileges under its franchise in favor of MNTC as approved by thePresident of the Philippines and granted MNTC concession rights, obligations and privilegesincluding the authority to finance, design, construct, operate and maintain the NLEX projectroads as toll roads commencing upon the date the STOA comes into effect until December 31,2030 or 30 years after the issuance of the Toll Operation Permit for the last completed phase,whichever is earlier. In October 2008, the concession agreement was extended for anotherseven years to 2037. Pursuant to the STOA, MNTC is required to pay franchise fees to PNCCand to pay for the government’s project overhead expenses based on certain percentages ofconstruction costs and maintenance works on the project roads. Upon expiry of the concessionperiod, MNTC shall hand over the project roads to the Philippine government without cost,free from any and all liens and encumbrances and fully operational and in good workingcondition, including any and all existing land required, works, toll road facilities andequipment found therein directly related to and in connection with the operation of the tollroad facilities.

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The Manila-North Expressway Project consists of three phases as follows:

Phase DescriptionStatus / Date ofOperation

Phase I(Segments 1, 2, 3and 7)

Expansion andrehabilitation

i. 84 kilometers (km) of the existing NLEXii. 8.8-km stretch of a Greenfield

expressway

February 5, 2005

Phase II(Segments 8.1, 8.2, 9 and 10)

Construction i. 17-km circumferential road C-5 whichconnects the current C-5 expressway tothe NLEX

Segment 8.1 – June5, 2010

ii. 5.85-km road from McArthur to Letre Segments 9 and 10 –OngoingconstructionSegment 8.2 – Preconstruction

Phase III(Segments 4, 5 and 6)

Construction i. 57-km Subic arm of the NLEX to SubicExpressway

Not started

§ CIC. CIC is exclusively responsible for the design, financing and construction of theCAVITEX, pursuant to a toll operation agreement dated July 26, 1996 entered into with thePhilippine Reclamation Authority (PRA) and the Government, acting through the TRB.Responsibility for the supervision of the operation and maintenance of the toll road, initiallyundertaken by the PRA, was also transferred to CIC pursuant to an operations andmaintenance agreement dated November 14, 2006 and a voting trust agreement datedNovember 16, 2006. The concession for CAVITEX extends to 2033 for the originally builtroad and to 2046 for a subsequent extension. Upon expiry of the concession period, CIC shallhand over the project to the Philippine government.

Under the amended Joint Venture Agreement with PRA, each of the following expresswaysshall be constructed in segments:

Phase DescriptionStatus / Date ofOperation

Phase I Design andimprovement

i. 6.5 km R-1 Expressway whichconnects the Airport Road toZapote

ii. Extension of the 7 km R-1Expressway which connects theexisting R-1 Expressway atZapote to Noveleta

May 1998

May 2011

Phase II Design andconstruction

i. Extension of the C-5 LinkExpressway which connects theR-1 Expressway to the SouthLuzon Expressway (SLEX)

Not started

Additions in 2013 and 2014 to the service concession asset included civil works construction onMNTC’s Segments 9 and 10 and CAVITEX’s Modified Zapote Interchange and fixed operatingequipment design, supply and installation for the toll collection system migration. Additions alsoinclude pre-construction costs of Segment 8.2 of Phase II of the NLEX.

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On June 14, 2013, MNTC entered into an agreement with Egis Projects, Phils. and Indra Philippines,Inc. for the front end and design works for the toll collection system migration with a total contractprice of €6.2 million or P=365.3 million. Of the total project cost, P=144.3 million was capitalized in2013 and P=194.7 million was capitalized in 2014.

Borrowing costs capitalized amounted to P=335.9 million and P=11.4 million in 2014 and 2013,respectively.

In 2013, additions also included the service concession asset through acquisition of CIC.

Service Concession Assets – Water Utilities. This represents the exclusive right granted to Mayniladand PHI to provide water distribution and sewerage services and charge users for these servicesduring the concession period.

§ Maynilad. In February 1997, Maynilad entered into a concession agreement with MWSS,with respect to the MWSS West Service Area. Under the concession agreement, MWSSgrants Maynilad, the sole right to manage, operate, repair, decommission and refurbish allfixed and movable assets required to provide water and sewerage services in the West ServiceArea for 25 years ending in 2022. In September 2009, MWSS approved an extension of itsconcession agreement with Maynilad for another 15 years to 2037. The legal title to allproperty, plant and equipment contributed to the existing MWSS system by Maynilad duringthe concession period remains with Maynilad until the expiration date at which time, all rights,titles and interests in such assets will automatically vest to MWSS. Under the concessionagreement, Maynilad is entitled to (a) an annual standard rate adjustment to compensate forincreases in the consumer price index subject to a rate adjustment limit; (b) an extraordinaryprice adjustment to account for the financial consequences of the occurrence of certainunforeseen events subject to grounds stipulated in the concession agreement; and (c) a raterebasing mechanism which allows rates to be adjusted every five years to enable Maynilad toefficiently and prudently recover expenditures incurred, Philippine business taxes andpayments corresponding to debt service on concession fees and Maynilad loans incurred tofinance such expenditure. In accordance with the concession agreement, Maynilad posted aperformance bond in the amount of US$80.0 million to secure the performance of itsobligations under certain provisions of its concession agreement (see Note 33).

§ PHI. In August 2012, Maynilad acquired a 100% interest in PHI, which engages in waterdistribution business in certain areas in central and southern Luzon. PHI is granted the soleright to distribute water in these areas under certain concession agreements granted by thePhilippine government for 25 years to 2035.

Additions to the service concession assets for the water utilities substantially relate to cost ofrehabilitation, additional constructions and to the additional concession fees (see Note 18)pertaining to the drawn portion of the MWSS loans relating to new projects. To date, Mayniladhad capitalized P=3.44 billion on wastewater projects, of which P=465.8 million was capitalized in2014.

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14. Property and Equipment and Property Use Rights

Property and Equipment. This account consists of:

December 31,2013

PurchasePrice

Allocation AdditionsDisposals/

ReclassificationsDecember 31,

2014(In Millions)

CostLand and land improvements P=1,152 P=– P=– P=– P=1,152Leasehold improvements 197 – 39 7 243Building and building improvements 3,630 – 71 289 3,990Office and other equipment, furniture

and fixtures 1,020 – 144 (17) 1,147Transportation equipment 412 – 118 (60) 470Instruments, tools and other equipment 2,689 – 722 (51) 3,360Library books 19 – 1 – 20

9,119 – 1,095 168 10,382Accumulated DepreciationLeasehold and land improvements 50 – 30 – 80Building and building improvements 434 – 230 – 664Office and other equipment, furniture and

fixtures 559 – 138 (17) 680Transportation equipment 298 – 64 (44) 318Instruments, tools and other equipment 1,158 – 518 (62) 1,614Library books 12 – 1 – 13

2,511 – 981 (123) 3,3696,608 – 113 292 7,013

Allowance for impairment loss (23) – – – (23)Construction-in-progress 274 – 413 (309) 378

P=6,859 P=– P=525 (P=16) P=7,368

December 31,2012

PurchasePrice

Allocation*(Note 4) Additions

Disposals/Reclassifications

December 31,2013

(In Millions)CostLand and land improvements P=1,044 P=140 P=62 (P=94) P=1,152Leasehold improvements 165 – 32 – 197Building and building improvements 3,272 88 41 229 3,630Office and other equipment, furniture

and fixtures 786 29 221 (16) 1,020Transportation equipment 335 8 115 (46) 412Instruments, tools and other equipment 2,146 146 401 (4) 2,689Library books 17 – 2 – 19

7,765 411 874 69 9,119Accumulated DepreciationLeasehold and land improvements 27 – 23 – 50Building and building improvements 241 – 193 – 434Office and other equipment, furniture and

fixtures 494 – 91 (26) 559Transportation equipment 211 – 122 (35) 298Instruments, tools and other equipment 752 – 435 (29) 1,158Library books 9 – 3 – 12

1,734 – 867 (90) 2,5116,031 411 7 159 6,608

Allowance for impairment loss (23) – – – (23)Construction-in-progress 41 7 469 (243) 274

P=6,049 P=418 P=476 (P=84) P=6,859*Includes both acquisitions through business combination and completion of purchase price allocation.

Land and certain property and equipment were pledged as security for certain interest-bearingloans of the Company (see Note 19).

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Property Use Rights. This account consists of:

December 31,2013

Adjustmentfrom

Completion ofPurchase Price

Allocation AmortizationsDecember 31,

2014(In Millions)

CostLand use rights P=208 P=– P=– P=208Building use rights 540 – – 540

748 – – 748Accumulated AmortizationLand use rights 26 – 12 38Building use rights 73 – 29 102

99 – 41 140P=649 P=– (P=41) P=608

December 31,2012

Adjustmentfrom

Completion ofPurchase Price

Allocation AmortizationsDecember 31,

2013(In Millions)

CostLand use rights P=208 P=– P=– P=208Building use rights 540 – – 540

748 – – 748Accumulated AmortizationLand use rights 15 – 11 26Building use rights 44 – 29 73

59 – 40 99P=689 P=– (P=40) P=649

The Company entered into lease agreements for the operation and management of hospitals,OLLH and CSMC (see Note 33). The lease agreements qualified as business combinations wherethe identifiable assets consist of property use rights for the use of existing land and building overthe term of the lease of twenty (20) years.

15. Other Noncurrent Assets



Deferred tax assets (see Note 29) P=1,164 P=1,218Deferred project costs (see Note 33) (a) 1,869 –Indemnification asset (see Notes 4 and 20) 548 533Deposits (b) 474 462Deposits for LTIP (see Note 25) (c) 345 131Long-term cash and miscellaneous deposits (d) 157 187Sinking fund (e) 139 126Basketball franchise (f) 100 –

(Forward)

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Software costs (g) P=67 P=73Pension asset (see Note 25) 22 24Derivative asset (see Notes 8, 33 and 36) – 32Others (h) 325 271

P=5,210 P=3,057

a. Deferred project costs substantially comprise of costs directly attributable to the acquisition ofthe service concession relating to the P=65-billion Light Rail Transit Line 1 Cavite Extensionand Operations & Maintenance Project incurred prior to Effective Date (see Note 33). TheEffective Date is expected to be the date of the handover to LRMC of the operation andmaintenance of the existing system of the LRT. Upon handover of the existing system, theaccumulated deferred project costs shall be reclassified to service concession asset. As atDecember 31, 2014, the deferred project costs substantially consist of P=105.0 million oftransaction advisory fee paid to Development Bank of the Philippines and InternationalFinance Corporation and P=935.0 million as 10% of the bid amount of P=9.35 billion paid toDepartment of Transportation and Communication and Light Rail Transit Authority(see Note 33). Accumulated deferred project costs for the LRT project amounted toP=1.11 billion as of December 31, 2014.

b. Deposits substantially relate to the various agreements entered into with Fil-EstateCorporation and its affiliated companies, and with Anglo Philippines Holdings Corporationand DBH Incorporated. The agreements relate to the options to acquire certain rights andinterests in the MRT 3 companies consisting of Metro Rail Transit Holdings, Inc. (MRTH),Metro Rail Transit Holdings II, Inc. (MRTH-II), Metro Rail Transit Corporation (MRTC) andMonumento Rail Transit Corporation (MNRTC) subject to the condition that the necessaryconsents and waivers from relevant parties are obtained. Should the acquisition push through,these deposits will form part of the acquisition price. Otherwise, these will be forfeited andcharged to expense.

c. This account consists of funding for the Long-term Incentive Plan (LTIP) which is expected tobe paid in 2016 following the LTIP program 3-year performance cycle ending in 2015. TheLTIP fund is covered by an Investment Management Agreement with a Trustee Bank(see Note 25).

d. Included in this account are long-term cash investments representing time deposits withmaturities of more than one year and earn interest at the respective long-term cash depositrates, and miscellaneous deposits comprising of rental deposits and deposits for restorationworks.

e. This pertains to CIC’s sinking fund established to finance the future major road repairs, re-pavements and other extraordinary costs and expenses of the R-1 Expressway.

f. Basketball franchise represents cost of MPTC’s Philippine Basketball Association (PBA)franchise named “NLEX Road Warriors”. The PBA franchise is an intangible asset with anindefinite life, and thus, subject to annual impairment review. As at December 31, 2014, noimpairment has been recognized.

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g. Software cost represents costs of the Company’s developed and implemented accounting andreporting system with estimated useful life of five years. Cost amounted to P=134.3 million andP=113.4 million as at December 31 2014 and 2013, respectively. Accumulated depreciationamounted to P=67.1 million and P=40.1 million as at December 31 2014 and 2013, respectively.Amortization expense amounted to P=27.0 million, P=40.0 million, and P=30.0 million for theyears ended December 31, 2014, 2013, and 2012, respectively.

h. This account includes advances to contractors and consultants.

16. Accounts Payable and Other Current Liabilities



Trade and accounts payable (a) P=4,313 P=4,496Accrued construction costs (see Note 21) (b) 2,680 4,655Accrued personnel costs 1,051 1,034Accrued expenses (c) 944 662Interest and other financing charges (see Note 19) 721 620Accrued outside services 564 421Dividends payable (see Notes 6 and 22) 299 425LTIP payable (see Note 25) 228 46Retention payable (d) 260 218Withholding taxes payable 212 169Payable to CHI (e) 163 163Output taxes payable 154 138Unearned revenue and other deposits 86 96Lease payable - current portion (see Note 20) 49 55Accrued PNCC fees (see Note 33) 48 42Pretermination fees and transaction cost – 30Others 277 206

P=12,049 P=13,476

a. This account includes unpaid billings of creditors, suppliers and contractors. It also includesliabilities relating to assets held in trust used in Maynilad’s operations amounting toP=97.3 million as at December 31, 2014 and 2013 (see Note 34). Trade and accounts payablesare non-interest bearing and are normally settled on 30 to 60 day terms.

b. This represents unbilled construction costs from contractors and normally settled upon receiptof billings (see Note 21).

c. This account includes accrued professional fees, utilities and repairs and maintenance charges.This account also included accruals in relation to the cases pending before the courts or quasi-judical bodies. Detailed disclosure of which are not provided as allowed under PAS 37, asthis may prejudice the Company’s positions in relation to these cases.

d. Retention payable is the amount withheld (equal to 10% of the contract price) by theCompany until the completion of the construction of a specific project.

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e. Payable to CHI as at December 31, 2013 relates to noninterest-bearing advances obtained byCIC in 2012 for its debt service requirements. Although payable within the year, the amountis yet to be settled as at December 31, 2014.

17. Provisions

The table below present the movements in this account:

Warrantiesand Guarantees (a)

(see Note 32)Heavy

Maintenance (b)Other

Provisions (c) Total(In Millions)

Balance at January 1, 2013 P=489 P=336 P=3,097 P=3,922Additions from business combination

(see Note 4) – 228 6 234Additions* and accretion – 196 1,046 1,242Payments – (327) (82) (409)Balance at December 31, 2013 489 433 4,067 4,989Additions* and accretion – 263 1,141 1,404Reversal – (123) (34) (157)Payments – (301) (162) (463)Balance at December 31, 2014 P=489 P=272 P=5,012 P=5,773

At December 31, 2013: Current portion P=489 P=121 P=4,067 P=4,677 Noncurrent portion – 312 – 312At December 31, 2014: Current portion 489 69 4,987 5,545 Noncurrent portion – 203 25 228* See Note 23.

a. This includes certain warranties and guarantees extended by NOHI in relation to debt for assetswap arrangements entered in prior years. Certain warranties and guarantees are secured byPacific Plaza Tower (PPT) condominium units and BLC shares with carrying values ofP=18.9 million and P=46.5 million, respectively (see Notes 9 and 10).

b. This pertains to the contractual obligations of MNTC and CIC to restore the serviceconcession assets to a specified level of serviceability during the service concession term andto maintain the same assets in good condition prior to turnover of the assets to the Philippinegovernment. In 2014, CIC reversed excess provision for heavy maintenance as result of anupdated study conducted by an independent engineer. Portion of the reversal amounting toP=4.9 million was deducted against the sinking fund while the remaining P=118.2 million wasrecorded as reversal of provisions and included in “Other income” account in the consolidatedstatement of comprehensive income.

c. These consist of estimated liabilities for losses on claims by third parties. The informationusually required by PAS 37 is not disclosed as it may prejudice the Company’s negotiationwith third parties.

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18. Service Concession Fees Payable



Service concession fees payable P=7,771 P=8,512Less current portion 500 603

P=7,271 P=7,909

Concession fees relate to and arise from Maynilad’s service concession agreement (see Note 13)and are denominated in various currencies. These are payable monthly following an amortizationtable up to the end of the concession period and are non-interest bearing.

The schedule of undiscounted estimated future concession fee payments, based on the extendedlife of Maynilad’s concession agreement as of December 31, 2014, is as follows:

In Original Currency

Year

ForeignCurrency Loans

(Translated to US$)*

Peso Loans/Project Local

SupportTotal Peso

Equivalent*(In Millions)

2015 $15.6 P=803.5 P=1,500.82016 16.5 529.7 1,266.12017 14.2 518.9 1,155.22018 14.2 537.0 1,172.22019-2037 73.0 10,218.2 13,484.6

$133.5 P=12,607.3 P=18,578.9* Translated using the December 31, 2014 exchange rate of P=44.72:US$1.

Concession fee payments relating to the extension of the concession agreement (see Note 13) areonly determinable upon loan drawdown of MWSS and their actual construction of the relatedconcession projects. Accretion expense for the years ended December 31, 2014, 2013 and 2012amounted to P=644.0 million, P=659.0 million and P=644.0 million, respectively (see Note 26).

19. Note Payable and Long-term Debt

Note Payable. On December 27, 2012, the Company availed a short-term unsecured note in theamount of P=4.7 billion from a local bank, the proceeds of which were invested in MPTC for thelatter’s capital requirements. The note bears fixed interest of 4.5% per annum, payable in 90 daysor on March 27, 2013. On the date of scheduled payment, the Company fully settled theoutstanding balance of the short-term payable including the related interest.

Long-term Debt. This account consists of:


Current portions P=3,573 P=3,512Noncurrent portions 57,494 47,536

P=61,067 P=51,048

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Details of the long-term debt per company as follows:December 31, 2014

Long-termLoans Bonds Total

(In Millions)MWHC and subsidiaries P=24,277 P=– P=24,277MPTC and subsidiaries 19,907 6,957 26,864MPIC 6,383 – 6,383AIF 2,721 – 2,721AHI 846 – 846Others 303 – 303

54,437 6,957 61,394Less unamortized debt issue cost 257 70 327

P=54,180 P=6,887 P=61,067

December 31, 2013

Loans

ConvertiblePreferred

SharesLong-term

Bonds Total(In Millions)

MWHC and subsidiaries P=25,424 P=– P=– P=25,424MPTC and subsidiaries 17,869 – – 17,869MPIC 6,448 – – 6,448AHI 1,121 – – 1,121Others 387 6 – 393

51,249 6 – 51,255Less unamortized debt issue cost 207 – – 207

P=51,042 P=6 P=– P=51,048

The table below presents the movements in unamortized debt issue costs:


Balance at beginning of year P=207 P=151Amortization during the year charged to interest

expense (see Note 26) (42) (46)Debt issue costs incurred during the year (see Note 26) 162 543Amortization during the year charged to other expenses

(see Note 27) – (441)Balance at end of year P=327 P=207

The repayments of loans based on existing terms are scheduled as follows:

2014 2013(In Millions and

undiscounted)(In Millions and

undiscounted)2015 P=3,558 2014 P=3,4962016 3,642 2015 3,1892017 and onwards 53,950 2016 and onwards 44,253

P=61,150 P=50,938

The credit agreements provides for certain restrictions with respect to, among others, availingother loans or advances to any of the Company’s affiliates, subsidiaries, stockholders, directorsand officers except in compliance with formally established and existing fringe benefit program ofthe Company. These restrictions were complied with by the Company.

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MWHC and SubsidiariesLong-term debt consists of:


(In Millions)P=21.2 Billion Term Loan Facility 5.75% p.a. for the first 5

years, subject torepricing on 5th year

Availed of in March 2013, payablein semi-annual installment within10 years with final repayment inMarch 2023; contains negativepledge

P=18,614 P=20,306

P=5.0 Billion loan with BDO 5.75% p.a. for the first 5years, subject torepricing on 5th year

Availed of in April 2013, payablein semi-annual installments within10 years; contains negative pledge

5,000 5,000

US$137.50 million loan with Land Bank ofthe Philippines (LBP)

Same rate of interestpayable by LBP underthe World Bank LoanAgreement + 1.25% perannum

Interest and principal payable insemi-annual installments within 25years, inclusive of seven yearsgrace period, contains negativepledge

663 89

Various peso-denominated loan of PHI Various Payable in quarterly installmentsover seven years from 2007 and2009

– 29

24,277 25,424Less unamortized debt issue costs 75 82Less current portion of long-term debt 1,692 1,703Noncurrent portion of long-term debt P=22,510 P=23,639

On March 22, 2013, Maynilad entered into a Concessionaire Lenders’ Agreement for aP=21.2 billion Term Loan Facility which was used to refinance certain outstanding debt. Theinterest rate floor on the P=21.2 Billion Term Loan Facility is an embedded derivative that wasassessed by Maynilad as not for bifurcation based on the provisions of PAS 39. The Term Loancontains a negative pledge.

The World Bank (WB), through the Metro Manila Wastewater Management Project (MWMP),provided a US$275 million loan to the Land Bank of the Philippines (LBP) for relending toMaynilad and Manila Water Company, Inc., the concessionaire for the east service area. The loanwas divided equally to these two concessionaires. The MWMP is intended to finance investmentsin wastewater collection and treatment, and septage management in Metro Manila. As atDecember 31, 2013, Maynilad had drawn US$2.0 million from the facility and in 2014, Mayniladmade additional drawdown amounting to US$12.8 million.

Covenants. Maynilad’s loan agreements contain, among others, covenants regarding themaintenance of certain financial ratios such as debt-to-equity ratio not to exceed 2.6 times anddebt service coverage ratio not to exceed 1.3 times, and maintenance of debt service account(see Note 7). As at December 31, 2014 and 2013, Maynilad has complied with these covenants.

Significant covenants for the PHI’s loan included maintenance of certain financial ratios and theprohibition against declaration or payment of dividends to PHI’s stockholders (other thandividends payable solely in shares of its capital stock) if payment of any sum due to the lenders isin arrears or if it would negatively affect PHI’s financial condition. As at December 31, 2014 and2013, PHI has complied with these covenants.

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PHI’s loans are secured by the assigned guarantee coverage of PHI at 85% of the customers’monthly billing obligation but not to exceed P=75.0 million and P=150.0 million for the loansobtained in 2009 and 2007, respectively. In addition to this guarantee, the loan obtained in 2007 issecured by certain property and equipment while the loan obtained in 2009 is secured by acontinuing surety made by PHI’s former shareholder. The loan obtained in 2007 has been fullypaid in April 2013 while the loan obtained in 2009 was preterminated in 2014.

MPTC and SubsidiariesLoans consist of:


(In Millions)

P=7.0 Billion Fixed-rate Bonds due 2021 and 2024

5.5% and 5.07% for the10-year and 7-year bonds,respectively

Bond issued in 2014 with 7-yearfixed rate bonds amounting toP=4.4 billion due in 2021 and 10-year fixed rate bonds amountingto P=2.6 billion due in 2024;contains negative pledge

P=6,957 P=–

Term Loan Facility Agreement with BDO 5.8% p.a. for the first5 years, subject torepricing on 5th year

P=3.25 billion drawn on variousdates in 2014; principal andinterest payable semi-annuallywithin 10 years based on theamortization schedule

3,201 –

P=6.2 Billion Series A Notes (unsecured) Weighted average fixedinterest rate of 7.22% p.a.

Availed of in April 2011 andhave tenors of 5 years,7 years and 10 years, subject tobullet like repayment

6,024 6,086

P=2.1 Billion loan with Philippine National Bank (PNB) (unsecured)

6-month PDST-F +0.50% margin

Availed of in March 2009payable within 7 years, balloontype semiannual payment startingJune 15, 2011, 85% payable onthe last 4 semiannual periods

893 1,785

P=1.0 Billion Term Loan Facility with the Insular Life Assurance Company Ltd. (Insular) and the Philippine American Life and General Insurance Company (Philam) (unsecured)

Average fixed interestrate of 7.10% p.a.

Availed of in December 2011.Final maturity date of 15 yearswith two bullet repaymenttranches of P=500.0 million eachafter 10 and 15 years

1,000 1,000

P=1.0 Billion Term Loan Facility with Philam (unsecured)

Fixed interest rate of5.80% p.a.

Availed of in December 2013,payable in lump sum after15 years

1,000 1,000

P=800.0 million Term Loan Facility with Sun Life of Canada (Philippines), Inc. (unsecured)


Availed of in October 2013,payable in lump sum after10 years

800 800

P=200.0 million Term Loan Facility with Insular (unsecured)


Availed of in November 2013,payable in lump sum after10 years

200 200

Series 2010-1 Dollar-denominated Notes Fixed rate of 12.0% Principal payments payablequarterly, commencing March2013 with final payment inSeptember 2022

792 854

P=6.1 Billion Loan with BDO-RCBC 6.50% subject torepricing on the fifth year

Availed of in 2013, payablequarterly within 10 years startingJanuary 13, 2014 to December26, 2023

P=5,997 P=6,144

26,864 17,869Less unamortized debt issue costs 189 125Less current portion of long-term debt 1,220 1,158Noncurrent portion of long-term debt P=25,455 P=16,586

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An interest rate swap (IRS) transaction was entered into to convert the floating rate P=2.1 billionloan with PNB into a fixed rate loan effective March 14, 2011. The interest rate swap effectivelyfixed the floating rate of the said loan over the remaining tenor at 5.9% per annum. However, onDecember 28, 2012, MNTC issued a notice for early termination of the IRS transaction coveringthe period December 15, 2012 up to December 15, 2015. The early termination fee wasrecognized as interest expense amounting to P=175.0 million in the 2012 consolidated statement ofcomprehensive income.

The proceeds from the P=7.0 Billion Fixed-rate Bonds due 2021 and 2024 issued by MNTC shallbe used primarily to partially fund the 5.65 km Segment 10 of the Manila-North ExpresswayProject which will connect the MacArthur Highway in Valenzuela City to C-3 Road in CaloocanCity.

On January 9, 2014, MPTDC entered into Term Loan Facility Agreement with BDO for up toP=3,250 million loan due 2024 for the purpose of financing its acquisition of approximately 8.5%of the total issued and outstanding capital stock of MNTC from EGIS Projects SA (Egis) and forother corporate purposes.

Proceeds from the P=6.2 Billion Series A Notes were used for the partial and full prepayment ofcertain outstanding debt of MNTC.

The Series 2010-1 Dollar-denominated Notes and P=6.1 Billion Loan with BDO-RCBC resultedfrom the consolidation of CIC effective January 2013 (see Note 4). On December 26, 2013, CICavailed a P=6.1 Billion Loan with BDO-RCBC, the proceeds of which was used primarily torefinance CIC’s existing loan (which included the long-term debt assumed upon by theCompany’s acquisition of CIC) and other obligations, repayment of the advances owed to MPTC,refinancing certain short-term loan obligations of the borrower to BDO and for general workingcapital requirements of the borrower. The refinancing did not qualify as extinguishment of debtand as such, the additional transaction costs were capitalized and a new effective interest rate wascomputed. The prepayment option and interest rate floor were assessed to be clearly and closelyrelated to the host loan, thus not bifurcated. The Series 2010-1 Dollar-denominated Notes, whichwas issued by CIC through a consolidated structured entity, stipulates certain “RepurchaseEvents” which would require CIC to repurchase certain concession collections and contract rightsunder CIC’s concession agreement, for a repurchase price. Repurchase Events included, amongothers, failure to make payments due under the transaction documents, attachment of CIC’s assetshaving a value in excess of US$5.0 million, and abandonment, or other than during thecontinuance of an event that constitutes force majeure under CIC’s Toll Operation Agreement.The Series 2010-1 Dollar-denominated Notes is secured by future toll collections fromCAVITEX; pledge over transaction accounts and 40,000 preferred shares of CIC held by CHI.

CIC provided collateral security in connection with the P=6.1 Billion loan with BDO-RCBC, whichincluded a mortgage on certain debt instruments, equity investments of CIC, voting shares in thestructured entity owned by the third party stockholders amounting to P=0.2 million and assignmentof a reserve account amounting to P=433.3 million. The agreement covering this loan generallyprovides, among others, that for as long as the loans remain outstanding, CIC is subject to certainnegative covenants requiring prior approval of the creditors for specified corporate acts.

Covenants. The bonds and the loans contain, among others, covenants regarding the maintenanceof certain financial ratios such and maintenance of reserve account. As at December 31, 2014 and2013, MPTDC, MNTC and CIC are in compliance with their respective debt covenants.

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MPICAs at December 31, 2014 and 2013, MPIC’s outstanding loan comprise of P=6.48 Billion FixedRate Note with BDO. The loan, which is due in 2023, is payable in ten years; with semiannualinterest and principal payments. The note bears an interest per annum of 7.5%, fixed for the firstfive (5) years and subject to repricing on the fifth year. Proceeds from the P=6.48 Billion FixedRate Note was used to repay then outstanding debt.

MPIC also has available committed short-term credit facility of up to P=7.0 billion with variousfinancial institutions.

Covenants. The P=6.48 Billion Fixed Rate Note contain, among others, covenants regardingmaintenance of reserve account and achieving certain financial ratios such as (1) debt-to-equityratio not to exceed 70:30; and (2) debt-service coverage ratio at a minimum of 1.3 times. TheNotes contain a negative pledge on all existing and future assets of MPIC and is redeemable at theoption of the Noteholder, in whole but not in part, on the 5th year, by giving written notice of earlyredemption no earlier than 60 days nor later than 30 days prior to the exercise date. As atDecember 31, 2014 and 2013, MPIC is in compliance with its debt covenants.

AIFOn August 1, 2014, AIF Toll Road Holdings (Thailand) Limited (AIF), a 100% owned subsidiaryof FPM Infra, entered into Term Loan Facility Agreement with Thanachart, a bank incorporatedunder the laws of Thailand, of up to Baht 2,100 million (or approximately US$65 million) loan forthe purpose of reorganizing AIF’s capital structure. AIF availed of the full amount of the facilityon August 6, 2014. Interest is to be paid monthly while the principal is to be paid semi-annuallyin 15 instalments with the final instalment due November 2021. The loan is subject to a floatinginterest rate of Minimum Lending Rate minus 1.50% per annum, and is secured by a standby letterof credit issued by MPIC with a face amount of US$45 million and a pledge over all the AIFshares owned by FPM Tollway (Thailand) Limited and substantially all the DMT shares owned byAIF. The carrying value of the investment in DMT amounted to P=5,929.0 million as atDecember 31, 2014.

Covenants. All dividend proceeds in respect of the investment in DMT shall be applied to repaythis loan (see Note 11). The loan agreement also contains, among others, covenants regarding themaintenance of certain financial ratios such as debt-to-equity ratio and debt service coverage ratio,maintenance of ownership in DMT of at least 29.45%, and maintenance of debt service reserveaccount. AIF is in compliance with its debt covenants.

AHILoans consist of:Description Interest Rate Terms 2014 2013

(In Millions)P=1.26 billion loan with International Finance Corporation (IFC)

8.5% p.a. on firstdrawdown; 8.1% p.a. onsecond drawdown

Availed of on February 8, 2008and payable in 16 unequalsemiannual principal beginningMay 15, 2010

P=543 P=730

P=595.0 million loan with DeutscheInvestitions-und EntwicklungsgeselleschaftmbH (DEG)

9.1% p.a. on firstdrawdown; 8.6% p.a. onsecond drawdown

Availed of on February 8, 2008and payable in 16 unequalsemiannual principal beginningMarch 15, 2010

258 347

US$1.0 million IFC Subordinated Loan LIBOR plus Incomeparticipation amount from1% to 2% of EBITDA

Availed of on February 8, 2005and payable onApril 30, 2017

45 44

846 1,121Less current portion of long-term debt 272 276Noncurrent portion of long-term debt P=574 P=845

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AHI’s property and equipment with a carrying value of P=3,235.4 million and P=3,398 million as atDecember 31, 2014 and 2013, respectively, are pledged as collaterals for its long-term loan(see Note 14).

Covenants. The agreements covering the loans generally provide, among others, that for as longas the loans remain outstanding, AHI is subject to certain negative covenants and maintenance ofcertain financial ratios. While the P=1.26 billion loan with IFC and P=595.0 million loan with DEGare outstanding, AHI is prohibited, among others, from: (i) declaring dividends or making cashdistributions on its share capital unless payment is out of its retained earnings subject tomaintenance of certain financial ratios and notification made to the lenders; (ii) incurringexpenditures or commitments for acquisitions of fixed or other noncurrent assets except forexpansion projects or necessary repairs and maintenance; (iii) entering into financial leasesexceeding US$500,000 of annual lease payments; (iv) entering into guarantees and derivativetransactions; and (v) creating lien on AHI’s property, revenue and other assets.

As at December 31, 2014 and 2013, AHI’s current ratio is below the minimum and is thereforeprohibited from declaring dividends. However, after obtaining the approval from IFC and DEG,AHI was able to declare dividends in 2014 and 2013. As long as AHI was not able to meet therequirements set out in the loan agreement, AHI needs to obtain the approval from IFC and DEGprior to any dividend declaration.

OthersConsist of:

Description Interest Rate Terms 2014 2013(In Millions)

CVHMC· Loans with local bank (unsecured) Fixed rates ranging from

4.0% to 5.5% p.a.P=150 million availed of in 2012and fully paid in 2013;P=200 million availed of in 2013and to be fully paid in 2014

P=65 P=125

RMCI and a subsidiary· Various loans with local banks 2% p.a. + PDST-F rate

for the loan with P=300million principal;prevailing market ratesfor the remaining loans

Availed of in various dates from2008 to 2013, and all payablequarterly

148 162

EMHMC· P=100 million loan with local bank

(unsecured)5.50% p.a. Availed of in 2012 payable

monthly from March 19, 2012 toMarch 14, 2013

90 92

Others – 14303 393

Less current portion of long-term debt 180 310Noncurrent portion of long-term debt P=123 P=83

RMCI’s loans are secured by continuing suretyship of some of the stockholders of RMCI and realmortgage constituted over various parcel of land and improvements of RMCI and RCI withaggregate carrying amount of P=348.1 million, as at December 31, 2014 and 2013 (see Note 14).The loan agreements provide for certain restrictions with respect to, among others, incurrence ofany other loans, advances or other obligations. These restrictions were complied with by RMCI in2014 and 2013.

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20. Other Long-term Liabilities


Contingent liabilities arising from businesscombinations (see Notes 4 and 32) (a) P=1,172 P=1,142

Lease payable (see Notes 3, 16 and 33) (b) 1,013 1,020Customers’ guaranty deposits (c) 804 783LTIP payable (see Note 25) 622 409Accrued interest payable to MWSS (d) 607 607Deferred credits (e) 602 478Accrued retirement liability (see Note 25) 440 333Payable to CHI (f) 257 257Subscription payable (see Note 11) 203 –Interest payable (g) 143 –Financial guarantee obligation (see Note 21) – 65Others 156 58

P=6,019 P=5,152

a. Contingent liability arising from probable claim from a third party at fair value ofP=1,100.1 million was recognized in January 2013 in relation to the acquisition of CIC whichwas accounted for under PFRS 3, Business Combination (see Note 4). The increase in thecontingent liability from December 31, 2013 to 2014 is attributable to accretion chargeresulting from the passage of time (see Note 26). An indemnification asset (included in“Other noncurrent assets”) was recognized in relation to such probable claim (see Note 15).

b. Lease payable represents present value of future minimum lease payments relating to the leaseagreements entered into by EMHMC and CVHMC, which lease agreements qualify asbusiness combinations. The lease payable was initially determined at acquisition date andsubsequently adjusted for payments and accretion (see Notes 3 and 33). Current portion of thelease payable is included in the “Accounts payable and other current liabilities” (see Note 16).Total lease payable has nominal value of P=2,390.0 million and P=2,522.0 million as atDecember 31, 2014 and 2013, respectively.

c. Customers’ guaranty deposits serve to guarantee payment of bills by customers. Thesedeposits are non-interest bearing and normally refunded upon termination of water serviceconnection and are initially measured at fair value. After initial recognition, these deposits aresubsequently measured at amortized cost using the effective interest rate method. Thediscount is amortized over the remaining concession period using the effective interest ratemethod (see Note 26).

d. In connection with Maynilad’s disputes with MWSS over certain charges billed by MWSSrelating to (a) the basis of the computation of interest; (b) MWSS cost of borrowings; and(c) additional penalties, and as further discussed in Note 32, Maynilad has accrued interest onits payable to MWSS accumulating to P=985.3 million as at December 31, 2011, which wasdisputed by Maynilad before the Rehabilitation Court. In 2012, in line with Maynilad’snegotiations and outstanding offer of US$14 million to fully settle the claim of MWSS,Maynilad reduced the accrued interest payable to MWSS to P=607.2 million as atDecember 31, 2012. The reduction of P=378.1 million in accrued interest payable and therelated contingent liability of P=686.6 million was released to “Other income” (see Note 27) inthe 2012 consolidated statement of comprehensive income.

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e. Deferred credits represent the net effect of unrealized foreign exchange gain or loss on serviceconcession payable to MWSS, and restatement of foreign currency-denominated interestbearing loans and related interest. Deferred credits are calculated as the difference betweenthe drawdown or rebased rate versus the closing rate. In 2013, Maynilad realized foreignexchange gain amounting to P=1.0 billion arising from the refinancing of dollar-denominatedCorporate Notes which resulted in a significant FCDA refund to the customers. This foreignexchange gain was fully refunded as at June 30, 2014.

f. On October 20, 2011, CIC and CHI executed a Memorandum of Agreement (MOA), wherein,CHI shall grant CIC a right-of-way to certain segments of the property CHI plans to reclaim toallow CIC to construct four feeder roads. The four feeder roads are estimated to costP=520 million where CHI shall be liable for approximately fifty (50%) percent of constructioncosts. Actual contribution of CHI amounting to P=256.7 million was received by CIC in 2012.As at December 31, 2014, the construction of the feeder roads has not yet started.

g. Interest payable represents present value of the interest due on the Exchangeable Bond(see Note 22).

21. Related Party Transactions

Enterprises and individuals that directly, or indirectly through one or more intermediaries, controlor are controlled by or under common control with the Company, including holding companies,subsidiaries and fellow subsidiaries, are related parties of the Company. Associates andindividuals owning, directly or indirectly, an interest in the voting power of the Company thatgives them significant influence over the enterprise, key management personnel, includingdirectors and officers of the Company and close members of the family of these individuals, andcompanies associated with these individuals also constitute related parties. In considering eachpossible related entity relationship, attention is directed to the substance of the relationship and notmerely the legal form.

Transactions with Related PartiesTransactions with related parties, whether or not conducted under normal terms and conditionssimilar to those with unrelated parties, are disclosed below. See tabular presentation for therecorded transactions with with these related parties.

§ Transactions with TMC. The Operation & Maintenance (“O&M”) of the NLEX andSegment 7 is undertaken by TMC pursuant to the O&M Agreement between MNTC andTMC. This agreement was signed on July 6, 2001 and shall be effective for the entireconcession period.

TMC oversees the day-to-day operations of the NLEX, including securing toll collection,depositing of funds to MNTC's accounts, facilitating smooth and uninterrupted flow of traffic,carrying out of routine maintenance, ensuring effective and safe responses to emergencysituations.

In exchange for performing its duties, TMC receives an O&M fee based on a base fee plus avariable fee. The base fee is a fixed annual amount, payable in twelve (12) monthlyinstallments and is escalated on a quarterly basis. The variable fee is the amount assessed andpaid by MNTC to TMC for the cost of performing its services over and above the agreed basetraffic volume assumption. TMC’s services have been expanded to include the O&M of theNLEX Mindanao Avenue link as well as the Balagtas Interchange and the Bocaue NorthboundExit.

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On January 22, 2014, MNTC and TMC agreed on the following base fees effectiveJanuary 1, 2012: P=1,470.1 million for the Phase 1 of the NLEX, P=94.3 million for Segment 7;P=7.8 million for Dau Interchange; and P=36.9 million for Segment 8.1. All compensationspayable to TMC shall be escalated in accordance with the O&M Agreement with a new BaseDate of January 1, 2012.

On August 22, 2014, MNTC and TMC entered into another O&M side letter to amend theBase Fee in view of the VAT inclusion in the revised O&M Base Fee, which should be VATexclusive, effective January 9, 2012.

Under the corporate guarantee agreement, TMC was required to pay annual guarantee fee toMPTDC equivalent to 2.5% of the gross value of the corporate guarantee issued by MPTDC.The guarantee was issued in favor of MNTC for the liability of TMC under the O&M. Theguarantee income is included as “Construction revenue and other income” in the consolidatedstatement of comprehensive income (see Note 27). Interest also accrues to the receivablefrom TMC and the related financial guarantee obligation. In connection with the corporateguarantee arrangement, MPTDC recognized a receivable from TMC equivalent to thefinancial guarantee obligation calculated as the present value of the guaranteed portion of theliability of TMC under the O&M. The receivable on financial guarantee obligation (includedas “Due from related parties” in the consolidated statement of financial position) and thefinancial guarantee obligation amounted to nil and P=64.8 million as at December 31, 2014 and2013. The corporate guarantee agreement was terminated effective January 1, 2014.

MPTC and MPTDC perform management, operational and financial advisory services forTMC. MPTC and MPTDC are in the process of formalizing their management agreementswith TMC as at February 26, 2015.

See tabular presentation for the recorded transactions with TMC relating to operator’s fee,guarantee fee, interest income on receivable on financial guarantee obligation, managementfee and the outstanding balances of amounts due from TMC.

§ Transaction with MWCI. As disclosed in Note 8, MPWIC extended a loan to MWCI inrelation to the project with CMWD.

§ Transaction with Landco. Refer to Notes 8, 10 and 33 for the details of the transaction withLandco.

§ Transactions with PLDT, SMART and Digitel. The Company’s primary telecommunicationscarriers are PLDT (an associate of FPC) for its wireline and SMART (PLDT’s subsidiary) forits wireless services. The Company also has transactions with Digitel Mobile Philippines,Inc., (Digitel) which became a subsidiary of PLDT in 2011. Such services are covered bystandard service contracts between the telecommunications carriers and each entity within theCompany. Other than these service contracts, the Company also has the followingtransactions with these telecommunication carriers:

· Northern Fiesta Campaign, a joint sponsorship agreement among MNTC, SMART andPLDT, which is a collaborative tourism promotion of local fiestas and festivals in theNorth and of safety and traffic discipline along NLEX through print media and throughbanners and traffic control gates stickers in the NLEX toll plazas.

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· Utilities Facilities Contract, between MNTC and SMART whereby MNTC providesSMART an access for the construction, operation and maintenance of a cellsite inside theNLEX right of way for an annual fee of P=0.3 million which shall then be escalatedannually at 4.5% starting on the fourth year of the contract and every year thereafter. Thecontract is effective for a period of five years from April 26, 2010 which may be renewedor extended upon mutual agreement by MNTC and SMART.

· Agreement for the naming rights of the SMART Connect Interchange, where MNTCgrants SMART the exclusive rights to name the NLEX-Mindanao Avenue Cloverleaf as aSMART Connect Interchange and put up outdoor advertising structures near theinterchange. The annual package is based on a predetermined timetable of when theofficial road signs are progressively built. The base price is from P=175.0 million toP=228.2 million and may increase depending on the final features and characteristics of thecloverleaf.

· Utilities Facilities Contract between MNTC and PLDT for the Fiber Optic Overlay alongPhase I and Phase II Segment 8.1 of the NLEX. PLDT pays an annual fee presented as“Others” under “Contruction costs and other expenses”.

· Advertising arrangements between MNTC and Digitel related to various advertisingmediums which include rental, material production, installation and maintenance atseveral locations along NLEX covering the period up to November 2013. Income fromthis arrangement is presented in Note 27 as other income.

· MNTC’s plan asset invested in unsecured notes issued by PLDT and SMART. MNTC’splan asset included unsecured Fixed Rate Corporate Notes (FXCNs) of PLDT amountingto P=2.4 million as at December 31, 2012. The PLDT FXCNs were disposed of in 2013.As at December 31, 2014 and 2013, MNTC’s plan assets included unquoted andunsecured term loans of SMART amounting to P=0.9 million. The SMART term loans aredue in 2022 and earns interest at 6.26% per annum.

· Other transactions with PLDT include various administrative assistance extended to theCompany and rentals from lease of office space.

§ Transactions with DM Consunji Inc. Maynilad, entered into certain construction contractswith D.M. Consunji, Inc. (Consunji), a subsidiary company of DMCI (a non-controllingshareholder in MWHC), in relation to the provision of engineering, procurement andconstruction services to Maynilad.

§ Transactions with Meralco. Meralco, sells electricity to the Company for the Company’sfacilities within Meralco’s franchise area. The rates charged by Meralco are the samemandated rates by the ERC applicable to customers within the franchise area.

On April 13, 2012, CVHMC entered into a Memorandum of Agreement (MOA) with Meralcofor the operation and management of the Meralco Corporate Wellness Center (WellnessCenter), an outpatient diagnostic and consultation center for its employees and theirdependents. In accord of the contract, CVHMC agreed to take steps to improve healthcareservices, expand diagnostic services, enhance customer services levels, increase operationalefficiencies, rationalize equipment upgrade and renovate and improve infrastructure. Incomerecognized for this arrangement in 2014 and 2013 amounted to P=42.7 million andP=41.1 million included as part of hospital revenue in the consolidated statements ofcomprehensive income. The total revenue comprises of retainer’s fee, pharmacy handling andmanpower and administrative reimbursement plus margin.

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§ Transactions with Beacon Electric. Refer to Note 11 for other related parties transactionswith respect to MPIC’s acquisition of Meralco shares from Beacon Electric and investment inBeacon Electric. Due to Beacon Electric as at December 31, 2014 pertains to the outstandingamount for the purchase price of Meralco shares acquired in June 2014 (see Note 11).

§ Transactions with ESC. On December 5, 2007, MNTC engaged the services of ESC to assistMNTC in increasing the usage of the electronic toll collection (ETC) facility along the NLEXwhich ended on April 30, 2010. On November 24, 2010, MNTC and ESC signed theSupplemental Agreement to the Service Agreement extending the services of ESC as ETCservice provider for another eight years effective on May 1, 2010 with a five year extension.In accordance with the Supplemental Agreement, MNTC will pay ESC an annual fixed fee ofP=14.0 million for Class 1 vehicles and annual fixed fee of P=5.0 million for Class 2 and 3vehicles, which are to be maintained and escalated every year for labor index and consumerprice index (CPI). MNTC shall also pay for variable fees of P=0.75 and P=2.5 per transactionfor Class 1 vehicles depending on the number of transactions achieved during the yearcompared with prior year; and P=3.0 and P=4.0 per transactions for Class 2 and 3, respectively,which are also to be maintained and escalated every year for labor index and CPI.

Pursuant to the Service Agreement, amounts due to MNTC arising from the use of Easytriptags in the NLEX shall be remitted by ESC to the designated MNTC bank accounts withinseven (7) days immediately following the date when any vehicle using the Easytrip tags passthrough the electronic payment lane of the NLEX. Any amount due to ESC arising from thereloading of the Easytrip tags in the NLEX shall be remitted by MNTC to the designated ESCbank accounts within seven (7) days immediately following the date of reloading.

§ Other transactions. Other transactions with related parties Metro Pacific InvestmentsFoundation, Inc. (MPIFI), Ideaspace Foundation, Inc. (Ideaspace; Philippines’ largestprivately-funded idea incubator supported by FPC), Lucena Land Corporation (LLC; asubsidiary of Landco), FPC and others mainly relate to advances to finance various projects aswell as intercompany charges for share in certain operating and administrative advances.

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The following table provides the total amount of transactions with related parties for the years ended December 31, 2014, 2013 and 2012 (amounts in millions):

Name

Management Income

(see Note 27)Guarantee

Income

InterestIncome

(see Note 26)

Incomefrom

Utility Facilities(see Note 27)

Income from

Advertising(see Note 27)

DividendIncome from

Preferred shares(see Notes 11

and 27)

ConstructionCost

(see Note 27)

Operator’sFee

(see Note 23)Outside services

Utilities(see Notes 23

and 24)

Rentals(see Notes 23

and 24)

Provision forImpairment

(see Notes 27and 32)

Associates and Joint Venture:TMC 2014 P=56 P=– P=– P=– P=– P=– P=– (P=1,711) P=– P=– P=– P=–

2013 56 24 11 – – – – (1,532) – – – –2012 60 23 11 – – – – (1,493) – – – –

PMHI 2014 – – – – – – – – – – – –2013 – – – – – – – – – – – (164)2012 – – – – – – – – – – – (9)

Beacon Electric2014 – – – – – 405 – – – – – –2013 – – – – – 405 – – – – – –2012 – – – – – 561 – – – – – –

Meralco 2014 – – – – – – – – – (1,006) – –2013 – – – – – – – – – (974) – –2012 – – – – – – – – – (948) – –

ESC 2014 – – – – 1 – – – 54 – – –

MWCI 2013 – – 4 – – – – – – – – –

Other related parties:SMART 2014 – – – – 58 – – – – (33) – –

2013 – – – – 59 – – – – (33) – –2012 – – – – 38 – – – – (23) – –

PLDT 2014 – – – 2 – – – – – (46) (15) –2013 – – – 2 – – – – – (41) (11) –2012 – – – 2 – – – – – (50) (11) –

Digitel 2014 – – – – 11 – – – – – – –2013 – – – – 8 – – – – – – –2012 – – – – 1 – – – – – – –

DM Consunji, Inc. 2014 – – – – – – (583) – – – – –2013 – – – – – – (504) – – – – –2012 – – – – – – (1,100) – – – – –

Total 2014 P=56 P=– P=– P=2 P=70 P=405 (P=583) (P=1,711) (P=54) (P=1,085) (P=15) P=–2013 56 24 15 2 67 405 (504) (1,532) – (1,048) (11) (164)2012 60 23 11 2 39 561 (1,100) (1,493) – (1,021) (11) (9)

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Outstanding balances of transactions with related parties are carried in the consolidated statement of financial position under the following accounts provided below (amountsin millions). Except for the noncurrent portion of the amount due from TMC, trade receivable, accounts payable and due to/from related parties are due and demandable, non-interest bearing, unsecured and requires cash settlement.

The noncurrent portion of the amount due from TMC is due more than 1 year, unsecured, interest-bearing at 12% per annum and requires cash settlement. Terms andconditions of the notes receivable from Landco are provided in Note 8.

Accounts Receivable(see Note 8)

Notes Receivable(see Note 8) Due from related parties

Accounts payable and other currentliabilities (see Note 16) Due to related parties

Company 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013Associates and Joint Venture

TMC - current P=– P=– P=– P=– P=106 P=107 P=436 P=337 P=– P=–TMC - noncurrent – – – – – 65 – – – –Meralco 15 12 – – – 2 21 26 – –Beacon – – – – 5 5 – – 7,188 –MWCI – 5 – 101 – – – – – –ESC 404 – – – – – 44 – – –

Other related parties:Digitel – 4 – – – – – – – –DM Consunji Inc. – – – – – – – – – –FPC – – – – 4 88 – – –FPCL – – – – – – – – – 1Ideaspace – – – – 2 – – – – 1Landco – – – 620 44 44 – – 15 15LLC – – – – 7 7 – – – –MPIF – – – – 1 1 – – – –PLDT 1 1 – – – – 7 1 – –Smart 53 9 – – – – 1 1 72 72Others 4 – – – 2 6 – – 4 4

477 31 – 721 171 325 509 365 7,279 93Less allowance for impairment – – – – 31 31 – – – –Total 477 31 – 721 140 294 509 365 7,279 93Less current portion 477 31 – 266 140 229 509 365 7,279 93

P=– P=– P=– P=455 P=– P=65 P=– P=– P=– P=–

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Directors’ RemunerationAnnual remuneration of the directors amounted to P=3.8 million, P=7.0 million and P=8.2 million in2014, 2013 and 2012, respectively.

Non-executive directors are entitled to a per diem allowance of P=50 thousand for each attendancein the Parent Company’s BOD meetings. The Parent Company’s By-Laws provide that an amountequivalent to 1.0% of net profit after tax of the Parent Company shall be allocated and distributedamong the directors of the Parent Company who are not officers of the Parent Company or itssubsidiaries and affiliates, in such manner as the BOD may deem proper. No accruals were madewith respect to this scheme for the years ended December 31, 2014, 2013 and 2012 in the absenceof resolution from the BOD. There are no other special arrangements pursuant to which anydirector will be compensated.

Compensation of Key Management PersonnelCompensation of key management personnel of the Company is as follows:

2014 2013 2012(In Millions)

Short-term employee benefits P=867 P=749 P=746Share-based payment (see Note 31) 64 18 12Post employment benefits - Retirement costs 54 47 45Other long-term benefits: LTIP expense (see Note 25) 440 411 165

Others 5 8 4P=1,430 P=1,233 P=972

22. Equity

Details of authorized and issued capital stock are in the following tables:

Common shares Preferred Shares – Class A Preferred Shares – Class B

No. of Shares

ParValue/

IssuePrice per

share No. of Shares

ParValue/

IssuePrice per

share No. of SharesPrice per

share

Authorized Capital Stock (ACS):Registration Date ActivityMarch 20, 2006 Incorporation 100,000 P=1.00June 5, 2006 Increase in ACS 4,599,900,000 1.00As at December 31, 2007 and 2006 4,600,000,000 1.00August 12, 2008 Increase in ACS 7,350,000,000 1.00 5,000,000,000 P=0.01As at December 31, 2008 11,950,000,000 1.00 5,000,000,000 0.01February 13, 2009 Increase in ACS 8,050,000,000 1.00 – – 1,500,000,000 P=1.0December 21, 2009 Increase in ACS 2,688,518,336 1.00 – – – –As at December 31, 2010 and 2009 22,688,518,336 1.00 5,000,000,000 0.01 1,500,000,000 1.0May 31, 2011 Increase in ACS 5,811,481,664 1.00 – – – –As at December 31, 2014, 2013 and 2012 28,500,000,000 1.00 5,000,000,000 0.01 1,500,000,000 1.0

(Forward)

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Common shares Preferred Shares – Class A Preferred Shares – Class B

No. of Shares

ParValue/

IssuePrice per

share No. of Shares

ParValue/

IssuePrice per

share No. of SharesPrice per

shareIssued and Outstanding:Date ActivitySeptember 6, 2006 Original subscription of MPIC’s

majority shareholders 968,820,495 P=1.00 – P=– – P=–October 23, 2006 Issuance of shares to NOHI

majority owners in exchange for MPIC shares 181,290,038 1.00 – – – –

November 8, 2006 Tendered shares of NOHI minority shareholders in exchange for MPIC shares 48,841,989 1.00 – – – –

As at December 31, 2006 1,198,952,522 – –December 31, 2007 Tendered shares of NOHI

minority shareholders in exchange for MPIC shares 143,966,271 1.00 – – – –

As at December 31, 2007 1,342,918,793 – –June 30, 2008 Additional subscription of

MPIC’s majority shareholders 3,791,525,175 2.00 – – – –

June 30, 2008 Conversion of loan from MPHI to equity 1,893,282,845 1.00 – – – –

As at December 31, 2008 7,027,726,813 – –February 13, 2009 Issuance on existing

subscriptions from MPHI 2,389,040,000 2.00 – – – –July 9, 2009 Issuance on existing

subscriptions from LAWL Pte. Ltd (LAWL) 791,110,491 2.60 – – – –

July 29, 2009 Conversion of advances from MPHI to equity 5,000,000,000 0.01 – –

October 2, 2009 Issuance in exchange for Meralco shares 4,464,202,634 3.20 – – – –

September 19, 2009 Additional subscriptions of MPHI 4,770,000,000 3.00 – – – –

December 21, 2009 Conversion of advances/loan from MPHI to equity 672,129,584 3.00 – – – –

Various Exercise of stock option plan 13,945,000 2.41* – – – –As at December 31, 2009 20,128,154,522 5,000,000,000 –Various Exercise of stock option plan 32,310,000 2.12* – – – –As at December 31, 2010 20,160,464,522 5,000,000,000 –May 31, 2011 Conversion of advances/loan

from MPHI to equity 2,030,769,230 3.25 – – – –

July 13, 2011Additional subscriptions of MPHI 2,400,000,000 3.60 – – – –

Various Exercise of stock option plan 2,060,000 2.73* – – – –As at December 31, 2011 24,593,293,752 5,000,000,000 –Various Exercise of stock option plan 20,530,000 2.41* – – – –As at December 31, 2012 24,613,823,752 5,000,000,000 –January 22, 2013 Additional subscriptions of

MPHI 1,330,000,000 4.60 – – – –Various Exercise of stock option plan 82,150,000 2.73* – – – –As at December 31, 2013 26,025,973,752 5,000,000,000 –Various Exercise of stock option plan 20,297,000 2.88* – – – –As at December 31, 2014 26,046,270,752 5,000,000,000 –*Weighted average exercise price.

Authorized Capital StockOn May 31, 2011, the SEC approved the increase in the authorized capital stock of the Companyfrom P=24.2 billion to P=30.05 billion, divided into 28.5 billion common shares, 5.0 billion Class APreferred Shares and 1.5 billion Class B Preferred Shares with a par value of P=1.0 per share.

Common SharesThe increase in common shares for the years ended 2014, 2013 and 2012 resulted from thefollowing transactions:

§ At various dates in 2014, 2013 and 2012, a total of 20.30 million, 82.15 million and 20.53million, common shares, respectively, were issued in connection with the Parent Companystock option plan (see Note 31).

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§ On January 22, 2013, MPIC raised P=6.12 billion in an overnight placement of 1.33 billion innew MPIC shares worth P=4.60 per share. The shares came from the shareholdings of MPHI.As a result of this transaction, MPHI’s interest in MPIC was reduced to 55.8% from 59.0%shareholding prior to this transaction.

In February 2015, MPIC raised P=8.9 billion in an overnight placement of 1,812,000,000 commonshares (see Note 39).

Class A Preferred SharesHolders of Class A Preferred Shares are entitled to vote and shall receive preferential cashdividends at the rate of 10.0% per annum based on share’s par value, upon declaration made at thesole option of the BOD. Dividends on these preferred shares, which shall be paid out of the ParentCompany’s unrestricted retained earnings, are cumulative whether or not in any period the amountis covered by available unrestricted retained earnings. No dividends or other distributions shall bepaid or declared and set apart for payment in respect of the common shares, unless the fullaccumulated dividends on all Class A Preferred Shares shall have been paid or declared. Holdersof Class A Preferred Shares do not have right to participate in any additional dividends declaredfor common shareholders. MPHI holds all of the Parent Company’s Class A Preferred Shares.

Class B Preferred SharesThe Parent Company may issue one or more series of Class B Preferred Shares, as the BOD maydetermine. The BOD shall also determine (a) cash dividend rate of such preferred share, which inno case to exceed 10.0% per annum; and (b) period and manner of conversion to common sharesor redemption. Dividends on these preferred shares, which shall be paid out of the ParentCompany’s unrestricted retained earnings, are cumulative whether or not in any period the amountis covered by available unrestricted retained earnings. No dividends shall be paid or declared andset apart for payment in respect of the common shares or Class A Preferred Shares, unless the fullaccumulated dividends on all Class B Preferred Shares shall have been paid or declared. Holdersof Class B Preferred Shares do not have right to participate in any additional dividends declaredfor common shareholders.

There were no Class B Preferred Shares issued in 2014, 2013 and 2012.

Record of Registration of Securities with the SECIn accordance with SRC Rule 68, as Amended (2011), Annex 68-D, below is a summary of theCompany’s track record of registration of securities:

Issue Offer price Date of SEC approvalNumber of registered sharessecurities

Number of holders ofsecurities as ofDecember 31,2014 2013

Tender offer to shareholders of MetroPacific Corporation (MPC)covering common shares andsubscription warrants relating tocommon shares of MPIC withpar value of P=1.0 per share

Four (4) MPC shares forone (1) MPIC share plusthree (3) warrants

October 25, 2006 Common shares of56,878,766*

1,334 1,358

Subscription warrants of170,636,298

– –

*Covered the 2006 registered shares only

The shares relating to the transaction above were exchanged in the PSE on December 15, 2006,effectively listing MPIC via listing by way of Introduction. Out of the total warrants available forconversion, 143,976,756 warrants were converted as of December 31, 2007 and 2,549,211warrants expired on December 15, 2007.

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Retained Earnings and Cash DividendsOf the Company’s consolidated retained earnings, P=12,439.4 million and P=8,773.5 million isavailable for dividend declaration as at December 31, 2014 and 2013, respectively. Theseamounts represent the Parent Company’s retained earnings available for dividend declarationcalculated based on the regulatory requirements of the Philippine SEC. The difference betweenthe consolidated retained earnings and the Parent Company’s retained earnings available fordividend declaration primarily consist of undistributed earnings of subsidiaries and equity methodinvestees. Stand-alone earnings of the subsidiaries and share in net earnings of equity methodinvestees are not available for dividend declaration by the Parent Company until declared by thesubsidiaries and equity investees as dividends.

Dividends paid and declared and proposed are as follows:

2014 2013 2012(In Millions)

Paid and declared:Final dividend in respect of the previous financial

year approved and paid during the followinginterim periodCommon shareholders (P=0.022, P=0.02 and P=0.015 per share in 2014, 2013 and 2012, respectively)

P=572.6 P=519.9 P=368.9

Class A preferred shareholders 2.5 2.5 1.8Interim dividend declared and paid during the

interim periodCommon shareholders (P=0.026, P=0.015 and P=0.012 per share in 2014, 2013 and 2012, respectively) 677.1 390.3 295.2Class A preferred shareholders 3.7 2.5 2.5

Special one off dividend:Common shareholders (P=0.04 per share in 2014) 1,041.1 – –

P=2,297.0 P=915.2 P=668.4

Proposed final dividend:Common shareholders (P=0.037,

P=0.022 and P=0.02 per share in 2014,2013 and 2012, respectively)

P=1,030.8 P=572.6 P=519.9

Class A preferred shareholders 1.3 2.5 2.5P=1,032.1 P=575.1 P=522.4

Proposed final dividends on both common and Class A preferred shares were declared after end ofreporting date and as such, are not recognized as a liability as at year-end.

On February 26, 2015, the BOD approved the declaration of the cash dividends of P=0.037 percommon share in favor of the Parent Company’s shareholders of record as at March 25, 2015 withpayment date of April 17, 2015. On the same date, the BOD approved the declaration of cashdividends amounting to P=1.25 million in favor of the preferred shareholders.

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Equity ReservesThis account consists of:

2014 2013 2012(In Millions)

Effect of MPIC acquisition of NOHI shares (a) P=690 P=690 P=690Equity transactions(b):

Disposal or dilution of equity interest in asubsidiary(b.1) 7,809 1,842 (122)

Acquisition of NCI(b.2) (2,377) 31 31Other reserve from ESOP(c) (see Note 31) 123 80 108

P=6,245 P=2,643 P=707

a. This relates to the difference between the par value of NOHI shares in exchange for MPICshares in relation to the Parent Company’s acquisition of NOHI shares through share swap in2006.

b. “Equity transactions” represent impact on the equity attributable to owners of the ParentCompany when the Parent Company’s ownership interest in its subsidiaries increases ordecreases but does not result in loss of control:

b.1 Disposal or dilution of equity interest in a subsidiary

i. On February 13, 2013, MCNK JV Corporation (MCNK) completed and fully paid itstotal subscription of 678,470,727 common shares of stock of MWHC at a totalsubscription price of P=10,400 million giving it 21.54% equity interest in MWHC.With the entry of MCNK as an investor in MWHC, the Company’s effectiveownership in Maynilad decreased from 56.81% as at December 31, 2012, to 52.80%as at December 31, 2013. MCNK is 90.0% owned by Marubeni Corporation, acompany incorporated in Japan and 10% owned by MAPL Holdings B.V., a companyincorporated in Netherlands.

ii. On July 2, 2014, GIC, through Arran Investment Private Limited, investedP=3.7 billion for a 14.4% stake in MPHHI and paid P=6.5 billion as consideration for anExchangeable Bond which can be exchanged into a 25.5% stake in MPHHI in thefuture, subject to certain conditions. This transaction was accounted for in MPIC’sconsolidated financial statements as an equity transaction with the amount recognizedin ‘equity reserve’ representing the difference between (a) the total net proceeds fromGIC’s investments in MPHHI shares and MPIC’s Exchangeable Bond aggregating toP=9.7 billion (net of deferred tax and transaction costs) and (b) sum of the interestpayable of P=149.2 million on the Exchangeable Bond and carrying value of the non-controlling interest of P=3.5 billion.

b.2 Acquisition of NCI. In 2014, MPTDC increased its ownership in MNTC (see Note 4).

c. This reserve is used to recognize the value of equity-settled share-based payments provided toemployees, including key management personnel, as part of their remuneration. See Note 31for further details of these plans.

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Other Comprehensive Income ReserveOther comprehensive income reserve consists of the following, net of applicable income taxes:

2014 2013 2012Share in the OCI of equity method investees P=840 P=725 P=558Fair value changes on AFS financial assets 35 210 25Fair value changes on cash flow hedges (1) (5) (11)Actuarial losses (8) (3) (52)Cumulative translation adjustment (30) – –Revaluation reserve and others – – (33)

P=836 P=927 P=487

Refer to Note 28 for the movements and analysis of the other comprehensive income.

23. Costs of Sales and Services


2014 2013 2012(In Millions)

Amortization of service concession assets(see Note 13) P=2,958 P=2,818 P=3,073

Cost of inventories* (see Note 9) 2,375 2,033 1,839Personnel cost (see Note 25) 2,366 2,025 1,671Operator’s fees (see Note 21) 1,877 1,707 1,493Utilities (see Note 21) 1,120 1,037 977Repairs and maintenance 617 592 539Contracted services 448 417 548PNCC fees (see Note 33) 443 418 400Depreciation and amortization

(see Notes 14 and 15) 312 288 265Provision for heavy maintenance

(see Note 17) 225 167 107Rentals (see Note 21) 140 123 144Insurance 65 51 43Toll collection and medical services 16 18 20Others 120 151 49

P=13,082 P=11,845 P=11,168*Includes cost of medical services, materials and supplies.

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24. General and Administrative Expenses


2014 2013 2012(In Millions)

Personnel costs (see Note 25) P=2,532 P=2,397 P=2,152Depreciation and amortization

(see Notes 14 and 15) 737 659 507Outside services 645 639 648Taxes and licenses 503 338 307Professional fees 459 392 163Transportation and travel 268 248 208Advertising and promotion 181 106 130Utilities (see Note 21) 171 149 108Repairs and maintenance 164 127 120Administrative supplies 129 102 112Collection charges 122 109 –Entertainment, amusement and

representation 101 144 109Provision for corporate initiatives and other

provisions 99 159 121Insurance 84 85 80Rentals (see Note 21) 81 62 49Provision for doubtful accounts (see Note 8) 67 160 158Public relation 60 78 60Commissions 25 15 121Miscellaneous 395 292 231

P=6,823 P=6,261 P=5,384

25. Personnel Costs and Employee Benefits


2014 2013 2012(In Millions)

Salaries and wages P=3,162 P=3,022 P=2,701LTIP expense (see Notes 16 and 20) 440 411 165Retirement costs (gain) (64) 198 181Provision for ESOP (see Note 31) 64 18 13Severance cost 524 – –Other employee benefits 772 773 763

P=4,898 P=4,422 P=3,823

Cost of sales and services (see Note 23) P=2,366 P=2,025 P=1,671General and administrative expenses

(see Note 24) 2,532 2,397 2,152P=4,898 P=4,422 P=3,823

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Long-Term Incentive Plan (LTIP)Certain of the Company’s employees are eligible for long-term employee benefits under a long-term incentive plan. The liability recognized on the LTIP comprises the present value of thedefined benefit obligation and was determined using the projected unit credit method. Each LTIPperformance cycle generally covers 3 years (e.g., 2013 to 2015 and 2010 to 2012 for MPIC’s LTIPand 2012 to 2014 for MPTC’s LTIP) with payment intended to be made at the end of the eachcycle (without interim payments) and is contingent upon the achievement of an approved targetcore income of the Company by the end of the performance cycle. Each LTIP performance cycleis approved by the respective boards of directors of the entities of the Company.

As at December 31, 2014, 2013 and 2012, the accrued LTIP is as follows:

2014 2013 2012(In Millions)

Balance at beginning of year P=455 P=446 P=281Current service cost 433 407 159Interest 9 2 6Actuarial loss (gain) (1) 2 –Payment (46) (402) –Balance at end of year P=850 P=455 P=446

Current (see Note 16) P=228 P=46 P=407Noncurrent (see Note 20) 622 409 39

P=850 P=455 P=446

On October 7, 2011 and December 18, 2013, MPIC entered into an Investment ManagementAgreement (IMA) with a Trustee Bank to fund the 2010-2012 and 2013-2015 LTIP programs,respectively. The LTIP fund will continue to accumulate until the LTIP target payout. Theinvestment portfolio of IMA is limited to the following: securities issued, directly or indirectly, orguaranteed by the government; and time deposit and money market placements issued by any ofthe top 10 banks in the Philippines. As at December 31, 2014 and 2013, the balance of the LTIPfund for the 2013-2015 LTIP program amounted to P=344.9 million and P=131.0 million,respectively, and presented as “Deposits for LTIP” under Other noncurrent assets in theconsolidated financial statements (see Note 15).

Pension

Regulatory Environment. R.A. 7641 requires a minimum benefit of equivalent to one-halfmonth’s salary for every year of service, with six months or more of service considered as oneyear. As the entities of the Company operate in the Philippines, they provide for either a definedcontribution retirement plan or a defined benefit plan that consider the minimum benefit guaranteemandated under R.A. 7641.

Defined Contribution Retirement Plan. As at December 31, 2014, the retirement benefits ofemployees of MPIC, MPTC, MPTDC and CVHMC are provided through a defined contributionscheme. Each of these companies operates its own retirement plan. The retirement plan is acontributory plan wherein the employer undertakes to contribute a predetermined amount to theindividual account of each employee and the employee gets whatever is standing to his credit,upon separation, from the company. The retirement plans are being managed and administered bythese companies’ respective compensation committee. Each entity has an appointed trustee bankwhich holds and invests the assets of the retirement fund in accordance with the provisions of theretirement plan.

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Contributions to the retirement plan are made based on the employee’s monthly basic salary whichis at 10.0%. Additionally, an employee has an option to make a personal contribution to the fund,at an amount not exceeding 40.0% of his monthly salary. The employer then provides anadditional contribution to the fund which aims to match the employee’s contribution but only up toa maximum of 5.0% of the employees’ monthly salary. Although the retirement plans of theseentities have a defined contribution format, MPIC, MPTC and MPTDC are covered underR.A. 7641, which provides a defined benefit minimum guarantee for its qualified employees. Thedefined minimum guarantee is equivalent to a certain percentage of the monthly salary payable toan employee at normal retirement age with the required credited years of service based on theprovisions of R.A. 7641. Accordingly and as discussed in Note 2, MPIC, MPTC and MPTDCaccount for the retirement obligation under the higher of defined benefit obligation relating to theminimum guarantee and the obligation arising from the defined contribution plan. Disclosuresrequired for a defined benefit retirement plan apply to MPIC, MPTC and MPTDC’s retirementplans and are provided together with the defined benefit retirement plans of the other subsidiariesof the Parent Company.

Each year, the compensation committee reviews compliance with R.A. 7641 to evaluate the levelof funding that would ensure that the expected future value of the defined benefit contribution planasset is sufficient to cover the future expected value of retirement benefits prescribed byR.A. 7641.

Defined Benefit Retirement Plan. These plans provide for a lump sum benefit payments uponretirement.

Maynilad, MNTC, RMCI, CLDH and AHI have funded noncontributory defined benefitretirement plan covering all their eligible regular employees. The retirement benefit plans of AHI,RMCI, Maynilad and MNTC are funded and managed as follows:

§ RMCI’s retirement fund is being monitored by its Treasury Officer under the supervision ofthe RMCI’s Chief Financial Officer.

§ The plan assets of AHI, Maynilad and MNTC are maintained in trust accounts with localbanks.

While there are no minimum funding standards in the Philippines, the companies annually engagethe services of an actuary to conduct a valuation study to determine the retirement obligations andthe level of funding to ensure that the assets currently in the fund would be sufficient to coverexpected benefit payments.

As at December 31, 2014, CIC, EMHMC and DLSMC each has an unfunded, noncontributorydefined benefit retirement plan covering substantially all of their respective employees. Whilethere are no minimum funding standards in the Philippines, these entities also annually engage theservices of an actuary to conduct a valuation study to determine the retirement obligations andensure that should there be maturing obligations in the immediately succeeding periods, these areappropriately considered in the budgeting process.

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Retirement Costs. The following tables summarize the components of the retirement costs underthe defined benefit plans and the defined contribution plans included in “Personnel costs” under“Cost of services” and “General and administrative expenses” account in the consolidatedstatement of comprehensive income.

2014 2013 2012(In Millions)

Current service cost P=173 P=180 P=164Net interest cost 20 17 17Past service cost – 1 –Curtailment gain (257) – –Retirement costs for the year (P=64) P=198 P=181

Actual return on plan assets P=91 P=77 P=158

In line with its strategic goal to improve operational efficiency, Maynilad offered a SpecialOpportunity Program (SOP), a redundancy and right-sizing program in 2014. This programoffered a separation package based on the number of years, or fractions thereof, on a pro-ratedbasis, of service with Maynilad plus monetary equivalent of some benefits. Total severance forthe separated employees amounted to P=524.0 million, of which, P=263.0 million is paid out ofMaynilad’s funds while the remaining was paid out of Maynilad’s retirement plan asset. Thereduction in the number of employees resulted in a curtailment gain of P=257.3 million.

Pension Assets and Accrued Retirement Costs. Reconciliation of net liability/(asset) recognized inthe consolidated statement of financial position as at December 31 follows:

2014 2013 2012(In Millions)

Present value of defined benefitobligation (PVDBO) P=1,589 P=1,589 P=1,452

Fair value of plan assets (FVPA) 1,171 1,280 1,174Net liability P=418 P=309 P=278

Pension asset(a) (P=22) (P=24) (P=49)Accrued retirement liability (b) 440 333 327Net liability P=418 P=309 P=278(a)Included under “Other noncurrent asset” account (see Note 15).(b)Included under “Deferred credits and other long-term liabilities” (see Note 20).

Changes in PVDBO are as follows:

2014 2013 2012(In Millions)

PVDBO at beginning of the year P=1,589 P=1,452 P=1,175PVDBO from acquired

subsidiaries – 48 43Interest cost 73 86 78Current service costs 173 180 164Past service cost – 1 –

(Forward)

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2014 2013 2012(In Millions)

Benefits paid from: Plan asset (P=7) (P=30) (P=26) Company funds (20) (19) (13)Curtailment (257) – –Actuarial losses (gains) due to: Changes in financial

assumptions 48 (119) 25Changes in demographics (5) (13) (16)

Experience adjustments (5) 3 22PVDBO at end of the year P=1,589 P=1,589 P=1,452

Changes in FVPA are as follows:

2014 2013 2012(In Millions)

FVPA at beginning of the year P=1,280 P=1,174 P=939FVPA from acquired subsidiaries – 6 6Interest income included in net

interest cost 53 69 61Benefits paid (270) (30) (26)Contributions by employer 72 53 97Remeasurement in OCI from return

on plan asset excluding amountincluded in net interest cost 36 8 97

FVPA at end of the year P=1,171 P=1,280 P=1,174

Maynilad, CIC, EMHMC, AHI, CVHMC and DLSMC are not expecting any contribution to theirrespective retirement plan assets for 2015. MPIC, MPTC, MNTC, RMCI and CLDH expect tomake a total of P=74.7 million of expected contribution to their respective retirement fund in 2015.

The major categories of the plan assets are the following:


Philippine bonds and treasury notes P=567 P=577Philippine equity securities 271 316Cash in bank 162 221Unit trust funds 87 74Philippine life insurance plans 21 17Receivables and other assets 63 75

P=1,171 P=1,280

The plan asset’s carrying amount approximates its fair value since these are short-term in nature ormarked-to-market. Plan assets consist of the following:

§ Philippine bonds and treasury notes. Consist of government issued securities and corporatebonds and subordinated notes. Government securities consist primarily of fixed-rate treasurynotes and retail treasury bonds that bear interest ranging from 2.3% to 9.4% (2014) and 3.5%to 9.4% (2013) and have varying maturities of up to 2037 as at December 31, 2014 and 2013.

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§ Philippine equity securities. This substantially pertains to investment in shares of variousentities (not related parties of the Company) which stocks are traded in the PSE.

§ Unit trust funds. Include mutual funds invested in quoted shares.

§ Receivables and others assets. Include a seven year certificate of deposit with interest of5.25% and certain unsecured fixed-rate notes of a related party and unsecured notes of anunaffiliated company with interests ranging from 6.3% to 6.7%.

While the Company does not perform any Asset-Liability Matching Study, the risks arising fromthe nature of the assets comprising the fund are mitigated as follows:

§ Credit Risks. Exposure to credit risk arises from financial assets comprising of cash and cashequivalents, investments and receivable. The credit risk results from the possible default ofthe issuer of the financial instrument, with a maximum exposure equivalent to the carryingamount of the instruments. The risk is minimized by ensuring that the exposure is limitedonly to the instruments as recommended by the trust managers.

§ Share Price Risk. Exposure arises from holdings of shares of stock being traded at the PSE.The price risk emanates from the volatility of the stock market. Policy is to limit investmentsin shares of stock to blue chip issues or issues with good fair values.

§ Liquidity Risk. This risk relates to the risk that the fund is unable to meet its paymentobligations associated with its retirement liability when they fall due. To mitigate this risk,the entities contribute to their respective fund from time to time, based on therecommendations of their actuaries with the objective of maintaining their respective fund in asound condition.

Actuarial assumptions. Principal assumptions used as at December 31, 2014 and 2013 indetermining retirement obligations are shown below:

2014 2013(In Percentage)

Annual discount rate 4.09 to 5.19 3.78 to 6.38Future range of annual salary increases 3.00 to 10.00 3.00 to 10.00

The discount rate represents the range of single weighted average discount rate used by each of theentities within the group in arriving at the present value of defined benefit obligation, service andinterest cost components of the retirement cost. Assumptions regarding future mortality rate arebased on the 1994 Group Annuity Mortality Table developed by the U.S. Society of Actuaries,which provides separate rates for males and females.

Sensitivity Analysis. The calculation of the defined benefit obligation is sensitive to theassumptions set above. The following table summarizes how the present value of defined benefitobligation as at December 31 would have increased (decreased) as a result of change in therespective assumptions by:

% Change 2014 2013(In Millions)

Annual discount rate + 1.0% (P=125) (P=124)- 1.0% 149 148

Future range of annual salary increases + 1.0% 140 142- 1.0% (120) (120)

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The following table provides for the maturity analysis of the undiscounted benefit payments as atDecember 31:


Less than one year P=155 P=136More than one year to five years 481 676More than five to ten years 1,035 1,201Beyond ten years 6,264 5,602Total expected benefit payments P=7,935 P=7,615

The average duration of the defined benefit obligation is 20 years as at December 31, 2014 and2013.

26. Interest Income and Interest Expense

The following are the sources of the Company’s interest income:

2014 2013 2012(In Millions)

Cash and cash equivalents, short-term depositsand restricted cash (see Note 7) P=253 P=295 P=505

Notes receivable (see Note 8) 67 96 100Investments in bonds and treasury notes

(see Note 10) 50 39 35Accretion on noncurrent financial assets 15 20 –Receivable on financial guarantee (see Note 21) – 11 11Others – 1 1

P=385 P=462 P=652

The following are the sources of the Company’s interest expense:

2014 2013 2012(In Millions)

Notes payable and long-term debt (see Note 19) P=3,267 P=3,093 P=2,793Accretion on service concession

fees payable (see Note 18) 644 659 644Accretion on financial liabilities (see Note 20) 215 140 10Amortization of debt issue costs (see Note 19) 42 46 93Financial guarantee obligation (see Note 21) 30 11 11Others 103 52 128

P=4,301 P=4,001 P=3,679

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27. Construction revenue and other income and Construction costs and other expenses

2014 2013 2012(In Millions)

Construction revenue and other income:Construction revenue (see Notes 3 and 13) P=6,670 P=5,557 P=6,731Dividend income (see Notes 10 and 11) 471 405 561Gain on sale of investment (see Note 10) 222 – –Reversal of provision for heavy maintenance (see Note 17) 118 – –Management fees (see Note 21) 103 153 82Income from advertising (see Note 21) 95 64 45Rental income 94 95 82Deferred credits and foreign exchange gains - net 44 763 886Income from toll service and utility facilities

(see Note 21) 24 23 19Reversal of provisions and accruals 20 63 99Reversal of provisions for doubtful accounts – 196 –Guarantee fees (see Note 21) – 24 23Gain on bargain purchase (see Note 4) – 22 –Reversal of contingent liabilities (a) – – 687Reversal of accrued interest payable to

MWSS (a) – – 378Others (b) 630 748 522

P=8,491 P=8,113 P=10,115

Construction costs and other expenses:Construction costs (see Notes 3 and 13) P=6,501 P=5,432 P=6,608Refinancing costs (see Notes 16 and 19) – 814 331Other provisions (see Note 32) 1,049 845 785FCDA (see Note 20) 110 174 960Adjustment to amortized cost due to change in expected cash flows (c) – – 374Mark-to-market loss on derivatives (see Note 36) – – 45Others (d) 227 294 136

P=7,887 P=7,559 P=9,239

a. As discussed in Note 3, in light of the Maynilad’s current negotiation and outstanding offer ofUS$14.0 million to fully settle the claim of MWSS, Maynilad reversed P=378.1 million ofaccrued interest and the Company derecognized the recorded contingent liability amounting toP=686.6 million resulting from the application of the accounting for business combinations whenthe Company acquired control of Maynilad.

b. “Others” under “Construction revenue and other income” included gains on sale of investments,property and equipment, and real estate inventory, reversal of provision for decline in value of anasset, adjustment on projected to actual payments, gain on remeasurements of existinginvestments, other recoveries and incidental income.

c. Relates to portion of the unamortized debt issue cost that was expensed as a result of change inexpected cash flow arising from refinancing of various long term debt.

d. “Others” under “Construction costs and other expenses” consists of provision for decline in valueof an asset, loss on remeasurements of previously held interest, loss on sale and conveyance ofcertain assets and other incidental expenses.

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28. Other Comprehensive Income

Other comprehensive income recognized in the consolidated statements of comprehensive incomeconsists of the following:

2014 2013 2012(In Millions)

Other comprehensive income to bereclassified to profit or loss insubsequent periods:Share in the OCI of an equity

method investee coming from(see Note 11):Fair value changes in cash

flow hedges P=135 (P=181) P=–Exchange differences on

translation of foreignoperations 32 (21) –

Exchange differences on translation of foreign operations (23) – –Fair value changes of cash flow

hedges 8 11 11Change in fair value of AFS

financial assets(see Note 10) (178) 199 17

Income tax 2 (22) (7)(24) (14) 21

Items not to be reclassified to profit orloss in subsequent periods:Share in the actuarial gains on

defined benefit plans ofequity method investees(see Note 11) (52) 369 469

Re-measurement gains (losses) ondefined benefit plans(see Note 25) (1) 137 68

Revaluation increment – (94) 94Income tax 1 (14) (50)

(52) 398 581(P=76) P=384 P=602

29. Income Tax

a. The Company’s deferred tax components as at December 31 are as follows:


Provisions P=281 P=619Accrued retirement cost and other accrued expenses 547 156NOLCO 165 203Lease payable 117 113

(Forward)

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Debt issue cost P=51 P=42MCIT 32 20Unamortized past service cost 42 12Excess of fair values over book values (3,114) (3,140)Timing difference in depreciation method (681) (555)Equity transaction (see Note 22) (483) –Unamortized foreign exchange losses capitalized as

service concession assets (20) (21)Improvement of facilities (3) (5)Others 2 –Net deferred tax assets/(liabilities) (P=3,064) (P=2,556)

Reflected in the Statement of Financial Position:

2014 2013 Net Movement(In Millions)

Deferred tax assets (see Note 15) P=1,164 P=1,218 (P=54)Deferred tax liabilities (4,228) (3,774) (454)

(P=3,064) (P=2,556) (P=508)

Net movement recognized in: Profit or loss (P=48) Equity (OCI and Equity reserve) (460)

(P=508)

As at December 31, 2013, deferred taxes included balances of acquired subsidiariesamounting to P=165.3 million of net deferred tax liability (see Note 4).

b. The Company has the following temporary differences for which no deferred tax assets havebeen recognized since management believes that it is not probable that these will be realizedin the near future.


NOLCO P=4,203 P=3,762Allowance for doubtful accounts 1,267 1,267Provisions and other accruals 635 54Accrued retirement cost and others ─ 82MCIT 18 17

P=6,123 P=5,182

c. As at December 31, 2014 and 2013, NOLCO of the Parent Company and various subsidiariescan be carried forward and claimed as deduction from regular taxable income as follows:

Year Incurred Amount Acquisition Addition Expired Application Balance Expiry Year(In Millions)

2014 P=– P=– P=1,635 P=– P=– P=1,635 20172013 1,454 – – – (7) 1,447 20162012 1,670 – – – – 1,670 20152011 1,314 – – (1,188) (126) – 2014

P=4,438 P=– P=1,635 (P=1,188) (P=133) P=4,752

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d. The following carryforward benefits of MCIT can be claimed as tax credits against futureincome taxes payable:

Year Incurred Amount Acquisition Addition Expired Application Balance Expiry Year(In Millions)

2014 P=– P=– P=17 P=– P=– P=17 20172013 18 – – – – 18 20162012 15 – – – – 15 20152011 4 – – (4) – – 2014

P=37 P=– P=17 (P=4) P=– P=50

e. The current provision for income tax for year ended December 31 consists of the following:

2014 2013 2012(In Millions)

RCIT P=1,086 P=978 P=977MCIT 19 18 7Final tax 55 65 113

P=1,160 P=1,061 P=1,097

The reconciliation of provision for income tax computed at the statutory income tax rate toprovision for income tax as shown in the consolidated statements of comprehensive income issummarized as follows:

2014 2013 2012(In Millions)

Income before income tax P=13,782 P=12,072 P=10,869Income tax at statutory tax rate of

30.0% 4,135 3,621 3,261Net income under ITH (2,078) (1,799) (1,634)Share in net earnings of equity

method investees (950) (686) (529)Changes in unrecognized deferred

tax assets and others (117) (193) 536Effect of optional standard deduction (176) (126) –Various income subjected to lower

final tax rates - net (84) (72) (145)Final tax on interest income 55 65 106Nondeductible (nontaxable) expenses

(income) - net 405 (235) 47MCIT 18 18 7Others – – 13

P=1,208 P=593 P=1,662

On December 18, 2008, the BIR issued Revenue Regulation (RR) No. 16-2008, whichimplemented the provisions of R.A. 9504 on Optional Standard Deduction (OSD), whichallowed both individual and corporate tax payers to use OSD in computing their taxableincome. For corporations, they may elect a standard deduction in an amount equivalent to 40%of gross income, as provided by law, in lieu of the itemized allowed deductions. MNTC optedto avail of the OSD for the taxable years 2013 and 2014.

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Income Tax HolidayMaynilad is registered with the Board of Investments (BOI) as an operator of water supply andsewerage system for the West Service Area on a pioneer status. Under the terms of theregistration, Maynilad is subject to certain requirements, principally that of maintaining at least60.0% Filipino ownership or voting equity. As a registered enterprise, Maynilad is entitled tocertain tax and non-tax incentives, including Income Tax Holiday (ITH). Maynilad’s ITHincentives for the sales generated from the operation of its three plants which substantially coverits total capacity, will end in December 2015. ITH incentive enjoyed by Maynilad amounted toP=2,078.0 million, P=1,799.4 million and P=1,889.9 million in 2014, 2013 and 2012, respectively.

PHI’s operations in Legazpi City and Norzagaray, Bulacan were registered with the BOI as NewBulk Supplier of Treated Water and New Operator of Bulk Water Supply Facility. As a registeredenterprise, PHI enjoys certain tax and non-tax incentives, including ITH until December 31, 2013limited to the revenue generated from the sales of bulk water supply to Legazpi City WaterDistrict and the bulk water supply facility with Norzagaray Water District.

CIC is registered with the BOI to build and transfer infrastructure project for the CAVITEX on apioneer status under the Omnibus Investments Code of 1987. As a registered enterprise, CIC isentitled to certain tax and non-tax incentives, including ITH for the sale/revenue of the R-1Extension, Segment 4 (Zapote to Kawit, Cavite) for a period of 6 years from January 2009 oractual start of commercial operation, whichever is earlier, but in no case earlier than the date ofregistration (February 8, 2008). As provided under the terms of the registration, CIC shall initiallybe granted a four-year ITH. The additional two-year ITH shall be granted upon submission ofcompleted or on-going projects in compliance with its corporate social responsibility, which shallbe submitted before the lapse of its initial four-year ITH. CIC was not able to comply with therequirements of the BOI, thus, did not avail of the ITH in 2014 and 2013.

30. Earnings Per Share

The calculation of earnings per share for the year ended December 31 follows:2014 2013 2012

(In Millions, Except for Per Share Amounts)Net income attributable to owners of the

Parent Company (a) P=7,940 P=7,209 P=5,907Effect of cumulative dividends on preferred

shareholders of the Parent Company (see Note 22) (b) (5) (5) (5)Net income attributable to common owners of the Parent Company (c) P=7,935 P=7,204 P=5,902

Outstanding common shares at the beginningof the year 26,026 24,614 24,593

Effect of issuance of common shares during the year 12 1,314 5Weighted average number of common shares

for basic earnings per share (d) 26,038 25,928 24,598Effects of potential dilution from: ESOP (see Note 31) 24 61 54Weighted average number of common shares adjusted

for the effects of potential dilution (e) 26,062 25,989 24,652

Basic earnings per share (c/d) P=0.305 P=0.278 P=0.240

Diluted earnings per share (c/e) P=0.304 P=0.277 P=0.239

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Weighted average number of shares issued and outstanding is derived by multiplying the numberof shares outstanding at the beginning of the year, adjusted by the number of shares issued duringthe year, with a time-weighting factor. The time-weighting factor is the number of days that thecommon shares are outstanding as a proportion to the total number of days in the year.

In 2014, 2013 and 2012, the ESOP was considered in the computation of the diluted earnings andcertain grants were considered dilutive.

31. Share-based Payment

On June 24, 2007, the shareholders of MPIC approved a share option scheme (the Plan) underwhich MPIC’s directors may, at their discretion, invite executives of MPIC upon theregularization of employment of eligible executives, to take up share option of MPIC to obtain anownership interest in MPIC and for the purpose of long-term employment motivation. Thescheme became effective on June 14, 2007 and is valid for 10 years. An amended plan wasapproved by the stockholders on February 20, 2009.

As amended, the overall limit on the number of shares that may be issued upon exercise of alloptions to be granted and yet to be exercised under the Plan must not exceed 5.0% of the shares inissue from time to time.

The exercise price in relation to each option shall be determined by the Company’s CompensationCommittee, but shall not be lower than the highest of: (i) the closing price of the shares for one ormore board lots of such shares on the PSE on the option offer date; (ii) the average closing price ofthe shares for one or more board lots of such shares on the PSE for the five business days onwhich dealings in the shares are made immediately preceding the option offer date; and (iii) thepar value of the shares.

First Grant. The Company granted on December 9, 2008 (Tranche A) and March 10, 2009(Tranche B) options in respect of 123,925,245 common shares to its senior management.Details of the said tranches follow: (a) Tranche A for 61,000,000 shares, 50.0% of whichvested immediately on January 2, 2009 with an exercise price of P=2.12 per share and(b) Tranche B for 62,925,245 shares, 50.0% of which vested on March 10, 2009 with anexercise price of P=2.73 per share. The remaining 50.0% of each said tranche will vest on thefirst anniversary of the initial vesting date. The share options automatically vest on theirrespective vesting schedules. The grantees of the said option may exercise in whole or in parttheir respective options at any time after vesting but prior to the expiration of three years afterall of the options shares for such tranche have vested. Both tranches of the First Grant expiredon January 2, 2013 and March 10, 2013, respectively.

Second and Third Grants. In 2010, in consideration of the Philippine SEC’s policy to excludethe independent directors from ESOP grant and pending MPIC’s consequent position paperfiled with the SEC maintaining the validity of the grant to independent directors, theCompensation Committee modified the resolution it adopted on July 2, 2010. TheCompensation Committee approved a modified plan excluding the independent directors fromESOP grant, without prejudice to reinstatement, as approved by the Philippine SEC onSeptember 20, 2010.

In the modified plan, MPIC allocated and set aside stock options relating to an additional145,000,000 common shares, of which (a) a total of 94,300,000 common shares was grantedto its new directors and senior management officers, as well as, members of the management

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committees of certain MPIC subsidiaries at the exercise price of P=2.73 per common share onJuly 2, 2010 (the Second Grant) and (b) another 10,000,000 common shares was granted atthe exercise price of P=3.50 on December 21, 2010 to officers of Maynilad (the ThirdGrant A).

On March 8, 2011, 1,000,000 common shares were granted at the exercise price of P=3.53 tosenior management of Maynilad (the Third Grant B) and on April 14, 2011, another 3,000,000common shares was granted at the exercise price of P=3.66 to an MPIC officer (the ThirdGrant C).

Fourth Grant. On October 14, 2013, MPIC made an ESOP grant (the Fourth Grant)consisting of 112.0 million common shares, to its directors and senior management officers.112 million common shares were granted under Tranche A while 8 million common shareswill be included under Tranche B. The grantees include the 3 independent directors of theCompany. Of the total shares granted, 14.0 million common shares are allocated to seniormanagement of MPTC. The grant was approved by the Philippine SEC on March 4, 2014.

The weighted average remaining term to expiry for the share options outstanding as atDecember 31, 2014 and 2013 as follows:

2014 2013(In Years)

First grant – –Second grant 0.5 1.5Third grant 1.1 2.1Fourth grant 3.8 4.8

For the years ended December 31, 2014 and 2013, the weighted average share price of MPIC’scommon share is P=4.87 and P=5.17 per share, respectively. Total ESOP expense recognized in2014, 2013 and 2012 follows:

2014 2013 2012Personnel

Cost(Note 25)

Equity Reserves

(Note 22)

PersonnelCost

(Note 25)

Equity Reserves(Note 22)

PersonnelCost

(Note 25)

Equity Reserves(Note 22)

(In Millions)First grant P=– P=– P=– P=– P=– P=–Second grant – – – – 8 8Third grant – – – – 5 5Fourth grant 64 64 18 18 – –

P=64 P=64 P=18 P=18 P=13 P=13

The following table illustrates the number of, exercise prices of, and movements in share optionsin 2014 and 2013:

First Grant Second GrantTranche A Tranche B Tranche A Tranche B

Numberof shares

Exerciseprice

Numberof shares

Exerciseprice

Numberof shares

Exerciseprice

Numberof shares

ExercisePrice

Outstanding at December 31, 2012 15,000,000 P=2.12 25,050,000 P=2.73 59,380,000 P=2.73 28,105,000 P=2.73Exercised during the year (see Note 22) (10,000,000) 2.12 (22,550,000) 2.73 (31,280,000) 2.73 (10,125,000) 2.73Expired during the year (5,000,000) – (2,500,000) – – – – –Outstanding at December 31, 2013 – – – – 28,100,000 P=2.73 17,980,000 P=2.73Exercised during the year (see Note 22) – – – – (7,100,000) 2.73 (10,920,000) 2.73Expired during the year – – – – – – – –Outstanding at December 31, 2014 – – – – 21,000,000 P=2.73 7,060,000 P=2.73

Exercisable at:December 31, 2012 15,000,000 P=2.12 25,050,000 P=2.73 59,380,000 P=2.73 16,975,000 P=2.73December 31, 2013 – – – – 28,100,000 P=2.73 17,980,000 P=2.73December 31, 2014 – – – – 21,000,000 P=2.73 7,060,000 P=2.73

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Third GrantTranche A Tranche B Tranche C

Numberof shares

Exerciseprice

Numberof shares

Exerciseprice

Numberof shares

Exerciseprice

Outstanding at December 31, 2012 10,000,000 P=3.50 1,000,000 P=3.53 2,750,000 P=3.66Grant during the year – – – – – –Exercised during the year (see Note22) (6,500,000) P=3.50 (650,000) 3.53 (1,045,000) 3.66Expired during the year – – – – –Outstanding at December 31, 2013 3,500,000 P=3.50 350,000 P=3.53 1,705,000 P=3.66Exercised during the year (see Note22) – – (350,000) 3.53 (927,000) 3.66Expired during the period – – – – – –Outstanding at December 31, 2014 3,500,000 P=3.50 – P=– 778,000 P=3.66

Exercisable at:December 31, 2012 6,500,000 P=3.50 300,000 P=3.53 1,250,000 P=3.66December 31, 2013 3,500,000 P=3.50 – – 1,705,000 P=3.66December 31, 2014 3,500,000 P=3.50 – – 778,000 P=3.66

Fourth GrantTranche A Tranche B

Numberof shares

ExercisePrice

Numberof shares

ExercisePrice

Grant during the year 56,000,000 P=4.60 56,000,000 P=4.60Exercised during the year (see Note 22) – – – –Expired during the year – – – –Outstanding at December 31, 2013 56,000,000 P=4.60 56,000,000 P=4.60Exercised during the year (see Note 22) (1,000,000) 4.60 – –Outstanding at December 31, 2014 55,000,000 P=4.60 56,000,000 P=4.60

Exercisable at:December 31, 2013 – – – –December 31, 2014 55,000,000 P=4.60 – –

The fair value of the options granted is estimated at the date of grant using Black-Scholes-Mertonformula, taking into account the terms and conditions at the time the options were granted. Thefollowing tables list the inputs to the model used for the ESOP:

First Grant Second GrantTranche A Tranche B Tranche A Tranche B

50.0%vesting onJanuary 2,

2009


2010

50.0%vesting onMarch 10,

2009

50.0%vesting onMarch 10,

2010


2011


2012

30.0%vesting on

July 2,2011

35.0%vesting on

July 2,2012

35.0%vesting on

July 2,2013

Spot Price P=2.10 P=2.10 P=2.70 P=2.70 P=2.65 P=2.65 P=2.65 P=2.65 P=2.65Exercise price P=2.12 P=2.12 P=2.73 P=2.73 P=2.73 P=2.73 P=2.73 P=2.73 P=2.73Risk-free rate 5.92% 6.60% 4.24% 4.82% 4.16% 4.92% 4.61% 5.21% 5.67%Expected volatility* 94.07% 58.10% 61.25% 66.43% 48.33% 69.83% 69.27% 67.52% 76.60%Term to vesting in days 24 389 61 365 183 548 365 731 1,096Call price P=0.20 P=0.55 P=0.27 P=0.75 P=0.35 P=0.91 P=0.73 P=1.03 P=1.39

Third Grant Fourth GrantTranche A Tranche B Tranche C Tranche A Tranche B

30.0%vesting onAugust 1,

2011


2012


2013

30.0%vesting on

March 8,2012

35.0%vesting on

March 8,2013

35.0%vesting on

March 8,2014

50.0%vesting on

April 14,2012

50.0%vesting on

April 14,2013

50.0%vesting on

October 14,2014

50.0%vesting on

October 14,2015

Spot Price P=3.47 P=3.47 P=3.47 P=3.53 P=3.53 P=3.53 P=3.66 P=3.66 P=4.59 P=4.59Exercise price P=3.50 P=3.50 P=3.50 P=3.53 P=3.53 P=3.53 P=3.66 P=3.66 P=4.60 P=4.60Risk-free rate 1.62% 2.83% 3.73 2.56% 4.38% 5.01% 2.05% 3.83% 0.66% 2.40%Expected volatility* 46.62% 68.23% 72.82% 39.32% 61.39% 64.42% 39.13% 60.76% 35.23% 33.07%Term to vesting in days 223 589 954 366 731 1,096 366 731 365 730Call price P=0.46 P=1.20 P=1.62 P=0.58 P=1.28 P=1.62 P=0.60 P=1.30 P=0.63 P=0.89

* The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also notnecessarily be the actual outcome.

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32. Contingencies

Water Segment

The following are the significant contingent liabilities of Maynilad as at December 31, 2014 and2013:

Disputed Billings with MWSS. Additional Tranche B Concession Fees and interest penalty arebeing claimed by MWSS in excess of the amount recommended by the Receiver. Such additionalcharges being claimed by MWSS (in addition to other miscellaneous claims) amounted toP=5.0 billion and P=4.9 billion as at December 31, 2014 and 2013, respectively. The RehabilitationCourt has resolved to deny and disallow the said disputed claims of MWSS in itsDecember 19, 2007 Order, upholding the recommendations of the Receiver on the matter.

Following the termination of the Maynilad’s rehabilitation proceedings, Maynilad and MWSSsought to resolve this matter in accordance with the dispute resolution requirements of the TCA(see Notes 3 and 20).

Real Property Taxes Assessment. On October 13, 2005, Maynilad and Manila Water Company,Inc. (the Concessionaires) were jointly assessed by the Municipality of Norzagaray, Bulacan forreal property taxes on certain common purpose facilities purportedly due from 1998 to 2005amounting to P=357.1 million. It is the position of the Concessionaires that these properties areowned by the ROP and therefore, exempt from taxation.

The supposed joint liability of the Concessionaires for real property tax, including interests, as atDecember 31, 2014 amounted to P=1.0 billion.

After the Local Board of Assessment Appeals (LBAA) ruled in favor of the Municipality ofNorzagaray, Bulacan, the Concessionaires elevated the ruling of the LBAA to the Central Boardof Assessment Appeals (CBAA) by filing separate appeals. As at February 26, 2015, the case isstill pending.

Cost of Living Allowance (COLA). On November 24, 2006, the Labor Arbiter issued a decision infavor of the Maynilad Water Supervisors Association (MWSA), ordering the payment of COLA toMaynilad’s supervisor-employees, retroactive to the date when they were hired by Maynilad in1997, with legal interest from the date of promulgation of the decision until full payment of theaward or P=249.5 million as computed and claimed by MWSA. This decision was reversed and setaside by the National Labor Relations Commission (NLRC) in 2007, but reinstated by the Court ofAppeals in 2010. After the issuance of the Labor Arbiter’s decision in 2007, Maynilad executed acompromise agreement with MWSA, wherein Maynilad agreed to pay MWSA residual benefitsequivalent to its claim for COLA for 23 months, from August 1997 to June 1999. ThusMaynilad’s dispute with MWSA was limited to the supervisor-employees claim for COLA fromJuly 1999 up to the present time. In 2011, the Court of Appeals granted the motion forreconsideration filed by Maynilad by issuing an amended decision reinstating and affirming theresolutions of the NLRC. The Court of Appeals thereafter issued a resolution denying the motionfor reconsideration filed by MWSA. On November 16, 2011, MWSA filed a Petition for Reviewon Certiorari before the Supreme Court, seeking to annul the said amended decision and theresolution of the Court of Appeals.

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On December 11, 2013, Notice of Judgment was issued by the Supreme Court which upheld theassailed Amended Decision and Resolution of the Court of Appeals which held that the employeesof Maynilad are not entitled to receive COLA pursuant to the terms of Maynilad’s concessionagreement.

On February 26, 2014, the Second Division issued a resolution (1) denying with finality MWSA’smotion for reconsideration and (2) denying MWSA’s motion to refer the case to the Court EnBanc. In its Decision, the Supreme Court upheld the assailed Amended Decision and Resolutionof the Court of Appeals that reinstated the earlier ruling of the NLRC that held that the employeesof Maynilad are not entitled to receive COLA pursuant to the terms of the Concession Agreement.

Others. Maynilad is a party to various civil and labor cases relating to breach of contracts withdamages, illegal dismissal of employees, and nonpayment of backwages, benefits andperformance bonus, among others.

Toll Operations Segment

Value-Added Tax (VAT). In view of RMC 39-2011, MNTC started imposing VAT on toll feesfrom motorists and correspondingly started recognizing VAT liability on October 1, 2011.Through all the years that the issues of VAT are being discussed, MNTC received the followingVAT assessments:

§ MNTC received a Formal Letter of Demand from the BIR on March 16, 2009 requestingMNTC to pay deficiency VAT plus penalties amounting to P=1,010.5 million for taxable year2006.

§ MNTC received a Final Assessment Notice from the BIR dated November 15, 2009, assessingMNTC for deficiency VAT plus penalties amounting to P=557.6 million for taxable year 2007.

§ MNTC received a Notice of Informal Assessment from the BIR dated October 5, 2009,assessing MNTC for deficiency VAT plus penalties amounting to P=470.9 million for taxableyear 2008.

§ On May 21, 2010, the BIR issued a Notice of Informal Conference assessing MNTC fordeficiency VAT plus penalties amounting to P=1.0 billion for taxable year 2009.

On April 3, 2014, the BIR accepted and approved the Company’s application for abatement andissued a Certificate of Approval for the cancellation of the basic output tax, interest andcompromise penalty amounting to P=1,010.5 million and P=584.6 million for taxable years 2006 and2007, respectively.

Notwithstanding the foregoing, management believes, in consultation with its legal counsel, that inany event, the Supplemental Toll Operation Agreement among MNTC, Republic of the Philippines,acting by and through the Toll Regulatory Board, and PNCC, provides MNTC with legal recourse inorder to protect its lawful interests in case there is a change in existing laws, which makes theperformance by MNTC of its obligations materially more expensive.

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Local Business Tax (LBT). On July 7, 2011, the Regional Trial Court (RTC) of Bulacan ruled thatMNTC is liable for P=67.4 million in local business taxes and permits and regulatory fees. In 2012,the Court of Tax Appeals (CTA) modified the RTC of Malolos, Bulacan’s decision and cancelledand set aside for lack of basis the notice of assessment dated 2008 issued against MNTC forP=67.4 million LBT for the years 2005 to 2007. The municipality of Guiguinto subsequently filedwith the CTA a motion for reconsideration. The CTA, in a resolution dated April 25, 2013, deniedthe motion for reconsideration filed by the municipality of Guiguinto. The decision and resolutionof the CTA have not been appealed and have thus become final, inappealable, and executory.

On September 3, 2013, an agreement was signed between MNTC and the Municipality ofGuiguinto to finally reconcile past collections and settle any remaining obligations to keepMNTC’s accounts with Guiguinto current. The parties agreed that (a) all of MNTC’s previouspayments of P10.0 million should be deemed advance payments for any liability for LBT andregulatory fees; and (b) MNTC shall pay P8.0 million to cover remaining LBT and regulatory feesup to the fourth quarter of 2013. The parties agreed that the payments made or to be made underthis agreement shall constitute full and sufficient payment by MNTC of any and all liability forLBT, regulatory fees, surcharges, interests, and penalties for the years 2004 to 2013 to Guiguinto,and MNTC is therefore released, free, and clear from any and all such liabilities for the statedperiod.

Real Property Tax (RPT). MNTC has filed several Petitions for Review under Section 226 of theLocal Government Code with the Local Board of Assessment Appeals (“LBAA”) of the Provinceof Bulacan on July 15, 2008 and April 16, 2013, seeking to declare as null and void certain taxassessments and tax declarations issued by the Provincial Assessor of the Province of Bulacan.The said tax declarations were issued in the name of MNTC as owner of the North LuzonExpressway and categorizing the North Luzon Expressway as a commercial property, subject toreal property tax. As at September 18, 2013, the total amount of tax assessed by the Province ofBulacan against MNTC was P=304.9 million. The LBAA has yet to determine whether saidproperties in fact covers portions of the NLEX, which MNTC argues are part of the public domainand exempt from real property tax.

On September 27, 2013, the Bureau of Local Government Finance of the Department of Finance(“DOF-BLGF”) wrote a letter to the Province of Bulacan advising it to hold in abeyance anyfurther course of action pertaining to the alleged real property tax delinquency.On October 4, 2013, the Provincial Treasurer of Bulacan has respected the directive from theDOF-BLGF to hold the enforcement of any collection remedies in abeyance.

The outcome of the claims on RPT cannot be presently determined. The management of MNTCbelieves that these claims will not have a significant impact on the Company’s consolidatedfinancial statements and believes that the STOA also provides MNTC with legal recourse in orderto protect its lawful interests in case there is a change in existing laws which makes theperformance by MNTC of its obligations materially more expensive.

Others. The companies in the toll operations segment are also parties to other cases and claimsarising from the ordinary course of business filed by third parties, which are either pendingdecisions by the courts or are subject to settlement agreements. The outcome of these claimscannot be presently determined. In the opinion of management and its legal counsel, the eventualliability from these lawsuits or claims, if any, will not have a material adverse effect on theCompany’s consolidated financial statements.

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Power SegmentMeralco and its subsidiaries are subject to various pending or threatened legal actions in theordinary course of business which, if the conclusion is unfavorable to Meralco and subsidiaries,may result in the payout of substantial claims and or the adjustment of electricity distributionrates. These contingencies substantially represent the amounts of claims related to a commercialcontract which remains unresolved and local taxes being contested. Other disclosures required byPAS 37 were not provided as this may prejudice Meralco’s position in on-going claims, litigationsand assessments.

Supreme Court (SC) Temporary Restraining Order (TRO) on December 2013 Increase in MeralcoRate. On December 9, 2013, the ERC gave clearance to the request of Meralco to implement astaggered collection over three (3) months covering the December billing month for the increasein generation charge and other bill components such as value-added tax, local franchise tax,transmission charge, and system loss charge, which reflected a total increase of P=4.15/kWh for a200-kWh residential consumer. The generation costs for the November 2013 supply month,increased significantly because of the use of the more expensive liquid fuel by the natural gas-fired power plants that were affected by the Malampaya Gas Field or Malampaya, shutdown fromNovember 11 to December 10, 2013. This was compounded by the aberrant spike in theWholesale Electricity Spot Market (WESM), charges on account of the scheduled and extendedshutdown, and the forced outages of several base load power plants, as well as the non-compliancewith WESM Rules by certain plants resulting in significant power generation capacities not beingoffered and dispatched.

On December 19, 2013, several party-list representatives in the House of Representatives, filed aPetition against Meralco, ERC and the Department of Energy or DOE before the SC, questioningthe ERC clearance granted to Meralco to charge the P=4.15/kWh price increase, alleging the lack ofhearing and due process. It also sought for the declaration of the unconstitutionality of Sections 6and 29 of Republic Act No. 9136, “The Electric Power Industry Reform Act of 2001” or EPIRA,which essentially declared the generation and supply sectors competitive and open, and notconsidered public utilities. A similar petition was filed by a consumer group and several privatehomeowners associations challenging also the legality of the Automatic Generation RateAdjustment or AGRA that the ERC had promulgated. Both petitions prayed for the issuance of aTRO, and Writ of Preliminary Injunction.

On December 23, 2013, the SC consolidated the two (2) Petitions and granted the application forTRO effectively immediately and for a period of sixty (60) days, which effectively enjoined theERC and Meralco from implementing the P=4.15/kwh price increase. The SC also orderedMeralco, ERC and DOE to file their respective comments to the Petitions and set the hearing forOral Arguments on January 21, 2014. The SC further set two more Oral Arguments onFebruary 4, 2014 and February 11, 2014. After the conclusion of the Oral Arguments, the SCgave all the Parties to the consolidated Petitions to file their respective Memorandum on or beforeFebruary 26, 2014 after which the Petitions will be deemed submitted for resolution of the SC.Meralco complied with said directive and had filed its Memorandum on said date.

On February 18, 2014, acting on the motion filed by the Petitioners, the SC extended for anotherperiod of 60 days or until April 22, 2014, the TRO that it originally issued against Meralco andERC on December 23, 2013. The TRO was also similarly applied to the generating companies,specifically Masinloc Power Partners Co. Ltd. (MPPCL), San Miguel Energy Corporation(SMEC), South Premier Power Corporation, First Gas Power Corporation, and the National GridCorporation of the Philippines, and the Philippine Electricity Market Corporation or PEMC (theadministrator of WESM and market operator) who were all enjoined from collecting from Meralcothe deferred amounts representing the P=4.15/kWh price increase for the November 2013 supplymonth.

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In the meantime, on January 30, 2014, Meralco filed an Omnibus Motion with Manifestation withthe ERC for the latter to direct PEMC to conduct a re-run or re-calculation of the WESM pricesfor the supply months of November to December 2013. Subsequently, on February 17, 2014,Meralco filed with the ERC an Application for the recovery of deferred generation costs for theDecember 2013 supply month praying that it be allowed to recover the same over a six (6)-monthperiod.

On March 3, 2014, the ERC issued an Order voiding the Luzon WESM prices during theNovember and December 2013 supply months on the basis of the preliminary findings of itsInvestigating Unit that these are not reasonable, rational and competitive and imposing the use ofregulated rates for the said period. PEMC was given seven (7) days upon receipt of the Order tocalculate these regulated prices and implement the same in the revised WESM bills of theconcerned. PEMC’s recalculated power bills for the supply month of December 2013 resulted in anet reduction of the December 2013 supply month bill of the WESM by P=9,274 million. Due tothe pendency of the TRO, no adjustment was made to the WESM bill of Meralco for theNovember 2013 supply month. The timing of amounts to be credited to Meralco is dependent onthe reimbursement of PEMC from associated generator companies. However, several generatingcompanies, including MPPCL, SN Aboitiz Power Corporation, Team (Philippines) EnergyCorporation, Panasia Energy Holdings, Inc., and SMEC, have filed motions for reconsiderationquestioning the Order dated March 3, 2014. Meralco filed a consolidated comment to thesemotions for reconsideration.

In view of the pendency of the various submissions before the ERC and mindful of thecomplexities in the implementation of ERC’s Order dated March 3, 2014, the ERC directedPEMC to provide the market participants an additional period of 45 days to comply with thesettlement of their respective adjusted WESM bills. In an Order dated May 9, 2014, the partieswere then given an additional non-extendible period of 30 days from receipt of the Order withinwhich to settle their WESM bills. However, in an Order dated June 6, 2014 and acting on anintervention filed by Angeles Electric Corporation, the ERC deemed it appropriate to hold inabeyance the settlement of PEMC’s adjusted WESM bills by the market participants.

In its Order dated October 15, 2014, the ERC issued an Order denying the motion filed by thegenerating companies. The generator companies have filed separate petitions before the CA toquestion the March 3, 2014 and October 15, 2014 Orders of the ERC.

On April 22, 2014, the SC extended indefinitely the TRO issued on December 23, 2013 andFebruary 18, 2014 and directed generating companies not to collect from Meralco. The SC hasyet to resolve the various petitions filed against Meralco, ERC and DOE as at February 26, 2015.

OthersDonor’s Tax. NOHI received on January 14, 2011 a Final Assessment Notice (FAN) demandingthe payment of approximately P=199.7 million as deficiency donor’s tax (including surcharge andinterest as at January 31, 2011) on the excess of the book value over the selling price of severalshares of stock in BLC which NOHI sold to a third party. The assessment was based on thefinding of the Bureau of Internal Revenue-Large Taxpayer Service (BIR-LTS) that the transactionis subject to donor’s tax as a “deemed gift” transaction under Section 100 of the 1997 NationalInternal Revenue Tax Code (the Tax Code).

On February 14, 2011, NOHI filed its formal protest to the FAN raising several factual and legalarguments. However, this was denied by the BIR through the letter it has delivered to NOHIstating its Final Decision on Disputed Assessment (“FDDA”). NOHI then filed a Petition forReview with the Second Division of the Court of Tax Appeals (“CTA”) to challenge the FDDA.On June 11, 2014, the CTA rendered its decision on the case which did not sustain the company’s

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position. The company filed a Motion for Reconsideration on the CTA 2nd Division’s decision asNOHI firmly believes that it is not liable for the deficiency donor’s taxes and that it has stronglegal and factual basis to support its claim. On September 16, 2014, the CTA 2nd Division issuedan Order denying NOHI’s Motion for Reconsideration. In October 2014, NOHI, through itscounsel, filed a Petition for Review before the CTA en banc praying for, among others, thereversal of the decision of the CTA 2nd Division. In January 2015, the CTA en banc gave duecourse to the Petion for Review and directed the parties to submit their memoranda. As ofFebruary 26, 2015, NOHI through its counsel is preparing the memorandum for submission to theCTA.

NOHI firmly believes that it is not liable for the deficiency donor’s taxes and that it has stronglegal and factual basis to question the FDDA in its appeal with the CTA.

Indemnity. Under the agreement relating to the repayment of a certain loan signed between NOHI,Ayala Land Inc. (ALI) and Greenfield Development Corp. (GDC) on April 17, 2003, certainobligations/warranties by NOHI will remain outstanding for certain periods ranging from one tothree years and covered by security arrangements. Under the agreement, NOHI shall indemnifyALI and GDC to the extent of NOHI’s derivative share in BLC/ Fort Bonifacio DevelopmentCorporation (FBDC) for certain secured indemnity obligations and other obligations resultingfrom any breach of warranties and representations.

ALI and GDC have formally advised NOHI in their letter dated September 19, 2003 that they areallocating the pledge of 5.0% interest of NOHI in BLC and a condominium unit in Pacific PlazaTower for possible payment of secured indemnity obligations enumerated in their letter. Totalestimated indemnity amounts to P=434.1 million, determined based on certain possible taxes thatwere actually claimed by ALI and GDC within the warranty period, which expired onApril 17, 2007. However, subject to actual payment of pending taxes included in the warranties,the provision has remained in the books.

In September 2009, NOHI sold 2,603,708 shares out of the 5% interest in BLC pledged toColumbus Holdings, Inc. (Columbus), a company jointly owned by ALI and GDC, at an agreedpurchase price of P=158.0 per share for a total consideration of P=411.4 million. No gain wasrecognized on the sale pending Supreme Court judgment on the ongoing documentary stamp taxclaim against FBDC in which case and in the event of an unfavorable judgment against FBDC, thetotal proceeds from the sale will be returned to Columbus. Consequently, NOHI recognized anadditional provision amounting to P=54.8 million in 2009 for liability equivalent to the unrealizedgain. Thus, total liability amounted to P=488.9 million (see Note 17).

On June 26, 2013, NOHI was informed that the Supreme Court rendered judgment in favor ofFBDC. As at February 26, 2015, NOHI is awaiting release from the guarantee undertaking fromColumbus to reverse the provision.

In the opinion of management and NOHI’s legal counsel, the eventual liability from these lawsuitsor claims, if any, will not have a material adverse effect on NOHI’s financial position andfinancial performance, as well as in MPIC’s consolidated financial statements.

Other disclosures required by PAS 37 were not provided as it may prejudice the Company’sposition in ongoing claims, litigations and assessments.

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33. Significant Contracts, Agreements and Commitments

MPIC

Landco’s Restructuring. On December 22, 2014, MPIC entered into an agreement with Landcoand its controlling shareholder, ABHC to restructure and clean up the balance sheet of Landco inpreparation for an eventual sale to third parties. The agreement contemplates the implementationof the following transactions: (i) the conversion of MPIC’s preferred shares in Landco to commonshares, (ii) additional subscription to non-voting preferred shares by way of cash infusion andconversion of MPIC’s receivables from Landco into equity, (iii) offsetting of certain inter-company accounts, and (iv) spin off of non-performing assets of Landco to a separate company.The cash infusion will be to the extent of P=85.0 million and conversion of receivables into equityto the extent of P=79.8 million. The conversion of the preferred shares to common shares inLandco and assumption of ABHC’s payable to Landco of P=155.3 million were completed in 2014.

After the transactions disclosed above, MPIC shall be entitled to 66% of the purchase price ofLandco’s outstanding common stock in the event of sale of Landco’s outstanding capital stock to athird party.

As a result of the planned divestment of the interests in Landco, the carrying values of the notesreceivable from Landco and ABHC and the investment in Landco’s common shares (includedunder “AFS Financial Assets” account as at December 31, 2013), were reclassified to “Assets heldfor sale”. The carrying amount of all interests in Landco as at December 31, 2014 comprising ofP=755.5 million of common shares or 38.1% interest (which percentage of ownership would qualifyas an investment in associate) and P=614.3 million of loans and interest receivable from Landcoand ABHC, is expected to be recovered principally through a sale transaction and the sale isconsidered highly probable. As the total carrying amount of all interests in Landco is less than thefair value less costs to dispose, no impairment loss was recognized for the period endedDecember 31, 2014.

Water Segment

Contracts. In relation to Maynilad’s concession agreement (the “Concession Agreement”),Maynilad entered into the following contracts with Manila Water (the “East Concessionaire”):

a. Interconnection Agreement wherein the two Concessionaires shall form an unincorporatedjoint venture that will manage, operate, and maintain interconnection facilities. The terms ofthe agreement provide, among others, the cost and the volume of water to be transferredbetween zones; and,

b. Common Purpose Facilities Agreement that provides for the operation, maintenance, renewal,and, as appropriate, decommissioning of the Common Purpose Facilities, and performance ofother functions pursuant to and in accordance with the provisions of the ConcessionAgreement and performance of such other functions relating to the concession (and theconcession of the East Concessionaire) as Maynilad and the East Concessionaire may chooseto delegate to the Joint Venture, subject to the approval of MWSS.

Commitments. Significant commitments under the Concession Agreement follow:

a. Payment of Concession Fees (see Note 18)

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b. Posting of performance bond

Under Section 6.9 of the Concession Agreement, Maynilad is required to post a performancebond to secure the performance of its obligations under certain provisions of the ConcessionAgreement.

The aggregate amount drawable in one or more installments under such performance bondduring the Rate Rebasing Period to which it relates is set out below.

Rate Rebasing Period

Aggregate AmountDrawable Under

Performance Bond(In Millions)

First (August 1, 1997 – December 31, 2002) US$120.0Second (January 1, 2003 – December 31, 2007) 120.0Third (January 1, 2008 – December 31, 2012) 90.0Fourth (January 1, 2013 – December 31, 2017) 80.0Fifth (January 1, 2018 – May 6, 2022) 60.0

Within 30 days from the commencement of each renewal date, Maynilad shall cause theperformance bond to be reinstated to the full amount set forth above applicable for the year.

In connection with the extension of the term of Maynilad’s Concession Agreement(see Note 13), certain adjustments to the obligation of Maynilad to post the performance bondunder Section 6.9 of the Concession Agreement have been approved and summarized asfollows:

§ The aggregate amount drawable in one or more installments under each performance bondduring the Rate Rebasing Period to which it relates has been adjusted to US$30.0 millionuntil the Expiration Date;

§ The amount of the Performance Bond for the period covering 2023 to 2037 shall bemutually agreed upon in writing by the MWSS and Maynilad consistent with theprovisions of the Concession Agreement.

§ Maynilad posted the Surety Bond for the amount of US$90.0 million issued by PrudentialGuarantee and Assurance, Inc. (the Surety) in favor of MWSS, as security for Maynilad’sproper and timely performance of its obligations under the Concession Agreement. OnDecember 6, 2012, Maynilad renewed the Surety Bond for the amount of US$80.0 millionissued by the Surety in favor of MWSS. The liability of the Surety under this bond willexpire on December 31, 2017.

c. Payment of half of MWSS and MWSS-RO’s budgeted expenditures for the subsequent years,provided the aggregate annual budgeted expenditures do not exceed P=200.0 million, subject toCPI adjustments. Beginning 2010, the annual budgeted expenditures shall increase by100.0%, subject to CPI adjustments, as a result of the extension of the life of the Maynilad’sconcession agreement.

d. To meet certain specific commitments in respect to the provision of water and sewerageservices in the West Service Area, unless modified by the MWSS-RO due to unforeseencircumstances.

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e. To operate, maintain, renew and, as appropriate, decommission facilities in a mannerconsistent with the National Building Standards and best industrial practices so that, at alltimes, the water and sewerage system in the West Service Area is capable of meeting theservice obligations (as such obligations may be revised from time to time by the MWSS-ROfollowing consultation with Maynilad).

f. To repair and correct, on a priority basis, any defect in the facilities that could adversely affectpublic health or welfare, or cause damage to persons or third-party property.

g. To ensure that at all times Maynilad has sufficient financial, material and personnel resourcesavailable to meet its obligations under the Concession Agreement.

h. Non-incurrence of debt or liability that would mature beyond the term of the ConcessionAgreement, without the prior notice of MWSS.

Failure of Maynilad to perform any of its obligations under the Concession Agreement of akind or to a degree which, in a reasonable opinion of the MWSS-RO, amounts to an effectiveabandonment of the Concession Agreement and which failure continues for at least 30 daysafter written notice from the MWSS-RO, may cause the Concession Agreement terminated.

Operating Lease Commitment. Maynilad leases the office space, branches where service outletsare located, equipment and service vehicles, renewable under certain terms and conditions to beagreed upon by the parties. Total rent expense for the above operating leases amounted toP=167.7 million, P=158.9 million and P=175.2 million in 2014, 2013 and 2012, respectively.

Future minimum operating lease payments as at December 31, 2014 and 2013 are:

Period Covered 2014 2013(In Millions)

Not later than one year P=112 P=132More than one year and not later than five years 154 76More than five years 170 –

Operation and Maintenance Agreement with Rio Verde Water Consortium, Inc (RVWCI). OnDecember 22, 2014, MPWIC entered into an agreement to operate and maintain the 100 mld bulkwater facility of RVWCI located in Baungon, Bukidnon. The agreement will be implementedthrough a subsidiary to be incorporated by MPWIC, which as of February 26, 2015 has yet to beincorporated. RVWCI is the exclusive supplier of bulk surface water to Cagayan de Oro WaterDistrict which supplies the water needs of more than 80% of Cagayan de Oro's population of640,000.

Toll Operations Segment

NLEX Concession Agreement. Obligations and commitments of MNTC under the NLEXConcession Agreement are discussed in Notes 13 and 17.

Subic-Clark-Tarlac Expressway (SCTEX) Concession Agreement. On February 9, 2015, MNTC,received the Notice of Award from the BCDA for the management, operation and maintenance ofthe SCTEX subject to compliance with specific conditions. The Notice of Award was issued byBCDA following the results of the Price Challenge held last January 30, 2015.

On February 26, 2015, MNTC and BCDA signed the Business Agreement (“BA”), marking theculmination of BCDA’s effort to privatize the management, operation and maintenance of theSCTEX. The BA binds MNTC and BCDA to a contract for the management, operation andmaintenance of SCTEX until the end of the SCTEX concession period (October 30, 2043). The

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privatization provides the opportunity to realize MNTC’s vision of integrating the operation of NLEXwith SCTEX, thereby offering seamless expressway travel to motorists. The effectivity of the BA issubject to conditions precedent, among which is the TRB approval and signing of the STOA. OnFebruary 26, 2015, the Business Operating Agreement was signed with full take over of the SCTEXoperation expected by second quarter of 2015.

On February 5, 2015, MNTC and BCDA signed the NLEX-SCTEX Integration Agreementrelating to the toll collection system integration that will feature a common transit ticket systemfor both NLEX’s closed system and that of the SCTEX. The project is expected to be completedwithin the year.NLEX-SLEX Connector Road Project. The Connector Road Project was approvedby the NEDA Board on February 20, 2015 as an unsolicited proposal under the BOT Law. This isexpected to trigger the commencement of the Swiss Challenge within 2nd quarter of 2015.MPTDC, as Original Proponent of the unsolicited proposal, awaits DPWH’s written notice of theNEDA Board approval.

Construction Contract for NLEX Segment 9. On May 3, 2013, MNTC, under a competitivebidding, has awarded the Civil Works contract to EEI Corporation. The Civil Works ConstructionAgreement was executed by MNTC and EEI Construction in relation to the construction of the2.4 km Segment 9 (part of Phase II of NLEX), a four-lane expressway that links the SMARTConnect Interchange to McArthur Highway. Total civil works construction contract was set atP=1,145.4 million, as may be adjusted from time to time pursuant to the terms of the agreement.

The Construction Notice to Proceed was issued by MNTC to EEI Corporation in May 2013 andmobilization works commenced in May 2013. The construction works are expected to becompleted by first quarter of 2015.

Unapplied mobilization advances to EEI Corporation, included as part of “Advances to contractorsand consultants” in the consolidated statement of financial position, amounted to P=71.0 millionand P=140.0 million as at December 31, 2014 and 2013, respectively.

Construction Contract for NLEX Segment 10. On April 28, 2014, MNTC signed a target costconstruction contract with Leighton Contractors (Asia) Ltd. (LCAL) for the construction of NLEXSegment 10, a 5.6-km, four-lane elevated expressway that will start from the terminal of Segment 9 inValenzuela City and go south to C-3 Road in Caloocan City above the alignment of the PNR railwaytracks. The target cost is approximately P=10 billion (inclusive of VAT) with a completion period oftwenty-four (24) months from start date. The contract structure is collaborative in nature and providesa risk and reward sharing mechanism if the actual construction cost exceeds or falls below the agreedtarget. LCAL’s performance obligations under the contract are backed up by: (i) a bank-issuedirrevocable stand-by letter of credit, (ii) cash retention, and (iii) a parent company guarantee issued byLeighton Asia Limited. Construction is in progress as of February 26, 2015 with target completiondate of fourth quarter of 2016.

On May 8, 2014, MNTC issued the notice to proceed to LCAL, signalling the start of pre-construction activities. Pursuant to the contract, MNTC placed a reserve amount of P=889 million inan escrow account on July 28, 2014 to cover payment default leading to suspension of works. Thisreserve amount is included in the restricted cash account under noncurrent assets.

PNCC. PNCC is a non-controlling stockholder in MNTC. In consideration of the assignment byPNCC of its usufructuary rights, interests and privileges under its franchise, PNCC is entitled toreceive a payment equivalent to 6.0% and 2.0% of the toll revenue from the NLEX andSegment 7, respectively. Any unpaid balance carried forward will accrue interest at the rate of thelatest Philippine 91-day Treasury bill rate plus 1.0% per annum. The PNCC franchise expired inMay 2007 but since the payment is a continuing obligation under the Shareholders’ Agreement,PNCC continues to receive the same payment. However, on December 2, 2010, MNTC received a

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letter from the TRB dated November 30, 2010, citing a decision of the Supreme Court datedOctober 19, 2010 directing MNTC to remit to the National Treasury, through TRB, all paymentsrepresenting PNCC’s percentage share of the toll revenues and dividends, if any, arising out ofPNCC’s participation in the NLEX Project.

On the basis of the conflicting claims of PNCC and TRB to the revenue share and dividends, onDecember 8, 2010, MNTC filed a motion for clarification asking the SC to clarify the entity towhich MNTC should remit its payments which was then due on December 20, 2010. Pendingresolution by the SC of the motion for clarification, MNTC filed a petition for consignation withthe RTC of Caloocan for the latter to hold the payments in trust and deliver to the party ultimatelyadjudged by the SC to be entitled to it. On December 29, 2010, MNTC through a letter sent by itslegal counsel, informed PNCC and TRB of the consignation made to the RTC of Caloocan.

In a resolution dated January 18, 2011, the SC directed MNTC to remit to the National TreasuryPNCC’s percentage share of toll revenues and dividends arising out of PNCC’s participation in theNLEX Project. On April 12, 2011, the SC issued a Resolution directing MNTC to remit PNCC’sshare in the net income from toll revenues to the National Treasury and the TRB, with theassistance of the Commission on Audit (COA) was directed to prepare and finalize theimplementing rules and guideline relative to the determination of the net income remittable byPNCC to the National Treasury. In the meantime, while the guidelines have yet to be formulated,PNCC and TRB have agreed to remit the entire consigned amount to the National Treasury.Following the directive of the TRB dated March 22, 2012, MNTC has remitted to the NationalGovernment through the TRB the payments for the PNCC fees accruing since the month ofDecember 2010 and the dividends payable to PNCC since July 2010. In accordance with the TRBdirective, 90% of the PNCC fees and dividends payable was remitted to the TRB while thebalance of 10% to PNCC.

On September 19, 2011, Forum Holdings Corporation (FHC, an Intervenor) filed a Petition-in-Intervention with the RTC of Caloocan praying that MNTC be ordered to comply with itscontractual commitment to PNCC under contract by releasing and delivering directly to PNCC theconsigned amount. The Intervenor, however, does not pray for any damages against MNTC.PNCC has filed its opposition to the Motion for Intervention. On January 11, 2012, RTC ofCaloocan, despite the fact that the consigned amount at that time has already been remitted to theNational Treasury, granted FHC’s petition filed on September 19, 2011. On September 6, 2013,the RTC heard the case to decide on the prayer for dismissal requested by MNTC, TRB andPNCC in their urgent joint manifestation and motion. During said hearing, the RTC found that thepetition for consignation was already rendered moot and academic since the consigned amountwas already remitted to the National Government and FHC already withdrew its intervention.Since there was no more pending incident for resolution, the RTC ordered the case dismissed.

Power Segment

Renewable Energy / Waste Management Project. MPIC and Global Green International Energy(“GGIE”), a Singapore-based company, have partnered to develop a renewable energy / wastemanagement project. MPIC and GGIE plan to invest approximately P=240.0 million (US$5.3million) in equity, out of the total project cost of P=480 million (US$10.6 million). The facility, tobe located in Tagum City, Davao del Norte, will convert 20 to 25 metric tons of municipal solidwaste into about 13,000 liters of biodiesel daily. The facility can be expanded to allow theconversion of excess heat into electricity. On November 7, 2014, MPIC and GGIE incorporatedMetro Global Green Waste, Inc., as an investment holding company for the waste-to-energyprojects.

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Healthcare Segment

Lease agreements. As discussed in Note 3, EMHMC and CVHMC entered into lease agreementswith SSpS and RCAM for the management and operation of OLLH and CSMC, respectively.Each of these lease agreements is for a period of 20 years, renewable for successive periods of 10years upon the mutual consent of both parties. EMHMC and CVHMC accounted for theirrespective lease agreements as acquisition of a business in accordance with PFRS 3.

As consideration for the lease agreement, EMHMC and CVHMC pay fixed and variable monthlyrates, where the variable rate is based on the prior year’s net revenues. Below is the schedule offixed and variable monthly rent:

Period

FixedMonthly

Rent

AnnualVariable Rent

(% of Prior Year’sNet Revenues)

(In Thousands)EMHMC

November 2010 to October 2015 P=1,000 2.00%November 2015 to October 2020 1,250 2.25%November 2020 to October 2030 1,500 2.50%

CVHMCMarch 2009 to February 2014 3,000 3.00%March 2014 to February 2019 3,300 3.00%March 2019 to February 2024 3,630 3.00%March 2024 to February 2029 3,993 3.00%

Lease payments under these arrangements are as follows:

2014 2013Fixed Variable Total Fixed Variable Total

(In Millions)Not later than one year P=52 P=45 P=97 P=51 P=62 P=113More than one year and not

later than five years 238 321 559 259 355 614More than five years 598 1,136 1,734 628 1,167 1,795Total lease payments 888 1,502 2,390 938 1,584 2,522Less amount representing

interest 1,328 1,447Present value of lease

obligation P=1,062 P=1,075

EMHMC commits to improve and develop OLLH, by way of cumulative capital expenditures ofat least P=350.0 million no later than November 1, 2015. The commitment shall be utilized inaccordance with EMHMC’s Capital Expenditure (CAPEX) program and in the event thatEMHMC fails to make or infuse the commitment in the amounts and within the period stated,EMHMC shall deposit in escrow such deficiency and the use of which will be mutuallydetermined by both parties. As of December 31, 2014, the approved CAPEX infusion is atP=181.8 million covering period of up to December 31, 2013. In 2014, EMHMC infusedP=76.8 million to the CAPEX program which is still for review and approval.

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CVHMC has a commitment to make a Capital Expenditure in CSMC amounting to at leastP=750.0 million (CAPEX Commitment) no later than the 10th anniversary of the Agreement, withat least P=250.0 million of which shall be spent over a period of three years, and with majorityspent as CAPEX for Expansion and Development no later than the 10th anniversary of theclosing date of the agreement. CVHMC’s accumulated infusion to the CAPEX program areP=1,139.0 million and P=1,018.4 million as of December 31, 2014 and 2013, respectively.

On September 16, 2011, CVHMC renewed a purchase commitment with a third party supplierwith a minimum purchase requirement amounting to P=28.0 million worth of certain medicalproducts for two years expiring September 2013. The agreement provides for rebates anddiscounts but if CVHMC fails to meet the set minimum purchase requirements, CVHMC shall paythe supplier the amount equal to all the rebates provided plus default interest. CVHMC completedits minimum purchase commitment in September 2013.

Rail Segment

P=65-billion Light Rail Transit Line 1 Cavite Extension and Operations & Maintenance Project(the “LRT Project”). On October 2, 2014, LRMC signed together with the Department ofTransportation and Communications (DOTC) and the Light Rail Transit Authority (LRTA, andtogether with DOTC as “Grantors”) the Concession Agreement for the LRT Project. LRMC wasformally awarded the LRT Project by the DOTC and LRTA after the consortium of MPLRC, ACInfrastructure Holdings Corporation (“AC Infra”) and Macquarie Infrastructure Holdings(Philippines) PTE Ltd. (MIHPL) submitted the lone bid with a premium of P=9.35 billion.

The concession agreement is for a period of thirty-two (32) years commencing from the EffectiveDate. The “Required Effective Date” means the date falling twelve (12) months after the signingdate of or as extended in accordance with the concession agreement. The handover of theoperation and maintenance of the existing system of the LRT by the Grantors to LRMC shall takeplace on the Effective Date or such other time as may be agreed in writing between the Grantorsand the Concessionaire. The Effective Date is subject to certain conditions precedent under theconcession agreement.

Under the Concession Agreement, LRMC will operate and maintain the existing LRT Line 1 andconstruct an 11.7-km extension from the present end-point at Baclaran to the Niog area in Bacoor,Cavite. A total of eight new stations will be built along this route, which traverses the cities ofParañaque and Las Piñas up to Bacoor, Cavite. LRMC will invest P=40.0 billion on the Project.The extended rail line is envisioned to help ease the worsening traffic conditions in the Parañaque-Las Piñas-Cavite corridor. It is also expected to enhance commercial development around the railstations.

LRMC is required to pay the bid premium of P=9.35 billion as concession fees, based on thefollowing schedule:

§ 10% of the bid amount within twenty (20) days from receipt of the Notice of Award (NOA),which amount has already been paid;

§ 10% of the bid amount upon Effective Date which is nine (9) months to a maximum of twelve(12) months from Signing Date of the Concession Agreement;

§ 80% of the bid amount in equal quarterly instalments over the Concession Period with the firstpayment on the fifth anniversary of the Effective Date as defined under the ConcessionAgreement.

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Equity infusion as at December 31, 2014 of the other shareholders in LRMH and LRMC with anaggregate amount of P=722.5 million are included in “Other changes in NCI” in the consolidatedstatement of changes in equity.

Escrow Agreement. On October 20, 2014, pursuant to the requirements of the ConcessionAgreement, DOTC, LRTA, LRMC, the initial shareholders of LRMC (namely AC Infra, MPLRCand MIHPL) and Security Bank as Escrow Agent entered into a Share Escrow Agreement.

Under the Share Escrow Agreement, each of the initial shareholders delivers to the Share EscrowAgent original stock certificates representing all of their respective equity interests in theConcessionaire. Such shares would be held in escrow until the third anniversary of the ExtensionCompletion Date as defined under the Concession Agreement.

34. Assets Held in Trust

Materials and SuppliesMaynilad has the right to use any item of inventory owned by MWSS in carrying out itsresponsibility under the Concession Agreement, subject to the obligation to return the same at theend of the concession period, in kind or in value at its current rate, subject to CPI adjustments.

FacilitiesMaynilad had been granted the right to operate, maintain in good working order, repair,decommission and refurbish the movable properties required to provide the water and sewerageservices under the Concession Agreement. MWSS shall retain legal title to all movable propertiesin existence at the commencement date on August 1, 1997. However, upon expiration of theuseful life of any such movable property as may be determined by Maynilad, such movableproperties shall be returned to MWSS in its then-current condition at no charge to MWSS orMaynilad (see Note 13).

The Concession Agreement also provides Maynilad and the East Concessionaire to have equalaccess to MWSS facilities involved in the provision of water supply and sewerage services in bothWest and East Service Areas including, but not limited to, the MWSS management informationsystem, billing system, telemetry system, central control room and central records.

The net book value of the facilities transferred to Maynilad on commencement date based onMWSS’ closing audit report amounted to P=7.3 billion with a sound value of P=13.8 billion.

MWSS’ corporate headquarters are made available to Maynilad and the East Concessionaire for aone-year period beginning on the commencement date, subject to yearly renewal with the consentof the parties concerned. Rent expense related to these properties amounted to P=38.0 million,P=33.8 million and P=33.1 million in 2014, 2013 and 2012, respectively.

35. Financial Risk Management Objectives and Policies

The Company’s principal financial instruments consist mainly of borrowings from a related partyand third party creditors, proceeds of which were used for the acquisition of investments and infinancing operations. The Company has other financial assets and financial liabilities such as cashand cash equivalents, short-term deposits, receivables, accounts payable and other currentliabilities, concession fees payable and other related party transactions which arise directly fromthe Company’s operations. The Company also holds AFS financial assets.

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The Company also enters into derivative transactions, particularly interest rate swaps and cross-currency swaps, to manage the interest rate and foreign currency risks arising from its long-termdebts (see Note 36).

The main risks arising from the Company’s financial instruments are credit risk, liquidity risk,interest rate risk, and foreign currency risk. The BOD reviews and approves policies of managingeach of these risks and they are summarized below.

Credit RiskCredit risk is the risk that the Company will incur a loss arising from customers, clients orcounterparties that fail to discharge their contracted obligations. The Company manages andcontrols credit risk by setting limits on the amount of risk that the Company is willing to acceptfor individual counterparties and by monitoring exposures in relation to such limits.

MPIC. MPIC’s exposure to credit risk is equal to the carrying amount of its financial assets.MPIC has no concentration of credit risk.

Toll segment. Receivables arose mainly from Easytrip Services Corporation (ESC) when Easytriptag-motorists ply in NLEX and those non-toll revenues in the form of advertising servicesparticularly from SMART. ESC, a joint venture of the Company beginning 2014 (see Note 11),assists MNTC in increasing the usage of the electronic toll collection (ETC) facility. Thesegment’s due from related parties are mainly from TMC. ESC, SMART and TMC areconsidered as low-risk counterparties as these are well-established companies. Moreover, MNTChas payment obligations to TMC which far exceed the aggregate amount of receivables and duesfrom TMC. Receivables also arose from motorists who cause accidental damage to NLEXproperty from day-to-day operations. Property damage claims are initially processed by TMC andare eventually turned over to MNTC. MNTC also has advances made to DPWH, a Philippinegovernment entity, which is covered by a Reimbursement Agreement.

MNTC also generates non-toll revenues in the form of service fees collected from businesslocators, generally called TSF (toll service facilities), along the stretch of the NLEX. Thecollection of such fees is provided in the STOA and is based on the principle that these TSF derivebenefit from offering goods and services to NLEX motorists. The fees range from one-timeaccess fees to recurring fees calculated as a percentage of sales. The arrangements are backed by aservice facility contract between MNTC and the various locators. The credit risk on thesearrangements is minimal because the fees are collected on a monthly basis mostly from well-established companies. The exposure is also limited given that the recurring amounts are notsignificant and there are adequate safeguards in the contract against payment delinquency.Nevertheless, MNTC closely monitors receivables from the TSF.

This segment’s exposure to credit risk arises from default of the counterparty, with a maximumexposure equal to carrying amount of these financial assets. The Company does not require anycollateral for its financial assets.

Water segment. Because of the basic need service that Maynilad provides, historical collections ofMaynilad are relatively high, thus, credit risk exposure is widely dispersed. Maynilad billings arepayable on the due date, which is normally 14 days from the billing date. However, customers aregiven 60 days to settle any unpaid bills before disconnection. Receivable balances are monitoredon an ongoing basis with the result that the Company’s exposure to bad debts is not significant.

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Healthcare segment. The hospitals of the Company manages risk by setting credit limits for allcustomers and by monitoring credit exposures and the creditworthiness of counterparties. Creditlimits are set and a regular review of these limits is being done by management. Credit isextended only to reputable entities such as HMO and insurance companies.

MPIC Group. The table below shows the maximum exposure to credit risk of the Companywithout considering the effects of collaterals, credit enhancements and other credit risk mitigationtechniques and the net maximum exposure to credit risk of the Company considering the effects ofcollaterals, credit enhancements and other credit risk mitigation techniques.

The credit enhancement relating to cash and cash equivalents pertains to insured deposits in banksas prescribed by Philippine Deposit Insurance Corporation. The collateral covering certainreceivables represents first-ranking pledge of Landco common shares in favor of the Company.For due from related parties, credit enhancement represents payable to the same counterparty thatthe Company will not pay until collection of the receivables.

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2014 2013

GrossMaximumExposure

(a)

Fair Value and Financial

Effect ofCollateral or

CreditEnhancement

(b)

NetExposure

(c) = (a) – (b)

GrossMaximumExposure

(a)

Fair Value and Financial Effect of

Collateralor Credit

Enhancement(b)

Netexposure

(c) = (a) – (b)(In Millions)

Financial assets at FVPL - Derivative assets P=- P=– P=– P=32 P=– P=32Loans and receivables: Cash and cash equivalents(a) 17,638 69 17,569 11,493 54 11,439 Short-term deposits 8,033 – 8,033 3,627 – 3,627 Restricted cash 2,367 – 2,367 1,827 – 1,827 Receivables 3,939 – 3,939 4,342 465 3,877 Due from related parties (current and noncurrent) 140 – 140 294 – 294 Deposits for LTIP(b) 345 – 345 131 – 131 Long-term cash and miscellaneous deposits(b) 308 – 308 313 – 313AFS financial assets (c) 1,938 – 1,938 3,515 – 3,515

P=34,708 P=69 P=34,639 P=25,574 P=519 P=25,055(a) Excludes cash on hand amounting to P=86.9 million and P=142.7 million as at December 31, 2014 and 2013, respectively.(b) Included under “Other noncurrent assets” account in the consolidated statement of financial position.(c) Excludes shares of stocks.

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As at December 31, 2014 the aging analysis of past due but not impaired financial assets is as follows:

Neither PastDue nor Past Due but not Impaired

Collectivelyand

IndividuallyImpaired <30 Days 30–60 Days 61–90 Days 91-120 Days >120 Days Total Total Impaired Total

(In Millions)Cash and cash equivalents(a) P=17,638 P=– P=– P=– P=– P=– P=– P=17,638 P=– P=17,638Short-term deposits 8,033 – – – – – – 8,033 – 8,033Restricted cash 2,367 – – – – – – 2,367 – 2,367Receivables: Notes receivable – – – – – – – – 150 150 Trade receivables 1,982 322 142 152 140 12 768 2,750 716 3,466 Advances to customers 373 – – – – – – 373 – 373 Accrued interests receivables 51 – – – – – – 51 – 51 Advances to other affiliates – – – – – 90 90 90 12 102 Advances to officers and employees 73 – – – – – – 73 – 73 Dividends receivable 41 – – – – – – 41 – 41 Others 547 3 – – 11 – 14 561 1 562Due from related parties 140 – – – – – – 140 – 140AFS(b) 1,938 – – – – – – 1,938 – 1,938Deposits for LTIP 345 – – – – – – 345 – 345Long-term cash and miscellaneous deposits(c) 308 – – – – – – 308 – 308

P=33,836 P=325 P=142 P=152 P=151 P=102 P=872 P=34,708 P=879 P=35,587*(a) Excluding cash on hand.(b) Excluding shares of stocks. (c) Included under “Other noncurrent assets” account in the consolidated statement of financial position.

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As at December 31, 2013 the aging analysis of past due but not impaired financial assets is as follows:

Neither PastDue nor Past Due but not Impaired Individually

Impaired <30 Days 30–60 Days 61–90 Days 91-120 Days >120 Days Total Total Impaired Total(In Millions)

Cash and cash equivalents(a) P=11,493 P=– P=– P=– P=– P=– P=– P=11,493 P=– P=11,493Short-term deposits 3,627 – – – – – – 3,627 – 3,627Restricted cash 1,827 – – – – – – 1,827 – 1,827Receivables: Notes receivable 853 – – – – – – 853 180 1,033 Trade receivables 1,406 261 163 98 97 88 707 2,113 667 2,780 Advances to customers 441 – – – – – – 441 – 441 Accrued interests receivables 279 – – – – – – 279 6 285 Advances to other affiliates – – – – – 90 90 90 12 102 Advances to officers and employees 80 – – – – – – 80 – 80 Dividends receivable 28 – – – – – – 28 – 28 Others 444 1 5 4 3 1 14 458 2 460Due from related parties 294 – – – – – – 294 – 294AFS(b) 3,515 – – – – – – 3,515 – 3,515Deposits for LTIP 131 – – – – – – 131 – 131Long-term cash and miscellaneous deposits(c) 313 – – – – – – 313 – 313Derivative assets(c) 32 – – – – – – 32 – 32

P=24,763 P=262 P=168 P=102 P=100 P=167 P=811 P=25,574 P=867 P=26,441*(a) Excluding cash on hand.(b) Excluding shares of stocks. (c) Included under “Other noncurrent assets” account in the consolidated statement of financial position.

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The Company also assesses each financial asset based on its credit quality.

The table below shows the credit quality per class of financial assets of the Company that areneither past due nor impaired.

2014

High GradeStandard

GradeSub-standard

Grade Total(In Millions)

Loans and receivables: Cash and cash equivalents(a) P=17,638 P=– P=– P=17,638 Short-term deposits 8,033 – – 8,033 Restricted cash 2,367 – – 2,367 Receivables: Trade receivables 1,538 388 56 1,982 Advances to customers 373 – – 373 Accrued interests receivables 51 – – 51 Advances to officers and employees 73 – – 73 Dividends receivable 41 – – 41 Others 547 – – 547 Deposit for LTIP(c) 345 – – 345 Due from related parties 140 – – 140 Miscellaneous deposits(c) – 308 – 308AFS financial assets (d) 1,938 – – 1,938

P=33,084 P=696 P=56 P=33,836(a) Excluding cash on hand.(b )Included under “Other current assets” account in the consolidated statement of financial position.(c) Included under “Other noncurrent assets” account in the consolidated statement of financial position.(d) Excluding shares of stocks.

2013

High GradeStandard

GradeSub-standard

Grade Total(In Millions)

Financial assets at FVPL - Derivative assets P=32 P=– P=– P=32Loans and receivables: Cash and cash equivalents(a) 11,493 – – 11,493 Short-term deposits 3,627 – – 3,627 Restricted cash 1,827 – – 1,827 Receivables: Notes receivable 589 264 – 853 Trade receivables 662 668 76 1,406 Advances to customers 441 – – 441 Accrued interests receivables 279 – – 279 Advances to officers and employees 80 – – 80 Dividends receivable 28 – – 28 Others 444 – – 444 Deposit for LTIP(c) 131 – – 131 Due from related parties 229 – – 229 Miscellaneous deposits(c) – 313 – 313AFS financial assets (d) 3,515 – – 3,515

P=23,377 P=1,245 P=76 P=24,698(a) Excluding cash on hand.(b )Included under “Other current assets” account in the consolidated statement of financial position.(c) Included under “Other noncurrent assets” account in the consolidated statement of financial position.(d) Excluding shares of stocks.

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Cash and cash equivalents and sinking fund are classified as high grade since these are placed withreputable local and international banks, which meet the standards set by the Company’s Board.

For the Company’s other financial assets, high-grade relate to those financial assets which areconsistently collected before the maturity date. In addition, these are financial assets fromcounterparties that also have corresponding collectibles from the Company for certain contractedservices. The first layer of security comes from the Company’s ability to offset amountsreceivable from those counterparties against payments due to them. Standard grade includefinancial assets that are collected on their due dates even without an effort from the Company tofollow them up. Sub-standard grade relates to financial assets that are collected on their due datesprovided that the Company made a persistent effort to collect them.

Liquidity RiskMPIC Group. Liquidity risk is the risk that the Company will encounter difficulty in meetingobligations associated with financial liabilities. The Company’s objective is to maintain a balancebetween continuity of funding and flexibility through the use of bank loans and facilities.

The Company monitors its cash position using a cash forecasting system. All expectedcollections, check disbursements and other cash payments are determined daily to arrive at theprojected cash position to cover its obligations and to ensure that obligations are met as they falldue. The Company monitors its cash flow position, particularly the collections from receivables,receipts of dividends and the funding requirements of operations, to ensure an adequate balance ofinflows and outflows. The Company also has online facilities with its depository banks whereinbank balances are monitored daily to determine the Company’s actual cash balances at any time.

The Company’s liquidity and funding management process include the following:

§ Managing the concentration and profile of debt maturities;§ Maintaining debt financing plans; and§ Monitoring liquidity ratios against internal and regulatory requirements.

Liquidity risk concentrations arise when a number of economic features would cause theCompany’s ability to meet contractual obligations to be similarly affected by changes ineconomic, political or other conditions. The Company has a total cash and cash equivalents andshort-term deposits, amounting to P=25,758.3 million and P=15,263.3 million as at December 31,2014 and 2013, respectively, that are allocated to meet the Company’s short-term liquidity needs.

The table below summarizes the maturity profile of the Company’s financial assets and liabilitiesas at December 31, 2014 and 2013 based on undiscounted contractual payments.

2014

On DemandWithin1 Year 1–2 Years 2–3 Years 3–4 Years

More than4 Years Total

(In Millions)

Financial AssetsCash and cash equivalents(a) P=3,174 P=14,464 P=– P=– P=– P=– P=17,638Short-term deposits – 8,033 – – – – 8,033Receivables 1,675 2,880 263 – – – 4,818Due from related parties – 140 – – – – 140Beacon Electric preferred shares (b) – – – – – 11,573 11,573AFS financial assets (c) – 323 310 – 542 1,490 2,665Cash and miscellaneous deposits(d) – – 653 – – – 653

4,849 25,840 1,226 – 542 13,063 45,520Financial LiabilitiesAccrued expenses(e) – 2,607 – – – – 2,607Accrued construction costs – 2,680 – – – – 2,680Trade payables(e) 546 2,741 – – – – 3,287Accounts payable – 1,026 – – – – 1,026

(Forward)

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2014



(In Millions)

Interest and other financing charges P=– P=721 P=– P=– P=– P=– P=721Dividends payable – 299 – – – – 299Retention payable – 260 – – – – 260Other current liabilities(e) – 277 – – – – 277Due to related parties – 7,338 – – – – 7,338Payable to CHI – 163 – – – – 163Customers’ guaranty deposits(f) – – – – – 804 804Concession fees payable – 1,501 1,266 1,155 1,172 13,485 18,579Long-term debts(g) – 7,214 7,096 6,155 10,147 52,990 83,602

546 26,827 8,362 7,310 11,319 67,279 121,643Liquidity gap P=4,303 (P=987) (P=7,136) (P=7,310) (P=10,777) (P=54,216) (P=75,523)

2013



(In Millions)

Financial AssetsCash and cash equivalents(a) P=2,413 P=9,080 P=– P=– P=– P=– P=11,493Short-term deposits – 3,627 – – – – 3,627Receivables 792 2,991 215 – 190 501 4,689Due from related parties – 240 11 11 11 221 494Beacon Electric preferred shares (b) – – – – – 11,573 11,573AFS financial assets (c) – 2,103 – 481 464 1,897 4,945Cash and miscellaneous deposits(d) – – – 444 – – 444

3,205 18,041 226 936 665 14,192 37,265Financial LiabilitiesAccrued expenses(e) – 2,189 – – – – 2,189Accrued construction costs – 4,655 – – – – 4,655Trade payables(e) 583 2,966 – – – – 3,549Accounts payable 45 902 – – – – 947Interest and other financing charges – 620 – – – – 620Dividends payable – 425 – – – – 425Retention payable – 218 – – – – 218Other current liabilities(e) 25 177 – – – – 202Due to related parties 93 – – – – – 93Payable to CHI – 163 – – – – 163Customers’ guaranty deposits(f) – – – – – 784 784Financial guarantee obligation(f) – 11 11 11 11 221 265Concession fees payable 7 1,214 1,119 1,155 1,050 11,889 16,434Long-term debts(g) 6 5,130 4,848 4,084 9,861 38,277 62,206

759 18,670 5,978 5,250 10,922 51,171 92,750Liquidity gap P=2,446 (P=629) (P=5,752) (P=4,314) (P=10,257) (P=36,979) (P=55,485) (a) Excluding cash on hand.(b) Included in the “Investments and advances” account in the consolidated statement of financial position.(c) Excluding shares of stocks but including interest to be received on investments in bonds.(d)Included under “Other Current assets” and “Other Noncurrent assets” accounts in the consolidated statement of financial position.(e)Excluding statutory payables.(f)Included under “Deferred credits and other long-term liabilities” account in the consolidated statement of financial position.(g)Including contractual interest payments.

Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market interest rates. As at December 31, 2014 and 2013, theCompany is subject to fair value and cash flow interest rate risks. Fixed rate financial instrumentsmeasured at fair value are subject to fair value interest rate risk while floating rate financialinstruments are subject to cash flow interest rate risk.

The Company’s exposure to interest rate risk relates primarily to long-term debt obligations thatbear floating interest rate. The Company generally mitigates risk of changes in market interestrates by constantly monitoring fluctuations of interest rates and maintaining a mix of fixed andfloating interest-bearing loans. Specific interest rate risk policies are as follows:

MPIC. In 2013, MPIC entered into a loan agreement to refinance its outstanding loan. The newloan bears a fixed rate for the first five years and is subject to an interest rate repricing on the fifthyear. Should the interest rate on the repricing date be significantly higher than the current fixedrate, the Company has an option to prepay or refinance the loan starting on the fifth year at everyinterest payment date.

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Tollway segment. The debt of the entities in this group are significantly fixed-rate loans,effectively locking in the interest rate in order to reduce exposure to interest rate fluctuations.With 100.0% of the financial instruments in local currency loans, around 21.0% of which is infloating interest rate, exposure is now limited to changes in six-month PDST-F.

Water segment. Maynilad’s exposure to interest rate risk relates primarily to its interest-bearingloans. Maynilad maintains a mix of floating and fixed rate loans, currently at a ratio of 3%floating and 97% fixed. The floating rate interest-bearing loans will increase to a higher portionover time because of future drawdowns in connection to the MWMP loan agreement.

MPIC Group. The following tables set out the carrying amount, classified by maturity, of theCompany’s interest-bearing financial assets and financial liabilities that are subject to interest raterisk. Interest on financial instruments classified as floating rate is repriced either semi-annually orquarterly on each interest payment date. Interest on financial instruments classified as fixed rate isfixed until the maturity of the instrument with an exception for the certain borrowings which aresubject to repricing as discussed above. The other financial instruments of the Company that arenot included in the table below are non-interest bearing and are therefore not subject to interestrate risk.

US Dollar-Denominated Financial Assets and Financial Liabilities

December 31, 2014

Interest Rate On DemandWithin1 Year 2–3 Years 4–5 Years


(In Millions)Cash and cash equivalents $1 $4 $– $– $– $5Restricted Cash 5 – – – 5

$6 $4 $– $– $– $10

Floating rate loans: MWMP Worldbank Loan Floating rate

benchmark+1.25% spread $– $– $– $– $15 $15

International Finance Corporation-Subordinated

LIBOR+IPA (1%-2% of EBITDA) – – – 1 – 1

$– $– $– $1 $15 $16

December 31, 2013



(In Millions)Cash and cash equivalents $2 $– $– $– $– $2

Floating rate loans: MWMP Worldbank Loan Floating rate

benchmark+1.25% spread $– $– $– $– $2 $2

International Finance Corporation- Subordinated

LIBOR+IPA (1%-2% of EBITDA) – – – 1 – 1

$– $– $– $1 $2 $3

Thai Baht-Denominated Financial Assets and Financial Liabilities

December 31, 2014



(In Millions)Cash and cash equivalents THB 23 THB– THB– THB– THB– THB 23

Floating rate loans - Thanachart Term Loan Minimum Lending

Rate less 1.5% – THB 106 THB 382 THB 667 THB 800 THB 1,955

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Peso-Denominated Financial Assets and Financial LiabilitiesDecember 31, 2014



(In Millions)

Cash and cash equivalents 0.25%-6.0% P=3,104 P=14,302 P=– P=– P=– P=17,406Investment in bonds and

corporate notes 2.13%-6% – 256 206 441 1,035 1,938P=3,104 P=14,558 P=206 P=441 P=1,035 P=19,344

Floating rate loans: PNB Loan PDST-F + 0.5%

Margin P=– P=893 P=– P=– P=– P=893 BDO Bank Loan 2% p.a +PDST-F

rate ;prevailingmarket interestrates – 25 46 56 21 148

P=– P=918 P=46 P=56 P=21 P=1,041

December 31, 2013



(In Millions)

Cash and cash equivalents 0.05%-4.60% P=2,326 P=9,068 P=– P=– P=– P=11,394Notes receivable 10%-12% – 265 133 100 355 853Investment in bonds and

corporate notes 2.13%-6% – – 350 394 778 1,522P=2,326 P=9,333 P=483 P=494 P=1,133 P=13,769

Floating rate loans: PNB Loan PDST-F + 0.5%

Margin P=– P=892 P=893 P=– P=– P=1,785 Peso-denominated Bank Loan

Floating ratebenchmark+4.00% (9.00%, June3, 2009 to June 3,2016) – 17 12 – – 29

BDO Bank Loan 2% p.a +PDST-F rate;prevailingmarket interestrates – 79 16 33 34 162

P=– P=988 P=921 P=33 P=34 P=1,976

The following table demonstrates the sensitivity of income before income tax arising fromchanges in interest cash flows of floating rate loans and fair values of AFS financial assets,respectively, due to changes in Philippine Peso and US Dollar interest rates with all othervariables held constant. The estimates in the movement of interest rates were based on themanagement’s annual financial forecast. There is no other impact on equity other than thosealready affecting the consolidated statement of comprehensive income.

Increase/Decreasein Basis Points

Effect on IncomeBefore Income Tax

(In Millions)

2014 +50 (22)–50 22

2013 +50 (10)–50 10

There were no outstanding derivative transactions as at December 31, 2014 and 2013.

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Foreign Currency RiskForeign currency risk is the risk that the fair value or future cash flows of a financial instrumentwill fluctuate because of changes in foreign exchange rates. As at December 31, 2014 and 2013,the Company’s foreign currency risk results primarily from movements of the Philippine Pesoagainst US Dollar, Euro and Japanese Yen.

In general, the Company’s exposure to foreign currency risk is minimal as significantly all of thetransactions are denominated in Philippine Peso. Exposure to foreign currency risk primarilyresults from the following foreign currency borrowings:

Tollways segment. The segment’s exposure to foreign exchange currency risk relates mainly toCIC’s dollar denominated Series 2010-1 Notes amounting to $20 million (P=792 million) as atDecember 31, 2014. The segment’s practice is to refinance outstanding U.S. dollar loans withpeso loans to reduce the exposure to foreign currency risk.

Payment for AIF’s loan which is denominated in Thai Baht is to be sourced from the dividends,also denominated in Thai Baht, to be declared by DMT (see Notes 11 and 19).

Water Segment. The servicing of foreign currency-denominated loans of MWSS is among therequirements of Maynilad’s Concession Agreement. Majority of the revenues are generated inPhilippine Peso. However, there is a mechanism in place as part of the Concession Agreementwherein Maynilad (or the end consumers) can recover foreign currency fluctuations through theFCDA that is approved by the Regulatory Office.

Hospital Segment. Of the entities in the healthcare segment, AHI has foreign currency risk arisingfrom its cash and cash equivalents, international insurance included under receivables and USdollar denominated loan exposure. AHI also has transactional currency exposures arising frompurchases of medical equipment or supplies in currencies other than the Philippine Peso. AHI isunable to take on any derivative transaction to hedge these exposures since its loan covenants donot allow it. AHI relies on its ability to generate dollar-based revenue from its foreign patients tomitigate this risk.

MPIC Group. The Company’s foreign currency-denominated financial assets and liabilities as atDecember 31 are:

2014 2013US Dollar Thai Baht JPY US Dollar Euro JPY

(In Millions)Assets: Cash and cash equivalents $5 THB 23 ¥– $2 €– ¥– Restricted cash 5 – – – – – Receivables – – – 1 – –

10 23 – 3 – –Liabilities: Service concession fees

payable (95) – (854) (92) (1) (1,472) Long-term debts (33) (1,955) – (22) – –

(128) (1,955) (854) (114) (1) (1,472)Net foreign currency-

denominated liabilities ($118) (THB 1,932) (¥854) ($111) (€1) (¥1,472)

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The following table demonstrates sensitivity of cash flows due to changes in foreign exchangerates with all variables held constant. The estimates in the movement of the foreign exchangerates were based on the management’s annual financial forecast.

Increase/Decreasein Foreign Exchange Rates

ForeignExchange Rate


(In Millions)2014US Dollar +5% 44.72 (P=273)THB +5% 1.36 (127)JPY +5% 0.37 (16)US Dollar -5% 44.72 273THB -5% 1.36 127JPY -5% 0.37 16

Increase/Decreasein Foreign Exchange Rates

ForeignExchange Rate


(In Millions)2013US Dollar +5% 44.40 (P=246)Euro +5% 60.82 (3)JPY +5% 0.42 (31)US Dollar -5% 44.40 246Euro -5% 60.82 3JPY -5% 0.42 31

Capital ManagementCapital includes preferred shares and equity attributable to the equity holders of the ParentCompany. The primary objective of the Company’s capital management policies is to ensure thatthe Company maintains a strong statement of financial position and healthy capital ratios in orderto support its business and maximize shareholder value. The Company ensures that it is compliantwith all debt covenants not only at the consolidated level but also at the level of Parent Companyand each of its subsidiaries.

In general, the Company closely monitors its debt covenants and maintains a capital expenditureprogram and dividend declaration policy that keeps the compliance of these covenants intoconsideration.

The following debt covenants are being complied with by the Company as part of maintaining astrong credit rating with its creditors:

MPIC. MPIC’s loan agreement provides that MPIC shall ensure during the term of the loan thatits debt-to-equity ratio does not exceed 70:30, and its debt service coverage ratio (DSCR) is at aminimum of 1.3x. To be able to declare dividends, MPIC shall achieve a DSCR of 1.5x. As atDecember 31, 2014 and 2013, MPIC is in compliance with the required financial ratios and otherloan covenants.

Tollways Segment. Under the loan agreements, MNTC is required a Maintenance Debt ServiceCoverage Ratio (DSCR) of not less than 1.15 times and maintain a debt-to-equity ratio notexceeding 3.0 times for the first three years after the date of the loan agreement and not exceeding2.5 times after such period. The loan agreements provide that MNTC may incur new loans ordeclare dividends as long as the Pro-forma DSCR for the relevant year is not less than 1.30 times.

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MNTC also ensures that its debt to equity ratio is in line with the requirements of the BOI. BOIrequires the Company to comply with a 75:25 debt to equity ratio as proof of capital build-up.MNTC is in compliance with the required financial ratios and other loan covenants.

In relation to CIC’s loan agreement relating to the Series 2010-1 Dollar-denominated Notes, CICshall not pay any dividends or make any other distribution in respect of its share capital followingthese events: (1) early amortization, cash trapping and repurchase events as indicated in the termsof the Notes; (2) failure to fully fund the transaction account; (3) while the construction ofCAVITEX is not yet complete; (4) while the Notes have not commenced to amortize. CIC has notpaid any dividends in 2014. Other than restrictions as to dividend distribution, CIC is not subjectto other externally imposed capital requirements.

Under the RCBC/BDO loan, CIC is required to maintain a DSCR of at least 1.05 times at all timesuntil full payment of the long-term debt and at least 1.20 times for declaration of dividends andother distributions. CIC shall also maintain a maximum debt to equity ratio of 3.0 times at alltimes until full payment of the long-term debt. CIC is in compliance with the required financialratios and other loan covenants.

Water Segment. Maynilad closely manages its capital structure vis-a-vis a certain target gearingratio, which is net debt divided by total capital plus net debt. Maynilad’s target gearing ratio is75%. This target is to be maintained over the next five years by managing the level of borrowingsand dividend payments to shareholders.

For purposes of computing its net debt, Maynilad includes the outstanding balance of its long-terminterest-bearing loans, service concession obligation payable to MWSS and trade and otherpayables, less the outstanding cash and cash equivalents, short-term investments, deposits andsinking fund. To compute its capital, Maynilad uses net equity. Maynilad closely monitors itsdebt covenants and maintains a capital expenditure program and dividend declaration policy thatkeeps the compliance of these covenants into consideration. In 2014, Maynilad is in compliancewith the required financial ratios and other loan covenants.

MPIC Group. The Company manages its capital structure and adjust to it in light of changes ineconomic conditions. To maintain or adjust the capital structure, the Company may obtainadditional advances from shareholders, return capital to shareholders, issue new shares or issuenew debt or redemption of existing debt. No changes were made in the objectives, policies orprocesses during the years ended December 31, 2014 and 2013. The Company monitors capitalon the basis of debt-to-equity ratio. Debt-to-equity ratio is calculated as long-term debts overequity. The Company’s goal is to maintain a sustainable debt-to-equity ratio. The debt-to-equityratio as at December 31, 2014 and 2013 are:


Long-term debts P=61,067 P=51,048Equity 129,572 113,280Debt-to-equity ratio 47% 45%

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36. Financial Instruments – Categories and Derivatives

Categories of Financial InstrumentsThe categories of the Company’s financial assets and financial liabilities as at December 31, 2014and 2013 are:

2014

Financial AssetsFinancialLiabilities

FVPLLoans and

Receivables

AFSFinancial

Assets

OtherFinancial

Liabilities Total(In Millions)

ASSETSCash and cash equivalents P=– P=17,638 P=– P=– P=17,638Short-term deposits – 2,994 – – 2,994Restricted cash – 2,367 – – 2,367Receivables - net – 3,939 – – 3,939Due from related parties – 140 – – 140Derivative assets – – – – –AFS financial assets:

Investment in bonds – – 1,938 – 1,938Investment in UITF – – 5,039 – 5,039Investment in equity – – 526 – 526

Equity method investees (a) – 756 11,573 – 12,329Other noncurrent assets – 653 – – 653

P=– P=28,487 P=19,076 P=– P=47,563

LIABILITIESAccounts payable and other

current liabilities (b) P=– P=– P=– P=11,320 P=11,320Due to related parties – – – 7,279 7,279Service concession fees payable – – – 7,771 7,771Long-term debt – – – 61,067 61,067Deferred credits and other long-term

liabilities – – – 1,406 1,406P=– P=– P=– P=88,844 P=88,844

(a) Includes advances to Beacon Electric and investment in preferred shares of Beacon Electric classified as AFS financial assets. (b)Excludes statutory payables

2013


FVPLLoans and

Receivables

AFSFinancial

Assets

OtherFinancial

Liabilities Total(In Thousands)

ASSETSCash and cash equivalents P=– P=11,493 P=– P=– P=11,493Short-term deposits – 3,627 – – 3,627Restricted cash – 1,827 – – 1,827Receivables - net – 4,342 – – 4,342Due from related parties – 294 – – 294Derivative assets 32 – – – 32AFS financial assets:

Investment in bonds – – 1,520 – 1,520Investment in UITF – – 1,995 – 1,995Investment in equity – – 1,297 – 1,297

Equity method investees (a) – 756 11,573 – 12,329Other noncurrent assets – 163 – – 163

P=32 P=22,502 P=16,385 P=– P=38,919

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2013


FVPLLoans and

Receivables

AFSFinancial

Assets

OtherFinancial

Liabilities Total(In Thousands)

LIABILITIESAccounts payable and other

current liabilities (b) P=– P=– P=– P=13,066 P=13,066Due to related parties – – – 93 93Service concession fees payable – – – 8,512 8,512Long-term debt – – – 51,048 51,048Deferred credits and other long-term

liabilities – – – 1,321 1,321P=– P=– P=– P=74,040 P=74,040

(a) Includes advances to Beacon Electric and investment in preferred shares of Beacon Electric classified as AFS financial assets. (b)Excludes statutory payables

Derivative Financial InstrumentsThe Company has no freestanding derivatives and no derivatives accounted for as cash flowhedges as at December 31, 2014 and 2013. However, the Company has outstanding andfreestanding derivative financial instruments as at December 31, 2013 comprising of embeddedconversion option presented under noncurrent assets amounting to P=32.0 million.

Embedded conversion option. As discussed in Note 8, the Company bifurcated the embeddedconversion option in its investment in Landco’s preferred shares. The conversion option gives theCompany the right to convert the preferred shares into common shares of Landco at a conversionprice of P=156.27, subject to the occurrence of certain contingent events. At initial recognition, theCompany assigned a value amounting to P=31.7 million to the conversion option. This amount isthe residual after deducting from the value of the hybrid instrument the fair value of the hostinstrument (preferred shares without any embedded derivative) calculated as the present value ofall future cash flows from the preferred shares discounted using credit adjusted interest ratesranging from 8.5% to 11.8%.

The embedded conversion option has been carried at cost in the consolidated statement offinancial position since the underlying common shares of Landco are unquoted and there is noreliable basis to determine subsequent fair value. As discussed in Note 33, the preferred shareshave been converted to common shares in 2014.

Fair Value Changes on Derivatives. The net changes in the fair values of all derivativeinstruments for the years ended December 31, 2014 and 2013 are:


Balance at beginning of year P=32 P=257Consolidation adjustment (see Note 4) – (225)Conversion of preferred shares (see Notes 8 and 33) (32) –Balance at end of year P=– P=32

In 2012, P=44.8 million and P=3.2 million are included under “Others” account under Otherexpenses of the consolidated statement of comprehensive income.

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37. Fair Value Measurement

The fair value of the assets and liabilities is determined as the price that would be received to sellan asset or paid to transfer a liability in an orderly transaction between participants at themeasurement date. The following tables summarize the carrying amounts and fair values of theassets and liabilities, analyzed among those whose fair value is based on:

· Level 1 - Quoted market prices in active markets for identical assets or liabilities· Level 2 - Those involving inputs other than quoted prices included in Level 1 that are

observable for the asset or liability, either directly (as prices) or indirectly (derived fromprices); and

· Level 3 - Those with inputs for the asset or liability that are not based on observable marketdata (unobservable input).

As discussed in Notes 10 and 36, the unlisted shares of stock (except for NEPSCC shares) and theembedded conversion option are carried at cost in the consolidated statement of financial positionsince there are no reliable bases to determine subsequent fair value. As at December 31, 2014 and2013, there were no financial instruments carried at fair value that were classified under Level 3.

2014Carrying

Value Level 1 Level 2 Level 3Total Fair

Value(In Millions)

Assets measured at fair valueAFS Financial Assets (see Note 10):

Shares of stock P=526 P=15 P=511 P=– P=526Unit Investment Trust Fund 5,039 – 5,039 – 5,039Investment in bonds and treasury notes 1,938 1,938 – – 1,938

P=7,503 P=1,953 P=5,550 P=– P=7,503Assets for which fair values are disclosedLoans and Receivables:

Notes receivables (see Note 8) P=– P=– P=– P=– P=–Miscellaneous deposits (see Note 15) 206 – – 160 160

P=206 P=– P=– P=160 P=160

Liabilities for which fair values are disclosedOther financial liabilities:

Refundable deposits P=8 P=– P=– P=2 P=2Service concession fees payable

(current and noncurrent) 7,771 – – 9,968 9,968Long-term debts (current and noncurrent) 61,067 – – 66,183 66,183Customer guaranty deposit 804 – – 1,234 1,234

P=69,650 P=– P=– P=77,387 P=77,387

2013Carrying


Value (In Millions)

Assets measured at fair valueAFS Financial Assets (see Note 10):

Shares of stock P=474 P=15 P=459 P=– P=474Unit Investment Trust Fund 1,995 – 1,995 – 1,995Investment in bonds and treasury notes 1,552 1,552 – – 1,552Investment in PMHI (see Note 11) 70 427 – – 427

P=4,091 P=1,994 P=2,454 P=– P=4,448

Assets for which fair values are disclosedLoans and Receivables:

Notes receivables (see Note 8) P=853 P=– P=– P=1,167 P=1,167Miscellaneous deposits (see Note 15) 155 – – 109 109

P=1,008 P=– P=– P=1,276 P=1,276

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2013Carrying


Value (In Millions)

Liabilities for which fair values are disclosedOther financial liabilities:

Refundable deposits P=8 P=– P=– P=1 P=1Service concession fees payable

(current and noncurrent) 8,512 – – 16,296 16,296Long-term debts (current and noncurrent) 51,048 – – 56,987 56,987Customer guaranty deposit 783 – – 1,149 1,149Financial guarantee obligation 65 – – 150 150

P=60,416 P=– P=– P=74,583 P=74,583

During the year ended December 31, 2014 and 2013, there were no transfers between Level 1 andLevel 2 fair value measurements, and no transfers into and out of Level 3 fair value measurement.

The following methods and assumptions were used to measure the fair value of each class ofassets and liabilites for which it is practicable to estimate such value:

Levels 1 and 2 Fair Value Hierarchy

Cash and Cash Equivalents. Due to the short-term nature of transactions, the fair value of cashand cash equivalents approximate the carrying amounts at the end of the reporting period.

Restricted Cash, Cash Deposits, and Accounts Payable and Other Current Liabilities. Carryingvalues approximate the fair values at the reporting date due to the short-term nature of thetransactions.

Investments in UITF. A UITF uses the mark-to-market method in valuing the fund’s securities. Itis a valuation method which calculates the Net Asset Value (NAV) based on the estimated fairmarket value of the assets of the fund based on prices supplied by independent sources.

Due from Related Parties. In 2014 and 2013, fair value of due from related parties approximatestheir carrying amounts as these are expected to be settled within a year from the consolidatedstatement of financial position date.

Refundable Occupancy Deposits. The fair value of the refundable occupancy deposits isdetermined by discounting the deposit using the prevailing market rate of interest. The effectiveannual rate used in 2014 and 2013 is 7.01% and 7.01%, respectively.

Service Concession Fees Payable and Customers’ Guaranty Deposits. Estimated fair value isbased on the discounted value of future cash flows using the applicable rates for similar types offinancial instruments.

Financial Guarantee Obligation. Estimated fair value is based on the discounted value of futurecash flows using the prevailing peso interest rates that are specific to the tenor of the instrumentscash flows ranging from 1.0% to 6.0% in 2013.

Notes Receivable, Miscellaneous Deposits and Other Financial Assets. Estimated fair value isbased on the present value of future cash flows discounted using the prevailing PDST-F rates thatare specific to the tenor of the instruments’ cash flows at the end of each reporting period withcredit spread adjustment.

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Long-term Debt. For both fixed rate and floating rate (repriceable every six months) US dollar-denominated debts and Philippine Peso-denominated fixed rate corporate notes, estimated fairvalue is based on the discounted value of future cash flows using the prevailing credit adjusted USrisk-free rates and Philippine risk free rates that are adjusted for credit spread ranging from 2.1%to 6.0% and 1.2% to 6.1% in 2014 and 2013, respectively.

38. Supplemental Cash Flow Information

The following table shows the Company’s significant non-cash investing and financing activitiesand corresponding transaction amounts for the years ended December 31, 2014, 2013 and 2012:

2014 2013 2012(In Millions)

Non-cash investing and financing activities:Payment of amount due to Beacon Electric by way

of offsetting against dividend receivable P=4,450 P=– P=–Unpaid AFCSI subscription 203 – –Acquisition of CIC through subscription of

convertible notes (see Note 4) – 6,772 –Additions to service concession assets and

concession fees payable pertains to drawnportion of MWSS loans(see Notes 13 and 18) – 1,143 1,075

Unpaid consideration related to the acquisition ofPHI (see Note 4) – – 317

For the year-ended December 31, 2014, the Company had a non-cash investing activity which wasnot reflected in the consolidated statement of cash flows. As discussed in Note 11, MPIC acquired56.35 million shares of Meralco at an aggregate consideration of P=13.24 billion. Of the amountdue to Beacon Electric, a total of P=4.45 billion was paid through offsetting with MPIC’s share ofdividends on common shares declared by Beacon Electric on June 24, 2014 andNovember 17, 2014.

39. Events after the Reporting Period

Aside from those disclosed in Note 5 (Maynilad’s arbitration), Note 22 (MPIC’s dividenddeclaration on February 26, 2015) and Note 33 (Notice of Award for the operations andmaintenance of the SCTEX), events occurring after the reporting period include:

Investment in CII Bridges and Roads Investment Joint Stock Company (CII B&R).On January 14, 2015, MPTC entered into a Share Purchase Agreement with Ho Chi Minh CityInfrastructure Investment Joint Stock Company (CII) covering the purchase by MPTC from CII of30 million shares of CII B&R at VND22,100 per share; and Bond Subscription Agreement withCII covering the issuance by CII of and the subscription by MPTC to 1,020,000 bonds each with aface value of VND1.0 million which are convertible to 56,666,667 shares of CII B&R that willresult in MPTC holding a minority equity interest equal to about 45% of the outstanding capital ofCII B&R (on a fully diluted basis) through a combination of purchase of CII B&R secondaryshares from CII, and subscription to VND-denominated bonds to be issued by CII, which areexchangeable into secondary shares in CII B&R. Total acquisition cost for the shares and bonds isVND1,955.0 billion (P=4.0 billion). Closing of the transaction is expected in March 2015.

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CII B&R (formerly Lu Gia Mechanical Electric Joint Stock Company) is a joint stock companyestablished and existing under the laws of Vietnam and listed in Ho Chi Minh City StockExchange. The Company manufactures and trades lighting equipment, metal pillars andmechanical parts for public lighting, traffic and decoration purposes.

Cebu-Cordova Bridge Project. In January 2015, MPTDC procured the original proponent statusfor the proposed Cebu-Cordova Bridge Project from Cebu City and the Municipality of Cordova.Negotiations with both Cebu City and the Municipality of Cordova are on-going and once done, aSwiss Challenge will have to be conducted before awarding of the contract.

This project spanning 8.3 kilometers will link the island of Mactan to mainland Cebu through theMunicipality of Cordova. The total construction cost of the Cebu-Cordova Bridge Project isestimated at P=17.0 billion and completion date by 2020 assuming that awards and approvals aresecured by the first half of 2015.

MPTDC is proposing to form a joint venture vehicle with the City of Cebu and the Municipality ofCordova for the design, construction, implementation, operation, and maintenance of the tollbridge. The proposed joint venture will operate under a 35-year concession period, inclusive ofthe preparatory work, design, and construction of the project.

MPIC Share Placement. MPIC, together with its principal shareholder, MPHI entered into aplacement agreement with UBS AG, Hong Kong Branch on February 9, 2015, in respect of theoffer and sale (the “Offer”) by MPHI of 1,812,000,000 common shares of MPIC at the Offer Priceof P=4.90 per share. Closing of the Offer is conditioned, among others, on MPHI subscribing (oragreeing to subscribe) to the same number of shares at the offer price or a total of approximatelyP=8.9 billion. The proceeds from the placement and subscription transaction shall be used byMPIC primarily for the reduction of relatively expensive debt at MPIC’s affiliate, Beacon Electric,investment in previously announced projects and general corporate purposes.

Consequently, MPHI’s economic interest in MPIC is reduced from 55.8% to 52.1%.

Meralco and Beacon Electric’s Dividend Declaration. On February 23, 2015, the BOD ofMeralco approved the declaration of the final cash dividend of P=8.49 per common share in favorof the common stockholders of record as at March 23, 2015 with payment date of April 15, 2015.The final cash dividends comprises of regular and special dividend of P=3.66 and P=4.83 percommon share, respectively.

On February 26, 2015, the BOD of Beacon Electric declared total dividends of P=4.3 billion infavor of the common shareholders of record as at February 26, 2015 with payment date ofFebruary 27, 2015. MPIC’s share of the dividends declared by Beacon Electric amounting toP=2.2 billion is earmarked for offsetting against MPIC’s payable to Beacon Electric for theacquisition of the Meralco shares as disclosed in Note 11.

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40. Future Changes in Accounting Policies

The Company has not applied the following PFRS, Philippine Interpretations and amendments toexisting standards which are not yet effective as at December 31, 2014. Except for additionaldisclosure requirements, adoption of the following standards are not expected to have any materialimpact on the Company’s financial position or performance:

§ PFRS 9, Financial Instruments – Classification and Measurement (2010 version) — PFRS 9(2010 version) reflects the first phase on the replacement of PAS 39 and applies to theclassification and measurement of financial assets and liabilities as defined in PAS 39,Financial Instruments: Recognition and Measurement. PFRS 9 requires all financial assets tobe measured at fair value at initial recognition. A debt financial asset may, if the fair valueoption (FVO) is not invoked, be subsequently measured at amortized cost if it is held within abusiness model that has the objective to hold the assets to collect the contractual cash flowsand its contractual terms give rise, on specified dates, to cash flows that are solely payments ofprincipal and interest on the principal outstanding. All other debt instruments aresubsequently measured at fair value through profit or loss. All equity financial assets aremeasured at fair value either through other comprehensive income (OCI) or profit or loss.Equity financial assets held for trading must be measured at fair value through profit or loss.For FVO liabilities, the amount of change in the fair value of a liability that is attributable tochanges in credit risk must be presented in OCI. The remainder of the change in fair value ispresented in profit or loss, unless presentation of the fair value change in respect of theliability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss.All other PAS 39 classification and measurement requirements for financial liabilities havebeen carried forward into PFRS 9, including the embedded derivative separation rules and thecriteria for using the FVO. The adoption of the first phase of PFRS 9 will have an effect onthe classification and measurement of the Group’s financial assets, but will potentially have noimpact on the classification and measurement of financial liabilities.

PFRS 9 (2010 version) is effective for annual periods beginning on or after January 1, 2015.This mandatory adoption date was moved to January 1, 2018 when the final version ofPFRS 9 was adopted by the Philippine Financial Reporting Standards Council (FRSC). Suchadoption, however, is still for approval by the Board of Accountancy (BOA).

§ Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate — Thisinterpretation covers accounting for revenue and associated expenses by entities thatundertake the construction of real estate directly or through subcontractors. The SEC and theFRSC have deferred the effectivity of this interpretation until the final Revenue standard isissued by the IASB and an evaluation of the requirements of the final Revenue standardagainst the practices of the Philippine real estate industry is completed. Adoption of theinterpretation when it becomes effective will not have any impact on the financial statementsof the Company.

The following new standards and amendments issued by the IASB were already adopted by theFRSC but are still for approval by BOA:

Effective January 1, 2015

§ PAS 19, Employee Benefits – Defined Benefit Plans: Employee Contributions (Amendments)— PAS 19 requires an entity to consider contributions from employees or third parties whenaccounting for defined benefit plans. Where the contributions are linked to service, theyshould be attributed to periods of service as a negative benefit. These amendments clarify

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that, if the amount of the contributions is independent of the number of years of service, anentity is permitted to recognize such contributions as a reduction in the service cost in theperiod in which the service is rendered, instead of allocating the contributions to the periods ofservice. This amendment is effective for annual periods beginning on or after January 1,2015. It is not expected that this amendment would be relevant to the Company, since none ofthe entities within the Company has defined benefit plans with contributions from employeesor third parties.

§ Annual Improvements to PFRSs (2010-2012 cycle). The Annual Improvements to PFRSs(2010-2012 cycle) are effective for annual periods beginning on or after January 1, 2015 andare not expected to have a material impact on the Company. They include:

o PFRS 2, Share-based Payment – Definition of Vesting Condition — This improvement isapplied prospectively and clarifies various issues relating to the definitions of performanceand service conditions which are vesting conditions, including: a performance conditionmust contain a service condition; a performance target must be met while the counterpartyis rendering service; a performance target may relate to the operations or activities of anentity, or to those of another entity in the same group; a performance condition may be amarket or non-market condition; if the counterparty, regardless of the reason, ceases toprovide service during the vesting period, the service condition is not satisfied.

o PFRS 3, Business Combinations – Accounting for Contingent Consideration in a BusinessCombination — The amendment is applied prospectively for business combinations forwhich the acquisition date is on or after July 1, 2014. It clarifies that a contingentconsideration that is not classified as equity is subsequently measured at fair value throughprofit or loss whether or not it falls within the scope of PAS 39, Financial Instruments:Recognition and Measurement (or PFRS 9, Financial Instruments, if early adopted). TheCompany shall consider this amendment for future business combinations.

o PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation ofthe Total of the Reportable Segments' Assets to the Entity's Assets —The amendments areapplied retrospectively and clarify that: an entity must disclose the judgments made bymanagement in applying the aggregation criteria in the standard, including a briefdescription of operating segments that have been aggregated and the economiccharacteristics (e.g., sales and gross margins) used to assess whether the segments are'similar'; and the reconciliation of segment assets to total assets is only required to bedisclosed if the reconciliation is reported to the chief operating decision maker, similar tothe required disclosure for segment liabilities.

o PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets – RevaluationMethod – Proportionate Restatement of Accumulated Depreciation and Amortization —The amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that theasset may be revalued by reference to the observable data on either the gross or the netcarrying amount. In addition, the accumulated depreciation or amortization is thedifference between the gross and carrying amounts of the asset.

o PAS 24, Related Party Disclosures – Key Management Personnel — The amendment isapplied retrospectively and clarifies that a management entity, which is an entity thatprovides key management personnel services, is a related party subject to the related partydisclosures. In addition, an entity that uses a management entity is required to disclose theexpenses incurred for management services.

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o PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements — Theamendment is applied prospectively and clarifies the following regarding the scopeexceptions within PFRS 3: joint arrangements, not just joint ventures, are outside thescope of PFRS 3; and this scope exception applies only to the accounting in the financialstatements of the joint arrangement itself.

o PFRS 13, Fair Value Measurement - Portfolio Exception — The amendment is appliedprospectively and clarifies that the portfolio exception in PFRS 13 can be applied not onlyto financial assets and financial liabilities, but also to other contracts within the scope ofPAS 39 (or PFRS 9, as applicable).

o PAS 40, Investment Property — The amendment is applied prospectively and clarifies thatPFRS 3, and not the description of ancillary services in PAS 40, is used to determine if thetransaction is the purchase of an asset or business combination. The description ofancillary services in PAS 40 only differentiates between investment property and owner-occupied property (i.e., property, plant and equipment).


§ PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification ofAcceptable Methods of Depreciation and Amortization (Amendments) — The amendmentsclarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of economicbenefits that are generated from operating a business (of which the asset is part) rather than theeconomic benefits that are consumed through use of the asset. As a result, a revenue-basedmethod cannot be used to depreciate property, plant and equipment and may only be used invery limited circumstances to amortize intangible assets. The amendments are effectiveprospectively for annual periods beginning on or after January 1, 2016, with early adoptionpermitted. These amendments are not expected to have any impact to the Company given thatthe Company has not used a revenue-based method to depreciate its non-current assets.

§ PAS 16, Property, Plant and Equipment and PAS 41, Agriculture – Bearer Plants(Amendments) — The amendments change the accounting requirements for biological assetsthat meet the definition of bearer plants. Under the amendments, biological assets that meetthe definition of bearer plants will no longer be within the scope of PAS 41. Instead, PAS 16will apply. After initial recognition, bearer plants will be measured under PAS 16 ataccumulated cost (before maturity) and using either the cost model or revaluation model (aftermaturity). The amendments also require that produce that grows on bearer plants will remainin the scope of PAS 41 measured at fair value less costs to sell. For government grants relatedto bearer plants, PAS 20, Accounting for Government Grants and Disclosure of GovernmentAssistance, will apply. The amendments are retrospectively effective for annual periodsbeginning on or after January 1, 2016, with early adoption permitted. These amendments arenot expected to have any impact to the Company as the Company does not have any bearerplants.

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§ PAS 27, Separate Financial Statements – Equity Method in Separate Financial Statements(Amendments) — The amendments will allow entities to use the equity method to account forinvestments in subsidiaries, joint ventures and associates in their separate financial statements.Entities already applying PFRS and electing to change to the equity method in its separatefinancial statements will have to apply that change retrospectively. For first-time adopters ofPFRS electing to use the equity method in its separate financial statements, they will berequired to apply this method from the date of transition to PFRS. The amendments areeffective for annual periods beginning on or after January 1, 2016, with early adoptionpermitted. These amendments will not have any impact on the Company’s consolidatedfinancial statements.

§ PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and JointVentures – Sale or Contribution of Assets between an Investor and its Associate or JointVenture — These amendments address an acknowledged inconsistency between therequirements in PFRS 10 and those in PAS 28 (2011) in dealing with the sale or contributionof assets between an investor and its associate or joint venture. The amendments require thata full gain or loss is recognized when a transaction involves a business (whether it is housed ina subsidiary or not). A partial gain or loss is recognized when a transaction involves assetsthat do not constitute a business, even if these assets are housed in a subsidiary. Theseamendments are effective from annual periods beginning on or after January 1, 2016.

§ PFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations(Amendments) — The amendments to PFRS 11 require that a joint operator accounting for theacquisition of an interest in a joint operation, in which the activity of the joint operationconstitutes a business must apply the relevant PFRS 3 principles for business combinationsaccounting. The amendments also clarify that a previously held interest in a joint operation isnot remeasured on the acquisition of an additional interest in the same joint operation whilejoint control is retained. In addition, a scope exclusion has been added to PFRS 11 to specifythat the amendments do not apply when the parties sharing joint control, including thereporting entity, are under common control of the same ultimate controlling party. Theamendments apply to both the acquisition of the initial interest in a joint operation and theacquisition of any additional interests in the same joint operation and are prospectivelyeffective for annual periods beginning on or after January 1, 2016, with early adoptionpermitted. These amendments are not expected to have any impact to the Company.

§ PFRS 14, Regulatory Deferral Accounts — PFRS 14 is an optional standard that allows anentity, whose activities are subject to rate-regulation, to continue applying most of its existingaccounting policies for regulatory deferral account balances upon its first-time adoption ofPFRS. Entities that adopt PFRS 14 must present the regulatory deferral accounts as separateline items on the statement of financial position and present movements in these accountbalances as separate line items in the statement of profit or loss and other comprehensiveincome. The standard requires disclosures on the nature of, and risks associated with, theentity’s rate-regulation and the effects of that rate-regulation on its financial statements.PFRS 14 is effective for annual periods beginning on or after January 1, 2016. Since theGroup is an existing PFRS preparer, this standard would not apply.

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o PFRS 5, Non-current Assets Held for Sale and Discontinued Operations – Changes inMethods of Disposal — The amendment is applied prospectively and clarifies thatchanging from a disposal through sale to a disposal through distribution to owners andvice-versa should not be considered to be a new plan of disposal, rather it is a continuationof the original plan. There is, therefore, no interruption of the application of therequirements in PFRS 5. The amendment also clarifies that changing the disposal methoddoes not change the date of classification.

o PFRS 7, Financial Instruments: Disclosures – Servicing Contracts — PFRS 7 requires anentity to provide disclosures for any continuing involvement in a transferred asset that isderecognized in its entirety. The amendment clarifies that a servicing contract thatincludes a fee can constitute continuing involvement in a financial asset. An entity mustassess the nature of the fee and arrangement against the guidance in PFRS 7 in order toassess whether the disclosures are required. The amendment is to be applied such that theassessment of which servicing contracts constitute continuing involvement will need to bedone retrospectively. However, comparative disclosures are not required to be providedfor any period beginning before the annual period in which the entity first applies theamendments.

o PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed Interim FinancialStatements — This amendment is applied retrospectively and clarifies that the disclosureson offsetting of financial assets and financial liabilities are not required in the condensedinterim financial report unless they provide a significant update to the informationreported in the most recent annual report.

o PAS 19, Employee Benefits – regional market issue regarding discount rate — Thisamendment is applied prospectively and clarifies that market depth of high qualitycorporate bonds is assessed based on the currency in which the obligation is denominated,rather than the country where the obligation is located. When there is no deep market forhigh quality corporate bonds in that currency, government bond rates must be used.

o PAS 34, Interim Financial Reporting – disclosure of information ‘elsewhere in the interimfinancial report’ — The amendment is applied retrospectively and clarifies that therequired interim disclosures must either be in the interim financial statements orincorporated by cross-reference between the interim financial statements and whereverthey are included within the greater interim financial report (e.g., in the managementcommentary or risk report).


§ PFRS 9, Financial Instruments – Hedge Accounting and amendments to PFRS 9, PFRS 7 andPAS 39 (2013 version) — PFRS 9 (2013 version) already includes the third phase of theproject to replace PAS 39 which pertains to hedge accounting. This version of PFRS 9replaces the rules-based hedge accounting model of PAS 39 with a more principles-basedapproach. Changes include replacing the rules-based hedge effectiveness test with anobjectives-based test that focuses on the economic relationship between the hedged item andthe hedging instrument, and the effect of credit risk on that economic relationship; allowingrisk components to be designated as the hedged item, not only for financial items but also for

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non-financial items, provided that the risk component is separately identifiable and reliablymeasurable; and allowing the time value of an option, the forward element of a forwardcontract and any foreign currency basis spread to be excluded from the designation of aderivative instrument as the hedging instrument and accounted for as costs of hedging.PFRS 9 also requires more extensive disclosures for hedge accounting.

PFRS 9 (2013 version) has no mandatory effective date. The mandatory effective date ofJanuary 1, 2018 was eventually set when the final version of PFRS 9 was adopted by theFRSC. The adoption of the final version of PFRS 9, however, is still for approval by BOA.

The Company is currently assessing the impact of adopting this standard.

Issued by the IASB but not yet been adopted by the FRSC

§ IFRS 15 Revenue from Contracts with Customers — IFRS 15 was issued in May 2014 andestablishes a new five-step model that will apply to revenue arising from contracts withcustomers. Under IFRS 15 revenue is recognised at an amount that reflects the considerationto which an entity expects to be entitled in exchange for transferring goods or services to acustomer. The principles in IFRS 15 provide a more structured approach to measuring andrecognising revenue. The new revenue standard is applicable to all entities and will supersedeall current revenue recognition requirements under IFRS. Either a full or modifiedretrospective application is required for annual periods beginning on or after January 1, 2017with early adoption permitted. The Company is currently assessing the impact of IFRS 15 andplans to adopt the new standard on the required effective date once adopted locally.


EXHIBIT II

SUPPLEMENTARY SCHEDULES

SCHEDULE I


SUPPLEMENTARY SCHEDULE REQUIRED

UNDER SRC RULE 68, AS AMENDED (2011)

A. List of Philippine Financial Reporting Standards (PFRSs) effective as at December 31, 2014

PHILIPPINE FINANCIAL REPORTING STANDARDS

AND INTERPRETATIONS

Effective as at December 31, 2014 Adopted

Not

Adopted

Not

Applicable

Not

Early

Adopted

Framework for the Preparation and Presentation of Financial

Statements

Conceptual Framework Phase A: Objectives and qualitative characteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1

(Revised)

First-time Adoption of Philippine Financial Reporting

Standards

Amendments to PFRS 1 and PAS 27: Cost of an

Investment in a Subsidiary, Jointly Controlled Entity or

Associate

Amendments to PFRS 1: Additional Exemptions for

First-time Adopters

Amendment to PFRS 1: Limited Exemption from

Comparative PFRS 7 Disclosures for First-time Adopters

Amendments to PFRS 1: Severe Hyperinflation and

Removal of Fixed Date for First-time Adopters

Amendments to PFRS 1: Government Loans

Amendments to PFRS 1: Borrowing Costs

Amendments to PFRS 1: Meaning of Effective PFRSs

PFRS 2 Share-based Payment

Amendments to PFRS 2: Vesting Conditions and

Cancellations

Amendments to PFRS 2: Group Cash-settled Share-

based Payment Transactions

Amendments to PFRS 2: Definition of Vesting Condition

PFRS 3

(Revised)

Business Combinations

Amendment to PFRS 3: Accounting for Contingent

Consideration in a Business Combination

Amendment to PFRS 3: Scope Exceptions for Joint

Arrangements

PFRS 4 Insurance Contracts

Amendments to PAS 39 and PFRS 4: Financial

Guarantee Contracts

PFRS 5 Non-current Assets Held for Sale and Discontinued

Operations

Changes in Method of Disposal

PFRS 6 Exploration for and Evaluation of Mineral Resources

PFRS 7 Financial Instruments: Disclosures

Amendments to PAS 39 and PFRS 7: Reclassification of

Financial Assets

SCHEDULE II


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted


Financial Assets - Effective Date and Transition

Amendments to PFRS 7: Improving Disclosures about

Financial Instruments

Amendments to PFRS 7: Disclosures - Transfers of

Financial Assets

Amendments to PFRS 7: Disclosures – Offsetting

Financial Assets and Financial Liabilities

Amendments to PFRS 7: Mandatory Effective Date of

PFRS 9 and Transition Disclosures

Amendments to PFRS 7: Servicing Contracts

Amendments to PFRS 7: Applicability of the

Amendments to PFRS 7 to Condensed Interim Financial

Statements

PFRS 8 Operating Segments

Amendments to PFRS 8: Aggregation of Operating

Segments and Reconciliation of the Total of the

Reportable Segments’ Assets to Condensed Interim


PFRS 9* Financial Instruments

Amendments to PFRS 9: Mandatory Effective Date of

PFRS 9 and Transition Disclosures

Financial Instruments – New hedge accounting

requirements

PFRS 10 Consolidated Financial Statements

Amendments to PFRS 10: Investment Entities

Amendments to PFRS 10: Sale or Contribution of Assets

Between Investor and its Associate or Joint Venture

PFRS 11 Joint Arrangements

Amendments to PFRS 11: Accounting for Acquisitions

of Interests in Joint Operations

PFRS 12 Disclosure of Interests in Other Entities

Amendment to PFRS 11: Accounting for Acquisitions of

Interests in Joint Operations

PFRS 13 Fair Value Measurement

Amendment to PFRS 13: Short-term Receivables and

Payables

Amendment to PFRS 13: Portfolio Exception

Philippine Accounting Standards

PAS 1

(Revised)

Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures

Amendments to PAS 32 and PAS 1: Puttable Financial

Instruments and Obligations Arising on Liquidation

Amendments to PAS 1: Presentation of Items of Other

Comprehensive Income

Amendment to PAS 1: Clarification of the Requirements

of Comparative Information

SCHEDULE II


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

PAS 2 Inventories

PAS 7 Statement of Cash Flows

PAS 8 Accounting Policies, Changes in Accounting Estimates

and Errors

PAS 10 Events after the Reporting Period

PAS 11 Construction Contracts

PAS 12 Income Taxes

Amendment to PAS 12 - Deferred Tax: Recovery of

Underlying Assets

PAS 16 Property, Plant and Equipment

Amendment to PAS 16: Classification of Servicing and

Equipment

Amendment to PAS 16: Revaluation Method –

Proportionate Restatement of Accumulated

Depreciation

Amendment to PAS 16: Clarification of Acceptable

Methods of Depreciation and Amortization

Amendment to PAS 16: Bearer Plants

PAS 17 Leases

PAS 18 Revenue

PAS 19 Amendments to PAS 19: Actuarial Gains and Losses,

Group Plans and Disclosures

Employee Benefits (Amended)

Employee Benefits - Defined Benefit Plans: Employee

Contributions (Amendments)

Employee Benefits: Regional Market Issue Regarding

Discount Rate

PAS 20 Accounting for Government Grants and Disclosure of

Government Assistance

PAS 21 The Effects of Changes in Foreign Exchange Rates

Amendment: Net Investment in a Foreign Operation

PAS 23

(Revised)

Borrowing Costs

PAS 24

(Revised)

Related Party Disclosures

Amendments to PAS 24: Key Management Personnel

PAS 26 Accounting and Reporting by Retirement Benefit Plans

PAS 27

(Amended)*

Separate Financial Statements

Amendments to PAS 27: Investment Entities

Amendments to PAS 27: Equity Method in Separate

Financial Statements

PAS 28

(Amended)*

Investments in Associates and Joint Ventures

Amendments to PFRS 10: Sale or Contribution of Assets

Between an Investor and its Associate or Joint Venture

SCHEDULE II


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

PAS 29 Financial Reporting in Hyperinflationary Economies

PAS 32 Financial Instruments: Disclosure and Presentation

Amendments to PAS 32 and PAS 1: Puttable Financial

Instruments and Obligations Arising on Liquidation

Amendment to PAS 32: Classification of Rights Issues

Amendments to PAS 32: Offsetting Financial Assets and

Financial Liabilities

Amendments to PAS 32: Tax Effect of Distribution to

Holders of Equity Instruments

PAS 33 Earnings per Share

PAS 34 Interim Financial Reporting

Amendments to PAS 34: Interim Financial Reporting and

Segment Information for Total Assets and Liabilities

Amendments to PAS 34: Disclosure of Information

Elsewhere in the Interim Financial Report

PAS 36 Impairment of Assets

Impairment of Assets - Recoverable Amount Disclosures

for Non-Financial Assets (Amendments)

PAS 37 Provisions, Contingent Liabilities and Contingent Assets

PAS 38 Intangible Assets

Amendments to PAS 38: Revaluation Method – Proportionate Restatement of Accumulated Amortization

PAS 39 Financial Instruments: Recognition and Measurement

Amendments to PAS 39: Transition and Initial

Recognition of Financial Assets and Financial Liabilities

Amendments to PAS 39: Cash Flow Hedge Accounting

of Forecast Intragroup Transactions

Amendments to PAS 39: The Fair Value Option

Amendments to PAS 39 and PFRS 4: Financial

Guarantee Contracts


Financial Assets


Financial Assets – Effective Date and Transition

Amendments to Philippine Interpretation IFRIC–9 and

PAS 39: Embedded Derivatives

Amendment to PAS 39: Eligible Hedged Items

Financial Instruments: Recognition and Measurement -

Novation of Derivatives and Continuation of Hedge

Accounting (Amendments)

PAS 40 Investment Property

Amendments to PAS 40: Clarifying the Interrelationship

between PFRS 3 and PAS 40 when Classifying Property

as Investment Property or Owner Occupied Property

PAS 41 Agriculture

SCHEDULE II


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

Amendments to PAS 41: Bearer Plants

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration and

Similar Liabilities

IFRIC 2 Members' Share in Co-operative Entities and Similar

Instruments

IFRIC 4 Determining Whether an Arrangement Contains a Lease

IFRIC 5 Rights to Interests arising from Decommissioning,

Restoration and Environmental Rehabilitation Funds

IFRIC 6 Liabilities arising from Participating in a Specific Market

- Waste Electrical and Electronic Equipment

IFRIC 7 Applying the Restatement Approach under PAS 29

Financial Reporting in Hyperinflationary Economies

IFRIC 8 Scope of PFRS 2

IFRIC 9 Reassessment of Embedded Derivatives

Amendments to Philippine Interpretation IFRIC–9 and

PAS 39: Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 11 PFRS 2- Group and Treasury Share Transactions

IFRIC 12 Service Concession Arrangements

IFRIC 13 Customer Loyalty Programmes

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum

Funding Requirements and their Interaction

Amendments to Philippine Interpretations IFRIC- 14,

Prepayments of a Minimum Funding Requirement

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

IFRIC 17 Distributions of Non-cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments

IFRIC 20 Stripping Costs in the Production Phase of a Surface

Mine

IFRIC 21 Levies

SIC-7 Introduction of the Euro

SIC-10 Government Assistance - No Specific Relation to

Operating Activities

SIC-12 Consolidation - Special Purpose Entities

Amendment to SIC - 12: Scope of SIC 12

SIC-13 Jointly Controlled Entities - Non-Monetary

Contributions by Venturers

SIC-15 Operating Leases – Incentives

SIC-25 Income Taxes - Changes in the Tax Status of an Entity or

its Shareholders

SIC-27 Evaluating the Substance of Transactions Involving the

SCHEDULE II


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

Legal Form of a Lease

SIC-29 Service Concession Arrangements: Disclosures.

SIC-31 Revenue - Barter Transactions Involving Advertising

Services

SIC-32 Intangible Assets - Web Site Costs

Annual improvements to PFRSs 2010 – 2012 Cycle

Annual improvements to PFRSs 2011 – 2013 Cycle

SCHEDULE II


SUPPLEMENTARY SCHEDULE REQUIRED

UNDER SRC RULE 68, AS AMENDED (2011)

Financial Soundness Indicators

Financial Ratios Formula December 31,

2014

December 31,

2013

a) Current Ratio Total Current Assets 1.22 1.10

Total Current Liabilities

b) Solvency Ratio Net Profit After Tax (NPAT) +

Depreciation and Amortization 0.16 0.17

Total Liabilities

c) Total Liabilities-to-Equity Ratio Total Liabilities 0.81 0.77

Total Stockholders' Equity

d) Long-term Debt-to-Equity Ratio Long-term Debt 0.47 0.45

Total Stockholders' Equity

e) Asset to Equity Ratio Total Assets

1.81 1.77 Total Stockholders' Equity

f) Interest Rate Coverage Ratio Earnings before Interest and Taxes 4.52 4.41

Net Interest Expense

g) Net Profit Margin NPAT 37.17% 37.18%

Net Revenues

h) Return on Asset NPAT + Interest expense (net of tax) 7.55% 8.07%

Average Total Assets

i) Return on Equity NPAT 10.36% 11.06%

Average Total Stockholders’ Equity

SCHEDULE III

RECONCILIATION OF RETAINED EARNINGS

AVAILABLE FOR DIVIDEND DECLARATION

As at December 31, 2014

Metro Pacific Investments Corporation

10th

Floor, MGO Building

Legaspi corner Dela Rosa Streets

Legaspi Village, Makati City

Amount

Unappropriated retained earnings available for dividend declaration,

beginning

(In Millions)

P=8,773.5

Add: Net income based on the face of Audited Financial Statements 10,164.6

Less: Unrealized gain as a result of transaction accounted for under

PFRS, net of tax (gain from accounting dilution on interest in

subsidiary) (4,200.9)

Net income actually earned during the period 5,963.7

Less: Dividend declarations during the period (2,297.8)

Total retained earnings end, available for dividend declaration P=12,439.4

SCHEDULE IV

METRO PACIFIC INVESTMENTS CORPORATION (MPIC) AND SUBSIDIARIES

Supplementary Schedules Required by Paragraph 6D, Part II

Under SRC Rule 68, As Amended (2011)

Schedule A. Financial Assets

Name of issuing entity and

association of each issue

Number of shares

or principal

amount of bonds

and notes

Amount shown

in the statement

of financial

position

Value based on

market quotation at

end of reporting

period

Income

received and

accrued

(Amounts in Millions)

Available-for-sale Financial

Assets

Investment in Preferred shares of

Beacon Electric

1,083,259,828 shares P=11,573 P=– P=405

Investments in shares of stock:

Citra Metro Manila Tollways

Corporation

1,379,674 shares 316 – 66

Bonifacio Land Corporation 339,772 shares 47 – –

Pacific Global One Aviation

Company, Inc.

37,500,000 shares 38 – –

Subic Water Sewerage Co.,

Inc.

915,580 shares 111 – –

Manila Polo Club 1 share 12 12 –

Palms Country Club 1 share 1 1 –

Alabang Country Club 1 share 2 2 –

Pico de Loro Club 1 share 1 1 –

Investment in Unit Investment

Trust Fund

P=4,980 5,039 5,039 –

Investments in quoted treasury

bonds and notes

P=1,514 1,496 1,496 39

Investments in quoted corporate

bonds

P=450 442 442 11

P=19,078 P=6,993 P=521

The Company does not have any Financial Assets at Fair Value through Profit or Loss and Held-to-Maturity

investments.

SCHEDULE IV

Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Parties, and Principal

Stockholders (Other than Related Parties)

Name and Designation of

debtor

Balance at

beginning

of period

Additions Amounts

collected Reversal

Current

Noncurrent

Balance

at end of

period

(In Millions)

Receivables:

Advances to officers and

employees P=80 P=73 (P=80) P=– P=73 P=– P=73

Due from related parties:

Tollways Management

Corporation 172 56 (57) (65) 106 – 106

Landco Pacific Corporation 13 – – – 13 – 13

First Pacific Company, Ltd. 88 14 (98) – 4 – 4

Lucena Land Corporation 7 – – – 7 – 7

Manila Electric Company 2 – (2) – – – –

Beacon Electric Assets

Holdings, Inc. 4 1 – – 5 – 5

Others 8 6 (9) – 5 – 5

P=374 P=150 (P=246) (P=65) P=213 P=– P=213

Schedule C. Amounts Receivable from Related Parties which are eliminated during the consolidation of

financial statements

Name and Designation of

debtor

Balance at

beginning

of period

Addition

s

Amounts

collected

Amounts

written

off

Current

Noncurren

t

Balance

at end of

period

(In Millions)

Metro Pacific Investments

Corporation (MPIC):

Metropac Water

Investments Corporation P=102 P=8 (P=110) P=– P=– P=– P=–

Metro Pacific Hospital

Holding, Inc. 51 2 (48) – 5 – 5

Colinas Verdes Hospital

Managers Corporation 22 23 (33) – 12 – 12

East Manila Hospital

Managers Corporation 20 30 (40) – 10 – 10

Fragrant Cedar Holdings,

Inc. 6 2 (8) – – – –

Metro Pacific Light Rail

Corporation 5 1 (6) – – – –

Asian Hospital, Inc. 2 14 (12) – 4 – 4

Bumrungrad International

Philippines, Inc. 2 – (2) – – –

Neo Oracle Holdings, Inc.:

MPIC 359 – – – 359 – 359

Metro Pacific Tollways

Corporation 2 – – – 2 – 2

P=571 P=80 (P=259) P=– P=392 P=– P=392

SCHEDULE IV

Schedule D. Intangible Assets – Other Assets

Description Beginning

balance

Additions

at cost*

Charged to

cost and

expenses

Charged

to other

accounts

Other charges

additions

(deductions)*

Ending

balance

(In Millions) Service Concession Assets:

Cost P=109,784 P=6,678 P=– P=– P=– P=116,462

Accumulated Amortization (15,244) – (2,958) – – (18,202)

Carrying Value 94,540 6,678 (2,958) – – 98,260

Property Use Rights:

Cost 748 – – – – 748

Accumulated Amortization (99) – (41) – – (140)

Carrying Value 649 – (41) – – 608

Software Cost**:

Cost 113 21 – – – 134

Accumulated Amortization (40) – (27) – – (67)

Carrying Value 73 21 (27) – – 67

Basketball franchise** – 100 – – – 100

Goodwill 18,308 – – – – 18,308

P=113,570 P=6,799 (P=3,026) P=– P=– P=117,343

*Note for Additions at cost and other charges additions (deductions)

Additions to Service Concession Assets pertains to toll service concession asset included civil works construction

on MNTC's Segments 9 and 10 and CAVITEX's Modified Zapote Interchange and fixed operating equipment

design, supply and installation for the toll collection system migration. Additions in 2014 also include pre-

construction costs of Segment 8.2 of Phase II of the NLEX and capitalized borrowing costs. Additions to the

water service concession assets for substantially relate to cost of rehabilitation, additional constructions and to the

additional concession fees pertaining to the drawn portion of the MWSS loans relating to new projects.

Basketball franchise represents cost of MPTC’s Philippine Basketball Association (PBA) franchise named

“NLEX Road Warriors”.

**Included under “Other noncurrent assets” in the consolidated statement of financial position.

SCHEDULE IV

Schedule E. Long Term Debt

Title of Issue and type of obligation

Amount authorized by

indenture

Amount shown under caption

‘‘Current portion of long-term

debt” in related balance sheet

Amount shown under caption ‘‘Long-Term

Debt’’ in related balance sheet

Interest rates, amount or number of periodic

installments, and maturity dates

(In Millions)

Metro Pacific Tollways Corporation and subsidiaries, Manila North Tollways Corporation and Cavitex Infrastructure Corporation

Philippine National Bank (PNB) Loan

P=2,100 P=891 P=─ Interest rate: Subject to floating rate based on 6-month PDST-F + 0.50% Payment terms: 7 years balloon-type semi-annual repayment starting June 2011, 85% payable on the last 4 semi-annual periods (June 2014 to December 2015)

Series A Corporate Notes Facility Agreement:

Series A-5 Notes Banco De Oro

Unibank, Inc. (BDO) Leasing & Finance Inc.

Bank of Philippine Islands (BPI)

1,000 8 959 Interest rate: Subject to 6.5346% fixed interest per annum Payment terms: 5 years bullet-like repayment, minimal annual amortizations aggregating 4% between March 2012 to March 2015 and 96% in April 2016

Series A-7 Notes BPI Robinsons Bank

Corp. (RBC) BDO Capital &

Investment Corp. PNB The Insular Life

Assurance Co., Ltd Security Bank

Corporation (SBC)

4,210 27 4,002 Interest rate: Subject to 7.2704% fixed interest per annum Payment terms: 7 years bullet-like repayment, minimal annual amortizations aggregating 6% between March 2012 to March 2017 and 94% in April 2018

Series A-10 Notes BDO Capital &

Investments Corporation

The Insular Life Assurance Co Ltd.

SBC

1,000 8 944 Interest rate: Subject to 7.7038% fixed interest per annum Payment terms: 10 years bullet-like repayment, minimal annual amortizations aggregating 9% between March 2012 to March 2020 and 91% in April 2021

Insular Life Assurance Company, Ltd.

500 ─ 497 Interest rate: Subject to 6.7512% fixed interest per annum Payment terms: 10 years

SCHEDULE IV



indenture








(In Millions)

bullet-like repayment with principal payable in December 2021

Philippine American Life and General Insurance Company

P=500 P=─ P=496 Interest rate: Subject to 7.4583% fixed interest per annum Payment terms: 15 years bullet-like repayment with principal payable in December 2026

Insular Life Assurance Company, Ltd.

200 ─ 198 Interest rate: 5.0303% fixed interest per annum Payment terms: 10 years bullet-like repayment with principal payable in November 2023

Philippine American Life and General Insurance Company

1,000 ─ 992 Interest rate: 5.7971% fixed interest per annum Payment terms: 15 years bullet-like repayment with principal payable in December 2028

SunLife of Canada Phils., Inc.

800 ─ 794 Interest rate: 5.2979% fixed interest per annum Payment terms: 10 years bullet-like repayment with principal payable in October 2023

BDO Rizal Commercial

Banking Corporation (RCBC)

6,100 160 5,837 Interest rate: (a) 6.50% fixed interest per annum from December 2013 to December 2018 (b) during the period from December 2018 to December 2023 the rate per annum is the higher of: (i) 5-year PDSTF plus 3%; or (ii) 6.25% per annum Payment terms: 10 years quarterly repayment starting January 2014 to December 2023

Bank of New York Mellon (Series 2010-1 Note - Dollar denominated)

7,232 (or US $160)

82 711 Interest rate: Subject to 12% fixed interest per annum Payment terms: 12 years quarterly repayment starting March 2013 to September 2022

BDO Capital & Investment Corporation

P=4,400 P=─ P=4,314 Interest rate: Subject to 5.07% interest per annum Payment terms:7 years bullet-like repayment with

SCHEDULE IV



indenture








(In Millions)

principal payable in 2021

BDO Capital & Investment Corporation

P=2,600 P=─ P=2,573 Interest rate: Subject to 5.50% interest per annum Payment terms:10 years bullet-like repayment with principal payable in 2024

Banco De Oro Bank loan 3,250 45 3,137 Interest rate: Subject to interest rate of the higher of: (i) 5-year PDST-F rate plus 1.75%; or (ii) 5.5%, which will be repriced after 5 years Payment terms: 10 years semi-annual principal and interest repayment starting March 2014 to January 2024

Maynilad Water Holding Company, Inc. and subsidiaries, Maynilad Water Services, Inc. and Philippine Hydro Inc.

Development Bank of the Philippines

Landbank of the Philippines

Chinabank SBC BPI BDO Leasing & Finance,

Inc. BDO Unibank, Inc.

P=21,152 P=1,692 P=16,922 Interest rate: 5.75% fixed interest per annum for the first 5 years, for the remaining 5 years, higher of: (i) benchmark rate plus 0.75% per annum; or (ii) 5.75% per annum Payment terms: 10 years semi-annual installments until March 2023

BDO Unibank, Inc. Loan 5,000 ─ 4,963 Interest rate: Fixed rate per annum equal to the higher of: (i) PDSTF rate plus 0.75% per annum; or (ii)5.75% per annum subject to repricing on the 5th year Payment terms: 10 years installment with a 3 years grace period and maturity in April 2023

Landbank of the Philippines

6,104 (or US $ 137.5)

─ 624 Interest rate: Floating interest rate plus 1.25% per annum based on the World Bank Lending Rate, subject to semi-annual repricing Payment terms: 25 years semi-annual installments with 7 years grace period

Asian Hospital, Inc.

International Finance Corporation Term loan

P=1,008 P=147 P=288 Interest rate: Fixed rate note, subject to 8.5% per annum

SCHEDULE IV



indenture








(In Millions)

Payment terms: Payable on equal semi-annual installments until November 2017

International Finance Corporation Term loan

P=252 P=36 P=72 Interest rate: Fixed rate note, subject to 8.1% per annum Payment terms: Payable on equal semi-annual installments until November 2017

Deutsche Investitions Entwicklungsgeselleschaft Term Loan

476 71 136 Interest rate: Fixed rate note, subject to 9.1% per annum Payment terms: Semi-annual interest and principal payments until September 2017

Deutsche Investitions Entwicklungsgeselleschaft Term Loan

119 17 34 Interest rate: Fixed rate note, subject to 8.59% per annum Payment terms: Semi-annual interest and principal payments until September 2017

International Finance Corporation - Subordinated Term Loan

45 (or US $ 1)

─ 45 Interest rate: LIBOR + IPA (1% to 2% of EBITDA) Payment terms: Lump sum payable on April 2017

Metro Pacific Investments Corporation

BDO Omnibus Notes Facility and Security Agreement

6,480 65 6,318 Interest rate: 7.5% fixed rate interest per annum, to be repriced in August 2018 based on the higher of: (i) 5-year PDST-F on the repricing date plus 1.75% per annum; or (ii)7.5% per annum; or (iii) the floor rate, if any, applicable on a 5 year fixed rate corporate loans of Noteholder prevailing as of 30 days prior to the repricing date Payment terms: 10 years semi-annual interest and principal payment until June 2023

Riverside Medical Center, Inc.

BDO Bank Loan P=30 P=4 P=17 Interest rate: Floating Rate Note

SCHEDULE IV



indenture








(In Millions)

Payment terms: 7 years quarterly installments until November 2019

BDO Bank Loan P=36 P=6 P=3 Interest rate: Floating Rate Note (2% plus 3M PDSTF) Payment terms: 6 years quarterly installments until May 2016

BDO Bank Loan 60 6 47 Interest rate: Floating Rate Note (2% plus 3M PDSTF) Payment terms: 5 years quarterly installments until September 2018

BDO Short-term facility 25 3 21 Interest rate: Floating Rate Note Payment terms: 7 years payable in March 2021

BDO Short-term facility 12 2 9 Interest rate: Floating Rate Note Payment terms: 5 years payable in July 2019

BDO Short-term facility 30 4 26 Interest rate: Floating Rate Note Payment terms: 7 years payable in September 2021

Colinas Verdes Hospital Managers Corporation

BDO Short-term facility 65 65 ─ Interest rate: 3.5% fixed interest Payment terms: Three months facilities payable in January 2015 and February 2015

East Manila Hospital Managers Corporation

Security Bank Corporation - Short term facility

250 90 ─ Interest rate: Subject to 4.25% fixed rate Payment terms: 1 year due in March 2015

AIF Toll Road Holding (Thailand) Limited

Thanachart Bank Public Company Limited

THB 2,100 P=144 P=2,515 Interest rate: Subject to floating interest rate of Minimum Lending Rate minus 1.50% per annum Payment terms: Semi-annual 15 installments with final installment due November 2021

SCHEDULE IV



indenture








(In Millions)

TOTAL P=3,573 P=57,494

SCHEDULE IV

Schedule F. Indebtedness to Related Parties (Long term loans from Related Companies)

Name of related party Balance at beginning of period Balance at end of period

Schedule G. Guarantees of Securities of Other Issuers

Name of issuing entity of

securities guaranteed by

the Company for which

this statement is filed

Title of issue of each class of

securities guaranteed

Total amount

guaranteed and

outstanding

Amount owned

by person for

which statement

is files

Nature of

guarantee

Schedule H. Capital Stock

Title of Issue

Number of

shares

authorized

Number of

shares issued

and

outstanding

as shown

under related

balance sheet

caption

Number of

shares

reserved for

options,

warrants,

conversion

and other

rights

Number of

shares held

by related

parties

Directors,

officers

and

employees

Others

Common

28,500,000,000 26,046,270,752 143,338,000 14,522,948,170 52,622,609 11,470,591,574

Preferred

Class A -

P=0.01 par value

5,000,000,000 5,000,000,000 – 5,000,000,000 – –

Class B -

P=1.00 par value

1,500,000,000 – – – – –

Not Applicable. There are no guarantees made by the Company as at December 31, 2014.

Not Applicable. The Company has no related party indebtedness as at December 31, 2014.


SCHEDULE V

MPIC GROUP STRUCTURE

as of December 31, 2014

dormant

NOTES:

1 First Pacific Company Limited holds 40% equity interest in EIH

2 Formerly DMCI-MPIC Water Co. Inc.

3 By virtue of the Management Letter-Agreement, MPTC acquired control over CIC effective Jan 2, 2013 Filed to SEC Non-Operation

4 4.6% is owned through 46% ownership in Egis Investment Partners Philippines Inc.

5 Effective interest of 95.55% in MSIHI through 57% owned by MPTC and 40% owned by NOHI

6 ESC is a Joint venture between MPTDC and EGIS. Equity interest of 50% plus one share.

7 Effective interest of 100% in AIF Toll Roads through intermediate wholly owned BVI companies

8

9 Controlling interest in LRMHI and LRMH2. Equity interest of 50% plus one share.

10 Formerly Light Rail Manila Corporation

11 End of corporate life (under liquidation)

MPIC's Operating Segments are as follows:

Water Utilities

Toll Operations

Power Distributions

Healthcare

Rail

Others

Formerly Neptune Stroika Holdings Inc.; GIC also holds an Exchangeable Bond issued by MPIC which can be exchanged into a 25.5%

stake in NSHI in the future, subject to certain conditions.

Operator of Cardinal Santos

Medical Center

Davao Doctors

Oncology Center Inc.

30.0%

5.0%

100.0%

50.0% Easytrip Services

Corporation (6)

Riverside College Inc.100.0%

Riverside Medical

Center Inc.

Davao Doctors

College, Inc.

100.0%

Davao Doctors Hospital

(Clinica Hilario) Inc.

Operator of Makati Medical

Center

Luzon Tollways

Corporation

24.5%

100.0%

operator of Our Lady of Lourdes

Hospital

51.0% De Los Santos

Medical Center, Inc.

51.0%MPCALA Holdings, Inc

58.8% MPIC-JGS Airport

Holdings, Inc.

100%

100.0%MPIC Infrastructure

Holdings Limited

FPM Infrastructure

Holdings Limited (7)

Manila Water

Consortium Inc.

39.0%

Colinas Verdes Hospital

Managers Corp.

Beacon Electric Asset

Holdings Inc

100.0%

Medical Doctors, Inc.


Development Corp.

MetroPac Water

Investments Corp.

51.0%

51.0%

100.0%

100.0%Larkwing Holdings, Inc.

100.0%

57.0%

100.0% 50.0% Light Rail Manila Holdings

2 Inc. (9)

46.0%

100.0%

Maynilad Water

Services, Inc.

Manila Electric Co

27.5%

50.0%

92.9%

70.0%

50.0%Porrovia Corporation (10)

58.1%Asian Hospital Inc.

50.0%

50.0%

20.0%

100.0% Metro Pacific Light

Rail Corporation

100.0% Allied Professional

Development Corp.

100%

100%

Philippine Hydro, Inc.

Amayi Water

Solutions Inc.

34.8%

57.5%

33.3%

Metro Strategic Infra

Holdings Inc. (5)

Collared Wren Holdings,

Inc.

24.5%

75.6%

Tollways Management

Corp

Manila North Tollways

Corp (4)

East Manila Hospital

Managers Corp.

The Megaclinic, Inc.

Central Luzon

Doctors' Hospital

AIF Toll Roads Holdings

(Thailand) Limited

29.5% Don Muang Tollway Public

Company Ltd (Thailand)

Colinas Healthcare,

Inc.

100.0%

Enterprise Investments

Holding, Inc. (1)

First Pacific International

LimitedIntalink B.V.

Metro Pacific Holdings,

Inc.

60.0% 26.7%

13.3%

44.96%


99.9%


Corporation

Cavitex Infrastructure

Corporation (3)

Metro Pacific Resource,

Inc.Two Rivers Holdings Corp.

60.0%

Bumrungrad

International Phils.

85.6%

5.2%

51.3%Metro Pacific Hospital

Holdings, Inc. (8)

Metro Pacific

Infrastructure Corporation

100.0%

Maynilad Water

Holding Company,

Inc. (2)

50.0%

55.8%

60.0%

100.0%

60.0% Computerized Imaging

Institute, Inc.

Automated Fare

Collection Services,

20.0%

Light Rail Manila Corporation

Light Rail Manila Holdings

Inc. (9)

100.0%

Neo Oracle Holdings,

Inc. (11)

100% First Pacific Bancshares

Philippines, Inc.

100% Metro Pacific Management

Services, Inc.

50.0% First Pacific Realty Partners

Corporation

100.0% Fragrant Cedar Holdings

Inc

33.3% First Gen Northern

Energy Corp

65.0% Metro Asia Link Holdings,

Inc.

70.0% Metro Global Green

Waste, Inc.

49.0% Metro Pacific Land

Holdings, Inc.

40.0% Metro Strategic Infra

Holdings Inc. (5)

100% Pacific Plaza Towers

Management Services, Inc.

100% Philippine International

Paper Corporation

100% Pollux Realty

Development Corporation

100.0% Metro Tagaytay Land Co.,

Inc

31.2%

13.4% Prime Media Holdings,

Inc.

62.0% Costa de Madera

Corporation

96.6%

.

.

.

.


EXHIBIT III

ANNUAL CORPORATE

GOVERNANCE REPORT

SECURITIES AND EXCHANGE COMMISSION

SEC FORM – ACGR

ANNUAL CORPORATE GOVERNANCE REPORT

1. Report is Filed for the Year 2014 2. Exact Name of Registrant as Specified in its Charter METRO PACIFIC INVESTMENTS CORPORATION 3. 10th Floor, MGO BUILDING, LEGAZPI CORNER DELA ROSA STREETS, LEGASPI VILLAGE, MAKATI CITY, PHILIPINES 1200 Address of Principal Office Postal Code 4. SEC Identification Number CS200604494

5. Industry Classification Code (SEC Use Only)

6. BIR Tax Identification Number 244-520-457-000

7. (632) 888-0888 Issuer’s Telephone number, including area code

8. N/A Former name or former address, if changed from the last report

TABLE OF CONTENTS A. BOARD MATTERS ........................................................................................................................................1

1. BOARD OF DIRECTORS ..............................................................................................................................1

a. COMPOSITION OF THE BOARD ..........................................................................................................1

b. DIRECTORSHIP IN OTHER COMPANIES ..............................................................................................4

c. SHAREHOLDING IN THE COMPANY ....................................................................................................9

2. CHAIRMAN AND CEO ............................................................................................................................. 10

3. OTHER EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS ................................................ 12

4. CHANGES IN THE BOARD OF DIRECTORS ............................................................................................. 18

5. ORIENTATION AND EDUCATION PROGRAM ......................................................................................... 49

B. CODE OF BUSINESS CONDUCT & ETHICS ................................................................................................. 57

1. POLICIES ................................................................................................................................................. 57

2. DISSEMINATION OF CODE ..................................................................................................................... 59

3. COMPLIANCE WITH CODE ..................................................................................................................... 59

4. RELATED PARTY TRANSACTIONS ........................................................................................................... 60

a. Policies and Procedures .................................................................................................................. 60

b. Conflict of Interest .......................................................................................................................... 61

5. FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS...................................................................... 63

6. ALTERNATIVE DISPUTE RESOLUTION .................................................................................................... 64

C. BOARD MEETINGS & ATTENDANCE ......................................................................................................... 64

1. SCHEDULE OF MEETINGS ...................................................................................................................... 64

2. DETAILS OF ATTENDANCE OF DIRECTORS ............................................................................................. 65

3. SEPARATE MEETINGS OF NON-EXECUTIVE DIRECTORS ........................................................................ 65

4. ACCESS TO INFORMATION .................................................................................................................... 66

5. EXTERNAL ADVICE ................................................................................................................................. 69

6. CHANGE/S IN EXISTING POLICIES .......................................................................................................... 70

D. REMUNERATION MATTERS ...................................................................................................................... 70

1. REMUNERATION PROCESS .................................................................................................................... 70

2. REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS ................................................................ 71

3. AGGREGATE REMUNERATION ............................................................................................................... 72

4. STOCK RIGHTS, OPTIONS AND WARRANTS ........................................................................................... 73

5. REMUNERATION OF MANAGEMENT .................................................................................................... 74

E. BOARD COMMITTEES............................................................................................................................... 75

1. NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES .............................................................. 75

2. COMMITTEE MEMBERS ......................................................................................................................... 81

3. CHANGES IN COMMITTEE MEMBERS.................................................................................................... 84

4. WORK DONE AND ISSUES ADDRESSED ................................................................................................. 85

5. COMMITTEE PROGRAM ........................................................................................................................ 87

F. RISK MANAGEMENT SYSTEM ................................................................................................................... 88

1. STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM ...................................................... 88

2. RISK POLICY ........................................................................................................................................... 89

3. CONTROL SYSTEM SET UP ..................................................................................................................... 95

G. INTERNAL AUDIT AND CONTROL ............................................................................................................. 98

1. STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL SYSTEM ...................................................... 98

2. INTERNAL AUDIT.................................................................................................................................... 99

a. Role, Scope and Internal Audit Function ........................................................................................ 99

b. Appointment/Removal of Internal Auditor .................................................................................. 100

c. Reporting Relationship with the Audit Committee ....................................................................... 100

d. Resignation, Re-Assignment and Reasons .................................................................................... 101

e. Progress Against Plans, Issues, Findings and Examination Trends ............................................... 101

f. Audit Control Policies and Procedures ......................................................................................... 101

g. Mechanism and Safeguards .......................................................................................................... 102

H. ROLE OF STAKEHOLDERS ....................................................................................................................... 103

I. DISCLOSURE AND TRANSPARENCY ........................................................................................................ 112

1. Ownership Structure ........................................................................................................................... 113

2. Annual Report ..................................................................................................................................... 114

3. External Auditor’s fee .......................................................................................................................... 114

4. Medium of Communication ................................................................................................................ 114

5. Release of Audited Financial Report ................................................................................................... 115

6. Company Website ............................................................................................................................... 115

7. Disclosure of RPT ................................................................................................................................. 116

J. RIGHTS OF STOCKHOLDERS ................................................................................................................... 117

1. Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings ..................... 117

2. Treatment of Minority Stockholders ................................................................................................... 124

K. INVESTORS RELATIONS PROGRAM ........................................................................................................ 125

L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES ................................................................................ 127

M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL ......................................................................... 128

N. INTERNAL BREACHES AND SANCTIONS ................................................................................................. 129

1

A. BOARD MATTERS

1. BOARD OF DIRECTORS

Number of Directors per Articles of Incorporation Fifteen (15)

Actual number of Directors for the year Fifteen (15)

a. COMPOSITION OF THE BOARD

Please see below the updated composition of the Board of Directors of the Corporation:

Director’s Name

Type [Executive (ED), Non-Executive (NED)

or Independent Director (ID)]

If nominee, identify the

principal

Nominator in the last election

(if ID, state the relationship with the nominator)

Date first elected Date last elected (if ID, state the number of years served as ID)

1

Elected when (Annual / Special

Meeting)

No. of years served as director

Manuel V. Pangilinan Chairman, Non-Executive Director

Metro Pacific Holdings Inc.

(MPHI)

Metro Pacific Holdings Inc. (MPHI)

March 2006 May 30, 2014 AGM 8

Jose Ma. K. Lim Executive Director, President and CEO


(MPHI)


March 2006 May 30, 2014 AGM 8

David J. Nicol Executive Director, Chief Financial Officer


(MPHI)


May 2010 May 30, 2014 AGM 4

Ray C. Espinosa Non-Executive Director Metro Pacific Holdings Inc.

(MPHI)


November 2009 May 30, 2014 AGM 4

Ramoncito S. Fernandez Non-Executive Director Metro Pacific Holdings Inc.

(MPHI)


June 2009 May 30, 2014 AGM 4

Robert C. Nicholson Non-Executive Director Metro Pacific Holdings Inc.

(MPHI)



Augusto P. Palisoc, Jr. Executive Director Metro Pacific Holdings Inc.

(MPHI)


March 2006 May 30, 2014 AGM 8

Antonio A. Picazo Non-Executive Director and Corporate

Secretary


(MPHI)


March 2006 May 30, 2014 AGM 8

Amado R. Santiago III Non-Executive Director Metro Pacific Holdings Inc.

(MPHI)


July 2006 May 30, 2014 AGM 7

1 Reckoned from the election immediately following May 30, 2014 AGM.

2

Edward A. Tortorici

Executive Director and Executive Advisor


(MPHI)



Victorico P. Vargas Non-Executive Director Metro Pacific Holdings Inc.

(MPHI)


May 2011 May 30, 2014 AGM 3

Washington Z. SyCip Independent Director Flordeliza Anibigno (Registered Stockholder); Relationship -

None

August 2011 May 30, 2014 AGM 3

Edward S. Go Independent Director Flordeliza Anibigno (Registered Stockholder); Relationship -

None

July 2006 May 30, 2014 AGM 7

Lydia B. Echauz Independent Director Flordeliza Anibigno (Registered Stockholder); Relationship -

None


Chief Justice Artemio V. Panganiban

Independent Director Flordeliza Anibigno (Registered Stockholder); Relationship -

None

August 2007 May 30, 2014 AGM 6

1) Provide a brief summary of the corporate governance policy that the board of directors has adopted. Please emphasize the policy/ies relative to the treatment of all

shareholders, respect for the rights of minority shareholders and of other stakeholders, disclosure duties, and board responsibilities. The Board adheres to the Corporation’s Revised Manual of Corporate Governance which provides guidance to the Board in executing their duties and responsibilities in accordance with the Securities and Exchange Commission’s (SEC) Revised Manual of Corporate Governance and best practices. The Corporation’s Revised Manual of Corporate Governance includes provisions on the following items: (i) Board Governance The Board Governance Section discusses the composition of the Board; the guidelines on multiple board seats; the duties and responsibilities of the Chairman and the Chief Executive Officer; the rules on the qualifications and disqualifications of the directors; the responsibilities, duties and functions of the Board; the Internal Control responsibilities of the Board; the Board meetings and quorum requirement; the remuneration of directors and officers; the description of the different board committees; and the functions of the board secretary and the compliance officer. (ii) Adequate and Timely Information This section of the Revised Manual of Corporate Governance tackles the Management’s provision to the Board of complete, adequate and timely information about the matters to be taken in their meetings and for them to be able to properly fulfill their duties and responsibilities. This section also states that the members of the Board, either individually or as a Board, and in furtherance of their duties and responsibilities, should have access to independent professional advice at the corporation’s expense.

3

(iii) Accountability and Audit The Board is primarily accountable to the stockholders and it should provide them with a balanced and comprehensible assessment of the corporation's performance, position and prospects on a quarterly basis, including interim and other reports that could adversely affect its business, as well as reports to regulators that are required by law. The Board, after consultations with the Audit and Risk Management Committee, shall recommend to the stockholders an external auditor duly accredited by the Commission who shall undertake an independent audit of the corporation, and shall provide an objective assurance on the manner by which the financial statements shall be prepared and presented to the stockholders. (iv) Stockholders’ Rights and Protection of Minority Stockholders’ Interests The Board shall respect the rights of the stockholders as provided for in the Corporation Code, namely:

1) Right to vote on all matters that require their consent or approval; 2) Pre-emptive right to all stock issuances of the corporation; 3) Right to inspect corporate books and records; 4) Right to information; 5) Right to dividends; and 6) Appraisal right.

The Board should be transparent and fair in the conduct of the annual and special stockholders’ meetings of the corporation. The stockholders should be encouraged to personally attend such meetings. If they cannot attend, they should be apprised ahead of time of their right to appoint a proxy. Subject to the requirements of the by- laws, the exercise of that right shall not be unduly restricted and any doubt about the validity of a proxy should be resolved in the stockholders favor. It is the duty of the Board to promote the rights of the stockholders, remove impediments to the exercise of those rights and provide an adequate avenue for them to seek timely redress for breach of their rights. The Board should take the appropriate steps to remove excessive or unnecessary costs and other administrative impediments to the stockholders’ meaningful participation in meetings, whether in person or by proxy. Accurate and timely information should be made available to the stockholders to enable them to make a sound judgment on all matters brought to their attention for consideration or approval. Although all stockholders should be treated equally or without discrimination, the Board should give minority stockholders the right to propose the holding of meetings and the items for discussion in the agenda that relate directly to the business of the corporation. (v) Disclosure and Transparency The essence of corporate governance is transparency. The more transparent the internal workings of the corporation are, the more difficult it will be for Management and dominant stockholders to mismanage the corporation or misappropriate its assets. All material information about the corporation which could adversely affect its viability or the interests of the stockholders should be publicly and timely disclosed. All such information should be disclosed through the appropriate Exchange

4

mechanisms and submissions to the Commission.

2) How often does the Board review and approve the vision and mission? The Corporation reviews its Mission and Vision from time to time as may be needed.

b. DIRECTORSHIP IN OTHER COMPANIES

(i) Directorship in the Company’s Group2

Identify, as and if applicable, the members of the company’s Board of Directors who hold the office of director in other companies within its Group:

Director’s Name Corporate Name of the

Group Company

Type of Directorship (Executive, Non-Executive, Independent). Indicate if

director is also the Chairman.


Philippine Long Distance Telephone Company

Chairman, Non-Executive Director

PLDT Communications and Energy Ventures Inc. (PCEV)

Smart Communications, Inc.

ePLDT, Inc.

Landco Pacific Corporation

Maynilad Water Services Corporation

Philex Mining Corporation

Manila Electric Company

Metro Pacific Tollways Corporation

Manila North Tollways Corporation

Medical Doctors, Inc. (Makati Medical Center)

Colinas Verdes, Inc.(Cardinal Santos Medical Center)

Davao Doctors, Inc.

Beacon Electric Asset Holdings, Inc

Riverside Medical Center, Inc

Our Lady of Lourdes Hospital

Asian Hospital, Inc

Mediaquest, Inc

Associated Broadcasting Corporation (TV5)

Light Rail Manila Holdings Inc.


2 The Group is composed of the parent, subsidiaries, associates and joint ventures of the company.

5

Jose Ma. K. Lim

Beacon Electric Asset Holdings Inc.

Non-Executive Director




Tollways Management Corporation

Maynilad Water Services, Inc.

Indra Philippines

Meralco Powergen



Our Lady of Lourdes Hospital

Asian Hospital

Automated Fare Collection Services, Inc.



Davao Doctors Hospital (Clinica Hilario) Inc. Chairman, Non-Executive Director

Riverside Medical Center

Metro Strategic Infrastructure Holdings, Inc. Executive Director, President

Edward S. Go

PLDT Communications and Energy Ventures, Inc. (PCEV) Independent Director

TV5 Network, Inc. (formerly ABC Development Corporation)

Non-Executive Director Mediaquest Holdings, Inc.

Cignal TV Inc.(formerly Mediascape, Inc.)



Executive Director


Colinas Healthcare Inc.

East Manila Hospital Managers Corporation

Asian Hospital Inc.

Riverside Medical Center Inc.

Riverside College Inc.

Davao Doctors Hospital (Clinica Hilario) Inc.

Davao Doctors College Inc.

De Los Santos Medical Center Inc.

De Los Santos – STI Megaclinic Inc.

Central Luzon Doctors Hospital Inc.



Independent Director Metro Pacific Tollways Corporation

Tollways Management Corporation

6

Philippine Long Distance Tel. Co.



Executive Director, President and CEO Tollways Management Corporation

Metro Pacific Tollways Development Corporation



Cavitex Infrastructure Corp.

PEA Tollway Corporation

PLDT Subic Telecom, Inc.

PLDT Clark Telecom, Inc.

TAHANAN

PLDT Global Corporation

Pacific Global One Aviation Company Inc.

Edward A Tortorici Philex Mining Corporation

Non-Executive Director Maynilad Water Services, Inc.

Ray C. Espinosa

Mediaquest Holdings, Inc.


ABC Development Corporation

Mediascape, Inc.

Digital Telecommunications Philippines

Digitel Crossing

Nation Broadcasting Corporation Executive Director, President

Philippine Long Distance Telephone Company Executive Director


Meralco PowerGen Corporation


Philippine Telecommunications Investment Corp.

Metro Pacific Assets Holdings

BTF Holdings, Inc

Inc Metro Pacific Resources, Inc. - Director

Metro Pacific Holdings

Two Rivers Pacific Holdings Corporation

Tahanan Mutual Building and Loan Association, Inc.


Cignal TV, Inc. (formerly Mediascape, Inc.)

Media5 Marketing Corporation

Robert C. Nicholson Philex Mining Corporation

Non-Executive Director Philex Petroleum Corporation

Victorico P. Vargas Maynilad Water Services, Inc. Executive Director, President

PLDT Global Corporation Non-Executive Director

7

Metropac Water Investments Corporation

Philippine Hydro, Inc.

Washington Z. SyCip None

David J. Nicol




Asian Hospital, Inc.

MPIC Infrastructure Holdings, Inc.


Automated Fare Collection Services, Inc.


Antonio A. Picazo None

Amado R. Santiago III None

Lydia B. Echauz

Philippine Long Distance Telephone Company

Independent Director

Cignal TV, Inc. (formerly Mediascape, Inc.)


ABC Development Corporation

BTF Holdings, Inc

(ii) Directorship in Other Listed Companies Identify, as and if applicable, the members of the company’s Board of Directors who are also directors of publicly-listed companies outside of its Group:

Director’s Name Name of Listed Company Type of Directorship (Executive, Non-Executive, Independent). Indicate if

director is also the Chairman.

Manuel V. Pangilinan None None

Jose Ma. K. Lim None None

David J. Nicol None None

Edward S. Go None None

Augusto P. Palisoc, Jr. None None

Antonio A. Picazo None None

Amado R. Santiago III None None


Petron Corporation


Bank of Philippine Islands

First Philippine Holdings Corporation

Robinsons Land Corporation

GMA Network, Inc.

GMA Holdings, Inc.

8

Jollibee Foods Corporation

Asian Terminals

Ramoncito S. Fernandez None None

Lydia B. Echauz Far Eastern University Inc. Non-executive Director

Edward A Tortorici None None

Ray C. Espinosa Lepanto Consolidated Mining Corporation Independent Director

Philweb Corporation Non-Executive Director, Vice Chairman

Robert C. Nicholson None None

Victorico P. Vargas None None

Washington Z. SyCip

Lopez Holdings Corporation

Independent Director Belle Corporation

First Philippine Holdings Corporation

Highlands Prime Inc.

Century Properties Group Inc.

Cityland Development Corp. Chairman, Independent Director

MacroAsia Corporation Chairman, Non-Executive Director

Philippine National Bank Non-Executive Director

(iii) Relationship within the Company and its Group

Provide details, as and if applicable, of any relation among the members of the Board of Directors, which links them to significant shareholders in the company and/or in its group: The Corporation has no other significant employee other than its Executive Officers. None of the aforementioned Directors or Executive Officers or persons nominated or chosen by the Corporation to become Directors or Executive Officers is related to the others by consanguinity or affinity within the fourth civil degree.

Director’s Name Name of the Significant Shareholder Description of the relationship

None None None

9

(iv) Has the company set a limit on the number of board seats in other companies (publicly listed, ordinary and companies with secondary license) that an individual director or CEO may hold simultaneously? In particular, is the limit of five board seats in other publicly listed companies imposed and observed? If yes, briefly describe other guidelines:

Guidelines Maximum Number of Directorships in other

companies

Executive Director

The Corporation’s Revised Manual of Corporate Governance states a provision that Corporation’s Board may consider the adoption of guidelines on the number of directorships that its members can hold in stock and non-stock corporations. The optimum number should take into consideration the capacity of a director to diligently and efficiently perform his duties and responsibilities. (Article 3. Board Governance, Section B. Multiple Board Seats)

The Corporation has not set a limit, although the Corporation’s Revised Manual of Corporate Governance states that the optimum number should take into consideration the capacity of a non-director to diligently and efficiently perform his duties and responsibilities. (Article 3. Board Governance, Section B. Multiple Board Seats)


The Corporation’s Revised Manual of Corporate Governance contains a provision that Corporation’s Board may consider the adoption of guidelines on the number of directorships that its members can hold in stock and non-stock corporations. The optimum number should take into consideration the capacity of a director to diligently and efficiently perform his duties and responsibilities. (Article 3. Board Governance, Section B. Multiple Board Seats)

The Corporation has not set a limit, although the Corporation’s Revised Manual of Corporate Governance states that the optimum number should take into consideration the capacity of a non-executive director to diligently and efficiently perform his duties and responsibilities. (Article 3. Board Governance, Section B. Multiple Board Seats)

CEO

The Corporation’s Revised Manual of Corporate Governance states that for the CEO and other executives, they may be covered by a lower indicative limit for membership in other boards. A similar limit may apply to independent or non-executive directors who, at the same time, serve as full-time executives in other corporations. (Article 3. Board Governance, Section B. Multiple Board Seats)

The Corporation has not set a limit, although the Corporation’s Revised Manual of Corporate Governance states that the optimum number should take into consideration the capacity of the CEO to diligently and efficiently perform his duties and responsibilities. (Article 3. Board Governance, Section B. Multiple Board Seats)

c. SHAREHOLDINGS IN THE COMPANY

Complete the following table on the members of the Company’s Board of Directors who directly and indirectly own shares in the company: The following are the number of common shares of stock owned of record and beneficially by the directors of the Company, and the percentage of shareholdings of each, as at February 28, 2015:

10

Name of Director Number of Direct

shares

Number of Indirect shares / Through (name of record owner)

% of Capital Stock

Manuel V. Pangilinan 1 None 0.00%

Jose Ma. K. Lim 11,000,001 None 0.04%

David J. Nicol 7,250,001 None 0.03%

Lydia B. Echauz 30,000 None 0.00%

Ray C. Espinosa 1 None 0.00%

Ramoncito S. Fernandez 5,862,001 None 0.02%

Edward S. Go 500,000 None 0.00%

Robert C. Nicholson 1 None 0.00%

Augusto P. Palisoc, Jr. 10,000,001 None 0.04%

Artemio V. Panganiban 250,001 None 0.00%

Antonio A. Picazo 1,001 None 0.00%

Amado R. Santiago III 2,500,001 None 0.01%

Edward A. Tortorici 10,729,596 None 0.04%

Victorico P. Vargas 4,500,001 None 0.00%

Washington Z. SyCip 1 None 0.00%

TOTAL 52,622,608 None

2. CHAIRMAN AND CEO

(a) Do different persons assume the role of Chairman of the Board of Directors and CEO? If no, describe the checks and balances laid down to ensure that the Board gets the benefit of independent views.

Yes X No (v)

Identify the Chair and CEO:

Chairman of the Board Manuel V. Pangilinan

CEO/President Jose Ma. K. Lim

(b) Roles, Accountabilities and Deliverables

1. Define and clarify the roles, accountabilities and deliverables of the Chairman and CEO.

11

The roles of the Chairman and CEO is separated to foster and appropriate balance of power, increased accountability and better capacity for independent decision-making by the Board. The summary of the roles, accountabilities and deliverables of the Chairman and the Chief Executive Officer as defined in the Corporation’s Amended By-Laws, and Revised Manual of Corporate Governance is stated in the table shown below.

Chairman Chief Executive Officer

Roles

The Chairman’s roles are as follows: a. Preside at the meetings of the directors and the

stockholders. b. Ensure that the meetings of the Board are held in

accordance with the By-Laws or as the Chair may deem necessary.

c. Supervise the preparation of the agenda of the meeting in coordination with the Corporate Secretary, taking into consideration the suggestions of the CEO, Management and the directors; and

d. Maintain qualitative and timely lines of communication and information between the Board and Management

e. Exercise such power and perform such duties as the Board of Directors may assign to him.

The Chief Executive Officer’s (CEO) roles are as follows: a. To preside at the meetings of the Board of Directors and of the

stockholders in the absence of the Chairman or Vice Chairman of the Board of Directors.

b. To initiate and develop corporate objectives and policies and formulate long range projects, plans and programs for the approval of the Board of Directors including those for executive training, development and compensation.

c. Administer and direct the day-to-day business of the Corporation. d. To have general supervision and management of the business affairs

and property of the Corporation. e. To ensure that the administrative and operational policies of the

corporation are carried out under his supervision and control. f. Subject to guidelines prescribed by the law, to appoint, remove,

suspend, or discipline employees of the Corporation, prescribe their duties, and determine their salaries.

g. To oversee the preparation of budgets and the statements of accounts of the Corporation.

h. To prepare such statements and reports of the Corporation as may be required of him by law.

i. To represent the Corporation at all functions and proceedings. j. To execute on behalf of the Corporation all contracts, agreements and

other instruments affecting the interests of the Corporation which require the approval of the Board of Directors, except as otherwise directed by the Board of Directors.

k. To make reports to the Board of Directors and stockholders. l. To sign certificates of stocks. m. To perform such other duties as are incident to his office or are

entrusted to him by the Board of Directors.

Accountabilities The Chairman is accountable to all shareholders of the The CEO is accountable to the Board of Directors in achieving goals and

12

Corporation. targets set by the Corporation.

Deliverables

The following are the deliverables of the Chairman: a. Ensure that the meetings of the Board are held in

accordance with the By-Laws or as the Chair may deem necessary.

b. Supervise the preparation of the agenda of the meeting in coordination with the Corporate Secretary, taking into consideration the suggestions of the CEO, Management and the directors; and

c. Maintain qualitative and timely lines of communication and information between the Board and Management

The Chief Executive Officer’s (CEO) roles are as follows: a. To initiate and develop corporate objectives and policies and formulate

long range projects, plans and programs for the approval of the Board of Directors including those for executive training, development and compensation.

b. Administer and direct the day-to-day business of the Corporation. c. To have general supervision and management of the business affairs and

property of the Corporation. d. To ensure that the administrative and operational policies of the

corporation are carried out under his supervision and control. e. To oversee the preparation of budgets and the statements of accounts

of the Corporation. f. To prepare such statements and reports of the Corporation as may be

required of him by law. g. To represent the Corporation at all functions and proceedings. h. To execute on behalf of the Corporation all contracts, agreements and

other instruments affecting the interests of the Corporation which require the approval of the Board of Directors, except as otherwise directed by the Board of Directors.

i. To make reports to the Board of Directors and stockholders. j. To sign certificates of stocks.

2. Explain how the Board of Directors plans for the succession of the CEO/Managing Director/President and the top key management positions?

The Board has the responsibility of adopting an effective succession planning program for Management. As part of its internal control responsibilities, the Board evaluates the proposed senior management appointments and reviews the Corporation’s management succession plan. The First Pacific Leadership Academy (FPLA), the group’s executive learning and development arm, is in charge of high level executive succession planning. FPLA gathers data on current and potential leaders across the First Pacific group of companies, and create development programs for those who are considered high potentials for future CEO/President positions. The academy continually conducts reviews with the Corporation’s Chairman on the development of the pipeline and replacing vacant key positions. Key leaders within the group are regularly rotated to ensure that high potentials are being developed.

3. OTHER EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS

(a) Does the company have a policy of ensuring diversity of experience and background of directors in the board? Please explain. The Corporation has a Diversity Policy, as disclosed in its website, which states the following:

13

“MPIC embraces and promotes diversity at all levels, including at Board level. Diversity, in terms of age, gender, culture and religion, exists in the workplace of the Corporation. The Corporation is committed to providing opportunities that allow individuals to reach their full potential irrespective of individual background or difference. In selecting new directors, The Corporation takes diversity of background into account in, addition to experience, skills and qualifications. Each year the Board will set measurable objectives to determine compliance with diversity related initiatives. The Nomination Committee will monitor and evaluate implementation thereof. “

(b) Does it ensure that at least one non-executive director has an experience in the sector or industry the company belongs to? Please explain. Yes, the Corporation ensures that least one non-executive director has an experience in the sector or industry the company belongs to. The non-executive directors that have experiences in investments are Mr. Edward S. Go (Independent Director) who has over 40 years of management experience in banking and finance; and Atty. Ray C. Espinosa who is a President and CEO of various companies within the group and who holds directorships (either as Executive, Non-Executive or Independent Director) in different publicly listed corporations. (c) Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and Independent Directors:

Executive Non-Executive Independent Director

Roles

The Executive director is a director who is also the head of a department or unit of the Corporation or performs any work related to its operation. The following are the roles of an Executive Director as stated in the Corporation’s By-Laws and Revised Manual of Corporate Governance:

It is the Board’s responsibility to foster the long-term success of the corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interests of its stockholders.

The Board should formulate the corporation’s vision, mission, strategic objectives, policies and procedures that shall guide its activities, including the means to effectively monitor Management’s performance.

The Non-executive director is a director who is not the head of a department or unit of the corporation nor performs any work related to its operation. The following are the roles of a Non-Executive Director as stated in the Corporation’s By-Laws and Revised Manual of Corporate Governance:

It is the Board’s responsibility to foster the long-term success of the corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interests of its stockholders.


An Independent director is a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to; materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director. The following are the roles of an Independent Director as stated in the Corporation’s By-Laws and Revised Manual of Corporate Governance:

Independent directors should always attend Board meetings. Unless otherwise provided in the By-laws, their absence shall not affect the quorum requirement. However, the Board may, to promote transparency, require the presence of at least one independent director in all its meetings.

It is the Board’s responsibility to foster the long-term success of the corporation, and to sustain its competitiveness and

14

To ensure a high standard of best practice for the corporation and its stockholders, the Board should conduct itself with honesty and integrity in the performance of, among others, the following duties and functions:

a. Implement a process for the selection of directors who can add value and contribute independent judgment to the formulation of sound corporate strategies and policies .Appoint competent, professional, honest and highly-motivated management officers. Adopt an effective succession planning program for Management.

b. Provide sound strategic policies and guidelines to the corporation on major capital expenditures. Establish programs that can sustain its long-term viability and strength. Periodically evaluate and monitor the implementation of such policies and strategies, including the business plans, operating budgets and Management’s overall performance.

c. Ensure the corporations faithful compliance with all applicable laws, regulations and best business practices.

d. Establish and maintain an investor relations program that will keep the stockholders informed of important developments in the corporation. If feasible, the corporations CEO or chief financial officer shall exercise oversight responsibility over this program.




c. Ensure the corporations faithful compliance with all applicable laws, regulations and best business practices.


e. Identify the sectors in the community in which the corporation operates or

profitability in a manner consistent with its corporate objectives and the best interests of its stockholders.





c. Ensure the corporations faithful

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e. Identify the sectors in the community in which the corporation operates or are directly affected by its operations, and formulate a clear policy of accurate, timely and effective communication with them.

f. Adopt a system of check and balance within the Board. A regular review of the effectiveness of such system should be conducted to ensure the integrity of the decision-making and reporting processes at all times. There should be a continuing review of the corporation’s internal control system in order to maintain its adequacy and effectiveness.

g. Identify key risk areas and performance indicators and monitor these factors with due diligence to enable the corporation to anticipate and prepare for possible threats to its operational and financial viability.

h. Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the corporation and its parent company, joint ventures, subsidiaries, associates, affiliates, major stockholders, officers and directors, including their spouses, children and dependent siblings and parents, and of interlocking director relationships by members of the Board.

i. Constitute an Audit Committee and such other committees it deems necessary to assist the Board in the performance of its duties and responsibilities.

are directly affected by its operations, and formulate a clear policy of accurate, timely and effective communication with them.



h. Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the corporation and its parent company, joint ventures, subsidiaries, associates, affiliates, major stockholders, officers and directors, including their spouses, children and dependent siblings and parents, and of interlocking director relationships by members of the Board.


j. Establish and maintain an alternative dispute resolution system in the

compliance with all applicable laws, regulations and best business practices.


e. Identify the sectors in the community in which the corporation operates or are directly affected by its operations, and formulate a clear policy of accurate, timely and effective communication with them.



h. Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the corporation and its parent company, joint ventures, subsidiaries, associates, affiliates, major stockholders, officers and directors, including their spouses, children and dependent siblings and

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j. Establish and maintain an alternative dispute resolution system in the corporation that can amicably settle conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including the regulatory authorities.

k. Meet at such times or frequency as may be needed. The minutes of such meetings should be duly recorded. Independent views during Board meetings should be encouraged and given due consideration.

l. Keep the activities and decisions of the Board within its authority under the articles of incorporation and by-laws, and in accordance with existing laws, rules and regulations.

m. Appoint a Compliance Officer who shall have the rank of at least vice president. In the absence of such appointment, the Corporate Secretary, preferably a lawyer shall act as Compliance Officer.

A director’s office is one of trust and confidence. A director should act in the best interest of the corporation in a manner characterized by transparency, accountability and fairness. He should also exercise leadership, prudence and integrity in directing the corporation towards sustained progress. A director should observe the following norms of conduct:

a. Conduct fair business transactions with the corporation, and ensure that his personal interest does not conflict

corporation that can amicably settle conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including the regulatory authorities.




A director’s office is one of trust and confidence. A director should act in the best interest of the corporation in a manner characterized by transparency, accountability and fairness. He should also exercise leadership, prudence and integrity in directing the corporation towards sustained progress. A director should observe the following norms of conduct:

a. Conduct fair business transactions with the corporation, and ensure that his personal interest does not conflict with the interests of the corporation.

b. Devote the time and attention

parents, and of interlocking director relationships by members of the Board.


j. Establish and maintain an alternative dispute resolution system in the corporation that can amicably settle conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including the regulatory authorities.




A director’s office is one of trust and confidence. A director should act in the best interest of the corporation in a manner characterized by transparency, accountability and fairness. He should also exercise leadership, prudence and integrity in directing the corporation towards

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with the interests of the corporation. b. Devote the time and attention

necessary to properly and effectively perform his duties and responsibilities.

c. Act judiciously. d. Exercise independent judgment. e. Have a working knowledge of the

statutory and regulatory requirements that affect the corporation, including its articles of incorporation and bylaws, the rules and regulations of the Commission and, where applicable, the requirements of relevant regulatory agencies.

f. Observe confidentiality.

necessary to properly and effectively perform his duties and responsibilities.




sustained progress. A director should observe the following norms of conduct:

a. Conduct fair business transactions with the corporation, and ensure that his personal interest does not conflict with the interests of the corporation.

b. Devote the time and attention necessary to properly and effectively perform his duties and responsibilities.




Accountabilities

Executive directors are accountable to the shareholders of the Corporation as they are involved in the day-to-day activities of the Company and are responsible for execution of business strategies and plans.

Non-Executive Directors are accountable to the shareholders of the Corporation as they are part of the Board which has responsibility to foster the long-term success of the corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interests of its stockholders.

Independent directors also have the same accountability to the shareholders. They are expected to be independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director. As Independent Directors, as much as possible, they are expected to be in attendance during board meetings to promote transparency and independence.

Deliverables Improved shareholder value. Improved shareholder value. Improved shareholder value.

(d) Provide the company’s definition of “independence” and describe the company’s compliance to the definition.

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In compliance with Corporation’s By-Laws and Revised Manual of Corporate Governance, the Board shall be composed of at least five (5), but not more than fifteen (15), members who are elected by the stockholders. At least two (2) or twenty percent (20%) of the Board shall be composed of Independent directors, while the rest of the members is a combination of executive and non-executive directors. An Independent director is a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director. The Corporation has fifteen (15) directors, four (4) of which are Independent.

(e) Does the company have a term limit of five consecutive years for independent directors? If after two years, the company wishes to bring back an independent

director who had served for five years, does it limit the term for no more than four additional years? Please explain.

The Corporation’s By-Laws stipulates that the Board of Directors shall be elected during each regular meeting of stockholders and shall hold office for (1) year and until their successors are elected. The Nomination Committee formulates screening policies to enable the committee to effectively review the qualification of the nominees for independent directors, and conduct nominations for independent directors prior to the stockholders’ meeting.

4. CHANGES IN THE BOARD OF DIRECTORS (EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS)

e. Resignation/Death/Removal Indicate any changes in the composition of the Board of Directors that happened during the period: No Director has resigned or declined to stand for re-election to the Board of Directors since the date of the last annual stockholders’ meeting due to disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

Name Position Date of Cessation Reason

None None None None

(b) Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement and Suspension

1) Describe the procedures for the selection/appointment, re-election, disqualification, removal, reinstatement and suspension of the members of the Board of Directors. Provide details of the processes adopted (including the frequency of election) and the criteria employed in each procedure:

The following are the procedures for the selection/appointment, re-election, disqualification, removal, reinstatement and suspension of the members of the Board of Directors as taken from the Securities and Regulation Code (SRC), the Corporation’s By-Laws and Revised Manual of Corporate Governance.

Procedure Process Adopted Criteria

a. Selection/Appointment

(i) Executive Company By-Laws Company By-Laws

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Directors

Article III Section 3 Election and Term The Board of Directors shall be elected during each regular meeting of stockholders and snail hold office for one (1) year and until their successors are elected and qualified. A nomination committee is hereby created which may be organized from time to time upon determination of the Board of Directors. The nomination committee shall be composed of at least three (3) members, one of whom shall be an independent director. The nomination committee shall have the following functions: (A) formulate screening policies to enable the committee to effectively review the qualification of the nominees for independent directors; and (B) conduct nominations for independent directors prior to the stockholders’ meeting in accordance with the procedures set forth in Rule 38 of the Amended Implementing Rules and Regulations of the Securities and Regulation Code, as the same may be amended from time to time.

Article III Section 2 Qualifications of the Members of the Board Any person having at least one share of stock registered in his name in the books of the Corporation may be nominated and elected to the Board of Directors, provided, however, that no person shall qualify or be eligible for nomination or election to the Board of Directors if he is engaged in any business which competes with or is antagonistic to that of the Corporation or any of its subsidiaries or affiliates. Without limiting the generality of the foregoing, a person shall be deemed to be so engaged:

i. if he is an officer, manager or controlling person of, or the owner (either of record or beneficial) of 20% or more of any outstanding class of shares of any corporation (other than one in which this Corporation owns at least 30% of the capital stock) engaged in business which the Board, by at least two-thirds (2/3) vote determines to be competitive or antagonistic to that of the Corporation or any of its subsidiaries or affiliates;

ii. if he is an officer, manager or controlling person of, or the owner (either of record or beneficial) of 20% or more of any outstanding class of shares of, any corporation or entity engaged in any line of business if the Corporation or any of its subsidiaries or affiliates, when in the judgment of the Board, by at least two-thirds (2/3) vote, the law against combinations in restraint of trade shall be violated by such person’s membership in the Board of Directors; or

iii. if the Board, in the exercise of its judgment in good faith, determines by at least two-thirds (2/3) vote that he is the nominee of any person set forth in (i) or (ii).

In determining whether or not a person is a controlling person, beneficial owner or nominee of another, the Board may take into account such factors as business and family relationships. For proper implementation of this provision, all nominations for election for Directors by the stockholders shall be submitted in writing to the Board of Directors and be received at the Corporation’s principal place of business at least thirty (30) working days before the date of the regular or special meeting of stockholders for the purpose of electing directors.

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Revised Manual of Corporate Governance Article 3 Part D. Qualifications of Directors

In addition to the qualifications for membership in the Board provided for in the Corporation Code, Securities Regulation Code and other relevant laws, the Board may provide for additional qualifications which include, among others, the following:

(i) College education or equivalent academic degree; (ii) Practical understanding of the business of the corporation; (iii) Membership in good standing in relevant industry, business or

professional Organizations; and (iv) Previous business experience.

(ii) Non-Executive Directors

Company By-Laws Article III Section 3 Election and Term The Board of Directors shall be elected during each regular meeting of stockholders and snail hold office for one (1) year and until their successors are elected and qualified. A nomination committee is hereby created which may be organized from time to time upon determination of the Board of Directors. The nomination committee shall be composed of at least three (3) members, one of whom shall be an independent director. The nomination committee shall have the following functions: (A) formulate screening policies to enable the committee to effectively review the qualification of the nominees for independent directors; and (B) conduct nominations for independent directors prior to the stockholders’ meeting in accordance with the procedures set forth in Rule 38 of the Amended Implementing Rules and Regulations of the Securities and Regulation Code, as the same may be amended from time to time.

Company By-Laws Article III Section 2 Qualifications of the Members of the Board Any person having at least one share of stock registered in his name in the books of the Corporation may be nominated and elected to the Board of Directors, provided, however, that no person shall qualify or be eligible for nomination or election to the Board of Directors if he is engaged in any business which competes with or is antagonistic to that of the Corporation or any of its subsidiaries or affiliates. Without limiting the generality of the foregoing, a person shall be deemed to be so engaged:




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Revised Manual of Corporate Governance Article 3 Part D. Qualifications of Directors In addition to the qualifications for membership in the Board provided for in the Corporation Code, Securities Regulation Code and other relevant laws, the Board may provide for additional qualifications which include, among others, the following:



(iii) Independent Directors

Company By-Laws Article III Section 3 Election and Term The Board of Directors shall be elected during each regular meeting of stockholders and snail hold office for one (1) year and until their successors are elected and qualified. A nomination committee is hereby created which may be organized from time to time upon determination of the Board of Directors. The nomination committee shall be composed of at least three (3) members, one of whom shall be an independent director.

Company By-Laws Article III Section 2A Independent Directors The Corporation shall have at least two (2) independent directors or at least twenty percent (20%) of the entire Board membership, whichever is lesser. The independent directors shall have all the qualifications and none of the disqualifications set forth in Section 38 of the Securities and Regulation Code and its Implementing Rules and Regulations, as the same may be amended from time to time.

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The nomination committee shall have the following functions: (A) formulate screening policies to enable the committee to effectively review the qualification of the nominees for independent directors; and (B) conduct nominations for independent directors prior to the stockholders’ meeting in accordance with the procedures set forth in Rule 38 of the Amended Implementing Rules and Regulations of the Securities and Regulation Code, as the same may be amended from time to time.

Republic Act No. 8799 Amended Implementing Rules and Regulation of the Securities Regulation Code (SRC) Rule 38 – Requirements on Nomination and Election of Independent Directors, Item (2)


2. As used in Section 38 of the Code, independent director means a person

who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in any covered company and includes, among others, any person who: A. Is not a director or officer of the covered company or of its related

companies or any of its substantial shareholders except when the same shall be an independent director of any of the foregoing;

B. Does not own more than two percent (2%) of the shares of the covered company and/or its related companies or any of its substantial shareholders;

C. Is not related to any director, officer or substantial shareholder of the covered company, any of its related companies or any of its substantial shareholders. For this purpose, relatives include spouse, parent, child, brother, sister, and the spouse of such child, brother or sister;

D. Is not acting as a nominee or representative of any director or substantial shareholder of the covered company, and/or any of its related companies and/or any of its substantial shareholders, pursuant to a Deed of Trust or under any contract or arrangement;

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E. Has not been employed in any executive capacity by the covered company, any of its related companies and/or by any of its substantial shareholders within the last five (5) years;

F. Is not retained, either personally or through his firm or any similar entity, as professional adviser, by that covered company, any of its related companies and/or any of its substantial shareholders, within the last five (5) years; or

G. Has not engaged and does not engage in any transaction with the covered company and/or with any of its related companies and/or with any of its substantial shareholders, whether by himself and/or with other persons and/or through a firm of which he is a partner and/or a company of which he is a director or substantial shareholder, other than transactions which are conducted at arm’s length and are immaterial.





b. Re-appointment

(i) Executive Directors

Company By-Laws Article III Section 3 Election and Term The Board of Directors shall be elected during each regular meeting of stockholders and snail hold office for one (1) year and until their successors are elected and qualified. A nomination committee is hereby created which may be organized from time to time upon determination of the Board of Directors. The nomination committee shall be composed of at least three (3) members, one of whom


i. if he is an officer, manager or controlling person of, or the owner (either

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shall be an independent director. The nomination committee shall have the following functions: (A) formulate screening policies to enable the committee to effectively review the qualification of the nominees for independent directors; and (B) conduct nominations for independent directors prior to the stockholders’ meeting in accordance with the procedures set forth in Rule 38 of the Amended Implementing Rules and Regulations of the Securities and Regulation Code, as the same may be amended from time to time.

of record or beneficial) of 20% or more of any outstanding class of shares of any corporation (other than one in which this Corporation owns at least 30% of the capital stock) engaged in business which the Board, by at least two-thirds (2/3) vote determines to be competitive or antagonistic to that of the Corporation or any of its subsidiaries or affiliates;

ii. if he is an officer, manager or controlling person of, or the owner (either

of record or beneficial) of 20% or more of any outstanding class of shares of, any corporation or entity engaged in any line of business if the Corporation or any of its subsidiaries or affiliates, when in the judgment of the Board, by at least two-thirds (2/3) vote, the law against combinations in restraint of trade shall be violated by such person’s membership in the Board of Directors; or

iii. if the Board, in the exercise of its judgment in good faith, determines by

at least two-thirds (2/3) vote that he is the nominee of any person set forth in (i) or (ii).






25








26









2. As used in Section 38 of the Code, independent director means a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a

27

director in any covered company and includes, among others, any person who: A. Is not a director or officer of the covered company or of its related










(i) College education or equivalent academic degree; (ii) Practical understanding of the business of the corporation;

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(iii) Membership in good standing in relevant industry, business or professional Organizations; and

(iv) Previous business experience.

Securities and Exchange Commission (SEC) Memorandum Circular No. 9, Series of 2011 on Term Limits for Independent Directors.

1. There shall be no limit in the number of covered companies that a

person may be elected as Independent Director (ID), except in business conglomerates where an ID can be elected to only five (5) companies of the conglomerate, i.e., parent company, subsidiary or affiliate;

2. IDs can serve as such for five (5) consecutive years, provided that service for a period of at least six (6) months shall be equivalent to one (1) year, regardless of the manner by which the ID position was relinquished or terminated;

3. After completion of the five-year service period, an ID shall be ineligible for election as such in the same company unless the ID has undergone a “cooling off” period of two (2) years, provided, that during such period, the ID concerned has not engaged in any activity that under existing rules disqualifies a person from being elected as ID in the same company;

4. An ID re-elected as such in the same company after the “cooling off” period can serve for another five (5) consecutive years under the conditions mentioned in paragraph 2 above;

5. After serving as ID for ten (10) years, the ID shall be perpetually barred from being elected as such in the same company, without prejudice to being elected as ID in other companies outside of the business conglomerate, where applicable, under the same conditions provided for in this Circular.

c. Permanent Disqualification


Revised Manual of Corporate Governance Article 3 Part E. Disqualification of Directors, Item (1) Permanent Disqualification

The following shall be grounds for the permanent disqualification of a director:

(i) Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (c) arises out of his fiduciary relationship with a bank, quasi-

29

bank, trust company, investment house or as an affiliated person of any of them;

(ii) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Commission or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in subparagraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities. The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the Commission or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;

(iii) Any person convicted by final judgment or order by a court or competent administrative body of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts;

(iv) Any person who has been adjudged by final judgment or order of the Commission, court, or competent administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of any provision of the Corporation Code, Securities Regulation Code or any other law administered by the Commission or BSP, or any of its rule, regulation or order;

(v) Any person earlier elected as independent director who becomes an officer, employee or consultant of the same corporation;

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(vi) Any person judicially declared as insolvent; (vii) Any person found guilty by final judgment or order of a foreign court

or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated in sub-paragraphs (i) to (v) above;

(viii) Conviction by final judgment of an offense punishable by imprisonment for more than six (6) years, or a violation of the Corporation Code committed within five (5) years prior to the date of his election or appointment.




(i) Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (c) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as an affiliated person of any of them;

(ii) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Commission or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in subparagraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities. The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation

31

issued by the Commission or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;










(i) Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (c) arises out of his fiduciary relationship with a bank, quasi-

32

bank, trust company, investment house or as an affiliated person of any of them;





(vi) Any person judicially declared as insolvent;

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(vii) Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated in sub-paragraphs (i) to (v) above;


d. Temporary Disqualification


Revised Manual of Corporate Governance Article 3 Part E. Disqualification of Directors, Item (2) Temporary Disqualification

The Board may provide for the temporary disqualification of a director for any of the following reasons:

(i) Refusal to comply with the disclosure requirements of the Securities Regulation Code and its implementing Rules and Regulations. The disqualification shall be in effect as long as the refusal persists.

(ii) Absence in more than fifty (50) percent of all regular and special meetings of the Board during his incumbency, or any twelve (12) month period during the said incumbency, unless the absence is due to illness, death in the immediate family or serious accident. The disqualification shall apply for purposes of the succeeding election.

(iii) Dismissal or termination for cause as director of any corporation covered by this Code. The disqualification shall be in effect until he has cleared himself from any involvement in the cause that gave rise to his dismissal or termination.

(v) If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final. A temporarily disqualified director shall, within sixty (60) business days from such disqualification, take the appropriate action to remedy or correct the disqualification. If he fails or refuses to do so for unjustified reasons, the disqualification shall become permanent.





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(v) If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final. A temporarily disqualified director shall, within sixty (60) business days from such disqualification, take the appropriate action to remedy or correct the disqualification. If he fails or refuses to do so for unjustified reasons, the disqualification shall become permanent.







(iv) if the beneficial equity ownership of an independent director in the corporation or its subsidiaries and affiliates exceeds two percent of its subscribed capital stock. The disqualification shall be lifted if the limit is later complied with.

(v) If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final. A temporarily disqualified director shall, within sixty (60) business days from such disqualification, take the appropriate action to remedy or correct the

35

disqualification. If he fails or refuses to do so for unjustified reasons, the disqualification shall become permanent.

e. Permanent Disqualification


Aside from the provisions cited in Section 28 (Removal of directors or trustees) of the Philippine Corporation Code, in the event that an executive director is subject to removal from his directorship, the Company follows the provision of its Revised Manual of Corporate Governance Article 3 Part E. Disqualification of Directors, Item (1) Permanent Disqualification



(ii) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Commission or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in subparagraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities. The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the Commission or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the

36

organization; (iii) Any person convicted by final judgment or order by a court or

competent administrative body of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts;







Aside from the provisions cited in Section 28 (Removal of directors or trustees) of the Philippine Corporation Code, in the event that a non-executive director is subject to removal from his directorship, the Company follows the provision of its Revised Manual of Corporate Governance Article 3 Part E. Disqualification of Directors, Item (1) Permanent Disqualification



(ii) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Commission or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal

37

distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in subparagraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities. The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the Commission or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;

(iii) Any person convicted by final judgment or order by a court or






38



Aside from the provisions cited in Section 28 (Removal of directors or trustees) of the Philippine Corporation Code, in the event that an independent director is subject to removal from his directorship, the Company follows the provision of its Revised Manual of Corporate Governance Article 3 Part E. Disqualification of Directors, Item (1) Permanent Disqualification



(ii) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Commission or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in subparagraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities. The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the Commission or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the

39

organization; (iii) Any person convicted by final judgment or order by a court or







f. Re-instatement


In the event that a removed/suspended executive director is subject to reinstatement as a director of the Company, the Company follows the provision of its Company By-Laws Article III Section 3 Election and Term The Board of Directors shall be elected during each regular meeting of stockholders and snail hold office for one (1) year and until their successors are elected and qualified. A nomination committee is hereby created which may be organized from time to time upon determination of the


i. if he is an officer, manager or controlling person of, or the owner (either of record or beneficial) of 20% or more of any outstanding class of

40

Board of Directors. The nomination committee shall be composed of at least three (3) members, one of whom shall be an independent director. The nomination committee shall have the following functions: (A) formulate screening policies to enable the committee to effectively review the qualification of the nominees for independent directors; and (B) conduct nominations for independent directors prior to the stockholders’ meeting in accordance with the procedures set forth in Rule 38 of the Amended Implementing Rules and Regulations of the Securities and Regulation Code, as the same may be amended from time to time.

shares of any corporation (other than one in which this Corporation owns at least 30% of the capital stock) engaged in business which the Board, by at least two-thirds (2/3) vote determines to be competitive or antagonistic to that of the Corporation or any of its subsidiaries or affiliates;





In the event that a removed/suspended non-executive director is subject to reinstatement as a director of the Company, the Company follows the provision of its Company By-Laws Article III Section 3 Election and Term The Board of Directors shall be elected during each regular meeting of stockholders and snail hold office for one (1) year and until their successors are elected and qualified. A nomination committee is hereby created which may be organized from time to time upon determination of the


i. if he is an officer, manager or controlling person of, or the owner (either of record or beneficial) of 20% or more of any outstanding class of

41


shares of any corporation (other than one in which this Corporation owns at least 30% of the capital stock) engaged in business which the Board, by at least two-thirds (2/3) vote determines to be competitive or antagonistic to that of the Corporation or any of its subsidiaries or affiliates;





In the event that a removed/suspended independent director is subject to reinstatement as a director of the Company, the Company follows the provision of its Company By-Laws Article III Section 3 Election and Term The Board of Directors shall be elected during each regular meeting of stockholders and snail hold office for one (1) year and until their successors are elected and qualified. A nomination committee is hereby created which may be organized from time to time upon determination of the


42



2. As used in Section 38 of the Code, independent director means a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in any covered company and includes, among others, any person who: A. Is not a director or officer of the covered company or of its related






43



g. Suspension


In the event that an executive director is subject to suspension from his duty as a director of the Company, the Company follows the provision of its Revised Manual of Corporate Governance Article 3 Part E. Disqualification of Directors, Item (1) Permanent Disqualification



(ii) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Commission or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in subparagraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities. The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or

44

permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the Commission or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;








In the event that a non-executive director is subject to suspension from his duty as a director of the Company, the Company follows the provision of its Revised Manual of Corporate Governance Article 3 Part E. Disqualification of Directors, Item (1) Permanent Disqualification


(i) Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor

45

broker; or (c) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as an affiliated person of any of them;





46





In the event that an independent director is subject to suspension from his duty as a director of the Company, the Company follows the provision of its Revised Manual of Corporate Governance Article 3 Part E. Disqualification of Directors, Item (1) Permanent Disqualification



(ii) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Commission or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in subparagraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities. The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the Commission or BSP, or has otherwise been restrained to

47

engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;







2) Stockholders' Meeting, Results and Attendance As previously disclosed to the Securities and Exchange Commission (“SEC”) and the Philippine Stock Exchange (“PSE”), the Corporation held its 2014 Annual Stockholders’ Meeting on 30 May 2014. Below are the results of such meeting:

Resolution Approving Dissenting Abstaining

Approval of the Chief Financial Officer’s Report and the Annual Report for the year 2013

100% of SH in attendance 0% of SH in attendance 0% of SH in attendance

Adoption of the Audited Financial Statements for the year ended 31st

December 2013 contained in the Annual Report


48

Ratification of all acts of the Board of Directors and Management for the year 2013


Appointment of the external auditor of the Company for the year 2014 100% of SH in attendance 0% of SH in attendance 0% of SH in attendance

Election of Directors:

Name of Director Votes Received

Manuel V. Pangilinan 20,683,075,913

Jose Ma. K. Lim 21,107,485,620

David J. Nicol 21,107,485,620

Lydia B. Echauz 21,535,400,889

Ray C. Espinosa 21,098,112,321

Ramoncito S. Fernandez 21,107,485,620

Edward S. Go 21,498,790,982

Robert C. Nicholson 20,683,075,913

Augusto P. Palisoc, Jr. 21,107,485,620

Chief Justice Artemio V. Panganiban

20,674,248,020

Antonio A. Picazo 21,099,708,721

Amado R. Santiago III 21,066,693,220

Edward A. Tortorici 20,690,220,913

Victorico P. Vargas 21,107,485,620

Washington Z. SyCip 20,685,128,013

Below is a summary of the attendance in the last stockholders’ meeting:

Type of Meeting Names of Board members /

Officers present Date of Meeting

Voting Procedure (by poll, show of hands, etc.)

% of SH Attending in Person

% of SH in Proxy

Total % of SH attendance

Annual Atty. Amado R. Santiago III Atty. Ray C. Espinosa

30 May 2014 Votes were

counted thru 0.09% 69.69% 69.78%

49

Ms. Lydia B. Echauz Chief Justice Artemio V. Panganiban Mr. Washington Z. SyCip Atty. Antonio A. Picazo Mr. Augusto P. Palisoc, Jr. Mr. Ramoncito S. Fernandez Mr. Victorico P. Vargas Mr. David J. Nicol Mr. Jose Ma. K. Lim

Proxies.

5. ORIENTATION AND EDUCATION PROGRAM

(a) Disclose details of the company’s orientation program for new directors, if any. The Corporation has no formal orientation program for new directors.

(b) State any in-house training and external courses attended by Directors and Senior Management

3 for the past three (3) years:

Name of Director/Officer Date of Training Program Name of Training Institution


12/04/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -

SEC Chairperson Teresita J. Herbosa and Mr. Graham Winter, Makati Shangri-la, Makati City

10/15/2014 Synopsis on Legal and Regulatory issues: Revised Listing Rules on connected transactions.

Graham Winter

04/01/2014 Briefing on Corporate Governance Requirements Under U.S. Laws and Regulations and Foreign Corrupt Practices Act Of 1977

Mr. Garth W. Bray Partner, Sullivan & Cromwell LLP

12/02/2013 Ensuring Effective Board Oversight of Ethics and Compliance: Emerging Trends and Lessons Learned

Mr. Winthrop Swenson

11/19/2012 First Pacific Companies: Navigating the New World of Business

Thomas Donaldson The Wharton School

08/29/2012 Corporate Governance Practices for Listed Company’s Directors Under The New Listing Rules

Ms Cecelia Ng

3 Senior Management refers to the CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the company.

50

Jose Ma. K. Lim





David J. Nicol



08/15/2012 Corporate Governance Asia's First Philippine International CG Forum: Marching Towards Economic Sustainability

Aldrin Monsod Corporate Governance Asia New Initiative Media Limited Rm 2301, 23th Floor, World Wide House 19 Des Voeux Road, Central, Hong Kong

Edward S. Go










8/17/2012 MVP “Back to School Lecture” Series Ateneo de Manila University

8/8-9/2012 Competitive Intelligence & Business Wargaming Kamia Room, G/F, EDSA, Shangri-La

5/21/2012 Innovation Forum: The First 90 Days First Pacific Leadership Academy Antipolo City, Philippines

Scott Anthony

04/18-19/2012 Leading the Self First Pacific Leadership Academy Antipolo City, Philippines

First Pacific Leadership Academy

03/15/2012 Executive Talks: On Higher Ground First Pacific Leadership Academy Antipolo City, Philippines

Archbishop Luis Antonio Tagle

02/02-03/2012 “Future Proofing our Business” First Pacific Leadership Academy

Mr. Karl Ronn and Mr. Bob Johansen, Facilitators thru the invitation of First

51

Antipolo City, Philippines Pacific Leadership Academy

01/12/2012 UBS Global Outlook 2012 Rigodon Ballroom, The Peninsula Manila

Antonio A. Picazo





Amado R. Santiago III 2012 Corporate Governance Course Douglas Henck Vice Chairman of the Asian Corporate Governance Association






03/31/2014 ASEAN Corporate Governance Scorecard Orientation Mr. Ricardo Nicanor N. Jacinto - President & CEO, Institute of Corporate Directors



08/15/2012 Corporate Governance Asia's First Philippine International CG Forum: Marching Towards Economic Sustainability Marriot Hotel, Resorts World Manila, Philippines

Aldrin Monsod Corporate Governance Asia New Initiative Media Limited Rm 2301, 23th Floor, World Wide House, 19 Des Voeux Road, Central, Hong Kong




05/15-17/ 2011 Interoperability and All Electronic Toll Collection Workshop Dallas, Texas, USA

IBTTA

03/1/2011 Orientation Course on Corporate Governance Makati City

The Institute of Corporate Directors

3/1/2011, 3/8/2011, 3/17/2011, 9/5/2011,

9/6/2011

Professional Directors Program Makati City

The Institute of Corporate Directors

52

11/23-24/2011 Evaluating Enterprise Risk Management At Eastwood Richmonde Hotel, Bagumbayan, Q.C.

The Institute of Internal Auditors – Philippines Centre for Professional Development



02/15/2012 Seminar-Workshop on New Media Strategies for Issues Management Discovery Suites, Pasig City

Creative Point International, Inc.

11/8/2012 PPP and Infrastructure Forum New World Hotel, Makati City

British Embassy Manila and The UK Trade and Investment (UKTI)

11/19/2012

First Pacific Companies: Navigating the New World of Business Topic: Corporate Government Enhancement Guest Speaker: Thomas Donaldson, The Wharton School


11/22/2012 PPP: On the Road to Investment Grade Manila Peninsula Hotel, Makati City

Economic Journalists Association of the Philippines (EJAP)

01/14-19/2013 Advanced Management Program Module 1 : Business Executive as Corporate Citizen Venue: Oakwood Hotel, Ortigas

University of Asia and the Pacific

03/4-9/2013 Advanced Management Program Module 2: Business Executive as Global Entrepreneur In Jakarta, Indonesia


04/22-27/2013 Advanced Management Program Module 3: Business Executive as Value Creator In Cebu City


06/19/2013 2013 Mid-Year Business Economics Briefing (Gearing UP for the Asean Economic Community)


07/06/2013 MVP Lecture Series (last session) Chiang-Tan Room,School of Management 111, Ateneo

MVP/Ateneo

08/22/2013 AIM CEO Forum | The Creation of Corporate Culture: “Building Values as the Basis of Corporate Culture” at Meralco Caseroom, Ground floor, AIM Building, Makati

AIM

09/10/2013

11th

MAP International CEO Forum Conference: Sept. 10, 2013 from8am to 5:30pm Rizal Ballroom, Makati Shangrila Hotel, Makati City Conference Theme: Business Beyond Borders: Global Perspectives, Domestic Dynamics

MAP

09/19-26/2013 81st

IBTTA Conference in Vancouver, Canada IBTTA

53

11/07/2013 FPLA’s Series: The Business of Innovation: Transcending Business Through Innovation SMX Convention Center, SM Aura, The Fort


11/27/2013 2013 Year-end Economics Briefing entitled Infrastructure Spending: Sustaining Philippine Growth: Nov. 27, 2013 from 1pm-5pm at Li Seng Giap Auditorium, UA&P


12/02/2013 Joint Corporate Governance Symposium of MVP Companies: Dec. 2 , 10am to 1:30pm Makati Shangrila Hotel


Lydia B. Echauz



01/15-17/2014 Good Governance Summit PICC

12/02/2013 Executive Talks: Corporate Governance Enchancement Session

Manila AB, Makati Shangri-la Hotel

11/28-29/2013 Corporate Governance Seminar The Institute of Corporate Directors



Edward A Tortorici




Graham Winter

12/5/2012 "Synopsis on Legal and Regulatory, First Pacific Company Limited, Hong Kong."

2/2-3/2012 “Future Proofing our Business” First Pacific Leadership Academy Antipolo City, Philippines

Mr. Karl Ronn and Mr. Bob Johansen, Facilitators thru the invitation of First Pacific Leadership Academy

8/29/2012 “Corporate governance practices for listed company’s directors under the new Listing Rules” First Pacific Company Limited, Hong Kong

Cecelia Ng, Director of Ernst & Young

8/29/2012 “Effective risk management and internal controls” First Pacific Company Limited, Hong Kong

Tim Clough, Keith Stephenson and Wong Hung Han, Risk & Controls Solutions, Price Waterhouse Coopers

Ray C. Espinosa 12/04/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -


54






Robert C. Nicholson





08/29/2012 “Corporate governance practices for listed company’s directors under the new Listing Rules” First Pacific Company Limited, Hong Kong

Cecelia Ng, Director of Ernst & Young

08/29/2012 “Effective risk management and internal controls” First Pacific Company Limited, Hong Kong

Tim Clough, Keith Stephenson and Wong Hung Han, Risk & Controls Solutions, Price Waterhouse Coopers

08/30/2012 Directors’ Training Lifestyle Properties Development Limited

Lifestyle Properties Development Limited

Victorico P. Vargas

12/4/2014

Corporate Governance: What to Expect from the SEC;

Corporate Governance Trends and Practices in Advanced

Economies -

SEC Chairperson Teresita J. Herbosa and

Mr. Graham Winter, Makati Shangri-la,

Makati City

11/07/2013

Executive Series: The Business Innovation: Transcending

Business Through Innovation

SMX Convention Center, SM Aura Premier Bonifacio Global City


12/02/213 Corporate Governance Enhancement Session

Makati Shangri-La, Makati City First Pacific Leadership Academy



03/15/2012 Executive Talks: On Higher Ground First Pacific Leadership Academy Antipolo City, Philippines

Archbishop Luis Antonio Tagle

55

04/18-19/2012 Leading the Self First Pacific Leadership Academy Antipolo City, Philippines


05/21/2012 Innovation Forum: The First 90 Days First Pacific Leadership Academy Antipolo City, Philippines

Scott Anthony



Washington Z. SyCip



12/02/2013 Executive Talks: Corporate Governance Enhancement Session

Manila AB, Makati Shangri-la Hotel



(c) Continuing education programs for directors: programs and seminars and roundtables attended during 2014.

Name of Director/Officer Date of Training Program Name of Training Institution





Graham Winter



Jose Ma. K. Lim 12/04/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -


David J. Nicol 12/04/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -


Edward S. Go 12/04/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -


Augusto P. Palisoc, Jr. 12/04/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced

SEC Chairperson Teresita J. Herbosa and Mr. Graham Winter, Makati Shangri-la,

56

Economies - Makati City

Antonio A. Picazo 12/04/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -








Ramoncito S. Fernandez 12/04/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -


Lydia B. Echauz 12/04/2014

Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -


01/15-17/2014 Good Governance Summit PICC

Edward A Tortorici




Graham Winter

Ray C. Espinosa






Robert C. Nicholson 12/04/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -


Victorico P. Vargas 12/4/2014 Corporate Governance: What to Expect from the SEC; SEC Chairperson Teresita J. Herbosa and

57

Corporate Governance Trends and Practices in Advanced

Economies -

Mr. Graham Winter, Makati Shangri-la,

Makati City

Washington Z. SyCip 12/4/2014 Corporate Governance: What to Expect from the SEC; Corporate Governance Trends and Practices in Advanced Economies -


B. CODE OF BUSINESS CONDUCT & ETHICS

1. POLICIES

Discuss briefly the company’s policies on the following business conduct or ethics affecting directors, senior management and employees:

The Corporation’s Code of Business Conduct and Ethics sets forth MPIC’s business principles and values which shall guide and govern all business relationships of MPIC, its directors, officers and employees, including their decisions and actions when performing their respective duties and responsibilities.

Business Conduct & Ethics

Directors Senior Management Employees

(a) Conflict of Interest

1. Avoid any actual or apparent conflicts of interest between your private interest, including the private interest of a member of your family, and the interests of MPIC, unless you have obtained prior approval by the appropriate approving authorities as designated in applicable policies of MPIC. Any actual or apparent conflict of interest, and any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest, should be disclosed to the Corporate Governance Office.

2. Avoid activities and interests that could significantly affect the objective or effective performance of duties and responsibilities in MPIC, including business interests or unauthorized employment outside MPIC, the receipt from and giving of gifts to persons or entities with whom MPIC relates, as well as insider dealing.

3. Be loyal to MPIC. As such, all business decisions and actions must be based on the best interest of MPIC and must not be motivated by personal considerations and other relationships, which may interfere with the exercise of independent judgment.

4. Advance MPIC’s legitimate interests when the opportunity arises. Avoid competing with MPIC on a business opportunity or acquiring an interest adverse to that of MPIC’s. Refrain from taking advantage of Company property, information or position, or opportunities arising from these, for personal gain, to compete with MPIC, or act against the best interest of MPIC. Directors, officers and employees who intend to make use of Company property or services in a manner not solely for the benefit of MPIC should obtain prior approval from appropriate approving authorities as designated in applicable policies of MPIC.

58

5. Refrain from the direct or indirect, grant or arrangements of loans to any director or officer, including loans granted or arranged by MPIC’s subsidiaries and affiliates, unless such grant or arrangement is allowed by all applicable laws and regulations.

(b) Conduct of Business and Fair Dealings

1. Avoid taking unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.

2. Deal fairly with MPIC’s customers, service providers, suppliers, competitors and employees.

(c) Receipt of gifts from third parties


(d) Compliance with Laws & Regulations

1. Engage in honest conduct and comply with all applicable laws, rules and regulations, including prohibitions on insider trading, both in letter and spirit. Demands brought on by prevailing business conditions or perceived pressures are not excuses for violating any law, rules or regulations.

2. Personally adhere to the standards and restrictions imposed by those laws, rules and regulations.

3. Avoid the direct or indirect commission of bribery and corruption of representatives of governments or regulators to facilitate any transaction or gain any perceived or actual favor or advantage, excluding permissible additional payments for routine governmental actions allowed by all applicable laws and regulations.

(e) Respect for Trade Secrets/Use of Non-public Information

1. Maintain and safeguard the confidentiality of information entrusted by MPIC, its subsidiaries, affiliates, customers, business partners, or such other parties with whom MPIC relates, except when disclosure is authorized or legally mandated. Confidential information includes any nonpublic information that might be of use to competitors, or harmful to MPIC, its subsidiaries, affiliates, customers, business partners, or such other parties with whom MPIC relates, if disclosed.

2. Follow Company policy and applicable laws regarding business records retention. Ensure that records are not altered, concealed,

destroyed or falsified to impede, obstruct or influence any investigation by, or proceeding before any official Company committee or body, governmental, regulatory or judicial body having jurisdiction.

3. Avoid trading any of MPIC’s securities or those of its subsidiaries and affiliates using price sensitive information that is not normally

available publicly, and obtained by reason of position, contact within, or other relationship with MPIC.

(f) Use of Company Funds, Assets and Information

1. Use Company property and resources, including Company time, supplies and software, efficiently, responsibly and only for legitimate business purposes.

2. Protect the assets of MPIC from loss, damage, misuse or theft.

(g) Employment & Labor Laws & Policies


(h) Disciplinary action 1. The Corporate Governance Office is responsible for applying the Code to specific situations in which questions or concerns may arise,

59

and has the authority to interpret and decide on such issues arising from the implementation of the Code. 2. There shall be no waiver of any of the provisions of this Code in favor of any directors, officer, or employee, except when expressly

granted by the Board of Directors or the Governance and Nomination Committee in the case of waivers for directors and officers or by the Corporate Governance Office in the case of waivers for employees. Any such waiver for any director or executive officer or any material amendment to the Code must be promptly disclosed to the shareholders of MPIC.

3. Disciplinary actions against violators include measures such as dismissal and/or the filing of appropriate civil and criminal actions. For

purposes of this Code, “violators” are defined as a)persons who commit prohibited acts or who fail to implement prescribed acts when there is an obvious opportunity to do so; b) employees who knowingly abet such acts of commission or omission or who fail to report such acts that violate the Code; and c) persons of authority who fail to impose the necessary disciplinary measures against violators.

4. Retaliation or discrimination, whether direct or indirect and in any form, against any director, officer, or employee who reports,

honestly and in good faith, any violation or perceived violation of this Code shall not be tolerated.

(i) Whistle Blower

1. Any director, officer or employee is encouraged to contact the Corporate Governance Office when in doubt about the best course of action in a particular situation relating to a subject matter of the Code.

2. Any director, officer or employee who is aware of any existing or potential violation of the Code is required to notify the Corporate

Governance Office promptly. The Corporate Governance Office shall take all action it considers appropriate to investigate any violations reported to it. If a violation has occurred, MPIC shall take such disciplinary or preventive action as it deems appropriate.

(j) Conflict Resolution

1. The Corporate Governance Office is responsible for applying the Code to specific situations in which questions or concerns may arise, and has the authority to interpret and decide on such issues arising from the implementation of the Code.

2. There shall be no waiver of any of the provisions of this Code in favor of any directors, officer, or employee, except when expressly granted by the Board of Directors or the Governance and Nomination Committee in the case of waivers for directors and officers or by the Corporate Governance Office in the case of waivers for employees. Any such waiver for any director or executive officer or any material amendment to the Code must be promptly disclosed to the shareholders of MPIC.

2. DISSEMINATION OF CODE Has the code of ethics or conduct been disseminated to all directors, senior management and employees? Yes, the Corporation’s Code of Business Conduct and Ethics are made available to all directors, senior management and employees. It is also published in the company website for ease of access and reference.

3. COMPLIANCE WITH CODE

Discuss how the company implements and monitors compliance with the code of ethics or conduct.

60

Directors, officers, and employees of the Corporation commit to comply with both the letter and spirit of the Code of Business Conduct and Ethics and MPIC endeavors to obtain the same commitment from its business partners. The Corporation’s Corporate Governance Office is responsible for monitoring compliance and implementing the Code to specific situations in which questions or concerns may arise, and has the authority to interpret and decide on such issues arising from the implementation of the Code. The Corporation also established a whistleblowing policy, to be used as a communication or reporting channel on observed non-compliance in the Revised Manual of Corporate Governance, Code of Business Conduct and Ethics, and other existing Corporate Governance policies and procedures. This policy is further discussed in item H. Role of Stakeholders.

4. RELATED PARTY TRANSACTIONS

a. Policies and Procedures

Describe the company’s policies and procedures for the review, approval or ratification, monitoring and recording of related party transactions between and among the company and its parent, joint ventures, subsidiaries, associates, affiliates, substantial stockholders, officers and directors, including their spouses, children and dependent siblings and parents and of interlocking director relationships of members of the Board. The Corporation discloses in its financial statements transaction with related parties during the year. As disclosed in the Corporation’s 2014 Audited Financial Statements, related party transactions pertain to enterprises and individuals that directly, or indirectly through one or more intermediaries, control or are controlled by or under common control with the Corporation, including holding companies, subsidiaries and fellow subsidiaries. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Corporation that gives them significant influence over the enterprise, key management personnel, including directors a officers of the Corporation and close members of the family of these individuals and companies associated with these individuals also constitute related parties. In considering each possible related entity relationship, attention is directed to the substance of the relationship and not merely the legal form.

Related Party Transactions Policies and Procedures

(1) Parent Company All transactions with Corporation goes through the same approval process as any normal business transaction with third party and is done at arm’s length basis. These are disclosed in the Audited Financial Statements of the Corporation.

(2) Joint Ventures All transactions with Corporation goes through the same approval process as any normal business transaction with third party and is done at arm’s length basis. These are disclosed in the Audited Financial Statements of the Corporation.

(3) Subsidiaries All transactions with Corporation goes through the same approval process as any normal business transaction with third party and is done at arm’s length basis. These are disclosed in the Audited Financial Statements of the Corporation.

(4) Entities Under Common Control

All transactions with Corporation goes through the same approval process as any normal business transaction with third party and is done at arm’s length basis. These are disclosed in the Audited Financial Statements of the Corporation.

(5) Substantial Stockholders All transactions with Corporation goes through the same approval process as any normal business transaction with third party and is done at arm’s length basis. These are disclosed in the Audited Financial Statements of the Corporation.

(6) Officers including spouse/children/siblings/parents

As provided in the Corporation’s Code of Business Conduct and Ethics, officers including spouse/children/siblings/parents are mandated to avoid any actual or apparent conflict of interest between the officer’s private interest and interest of the Corporation. They are also mandated to disclose to the Corporate Governance Office any actual or apparent conflict of interest, and any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest.

(7) Directors including As provided in the Corporation’s Revised Manual of Corporate Governance, a director should not use his position to profit or

61

spouse/children/siblings/parents gain some benefit or advantage for himself and/or his related interests. He should avoid situations that may compromise his impartiality. If an actual or potential conflict of interest may arise on the part of a director, he should fully and immediately disclose it and should not participate in the decision-making process. A director who has a continuing material conflict of interest should seriously consider resigning from his position. A conflict of interest shall be considered material if the director’s personal or business interest is antagonistic to that of the corporation, or stands to acquire or gain financial advantage at the expense of the Corporation.

(8) Interlocking director relationship of Board of Directors

As provided in the Corporation’s Revised Manual of Corporate Governance, a director should not use his position to profit or gain some benefit or advantage for himself and/or his related interests. He should avoid situations that may compromise his impartiality. If an actual or potential conflict of interest may arise on the part of a director, he should fully and immediately disclose it and should not participate in the decision-making process. A director who has a continuing material conflict of interest should seriously consider resigning from his position. A conflict of interest shall be considered material if the director’s personal or business interest is antagonistic to that of the corporation, or stands to acquire or gain financial advantage at the expense of the Corporation.

b. Conflict of Interest

(i) Directors/Officers and 5% or more Shareholders

Identify any actual or probable conflict of interest to which directors/officers/5% or more shareholders may be involved. There is no actual or potential conflict of interest to which directors/ officers/ shareholders owning 5% or more are involved.

Details of Conflict of Interest (Actual or Probable)

Name of Director/s None

Name of Officer/s None

Name of Significant Shareholders None

(ii) Mechanism

Describe the mechanism laid down to detect, determine and resolve any possible conflict of interest between the company and/or its group and their directors, officers and significant shareholders.

Directors/Officers/Significant Shareholders

Company The Corporation’s Code of Business Conduct and Ethics states the following provisions related to Conflict of Interest : D. CONFLICTS OF INTEREST AND CORPORATE OPPORTUNITIES

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1. Avoid any actual or apparent conflicts of interest between your private interest, including the private interest of a member

of your family, and the interests of MPIC, unless you have obtained prior approval by the appropriate approving authorities as designated in applicable policies of MPIC. Any actual or apparent conflict of interest, and any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest, should be disclosed to the Corporate Governance Office.

2. Avoid activities and interests that could significantly affect the objective or effective performance of duties and responsibilities in MPIC, including business interests or unauthorized employment outside MPIC, the receipt from and giving of gifts to persons or entities with whom MPIC relates, as well as insider dealing. \

3. Be loyal to MPIC. As such, all business decisions and actions must be based on the best interest of MPIC and must not be

motivated by personal considerations and other relationships, which may interfere with the exercise of independent judgment.

4. Advance MPIC’s legitimate interests when the opportunity arises. Avoid competing with MPIC on a business opportunity or

acquiring an interest adverse to that of MPIC’s. Refrain from taking advantage of Company property, information or position, or opportunities arising from these, for personal gain, to compete with MPIC, or act against the best interest of MPIC. Directors, officers and employees who intend to make use of Company property or services in a manner not solely for the benefit of MPIC should obtain prior approval from appropriate approving authorities as designated in applicable policies of MPIC.

5. Refrain from the direct or indirect, grant or arrangements of loans to any director or officer, including loans granted or

arranged by MPIC’s subsidiaries and affiliates, unless such grant or arrangement is allowed by all applicable laws and regulations.

Group

The Corporation, as a Parent Company, has a Code of Business Conduct and Ethics stating the following provisions related to Conflict of Interest : D. CONFLICTS OF INTEREST AND CORPORATE OPPORTUNITIES 1. Avoid any actual or apparent conflicts of interest between your private interest, including the private interest of a member

of your family, and the interests of MPIC, unless you have obtained prior approval by the appropriate approving authorities as designated in applicable policies of MPIC. Any actual or apparent conflict of interest, and any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest, should be disclosed to the Corporate Governance Office.

2. Avoid activities and interests that could significantly affect the objective or effective performance of duties and responsibilities in MPIC, including business interests or unauthorized employment outside MPIC, the receipt from and giving of gifts to persons or entities with whom MPIC relates, as well as insider dealing. \

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3. Be loyal to MPIC. As such, all business decisions and actions must be based on the best interest of MPIC and must not be

motivated by personal considerations and other relationships, which may interfere with the exercise of independent judgment.

4. Advance MPIC’s legitimate interests when the opportunity arises. Avoid competing with MPIC on a business opportunity or acquiring an interest adverse to that of MPIC’s. Refrain from taking advantage of Company property, information or position, or opportunities arising from these, for personal gain, to compete with MPIC, or act against the best interest of MPIC. Directors, officers and employees who intend to make use of Company property or services in a manner not solely for the benefit of MPIC should obtain prior approval from appropriate approving authorities as designated in applicable policies of MPIC.

Refrain from the direct or indirect, grant or arrangements of loans to any director or officer, including loans granted or arranged by MPIC’s subsidiaries and affiliates, unless such grant or arrangement is allowed by all applicable laws and regulations.

5. FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS

(a) Indicate, if applicable, any relation of a family,4 commercial, contractual or business nature that exists between the holders of significant equity (5% or more), to the

extent that they are known to the company: The Corporation has not had any transaction during the last two (2) years in which any Director or Executive Officer or any of their immediate family members, or relations of commercial, contractual or business nature, had a direct or indirect interest.

Names of Related Significant Shareholders Type of Relationship Brief Description of the Relationship

None None None

(b) Indicate, if applicable, any relation of a commercial, contractual or business nature that exists between the holders of significant equity (5% or more) and the

company: The Corporation has not had any transaction during the last two (2) years in which any Director or Executive Officer or any relations of commercial, contractual or business nature, had a direct or indirect interest.

Names of Related Significant Shareholders Type of Relationship Brief Description

None None None

4 Family relationship up to the fourth civil degree either by consanguinity or affinity.

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(c) Indicate any shareholder agreements that may impact on the control, ownership and strategic direction of the company:

Name of Shareholders % of Capital Stock affected (Parties) Brief Description of the Transaction

None None None

6. ALTERNATIVE DISPUTE RESOLUTION

Describe the alternative dispute resolution system adopted by the company for the last three (3) years in amicably settling conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including regulatory authorities.

Alternative Dispute Resolution System

Corporation & Stockholders

The Corporation does not have a formal dispute resolution system set-up to resolve disputes between the Corporation and its Stockholders. However, it maintains good relationships with its stockholders and attends to the resolution of their concerns and issues, if there’s any. Such opportunity for stockholders to raise their concerns is during the Annual Stockholders’ Meeting. If such a situation arise, the Corporation may adopt the Rules of the Philippine Dispute Resolution Center Inc.

Corporation & Third Parties

The Corporation does not have a formal dispute resolution system set-up to resolve disputes between the Corporation and Third Parties. However, it maintains good relationships with third parties and resolve concerns and issues amicably. If such a situation arise, the Corporation may adopt the Rules of the Philippine Dispute Resolution Center Inc.

Corporation & Regulatory Authorities

The Corporation does not have a formal dispute resolution system set-up to resolve disputes between the Corporation and Regulatory Authorities. However, the Corporation proactively and amicably engages the SEC, PSE and other agencies in resolving issues affecting the Company and the concerned agencies.

C. BOARD MEETINGS & ATTENDANCE

1. SCHEDULE OF MEETINGS Are Board of Directors’ meetings scheduled before or at the beginning of the year? Yes, the schedule of regular board meetings is set at the beginning of the year.

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2. DETAILS OF ATTENDANCE OF DIRECTORS Attendance of Directors

Board Name Date of Election

No. of Meetings Held

during the year

No. of Meetings Attended

%

Chairman Manuel V. Pangilinan 30 May 2014 10 8 80%

Member Jose Ma. K. Lim 30 May 2014 10 10 100%

Member David J. Nicol 30 May 2014 10 10 100%

Member Ray C. Espinosa 30 May 2014 10 9 90%

Member Ramoncito S. Fernandez 30 May 2014 10 7 70%

Member Robert C. Nicholson 30 May 2014 10 6 60%

Member Augusto P. Palisoc, Jr. 30 May 2014 10 9 90%

Member Antonio A. Picazo 30 May 2014 10 9 90%

Member Amado R. Santiago III 30 May 2014 10 9 90%

Member Edward A. Tortorici 30 May 2014 10 7 70%

Member Victorico P. Vargas 30 May 2014 10 10 100%

Independent Director Washington Z. SyCip 30 May 2014 10 9 90%

Independent Director Edward S. Go 30 May 2014 10 8 80%

Independent Director Lydia B. Echauz 30 May 2014 10 10 100%

Independent Director Chief Justice Artemio V. Panganiban 30 May 2014 10 10 100%

3. SEPARATE MEETINGS OF NON-EXECUTIVE DIRECTORS (a) Do non-executive directors have a separate meeting during the year without the presence of any executive? If yes, how many times?

The Board of Directors agrees that non-executive directors can meet from time to time as they deem necessary. (b) Is the minimum quorum requirement for Board decisions set at two-thirds of board members? Please explain.

The Corporation’s By-Laws state that a majority of the number of directors as fixed in the Corporation’s Articles of Incorporation shall constitute a quorum for the transaction of corporate business in every decision of at least a majority of the directors present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall be valid as a corporate act, except for the elections of officers which shall require the vote of a majority of all the members of the Board. This is in compliance with Section 25 of the Philippine Corporation Code. The Corporation aims to achieve a 100% attendance in each Board meeting as the directors had confirmed their availability on the scheduled Board meeting dates as agreed upon at the start of the year. However, due to certain reasons, it can be observed that the average attendance per meeting is at 90%, which is more that 2/3 of the board members.

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4. ACCESS TO INFORMATION

(a) How many days in advance are board papers5 for board of directors meetings provided to the board?

In practice, the Corporation provides its directors the agenda and materials for board and board committee meetings days in advance of the scheduled board or board committee meeting to provide them with ample time in evaluating and understanding the issues and concerns that will be raised in the meeting.

(b) Do board members have independent access to Management and the Corporate Secretary? The members of the Board have independent access to Management and the Corporate Secretary. The Revised Manual of Corporate Governance Article (4) – Adequate and Timely Information states the provision below:

“ To enable the members of the Board to properly fulfill their duties and responsibilities, Management should provide them with complete, adequate and timely information about the matters to be taken in their meetings. Reliance on information volunteered by Management would not be sufficient in all circumstances and further inquiries may have to be made by a member of the Board to enable him to properly perform his duties and responsibilities. Hence, the members should be given independent access to Management and the Corporate Secretary.”

(c) State the policy of the role of the company secretary. Does such role include assisting the Chairman in preparing the board agenda, facilitating training of directors,

keeping directors updated regarding any relevant statutory and regulatory changes, etc?

According to the Corporation’s By-Laws, the Corporate Secretary shall be the custodian of and shall maintain the corporate books and record and shall be the recorder of the Corporations formal actions and transactions. The Corporate secretary shall have the following specific roles and duties: (a) to record or see the proper recording of the minutes and transactions of all meetings of the directors and the stockholders and to maintain minute books of such meetings in the form and manner required by the law; (b) to keep or cause to be kept record books showing the details required by law with respect to the stock certificates if the Corporation, including ledgers and transfer books showing all shares of the Corporation subscribed, issued and transferred; (c) to keep the corporate seal and affix it in all papers and documents requiring seal, and to attest by his signature all corporate documents requiring the same; (d) to attend to the giving and serving of all notices of the Corporation required by law or the By-Laws to be given; (e) to certify to such corporate acts, countersign corporate documents or certificates, and make reports or statements as may be required of him by law or by government rules and regulations; (f) to act as the inspector at the election of directors and, as such, to determine the number of shares of stocks outstanding and entitled to vote, the shares of stocks represented at the meeting, the existence of a quorum, the validity and effect of proxies, and to receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote. The Secretary may assign the exercise or performance of any of the forgoing duties, powers and functions to any other person or

5 Board papers consist of complete and adequate information about the matters to be taken in the board meeting. Information includes the background or explanation on matters brought before the Board, disclosures,

budgets, forecasts and internal financial documents.

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persons, subject always to his supervision and control; and (g) to perform such duties as are incident to his office or as may be assigned by the Board of Directors or the President. The Revised Manual of Corporate Governance on the other hand states the following roles, duties and qualifications of the Corporate Secretary: (a) be responsible for the safekeeping and preservation of integrity of the minutes of the meetings of the Board and its committees, as well as the other official records of the corporation; (b) be loyal to the mission, vision and objectives of the corporation; (c) work fairly and objectively with the Board, Management and stockholders; (d) have appropriate administrative and interpersonal skills; (e) if he is not at the same time the corporate legal counsel, be aware of the laws, rules and regulations necessary in the performance of his duties and responsibilities; (f) have a working knowledge of the operations of the corporation; (g) inform the members of the Board, in accordance with the By-Laws, of the agenda of their meetings and ensure that the members have before them accurate information that will enable them to arrive at intelligent decisions on matters that require their approval; (h) attend all Board meetings, except when justifiable causes, such as illness, death in the immediate family and serious accidents, prevent him from doing so; (i) ensure that all Board procedures, rules and regulations are strictly followed by the members; and (j) if he is the Compliance Officer, perform all duties and responsibilities of the said officer as provided for in the Code. In practice, the facilitation of the trainings for the directors, specifically on Corporate Governance matters, is done as a function of the Compliance Officer. The Corporation’s group of companies conducts various corporate governance trainings and seminars, through third party facilitators, to equip its directors and officers on the relevant corporate governance best practices.

(d) Is the company secretary trained in legal, accountancy or company secretarial practices? Please explain should the answer be in the negative. The Corporate Secretary, Mr. Antonio A. Picazo, is a well trained Legal and corporate secretarial practitioner. Mr. Picazo is currently the Managing Partner of Picazo Buyco Tan Fider & Santos Law Offices. He serves as a Director and/or Corporate Secretary of several large Philippine corporations, including Metro Pacific Investments Corporation, a position he has held since 2006. Mr. Picazo obtained his Bachelor of Laws degree from the University of the Philippines and passed the 1964 Philippine Bar Examinations with the 5th highest rating. In 1967, he obtained a Master of Laws degree, Major in Taxation from the University of Pennsylvania.

(e) Committee Procedures

Disclose whether there is a procedure that Directors can avail of to enable them to get information necessary to be able to prepare in advance for the meetings of different committees:

Yes x No

Committee Details of the procedures

Executive

The Revised Manual of Corporate Governance Article (4) – Adequate and Timely Information states the provision below: “To enable the members of the Board to properly fulfill their duties and responsibilities, Management should provide them with complete, adequate and timely information about the matters to be taken in their meetings. Reliance on information volunteered by Management would not be sufficient in all circumstances and further inquiries may have to be made by a member of the Board to enable him to properly perform his duties and responsibilities. Hence, the members should be given independence

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access to Management and the Corporate Secretary. The information may include the background or explanation of matters brought before the Board, disclosures, budgets, forecasts and internal financial documents. The members, either individually or as a Board, in the furtherance of their duties and responsibilities, should have access to independent professional advice at the corporation’s expense.”

Audit and Risk Management

The Revised Manual of Corporate Governance Article (4) – Adequate and Timely Information states the provision below: “To enable the members of the Board to properly fulfill their duties and responsibilities, Management should provide them with complete, adequate and timely information about the matters to be taken in their meetings. Reliance on information volunteered by Management would not be sufficient in all circumstances and further inquiries may have to be made by a member of the Board to enable him to properly perform his duties and responsibilities. Hence, the members should be given independent access to Management and the Corporate Secretary. The information may include the background or explanation of matters brought before the Board, disclosures, budgets, forecasts and internal financial documents. The members, either individually or as a Board, in the furtherance of their duties and responsibilities, should have access to independent professional advice at the corporation’s expense.”

Nomination


Compensation

The Revised Manual of Corporate Governance Article (4) – Adequate and Timely Information states the provision below: “To enable the members of the Board to properly fulfill their duties and responsibilities, Management should provide them with complete, adequate and timely information about the matters to be taken in their meetings.

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Reliance on information volunteered by Management would not be sufficient in all circumstances and further inquiries may have to be made by a member of the Board to enable him to properly perform his duties and responsibilities. Hence, the members should be given independent access to Management and the Corporate Secretary. The information may include the background or explanation of matters brought before the Board, disclosures, budgets, forecasts and internal financial documents. The members, either individually or as a Board, in the furtherance of their duties and responsibilities, should have access to independent professional advice at the corporation’s expense.”

Governance


5. EXTERNAL ADVICE

Indicate whether or not a procedure exists whereby directors can receive external advice and, if so, provide details:

Procedures Details

The procedure stating that the directors can receive external advice is stated in the Revised Manual of Corporate Governance Article (4) – Adequate and Timely

The Revised Manual of Corporate Governance Article (4) – Adequate and Timely Information states the provision below: “To enable the members of the Board to properly fulfill their duties and responsibilities, Management should provide them with complete, adequate and timely information about the matters to be taken in their meetings. Reliance on information volunteered by Management would not be sufficient in all circumstances and further inquiries may have to be made by a member of the Board to enable him to properly perform his duties and responsibilities. Hence, the members should be given

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Information. independent access to Management and the Corporate Secretary. The information may include the background or explanation of matters brought before the Board, disclosures, budgets, forecasts and internal financial documents. The members, either individually or as a Board, in the furtherance of their duties and responsibilities, should have access to independent professional advice at the corporation’s expense.”

6. CHANGE/S IN EXISTING POLICIES

Indicate, if applicable, any change/s introduced by the Board of Directors (during its most recent term) on existing policies that may have an effect on the business of the company and the reason/s for the change:

Existing Policies Changes Reason

-- -- --

D. REMUNERATION MATTERS

1. REMUNERATION PROCESS

Disclose the process used for determining the remuneration of the CEO and the four (4) most highly compensated management officers: The Corporation’s executive officers are covered by standard employment contracts and employees’ retirement plan and can be terminated upon appropriate notice. The following are the procedures followed by the Corporation:

Process CEO Top 4 Highest Paid Management Officers

(1) Fixed remuneration

Remuneration of the Corporation’s CEO is positioned in the top quartile of Industry figures based on the market data obtained from Tower Watsons, a world-leader in Human Resource consultancy. The fixed remuneration also includes a 13

th month

pay as required by Law.

Remuneration of the Corporation’s top executives is positioned in the top quartile of Industry figures based on the market data obtained from Tower Watsons, a world-leader in Human Resource consultancy. The fixed remuneration also includes a 13

th month pay as required by

Law.

(2) Variable remuneration

The Corporation’s Long Term Incentive Plan (LTIP) is aimed at providing a competitive level of financial incentives for eligible employees to encourage them to achieve performance targets consistently. The amount of LTIP is fixed upon achievement of the target Core Income and is not affected by changes in future

The Corporation’s Long Term Incentive Plan (LTIP) is aimed at providing a competitive level of financial incentives for eligible employees to encourage them to achieve performance targets consistently. The amount of LTIP is fixed upon achievement of the target Core Income and is not affected by changes in future salaries of

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salaries of the employees covered. The LTIP is composed of a cash pay-out and an ESOP. The ESOP is for eligible executives to receive remuneration in the form of share-based payment transactions, whereby executives render services in exchange for the share option.

the employees covered. The LTIP is composed of a cash pay-out and an ESOP. The ESOP is for eligible executives to receive remuneration in the form of share-based payment transactions, whereby executives render services in exchange for the share option.

(3) Per diem allowance The Corporation does not provide per diem allowance to CEO for attending Regular and Special Board, and Board Committee meetings.

The Corporation does not provide per diem allowance to its four highly compensated officers for attending Regular and Special Board, and Board Committee meetings.

(4) Bonus The CEO receives variable bonuses depending on the performance of the Corporation for the year.

The Corporation’s executives receive variable bonuses depending on the performance of the Corporation for the year.

(5) Stock Options and other financial instruments

Stock options are included in the Corporation’s Long Term Incentive Plan (LTIP).

Stock options are included in the Corporation’s Long Term Incentive Plan (LTIP).

2. REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS

(a) Remuneration Policy and Structure for Executive and Non-Executive Directors

Disclose the company’s policy on remuneration and the structure of its compensation package. Explain how the compensation of Executive and Non-Executive Directors is calculated. Except as aggregately disclosed in the section below none of the Directors and Executive Officers is covered by a special compensatory plan or arrangement, nor do any of them hold any outstanding warrants or options in respect of the Corporation or its shares. The Corporation’s By Laws provide that, additionally, an amount equivalent to 1 percent (1%) of net profit after tax shall be allocated and distributed amongst the directors of the Corporation who are not officers thereof or of any of its subsidiaries or affiliates, in such manner as the Board may deem proper. There are no other special arrangements pursuant to which any director was compensated.

Remuneration Policy Structure of Compensation Packages How Compensation is Calculated

Executive Directors

Remuneration of the Company’s top executives is positioned in the top quartile of Industry figures based on the market data obtained from Tower Watsons, a world-leader in Human Resource consultancy.

The Company provides its executives with 13 months guaranteed basic pay, a variable bonus, and a Long Term Incentive Plan (LTIP).

The compensation of the Company’s executives is computed based on Market/ Industry Practice.

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Non-Executive Directors

Non-Executive directors do not receive any remuneration aside from the diem allowance for each attendance in Board and Board Committee meetings.

Non-executive Directors are entitled to a per diem allowance of Php50,000 for each attendance in MPIC’s Regular Board meetings; Php30,000 for Special Board meetings; and Php30,000 for Board Committee Meetings.

As per the Company’s By-Laws, the amount of per diem allowance may be fixed by the Board of Directors or by resolution of the stockholders.

(b) Do stockholders have the opportunity to approve the decision on total remuneration (fees, allowances, benefits-in-kind and other emoluments) of board of

directors? Provide details for the last three (3) years.

The Corporation’s By-Laws, which was approved by the stockholders, states that: “Each director of the Corporation shall receive per diem allowance for his attendance at each meeting of the Board, in such amount as may be fixed by the Board or by resolution of the stockholders. Additionally, an amount equivalent to 1 percent (1%) of net profit after tax shall be allocated and distributed amongst the directors of the Company who are not officers thereof or of any of its subsidiaries or affiliates, in such manner as the Board may deem proper.“

Remuneration Scheme Date of

Stockholders’ Approval

- -

3. AGGREGATE REMUNERATION

Complete the following table on the aggregate remuneration accrued during the most recent year: The annual remuneration of the directors amounted to Php 3.8 million, Php 7.0 million and Php 8.2 million in 2014, 2013 and 2012, respectively. Non-executive directors are entitled to a per diem allowance of Php 50,000 for each attendance in the Company’s Board meetings; and Php 30,000 for each attendance in Special Board and Board Committee meetings. The Company’s By-Laws provide that an amount equivalent to 1.0% of net profit after tax of the Company shall be allocated and distributed among the directors of the Company who are not officers of the Company or its subsidiaries and affiliates, in such manner as the Board may deem proper. No accruals were made with respect to this scheme for the years ended December 31, 2014, 2013 and 2012 in the absence of resolution from the Board. There are no other special arrangements pursuant to which any director will be compensated. The aggregate compensation for 2014 of the Chairman and the four most highly compensated management officers, including the CEO and the CFO, is shown below (in Php).

Process Chairman Top 4 Highest Paid Management Officers

(1) Fixed remuneration Php 97,864,529

(2) Variable remuneration Pay-out for LTIP Cycle 2012-2015 is in 2016

(3) Per diem allowance The Corporation does not provide per diem allowance to executive directors.

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(4) Bonuses Php 107,715,641

(5) Stock Options and other financial Instruments 6.25 million options exercised in 2014.

(6) Others (specify) --

* The aggregated number of options presented includes those awarded to the directors and officers of the Company.

Remuneration Item Executive Directors Non-Executive Directors (other

than independent directors) Independent Directors

(a) Fixed Remuneration (Please see above table) (Please see above table) (Please see above table)

(b) Variable Remuneration (Please see above table) (Please see above table) (Please see above table)

(c) Per diem Allowance (Please see above table) (Please see above table) (Please see above table)

(d) Bonuses (Please see above table) (Please see above table) (Please see above table)

(e) Stock Options and/or other financial instruments (Please see above table) (Please see above table) (Please see above table)

(f) Others (Specify) (Please see above table) (Please see above table) (Please see above table)

Total (Please see above table) (Please see above table) (Please see above table)

Other Benefits Executive Directors Non-Executive Director (other than independent directors)

Independent Directors

1) Advances (Please see above table) (Please see above table) (Please see above table)

2) Credit granted (Please see above table) (Please see above table) (Please see above table)

3) Pension Plan/s Contributions (Please see above table) (Please see above table) (Please see above table)

(d) Pension Plans, Obligations incurred (Please see above table) (Please see above table) (Please see above table)

(e) Life Insurance Premium (Please see above table) (Please see above table) (Please see above table)

(f) Hospitalization Plan (Please see above table) (Please see above table) (Please see above table)

(g) Car Plan (Please see above table) (Please see above table) (Please see above table)

(h) Others (Specify) (Please see above table) (Please see above table) (Please see above table)

Total (Please see above table) (Please see above table) (Please see above table)

4. STOCK RIGHTS, OPTIONS AND WARRANTS

(a) Board of Directors

Complete the following table, on the members of the company’s Board of Directors who own or are entitled to stock rights, options or warrants over the company’s shares: Except as disclosed in Item 2 above, none of the aforementioned Directors are covered by a special compensatory plan or arrangement, nor do any of them hold any outstanding warrants or options in respect of the Corporation or its shares.

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Director’s Name Number of Direct Option/

Rights/Warrants Number of Indirect Option/

Rights/Warrants Number of Equivalent Shares Total % from Capital Stock

None None None None None

(b) Amendments of Incentive Programs

Indicate any amendments and discontinuation of any incentive programs introduced, including the criteria used in the creation of the program. Disclose whether these are subject to approval during the Annual Stockholders’ Meeting: The Corporation has done no amendments and discontinuation of any incentive programs, such as the Long-Term Incentive Plan, within year 2014. The Corporation’s LTIP is aimed at providing a competitive level of financial incentives for eligible employees to encourage them to achieve performance targets consistent with Corporation’s long-term business plans; recognizing and rewarding the contribution of eligible employees to the overall profitability and performance of the Corporation; and attracting and retaining talented employees to ensure the sustained growth and success of the Corporation.

Incentive Program Amendments Date of Stockholders’ Approval

None None None

5. REMUNERATION OF MANAGEMENT

Identify the five (5) members of management who are not at the same time executive directors and indicate the total remuneration received during the financial year: The aggregate remuneration received by the top five (5) members of management and other officers of the Corporation in 2014 is shown in the table below.

Name of Officer/Position Total Remuneration

Jose Ma. K. Lim

Php 205,580,170

David J. Nicol

Augusto P. Palisoc Jr.


Robin Michael L. Velasco

All Other Directors and Officers as a group excluding the abovenamed officers Php 165,718,478

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E. BOARD COMMITTEES

1. NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES

Provide details on the number of members of each committee, its functions, key responsibilities and the power/authority delegated to it by the Board:

Committee

No. of Members

Committee Charter Functions Key Responsibilities Power Executive Director

(ED)

Non-executive Director

(NED)


(ID)

Executive None* None* None*

Corporation’s By-Laws Article III, Section 10, Executive Committee An executive Committee is hereby created which may be organized from time to time upon the determination of the Board of Directors. The Committee shall be composed of not less than three (3) members, which shall include the President. The Board shall have the power at anytime to remove and replace the members of, and fill vacancies, in the Executive Committee. The Executive Committee, when the Board is not in session, shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation, except with respect to: (1) approval of any action for which stockholders’ approval is also required; (2) the filing of vacancies in the Board; (3) the amendment or repeal of these By-Laws or the adoption of new By-Laws; (4) the amendment or repeal of any resolution of the Board which by it express terms is not so amenable or repealable; (5) a distribution of dividends to the stockholders; (6) such other matters as may be specifically excluded or limited to the Board.

Audit and Risk Management

- 1 2

Section 1. Basis and Purpose The Revised Manual on Corporate Governance (the “Governance Manual”) of Metro Pacific Investments Corporation (the “Corporation”) provides that its Board shall constitute, among others, an Audit Committee to assist it in good corporate governance. The purpose of the Audit and Risk Management Committee (the “Committee") is to assist the Board of Directors in fulfilling its oversight responsibilities over the following:

a. the Corporation's financial statements and reporting system; b. the Corporation's compliance with legal and regulatory requirements;

c. the external auditor's qualifications, independence, and performance;

d. the performance of the Corporation's internal audit function and internal auditors;

e. risk management policy and execution; and

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f. the business practices and ethical standards of the Corporation.

Section 2. Structure and Membership

2.1 Composition. The members of the Committee shall be appointed by the Board of Directors. The Committee shall be composed of at least three (3) Board members (the “Members”), preferably with accounting and finance background. The Chairman of the Committee shall be an independent director and one member shall have related audit experience as defined by the Securities and Exchange Commission (SEC). An independent director is one who is independent of management and who, apart from his fees and shareholdings, is free from any business or other relationship which could materially interfere with the exercise of his independent judgment. The Board may appoint one or more persons to serve as advisor(s) (“Adviser”) to the Committee. Advisors shall have the right to attend and speak at any meeting of the Committee but shall have no right to vote on any action of the Committee.

In addition to the qualifications required for election as director of the Corporation provided under the Corporation's By-Laws and Governance Manual, the Members of the Committee shall preferably have accounting and finance backgrounds, one of whom shall be an independent director and another shall have audit experience. The Members shall be disqualified for any of the grounds for disqualification of a director provided under the Corporation's Governance Manual, the Corporation Code of the Philippines, Securities Regulation Code and its Implementing Rules and Regulations, and other relevant laws, rules and regulations of the Securities and Exchange Commission. The Chairman or any member or advisor of the Committee may be removed and replaced only by the Board.

2.2 Appointment. The Chairman and members of the Committee shall be appointed by, and removed from office,

only by the Board. In case of vacancy in the Committee, the Board shall appoint a new Committee member from among the directors.

2.3 Committee Secretary. The Committee shall appoint a Committee Secretary who shall prepare the minutes of the

meetings and keep the records of the Committee. Section 3. Meetings and Procedures

3.1 Meetings, Quorum and Voting. The Committee shall meet at least once every quarter or more frequently as circumstances require. During these meetings, the Committee may meet privately with senior management, the external auditors, or as a Committee to discuss any matters that need to be discussed.

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The time and place of the meetings and procedures at such meetings shall be determined by the Committee. A majority of the members of the Committee shall constitute a quorum provided an Independent Director is present (unless he has been duly notified but deliberately and without justifiable cause fails to attend the meeting).

3.2 Meeting through Teleconference, Video Conference or Similar Means. Members and Advisors may participate in

any meetings of the Committee through teleconference, video conference or other similar means, provided that all persons participating in the meeting can hear each other.

3.3 Notices. Notices of the meetings of the Committee shall be sent to the Members and Advisors by personal

delivery, mail, facsimile, electronic mail or other similar means at least two (2) days prior to the meeting and specifying the place, date and time of the meeting, as well as the matters to be discussed during the meeting. For this purpose, the Committee Secretary shall obtain the addresses, facsimile numbers and electronic mail addresses of each Member and Advisor where notices of meetings may be sent.

3.4 Remuneration. No fees or other remuneration shall be payable to the members and advisors of the Committee

for services provided or attendance to Committee meetings, except fees or remuneration authorized and approved by the Board. No fees or compensation shall be paid directly or indirectly to any member of the committee as consultant or legal or financial Advisor or to such member's firm for such consulting or advisory services even if such member is not the actual service provider.

Section 4. Functions and Responsibilities The Committee's specific duties and responsibilities are as follows:

4.1 On External Auditors:

a) Review and evaluate the qualifications, performance and independence of the external auditors and the lead partner.

b) Select and appoint the external auditors and remove or replace the external auditors as it may deem necessary.

c) Discuss with the external auditor before the audit commences the nature and scope of the audit. d) Review and approve the fees charged by the external auditor for audit and non-audit services. e) Evaluate and determine non-audit work by external auditor and keep under review the non-audit fees paid to

the external auditor in relation to their significance to the auditor. f) Ensure that the external auditor or the lead, engagement, or handling partner having primary responsibility

for the audit or review of the Corporation is rotated at least once every five (5) years.

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4.2 On Financial Statements:

a) Review and discuss with management and the external auditor the Corporation's quarterly, half-year, and annual financial statements before submission to the Board, focusing particularly on the following:

Critical accounting policies and practices to be used.

Major financial reporting issues and judgments made.

Significant adjustments resulting from the audit.

Unusual or complex transactions.

Going concern assumption.

Compliance with accounting standards.

Compliance with tax, legal, and stock exchange requirements.

b) Review interim financial reports, with management and the external auditors, before filing with regulators and consider whether these are complete and consistent with the information known to the Committee.

c) Evaluate relationship that senior management, financial management, external auditors, and internal auditors have to ensure accurate and timely financial reporting.

d) Resolve any disagreement between management and the external auditors regarding financial reporting. e) Review the management representation letter to the external auditor.

4.3 On Internal Audit Function:

a) Review the appointment and replacement of the internal auditor. b) Review and approve the Internal Audit Charter and annual audit plan. c) Review the significant issues raised in internal audit reports to management and management's responses and

ensure appropriate corrective actions are undertaken. d) Review the effectiveness of the internal audit function, its budget and staffing, and compliance with the

Standards for the Professional Practice of Internal Auditing. e) Ensure the Internal Auditor is given full and unrestricted access to all company records, properties and

personnel relevant to the internal audit activity. f) Establish direct functional reporting of the internal auditor to the Audit Committee to allow it to effectively

fulfill its responsibilities. g) Require the internal auditor to render to the Committee an annual report on the activities and performance of

the internal audit organization relative to the audit plan approved by the Committee, including significant risk exposures and control issues, corporate governance issues, and other matters requested by the Committee.

4.4 On Internal Controls:

a) Appoint and designate an Internal auditor

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b) Review with the Corporation's management and the Internal auditors findings on the adequacy and effectiveness of internal controls and their recommendations for improving the internal control environment, including information technology security and controls.

c) Review the adequacy of the Corporation's system of internal control over financial reporting including the reliability of its financial reporting systems.

4.5 On Legal, Regulatory, and Ethical Standards Compliance:

a) Monitor compliance and adherence by the Corporation to all Board policies as well as applicable laws, rules and regulations covering the conduct of its operations and business activities.

b) Review reports and findings of any examinations by regulatory agencies and ensure appropriate and timely corrective action by management.

c) Review and oversee related party transactions and other potential conflicts of interest situations where appropriate considering that the Corporation is a public service firm subject to regulatory scrutiny and public perception.

d) Evaluate and monitor compliance with Code of Ethics for management. e) Review Whistle Blowing Policy.

4.6 On Risk Management:

a) Appoint or designate a Chief Risk Officer. b) Discuss with management policies with respect to risk assessment and risk management. c) Inquire on major risk exposures and the steps management has taken to monitor and control such exposures. d) Review Business Continuity Plan.

4.7 On Reporting

Report regularly to the Board of Directors about committee activities, issues, and any related recommendations. Section 5. Powers of the Committee The Committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:

a) Retain external legal counsel, accountants, or other advisors to advise the Committee or assist in the conduct of an investigation.

b) Seek information it requires from employees - all of whom are directed to cooperate with the Committee's requests - or external parties.

c) Appoint or replace the external auditors and pre-approve all auditing and non-auditing services (including the

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fees and terms thereof) to be provided by independent auditors. d) Meet with Company Officers, external auditors or outside counsel, as necessary. e) Obtain appropriate funding and resources necessary to carry out its duties and responsibilities.

Nomination 1** 1 2

The Nomination Committee, which may be composed of at least three (3) members and one of whom should be an independent director, to review and evaluate the qualifications of all persons nominated to the Board and other appointments that require Board approval, and to assess the effectiveness of the Board‘s processes and procedures in the election or replacement of director. Corporation By-Laws Article III, Section 3, Election and Term A nomination committee is hereby created which may be organized from time to time upon determination of the Board of Directors. The nomination committee shall be composed of at least three (3) members, one of whom shall be an independent director. The nomination committee shall have the following functions: (A) formulate screening policies to enable the committee to effectively review the qualification of the nominees for independent directors; and (B) conduct nominations for independent directors prior to the stockholders’ meeting in accordance with the procedures set forth in Rule 38 of the Amended Implementing Rules and Regulations of the Securities Regulation Code, as the same may be amended from time to time.

Compensation 1 2

The Compensation or Remuneration Committee, which may be composed of at least three (3) members and one of whom should be an independent director, to establish a formal and transparent procedure for developing a policy on remuneration of directors and officers to ensure that their compensation is consistent with the corporation's culture, strategy and the business environment in which it operates. Corporation By-Laws Article III, Section 11, Compensation and Remuneration Committee A compensation and remuneration committee is hereby created which may be organized from time to time upon determination of the Board of Directors. The compensation and remuneration committee shall be composed of at least three (3) members, one of whom shall be an independent director. The compensation and remuneration committee shall have the following functions: (A) establish a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of corporate officers and directors, and provide oversight over remuneration of senior management and other key personnel, ensuring that compensation is consistent with the Corporation’s culture, strategy and control environment; (B) designate the amount of remuneration of directors and officers, which shall be in a sufficient level to attract and retain directors and officers, who are needed to run the Corporation successfully; (C) establish a formal and transparent procedure for developing policy on executive remuneration and for transparent procedure for developing a policy on executive remuneration and for fixing remuneration packages of individual directors, if any, and officers; (D) develop a form on full business interest disclosure as part of the pre-employment requirements for all incoming officers, which among others, compel all officers to declare under the penalty of perjury, all their existing business interest or shareholding that may directly of

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indirectly conflict in their performance of duties once hired; (E) disallow any director to decide his or her own remuneration; (F) provide in the Corporation’s annual reports, information and proxy statement, a clear, concise, and understandable disclosure of compensation of its executive officers for the previous fiscal year and the ensuing year; and (G) review of the human resources development or personnel handbook, if any, to strengthen provisions on conflict of interest, salaries and benefit policies, promotion and career advancement directives and compliance of personnel concerned with all statutory requirements that must be periodically met in their respective posts, or in the absence of such human resources development or personnel handbook, cause the development of such, covering the same parameters of governance as stated above.

Governance 1 2

Corporate Governance Committee ensures overall governance framework is robust and compares favorably with best in class practices. The Committee is tasked to develop and oversee the implementation of the Corporation’s Revised Manual of Corporate Governance. The Committee has the power to review, endorse to the Board recommendations of the Compliance officer in relation to violations of provisions and requirements of the Revised Code of Corporate Governance and other corporate governance rules applicable to the Company, including the Company’s Manual of Corporate Governance and the Code of Business Conduct and Ethics. It is responsible for recommending to the Board the development of corporate governance principles, structure, best practices and rules for adoption by the Company, and assists the Board in the implementation thereof. Finally, it has the responsibility of facilitating the assessment of the Board processes, procedures and performance in line with Corporate Governance practices and metrics.

* The Board finds that there is no need to organize an Executive Committee because all corporate agenda and items for decision are discussed and managed by the Board.

** One (1) executive director is a non-voting member of the Committee.

2. COMMITTEE MEMBERS

(a) Executive Committee The Corporation’s By-Laws, Article 3, Section 10, Executive Committee states that “An executive Committee is hereby created which may be organized from time to time upon the determination of the Board of Directors. The Committee shall be composed of not less than three (3) members, which shall include the President. The Board shall have the power at anytime to remove and replace the members of, and fill vacancies, in the Executive Committee.” To date, the Board finds that there is no need to organize an Executive Committee because all corporate agenda and items for decision are discussed and managed by the Board.

Office Name Date of

Appointment

No. of Meetings

Held


%

Length of Service in

the Committee

Chairman None None None None None None Member (ED) None None None None None None Member (NED) None None None None None None Member (ID) None None None None None None Member None None None None None None

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(b) Audit and Risk Management Committee

Office Name Date of

Appointment

No. of Meetings

Held


%


the Committee*

Chairman Edward S. Go (ID) May 30, 2014 5 5 100 6

Member (NED) Amado R. Santiago III May 30, 2014 5 5 100 4

Member (ID) Lydia B. Echauz May 30, 2014 5 5 100 4 *Number of non-consecutive years as Committee Member since 2008.

i. Disclose the profile or qualifications of the Audit Committee members.

As stated in the Board’s Audit and Risk Management Committee Charter, the members of the Committee shall be appointed by the Board of Directors. The Committee shall be composed of at least three (3) Board members, preferably with accounting and finance background. The Chairman of the committee shall be an independent director and one member shall have related audit experience as defined by the Securities and Exchange Commission (SEC). An independent director is one who is independent of management and who, apart from his fees and shareholdings, is free from any form of business or other relationship which could materially interfere with the exercise of his independent judgment. In addition to the qualifications required for election as director of the Corporation provided under the Corporation's By-Laws and Governance Manual, the Members of the Committee shall preferably have accounting and finance backgrounds, one of whom shall be an independent director and another shall have audit experience. The members shall be disqualified for any of the grounds for disqualification of a director provided under the Corporation's Governance Manual, the Corporation Code of the Philippines, Securities Regulation Code and its Implementing Rules and Regulations, and other relevant laws, rules and regulations of the Securities and Exchange Commission. Below are the profiles of the members of the Audit and Risk Management Committee: Edward S. Go (Independent Director), Committee Chairman Edward S. Go currently serves as Chairman of the Board of Hyundai Asia Resources, Inc. and of ASA Philippines Foundation. He is an Independent Director of Metro Pacific Investments Corporation, PLDT Communications and Energy Ventures, Inc. (PCEV) and Filipino Fund Inc. He is also Chairman of the PLDT Beneficial Trust Fund and member of the Board of ABC Development Corporation, Mediaquest Holdings, Inc., Mediascape Inc., AB Capital Investment Corporation and Vicsal Investment Corporation. He has over 40 years of management experience in banking and finance, starting as Executive Trainee with Citibank N.A. and became President of Philippine Bank of Communications in 1974 and Chairman and Chief Executive Officer of Chinabank in 1985. Mr. Go is also Chairman of the Audit Committees of MPIC and PCEV. He obtained his Bachelor of Arts Degree, magna cum laude, and underwent postgraduate studies at the Ateneo de Manila University, where he currently serves as Chairman of the Board of Trustees. Lydia Balatbat-Echauz (Independent Director), Committee Member

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Lydia Echauz is recently retired from academe. She was for ten years President of Far Eastern University and its three other affiliate schools. Prior to joining FEU in 2002, she served as Dean of De La Salle University Graduate School of Business, Associate Director of the MBA program of the Ateneo de Manila University Graduate School of Business, and Associate Professor of the University of the East, College of Business Administration. She is currently a member of the Board of Trustees of a few organizations, member and former governor of the Management Association of the Philippines, and past President of the Association of Southeast Asian Institutions of Higher Learning, RP Council. She has been awarded most outstanding Filipino and also most distinguished alumna of ADMU, DLSU, and St. Theresa’s College. Amado R. Santiago III, Committee Member Amado R. Santiago III is the Managing Partner of the Santiago & Santiago Law Offices and is engaged in the general practice of law. He specializes in corporate litigation, which includes corporate rehabilitation proceedings under the Securities and Exchange Commission Rules on Corporate Recovery, Interim Rules of Procedure on Corporate Rehabilitation and the Rules of Procedure on Corporate Rehabilitation, as well as taxation law. He acts as director, corporate secretary, and/or corporate counsel of various corporate clients. He graduated from the Ateneo de Manila School of Law in 1992 and passed the Philippines Bar Examinations given in the same year. He received his degree of Bachelor of Science in Legal Management in 1988 from the Ateneo de Manila University.

ii. Describe the Audit Committee’s responsibility relative to the external auditor. The Audit and Risk Management Committee's specific duties and responsibilities in relation to the External Auditors are as follows: a. Review and evaluate the qualifications, performance and independence of the external auditor and the lead partner; b. Select and appoint the external auditors and remove or replace the external auditors as it may deem necessary; c. Discuss with the external auditor before the audit commences the nature and scope of the audit; d. Review and approve the fees charged by the external auditor for audit and non-audit services; e. Evaluate and determine non-audit work by external auditor and keep under review the non-audit fees paid to the external auditor in relation to their significance to

the auditor; and f. Ensure that the external auditor or the lead, engagement, or handling partner having primary responsibility for the audit or review of the Corporation is rotated at

least once every five (5) years.

(c) Nomination Committee

Office Name Date of

Appointment

No. of Meetings

Held


%


the Committee*

Chairman Edward S. Go (ID) May 30, 2014 1 1 100 6

Member (ED) Robert C. Nicholson May 30, 2014 1 1 100 3

Member (ID) Lydia B. Echauz May 30, 2014 1 1 100 4

Member Jose Ma. K. Lim (ED / Non-Voting)

May 30, 2014 1 1 100 6

*Number of non-consecutive years as Committee Member since 2008.

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(d) Compensation Committee

Office Name Date of

Appointment

No. of Meetings

Held


%


the Committee*

Chairman Lydia B. Echauz (ID) May 30, 2014 1 1 100 4

Member (NED) Manuel V. Pangilinan May 30, 2014 1 1 100 4

Member (ID) Edward S. Go May 30, 2014 1 1 100 6 *Number of non-consecutive years as Committee Member since 2008.

(e) Governance Committee

Provide the same information on all other committees constituted by the Board of Directors:

Office Name Date of

Appointment

No. of Meetings

Held


%


the Committee*

Chairman Artemio V. Panganiban (ID) May 30, 2014 2 2 100 6

Member (NED) Amado R. Santiago III May 30, 2014 2 2 100 3

Member (ID) Edward S. Go May 30, 2014 2 2 100 4 *Number of non-consecutive years as Committee Member since 2008. 3. CHANGES IN COMMITTEE MEMBERS

Indicate any changes in committee membership that occurred during the year and the reason for the changes: There were no changes in the committee memberships in the past year after the appointment of the members during last year's Organization Meeting.

Name of Committee Name Reason

Executive None None

Audit None None Nomination None None Compensation None None Governance None None

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4. WORK DONE AND ISSUES ADDRESSED

Describe the work done by each committee and the significant issues addressed during the recent years.

Name of Committee Work Done Issues Addressed

Executive Not Applicable Not Applicable

Audit

The Audit and Risk Management Committee accomplished the following:

Reviewed and approved all audit and review services provided by the external auditor to MPIC, and the related fees for such services;

Discussed with the external auditor the matters required to be discussed by the prevailing applicable Auditing Standard, and the committee has received written disclosures and the letter from the external auditor as required by the prevailing applicable Independence Standards (Statement as to Independence) and have discussed with external auditor its independence from the MPIC Group and MPIC Group’s management;

Approved the creation of the Internal Audit Office and the appointment of the Internal Auditor;

Together with Management and with the Internal Auditor, conducted a review of the effectiveness of the Company's internal control systems;In the performance of its oversight responsibilities, the Committee have reviewed and discussed the audited financial statements of MPIC Group with the MPIC Group’s management, which has the primary responsibility for the financial statements, and with the external auditor, the MPIC Group’s independent auditor, who is responsible for expressing an opinion on the conformity of the MPIC Group’s audited financial statements with Philippine Financial Reporting Standards (PFRS);

Approved and endorsed to the Board, which subsequently approved, the Whistle Blower Policy;

All audit and review services provided by the external auditor and related fees;

Amendment of the Audit and Risk Management Charter;

Matters required to be discussed on applicable Auditing Standard;

Creation of the Internal Audit Office and the appointment of the Internal Auditor;

Review of the audited financial statements of MPIC Group as of and for the year ended December 31, 2012; and

The Company’s Whistle Blower Policy.

Nomination

The Nomination Committee is responsible for vetting and recommending members for nomination to the Board of Directors, including membership in the various Board Committees. In 2011, the committee recommended Victorico P. Vargas and Washington Sycip for nomination to the Board of Directors. During the same year, the committee recommended the appointment of Alberto G. Romulo and Alfred A. Xerez-Burgos as Board Advisers. As a result of the nomination and election of Washington Sycip to the Board of Directors, we have increased the number of independent directors to four from three in the prior year.

Nomination and screening of nominees to the Board of Directors.

Compensation

The Compensation Committee directly oversees compensation and benefits packages of senior executives of the company. Periodic meetings are conducted by the committee to review current and proposed compensation structure and benefits package of senior executives. It is the role of the committee to ensure that the senior executives are fairly

Compensation and incentive framework.

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compensated as well as to ensure the correctness and the appropriateness of all compensation and benefits provided to its senior executives.

Governance

The Governance Committee ensures overall governance framework is robust and compares favorably with best in class practices. The committee proposed the Revised Manual on Corporate Governance to the Board of Directors, which was adopted by the Board on the same date, on 3 March 2011. The Revised Manual was formulated to address gaps in the process used to implement our Corporate Governance framework. The Governance Committee supported the Corporation in joining various Corporate Governance groups, through the Corporate Governance Officer, the Institute of Corporate Directors (ICD) and the Ethics and Compliance Officers Association (ECOA). These institutions regularly meet to discuss current best practices and conduct seminars on developments in Corporate Governance. In addition, the committee supported the Corporation’s employees in attending various seminars on governance throughout the year in order to expand their knowledge of past misdeeds and potential pitfalls in order to better prepare for any eventuality. Through these efforts, the Corporation received the following awards:

1. Finance Asia (April 2014) – 10th Best Managed Companies in the Philippines, 6th Best in Corporate Governance and 3rd Best in Investor Relations

2. IR Magazine (December 2013) - 2nd Place for Grand Prix for Best Overall Investor Relations – Small or Mid-cap; 2nd Place for Best Investor Relations by a Philippine Company; 2nd Place for Best Investor Relations by a CFO; 3rd Place for Best Investor Relations for Diversified Industrials / Conglomerates

3. The Asset (November 2013) – Gold Award for Excellence in Management and Corporate Governance

4. Institutional Investor (July 2013) - All Asia Executive Team: Conglomerates Sector 1st place for Best CFO

5. Corporate Governance Asia (December 2012) – Asia’s Best CEO; Asia’s Best CFO; and Best Investor Relations Website

6. Institutional Investor (June 2012) – All Asia Executive Team; Conglomerates Sector 1st place for Best CFO and IR Professional; 2nd place for Best Investor Relations

7. Asia Money (January 2012) - #1 for Investor Relations in the Philippines and #2 for disclosure and transparency in the Philippines

Company’s compliance to the regulatory requirements on Corporate Governance.

Continuous support, membership, and participation to various CG groups.

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8. COMMITTEE PROGRAM

Provide a list of programs that each committee plans to undertake to address relevant issues in the improvement or enforcement of effective governance for the coming year.

Name of Committee Planned Programs Issues to be Addressed

Executive Not Applicable Not Applicable

Audit

Review and approval of all audit and review services provided by the external auditor to MPIC, and the related fees for such services;

Discussion with the external auditor the matters required to be discussed by the prevailing applicable Auditing Standard,

Reviewed the audited financial statements of MPIC Group

All audit and review services provided by the external auditor and related fees;

Matters required to be discussed on applicable Auditing Standard; and

Review of the audited financial statements of MPIC Group as of and for the year.

Internal udit plan for the year normally covering the following: o Preparation and approval of internal audit manual o Includes review of policies and procedures, validation/test for compliance and

critical risks identification o Business planning and consolidation process o Identification of coordination activities with Internal Auditors of various

subsidiaries and affiliates

Nomination Vetting and recommending members for

nomination to the Board of Directors, including membership in the various Board Committees.

Promulgate the guidelines or criteria to govern the conduct of the nomination for directors;

Pre-screen the qualifications and prepare a final list of all candidates and put in place screening policies and parameters to enable it to effectively review the qualifications of the nominees for directors;

Prepare a Final List of Candidates which shall contain all the information about all the nominees for directors; and

Recommend members for nomination to the Board, including membership in the various Board Committees.

Compensation

Oversee compensation and bonus of senior executives and overall compensation framework for all employees.

Ensure bonus targets are set aggressively and management is motivated for the long term.

Oversee compensation and bonus of senior executives and overall compensation framework for all employees.

Governance

Development of related Corporate Governance Policies and Board Committee Charters.

Continuous review and monitoring of the Corporation’s Corporate Governance Scorecard.

Oversee compliance to regulatory requirements on Corporate Governance.

Development of supporting Corporate Governance Policies.

Development/Review of Board Committee Charters.

Assessment of the Corporation’s Corporate Governance Scorecard.

Compliance to regulatory requirements on Corporate Governance such as (1) the Annual Corporate Governance Report (ACGR); (2) PSE Guidebook Compliance; (3) ASEAN Corporate Governance Scorecard; (4) the Certificate of Compliance to SEC’s Revised Manual of Corporate Governance; and SEC/PSE Regulator Disclosures.

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F. RISK MANAGEMENT SYSTEM

1. STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM

Disclose the following: (a) Overall risk management philosophy of the company; As an investment and management company, Metro Pacific Investments Corporation (MPIC) undertakes risk management at a number of distinct levels: 1. On entering new investments

2. On- going management of the financial stability of the holding company itself; and

3. Within the operating company investments.

(b) A statement that the directors have reviewed the effectiveness of the risk management system and commenting on the adequacy thereof; As disclosed in the Corporation’s Annual Report, the Board reviews the Risk profile of the Company as well as its portfolio investments. The Corporation made the process more robust by incorporating the review process under the aegis of the renamed Audit and Risk Management Committee. In addition, the Corporation has bolstered its internal audit function with the ratification of an Internal Audit Charter that institutionalizes the guidelines for the internal audit function. The Board’s Audit and Risk Management Committee has established the policies and procedures surrounding risk management and is overseeing its successful implementation via oversight of the Chief Risk Officer. The risks reviewed are those associated with entering new investments; ongoing management of the financial stability of the holding company itself; and those within the operating company investments.

(c) Period covered by the review; The period covered by the review is year 2014. (d) How often the risk management system is reviewed and the directors’ criteria for assessing its effectiveness; and The risk management system is reviewed annually.

(e) Where no review was conducted during the year, an explanation why not. Not Applicable.

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2. RISK POLICY

(a) Company Give a general description of the company’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk: The Corporation’s Risk Management Policy contains the following provisions:

Risk Exposure Risk Management Policy Objective

On Entering New Investments

MPIC has taken steps to increase its presence in Southeast Asia through equity investments in Thailand's DMT and Vietnam's CII B&R, while remaining committed to its core busienss in the Philippines. MPIC’s geographic focus remains to be predominantly the Philippines within which its management team has extensive experience. Prior to making a new investment, any business to be acquired is subject to an extensive due diligence including financial, operational, regulatory and risk management. Risks to investment returns are then calibrated and specific measures to manage these risks are determined. The Company is highly selective in the investment opportunities it examines. Due diligence is conducted on a phased basis to minimize costs of evaluating opportunities that may ultimately not be pursued. MPIC’s investments involve - to varying degrees - a partnership approach with MPIC taking a controlling position and key operating partners providing operational and technological input and thereby mitigating risks associated with investing in new business areas. These partners are equity partners - and having co-invested with the Company in a particular opportunity, they will participate in the risks and rewards of the business alongside MPIC. Financing for new investments is through a combination of debt and/or equity by reference to the underlying strength of the cashflow of the target business and the overall financing position of MPIC itself.

On Ongoing Management of the Financial Stability of the Holding Company

MPIC does not guarantee the borrowings of its investee companies and there are no cross default provisions from one investee company to another. Financial stability of the holding company is managed by reference to the ability of the investee companies to remit dividends to MPIC to cover operating costs and service borrowings. We avoid currency and investment cycle mismatches by borrowing only in Pesos using primarily long term instruments with fixed rates. The Company sets the level of debt on its own balance sheet so as to withstand variability of dividend receipts from its operating companies associated with regulatory and other risks described below.

Risk Management within the Operating Companies

Operational risks Each of the operating companies has a full management team which is responsible for having their own plan to manage risk which is reviewed annually by the MPIC Audit and Risk Committee, together with MPIC’s designated Chief Risk Officer, and each of the respective operating companies’ board of directors.

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Regulatory The majority of our invested capital is deployed into businesses which are directly regulated by arms of the state: electricity distribution; water supply and distribution along with sewage treatment; tollroads; and rail. Each of these businesses has concession and / or franchise agreements which involve a degree of operating performance obligation in order to retain our rights and earn our expected returns. In some cases, these agreements provide for retrospective assessment of the extent of our overall operational and financial performance sometimes over a period of years. Risks arising from these types of businesses include the potential for differences with regulators involving interpretation of the relevant concessions – either during the period in question or in retrospect. To manage these risks, the investee companies have established dedicated regulatory management groups with experienced personnel. Their duty is to manage the relationship with regulators, keep management up-to-date on the status of the relationship and ensure companies are well prepared for any forthcoming regulatory changes or challenges. Competition and Market Competitive and market-driven demand risks are most pronounced in Meralco, MPTC and the Healthcare group. o Meralco carries a degree of market risk and its returns in the short term may be impacted by consumers who elect to self-generate

and disconnect from the distribution grid. MPIC is mitigating that risk by improving efficiencies to the point that makes it largely uneconomic to self-generate. With the move to Open Access from June 2013, Meralco will take on risks associated with buying and selling power on its own account instead of on a pass through basis. Meralco has long prepared for this and has an experienced management team already in place to lead this new business. Meralco is now also invested in power generation with attendant demand volume and price risks and fuel source price and supply risks. The primary mitigants are contracting to match demand and supply side volumes where possible and employing highly experienced power market professionals to manage any open positions by trading in the market.

o At MPTC, MPIC sets tariff on new road projects based on traffic projections agreed with the regulator. Rising fuel prices, alternative

means of transport and existing or prospective alternative routes are all factors that can affect the number of vehicles that use our roads.

MPIC alleviate this risk by choosing our projects carefully. Existing high traffic density, difficulty in securing competing routes, a high potential for growth given demographic changes and conservative growth estimates, even with the prior factors included in the assessment, are the important variables we consider when committing to traffic projections with the regulator.

o For the Hospitals group, investment is taking place to enable more qualified personnel to better serve patients more efficiently and

effectively in upgraded facilities and with better equipment.

The primary risk is that investment runs ahead of demand and patient ability or willingness to pay. MPIC mitigate this risk by ensuring MPIC knows our target market and scale our improvements to their ability to pay. The pace of medical innovation is accelerating requiring increased management of the risks that costly equipment may become out of date before its cost is fully

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recovered and traditional healthcare delivery models may be disrupted.

The water company has some supply side risk in that: (i) it secures most of its supply from a single source – the Angat dam; and (ii) this water source is shared by another water concessionaire, a hydroelectric plant, and the needs of farmers for irrigation. A water usage protocol is in place to ensure all users receive water as expected within the constraints of available supply. Following significant water supply disruption in late 2009 arising indirectly from typhoons, the business entered 2010 with less water supply available than allowed for in its concession. We have worked to moderate our reliance on Angat by developing the Putatan Water Treatment Plant and are working on other alternative water sources in partnership with our regulator. However, our regulator does not now wish us to invest further in alternative water sources and this means the logical way to mitigate our supply side risk is now largely prohibited to us. Financial MPIC’s investee companies’ financial risks are primarily: interest rate risk, foreign currency risk, liquidity risk, credit risk and equity price risk. The Board of Directors of each company reviews and approves policies for managing each of these risks as follows.

Interest Rate Risk Interest rate exposure is managed by using a mix of fixed and variable rate debt.

Foreign Currency Risk In general the investee companies will place some degree of reliance on their regulated return mechanisms to pass through foreign currency risk. The current liquidity and depth of the Philippine credit market is such that there should be little need for raising new borrowings in foreign currency. Maynilad has some foreign currency borrowing but there is a mechanism in place wherein it can recover currency fluctuations as approved by its Regulator. Asian Hospital Inc. (AHI) has foreign currency risk arising from its cash and cash equivalents; receivables from international insurance companies; and dollar loans. AHI is unable to take on any derivative transaction to hedge these exposures since its loan covenants do not allow it. AHI regularly reviews and manages its ability to generate dollar-based revenue from its foreign patients to mitigate this risk.

Liquidity Risk Each business monitors its cash position using a cash forecasting system wherein all expected collections, check disbursements and other payments are determined to arrive at the projected cash position to cover its obligations.

Credit Risk Credit risk is managed by setting limits on the amount of risk a business is willing to accept for individual counterparties and by monitoring exposures in relation to such limits.

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Equity Price Risk Our investee companies are generally not faced with equity price risk beyond that normal for any listed company, where relevant. MPIC’s investment in Meralco, through Beacon Electric, is partly financed by borrowings which require a certain security cover based on the price of Meralco’s shares on the PSE on a volume weighted 30 trading day average calculation. Meralco’s share price would have to decline by 54.35% from its price as at 31st December 2014 before Beacon Electric would be required to top-up collateral with cash or pay-down debt.

(b) Group Give a general description of the Group’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk: As an investment and management holding Company, the Group’s Risk Management Policy contains the following provisions:

Risk Exposure Risk Management Policy Objective

Risk Management within the Operating Companies

Operational risks Each of the operating companies has a full management team which is responsible for having their own plan to manage risk which is reviewed annually by the MPIC Audit and Risk Committee, together with MPIC’s designated Chief Risk Officer, and each of the respective operating companies’ board of directors. Regulatory The majority of our invested capital is deployed into businesses which are directly regulated by arms of the state: electricity distribution; water supply and distribution along with sewage treatment; tollroads; and rail. Each of these businesses has concession and / or franchise agreements which involve a degree of operating performance obligation in order to retain our rights and earn our expected returns. In some cases, these agreements provide for retrospective assessment of the extent of our overall operational and financial performance sometimes over a period of years. Risks arising from these types of businesses include the potential for differences with regulators involving interpretation of the relevant concessions – either during the period in question or in retrospect. To manage these risks, the investee companies have established dedicated regulatory management groups with experienced personnel. Their duty is to manage the relationship with regulators, keep management up-to-date on the status of the relationship and ensure companies are well prepared for any forthcoming regulatory changes or challenges. Competition and Market Competitive and market-driven demand risks are most pronounced in Meralco, MPTC and the Healthcare group. o Meralco carries a degree of market risk and its returns in the short term may be impacted by consumers who elect to self-generate

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and disconnect from the distribution grid. MPIC is mitigating that risk by improving efficiencies to the point that makes it largely uneconomic to self-generate. With the move to Open Access from June 2013, Meralco will take on risks associated with buying and selling power on its own account instead of on a pass through basis. Meralco has long prepared for this and has an experienced management team already in place to lead this new business. Meralco is now also invested in power generation with attendant demand volume and price risks and fuel source price and supply risks. The primary mitigants are contracting to match demand and supply side volumes where possible and employing highly experienced power market professionals to manage any open positions by trading in the market.

o At MPTC, MPIC sets tariff on new road projects based on traffic projections agreed with the regulator. Rising fuel prices, alternative

means of transport and existing or prospective alternative routes are all factors that can affect the number of vehicles that use our roads.

MPIC alleviate this risk by choosing our projects carefully. Existing high traffic density, difficulty in securing competing routes, a high potential for growth given demographic changes and conservative growth estimates, even with the prior factors included in the assessment, are the important variables we consider when committing to traffic projections with the regulator.

o For the Hospitals group, investment is taking place to enable more qualified personnel to better serve patients more efficiently and

effectively in upgraded facilities and with better equipment.

The primary risk is that investment runs ahead of demand and patient ability or willingness to pay. MPIC mitigate this risk by ensuring MPIC knows our target market and scale our improvements to their ability to pay. The pace of medical innovation is accelerating requiring increased management of the risks that costly equipment may become out of date before its cost is fully recovered and traditional healthcare delivery models may be disrupted.

The water company has some supply side risk in that: (i) it secures most of its supply from a single source – the Angat dam; and (ii) this water source is shared by another water concessionaire, a hydroelectric plant, and the needs of farmers for irrigation. A water usage protocol is in place to ensure all users receive water as expected within the constraints of available supply. Following significant water supply disruption in late 2009 arising indirectly from typhoons, the business entered 2010 with less water supply available than allowed for in its concession. We have worked to moderate our reliance on Angat by developing the Putatan Water Treatment Plant and are working on other alternative water sources in partnership with our regulator. However, our regulator does not now wish us to invest further in alternative water sources and this means the logical way to mitigate our supply side risk is now largely prohibited to us. Financial MPIC’s investee companies’ financial risks are primarily: interest rate risk, foreign currency risk, liquidity risk, credit risk and equity price risk. The Board of Directors of each company reviews and approves policies for managing each of these risks as follows.

Interest Rate Risk Interest rate exposure is managed by using a mix of fixed and variable rate debt.

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Foreign Currency Risk In general the investee companies will place some degree of reliance on their regulated return mechanisms to pass through foreign currency risk. The current liquidity and depth of the Philippine credit market is such that there should be little need for raising new borrowings in foreign currency. Maynilad has some foreign currency borrowing but there is a mechanism in place wherein it can recover currency fluctuations as approved by its Regulator. Asian Hospital Inc. (AHI) has foreign currency risk arising from its cash and cash equivalents; receivables from international insurance companies; and dollar loans. AHI is unable to take on any derivative transaction to hedge these exposures since its loan covenants do not allow it. AHI regularly reviews and manages its ability to generate dollar-based revenue from its foreign patients to mitigate this risk.

Liquidity Risk Each business monitors its cash position using a cash forecasting system wherein all expected collections, check disbursements and other payments are determined to arrive at the projected cash position to cover its obligations.

Credit Risk Credit risk is managed by setting limits on the amount of risk a business is willing to accept for individual counterparties and by monitoring exposures in relation to such limits.

Equity Price Risk Our investee companies are generally not faced with equity price risk beyond that normal for any listed company, where relevant. MPIC’s investment in Meralco, through Beacon Electric, is partly financed by borrowings which require a certain security cover based on the price of Meralco’s shares on the PSE on a volume weighted 30 trading day average calculation. Meralco’s share price would have to decline by 54.35% from its price as at 31st December 2014 before Beacon Electric would be required to top-up collateral with cash or pay-down debt.

(c) Minority Shareholders

Indicate the principal risk of the exercise of controlling shareholders’ voting power.

Risk to Minority Shareholders

Since the inception of the Company, there have been no disputes or disagreements with minority shareholders. No single shareholder was aggrieved and they are given proper opportunities to raise their concerns to the Corporation during the Annual Stockholders’ Meeting. The Corporation gives due diligence in addressing the said concerns of the shareholders. To date, there have been no objections raised in the items discussed during the Annual Stockholders’ Meeting.

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3. CONTROL SYSTEM SET UP

(f) Company

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company: As disclosed in the Corporation’s Financial Statements, the following are the Corporation’s control system set-up to assess, manage and control the main issues faced by the Corporation:

Risk Exposure Risk Assessment (Monitoring and Measurement Process)

Risk Management and Control (Structures, Procedures, Actions Taken)

Credit Risk Credit risk is the risk that the Corporation will incur a loss arising from customers, clients or counterparties that fail to discharge their contracted obligations.

The Corporation manages and controls credit risk by setting limits on the amount of risk that the Corporation is willing to accept for individual counterparties and by monitoring exposures in relation to such limits.

Liquidity Risk Liquidity risk is the risk that the Corporation will encounter difficulty in meeting obligations associated with financial liabilities. The Corporation’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and facilities.

The Corporation monitors its cash position using a cash forecasting system. All expected collections, check disbursements and other cash payments are determined daily to arrive at the projected cash position to cover its obligations and to ensure that obligations are met as they fall due. The Corporation monitors its cash flow position, particularly the collections from receivables, receipts of dividends and the funding requirements of operations, to ensure an adequate balance of inflows and outflows. The Corporation also has online facilities with its depository banks wherein bank balances are monitored daily to determine the Corporation’s actual cash balances at any time. The Corporation’s liquidity and funding management process include the following:

Managing the concentration and profile of debt maturities;

Maintaining debt financing plans; and

Monitoring liquidity ratios against internal and regulatory requirements.

Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As at December 31, 2014 and 2013, the Corporation is subject to fair value and cash flow interest rate risks. Fixed rate financial instruments measured at fair value are subject

The Corporation generally mitigates risk of changes in market interest rates by constantly monitoring fluctuations of interest rates and maintaining a mix of fixed and floating interest-bearing loans.

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to fair value interest rate risk while floating rate financial instruments are subject to cash flow interest rate risk.

Foreign Currency Risk

Foreign Currency Risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. As at December 31, 2014 and 2012, the Corporation’s foreign currency risk results primarily from movements of the Philippine Peso against US Dollar, Euro, Japanese Yen and Thailand Baht.

The Corporation’s exposure to foreign currency risk is minimal as nearly all of its transactions are denominated in Philippine Peso.

Capital Management

Capital includes preferred shares and equity attributable to the equity holders of the Corporation. The primary objective of the Corporation’s capital management policies is to ensure that the Corporation maintains a strong statement of financial position and healthy capital ratios in order to support its business and maximize shareholder value. The Corporation ensures that it is compliant with all debt covenants not only at the consolidated level but also at the level of the Corporation and each of its subsidiaries.

The Corporation manages its capital structure and adjust to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Corporation may obtain additional advances from shareholders; return capital to shareholders, issue new shares or issue new debt or redemption of existing debt. No changes were made in the objectives, policies or processes during the recent years. The Corporation monitors capital on the basis of debt-to-equity ratio. Debt-to-equity ratio is calculated as long-term debts over equity.

Detailed descriptions of the financial exposures of these risks are available in the Note 35 of the 2013 Financial Statements.

(g) Group

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the Company: As disclosed in the Corporation’s Financial Statements, the following are the Corporation’s control system set-up to assess, manage and control the main issues faced by the Group:

Risk Exposure Risk Assessment (Monitoring and Measurement Process)

Risk Management and Control (Structures, Procedures, Actions Taken)

Credit Risk Credit risk is the risk that the Corporation will incur a loss arising from customers, clients or counterparties that fail to discharge their contracted obligations.

The Corporation manages and controls credit risk by setting limits on the amount of risk that the Corporation is willing to accept for individual counterparties and by monitoring exposures in relation to such limits.

Liquidity Risk Liquidity risk is the risk that the Corporation will encounter difficulty in meeting obligations associated with financial liabilities. The Corporation’s objective is to maintain a balance between continuity of funding and flexibility

The Corporation monitors its cash position using a cash forecasting system. All expected collections, check disbursements and other cash payments are determined daily to arrive at the projected cash position to cover its obligations and to ensure that obligations are met as they fall

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through the use of bank loans and facilities. due. The Corporation monitors its cash flow position, particularly the collections from receivables, receipts of dividends and the funding requirements of operations, to ensure an adequate balance of inflows and outflows. The Corporation also has online facilities with its depository banks wherein bank balances are monitored daily to determine the Corporation’s actual cash balances at any time. The Corporation’s liquidity and funding management process include the following:

Managing the concentration and profile of debt maturities;

Maintaining debt financing plans; and

Monitoring liquidity ratios against internal and regulatory requirements.

Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As at December 31, 2014 and 2013, the Corporation is subject to fair value and cash flow interest rate risks. Fixed rate financial instruments measured at fair value are subject to fair value interest rate risk while floating rate financial instruments are subject to cash flow interest rate risk.

The Corporation generally mitigates risk of changes in market interest rates by constantly monitoring fluctuations of interest rates and maintaining a mix of fixed and floating interest-bearing loans.

Foreign Currency Risk

Foreign Currency Risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. As at December 31, 2014 and 2013, the Corporation’s foreign currency risk results primarily from movements of the Philippine Peso against US Dollar, Euro, Japanese Yen and Thailand Baht.

The Group’s exposure to foreign currency risk is minimal as nearly all of its transactions are denominated in Philippine Peso. Maynilad has some foreign currency borrowing but there is a mechanism in place wherein it can recover currency fluctuations as approved by its Regulator. Asian Hospital Inc. (AHI) has foreign currency risk arising from its cash and cash equivalents; receivables from international insurance companies; and dollar loans. AHI is unable to take on any derivative transaction to hedge these exposures since its loan covenants do not allow it. AHI regularly reviews and manages its ability to generate dollar-based revenue from its foreign patients to mitigate this risk.

Capital Management

Capital includes preferred shares and equity attributable to the equity holders of the Corporation. The primary objective

The Group manages its capital structure and adjust to it in light of changes in economic conditions. To maintain or adjust the capital

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of the Corporation’s capital management policies is to ensure that the Corporation maintains a strong statement of financial position and healthy capital ratios in order to support its business and maximize shareholder value. The Corporation ensures that it is compliant with all debt covenants not only at the consolidated level but also at the level of the Corporation and each of its subsidiaries.

structure, the Corporation may obtain additional advances from shareholders; return capital to shareholders, issue new shares or issue new debt or redemption of existing debt. No changes were made in the objectives, policies or processes during the recent years. The Group monitors capital on the basis of debt-to-equity ratio. Debt-to-equity ratio is calculated as long-term debts over equity.

Detailed descriptions of the financial exposures of these risks are available in the Note 35 of the 2014 Audited Financial Statements.

(h) Committee

Identify the committee or any other body of corporate governance in charge of laying down and supervising these control mechanisms, and give details of its functions:

Committee/Unit Control Mechanism Details of its Functions

Internal Audit Provision of independent and objective assurance and consulting services based in risk-based audit plans.

Review and evaluation of the effectiveness of risk management, control, and, governance processes.

Risk Management Office

Provision of risk management policies and procedures including the identification, assessment and monitoring of the existence of risks and its impact to the Corporation

Responsible for the identification, assessment and monitoring of the existence of risks and its impact to the Corporation

Corporate Governance Office

Provision of corporate governance policies and procedures for the guidance of the directors, officers, and employees of the Corporation in executing their responsibilities and functions.

Craft and Implement the Corporate Governance Policies of the Corporation, and monitor the compliance of the directors, officers and employees to these policies. Monitor the compliance of the Corporation to the Corporate Governance Scorecard and regulatory requirements on Corporate Governance.

G. INTERNAL AUDIT AND CONTROL

1. STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL SYSTEM

Disclose the following information pertaining to the internal control system of the company:

i. Explain how the internal control system is defined for the company;

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The Company’s internal control is a process – effected by the Company’s Board of Directors, Management and other personnel, designed to provide adequate and effective controls to achieve its objectives in the following categories: i. Compliance to Corporate Governance practices;

ii. Set-up of operations and information systems (including the reliability and integrity of financial and operational information); iii. Effectiveness and efficiency of operations; iv. Protection of assets; and v. Compliance to applicable laws and regulations.

ii. A statement that the directors have reviewed the effectiveness of the internal control system and whether they consider them effective and adequate; The Company’s Management is responsible for establishing and maintaining adequate internal controls. The Audit and Risk Management Committee of the Board of Directors conducts regular meetings and assists the Board in fulfilling its oversight responsibilities for the Company’s system of internal controls.

iii. Period covered by the review;

The period covered by the review is the year of 2014.

iv. How often internal controls are reviewed and the directors’ criteria for assessing the effectiveness of the internal control system; and

The Company’s internal controls are reviewed annually as shown in the Statement of Management’s Responsibility in the Corporation’s Annual Report which states that: “The Management of Metro Pacific Investments Corporation and Subsidiaries (the Company) is responsible for the preparation and fair presentation of the consolidated financial statements as of and for the three recent years , including the additional components attached therein, in accordance with Philippine Financial Reporting Standards. This responsibility includes designing and implementing internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.”

v. Where no review was conducted during the year, an explanation why not. A review was conducted in 2014 .

2. INTERNAL AUDIT

a. ROLE, SCOPE AND INTERNAL AUDIT FUNCTION

Give a general description of the role, scope of internal audit work and other details of the internal audit function. The following are the roles of the Internal Audit as defined in the Internal Audit Charter of the Corporation.

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Role Scope Indicate whether In-house or

Outsource Internal Audit Function

Name of Chief Internal Auditor/Auditing Firm

Reporting process

To determine whether MPIC’s structure of risk management, control and governance processes, as designed and represented by Management, is adequate and functioning effectively.

The mission of Internal Audit, as defined in its charter, is to provide an independent and objective assurance and consulting services designed to add value and improve MPIC’s operations. It was also established to help MPIC accomplish its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

Outsource Michael C, Gallego, Partner-in-charge, Punongbayan and Araullo

Functionally to the Audit and Risk Management Committee; Administratively to the President and CEO.

b. APPOINTMENT/REMOVAL OF INTERNAL AUDITOR

Do the appointment and/or removal of the Internal Auditor or the accounting /auditing firm or corporation to which the internal audit function is outsourced require the approval of the audit committee? Part of the duties and responsibilities of the Audit and Risk Management Committee, as stated in Section 4.3 of the Committee Charter, is the “review of the appointment and replacement of the Internal Auditor”.

c. REPORTING RELATIONSHIP WITH THE AUDIT COMMITTEE Discuss the internal auditor’s reporting relationship with the audit committee. Does the internal auditor have direct and unfettered access to the board of directors and the audit committee and to all records, properties and personnel? The Internal Auditor functionally reports to the Audit and Risk Management Committee. Regular meetings are conducted with the ARMC to surface issues warranting the attention of the Committee. The ARMC regularly reports to the Board of Directors of MPIC. The Internal Audit Charter authorizes the Internal Auditor to: i. Unrestricted access to all functions, records, property, and personnel;

ii. Full and free access to the ARMC; iii. Allocate resources, set frequencies, select subjects, determine scopes of work, and apply the techniques required to accomplish its audit objectives; and iv. Obtain the necessary assistance of personnel in the units of the organization where they perform audits, as well as other specialized services from within or

outside the organization.

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d. RESIGNATION, RE-ASSIGNMENT AND REASONS

Disclose any resignation/s or re-assignment of the internal audit staff (including those employed by the third-party auditing firm) and the reason/s for them. No resignation/s or re-assignment of the internal audit staff in 2014.

Name of Audit Staff Reason

none none

e. PROGRESS AGAINST PLANS, ISSUES, FINDINGS AND EXAMINATION TRENDS

State the internal audit’s progress against plans, significant issues, significant findings and examination trends.

Progress Against Plans Review of internal operations’ policies and procedures (Status: On-going)

Internal Audit Manual (Status: Completed)

Issues6 There are no significant issues based on the results of the reviews.

Findings7 There are no significant findings based on the results of the reviews.

Examination Trends Policies and procedures require updating to include automated processes.

The relationship among progress, plans, issues and findings should be viewed as an internal control review cycle which involves the following step-by-step activities:

1) Preparation of an audit plan inclusive of a timeline and milestones; 2) Conduct of examination based on the plan; 3) Evaluation of the progress in the implementation of the plan; 4) Documentation of issues and findings as a result of the examination; 5) Determination of the pervasive issues and findings (“examination trends”) based on single year result and/or year-to-year results; 6) Conduct of the foregoing procedures on a regular basis.

f. AUDIT CONTROL POLICIES AND PROCEDURES

Disclose all internal audit controls, policies and procedures that have been established by the company and the result of an assessment as to whether the established controls, policies and procedures have been implemented under the column “Implementation.” The Internal Audit Manual, which contains the Audit Control Policies and Procedures, was completed and approved by the ARMC and is now being implemented by the Company. The said Manual covers the following:

6 “Issues” are compliance matters that arise from adopting different interpretations.

7 “Findings” are those with concrete basis under the company’s policies and rules.

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Policies & Procedures Implementation

Audit Planning and Risk Assessment Methodology Implemented

Audit Reporting Guidelines Implemented

Audit Field Work and Working Paper Guidelines Implemented

Audit Follow-Up Guidelines Implemented

Quality Assurance and Improvement Program Implemented

g. MECHANISM AND SAFEGUARDS

i. State the mechanism established by the company to safeguard the independence of the auditors, financial analysts, investment banks and rating agencies (example, restrictions on trading in the company’s shares and imposition of internal approval procedures for these transactions, limitation on the non-audit services that an external auditor may provide to the company):

Auditors (Internal and External)

Financial Analysts Investment Banks Rating Agencies

The Internal Audit Code of Ethics is embodied in the Internal Audit Manual which is based on the International Standards for Professional Practice of Internal Auditing. The Internal Auditor is expected to abide by it and to uphold its principles. The appointment of the Internal Auditor underwent a rigorous scrutiny by the ARMC and the Board of Directors to ensure her independence and professional qualifications for the position. The internal auditor follows the Corporation’s Coe of Business Conduct which states that: Code of Business Conduct and Ethics Part C. Confidentiality of Information and Proper Use of Property 2. Maintain and safeguard the

Financial Analysts are considered public entities and therefore the PSE Disclosure Rules to protect public interest is being followed. Information received by investors, analysts and media, during briefings are information which were disclosed publicly through the PSE and the Corporation’s website. The Corporation adheres to the objectives of the PSE to provide a fair, orderly, efficient, and transparent market for the trading of securities and to determine the suitability of securities for listing for the protection of the public interest at all times.

Investment Banks are considered public entities and therefore the PSE Disclosure Rules to protect public interest is being followed. Information received by investors, analysts and media, during briefings are information which were disclosed publicly through the PSE and the Corporation’s website. The Corporation adheres to the objectives of the PSE to provide a fair, orderly, efficient, and transparent market for the trading of securities and to determine the suitability of securities for listing for the protection of the public interest at all times.

Rating Agencies are considered public entities and therefore the PSE Disclosure Rules to protect public interest is being followed. Information received by investors, analysts and media, during briefings are information which were disclosed publicly through the PSE and the Corporation’s website. The Corporation adheres to the objectives of the PSE to provide a fair, orderly, efficient, and transparent market for the trading of securities and to determine the suitability of securities for listing for the protection of the public interest at all times.

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confidentiality of information entrusted by MPIC, its subsidiaries, affiliates, customers, business partners, or such other parties with whom MPIC relates, except when disclosure is authorized or legally mandated. Confidential information includes any non-public information that might be of use to competitors, or harmful to MPIC, its subsidiaries, affiliates, customers, business partners, or such other parties with whom MPIC relates, if disclosed.

Avoid trading any of MPIC’s securities or those of its subsidiaries and affiliates using price sensitive information that is not normally available publicly, and obtained by reason of position, contact within, or other relationship with MPIC.”

ii. State the officers (preferably the Chairman and the CEO) who will have to attest to the company’s full compliance with the SEC Code of Corporate Governance.

Such confirmation must state that all directors, officers and employees of the company have been given proper instruction on their respective duties as mandated by the Code and that internal mechanisms are in place to ensure that compliance.

The Company’s Compliance Officer, as witnessed and countersigned by the President and CEO, attested that, in 2013, the Company fully complied with the SEC Code of Corporate Governance and its own Revised Manual of Corporate Governance.

H. ROLE OF STAKEHOLDERS

1. Disclose the company’s policy and activities relative to the following:

Policy Activities

Customers' welfare

Code of Business Conduct and Ethics Part B. Competition and Fair Dealing “ 1. Avoid taking unfair advantage of anyone through manipulation,

The Corporation’s customers are investors and analyst. The Company provides timely and accurate information to its customers through investors/analysts/media briefing. They are encouraged to attend:

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concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.

2. Deal fairly with MPIC’s customers, service providers, suppliers,

competitors and employees.”

· Attendance in IR Conferences · Quarterly Financial Results Briefing · Annual Stockholders’ Meeting

In communicating with our investors, we try to be as clear as possible about our strategy, growth catalysts and potential risks. We work towards providing investors and analysts the information they need to build as complete a picture of our business and prospects as possible through this website, our Annual Report, quarterly presentation of results and investor presentations. The challenge rests in determining the level of disclosure - sufficient to show where we want to go but not enough to allow competitors to anticipate and block our steps to get there. Ours is a complex story - we are looking to add to four business lines which on their own have varying degrees of ownership, government oversight and public interest. It takes time and sometimes multiple meetings to tell the story, get it understood and acted upon - either through a research report or an actual investment. That is why we have an active travel schedule. We are cognizant of our own story's complexity and take that into account when determining how much time we spend on the road talking to investors. It is also why we are always available to analysts and sales people of stockbrokers. They expand our reach and make us more efficient - a well conveyed message to a research analyst can be re-told multiple times to investors that we may otherwise not have access to. Our goal for is to have the stock price reflect the future we see for our company.

Supplier/contractor selection practice

Code of Business Conduct and Ethics Part B.2 Competition and Fair Dealing “Deal fairly with MPIC’s customers, service providers, suppliers, competitors and employees.”

Code of Business Conduct and Ethics Part B.2 Competition and Fair Dealing “Deal fairly with MPIC’s customers, service providers, suppliers, competitors and employees.”

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Corporation’s Statement on the ROLE OF BUSINESS PARTNERS As an investment and management company, some of the primary tools used by the organization to achieve its goals are funding and financial oversight of its investee companies. It is of vital importance that funding be provided by stable financial institutions that can support their commitments. As such, included among the company's business partners are financial institutions that either extend credit or arrange financing for companies within its sphere of influence. MPIC needs to ensure that the financial statements of each and every company are accurate and reliable. Given that, a strong and independent auditing firm is critical to providing us with an accurate picture of the state of our investments. To continually be at the forefront as the leading infrastructure investment firm in the Philippines, we seek out and adopt best practices and technologies that are applicable to our businesses. We form joint-ventures for this purpose. We view their roles as providing significant technical and/or financial support in each venture we partner with them. To consistently uphold the values central to MPIC's corporate governance policies, financial discipline and accountability as well as integrity and transparency are expected from all suppliers and business partners. MPIC's suppliers and contractors play an essential role in achieving its sustainability goals. MPIC select materials and services that consider the environmental, social, and economic impact in evaluating total cost. It is building relationships with suppliers who operate with the highest ethical and financial standards and comply with all relevant laws and regulations. MPIC communicates its expectations to its suppliers of its commitment to sustainability, assesses its suppliers and monitors their improvement and compliance with the sustainability goals.

MPIC select materials and services that consider the environmental, social, and economic impact in evaluating total cost. It is building relationships with suppliers who operate with the highest ethical and financial standards and comply with all relevant laws and regulations. MPIC communicates its expectations to its suppliers of its commitment to sustainability, assesses its suppliers and monitors their improvement and compliance with the sustainability goals.

Environmentally friendly value-chain

The E's of MPI Foundation's Strategic Thrust : Excellent Education, Environmental Awareness and Economic Empowerment MPI Foundation's (MPIF) strategic program has evolved throughout its five years of existence and is now geared towards three fronts of Social Infrastructure: Education, Environment and Economic Empowerment. In line with Metro Pacific Investments Corporation's (MPIC) commitment to nation-

The Company, its Foundation, and its portfolio companies have the following activities in keeping its value chain environment-friendly. METRO PACIFIC INVESTMENTS CORPORATION The Company engages itself to environmental awareness campaigns such as “SHORE IT UP”.

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building, MPI Foundation seeks to complement MPIC's efforts on the hard front of infrastructure development. MPIF is committed to implementing all its program - especially to benefit communities, organizations, families and individuals in the areas in which MPIC portfolio companies operate. As MPIC continues to grow and expand, so will MPIF's involvement and participation in noteworthy and transformative corporate social responsibility initiatives continue to evolve. MPIC's portfolio companies, most of which are in regulated industries, are constantly confronted with various environmental issues. The Company, it Foundation, and its portfolio companies established its own environment protection policies and programs to address related key environmental concerns.

The ‘Shore It Up!’ campaign is an effort towards sustainable development, preservation and conservation of our marine resources. As a yearly program of the Foundation, it also aims to help reduce destructive floods caused by environmental neglect by both businesses and communities. MAYNILAD ENVIRONMENT AND HEALTH AWARENESS Maynilad’s primary thrusts were in the areas of education and environment, using what it came to call as “Daloy Dunong” as its main vehicle, even as it empowered customers by making its business services more accessible through “Maynilad sa Kommunidad”. • Water Warriors – The Daloy Dunong program also encourages students to become “Water Warriors” for their respective communities—advocates who promote the importance of clean and safe water to health and the environment. • Global Handwashing Day – Since its soft launch in 15 October 2012 to coincide with the 5th Global Handwashing Day, Maynilad’s Daloy Dunong program has benefited over 10,000 students from 40 public schools in 2012. METRO PACIFIC TOLLWAYS CORPORATION ENVIRONMENT CLEAN-UPS AND GREENING • Tullahan River Clean-up Drive – A program that aims at “Cleaning It Up, Keeping It Clean” the 1-kilometer stretch of the Tullahan River in Quezon City, Valenzuela City and Caloocan City. • Greening the NLEX Belt – MPTC has began to plant ornamental, shade, and fruit trees along the entire stretch of NLEX and SCTEX, thus turning it into a long green belt.

Community interaction

Metro Pacific Investments Corporation (MPIC) through its Foundation remains committed to upholding its 3-pronged approach in the areas of Education, Empowerment and the Environment. The Company provides targeted programs in order to create greater impact and make a difference in the lives of chosen beneficiaries. Such programs include:

Quality Education through Mano Amiga

Empowering People through Manpower for Infrastructure Cooperative

Environmental Awareness through Shore It Up

Metro Pacific Foundation has the following programs and initiatives: QUALITY EDUCATION THROUGH MANO AMIGA Mano Amiga is a school that provides children from low-income families access to quality education, holistic formation, and other necessary support for them to have a better life. It follows the Kindergarten to 12th Grade model and uses the Integral Formation Program which focuses on the harmonious development of all dimensions of the human person: intellectual, character, spiritual and apostolic formation.

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Special Outreach Activities EMPOWERING PEOPLE THROUGH MANPOWER FOR INFRASTRUCTURE COOPERATIVE In February 2012, MPIC launched the ManPower for Infrastructure Cooperative Development (MPIC) project - a sustainable Livelihood and Enterprise Development program for 25 urban poor households of Ana Maria Heights, Barangay Calamansian, Caloocan City. In cooperation with the Philippine Business for Social Progress of which MPIC is a member company, the community-based cooperative project embarks on raising the quality of labor skills of its members for possible employment within MPIC’s business portfolio. ENVIRONMENTAL AWARENESS THROUGH SHORE IT UP The ‘Shore It Up!’ campaign is an effort towards sustainable development, preservation and conservation of our marine resources. As a yearly program of the Foundation, it also aims to help reduce destructive floods caused by environmental neglect by both businesses and communities. SPECIAL OUTREACH ACTIVITIES: FAITH, HOPE AND LOVE Started in 2004, the Faith, Hope & Love Kid’s Ranch Inc. was established by the Lamar family to give abandoned, abused, neglected and orphaned children a second chance at life. Currently, the facility has about 40 children under its care and is registered with the Department of Social Welfare and Development. “TULONG KAPATID”: ALIGNING PROGRAMS AND WORKING TOGETHER TO IMPROVE LIVES AND BENEFIT COMMUNITIES The CSR Council composed of foundations and CSR departments in the MVP Group of companies formed “Tulong Kapatid” (Brotherly Help) to collaborate in common activities relating to environmental programs, tree planting, coastal clean-ups, blood banks, medical missions and disaster preparedness and responsiveness. Recent efforts of Tulong Kapatid provided coordination for medical assistance and service restoration in telecommunications, electricity and water.

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Prompted by one text message and organized in 24 hours, the “Tulong Kapatid” MVP Telethon in December 2012 raised over ₱100 million for victims of typhoon Pablo in just six hours.

Anti-corruption programmes and procedures

Code of Business Conduct and Ethics Part A.3 Compliance “Avoid the direct or indirect commission of bribery and corruption of representatives of governments or regulators to facilitate any transaction or gain any perceived or actual favor or advantage, excluding permissible additional payments for routine governmental actions allowed by all applicable laws and regulations.”

The Company established a Whistleblowing Policy is to increase the awareness of maintaining internal corporate justice and regard it as a kind of internal control mechanism. It provides the employees of the Company with reporting channels and guidance on whistleblowing. Continuous monitoring of the implementation of the Company’s Whistleblowing policy is assured through the Corporate Governance Committee of the Board.

MPIC’s Whistleblowing Policy This Policy is intended to assist individual employees (permanent or temporary employees) to disclose information relevant to suspected misconduct, malpractice or irregularity through a confidential reporting channel. It is not designed to further any personal disputes, question financial or business decisions taken by the Corporation nor should it be used to reconsider any staff matters which have been addressed under the grievance procedure already in place.

Whistleblowing matters may include but are not confined to: 1. Malpractice, impropriety or fraud relating to internal controls, accounting,

auditing and financial matters; 2. Violation of the rules and regulations of the Corporation or the Code of

Business Conduct and Ethics of the Corporation 3. Improper conduct or unethical behavior likely to prejudice the standing of

the Corporation 4. Breach of legal or regulatory requirements 5. Criminal offences, breach of civil law and miscarriage of justice 6. Endangerment of the health and safety of an individual 7. Damage caused to the environment 8. Deliberate concealment of any of the above.

Safeguarding creditors'

The primary objective of the Corporation’s capital management policies is to ensure that the Corporation maintains a strong statement of financial

The primary objective of the Corporation’s capital management policies is to ensure that the Corporation maintains a strong statement of financial

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rights position and healthy capital ratios in order to support its business and maximize shareholder value. The Corporation ensures that it is compliant with all debt covenants not only at the consolidated level but also at the level of Parent Company and each of its subsidiaries. The Corporation complies with these debt covenants as part of maintaining a strong credit rating with its creditors.

position and healthy capital ratios in order to support its business and maximize shareholder value. The Corporation ensures that it is compliant with all debt covenants not only at the consolidated level but also at the level of Parent Company and each of its subsidiaries. The Corporation complies with these debt covenants as part of maintaining a strong credit rating with its creditors.

2. Does the company have a separate corporate responsibility (CR) report/section or sustainability report/section?

The Company has a separate Corporate Responsibility Report (CSR) section in its Annual Report (printed and downloadable) and can also be viewed in its website.

3. Performance-Enhancing Mechanisms For Employee Participation

(a) What are the company’s policy for its employees’ safety, health, and welfare? The following are the Corporation’s policies covering its employees’ safety, health and welfare: Training and Development Program “MPIC offers its employees many opportunities to further their career not only within the company, but within the group of companies. Our cross posting opportunity spans across several industries, such as Health Care, Utilities (Water, Electricity & Communications), Road and other Infrastructure Industries all throughout the archipelago including possible assignment in our Hong Kong Office. We want to attract and retain the best talent within and outside of our industry over the long term. MPIC firmly believes that it has an obligation to offer its employees ample training and development opportunities. We maximize our resources where we share training courses and facilities across MPIC Group of Companies including that of our sister company PLDT. It is through this that our employee can avail of a wide array of training and development programs.” Benefits and Incentives “It is our belief that employees drive our success and our future, it is in these that we create a core welfare program which express our respect for human rights, character and individuality. We have an aggressive rewards and compensation program that is centered towards distinct performance recognition and market competitiveness. In our further response to the welfare of our employees, we likewise acknowledge the need to care for employee's family members, where most of our benefit programs and company activities cover and/or consider the welfare of members of the family. As an employee, we promise that you will have access to a wide range of rewards and compensation, such as:

Competitive Compensation

Performance Based Rewards

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Exclusive Medical Coverage

Communication Allowance

Travel Subsidy & Allowance

Gym Memberships

Personal Loans

Savings Programs

Participative Pension Scheme”

(b) Show data relating to health, safety and welfare of its employees. Part of the Corporation’s benefit is the exclusive medical coverage for its employees. Every year, employees are required to have their annual physical examinations in order to monitor their health and wellness. The following are the employee engagement on the various health programs facilitated by the Corporation in 2013:

64% of the employees has undergone the required annual physical examination;

74% of employees availed the Flu vaccination;

57% of employees enrolled in sponsored gym classes; and

No employee was hospitalized due to work-related safety/health concerns.

(c) State the company’s training and development programmes for its employees. Show the data. The Corporation conducted training programs that are open for all its employees in 2014. The various training programs are summarized in the following categories: 1. 2014 MPIC Business Communication Series (28 participants)

a. Fundamentals of Verbal Business Communication (July 1-2 and August 8) b. Essentials of Verbal Business Communication (October 14-15) c. Advanced Business Communication (November 27-28)

2. Leadership Communication Series (11 participants) a. Effective Feedback (October 15) b. Influencing Skills program (November 26)

3. Accounting for Non-Accountants (8 participants; August 1 and November 19)

(d) State the company’s reward/compensation policy that accounts for the performance of the company beyond short-term financial measures The Corporation has established a Long Term Incentive Plan (LTIP) aimed at providing a competitive level of financial incentives for eligible employees to encourage them to achieve performance targets consistent. The amount of LTIP is fixed upon achievement of the target Core Income and is not affected by changes in future salaries of the employees covered.

(e) What are the company’s procedures for handling complaints by employees concerning illegal (including corruption) and unethical behaviour? Explain how employees are protected from retaliation.

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The Corporation established a Whistleblowing Policy which is intended to assist individual employees (permanent or temporary employees) to disclose information relevant to suspected misconduct, malpractice or irregularity through a confidential reporting channel. It is not designed to further any personal disputes, question financial or business decisions taken by the Corporation nor should it be used to reconsider any staff matters which have been addressed under the grievance procedure already in place.

Whistleblowing matters may include but are not confined to: 1. Malpractice, impropriety or fraud relating to internal controls, accounting, auditing and financial matters; 2. Violation of the rules and regulations of the Corporation or the Code of Business Conduct and Ethics of the Corporation 3. Improper conduct or unethical behavior likely to prejudice the standing of the Corporation 4. Breach of legal or regulatory requirements 5. Criminal offences, breach of civil law and miscarriage of justice 6. Endangerment of the health and safety of an individual 7. Damage caused to the environment 8. Deliberate concealment of any of the above

Reporting and Investigation Procedures

1. Reporting Channel for the Corporation

Employee who has a legitimate malpractice concern can raise the matter directly with the officer of the Corporate Governance Committee. The officer will review the complaint and decide how the investigation should proceed. Depending on the circumstances, the Corporate Governance Committee may consider nominating an appropriate investigating officer or set up a special committee to investigate the matter independently.

2. Reporting Format and Supporting Documentation

Disclosures can be made in writing or by using the standard form (Whistleblower Report Form) attached to this Policy. While the Corporation does not expect the employee to have absolute proof or evidence of the misconducts, malpractices or irregularities reported, the report should show reasons for the concerns and full disclosure of any relevant details and supporting documentation.

The disclosure should be sent to the Chairman of the Corporate Governance Committee at 10/F MGO Building Legaspi cor Dela Rosa Streets Makati City, 0721 Philippines in a sealed envelope clearly marked “Strictly Private and Confidential – to be opened by Addressee Only” to ensure confidentiality, or through sending emails to [email protected]. Employees should ensure all the attachments to the emails should have passwords in order to ensure confidentiality. Employees are required to put their name to any disclosures they make. Anonymous complaints are usually not considered.

The Company will hold it a serious disciplinary offence for any person who seeks to prevent a communication of malpractice concerned reaching to the designated person, or to impede any investigation which he or anyone on his behalf may make.

3. Investigation Procedure

The format and length of an investigation will vary depending upon the nature and particular circumstances of each complaint made. The matters raised may:

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i. be investigated internally; ii. be referred to the External Auditor; and/or iii. form the subject of an independent inquiry

The Chairman of the Corporate Governance Committee or the person designated to investigate the complaint will write to the complainant whenever reasonably practicable of the concern being received: i. acknowledging that the concern has been received; ii. advising whether or not the matter is to be investigated further and if so what the nature of the investigation will be; iii. giving an estimate of how long the investigation will take to provide a final response telling the complainant whether any initial inquiries have been made, and

whether further investigation will take place, and if not, why not.

False Reports

If an employee makes a false report maliciously, with an ulterior motive, or for personal gain, the Corporation reserves the right to take appropriate actions against the employee to recover any loss or damage as a result of the false report. In particular, the employee may face disciplinary action, including dismissal, where appropriate.

Anonymous Reports

As the Corporation takes reporting of misconducts, malpractices, and irregularities seriously and wants to conduct warranted investigations of both potential and actual violations, it is preferred that these reports are not made anonymously. However, it is recognized that for any number of reasons, employees may not feel comfortable reporting potential violations directly to the Chairman of the Corporate Governance Committee. In these cases, anonymous reports may be submitted to the HR Department.

Protection and Confidentiality

It is the Corporation's policy to make every effort treating all disclosures in a confidential and sensitive manner after employee reports concern about any of the above matters. The identity of the individual employee making genuine and appropriate allegation under this Policy are assured of fair treatment. In addition, employees are also assured of protection against unfair dismissal, victimization or unwarranted disciplinary action, even if the concerns raised turned out to be unsubstantiated.

The Corporation reserves the right to take appropriate actions against anyone who initiates or threatens to initiate retaliation against those who have raised concerns under this Policy. In particular, employees who initiate or threaten retaliation will be subject to disciplinary actions, which may include summary dismissal.

Management will support all employees and encourage them to raise concerns without fear of reprisals.

I. DISCLOSURE AND TRANSPARENCY

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1. Ownership Structure Security ownership of Record and Beneficial Owners of at least 5% of the total issued and outstanding capital stock as at February 28, 2015:

Shareholder Number of Shares Percent Beneficial Owner

Metro Pacific Holdings, Inc. 14,522,948,170 52.13% Metro Pacific Holdings, Inc.

PCD Nominee Corporation (Foreign) 9,431,034,166 33.85% Public ownership

PCD Nominee Corporation (Filipino) 3,868,205,726 13.88% Public ownership

Below is a list of directors and officers holding shares in the Corporation as at February 28, 2015:

Name of Senior Management Number of

Direct shares

Number of Indirect shares / Through (name

of record owner)

% of Capital Stock

Manuel V. Pangilinan 1 None 0.00%

Jose Ma. K. Lim 11,000,001 None 0.04%

David J. Nicol 7,250,001 None 0.03%

Ray C. Espinosa 1 None 0.00%

Ramoncito S. Fernandez 5,862,001 None 0.02%

Robert C. Nicholson 1 None 0.00%

Augusto P. Palisoc, Jr. 10,000,001 None 0.04%

Antonio A. Picazo 1,001 None 0.00%

Amado R. Santiago III 2,500,001 None 0.01%

Edward A. Tortorici 10,729,596 None 0.04%

Victorico P. Vargas 4,500,001 None 0.00%

Washington Z. SyCip 1 None 0.00%

Edward S. Go 500,000 None 0.00%

Lydia B. Echauz 30,000 None 0.00%

Chief Justice Artemio V. Panganiban 250,001 None 0.00%

TOTAL 52,622,608 0.20%

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2. Annual Report

Key risks Yes

Corporate objectives Yes

Financial performance indicators Yes

Non-financial performance indicators Yes

Dividend policy Yes

Details of whistle-blowing policy No

Biographical details (at least age, qualifications, date of first appointment, relevant experience, and any other directorships of listed companies) of directors/commissioners

Yes

Training and/or continuing education programme attended by each director/commissioner

No

Number of board of directors/commissioners meetings held during the year Yes

Attendance details of each director/commissioner in respect of meetings held Yes

Details of remuneration of the CEO and each member of the board of directors/commissioners

Yes

Should the Annual Report not disclose any of the above, please indicate the reason for the non-disclosure.

The Annual Report discloses the Board approval of the Company’s Whistleblowing policy. The complete full detailed policy is posted in the Company website. For the trainings and seminars attended, the breakdown of the trainings per director was not included in the Annual Report but there was a mention that the directors and officers of the Company attended different Corporate Governance Trainings and Seminars conducted by third-party entities.

3. External Auditor’s fee

The table below shows the aggregate Audit Fees for 2014.

Name of auditor Audit Fee Non-audit Fee

SGV & Company 23,140,875.00 --

4. Medium of Communication

List down the mode/s of communication that the company is using for disseminating information. The Company’s modes of communication are the following:

i. Corporate Website (http://www.mpic.com.ph)

http://www.mpic.com.ph/

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ii. Annual Report (Printed and Downloadable) iii. SEC/ PSE Disclosures

a. SEC Form 17-A (Annual Report) b. Corporate Disclosures: SEC Form 17-C and Clarifications c. SEC Form 17-Q (Quarterly Financial Report) d. Public Ownership Report e. Report on number of shareholders and foreign ownership report f. Shareholders list: Top 100, Top 20 and Shareholders’ Masterlist g. 20-IS (Preliminary and Definitive Information Statement)

iv. Analysts/ Investors Briefing (close to 300 meetings were conducted) 5. Release of Audited Financial Report

Date of release of audited financial report: The table below shows the summary of the release of the audited annual and interim financial statements for 2014 and 2013. The indicated release date is the date the 17Q and 17A were filed with the Securities and Exchange Commissions.

Financial Report Release Date

2013 Reports 2014 Reports

1st

Quarter May 15, 2013 May 14, 2014

2nd

Quarter August 14, 2013 August 13, 2014

3rd

Quarter November 13, 2013 November 13, 2014

Annual Financial Report April 15, 2014 April 15, 2015

6. Company Website

Does the company have a website disclosing up-to-date information about the following? The Company provides information to its stakeholders through its website address http://www.mpic.com.ph

Business operations Yes

Financial statements/reports (current and prior years) Yes

Materials provided in briefings to analysts and media Yes

Shareholding structure Yes

Group corporate structure Yes

Downloadable annual report Yes

http://www.mpic.com.ph/

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Notice of AGM and/or EGM Yes

Company's constitution (company's by-laws, memorandum and articles of association) Yes

Should any of the foregoing information be not disclosed, please indicate the reason thereto.

None.

7. Disclosure of RPT

RPT* Relationship Nature Value (In millions PhP)

Traffic Management Corporation (TMC)

Associate

TMC provides services as operator to the North Luzon Expressway (NLE) under the Operations & Maintenance (O&M). The O&M contains the terms and

conditions for the operation and maintenance by TMC of Phase I of the NLE and subsequently of Segment 7, and sets forth the scope of its services.

Php 1,711

Smart Communications Other related

party Smart Communications provides wireless communication services to MPIC and its

subsidiaries. Php 33

Advertising agreements between MNTC and Digitel related to various advertising

mediums along NLEX Php 58

PLDT Other related

party PLDT provides landline services to MPIC and its subsidiaries. Php 46

PLDT provides services for various administrative assistance extended to the

Company. It also includes rentals from lease of office space. Php 15

D.M. Consunji Inc.

Non-controlling shareholder in

Maynilad Water Holding

Company, Inc.

Maynilad entered into certain construction contracts with D.M. Consunji, Inc. in relation to the provision of engineering, procurement and construction services

to Maynilad. Php 583

Manila Electric Company (Meralco)

Associate

Meralco provides electricity to MPIC and certain subsidiaries’ offices within its franchise area. The rates charged by Meralco are the same as those with

unrelated parties. Meralco is the sole provider of electricity for the Corporation since it is located within Meralco’s franchise area.

Php 1,006

* Full details of the Company’s Related Party Transactions are available in the Note 21 of the 2014 Audited Financial Statements.

When RPTs are involved, what processes are in place to address them in the manner that will safeguard the interest of the company and in particular of its minority shareholders and other stakeholders? Transactions with TMC. The Operation & Maintenance (“O&M”) of the NLEX and Segment 7 is undertaken by TMC pursuant to the O&M Agreement between MNTC and

TMC. This agreement was signed on July 6, 2001 and shall be effective for the entire concession period. In exchange for performing its duties, TMC receives an O&M fee based on a base fee plus a variable fee. The base fee is a fixed annual amount, payable in twelve (12) monthly installments and is escalated on a quarterly basis. The variable fee is the amount assessed and paid by MNTC to TMC for the cost of performing its services over and above the agreed base traffic volume assumption. TMC’s

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services have been expanded to include the O&M of the NLEX Mindanao Avenue link as well as the Balagtas Interchange and the Bocaue Northbound Exit. Transactions with PLDT and SMART. The Company’s primary telecommunications carriers are PLDT (an associate of FPC) for its wireline and SMART (PLDT’s subsidiary)

for its wireless services. Such services are covered by standard service contracts between the telecommunications carriers and each entity within the Company. Transactions with DM Consunji Inc. Maynilad, entered into certain construction contracts with D.M. Consunji, Inc. (Consunji), a subsidiary company of DMCI (a non-

controlling shareholder in MWHC), in relation to the provision of engineering, procurement and construction services to Maynilad. Transactions with Meralco. Meralco, sells electricity to the Company for the Company’s facilities within Meralco’s franchise area. The rates charged by Meralco are the

same mandated rates by the ERC applicable to customers within the franchise area. J. RIGHTS OF STOCKHOLDERS 1. Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings

(a) Quorum

Give details on the quorum required to convene the Annual/Special Stockholders’ Meeting as set forth in its By-laws.

Quorum Required The Corporation’s By-Laws, Article II. Section 5. Quorum states that to have a quorum, the holders of the “Majority of the outstanding capital stock” should be present in the Annual Stockholders Meeting.

(b) System Used to Approve Corporate Acts

Explain the system used to approve corporate acts.

System Used Voting in person or proxy.

Description Stockholders were given an opportunity to “vote in person or proxy” as stated in the Corporation’s By-Laws, Article II. Section 5. Quorum.

(c) Stockholders’ Rights

List any Stockholders’ Rights concerning Annual/Special Stockholders’ Meeting that differ from those laid down in the Corporation Code.

Stockholders’ Rights under The Corporation Code

Stockholders’ Rights not in The Corporation Code

None None

(d) Dividends

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Declaration Date Record Date Payment Date

March 19, 2014 April 8, 2014 April 30, 2014

August 12, 2014 August 29, 2014 September 24, 2014

November 6, 2014 December 2, 2014 December 18, 2014

February 26, 2015 March 25, 2015 April 17, 2015

(e) Stockholders’ Participation

1. State, if any, the measures adopted to promote stockholder participation in the Annual/Special Stockholders’ Meeting, including the procedure on how stockholders and other parties interested may communicate directly with the Chairman of the Board, individual directors or board committees. Include in the discussion the steps the Board has taken to solicit and understand the views of the stockholders as well as procedures for putting forward proposals at stockholders’ meetings.

Measures Adopted Communication Procedure

During the 2014 Annual Stockholders’ Meeting, the Company’s stockholders were given the opportunity to ask questions or raise their concerns, given the following conditions 1. Only shareholders of the Company are entitled to ask questions; and 2. Before posing questions, the stockholder must state his/her name for

the record.

At the start of the 2014 Annual Stockholders’ Meeting, the Chairman reads the rules to be observed by the Stockholders in raising their questions and concerns during the meeting.

2. State the company policy of asking shareholders to actively participate in corporate decisions regarding: a. Amendments to the company's constitution b. Authorization of additional shares c. Transfer of all or substantially all assets, which in effect results in the sale of the company

Shareholders are encouraged to actively participate in the annual meetings to discuss and approve items a-c.

3. Does the company observe a minimum of 21 business days for giving out of notices to the AGM where items to be resolved by shareholders are taken up? As stated in the Corporation’s By-Laws, which was based on the Philippine Corporation Code, the notices for regular or special meetings of stockholders may be sent by the Corporate Secretary by personal delivery or by mail at least fifteen (15) days prior to the date of the meeting to each stockholder of record.

a. Date of sending out notices:

The Notices for the 2014 Annual Stockholders Meeting was sent to the Stockholders on May 5, 2014, 26 days prior to the May 30, 2014 Annual Stockholders’

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Meeting .

b. Date of the Annual/Special Stockholders’ Meeting: The 2014 Annual Stockholders Meeting was held on May 30, 2014.

4. State, if any, questions and answers during the Annual/Special Stockholders’ Meeting. The Company encourages the stockholders to raise their questions or concerns during the Annual Stockholders’ Meeting.

5. Result of Annual/Special Stockholders’ Meeting’s Resolutions Result of the Annual Stockholders’ Meeting on May 30, 2014

Resolution Approving Dissenting Abstaining

Approval of the President’s Report and the Annual Report for the year 2013

100% of SH in attendance

- -

Adoption of the Audited Financial Statements for the year ended 31

st December 2013 contained in the Annual Report


- -

Ratification of all acts of the Board of Directors and Management for the year 2013


- -

Appointment of the external auditor of the Company for the year 2014


- -

6. Date of publishing of the result of the votes taken during the most recent AGM for all resolutions: The results of the AGM and the Special Stockholders’ Meeting were disclosed on the same day of the meeting.

(f) Modifications

State, if any, the modifications made in the Annual/Special Stockholders’ Meeting regulations during the most recent year and the reason for such modification:

Modifications Reason for Modification

None None

(g) Stockholders’ Attendance

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(i) Details of Attendance in the Annual/Special Stockholders’ Meeting Held:

Type of Meeting Names of Board members / Officers

present Date of Meeting

Voting Procedure (by poll, show of hands, etc.)

% of SH Attending in Person

% of SH in Proxy

Total % of SH attendance

Annual

Atty. Amado R. Santiago III; Atty. Ray C. Espinosa; Ms. Lydia B. Echauz; Chief Justice Artemio V. Panganiban; Mr. Washington Z. SyCip; Atty. Antonio A. Picazo; Mr. Augusto P. Palisoc, Jr.; Mr. Ramoncito S. Fernandez; Mr. Victorico P. Vargas; Mr. David J. Nicol; Mr. Jose Ma. K. Lim;

30 May 2014 Votes were

counted thru Proxies.

0.09% 69.69% 69.78%

(ii) Does the company appoint an independent party (inspectors) to count and/or validate the votes at the ASM/SSMs? SGV and Co., external auditor, was appointed by the Corporation as the independent party (inspectors) to count and/or validate the votes and proxies at the AGM and SSM.

(iii) Do the company’s common shares carry one vote for one share? If not, disclose and give reasons for any divergence to this standard. Where the company has more than one class of shares, describe the voting rights attached to each class of shares.

The Corporation’s Common Shares carry one vote for one share. Holders of common and Class A Preferred shares of stock of the Company are entitled to vote on all matters to be voted upon by the stockholders. Stockholders entitled to vote are also entitled to cumulative voting in the election of directors. Section 24 of the Corporation Code provides, in part, that: “….in stock corporations, every stockholder entitled to vote shall have the right to vote in person or by proxy the number of shares of stock standing, at the time fixed in the by-laws, in his own name on the stock books of the corporation, or where the by-laws are silent, at the time of the election; and said stockholder may vote such number of shares for as many persons as there are directors to be elected, or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit….”

(h) Proxy Voting Policies

State the policies followed by the company regarding proxy voting in the Annual/Special Stockholders’ Meeting.

Company’s Policies

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Execution and acceptance of proxies

The following are the requirements for the execution and acceptance of proxies: a. The proxy form must be completed, signed and dated by the stockholder or his duly authorized representative, and received at the

principal office and mailing address of the Company on or before the scheduled meeting where such proxy will be utilized. b. If the shares of stock are owned by two or more joint owners, the proxy form must be signed by all of the joint owners. c. If the shares of stock are owned in an "and/or" capacity, the proxy form must be signed by either one of the owners. d. If the shares of stock are owned by a corporation, association, partnership or unincorporated entity, the proxy form must be

accompanied by a certification, signed by a duly authorized officer, partner or representative of such corporation, association, partnership or unincorporated entity, to the effect that the person signing the proxy form has been authorized by the governing body or has the power pursuant to the By-Laws, constitutive documents or duly approved policies of such corporation, association, partnership or unincorporated entity, for such purpose.

e. A proxy form given by a broker or dealer in respect of shares of stock carried by such broker or dealer for the account of a customer

must be supported by a sworn certification that the same is given with the express prior authorization of such customer. f. If any customer of a broker or dealer who is the beneficial owner of shares of stock executes a sub-proxy, the broker or dealer shall

certify that the signature on the sub-proxy is the true and genuine signature of its customer.

Notary For the convenience of every shareholder and to facilitate the use of proxy voting, NO NOTARIZATION of the pertinent document is required for the validity of Proxy Appointment.

Submission of Proxy

The proxy form must be completed, signed and dated by the stockholder or his duly authorized representative, and received at the principal office and mailing address of the Company on or before the scheduled meeting where such proxy will be utilized.

Several Proxies

The Corporation follows the SRC Rule 20 (11)(b) Proxy Where the corporation receives more than one (1) proxy from the same stockholder and they are all undated, the postmark dates shall be considered. If the proxies are mailed on the same date, the one bearing the latest time of day of postmark is counted. If the proxies are not mailed, then the time of their actual presentation is considered. That which is presented last will be recognized. Where a proxy is given to two (2) or more persons in the alternative in one instrument, the proxy designated as an alternate can only act as proxy in the event of non-attendance of the other designated person. Where the same stockholder gives two (2) or more proxies, the latest one given is to be deemed to revoke all former proxies. If the stockholder intends to designate several proxies, the number of shares of stock to be represented by each proxy shall be specifically indicated in the proxy form. If some of the proxy forms do not indicate the number of shares, the total shareholdings of the stockholder

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shall be tallied and the balance thereof, if any, shall be allotted to the holder of the proxy form without the number of shares. If all are in blank, the stocks shall be distributed equally among the proxies. The number of persons to be designated as proxies may be limited by the By-laws.

Validity of Proxy

The following are the requirements for the validity of a proxy: a. The proxy form must be completed, signed and dated by the stockholder or his duly authorized representative, and received at the

principal office and mailing address of the Company on or before the scheduled meeting where such proxy will be utilized.

b. If the shares of stock are owned by two or more joint owners, the proxy form must be signed by all of the joint owners.

c. If the shares of stock are owned in an "and/or" capacity, the proxy form must be signed by either one of the owners.

d. If the shares of stock are owned by a corporation, association, partnership or unincorporated entity, the proxy form must be accompanied by a certification, signed by a duly authorized officer, partner or representative of such corporation, association, partnership or unincorporated entity, to the effect that the person signing the proxy form has been authorized by the governing body or has the power pursuant to the By-Laws, constitutive documents or duly approved policies of such corporation, association, partnership or unincorporated entity, for such purpose.

e. A proxy form given by a broker or dealer in respect of shares of stock carried by such broker or dealer for the account of a customer

must be supported by a sworn certification that the same is given with the express prior authorization of such customer.

f. If any customer of a broker or dealer who is the beneficial owner of shares of stock executes a sub-proxy, the broker or dealer shall certify that the signature on the sub-proxy is the true and genuine signature of its customer.

Proxies executed abroad

Proxies executed abroad shall be duly authenticated by the Philippines Embassy or Consular Office.

Invalidated Proxy

Proxies invalidated by the Special Committee of Inspectors shall not be included for quorum and voting purposes.

Validation of Proxy

The Board shall schedule the validation of proxies. The scheduled is indicated in the Notice of Meeting and Information Statement.

Violation of Proxy

If the instruction of the stockholder as to manner is not followed, then the proxy vote shall not be honored.

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(i) Sending of Notices

State the company’s policies and procedure on the sending of notices of Annual/Special Stockholders’ Meeting.

Policies Procedure

The Company’s By-Laws states that Notices for regular or special meetings of stockholders may be sent by the Secretary by personal delivery or by mail at least fifteen (15) days prior to the date of the meeting to each stockholder of record at his last known post office address or by publication in newspaper of general circulation.

Notices of AGM are sent through courier service, disclosed to SEC and PSE, published in newspaper of general circulation, and posted on the Company website.

(j) Definitive Information Statements and Management Report

Number of Stockholders entitled to receive Definitive Information Statements and Management Report and Other Materials

For the 2014 AGM, there were 1,354 Stockholders entitled to receive DIS and other materials. For the 2015 AGM, the number of Stockholders shall be determined based on the latest Stock Transfer Service, Inc. (STSI) report on the number of Stockholders of the Company.

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by market participants/certain beneficial owners

For the 2014 AGM, DIS were distributed on May 5, 2014, 26 days before the actual AGM.

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by stockholders

For the 2014 AGM, DIS were distributed on May 5, 2014, 26 days before the actual AGM.

State whether CD format or hard copies were distributed For the 2014 AGM, Hard copies of the Definitive Information Statements and Management Report and Other Materials were distributed to the Stockholders.

If yes, indicate whether requesting stockholders were provided hard copies For the 2014 AGM, Hard Copies of the Definitive Information Statements and Management Report and Other Materials were distributed to the Stockholders.

(k) Does the Notice of Annual/Special Stockholders’ Meeting include the following:

Each resolution to be taken up deals with only one item. Yes

Profiles of directors (at least age, qualification, date of first appointment, experience, and directorships in other listed companies) nominated for election/re-election.

Yes

The auditors to be appointed or re-appointed. Yes

An explanation of the dividend policy, if any dividend is to be declared. Yes

The amount payable for final dividends. Yes

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Documents required for proxy vote. Yes

Should any of the foregoing information be not disclosed, please indicate the reason thereto. none

2. Treatment of Minority Stockholders

(a) State the company’s policies with respect to the treatment of minority stockholders.

Policies Implementation

The Corporation’s Revised Manual of Corporate Governance Article 6 - Stockholders’ Rights and Protection of Minority Stockholders’ Interests states the following with respect to the treatment of minority stockholders: “A) The Board shall respect the rights of the stockholders as provided for in the Corporation Code, namely:

(i) Right to vote on all matters that requires their consent or approval; (ii) Pre-emptive right to all stock issuances of the corporation; (iii) Right to inspect corporate books and records; (iv) Right to information; (v) Right to dividends; and (vi) Appraisai right.

B) The Board should be transparent and fair in the conduct of the annual and special stockholders’ meetings of the corporation. The stockholders should be encouraged to personally attend such meetings. If they cannot attend, they should be apprised ahead of time of their right to appoint a proxy. Subject to the requirements of the by- laws, the exercise of that right shall not be unduly restricted and any doubt about the validity of a proxy should be resolved in the stockholders favor. It is the duty of the Board to promote the rights of the stockholders, remove impediments to the exercise of those rights and provide an adequate avenue for them to seek timely redress for breach of their rights. The Board should take the appropriate steps to remove excessive or unnecessary costs and other administrative impediments to the stockholders’ meaningful participation in meetings, whether in person or by proxy. Accurate and timely information should be made available to the stockholders to enable them to make a sound judgment on all matters brought to their attention for consideration or approval. Although all stockholders should be treated equally or without discrimination, the Board should give minority stockholders the right to propose the holding of meetings and the items for discussion in the agenda that relate directly to the business of the corporation.”

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(b) Do minority stockholders have a right to nominate candidates for board of directors?

Yes, the minority stockholders have a right to nominate candidates for board of directors, as specifically stated in the Company’s Revised Manual of Corporate Governance.

K. INVESTORS RELATIONS PROGRAM

1. Discuss the company’s external and internal communications policies and how frequently they are reviewed. Disclose who reviews and approves major company announcements. Identify the committee with this responsibility, if it has been assigned to a committee.

The Corporation’s Public Relations (PR) and Corporate Communications office is tasked in crafting, disseminating and managing the information, both internal and external, about the Corporation, its directors, officers, and employees. The said office handles media events and releases for various stakeholders which include the shareholders, various government regulatory agencies and the general public. The Corporation uses different channels of external communication such as press releases, newspaper prints, TV, radio and electronic media (such as the internet and social media sites) and the Corporation’s website. Information is released using these media as events occur. The Corporation provides internal communication and messaging using the corporate email services. The directors, officers and employees are made aware of updates and notices sent by PR and Corporate Communications, the Human Resources and other involved offices. The Head of Public Relations and Corporate Communications Office, reviews and approves the release of the aforementioned information. In the execution of such function, she coordinates with concerned groups including the Board, the Chairman, the President and CEO and other Key Officers to get approval for the disclosure of the information relevant to their offices or functions. The Investor Relations Office, on the other hand, prepares the materials for the analysts and investors’ briefing. This is done in coordination with the Chief Finance Officer and the Corporation’s Finance Office. As a listed Corporation, MPIC is expected to report to the SEC and PSE any material event or pertinent information relating to the company or its subsidiaries. For official disclosures and releases, the Corporation has designated corporate information officers — these being the head of Public Relations and Corporate Communications Office, head of Legal and the Legal Counsel. The said officers are the only authorized disclosure officers of MPIC to the PSE/SEC.

2. Describe the company’s investor relations program including its communications strategy to promote effective communication with its stockholders, other stakeholders

and the public in general. Disclose the contact details (e.g. telephone, fax and email) of the officer responsible for investor relations.

Details

(1) Objectives To provide clear, relevant, accurate and timely information about the Corporation, its strategies, and business drivers to current and potential investors, equity analysts, shareholders and the general public.

(2) Principles Excellence – to ensure that the information is relevant and communicated in a professional, clear and orderly manner

Integrity – to ensure that the acts of the company with regard to investor relations are performed within the rules and regulations of its governing bodies (Corporation, SEC, PSE, Philippine government); and that the information communicated is accurate, relevant and timely.

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(3) Modes of Communications

Quarterly Results Briefing (Investors/Analysts and Media)

Annual Stockholders’ Meeting

Investor Relations Meetings

Regular Company Disclosures

Conferences and road shows

Responses to calls and emails

Corporate website Announcements and Postings

(4) Investors Relations Officer

Corporation’s Investor Relations Team:

Mr. Jose Ma. K. Lim, President and Chief Executive Officer

Mr. David J. Nicol, Chief Finance Officer

Mr. Albert W. F. Pulido, Vice President and Investor Relations Head Contact Details:

a. Email : [email protected] b. Tel No.: (632) 888-0888 c. Fax: (632) 888-0813

3. What are the company’s rules and procedures governing the acquisition of corporate control in the capital markets, and extraordinary transactions such as mergers, and

sales of substantial portions of corporate assets? The Corporation receives various investment and acquisition proposals through different forms and medium. These proposals are elevated to the Board who may direct the proper officers to conduct the necessary evaluation. The evaluation results are presented to the Board for approval. Should the viability of such acquisition require further evaluation and analysis, the Board normally creates a committee to review the transaction. All the processes are done in accordance with the Corporation Code and the Securities and Regulations Code.

4. Name of the independent party the board of directors of the company appointed to evaluate the fairness of the transaction price. Independent directors who are present at both at the Audit and Risk Management Committee and the Board provide the oversight as to the fairness of the transaction pricing.

mailto:[email protected]

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L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Discuss any initiative undertaken or proposed to be undertaken by the company. CSR activities are implemented through Metro Pacific Investments Foundation, Inc., MPIC's CSR arm.

Initiative Beneficiary

Empowering People Through

Manpower For Infrastructure

Cooperative

In February 2012, MPIC launched the ManPower for Infrastructure Cooperative Development (MPIC) project -- a sustainable

Livelihood and Enterprise Development program for 25 urban poor households of Ana Maria Heights, Barangay Calamansian,

Caloocan City. In cooperation with the Philippine Business for Social Progress of which MPIC is a member company, the

community-based cooperative project embarks on raising the quality of labor skills of its members for possible employment

within MPIC’s business portfolio.

As part of the cooperative governance and pre-membership education seminars, the group familiarized themselves with their

organizational structure and roles of each officer and formed committees to oversee education, election, ethics, membership,

and mediation and policy formulation.

The cooperative, composed of members of the Ana Maria Heights HOA, aims to provide services in the areas of carpentry,

masonry, plumbing, welding and electrical installations and infrastructure painting via construction contracts or sub-contracts

thru referred or endorsed affiliates and subsidiaries of the Metro Pacific Investments Corporation (MPIC). The engagement with

PBSP ended in 2014 and MPIC continues to monitor the progress of the group so as to extend assistance when needed.

Environmental Awareness Through

Shore It Up

The ‘Shore It Up!’ campaign is an effort towards sustainable development, preservation and conservation of our marine

resources. As a yearly program of the Foundation, it also aims to help reduce destructive floods caused by environmental

neglect by both businesses and communities.

Shore It Up which adopts the relevant slogan: ‘Rescue, Restore, Revive’ – continued to undertake a coastal/underwater clean-

up and environmental protection campaign after its successful start in 2009. On its 6th year, the environmental awareness

program of the MVP group spearheaded by the Metro Pacific Foundation known as Shore it Up (SIU), recently concluded a

livelihood program in the coastal community of Pamilacan, Bohol, thereby realizing the nationwide goal of the multi-awarded

program.

Other activities such as mangrove planting and coastal cleaning were simultaneously implemented in Pangasinan, Luzon, and

Siargao in Mindanao on the same weekend last June of this year. As part of SIU’s sustainable environmental contribution to

these areas, the Mangrove Propagation and Information Center, launched 2014 in Siargao, will serve as a structure to increase

the region’s knowledge and appreciation of the benefits of mangroves.

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Recognized for its sincere commitment to engage various communities in environmental awareness, “Shore it Up” received

awards from Corporate Governance Asia, Finance Asia and the Public Relations Society of the Philippines.

Excellent Education: The MPIF Annual Excellence Fund for Mano Amiga

The MPIF Annual Excellence Fund is MPIF’s education program whose beneficiary is Mano Amiga Academy, a private school in

Taguig City that provides international school-quality education to children from underprivileged families. In 2011, the

Foundation sought to make a more significant impact on the children of Mano Amiga and manifested a deeper commitment to

them by expanding the Foundation’s pool of scholars through an endowment fund that would ensure 30 students getting the

full benefit of education. The 30 students receive excellent primary and secondary education through a scholarship that covers

per-pupil operational expenses of the School, as well as miscellaneous fees and expenses on student enrichment activities. In

addition, the grant from MPIF also supports the teachers’ benefits and training opportunities. MPIF provided a significant

donation that enabled Mano Amiga Academy to acquire a property in Paranaque for the School’s eventual relocation.

“Tulong Kapatid”: Aligning

Programs And Working Together To

Improve Lives And Benefit

Communities

The CSR Council composed of foundations and CSR departments in the MVP Group of companies formed “Tulong Kapatid”

(Brotherly Help) to collaborate in common activities relating to environmental programs, tree planting, coastal clean-ups, blood

banks, medical missions and disaster preparedness and responsiveness. Recent efforts of Tulong Kapatid provided coordination

for medical assistance and service restoration in telecommunications, electricity and water, soup kitchen drives and assistance

in home and infrastructure rehabilitation.

M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL

Disclose the process followed and criteria used in assessing the annual performance of the board and its committees, individual director, and the CEO/President.

Process Criteria

Board of Directors Annually, the Board conducts a Performance-Self Assessment* in order to measure the performance of the Board.

Board Responsibilities Board Processes

Board Committees The Board conducts a Board Committee Performance Assessment in order to measure the performance of each Board Committee against their functions.

Board Responsibilities Board Processes

Individual Directors The Board conducts a Performance-Self Assessment in order to measure their performance as Individual members of the Board.

Individual Board Member Expectations

CEO/President The Board conducts a CEO/President Performance Assessment in order to measure the performance of the CEO/President as against his expected deliverables for the year.

Management Relationship

* The questionnaire for the Board/ Directors/President/CEO Assessment is available at the Corporation’s Website.

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N. INTERNAL BREACHES AND SANCTIONS

Discuss the internal policies on sanctions imposed for any violation or breach of the corporate governance manual involving directors, officers, management and employees

Violations Sanctions

Violation to the Company’s Revised Manual of Corporate Governance

The following are the stated sanctions in the Company’s Revised Manual of Corporate Governance, Article 11 – Administrative Sanctions: To avoid non-compliance and to strictly observe the provisions of this Manual, the Board of Directors may impose appropriate sanctions, penalty or corrective measures, after due notice and hearing, on the erring directors, officers and employees. Sanction or penalty may include censure, suspension and removal from office depending on the gravity of the offense, the resulting damage, as well as the frequency of the violation. The commission of a grave violation of this Manual by any member of the Board of the Corporation shall be sufficient cause for removal from directorship.

Violation to the Company’s Employee Handbook

Described below are the types of disciplinary action stated in the Company’s Employee Handbook: 1. Oral Reprimand – an oral admonition or counsel given to erring employee for an infraction of a rule, and warning him that a repetition of

the offense shall be dealt with more severely. 2. Written Reprimand – a written admonition issued to an employee upon repetition of an offense in which an oral reprimand was previously

given; or commission of a more serious offense which requires a stronger disciplinary measure so that the repetition of the same offense subjects the employee to a suspension penalty.

3. Suspension – Cessation of reporting for work by the employee without pay. Such advice shall be made in writing with a warning to the employee that a repetition of the same offense means dismissal from the Company. Suspension shall range from a minimum of 1 to 90 days.

4. Dismissal – Termination of the employee for cause after due process.

Note: All the above answers are based on available Corporation records as of December 31, 2014 and reports of Corporation executives and personnel, not necessarily on the personal knowledge of the affiants.