About our Cover On the cover is the Balangay team raising the Philippine flag. The Balangay team, consisting of a hardy crew of 40, journeyed throughout Southeast Asia in 14 months, using three replicas of ancient Filipino boats and relying on the sun, the stars, the wind, Business Mission Our basic purpose is to create new wealth for our stakeholders. cloud formations, wave patterns, and bird migrations to navigate. The team covered 14,000 kilometers and braved unfamiliar, even Our businesses will focus on vital needs for national development stormy seas thereby showcasing the best of the Filipino to the in the areas of energy, infrastructure, manufacturing and supporting industries. world.

Credo First Philippine Holdings renews its commitment to Philippine We believe in the Filipino’s ability to innovate, to seize developmental opportunities borne from the real needs development, as it braves new horizons through pioneering and of domestic and overseas markets. sustainable undertakings. The Company will continue to represent the best of the Filipino, united by shared values and consistently We affirm our partnership with the Filipino in their endeavor of ever adhering to global best practices in clean and renewable energy pushing the social development frontiers beyond currently known limits. generation, power distribution, property and infrastructure development, and manufacturing for the electrical and solar We share the Filipino’s vision of spreading gainful employment to power industries, while consciously and deliberately protecting all who are willing to put their talents in the total betterment of the Filipino. the environment for the benefit of future generations.

The FPH Commitments We at the First Philippine Holdings commit to the Filipino nation: TABLE OF CONTENTS • Our continuing search for innovative ventures and technology Business Mission, Credo and Commitments IFC that optimize human and natural resources bringing out the Financial Highlights 1 best from the Filipino mind and skills; and Investment Summary 2 • Our thrust towards the development of communities and Organizational Structure 3 persons we influence in our work. At a Glance 4 FPH at Fifty 6 We commit to our suppliers of goods and services: Message of the Chairman Emeritus and Chief Strategic Officer 8 • Our adherence to conducting business transactions with Message of the Chairman and Chief Executive Officer 14 integrity, fairness, and professionalism; Message of the President and Chief Operating Officer 16 • Our willingness to assist in their development; and Message of the Chief Finance Officer 20 • Our continuous assistance in improving the quality of such Board of Directors 24 services. Senior Management 28 Key Officers 30 We commit to our stockholders: Corporate Governance 32 • Our untiring efforts to give competitive returns on their Board Committees 35 investments while exercising prudence in our decisions. Business Excellence 36 Corporate Social Responsibility 40 We commit to our customers: Operations Review • Our unceasing quest to meet their needs; and Power Generation • Our uncompromising struggle for excellence in meeting their First Gen Corporation (First Gen) 44 expectations. Power Distribution Manila Electric Company (Meralco) 48 We commit to all members of the FPH family: Panay Electric Company (PECO) 51 • Our institution of better and more comprehensive programs Manufacturing that allow for total personal development; and First Philippine Electric Corporation (First Philec) 52 • Our constant search for more effective ways to foster Property teamwork and employee participation to attain higher levels of Rockwell Land Corporation (Rockwell Land) 56 productivity and creativity. First Philippine Industrial Park (FPIP) 58 Other Businesses First Balfour, Inc. (First Balfour) 60 First Philippine Industrial Corporation (FPIC) 62 Securities Transfer Services, Inc. (STSI) 63 Asian Eye Institute (Asian Eye) 64 Corporate Directory 66 Lopez Credo and Acknowledgements IBC

The First Philippine Holdings 2010 Annual Report is printed on 9Lives Silk, a paper made of carbon neutral quality composed of 55% post-consumer waste. 1 Financial Highlights

December 31 OPERATING RESULTS (In million Php)1 2010 2009 (as restated) Revenues 64,285 59,094 Sale of electricity 52,973 48,243 Sale of merchandise 6,076 4,341 Equity in net earnings of associates 2,777 2,097 Contracts and services 1,697 1,390 Sale of real estate 657 1,044 Share in project revenue of joint ventures 105 1,979 Finance costs (5,594) (6,897) Foreign exchange loss (241) (442) Provision for income tax 1,935 2,027 Gain on sale of investment in an associate 23,560 8,957 Net income for the year 28,372 13,074 Net income attributable to equity holders of the parent 24,850 8,731 FINANCIAL POSITION (In million Php)2 Total assets 160,534 149,027 Investments and deposits in associates 57,222 63,529 Total debt 66,437 86,236 Total long-term debt 42,311 54,852 Total liabilities 69,154 88,920 Total equity attributable to equity holders of the parent 63,679 38,691 Total equity attributable to equity holders of the parent - adjusted3 80,984 53,863 Total equity 91,380 60,107 Total equity - adjusted3 108,685 75,279 FINANCIAL RATIOS Return on equity4 36.86% 17.60% Dividend payout ratio5 13.28% 39.18% Current Ratio (times)6 1.87 1.41 Debt to equity (times)7 0.61 1.15 PER SHARE DATA (In Php) Earnings per share8 Basic 41.076 13.837 Diluted 40.652 13.779 Book value per share9 133.55 83.39 Price earnings ratio10 1.52 3.47 Market price 62.60 48.00 Cash dividend per share11 1.96 0.79 Number of common shares issued, subscribed and outstanding 574,194,048 594,326,513 Weighted average number of shares Basic 591,270,907 590,355,623 Diluted 597,441,198 592,805,699 Number of stockholders 12,899 13,019

1 The statements of income for the years ended December 31, 2010 and 2009 are set out on the consolidated financial statements. 2 The statement of financial position as of December 31, 2010 and 2009 are set out on the consolidated financial statements. 3 Equity - adjusted excludes cumulative translation adjustments (CTA), share in other comprehensive income of associates, and equity reserve pertaining to effect of dilution of a subsidiary and effect of acquisition of minority interests 4 Return on equity = net income for the year attributable to equity holders of the parent / average total equity attributable to equity holders of the parent - adjusted 5 Dividend payout ratio = dividends paid to common shareholders by parent / last year’s net income attributable to equity holders of the parent 6 Current ratio = current assets / current liabilities 7 Debt to equity ratio = total debt / total equity - adjusted. The details of the total debt are set out on the notes to consolidated financial statements (Note 32). 8 The EPS computation for the years ended December 31, 2010 and 2009 are set out on the notes to the consolidated financial statements (Note 29). 9 Book value per share = (total equity attributable to equity holders of the parent - adjusted less preferred equity) / number of common shares, subscribed and outstanding 10 Price-Earnings ratio = market value per share / basic earnings per share 11 Cash dividend per share = cash dividends paid to common shareholders / weighted average number of common shares (basic)

2010 Annual Report 2 2010 Investment Summary

Amounts in Thousands Php % Ownership5 Revenues Net Income Total Total Total (loss)6 Assets Liabilities Equity6 POWER GENERATION AND POWER RELATED1 First Gas Power Corporation 4 39.75 34,768,088 3,538,814 35,633,853 26,778,524 8,855,329 Energy Development Corporation 28.54 24,901,616 4,115,747 81,303,593 49,064,612 30,669,891 FGP Corp. 4 39.75 18,166,689 2,358,288 16,023,695 7,043,291 8,980,405 First Gen Hydro Power Corporation 43.62 2,139,536 704,552 9,016,116 5,087,161 3,928,955 Bauang Private Power Corporation 4 24.71 457,194 (7,286) 251,452 13,639 237,813 FG Bukidnon Power Corp. 66.25 37,359 7,282 163,703 26,565 137,138 POWER DISTRIBUTION Manila Electric Company2 6.60 245,461,000 9,685,000 178,968,000 115,772,000 58,969,000 Panay Electric Company 7 30.00 3,790,867 321,561 2,358,706 1,195,494 1,163,212 MANUFACTURING3 First Philec Solar Corporation 7 74.54 4,424,633 200,953 5,239,488 3,299,732 1,939,756 First Sumiden Circuits, Inc. 4 40.00 2,647,529 (97,318) 1,715,188 1,322,889 392,299 Philippine Electric Corporation 99.15 1,353,999 43,406 1,086,026 652,479 433,547 First Philec Manufacturing 100.00 399,542 26,350 361,836 249,579 112,257 Technologies Corporation First Philippine Power Systems, Inc. 100.00 178,424 26,577 148,602 42,587 106,016 First Electro Dynamics Corporation 100.00 77,764 (4,603) 151,989 100,439 51,550 PROPERTY Rockwell Land Corporation 49.00 4,949,367 801,307 13,955,404 5,708,330 8,247,074 First Philippine Industrial Park, Inc. 70.00 873,432 312,250 3,054,392 131,378 2,923,014 First Philippine Realty Corporation 100.00 95,143 (16,788) 1,583,900 21,918 1,561,983 First Sumiden Realty, Inc.3, 4 60.00 17,861 8,514 127,085 7,259 119,826 OTHER BUSINESSES First Balfour, Inc. 100.00 933,961 35,819 1,924,979 1,346,641 578,337 First Philippine Industrial Corporation 60.00 580,275 (45,595) 1,797,565 698,516 1,099,048 Securities Transfer Services, Inc. 100.00 11,149 (17,997) 19,150 15,946 3,204

1 Through First Gen 2 Direct and through FPUC 3 Through First Philec 4 Dollar denominated results of operations and financial conditions were converted to Php using the conversion rate of US$1:Php45.309 and US$1:Php43.840, respectively. 5 Effective economic interest 6 Meralco and EDC's net income and equity are attributable to equity holders of the parent. 7 Figures are unaudited

First Philippine Holdings 3 organizational structure

Media Power

57.3% 44.8% ABS-CBN First Philippine Holdings Corporation

Power Power Manufacturing Property Sky Vision Generation Distribution Corporation 66.25% 6.61% First Gen Manila Electric 100% 49% Sky Cable Corporation Company First Philippine Rockwell Land Electric Corporation Corporation

30% 43.08% Panay Electric Energy Company Development Corp. Philippine Electric 70% Corporation First Philippine Industrial Park

First Philec Solar Corporation

Other Businesses

100% 60% 100% First Balfour, Inc. First Philippine Securities Transfer Industrial Corp. Services, Inc.

2010 Annual Report 4 At a glance

POWER GENERATION First Gen is the country’s leading clean and renewable energy producer with power plants that use geothermal, hydro, and natural gas for fuel. It has a total installed capacity of 2,833 MW, or 18.2% of the country’s total installed capacity.

MAJOR Companies 1. First Gen Corporation (First Gen) 2. Energy Development Corporation (EDC) 3. First Gas Power Corporation (FGPC) 4. FGP Corp. 5. First Gen Hydro Power Corporation (FGHPC)

2010 FINANCIAL Highlights First Gen’s net income attributable to Parent soared by 319% year-on-year primarily due to higher earnings posted by EDC.

POWER DISTRIBUTION Meralco is the largest electricity distributor in the Philippines. It serves almost 4.8 million customers in 31 cities and 80 municipalities.

PECO is the largest electricity distributor in the island of Panay.

MAJOR COMPANIES 1. Manila Electric Company (Meralco) 2. Panay Electric Company (PECO)

2010 FINANCIAL Highlights Meralco’s consolidated net income attributable to PROPERTY Parent increased by 61%. FPIP operates the country’s leading industrial park hosting prominent multinational companies in PECO posted a net income of P321.6 million, higher consumer, electronics, and technology industries. by 5% over that of the previous year’s net income of Rockwell Land is a premier mixed-use inner city P307.5 million. developer.

MAJOR COMPANIES 1. Rockwell Land Corporation (Rockwell Land) 2. First Philippine Industrial Park (FPIP)

2010 FINANCIAL HIGHLIGHTS Rockwell Land’s net income grew by 26% year-on- year.

For FPIP, the recorded revenues were the second highest ever, while land hectares sold was the highest in the company’s history.

First Philippine Holdings 5

MANUFACTURING First Philec is the holding company for the manufacturing businesses of First Philippine Holdings. Its major investments are grouped into three sectors: Electrical, Electronic, and Photovoltaics (Solar).

MAJOR COMPANIES 1. First Philippine Electric Corporation (First Philec) 2. First Philec Solar Corporation (FPSC) 3. Philippine Electric Corporation (Philec) 4. First Electro Dynamics Corporation (FEDCOR) 5. First Philippine Power Systems (FPPS) 6. First Philec Manufacturing Technologies Corporation (FPMTC) 7. First Sumiden Circuits, Inc. (FSCI) 8. First Philec Nexolon Corporation (FPNC)

2010 FINANCIAL HIGHLIGHTS First Philec’s net income grew threefold from P55.3 million to P159.9 million.

OTHER BUSINESSES First Balfour is a Triple-A construction and engineering company. FPIC is the country’s largest commercial oil pipeline system.

Asian Eye Institute is a leading eye care center in the country.

STSI is the Lopez group’s stock transfer agent.

MAJOR COMPANIES 1. First Balfour Inc. (First Balfour) 2. First Philippine Industrial Corporation (FPIC) 3. Securities and Transfer Services, Inc. (STSI) 4. Asian Eye Institute (AEI)

2010 FINANCIAL HIGHLIGHTS First Balfour completed the LRT Line 1 North Extension project. First Balfour earnings dropped due to the completion of major projects.

FPIC incurred losses of P45.6 million arising from the significant expenses and provisions for the repair and remediation works in connection with the pipeline leak.

2010 Annual Report 6 1961 FPH at

Don Eugenio Lopez Sr. and other leading Filipino businessmen fifty formed Meralco Securities Corporation (MSC), forerunner of FPH. In 1961, Eugenio H. Lopez, Sr. founded First Philippine MSC was the corporate vehicle which acquired Meralco from its American owners. From managing Meralco, MSC diversified into other Holdings (FPH), then known as Meralco Securities pioneering ventures—building the country’s first commercial pipeline, Corporation, as the vehicle for a group of Filipino manufacturing distribution and power transformers, and exploring design and construction of power generation stations. investors to buy Manila Electric Company (Meralco) from its American owners. The FPH portfolio grew, aligned with the needs of the nation, as the Company invested heavily in power plants, pipeline operations, distribution transformer manufacturing, and construction.

Stripped of its power generation assets during Martial Rule, FPH re-entered the power generation business 1989 1994 in the 1990s in response to the government’s Pushing the frontiers of technology Energy is the future. FPH saw this urgent call to power the Philippines’ recovering is one of the company’s early opportunity before others had seen advocacies. From a transformer it. It re-entered the power generation commercial and industrial sectors. Over the last two manufacturer in the 1970s, business through Bauang Power Philippine Electric Corporation and took part in developing the decades, it has successfully refocused (Philec) grew and was put back on Malampaya Project, the largest its feet in 1989. Today, FPH grows industrial investment in Philippine its main investment from power distribution its investments in manufacturing history—signaling the birth of the through First Philec—bringing its country’s natural gas industry. By to power generation. At the same time, it has core competencies in the service of 1994, First Gas Power Corporation maintained its in the Filipino. It houses the country’s forged an alliance with British Gas competitiveness pioneer manufacturer of high and Siemens to build two new plants manufacturing, property development, construction quality flexible-printed circuits in Batangas producing 1,500 MW. and the first silicon wafer-slicing and infrastructure among other pursuits. company in the Philippines.

For the next 50 years, FPH commits to strengthen the strategic position of all its businesses; integrate sustainability in all its endeavors; enhance financial performance by adhering toglobal best practices, achieving operational excellence and building brand value; and pursue overseas opportunities. An environment of openness, a culture of learning and innovation, and a spirit of 2003 2005 unity enable FPH to believe in, partner with, and Business Excellence is the More than a tradition, CSR is a way share the Filipino vision foundation on which organizations of life. It is a defining characteristic are built to last. FPH journeys toward of FPH and its people, believing that of development and true progress. excellence every day. The challenge value should be grown responsibly. lies in consistently doing the right Our projects are aligned with things right. By this discipline the United Nations Millennium embedded in its people, processes, Development Goals, particularly and policies, FPH can successfully education, environment, health and adjust to the perpetually changing poverty alleviation. We believe that business landscape. in engaging the community, we empower people and do our share in uplifting the nation’s quality of life.

First Philippine Holdings 7

1972 1986 The Philippines was confronted with economic and political crises that lasted for 25 The dark days had ended, and democracy was reborn. years. When the entire country was placed under Martial Law in 1972, Meralco, then Filipinos from all walks of life gathered and gave birth to MSC’s cornerstone, was one of the hardest hit. Shortly after midnight of September the historic EDSA Revolution. The chain of events pulled the 22, the military entered the Meralco compound and took over the power company. Lopezes back into business. In 1986, Oscar M. Lopez took the helm of a battered company, nearly bankrupt and bleeding with debt. But with an undaunted leadership and team, he led the company’s stunning recovery to where it is today.

1998 1999 2000 The new decade marked the company’s entry into First Holdings opened the First The Lopez Group had a vision of a mixed-use infrastructure with the development of the North Luzon Philippine Industrial Park (FPIP) community where one can live, work, play, and Expressway (NLEX), an 84-kilometer world-class highway through a joint venture with learn. For a company completely unfamiliar with and the longest toll road in the country in terms of lane- Sumitomo Corporation. FPIP is a real estate, the vision was neither cheap nor kilometers. Another pioneering venture in the industry is 300-hectare estate in Batangas, quick to achieve, but with an undaunted spirit, the group’s construction and engineering company—First with world-class facilities designed seasoned management, and dedicated people, Balfour. Created in1969, First Balfour expanded its market to have minimum impact on the that dream came into fruition—Rockwell Land. leadership from the construction of power plants and water environment. Today, it has grown infrastructure to buildings and transport infrastructure such to become the country’s premier as the St. Luke’s Medical Center in Bonifacio Global City with industrial park hosting prominent Makati Development Corporation and the six-kilometer LRT 1 multinational companies in North Extension Project with DMCI. consumer, electronics, and technology industries.

2007 2008 2010 We build where opportunities are great. In Recognizing the opportunities in the fast- As FPH turns 50, we witness the passing of the 2007, another global leader in renewable growing solar energy industry, another torch from Oscar M. Lopez to Federico R. Lopez energy became part of the company—Energy defining moment came in 2008. The first to continue braving new horizons. This decade Development Corporation (EDC). As the second large-scale silicon wafer-slicing plant was marks two significant milestones—the new largest geothermal producer in the world, EDC inaugurated in the Philippines—First Philec leadership and FPH’s growth from managing strengthens the company’s thrust in providing Solar Corp. This subsidiary, a joint venture the country’s largest power company to clean, renewable, and reliable energy here and between First Philec and the Sunpower growing a portfolio of clean and renewable abroad. Manufacturing Ltd. of the United States, aims energy. This is our warm welcome to a broader to develop the country’s potential for this vision and an exciting future. global industry.

2010 Annual Report 8

Fellow Stockholders:

In a meeting of your Board of Directors immediately expatriates. The age of the large public corporation had following our Annual Stockholders’ Meeting last June not yet dawned on this country. Most businesses were 2010, I stepped down from my role as Chairman and small, proprietary and entrepreneurial in nature. Larger Chief Executive Officer of First Philippine Holdings (FPH), business enterprises tended to be owned and controlled a position I had held for close to 25 years. In my place, my by moneyed families whose wealth, more often than not, son, Federico R. Lopez was elected Chairman and Chief was derived from ownership of land. Even the monopolies, Executive Officer while I was conferred the title of Chairman such as they were, were quite small when compared to Emeritus. today. Meralco only had some 360,000 customers and it was, by far, the largest public utility we had. After all, the Our new Chairman and Chief Executive Officer, our country’s population was only 27,087,685 according to a President and Chief Operating Officer, and our Chief 1960 census, compared to over 92 million today. Financial Officer will share the honor of reporting to you on FPH’s performance for its operating year 2010, as well as But if industry was quite undeveloped in 1961 because we to provide you with essential updates on the conduct and still largely lived off the fruits of the land, and if spending future of our business. I, for my part, already delivered my power was still relatively low, we could nevertheless feel valedictory to you during last year’s annual stockholders’ the stirrings of a sense of economic nationalism, a sense meeting. that Filipinos had the right and responsibility to, and were capable of, ownership of its industries. All it took was for This year marks the 50th anniversary of the establishment the most daring and capable Filipinos to prove that it could of our Corporation, an event that we will be celebrating be done. with modest pomp later in the year. Inasmuch as I am the sole remaining employee of FPH who has been on the In 1961, a group of Filipino businessmen led by my father, scene since shortly after it started life as Meralco Securities Eugenio Lopez, Sr., did just that. They dared to purchase Corporation on June 30, 1961, I thought it’s appropriate to ownership and control of Meralco for what was then an share with you the insights and perspectives that I have inconceivable amount of US$62 million, inconceivable gained from watching FPH grow into adulthood, that they because the largest corporate acquisitions then being may serve as a beacon to help illuminate its way into the contemplated were in the US$10 million range. This next 50 years. acquisition proved to be the catalyst that triggered a wave of transfers of ownership of large businesses from foreign Our world was very different in 1961. Most large and hands to Filipinos. But what Eugenio Lopez, Sr. and his important businesses were still under foreign control, associates did in 1961 was truly a pioneering precedent in having been established during our colonial period, the annals of Philippine business. although the shift to Filipino ownership was beginning, partly in compliance with the terms of the Laurel-Langley FPH, or Meralco Securities Corporation as it was initially Agreement. The Filipino executive class had just begun called, was formed to serve as the corporate vehicle for to emerge, as our first graduates from Western business this historic Filipinization. The new owners had to prove to schools began returning to the Philippines; nevertheless, skeptics, and there were many doubters, that they could the highest management and board positions in manage Meralco just as well as the Americans could, and Philippine companies remained largely in the hands of that Meralco, under Filipino management, could provide

First Philippine Holdings 9 Message of the Chairman emeritus and chief strategic officer

service to its customers just as well as it could under American management. As it turned out, they proved that they could run Meralco even better. What followed, over the next 10 years, was a period of unprecedented growth, profitability and service that we fondly speak of as Meralco’s “golden years.”

Meralco flourished under a set of values and principles by which my father lived his life and managed his businesses. I will now use his words in describing Meralco’s formula for success during its golden period.

• “We all here wish to restate the policy of the Company. We believe in the welfare and advancement of the employees. As the Company grows, so must the condition and welfare of our employees improve. The expansion and growth of the Company must run parallel with the betterment and upliftment of our employees.” • “The company must make profits, yes. But a good portion of this must be returned to the public in the form of improvements and better service and our employees should share in these profits. A company cannot be called progressive if it accumulates only profits, with utter disregard to its moral and social obligations to the public and its employees. A company of that kind cannot and should not deserve the support of the public.” • “…we believe that its ownership should not be a monopoly of a family or a group of families. Neither should it be a monopoly of a group of interests. Rather, it should be spread as much as possible to the greatest number of people…” • “…the Manila Electric Company is far from being perfect, and it is our constant preoccupation to continue improving its service to the public. We welcome all criticism, whether fair or unfair, because we believe that only in this way can we know our defects and thus improve our service.”

2010 Annual Report 10

• “…we believe that Meralco must be completely sell its shares in Meralco to Meralco Foundation. Meralco, independent from the Government… It must not for its part, was struggling after many consecutive years of depend on the Government for guarantees, subsidies, financial losses; a quarter of the power that it distributed or any special privileges. On the other hand, it shall was categorized as non-revenue power. It had been be the Company’s duty to cooperate fully with the stripped of its power plants and its ability to generate Government in its economic program…” power.

These tenets were paraphrased in many different ways on The first thing we had to do was to recover our ownership many different occasions by my father during his period in Meralco. Although FPH’s creditors gave us the time and of stewardship. Their essence remains constant to this space to restructure our debt, it was clear that we would day, and we remain faithful to them to this day because not be able to revive the business without recovering they have never let us down: to provide the best service Meralco. Yet, it took the better part of five years for us to to consumers; to be the best employer in the country; to do so. At that, we were not permitted to recover the full broaden ownership so as to counteract the monopolistic ownership in Meralco that had been taken from us under tendencies of the industry; and to demonstrate a strong duress; indeed, we were only permitted to recover the so- sense of nationalism by being Government’s partner in called unpaid balance equivalent to about 30% of Meralco, economic development. and even then, we were compelled by Government to donate half of what we recovered for the benefit of Unfortunately, this golden period lasted for only a the country’s land reform program. I don’t know how fleeting 10 years. Meralco, like a shooting star, burst much, if any, of those donated shares ever went towards upon the firmament in all its glory and spectacle, then supporting land reform. I am fairly certain that at least abruptly disappeared into darkness and obscurity. Like some of those very shares were, 20 years later, used by the the Philippines as a whole, its democratic institutions, previous administration to try to wrest control of Meralco its nationalistic and patriotic values, its youth and its away from us. innocence, Meralco was devastated by the 14 years of martial law. And like my father and all the executives loyal So, in 1990, we were left with the daunting task of to him, I was forced out of our businesses into an exile of rebuilding our businesses. Meralco was still at the center sorts during the martial law period. of our solar system, the sun around which our other major businesses revolved. We were absolutely convinced, When I was asked to return to FPH following the EDSA however, that we would be up to the task, guided by the Revolution in early 1986, what I encountered was an same values and principles passed down from my father. organization that was a mere shadow of what it used to be. FPH was virtually bankrupt, saddled by more than We would have to do it in a world vastly different from P2.0 billion in liabilities, but without sufficient cash flow that which my father encountered in 1961. Even though to even meet the monthly payroll. It had been forced to the dictator had been banished, economic power now

First Philippine Holdings 11

largely resided in the hands of crony capitalists who A utility like Meralco, far from being regarded by the had made hay during the martial law era. Many of the consuming public as its friendly utility and service provider, leading industrialists of the ‘60s had not survived the had come to be regarded, in this new era of soaring fuel martial law era and had disappeared for good. Our prices and power rates, in this new era of frequent rotating population had more than doubled to over 60 million, brown-outs, in this new era where disconnection was an but it was a population in which poverty and illiteracy immediate consequence of delinquency, as the enemy. now predominated. As an economy, the Philippines had It was viewed as oppressive, uncaring and remote, and fallen far behind its neighbors in the region. We had was an easy target for politicians and economic managers failed to develop and maintain our infrastructure in a looking for a scapegoat for their lack of performance. manner competitive with what countries like Singapore, Taiwan, and Thailand had done. Investment in our human But even if consumer attitudes in the early 1990s were not capital, by way of high standards of education, nutrition, welcoming and friendly, the large gaps in our economy and healthcare had fallen to neglect. As a result, our provided us ample opportunity to rebuild our businesses. productivity fell below that of our competitors, and we The power crisis of the late 1980s provided us a way back were unable to attract investments in manufacturing into power generation, first with the Bauang diesel power and technology. Government had become the largest plant, then later with the much cleaner and more efficient employer, and competed with the private sector for gas-fired plants that provide an anchor market for our ownership and control of large segments of the economy. indigenous Malampaya gas. Over the past 10 years, we have further parlayed this into other major investments A new attitude of entitlement had also emerged. Major in clean and renewable power generation, including sectors of our population demanded the best, but were hydroelectric, geothermal, and soon, wind, and solar. unwilling to pay the price or do the work. We had, to coin Today, we are the second largest privately-owned power the words of the late great Don Claro M. Recto, become generating company in the country, and certainly the a mendicant society. Worse, the dismantling of martial greenest. law did little to inhibit the graft and corruption that had flourished during that era.

“Today, we are the second largest privately-owned power-generating company in the country, and certainly the greenest.”

2010 Annual Report 12

“I thank all of you

for the faith, The same gaps enabled us to invest in large-scale infrastructure projects such as the North Luzon friendship, and Expressway. In other parts of the wider Lopez Group, we have endeavored to fill obvious gaps in water supply support that you have and distribution, telecommunications and digital media, not always successfully, I might add. In fact, our over- constantly gifted exuberance and over-ambitious expansion programs at Lopez Group-level during the 1990s ultimately brought us a lot of grief in the form of heavy indebtedness that took me in the close to us the better part of 10 years, the first decade of the 21st century, to restructure and repay. that 25 years The last several years of my period of stewardship at FPH have not been without great excitement and suspense. I have served as your In 2007, we bid for and won the Government’s auction of its geothermal power assets in a privatization that could Chairman and CEO. potentially be every bit as historic as the privatization of Meralco. Our foreign partner in this endeavor backed out I cannot remember a at the last minute and the onus fell on us to borrow even more heavily in order to fund our winning bid. Then, the single moment, a single global financial crisis of 2008 descended upon us with appalling suddenness. As fate would also have it, our major annual stockholders’ new undertaking coincided with a takeover bid for control of Meralco launched by powerful hostile parties with the meeting of FPH, backing and support of a hostile administration. Funding our acquisition of EDC and defending our controlling when I did not feel interest in Meralco stretched our financial capabilities ever so close to the breaking point. In the end, we had to the fall back upon the support of a “white knight” in order to support protect the value of our stake in Meralco. and affection of my fellow stockholders and employees.”

First Philippine Holdings 13

And so we close the chapter on the first 50 years of FPH. will potentially allow us to be players in a global arena. Not And wonder what we might expect of the next 50 years. immediately, perhaps, but quickly enough so that we are not left behind, stranded in our past. Geothermal and solar It is my belief that our Corporation will have to operate in energy know-how are not competencies that can easily be an environment that, progressively, will be very unlike the acquired and mobilized. We have significantly reduced and economic environment that we know today. Already, large termed out our indebtedness, and we have the means to corporations are crowding each other and encroaching mobilize a hefty war-chest for new investments. I leave it upon each other’s traditional domains in looking for space to my successor to describe to you precisely how we move to grow. As trade barriers continue to be dismantled into this very promising future. and as we are drawn further into the regional and global economies, we will have to compete against regional and I thank all of you for the faith, friendship, and support that global giants and we will have to survive that competition, you have constantly gifted me in the close to 25 years or be eaten up by them. Many will not survive this process. that I have served as your Chairman and CEO. I cannot The competition for scarce resources will be even stiffer remember a single moment, a single annual stockholders’ —for capital, for political capital, but most of all, for talent meeting of FPH, when I did not feel the support and and expertise. The rules of competition are also being affection of my fellow stockholders and employees. I rewritten, most particularly in aspects of transparency and look forward to doing my utmost to serve you as your governance, environmental responsibility and corporate Chairman Emeritus for as long as you will have me, as social responsibility. In the next 50 years, it will not be a senior statesman of the Corporation, perhaps, and enough for FPH to be just a Filipino company operating in certainly as custodian of our history, traditions, and values. the Philippines. But for those businesses that are able to transition into the wider, global marketplace, I believe that the opportunities will be much, much greater.

For the first time, we look to the future without Meralco at the center of our universe. As difficult as that may be from a sentimental viewpoint, it poses a tremendous challenge and opportunity for us to re-define our place in the world at just the right time. Today, we have, I believe, the core businesses, technologies and key personnel that

OSCAR M. LOPEZ Chairman Emeritus and Chief Strategic Officer

2010 Annual Report 14

Message of the Chairman and chief executive officer

The year 2010 was a special one for me. As I assumed the mantle of leadership at First Philippine Holdings (FPH), I did so at a time when its finances were rock-solid and our platform of businesses were enviably strong and raring for more growth. Of course, the last decade for FPH was not an easy one but I attribute the crucial shaping, pruning, and forging of our current platform of businesses to the decisiveness of our Chairman Emeritus at critical junctures these last few years. We were admittedly in crisis, and it forced us to make difficult choices. But when those tough, painful decisions were taken to sell our controlling stakes in Meralco and Manila North Tollways Corporation we found that we closed a door but unlocked many new windows not previously open to us before. Today, our businesses are less reliant on government-regulated franchises but have more involvement in industries where we constantly have to compete for the attention of customers. In the power business, our sights are no longer just set on growing domestically but also now positioned to compete internationally in new markets where we can bring Energy Development Corporation’s (EDC) geothermal expertise. Even many of our businesses that are located in the country, like First Philec Solar and First Philippine Industrial Park for example, are in fact serving tough global customers with options to source their requirements anywhere in the world. Thus, quite a number of our businesses are already compelled to benchmark the products and services they offer against the best in the world if they want to prosper.

As we grow, we also seek to align our strategic goals with that of the country. We have always believed that as a nation striving to be competitive we must develop more clean and indigenous sources of energy. Today all the power we produce at First Gen and its subsidiaries are from such sources, and we will relentlessly continue to develop more. But we will also align our goals with that of the Filipino aspiring to go global and to bring our unique talents and expertise to that global arena. Amidst an international arena that’s already crowded with bigger rivals we can only do that credibly if we bring something unique to the table. For the First Gen group of companies,

First Philippine Holdings 15 “...never forgetting that staying relevant means we are always watchful, ready and willing to reinvent ourselves for a constantly changing world.” that means taking our “35-year headstart” in integrated between the Batangas refinery and Pandacan oil depots geothermal power development expertise to new markets in the heart of Manila at a fraction of the cost per liter. But abroad that are clearly in search of more indigenous, low- to play that role effectively it must also earn the public’s carbon energy alternatives. confidence that safety is not an issue. This we will do.

At First Philec Solar we are among the best producers of Taking all challenges in stride, it’s evident that the year silicon wafers for the growing solar photovoltaic industry. indeed ushered in many new changes. In fact last year, the Today we supply some of the world’s leading PV companies cover of our Annual Report was entitled “New Beginnings.” helping them to improve performance efficiencies and And as we celebrate our 50th year in 2011 and face this drive costs down towards their holy grail of grid parity. new beginning with anticipation and excitement we also thought it fitting to start it with a new, fresh corporate logo At First Philippine Industrial Park, we are creating a platform that will hopefully convey our journey and vision for the to attract firms to invest and locate their manufacturing next 50 years. businesses in the Philippines and make it easy for them to access the best resources our country has to offer. Our new logo has us envision a green road through vibrant blue oceans and leading towards a golden sunrise. We At Rockwell Land, we will continue to raise the bar for real want the imagery to be a constant reminder that as we estate development in the country. We know that this seek growth we must plan to ingrain sustainability in the industry has many bigger, better-heeled players but what business models we choose, that in the spirit of the great began as an opportunistic foray into a new industry for explorers, we should incessantly be in search of new, blue us has now turned into strong brand synonymous with oceans, and never forgetting that staying relevant means success and high-end quality. We will continue to build on we are always watchful, ready and willing to reinvent that success profitably. ourselves for a constantly changing world.

Not all has gone well for our group of businesses last So on our 50th year, it’s a good time to take stock of where year. Our oil products pipeline First Philippine Industrial we will take FPH in the next 50 years. But our Chairman Corp. (FPIC) had an unfortunate accident last year when Emeritus constantly reminds us to make sure we build an a leak was discovered along a highly urbanized section FPH that will last more than 400 years into the future. So we of its pipeline in Barangay Bangkal, Makati. Although the shouldn’t just think about the kind of world we want, we ultimate liability is still to be established we believe that it should begin making that world now. is our duty to ensure that public health and safety are not compromised and that the environment is protected. From the onset of the crisis, FPIC has always sought to act with integrity and “do the right thing.” We believe this is the only way a company emerges stronger from a crisis. Though it was an unfortunate accident no one wanted to happen, it’s a fact that an oil products pipeline such as FPIC remains the safest, most efficient way to transport oil products to the metropolis. Prior to shutdown, it was supplying close to FEDERICO R. LOPEZ 60% of the requirements of Metro Manila and surroundings Chairman and Chief Executive Officer and took on the role of more than 800 truck trips daily

2010 Annual Report 16

Fellow Shareholders:

2010 marked a new era for the Company. In March we Gas Power Corp. (FGPC), and FG Hydro and lower completed the sale of another 6.6% interest in Meralco. finance costs. EDC’s net income grew 31% to P4.4 This transaction, together with the initial sale of 20% in billion resulting principally from revenue growth from 2009, brought the total proceeds realized by the Company new acquisitions and lower finance costs. FGPC’s net to P42.5 billion, from an investment carried in our books income grew by 10% to US$78 million (P3.5 billion) at P20.4 billion. Prior to this, we sold our interest in the against the previous year driven by the reimbursement tollway business. We made these critical decisions to of expenses related to the Gas Sale and Purchase reduce our financial burden and regulatory vulnerability. Agreement and the decline in professional fees and We, instead, chose to expand our core business in power interest. FG Hydro posted higher earnings due to generation, a less regulated but more competitive sector. favorable Wholesale Electricity Spot Market (WESM) Likewise, we increased our investments in solar wafer prices. Its net income for the year amounted to P704.6 manufacturing and property development, businesses million against only P114.1 million in 2009. with big international and local players. We will have to compete with these strong players. But we have the First Gen is fully engaged in cultivating its investment organization; we have the people; and we now have the in EDC by focusing on operational and financial balance sheet. performance. EDC has: - Embarked on a capital expenditure program to First Philippine Holdings (FPH) reported net earnings achieve optimum availability and reliability for all of P28.4 billion for the year ended December 31, 2010, of its operating steamfields and power-generating compared with P13.1 billion for the year ended December assets. 31, 2009. This reflected the much higher gain on our - Re-denominated its loan portfolio into Philippine divestment of the 6.6% ownership in Meralco and the peso, reducing its exposure to foreign exchange improved performance of our operating subsidiaries. Net movements. EDC’s JPY debt as of yearend was income attributable to Parent amounted to P24.9 billion down to 12% of total debt, from 79% and 37% this year, against P8.7 billion last year. in 2008 and 2009, respectively. This has been further brought down in 2011 to JPY 543.6 million, • First Gen reported a strong year, with its net income representing 0.58% of total outstanding loans. reaching US$121 million (P5.5 billion), considerably better than the US$95 million (P4.5 billion) reported in First Gen’s bunker-fired power plant, the Bauang Plant, 2009. The 27% growth was driven by higher earnings was turned over to the National Power Corporation posted by Energy Development Corp. (EDC), First (NPC) on July 26, 2010 following the expiration of the

First Philippine Holdings 17

Message of the President and chief operating officer

15-year Cooperation Period covering the project. The 225 MW plant was constructed pursuant to a Build- Operate-Transfer (BOT) Agreement entered into with the NPC during the power crisis in the early 1990s.

The Santa Rita and San Lorenzo power plants both reached their 75,000 Equivalent Operating Hours (EOH, a major maintenance milestone) during the year. Now on their 11th and 9th contract year respectively, the two natural gas-fired power plants continue to deliver stable and exceptional returns to First Gen. FGPC (for Santa Rita) and FGP (for San Lorenzo) entered into new long-term agreements with Siemens Power Operations, Inc. (Siemens) for the operation and maintenance (O&M) of the two power plants. The O&M Agreements have nominal terms of 15 years and replaced the original agreements with Siemens which expired on July 31, 2010. Siemens has been operating and maintaining the Santa Rita power plant since 2000 and the San Lorenzo power plant since 2002.

In line with its debt reduction program, First Gen fully paid its P5.0 billion bonds on July 30, 2010. The bonds were issued on June 24, 2005 at an effective interest rate of 12.03%. On February 11, 2011, holders of First Gen’s Convertible Bonds (CBs) amounting to US$72.5 million exercised their option to require First Gen to redeem the CBs at a price of 115.6% of the face value. The total put value amounting to US$83.8 million (with a face value of US$72.5 million and a carrying value of US$83.1 million) was paid on February 11, 2011.

2010 Annual Report 18

• First Philec, likewise, posted significant growth. engineering and rehabilitation works and, by way Earnings attributable to Parent reached P160 million of contingency, for any damages which have yet to this year from P55 million last year, reflecting the be established, subject to the company’s rights and robust performance of First Philec Solar Corp. (FPSC), defenses. its wafer slicing business. Now on its second year of operation, FPSC posted a net income of US$4.4 We are committed to global business practices in million (P201.0 million) from US$336.1 thousand (P16.1 safety, security, health and environmental standards. million) last year. Its revenues reached US$97.7 million And while risks are inherent in all businesses, we (P4.4 billion) from the US$51.8 million (P2.5 billion) continue to take the measures necessary to strengthen year-ago level. our business continuity planning and emergency preparedness. Insofar as FPIC is concerned, it has • Rockwell Land registered a 26% growth in its net completed the repair and taken responsibility for the income to P801.3 million due to the completion clean-up. It has contracted a US firm to perform an of One Rockwell and higher contributions of new assessment of the environmental impact of the leak. projects—Edades and The Grove. As of December 31, 2010 FPIC’s net loss amounted to P45.6 million. Its expenses related to the pipeline leak Our other businesses, however, did not fare as well. have exceeded P300 million as of March 2011. • First Balfour posted a net income of P35.8 million, down from P138.2 million in 2009. Profits fell by 74% Despite the various challenges, we made progress in as revenues declined sharply, by 62% to P934.0 million, other areas. As we announced last year, we will focus on due to the absence of major projects. rebuilding our portfolio through the expansion of power generation and further investments in our manufacturing • First Philippine Industrial Park (FPIP) failed to equal and property businesses: the previous year’s record-breaking results with its net income showing a significant downturn (57%) to • First Gen has completed a rights offering generating P312.3 million in 2010 compared to P726.5 million in proceeds of P15 billion, which were used to repay its 2009. convertible bonds and other debts. First Philippine Holdings purchased 1,420,681,182 First Gen shares • First Philippine Industrial Corp.’s (FPIC) operating results amounting to P10.0 billion. Our ownership interest in suffered due to the shutdown of its operations from First Gen remains at 66.25%. October 2010, when a leak was discovered along its pipeline. In 2010, FPIC recognized provisions totaling • FPH bolstered its manufacturing portfolio with P274 million representing the estimated cost for additional investments throughout 2010. Through First

First Philippine Holdings th 19 “FPH is celebrating its 50 anniversary in 2011. As we celebrate this milestone, we continue to explore opportunities in the businesses we are in and to invest cautiously to make sure that we derive the maximum benefits from them.” Philec, we have invested an additional P463.9 million Moving forward, our sell-down of Meralco will negatively (US$ 10.1 million) in the solar wafer slicing business. impact our recurring earnings. Our shareholdings are We remain bullish on the long-term growth of our now treated as Investment in Equity Securities which is manufacturing sector. In fact, First Philec just signed a measured at fair value. Any gains or losses from the assets joint venture with Nexolon of Korea to put up a 400- are no longer reported in the Consolidated Statement of MW solar wafer facility in Laguna, which is expected to Income until such time that the investments are sold or commence operation in the third quarter of 2011. determined to be impaired.

• Rockwell Land continues to capitalize on the healthy FPH is celebrating its 50th anniversary in 2011. As demand in the high end market. The 2010 revenues we celebrate this milestone, we continue to explore were driven by One Rockwell, the first two towers of opportunities in the businesses we are in and to invest The Grove and Edades. Rockwell is set to launch the cautiously to make sure that we derive the maximum next two towers of The Grove in 2011. benefits from them.

Our ending cash balance is at P26 billion. In view of our Once again, we would like to thank you, our fellow strong financial position, we have declared cash dividends shareholders, for your continued support. of P1.00 to our common and P4.36 to our preferred shareholders. The Company also initiated a P6.0 billion two-year share buyback program between July 2010 and 2012. As of December 31, 2010, First Philippine Holdings had repurchased 25,689,440 common shares at an average price of P63.10/share for a total consideration of P1.6 billion. By end April 2011, we have bought back 33,391,150 shares at a total cost of P2.1 billion. We will continue to buy back our shares in 2011. Over the past five years, we have utilized over P6.0 billion for dividend payments and share re-purchases.

The Group’s total debt fell from P74.7 billion at the end of 2009 to P55.8 billion. The Group received P22.4 billion from the additional divestment of Meralco and spent over P9.0 ELPIDIO L. IBAÑEZ billion on investments during the year, mostly on First Gen President and and EDC. Chief Operating Officer

2010 Annual Report 20

message of the chief finance officer

HISTORIC GAINS “The substantial 2010 saw considerable improvements in the financial results of the Company driven by the strong operational improvement in the performance and financial contribution of our power generation, manufacturing, and real estate portfolio. Group’s liquidity Our Company achieved a record consolidated income attributable to Parent of P24.9 billion representing 287% position allowed year-on-year increase. us to carry on our The financial results were supplemented by significant one- time gains from the additional sale of Meralco shares.

deleveraging In March, First Philippine Holdings (FPH) received P22.42 billion from Beacon Electric for the P300.0 per share program and to acquisition of an additional 6.6% of Meralco shares. The remaining 6.6% investment in Meralco shares will now be undertake certain booked as investment in equity securities subject to mark- to-market adjustments. Consequently, FPH recognized share value- a net gain of P23.6 billion in consolidated statement of income following a P9.0 billion gain from the initial 20% enhancing Meralco shares sale in 2009. initiatives.” Notwithstanding the reduced Meralco stake, consolidated revenues increased by 9% to P64.38 billion, primarily driven by power generation (P53 billion) and the increased capacity of the manufacturing businesses (P6.1 billion). First Gen, our power generation subsidiary, delivered improved results from its deleveraging program and the consistent performance of its First Gas operating subsidiaries and its affiliate, Energy Development Corporation (EDC). The growth of EDC came from the increased contribution of the 192 MW Palinpinon and 112 MW Tongonan plants acquired in 2009 while the acquisition of the Bacon-Manito plants

First Philippine Holdings 21

in 2010 that is going through a complete rehabilitation is expected to deliver 130 MW of generating capacity in 2012.

Following an investment increase in the manufacturing business, First Philec recorded a substantial growth in net income (P215.1 million versus P64.1 million in 2009) as a result of its increasing capacity in its solar wafer slicing operations. Further growth will be facilitated by additional investment in First Philec’s other joint venture company, First Philec Nexolon Corporation, to increase its solar wafer slicing capacity to approximately 1.1 gigawatts.

Meanwhile, the contribution from the property sector likewise remained healthy. Rockwell Land’s good performance coupled with the increase in our stake to 49% allowed us to recognize higher share in associates’ earnings. Meanwhile, First Philippine Industrial Park (FPIP) also enjoyed two major land sales in 2010.

IMPROVED LEVERAGE AND VALUE ENHANCING INITIATIVES The substantial improvement in the Group’s liquidity position allowed us to carry on our deleveraging program and to undertake certain share value-enhancing initiatives. The Parent company ended the year with a considerable cash balance of P19.6 billion. It generated P6.1 billion cash dividend from its subsidiaries and associates. In July 2010, our Board approved a two-year common share buyback program of up to P6.0 billion to take advantage of the mismatch of our share price compared to our net asset value. We bought back 25.7 million of our common shares for P1.63 billion equivalent to 4.47% of the total outstanding common shares of 574.7 million as of end of 2010. The short-term loans of P11.2 billion from Metro

2010 Annual Report 22

“We will continue to focus on the success of our current business platform to deliver a steady increase in revenues, earnings, and operating results of the portfolio.”

Pacific Investments Corporation (MPIC) were settled after the sale of Meralco shares in March 2010. At the end of 2010, the Parent Company’s debt dropped to P10.4 billion from P11.5 billion in 2009.

Total interest bearing debt of the Group went down from P74.7 billion in 2009 to P55.8 billion in 2010. The ratio of consolidated long-term debt to total equity improved from 1.02:1:00 in 2009 to 0.54:1.00. The decrease in long-term debt was due to loan repayments, partial buyback of First Gen’s convertible bonds, as well as the reclassification to current portion of First Gen’s remaining convertible bonds scheduled to be redeemed in February 2011. Current ratio went up from 1.41:1.00 in 2009 to 1.87:1.00 in 2010 due to P6.5 billion reduction in current liabilities and P1.5 billion increase in current assets.

Comparative consolidated interest bearing debt (Amount in 2010 2009 Million Php) Current Noncurrent Total Current Noncurrent Total Parent 1,722 8,667 10,389 1,039 10,492 11,531 Power 10,981 31,981 42,962 7,137 44,186 51,323 Manufacturing 495 1,550 2,045 309 156 465 Others 329 113 442 11,322 18 11,340 Total 1,722 42,311 55,838 19,807 54,852 74,659

First Philippine Holdings fully subscribed to its prorata share of P10.0 billion out of First Gen’s successful P15.0 billion Rights Offer in January 2010. For the remaining part of the year, First Gen signed three new loans to prepay higher interest loans and to refinance short-term debt. First Gen fully paid its P5.0 billion bond on July 30, 2010 and bought back a total of US$74.0 million of its convertible bond. In February 2011, First Gen redeemed US$72.5 million of its convertible bond at the pre-agreed put price of 115.6%. As

First Philippine Holdings 23

a result, First Gen’s consolidated debt level declined by 11% economic interest in affiliate EDC to over 46%. EDC began or US$130.0 million from US$1.13 billion in 2009 to US$1.00 the year with a successful launch of a 10-year Regulation-S billion in 2010. The face value of the remaining First Gen non-rated US$300 million bond at a fixed coupon of 6.5% convertible bonds amounting to US$113.5 million will that was close to four times oversubscribed. mature in February 2013. The Parent Company’s remaining cash may be used to First Gen’s affiliate, EDC, likewise issued a US$175.0 million continue its share buyback program, maintain its P2.0 three-year loan and prepaid its Japanese Yen loans to per annum cash dividend, reduce debt and/or redeem further re-denominate its foreign currency exposure to Preferred Shares and make further investments in (a) power Philippine Peso and US Dollar. EDC has a natural hedge generation through First Gen for its potential expansion since more than 40% of its revenues are linked to US and acquisition opportunities, (b) manufacturing through Dollars. On April 19, 2010, First Gen entered into Call Option First Philec for the expansion of its solar wafer slicing Agreements to purchase 585 million EDC common shares. business, (c) First Balfour for its projects in drilling services These call options can be exercised at the applicable and middle-income housing, and (d) other existing exercise price ranging from P5.67 per share to P6.76 per business expansions and/or opportunities. share on or before April 2013. We would like to express our sincere appreciation to our LOOKING AHEAD stakeholders for their continued trust and confidence in We will continue to focus on the success of our current FPH. business platform to deliver a steady increase in revenues, earnings and operating results of the portfolio. We will utilize our excess cash balances to reduce our negative carry and will implement an investment and funding strategy for the Parent Company that is coordinated with our subsidiaries and affiliates. We are evaluating our options to refinance our remaining debts to take advantage of the favorable debt market.

As of the first quarter of 2011, total buyback of FPH common shares reached 33.4 million shares for a total of Francis Giles B. Puno P2.1 billion or 5.89% of the total outstanding shares of Treasurer and Chief Finance Officer the Company since the program started. In March and April 2011, First Gen fully exercised its call option over 585 million EDC common shares that resulted in increasing its

2010 Annual Report 24 Board of Directors

Oscar M. Lopez Federico R. Lopez Manuel M. Lopez Augusto Almeda-Lopez Chairman Emeritus and Chairman and Chief Vice Chairman Director Chief Strategic Officer Executive Officer

Elpidio L. Ibañez Eugenio L. Lopez III Artemio V. Panganiban Francis Giles B. Puno President and Director Independent Director Chief Finance Officer Chief Operating Officer

First Philippine Holdings 25

Cesar B. Bautista Arthur A. De GuiA Peter D. Garrucho, Jr. Oscar J. Hilado Independent Director Director Director Independent Director

Ernesto B. Rufino, Jr. Juan B. Santos Washington Z. Sycip Director Independent Director Independent Director

2010 Annual Report 26 Board of Directors’ Profiles

OSCAR M. LOPEZ Plenipotentiary to the United Kingdom of Great Britain Chairman Emeritus and Chief Strategic Officer and Northern Island, Republic of Ireland and Republic of Mr. Oscar M. Lopez is also the Chairman Emeritus of Lopez Iceland. He was a Permanent Representative to the United Holdings Corp. and Chairman of Lopez Group Foundation, Nations International Maritime Organization and a Special Inc. Mr. Lopez finished his Masters of Public Administration Presidential Envoy to Europe. He was also the Secretary of at the Littauer School of Public Administration (now the Department of Trade and Industry. He graduated with the John F. Kennedy School of Government) at Harvard a Degree in Bachelor of Science in Chemical Engineering University, where he also earned his Bachelor of Arts, cum from the University of the Philippines and pursued his laude. Master’s Degree in Chemical Engineering at the Ohio State University. FEDERICO R. LOPEZ Chairman and Chief Executive Officer ARTHUR A. DE GUIA Director Mr. Federico R. Lopez is also the Chairman and Chief Executive Officer of First Gen Corporation and Energy Mr. Arthur A. De Guia has been the Managing Director for Development Corporation. He graduated with a Bachelor Manufacturing and Portfolio Investments since he joined of Arts Degree with a Double Major in Economics and the corporation in June 1997 and is currently the President International Relations, cum laude from the University of of First Philippine Electric Corp. He completed his B.S. Pennsylvania in 1983. Electrical Engineering in Mapua Institute of Technology and his Masters of Engineering Degree in Industrial MANUEL M. LOPEZ Management from the Asian Institute of Technology and Vice Chairman received the Alumni Award for Academic Excellence. He pursued his Doctor of Engineering Degree at the Mr. Manuel M. Lopez is the Philippine Ambassador to Japan. University of California (Berkeley) under the Fulbright Hayes Ambassador Lopez retains his position as the Chairman Fellowship Program. of the Board of the Manila Electric Company where he served as its Chairman and Chief Executive Officer from PETER D. GARRUCHO, JR. 2001 to May 2010. He also serves as the Chairman and Director Chief Executive Officer of Lopez Holdings Corporation. He obtained his Bachelor of Science Degree in Business Mr. Peter D. Garrucho, Jr. was the Managing Director of the Administration from the University of the East, and Corporation from 1994 to January 2008. He is also a Board pursued advanced studies in financial and management Member of First Gen Corp and Energy Development Corp. development from the Harvard Business School. He was former Executive Secretary and Secretary of the Department of Trade and Industry and Tourism. He has an AUGUSTO ALMEDA-LOPEZ AB-BSBA Degree from De La Salle University (1966) and an Director MBA Degree from Stanford University (1971).

Mr. Augusto Almeda-Lopez is Vice Chairman of ABS-CBN Oscar J. Hilado Corporation among others. He graduated with an Associate Independent Director in Arts Degree from the Ateneo de Manila University and a Bachelor of Laws Degree from the University of the Mr. Oscar J. Hilado sits as Chairman of the Audit Philippines. He placed fourth in the 1952 Bar Exams. Committee and a member of the Nomination, Election and Governance Committee. Mr. Hilado is the Chairman of CESAR B. BAUTISTA the Philippine Investment Management, Inc. He is also the Independent Director Chairman of Holcim Phils., Inc. He graduated with Highest Honors and with a Gold Medal for General Excellence and a Mr. Cesar B. Bautista is a member of the Risk Management Bachelor of Science in Commerce Degree from De La Salle Committee and the Compensation and Remuneration College (Bacolod). He pursued his Degree of Masters in Committee. He was an Ambassador Extraordinary and Business Administration at the Harvard Graduate School of Business Administration from 1960-1962.

First Philippine Holdings 27

ELPIDIO L. IBAÑEZ ERNESTO B. RUFINO, JR. President and Chief Operating Officer Director Mr. Elpidio L. Ibañez is Director of the Board of various Mr. Ernesto B. Rufino, Jr. is Chairman and Chief Executive FPH subsidiaries and affiliates. He graduated with an AB Officer of Health Maintenance, Inc. He is President of Economics Degree from Ateneo de Manila University and Securities Transfer Services, Inc. He has AB and BSBA obtained his MBA at the University of the Philippines in Degrees, cum laude from De La Salle University and an MBA 1975. Degree from Harvard University.

EUGENIO L. LOPEZ III JUAN B. SANTOS Director Independent Director Mr. Eugenio L. Lopez III is the Chairman of the Board of Mr. Juan B. Santos is a member of the Audit, Nomination, ABS-CBN Corporation. He graduated with a Bachelor of Election and Governance Committee. He is Chairman Arts Degree in Political Science from Bowdoin College and of the Social Security System. He was former Chairman has a Master’s Degree in Business Administration from the and President of Nestlé Philippines, Inc. and Secretary of Harvard Business School. Trade and Industry. Mr. Santos obtained his BSBA Degree from the Ateneo de Manila University and pursued post- ARTEMIO V. PANGANIBAN graduate studies at the Thunderbird Graduate School Independent Director of Management in Arizona, U.S.A. He completed the Mr. Artemio V. Panganiban is the Chairman of the Risk Advanced Management Course at IMD in Lausanne, Management Committee. He was the Chief Justice of Switzerland. the Philippines from 2005 to 2006. He was Justice of the Supreme Court from 1995 to 2005. At present, he is WASHINGTON Z. SYCIP a columnist of the Philippine Daily Inquirer, and acts as Independent Director adviser, consultant or independent director of several Mr. Washington Z. Sycip is a member of the Audit business, civic, non-government, and religious groups. Committee, Nomination, Election and Governance He graduated with an Associate in Arts with Highest Committee, and the Compensation and Remuneration Honors from the Far Eastern University in 1956 and with Committee. Mr. Sycip is the founder of the SGV group, a Bachelor of Laws Degree, cum laude and as the Most auditors and management consultants, with operations Outstanding Student in 1960. He placed 6th in the 1960 Bar throughout East Asia. He is the Chairman Emeritus of the Examinations. Board of Trustees and Board of Governors of the Asian Institute of Management. He graduated with a Bachelor FRANCIS GILES B. PUNO of Science in Commerce Degree, summa cum laude and a Director Master of Science in Commerce Degree (Meritissimus) from Mr. Francis Giles B. Puno is President and Chief Operating the University of Santo Tomas. He pursued his Master of Officer of First Gen. He is also a director and officer of Science in Commerce at Columbia University. First Gen, its subsidiaries and affiliates. He has a Bachelor of Science Degree in Business Management from the Ateneo de Manila University and a Master in Business Administration Degree from Northwestern University’s Kellogg Graduate School of Management in Chicago, Illinois.

2010 Annual Report 28

Oscar M. Lopez Federico R. Lopez Elpidio L. Ibañez Francis Giles B. Puno Chairman Emeritus and Chairman and Chief President and Chief Treasurer and Chief Strategic Officer Executive Officer Operating Officer Chief Finance Officer

Ricardo B. Yatco Oscar R. Lopez, Jr. Benjamin R. Lopez Ramon T. Pagdagdagan Vice President Vice President Vice President Vice President/ Internal Auditor

First Philippine Holdings 29

Senior Management

Arthur A. De Guia Perla R. Catahan LEONIDES U. GARDE Managing Director for Vice President and Vice President Manufacturing and Comptroller Portfolio Investments Group

Elizabeth M. Canlas Enrique I. Quiason Rodolfo R. Waga, Jr. Vice President Compliance Officer and Vice President and Assistant Corporate Secretary Compliance Officer

2010 Annual Report 30

POWER GENERATION

FEDERICO R. LOPEZ FRANCIS GILES B. PUNO RICHARD B. TANTOCO VICTOR EMMANUEL B. Chairman and CEO, First Gen President and COO, First Gen President and Chief Operating SANTOS, JR. Officer, EDC Senior Vice President, First Gen

PROPERTY

NESTOR J. PADILLA HECTOR Y. DIMACALI President, Rockwell Land President and General Manager, FPIP

OTHER BUSINESSES

DR. FIORELLO R. ESTUAR ANTHONY L. FERNANDEZ ANTHONY M. MABASA Vice Chairman and CEO, President, First Balfour President, FPIC and First Balfour Therma Prime

First Philippine Holdings 31

POWER DISTRIBUTION

Key

MANUEL M. LOPEZ Officers Chairman

MANUFACTURING

ARTHUR A. DE GUIA DANILO C. LACHICA ARIEL C. ONG President, First Philec Managing Director for Managing Director for Electronics Division, First Philec Electrical Division, First Philec

OTHER BUSINESSES

ERNESTO B. RUFINO, JR. BENJAMIN K. LIBORO President, STSI President, Asian Eye

2010 Annual Report 32 Corporate Governance

Governance Initiatives Corporate Directors (ICD) and has accredited some of its First Philippine Holdings (FPH) adopted a Manual on officers as fellows of the ICD. Corporate Governance (the Manual) on January 1, 2003 as amended last March 29, 2010. In compliance with the FPH is likewise active in the Good Governance Advocates requirements of the Securities and Exchange Commission and Practitioners of the Philippines which is composed (SEC), FPH filed on March 11, 2011, an amended Manual of a number of companies dedicated towards corporate enhancing and clarifying its provisions. FPH also has in governance, among other things. It is also a member of the place a Corporate Code of Conduct. Philippine Association of Publicly-Listed Companies.

The Corporate Code of Conduct reiterates the values Compliance and principles instilled by its founder and carried Apart from its own governance initiatives, FPH has sought on by the Company, namely: nationalism, integrity, to be in compliance with legal requirements. It has filed the entrepreneurship and innovation, teamwork, and a strong certificate required by the SEC certifying its compliance, as work ethic. It embodies the principles and guidelines well as that of its directors, officers and employees, with the for the conduct of the business of the Company and in Manual. FPH has likewise submitted to the Philippine Stock dealing with its shareholders, customers, joint venture Exchange (PSE) its responses to the Disclosure Template on partners, suppliers/service providers, the government, Corporate Governance Guidelines for Listed Companies. creditors, and employees. The Code also affirms the Company’s commitment to pursue civic, charitable, and Governance Awards social projects and undertakings. The Corporate Code of In recognition of its continuing pursuit to enhance Conduct, the Business Mission, the Company Credo and its shareholder value, FPH has received the platinum award Commitments are made part of the Manual of Corporate for its performance in the Corporate Governance Scorecard Governance. (CGS) administered by ICD. FPH received a gold award for two consecutive years in 2009 and 2008 for garnering the To further flesh out its commitment to sound corporate highest ratings (a rating between 95% to 99%) among 169 governance, FPH has been active with the Institute of publicly-listed companies. CGS is jointly conducted with the PSE and SEC. FPH has consistently advocated that corporate governance is an indispensable component of sound strategic business management ...

First Philippine Holdings As stated by its President and COO, Mr. Elpidio L. Ibañez, FPH’s Board of Directors are: Messrs. Oscar M. Lopez 33 “This award validates our group’s advocacy to espouse (Chairman Emeritus and Chief Strategic Officer), Federico integrity, transparency, and fairness in all our business R. Lopez (Chairman and Chief Executive Officer), Manuel M. practices. We are indeed very honored, and would like to Lopez (Vice Chairman), Augusto Almeda-Lopez, Elpidio L. thank the ICD for this award.” Ibañez (President and COO), Peter D. Garrucho, Jr., Oscar J. Hilado, Eugenio Lopez III, Arthur A. De Guia, Washington Z. The companies reviewed under the Corporate Governance Sycip, Ernesto B. Rufino, Jr., Juan B. Santos, Cesar B. Bautista, Scorecard were graded based on: (1) rights of shareholders; Artemio V. Panganiban, and Francis Giles B. Puno. (2) equitable treatment of shareholders; (3) role of stakeholders; (4) disclosure and transparency; and (5) board Standing Committees responsibilities. ICD was formally established in 2004 and The Board has constituted standing committees from is chiefly made up of individual corporate directors and among its ranks which exercises the duties and functions reputational agents committed to the professional practice provided for in the Manual for Corporate Governance. of corporate directorship in the Philippines in line with global principles of modern corporate governance. The Nomination Election and Governance Committee passes upon the nomination and election of directors as FPH has consistently advocated that corporate governance well as oversees the implementation of the Manual. The is an indispensable component of “sound strategic members of the Committee are as follows: Mr. Oscar M. business management to improve the economic and Lopez as Chair, with Messrs. Federico R. Lopez, Manuel M. commercial prosperity of the corporation and enhance Lopez, Oscar J. Hilado, Juan B. Santos, and Washington shareholder value.” Z. Sycip, as members. This committee performs a crucial function, as it selects the directors and passes upon their The Board qualifications, seeking to entrust management to those To this end, the Company endeavors to have a board who can “bring prudent judgment to bear on the decision of directors composed of individuals with proven making process.” In addition, it reviews recommendations competence, probity, and integrity. FPH tries to insure that with respect to governance, the relevant trainings of the they are provided with the structures and support that will Board and Senior Management, as well as the charters of enable them to effectively fulfill their duties. the different committees.

BOARD ATTENDANCE The record of attendance of the Directors in the Board meetings and stockholders’ meetings for the calendar year 2010 is as follows:

DIRECTORS FEB 4 MAR 4 APR 8 MAY 6 MAY MAY JUN 8 JUL 8 AUG 5 SEP 2 OCT 7 NOV 4 DEC 2 311 312 O.M. Lopez √ √ √ √ √ √ √ √ X √ X √ √ F.R. Lopez √ √ √ √ √ √ √ √ √ √ √ √ √ M.M. Lopez √ √ √ √ √ √ √ √ X X X √ √ A.A. Lopez √ √ √ √ √ √ √ √ X √ X √ √ C.B. Bautista √ √ √ √ √ √ √ X √ √ √ √ √ T.Y. Cunanan √ √ X √ √ √ √ √ √ ** ** ** ** A.A. De Guia * * * * * * * * √ √ √ X √ J.P. De Jesus √ √ X √ √ √ √ ** ** ** ** ** ** P.D. Garrucho, Jr. √ √ X √ √ √ √ √ √ √ √ √ √ O.J. Hilado √ √ √ √ √ √ √ √ √ √ √ √ √ E.L. Ibañez √ √ √ √ √ √ √ √ √ √ √ √ √ E.L. Lopez III √ √ √ √ √ √ X X √ √ √ X √ A.V. Panganiban √ √ √ √ √ √ X √ √ √ √ √ √ E.B. Rufino Jr. √ √ X X X X X √ √ √ √ √ √ J.B. Santos √ √ √ √ √ √ X √ √ √ √ √ √ W.Z. Sycip X √ X X √ √ X √ √ √ X √ √

Legend: √ -Present X –Absent * - Not a Board Member Yet **-No Longer a Board Member 1 - Annual Stockholders’ Meeting 2 - Organizational Board Meeting

2010 Annual Report 34 The Corporate Code of Conduct reiterates the values and principles instilled by its founder and carried on by the Company: nationalism, integrity, entrepreneurship and innovation, teamwork, and a strong work ethic. The Compensation and Remuneration Committee oversees fund raising, major capital expenditures, investment the appropriate corporate rewards system. It is composed opportunities as well as divestments, among other things. of the following: Messrs. Augusto Almeda-Lopez (Chairman), with Washington Z. Sycip and Cesar B. Bautista The Company has constituted a Risk Management as members. It seeks to promote a culture that supports Committee headed by Mr. Artemio V. Panganiban enterprise and innovation, with suitable performance- as Chairman with Messrs. Manuel M. Lopez, Peter D. related rewards that help motivate management and the Garrucho, Jr., Arthur A. De Guia, Ernesto B. Rufino, Jr. and employees to be effective and productive. Cesar B. Bautista, as members. This committee is tasked to: (a) oversee the formulation and establishment of an The Audit Committee assists the Board of Directors in enterprise-wide risk management system; (b) review, fulfilling its oversight responsibilities for the financial analyze, and recommend the policy, framework, strategy, reporting process, the system of internal controls, the method and/or system of or used by the company maintenance of an effective audit process, and the process to manage risks, threats or liabilities; (c) review with for monitoring compliance with laws and regulations. The management the corporate performance in the areas Audit Committee is composed of six (6) members chaired of legal risks and crisis management; and (d) review and by Independent Director Mr. Oscar J. Hilado and with the assess the likelihood and magnitude of the impact of following members: Messrs. Juan B. Santos (Independent material events on the Company and/or to recommend Director); Washington Z. Sycip (Independent Director); measures, responses, or solutions to avoid or reduce risks Manuel M. Lopez; Augusto Almeda-Lopez; and Peter D. or exposure. Garrucho, Jr. Transparency and Compliance, FPH has an Internal Audit Group (IAG) composed of Management Standards Certified Public Accountants (CPA), Certified Internal Complete, prompt, and timely disclosures of material Auditors (CIA), Certified Information Systems Auditor information have been made by the Company to the (CISA), among others. The IAG reports to the Board through Exchange and to the SEC for the benefit of the investing the Audit Committee. The IAG provides assurance and public. consulting functions for FPH and its subsidiaries in the areas of internal control, corporate governance, and risk The law only requires two (2) independent directors management. It conducts its internal audit activities for covered companies. FPH has over the years had in accordance with the International Standards for the and continues to have five (5) such directors and the Professional Practice of Internal Auditing (ISPPIA) under the requirement for independent directors is likewise enshrined International Professional Practices Framework (IPPF). in its by-laws. The independent directors are also members of their respective Board committees. As a company focused on financing and business prospects, FPH has a Finance and Investment Committee Atty. Enrique I. Quiason has been designated as composed of Messrs. Federico R. Lopez (Chairman), Elpidio Compliance Officer and Atty. Rodolfo R. Waga, Jr. as Asst. L. Ibañez, Peter D. Garrucho, Jr., Eugenio L. Lopez III, Ernesto Compliance Officer, specifically for corporate governance. B. Rufino, Jr., and Francis Giles B. Puno as members. This Both are FPH’s Corporate Secretary and Assistant Corporate committee reviews the investments and financing efforts Secretary, respectively. of the Company, investment objectives and strategies,

First Philippine Holdings 35 Board Committees

Executive Committee Oscar M. Lopez Chairman Federico R. Lopez Member Manuel M. Lopez Member Augusto Almeda-Lopez Member Elpidio L. Ibañez Member

Audit Committee FPH likewise implements corporate excellence initiatives Oscar J. Hilado Chairman both at the parent and subsidiary levels such as ISO Manuel M. Lopez Member certification, Environment, Safety and Health programs, Risk Augusto Almeda-Lopez Member Management, Six Sigma and Knowledge Management, Peter D. Garrucho, Jr. Member the Oscar M. Lopez Award for Performance Excellence and Washington Z. Sycip Member the Lopez Achievement Award, among others. Last August Juan B. Santos Member 16, 2010, it successfully hurdled the requirements of the surveillance audit for its transition to the standards for an Compensation and Remuneration Committee integrated management system under ISO 9001:2008. Augusto Almeda-Lopez Chairman ISO 9001:2008 specifies the requirements for a quality Washington Z. Sycip Member management system. Cesar B. Bautista Member

Other Offices Finance and Investment Committee The Board of Trustees of the FPH Retirement Fund Federico R. Lopez Chairman which administers the retirement fund of the Company Peter D. Garrucho, Jr. Member is composed of Mr. Elpidio L. Ibañez as Chairman and Eugenio L. Lopez III Member Messrs. Francis Giles B. Puno, Arthur A. De Guia, Ms. Perla R. Ernesto B. Rufino, Jr. Member Catahan, and Ms. Elizabeth M. Canlas as members. Francis Giles B. Puno Member

The Employee Stock Purchase Plan Board of Administrators Nomination, Election, and Governance Committee which administers the Company’s stock option plan is Oscar M. Lopez Chairman composed of Mr. Elpidio L. Ibañez as Chairman and Mr. Manuel M. Lopez Member Francis Giles B. Puno and Ms. Perla R. Catahan as members. Federico R. Lopez Member Juan B. Santos Member The Seven Lopez Values Washington Z. Sycip Member Group-wide, the Lopez Credo has likewise been launched. Oscar J. Hilado Member It is a statement of purpose that puts all Lopez Group businesses in the service of the Filipino and articulates the seven Lopez values to guide corporate decisions and Risk Management Committee operations as well as employees. Artemio V. Panganiban Chairman Manuel M. Lopez Member The distinct Lopez values are: Cesar B. Bautista Member • A pioneering entrepreneurial spirit Ernesto B. Rufino, Jr. Member • Business excellence Peter D. Garrucho, Jr. Member • Unity Arthur A. De Guia Member • Nationalism • Social justice • Integrity • Employee welfare and wellness

2010 Annual Report 36

Business Excellence

The need to transform the First Philippine Holdings Achievement Awards or LAA was developed to recognize (FPH) group of companies into globally competitive and companies who are in the process of improving their sustainable businesses prompted its journey into Business work systems, while at the same time enhancing cross Excellence. It began in 1998 from modest initiatives in functional alignment. The six categories of the LAA mirror environment, safety and health (ESH) that later served the Baldrige categories. These are: business management, as a platform for other programs. The ESH program was customer focus, operations management, human resource based on ISO standards which in turn led to a mandatory focus, corporate image building, and public responsibility. requirement for ISO 9001 certification. By 1999, its The LAA is bestowed to outstanding individual and team companies were urged to pursue Integrated Management achievements that contribute to the Group’s business System certification covering ISO 9001:Quality objectives and exemplify its core values. Management System; ISO 14001:Environmental Management System; and OHSAS 18001:Occupational For the 2009-2010 cycle, six teams were honored with the Health and Safety Management System. Lopez Achievement Awards, of which, five are from the FPH Group, as follows: Through these international standards, group companies strengthened their business processes and learned • Management Team of First Sumiden Circuits, Inc. (FSCI) the necessity of continuous improvement. Yet, global for “FSCI: Resilient in the Midst of Global Financial competitiveness still looked daunting. Companies Crisis”; journeyed further in search for a broader, more encompassing and rigorous standard for world-class • Mahanagdong Geothermal Power Plant Exciter Team, performance, finding it in the Baldrige. Energy Development Corporation (EDC) for “EDC’s Fast Track Restoration of its MGPP-2 Exciter”; Patterned after the US Malcolm Baldrige National Quality Award, the Oscar M. Lopez Award for Performance • Operations Team, First Philec Solar Corporation for Excellence or the “Oscars” was launched in February 2002, “Braving the Uncharted Territory: In Pursuit of Global as the group’s highest level of recognition for organizations Leadership in PhotoVoltaic Industry”; with a mature culture of excellence, as evidenced by role model integrated business systems and sustained positive • Bacon Manito Geothermal Production Field results that more than satisfy stakeholder requirements. The Labor Management Council, EDC for “The Labor exacting requirements of the Baldrige framework, adopted Management Council as Tool for Lasting Industrial as Oscars criteria, cover all aspects of an organization: Peace in the Workplace”; and leadership; strategic planning; customer and market focus; measurement, analysis and knowledge management; • Management Coordinating Council, First Philippine workforce focus; process management; and business results. Industrial Corporation for “The Golden Transformation to Achieve Profitability and Superior Performance.” At the Business Excellence Awards for 2010, engineering and construction company First Balfour was cited for To further enhance competitiveness programs in 2010, four submitting an application to the Oscars Award program. learning sessions introduced the Balanced Scorecard (BSc) Petroleum pipeline operator First Philippine Industrial to group executives and functional managers. This may Corporation (FPIC) was conferred the Oscar M. Lopez Award pave the way to another full-blown excellence program for Performance Excellence. It was FPIC’s fourth application or as a systematic approach in strategy deployment with the Oscars, and twice with the Philippine Quality as defined in Baldrige. BSc measures an organization’s Award, which uses the same Baldrige criteria. performance in four integrated strategic perspectives: financial; customer satisfaction; internal capability; and Organizations take an average of five to six years to reach learning and growth. the performance level deserving the Oscars. The Lopez

First Philippine Holdings 37

Two other executive learning sessions were on Investors-in- The standards embedded in the IMS influence a way of life, People (IiP), in collaboration with Group HR and the People an attitude that each officer and staff member of FPH has Management Association of the Philippines. IiP is the to imbibe and live, as the Company continues its search emerging international standard on people management of opportunities for improvement. It is a united journey to leading to improvement in business performance. become a world-class company.

To cap Business Excellence highlights for 2010, Lopez Risk Management Group Business Excellence, through FPH’s membership As part of enhancing corporate governance, the First in the Philippine Business for the Environment, served as Philippine Holdings Corporation Board of Directors formed the convenor of the Clean Fleet Cluster of the Philippine a Risk Management Committee (RMC) in late 2007, initially Imperative on Climate Change, in collaboration with the composed of independent directors, former Chief Justice Asian Development Bank-funded Clean Air Initiative for Artemio V. Panganiban, Ambassador Cesar B. Bautista and Asian Cities. another director, Ernesto B. Rufino, Jr. The RMC was initially tasked to evaluate the manner in which risks were being Lopez Group Business Excellence was conferred the Philippine assessed and managed by the corporation. Chaired by Quill Award of Merit by the local chapter of the International the former Chief Justice, the FPH’s RMC is supported by a Association of Business Communicators, for its effective team composed of the FPH Enterprise Risk Management and efficient deployment of internal communications (ERM) champion Benjamin K. Liboro, RMC secretariat Atty. strategies for its advocacy in process improvement, business Rodolfo R. Waga, and ERM coordinator Ronaldo C. Sabella. competitiveness, and performance excellence. In late 2010, three other directors joined the RMC namely, Ambassador Manuel M. Lopez, Peter D. Garrucho, and Dr. Integrated Management System Arthur A. De Guia. The addition of these new members In 2010, FPH tested the efficacy of its Integrated augmented the RMC’s capabilities to assess the emerging Management System (IMS) by hurdling two audits. risks in the fields currently pursued by the FPH in areas of First was the IMS Surveillance Audit, on March 2, 2010, power generation, manufacturing (electronics, electrical which focused on the effectiveness of its Quality and solar power), and property. and Environmental, Occupational Health and Safety Management Systems assimilated under its IMS. Second Enterprise Risk Management (ERM) Framework was the transition to the new standard of ISO 9001:2008 FPH’s ERM efforts, started six years ago, coordinate efforts Quality Management System (QMS), on August 16, 2010, both at the operating and holding company levels in which reflected the Company’s responsiveness to its managing business operating risks, and in exploiting changing business and customer requirements. opportunities derived from managing these risks well.

2010 Annual Report 38 A staple activity in the Company’s planning and review its ESH system, the corporation was able to respond sessions, sector holding and operating companies now properly to safety and health-related risk events like the report their top 10 risks and mitigating strategies during AH1N1 pandemic and the devastating effects brought the yearly one-on-one sessions with the Executive about by Typhoon Ondoy where in the latter, response Committee (ExCom), in the Annual Lopez Group Budget and relief operations were conducted to help employees Conference and during the Mid-year Review Sessions. and their respective families. FPH obtained its Integrated Strategy implementation monitorings are tackled during Management System (IMS) Certificate for its Quality, monthly board meetings, bi-monthly CEO meetings, Environment, Safety and Health (QESH) System in February and also through informal sessions called “strategic 2009. conversations” with members of the ExCom. In addition, calibration meetings called “strategic discussions” with the Continual Improvement of the First Philippine Board of Directors are also done yearly. Here, discussion Holdings ERM Framework and System about the company’s key result areas and five-year plans As further enhancement of the Company ERM Framework are deliberated by both the functional heads and the and Systems, the RMC spearheaded an initiative for an Board of Directors, before cascading them to the rest ERM system rollout at FPH, tapping SGV as consultant. This of the organization. In 2011, FPH Chairman Federico R. initiative, which started in 2010, will equip risk owners and Lopez introduced a forum called “Strategy and Synergies the Executive Risk Management Unit (ERMU) composed Discussions” with the various sector and subsidiaries heads of the corporate group heads with the necessary tools to fully explore synergies, and harmonize these synergies to enhance their existing controls, policies, procedures across the different operating companies in executing their and systems to better manage the Company’s risks. respective goals and strategies. The SGV ERM methodology, patterned after the COSO (Committee of Sponsoring Organizations of the Treadway On the RMC level, one-on-one sessions with the various Commission) and ISO (International Organization for FPH sectors and subsidiaries are also conducted to give Standardization) standards, has been adopted by most sector and subsidiary risk management champions the of the FPH group companies. FPH expects to complete opportunity to solicit feedback on their risk strategies from this initiative in the first half of 2011. Consistent with its RMC members, who have both extensive knowledge and adherence to world-class standards, and as part of its experience from their respective stints in the government continual improvement, the Company is also looking at and private sectors. An output of this exercise is the risk aligning its ERM approach with the recently established map of the FPH portfolio. The RMC also conducts special ISO 31000 (Risk Management Standards) and ISO 31010 sessions in order to validate the approaches and methods (Risk Assessment Techniques), as well as other globally the Company will adopt in addressing specific operational accepted standards on business continuity and crisis risks or issues. management. Currently, the Lopez Group is eyeing the formation of a group-wide crisis management team to Another component of the FPH’s ERM system is its be championed by Rafael Alunan III. All these efforts Environment, Safety and Health (ESH) Management to improve are consistent with the Company’s goal of Systems certified under ISO 14001 and 18001. Through attaining competitiveness and corporate resiliency.

First Philippine Holdings 39 The need to transform the First Philippine Holdings group of companies into globally competitive and sustainable businesses prompted its journey into Business Excellence.

KNOWLEDGE MANAGEMENT certifications, such as Certified Internal Auditor, Certified Information Systems Auditor, Certified Financial Analyst, Talent Management Certified Management Accountant, Certificate in Human First Philippine Holdings (FPH) strongly believes that Resource Management, Mandatory Continuing Legal putting the right people in the right place at the right time Education and Financial Modeling. is a key ingredient in managing business complexities. It takes a deliberate process that is anchored on the The Company has established the groundwork for both the Company’s vision, mission and values, as well as its strategic Career Management and the Performance Management directions. Hence, the adoption by the Company of Talent System (PMS). These include defining the core competency Management and Competency-based Human Resource framework, updating and refining the job profiles which (HR) Systems in managing its human resources focusing cover job roles and responsibilities, core competencies on specific HR programs such as career management, and functional/technical competencies, and the required succession management, and performance management, competency levels. among others. These are all meant to reinforce and ensure excellence in the attraction, development, and retention of HR Management Group is now ready to assess the great talents. After all, great talents are what separate high- employees’ career goals and objectives, career aspirations, performing organizations or “stand-outs’” from the rest. and competency levels. Expected deliverable at the end of the project is a career path or roadmap per position, Talent Management starts from employee attraction and which also defines the competencies, experience, and selection. Those who are equipped with the required job training requirements. competencies, who show strong potential for growth and whose personal values are aligned with the corporate The PMS project is now in the final phase. This includes values, are given priority in the selection process. The building PMS-related skills across levels, i.e., goal- Company recognizes that empowering and providing setting process, rating orientation, coaching and giving talents with opportunities for growth and development, performance feedback; creating the communication and providing them with an equitable compensation strategy; and integrating competencies and the Lopez and benefits package are critical for employee retention. values in the appraisal form. Talents are given deliberate exposure to real-life scenarios by deploying them to the group’s various operating The Company has also defined its Succession subsidiaries. Management framework, identified the critical roles in the organization, and defined its talent management FPH continues to build and develop its leadership pipeline. strategy and the succession pool eligibility criteria, using High potential employees are sent to the Asian Institute current company practice, market practice and company of Management (AIM) for an Executive Masters in Business aspirations as bases. Success profiles were also developed Administration (EMBA) program. It also provides programs for each critical role. Candidates have been identified such as Coaching for High Performance, values formation, for each critical role and will go through assessment project management, among others. The Company to identify current strengths and areas of growth, and likewise levels up on its various functional and technical will continuously be developed until such time that an capabilities by encouraging and supporting high potential appropriate role for them becomes available. employees to pursue specialized training programs and

2010 Annual Report 40

Corporate Social Responsibility AND GIVING

For First Philippine Holdings (FPH), corporate social responsibility (CSR) is a way of life. It is a defining characteristic of the Company and its employees, believing that engaging the community empowers people and helps uplift the nation’s quality of life.

AIM inauguration of renovated spaces FPH’s CSR and corporate giving activities are linked to the United Nations Millennium Development goals particularly on education, environment, health, and poverty alleviation.

EDUCATION AND CULTURE FPH puts a premium on giving the gift of knowledge and nurturing the seeds of culture by supporting programs aligned with these advocacies.

The Asian Institute of Management (AIM). In keeping with its commitment to promoting higher education in the country, FPH donated funds for the Lopez Group Foundation Inc.’s (LGFI) renovation of AIM’s case rooms. The case rooms were named after Lopez Holdings Corporation, ABS-CBN, and First Philippine Holdings. Also renovated were the Alumni Relations Office, the Student Services Admissions and Registration Office, and the lobby among others. The AIM building was donated by the Eugenio Lopez Foundation in 1968. At that time, it was considered the single biggest donation made by private business to an educational institution. More than 40 years later, the Lopez Group, reaffirmed their strong support to AIM through the donation.

The Out-of-School Youth and Mature Learners (OML) Institute for Alternative Learning. To help address the growing problem of illiteracy among Filipinos, FPH supported Knowledge Channel Foundation, Inc. in establishing the OML Institute for Alternative Learning, an initiative that provides access to quality education through media. This initiative is in partnership with the Department

Lopez Museum’s ‘Unfolding: Half a Century’ of Education’s Bureau of Alternative Learning System and the ABS-CBN Bayan Academy for Social Entrepreneurship and Human Resource Development. The institute aims

First Philippine Holdings 41

to nurture its beneficiaries as productive members of the society through gainful employment or as entrepreneurs.

Undaunted: The Lopez Legacy. LGFI also published the Anvil award-winning coffee-table book Undaunted in cooperation with FPH. Undaunted is the visual chronicle of the Lopez Group’s resilience. It is a testament to what makes the family and its businesses continue to live—the belief in certain basic values and principles that guide its existence beyond mere bottom-line results.

Unfolding: Half A Century. FPH supported the publishing taxa that are facing a high risk of global extinction. The of the book Unfolding, a book chronicling 50 years of the book contains information on the conservation status Lopez Memorial Museum and Library. Unfolding contains of 29 endemic marine fishes, many of which were last chapters on the history of the museum, the rare and recorded 30-100 years ago. It also contains a section important works in the library, and the new directions on management and policy actions to address the envisioned for the museum. It represents what the Eugenio conservation needs of endemic marine fishes. Lopez Foundation is today and shares its most important tenets: to preserve its collections and make them Global Marine Species Assessment (GMSA) funded by the accessible, engaging and relevant for future generations. Foundation for Philippine Environment (FPE). This year, more than 500 marine species were entered into the ENVIRONMENT International Union for Conservation of Nature (IUCN) Aligned with its advocacy on environmental stewardship, database for the Red List Process, which would undergo FPH continues to support the work of First Philippine extensive analysis and validation. Once done, the marine Conservation, Inc. (FPCI) in protecting Philippine species will be categorized accordingly. This exercise biodiversity. In 2010, FPCI continued streamlining its helped identify 150 potential endemic species in the operations and pragmatic work, focusing on what it does Philippines. best. The project was able to push the institutionalization Coastal Resource Conservation. Strengthening the of the use of the IUCN Criteria and Categories in the Capacity of Resource Managers to Protect and Conserve Department of Agriculture–Bureau of Fisheries and Aquatic Marine Biodiversity with the German Technical Cooperation Resources (DA-BFAR) through the latter’s Implementing (GTZ). Rules and Regulations (IRR) of the Wildlife Protection and Conservation Act. Under this project, a book entitled Red List Status of Marine Endemic Teleosts (Bony Fishes) of the Philippines was FPCI also trained 12 Filipino coastal resource management launched and distributed to relevant government agencies, practitioners on the Red List Assessment, with local and schools, and other non-governmental organizations. The international experts who served as mentors to the group. Red List is a worldwide initiative to provide taxonomic, The experts also assessed three marine species groups: conservation status, and distribution information on Acanthuridae, Tripterygiidae, and Clinidae. The value of

2010 Annual Report 42

the Red List Assessment lies on the fact that it highlights Calauan. In this project where informal settlers are relocated taxonomic groups and regions under particular threat. to Barangay Dayap in Calauan, Laguna to reduce overall risk posed by future typhoons in the metropolis. To date, 4,897 The data gathered is the most up-to-date information more families from Estero de Paco have been relocated. available on each species, and the expert participants Another 10,000 families are expected to be moved from contribute relevant information on each species assessed. Pasig River and other major tributary rivers. Without it, the on-the-ground knowledge collected would be near impossible to obtain. Thus, sound and important The LGFI coordinated with FPH in the rehabilitation of a decisions can be made, e.g., the designation of Marine school later named Oscar M. Lopez Dayap Elementary Protected Areas (MPAs). The trainees found the training School and donated funds for the construction of the useful in line with their work. Moreover, they saw the school’s basketball center. Subsidiary First Gen sponsored relevance of their work in the global context of marine construction of various class rooms and a canteen. species conservation, particularly on data integration, identifying data gaps, and influencing decision making in Its construction arm First Balfour, took charge of terms of coastal conservation efforts. rehabilitating the school buildings, construction of basketball court, and the design and building of two To date, FPCI has completed a manuscript on another Livelihood and Training Centers. Rockwell Land is handling publication of the Red List status of an additional 30 species design and construction for the 500-seat Chapel of Two of fish. Hearts, and Lopez Group company Adtel provided solar lighting for a number of streets in the site. Forest Restoration. FPCI has completed the biophysical and socio-economic surveys of five forest restoration sites CORPORATE PROGRAMS in Luzon and the Visayas that could serve as pilot sites for Employee Wellness Program. The Company’s award the joint collaboration with Energy Development Corp. winning flagship program, Employee Wellness, is now on (EDC) and the Philippine Native Plant Conservation Society its 12th year. The program was recognized in the Asian CSR Inc. headed by (the late) prominent botanist Mr. Leonard Forum as one of the best CSR in the workplace programs. Co. The program ensures that FPH employees are able to lead a well-balanced life as the Company continues to provide DISASTER RELIEF AND REHABILITATION/POVERTY holistic wellness activities. These cover the physical, mental, ALLEVATION emotional, and spiritual aspects of life. Wellness courses, BayaniJuan sa Calauan. FPH increased its participation learning sessions, and various fitness and sports activities in the clearing of Pasig River tributaries through active are regularly offered to all employees. support of ABS-CBN Foundation Inc.’s BayaniJuan sa

First Philippine Holdings 43

EMPLOYEE VOLUNTEERISM Provision of medical and dental care. For the last Employee Volunteerism, one of the Company’s employee seven years, the Company has been maintaining medical engagement programs, is anchored on the Lopez values and dental clinics in Paliparan, Dasmariñas and General of social justice, nationalism, and concern for employee Trias in Cavite, providing medical and dental care to wellness and welfare. The program allows employees to the Alay Kapwa Christian Community and neighboring share their time, talent, and resources to help improve communities. the quality of life of needy Filipinos including victims of calamities, protect the environment, and provide Philippine Business for Social Progress (PBSP). The educational assistance, among others. Company continues to partner with PBSP through its active involvement in the Luzon and Membership Committees. Tree planting. Employees planted trees of rare species at the Oscar M. Lopez (OML) Binhi Tree Park in the BayaniJuan resettlement. Energy Development Corporation (EDC) established the Binhi Tree Park, a 1,000-square-meter lot planted with 80 species of 14 endangered and premium native species. The park is part of EDC’s Binhi program, a greening legacy program which aims to rescue and secure the gene pool of the country’s endangered premium trees by planting and growing seedlings into so called mother trees in school grounds, public parks, and safe havens. Volunteers also planted mahogany saplings at the Eugenio Lopez Center in Antipolo City.

Employee Volunteerism, one of the Company’s employee engagement programs, is anchored on the Lopez values of social justice, nationalism, and concern for employee wellness and welfare.

2010 Annual Report POWER GENERATION

Delivering reliable, renewable, and clean energy for the country

First Philippine Holdings FIRST GEN CORPORATION (FIRST GEN) The reliable dispatch of First Gas’ 1,000-MW Santa Rita and 45 First Gen remains the country’s leading clean and renewable the 500-MW San Lorenzo natural gas-fired power plants energy producer with power plants that use geothermal, was the main contributor for the increase in revenues from hydro, and natural gas for fuel. At the end of 2010, the total the sale of electricity by US$159.2 million, or 16% to US$1.2 installed capacity stood at 2,832.6 MW, or 18.2% of the billion in 2010 from US$1.0 billion in 2009. The higher country’s total installed capacity. revenues were offset by corresponding increases in the cost of natural gas and higher operations and maintenance fees The year 2010 marked First Gen’s continued growth as paid to Siemens Power Operations, Inc. For 2010, the First its assets provided strong and steady operational results Gas plants delivered stable earnings of US$130.1 million. complemented by a successful financial deleveraging program. There was also a notable increase in equity in net earnings from associates EDC and FG Hydro in 2010. First Gen reported a sharply higher attributable net income to parent of US$70.2 million for 2010, up by 319% from EDC, the country’s largest operator of geothermal-fired US$16.7 million posted last year. First Gen’s consolidated power plants, provided higher earnings to First Gen of revenues likewise jumped by US$222.2 million, or 22% to US$52.5 million in 2010, up by US$21.5 million, compared US$1.2 billion in 2010 from last year’s US$1.0 billion. to US$31.0 million in the previous year. This improvement resulted from the full year effect of the operation of the “The substantial increase in earnings was driven by the 192.5-MW Palinpinon and 112-MW Tongonan geothermal strong operating performance of the First Gas group, First power plants, EDC’s receipt of VAT Tax Credit Certificates Gen Hydro Power Corporation (FG Hydro) and Energy and its lower deferred taxes. The improvement in earnings Development Corporation (EDC). These developments were was partially offset by the impairment booked for EDC’s complemented by the positive effects of the Company’s 49-MW Northern Negros geothermal power plant and lower deleveraging program,” First Gen President Francis Giles B. revenues from EDC’s Unified Leyte geothermal power plant Puno said. complex.

The year 2010 marked First Gen Corporation’s continued growth as its assets provided strong and steady operational results complemented by a successful financial deleveraging program.

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FG Hydro’s income went up by US$8.4 million from US$1.5 million in 2009 to US$9.9 million in 2010. This increase was due to better prices in the Wholesale Electricity Spot Market and higher dispatch of the hydro plants.

MILESTONES In May 2010, Bacman Geothermal, Inc. (BGI), a wholly owned subsidiary of EDC, won the bidding for the 150-MW Bacon-Manito geothermal power plants in Bicol. With the Bacman acquisition, EDC achieved full integration—from steam to power generation—in its geothermal production fields.

Also in 2010, FG Hydro completed an enhancement and rehabilitation project to increase the installed capacity of the Pantabangan hydroelectric plant by 20 MW. The Pantabangan hydro plant originally consisted of two 50- MW generating units, excluding the downstream Masiway facility, which consists of a single 12-MW generating unit. The contract for the enhancement work was signed in January 2008, and site work for the first unit to boost Pantabangan’s capacity by 10 MW was completed in December 2009. The completion of the second phase added another 10 MW to Pantabangan’s capacity bringing the total capacity of the Pantabangan-Masiway complex to FRANCIS GILES B. PUNO 132 MW. President and Chief Operating Officer First Gen has a track record in natural gas, geothermal, In July 2010, Bauang Private Power Corporation turned over and hydroelectric energy development on which to its 225-MW diesel bunker-fired power plant in Bauang, La anchor its foray into new horizons. Focused on clean, Union, to National Power Corporation / Power Sector Assets green and renewable energy, First Gen pursues wind and Liabilities Management Corporation following the and solar projects and braves the international arena expiration of the 15-year cooperation period covering the purposely seeking ventures that require its expertise in project. power asset management.

First Philippine Holdings 47

First Gen took additional steps in 2010 to further boost which covers the whole Batangas Province by supplying the Company’s capital base and support its investment 20,000 seedlings per year for five years. A Memorandum program, capital requirements and growth initiatives. of Understanding (MOU) was signed among the Provincial First Gen raised P14.997 billion in equity by offering to Government of Batangas, First Gas, and Department of stockholders 2.14 billion shares through a rights offer which Environment and Natural Resources (DENR). was conducted and completed in January 2010. In recognition of First Gas efforts to protect and enhance In May 2010, First Gen signed a P3.75-billion 5-year Facility the environment, First Gas bagged the Silver Award for Agreement with the Banco de Oro group. In September the Best Environmental Company of the Year when Asian 2010, First Gen signed a US$142-million, 6- and 7-year Power Magazine held the Asian Power Awards 2010 in syndicated term loan that was arranged by BDO Capital November 2010 at the Ritz Carlton Hotel in Singapore. and Investment Corporation (BDO Capital) with a bank Asian Power, a leading trade publication in the region, holds consortium. In December 2010, First Gen signed a US$100- the Asian Power Awards to recognize independent power million Notes Facility Agreement with Banco de Oro producers in Asia for their outstanding performances and Unibank, Inc., with BDO Capital also as the arranger. contributions to the power sector. A total of 54 entries competed for the 10 categories of the Asian Power Awards CSR/AWARDS in 2010. First Gen, on its own or through subsidiaries, continues to implement corporate social responsibility (CSR) and First Gen also received an Award of Excellence for its 2009 community relations projects in an effort to develop Annual Report “More with Less” as well as an Award of and improve the quality of life of host-communities and Merit for a special feature story “Making a Difference” in its promote their level of self-reliance. annual report during the 2010 Philippine Quill Awards of the International Association of Business Communicators Likewise, as part of its commitment to enhance and protect (IABC). The prestigious annual awarding ceremony is being the environment, First Gas has committed to support the held by the IABC to recognize outstanding corporate Centennial Tree Planting Program of the Archdiocese of Lipa communication programs and tools.

2010 Annual Report POWER DISTRIBUTION

Attaining sterling operational performance

First Philippine Holdings 49

MANILA ELECTRIC COMPANY (Meralco) election spending in the first half of 2010, business Meralco ended 2010 with record results. Consolidated expansion within the franchise area throughout 2010 and revenues amounted to P245.5 billion while consolidated the record 3% increase in the number of billed customers, net income attributable to the parent of Meralco amounted which now stands at P4.8 million. Marked savings in to P9.7 billion, 33% and 61% higher compared with the financing charges were generated as favorable financial amounts delivered in 2009, respectively. markets ushered significantly lower interest rates and most of Meralco’s long-term debt was refinanced at reduced The robust financial results stem from record energy rates. The company has negligible foreign exchange sales volumes, operational performance and the delayed exposure. implementation of the distribution rate adjustment for the 3rd Regulatory Year (July 1, 2009–June 30, 2010) of The company’s liquidity position has never been stronger. the 2nd Regulatory Period (4 years ending June 30, 2011). Total cash as at December 31, 2010 was P24.4 billion, 43% Consolidated revenues reflect the significantly higher pass- higher than in 2009. Current ratio was at 1.26:1.0 while through power purchase charge. net cash was negative P3.1 billion. Meralco has intensified its collection activities, realizing notable improvement in The volume of energy sold grew by an unprecedented days-sales outstanding from 29 days to 24 days in 2010, 10% to 30,247 GWh as a result of the unusually high despite the much higher pass-through generation and temperatures, higher consumption brought about by transmission costs.

The volume of energy sold grew by an unprecedented 10% to 30,247 GWh and the record 3% increase in number of billed customers now stands at P4.8 million.

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In recognition of Meralco’s exceptional performance, is below the cap, resulting in lower system loss charge to Standard & Poor’s upgraded its credit rating to ‘B+’ with consumers. The cumulative savings to customers was P2.9 ‘stable’ outlook to reflect the significant and sustained billion or P3.4 centavos per kWh from 2008 to 2010. The improvement in its financial risk profile arising from steady improvement in Meralco’s system loss is attributable stronger electricity sales and improved tariffs. Earnings to the institutionalization of loss-reduction activities, per share was P8.59. In February 2010, the company improved pilferage management, and the effort to expand implemented a dividend pay-out policy where the regular its partnership with local government units within the cash dividend is set at 50% of audited Core Net Income, franchise area. In addition, the continued growth of energy which may be supplemented by a special dividend sales particularly those taken at primary voltage levels, determined on a ‘look-back’ basis. In 2010, the company and the steady decline of the losses attributed to informal declared total cash dividends of P6.45 per share, equivalent settlers due to the resettlement programs implemented to 60% of Core Net Earnings. by the government have also contributed significantly to system loss management. Actual system loss charge Total capital expenditures in 2010 amounted to P10.1 of Clark Electric Distribution Corporation, Meralco’s billion, with electric capital projects committed for the 2nd distribution subsidiary is at 3.81% as at end-2010. Regulatory Period accounting for 51% of the total amount spent for the year. The major capital projects include the System reliability and availability performance are major development of substations, construction of the NAIA 115 service priorities of Meralco. The number or frequency kV-line, replacement of substation power transformers and of interruptions and cumulative interruption time has relocation of sub-transmission and distribution facilities to improved to record low rates. Unplanned interruption was pave the way for the construction of major government also reduced to levels lower than in 2009. These are largely infrastructure. due to efficient preventive maintenance procedures to address system reliability performance issues. Customers The company continues to reap the benefits of its System continue to benefit from speedy power restoration through Loss Management Program. The 12-month moving the use of distribution automation for prompt detection average system loss as at December 31, 2010 was 7.94%, and isolation of line troubles. remarkably lower than the 8.5%-cap imposed by the Energy Regulatory Commission beginning January 2010. Part of the future for Meralco will be its re-entry into This marks the third consecutive year where system loss power generation to help address the anticipated power

First Philippine Holdings supply deficiency issue. The generation portfolio consists of baseload, mid-merit, and peaking plants of various fuel sources. Likewise, the company seeks to further improve customer satisfaction and convenience with its innovative products and services.

Meralco was awarded for “Best Investor Relations” in the Manuel M. Lopez Philippines at the 1st Asian Excellence Recognition Awards Chairman of Corporate Governance Asia based on the results of a regional survey conducted between August and December Meralco braves new horizons in attaining sterling 2010 among investors in Asia. operational performance with record-setting technical accomplishments such as lower system loss, lower Awards interruption frequency rate and lower cumulative Also, in 2010, Meralco was recognized in the Platts Top 250 interruption time, all with the end of providing superior Global Energy Company Rankings. The ranking measures customer care and becoming the preferred service a company’s financial performance using asset worth, provider of industrial, commercial, and residential revenues, profits and return on investment capital. Meralco customers alike. ranked 215th globally, 59th in Asia, and 5th in the Philippines.

ENHANCED CORPORATE SOCIAL RESPONSIBILITY Meralco renewed its Corporate Social Responsibility framework along four pillars: Rural/Missionary Electrification, Grassroot Partnership, Sports and Youth Advocacy, and Disaster Relief and Emergency Preparedness. The programs and initiatives are designed to bolster Meralco’s commitment to its customers, community, and country.

PANAY ELECTRIC COMPANY (PECO) PECO is one of the oldest private electricity distribution utilities in the Philippines, having been established in 1951, and remains to be the only private electricity distributor in the island of Panay.

In 2010, the company posted a net income of P321.6 million, higher by 5% over that of the previous year’s net income of P307.5 million largely due to increase in income from interest—from P2.5 million last year to P168.0 million increase application before moving to Performance-Based this period. Regulation (PBR). Its application was filed in September 2010. Revenue on sale of energy went up by 18% because of the 6% increase in kilowatt-hour sales combined with the The island of Panay was hit by daily brownouts last year increase by over 30% in average bunker fuel prices over last owing to the tight supply. PECO is looking forward to the year. Operating income contracted by 2% as the increase full commercial operations of Panay Electric Development in cost of sales and operations outweighed the increase in Corporation’s coal-fired power plant in May 2011. revenues.

PECO is still waiting for the Energy Regulatory Commission’s decision on its last Return on Rate Base (RORB) rate

2010 Annual Report MANUFACTURING

Ensuring a culture of excellence, discipline, and accountability

First Philippine Holdings 53

FIRST PHILIPPINE ELECTRIC CORPORATION plan in order to respond to the rising global demand for (First Philec) solar energy. In December 2010, FPSC inaugurated its The year 2010 witnessed the ability of First Philec to second production facility to house the additional highly compete in the global arena as it continued to grow automated machines that would bring capacity to 240 its investments in the solar/photovoltaic (PV) industry million wafers a year, capable of supporting approximately and enhance the strategic position of its more mature 720 MW of solar energy. businesses. Net income attributable to parent grew threefold from P55 million in 2009 to P160 million in 2010. A PV Technology Center was set up in 2010 to further Total managed revenues for 2010 were at P9.6 billion, enhance the sector’s competitiveness. Alliances with better by 13% from the previous year’s revenues of P8.5 foreign research institutes are being developed to gain billion, despite the negative effects of foreign exchange access to cutting edge technology. At FPSC, process fluctuations. improvements are being undertaken to continuously bring down the cost per wafer, and to increase the value In mid-2008, First Philec, the intermediate holding company proposition of the company to its customers. All these for the manufacturing businesses of First Philippine contributed to FPSC’s capturing the majority of its primary Holdings, expanded its portfolio when it ventured into the customer’s wafer demands and to its developing additional PV space. It made its initial investment in First Philec Solar third party customers. Corporation (FPSC) through a joint venture with SunPower Corporation, an established technology leader in the FPSC is the first company in First Philec’s newly established industry. FPSC manufactures silicon wafers that form the PV Sector. In 2010, another company was established to core in the production of high-efficiency solar cells and cater to the downstream segment of the PV value chain. panels. Located in Batangas, FPSC has grown impressively First Philec Solar Solutions (FPSS) was incorporated in June since its inception, ramping its production facilities to 2010 to focus on the “end of line” applications on both full capacity two years ahead of its original business the utility and commercial scale photovoltaic systems. It

FPSC has grown impressively since its inception, ramping its production facilities to full capacity two years ahead of its original business plan in order to respond to the rising global demand for solar energy.

2010 Annual Report 54 successfully completed its first commercial scale solar solutions for the electrical transmission and distribution photovoltaic installation that is expected to generate up industry. Philippine Electric Corporation (Philec) has been to 200 peak kilowatts with the expansion plans. Several manufacturing transformers since 1969. The recognized projects are in the pipeline awaiting the feed-in-tariff industry leader pioneered the manufacture of amorphous implementation in the country. FPSS is First Philec’s vehicle transformers in Southeast Asia. These transformers are the for the power generation business. most efficient products in their class. First Electro Dynamics Corporation (FEDCOR) complements the operations of In December 2010, First Philec, through First PV Ventures, Philec through the production and services for transformers entered into another joint venture agreement with and distribution line equipment. First Philippine Power Nexolon Corporation, the leading manufacturer of solar Systems, Inc. (FPPS) supplies dry-type transformers wafers in Korea. First Philec Nexolon Corporation will be a for uninterrupted power supply units of American 400-MW wafer-slicing facility in the Philippines. Operations Power Conversion, a major global original equipment are expected to commence in the last quarter of 2011, manufacturer. First Philec Manufacturing Technologies with full ramp up the following year. This brings the total Corporation (FPMTC) currently serves as an incubation wafer-slicing capacity of First Philec to 1.1 GW. Estimated company that constantly develops new products and project cost is around US$100 million. product lines for the sector. It is the only local producer of amorphous core in the country. This development was Leveraging on its partnership with SunPower and Nexolon, in response to distribution utilities’ desire to reduce their First Philec’s prospects to create the first and the biggest system losses and to improve operating cost through Filipino solar company shines brighter. It will continue energy savings. to actively explore opportunities in the PV value chain, specifically focusing on integrating upward to ingot The Electrical Utilities Sector has been operating in a growing and gearing for an overseas venture. mature industry. Year 2010 was considered pivotal in gearing the company toward entering potential growth The other leg of the manufacturing portfolio of First markets. Significant steps were undertaken to rationalize Philec is the Electrical Utilities Sector which is engaged operations and processes, aiming to maintain leadership in the manufacture of products and packaging of in current markets and break new ground as opportunities

First Philippine Holdings 55

open up with the growth of the renewable energy industry and the substation markets in the Philippines. Similar to the PV Sector, strategic alliances are in the development stage to further enhance the sector’s competitiveness not just locally, but within the Southeast Asian region.

First Philec’s manufacturing plants have integrated quality management systems (IMS) which ensure a culture of excellence, discipline, and accountability. In addition to being IMS certified, FPSC was also the first Filipino private entity to be awarded the Palladium Hall of Fame for Strategy Execution. Arthur De Guia With a mandate to grow manufacturing into a core President business of First Philippine Holdings in the medium term, First Philec’s continued growth will be fueled by First Philec will continue with its three-pronged strategy the profitable operations of our existing businesses of enhancing the profitability of its businesses, growing and our entry into new product and geographical its revenue base and establishing a culture of excellence markets. Our goal is to become a recognized global across the organization. With its existing businesses, First player particularly in the photovoltaics industry; our Philec estimates revenues to grow to P20 billion and net achievements, thus far, prove that the Filipino has income to P1.5 billion within the next five years. To fuel what it takes to compete in this arena. Indeed, working further growth, First Philec plans to go for an initial public as one, the First Philec team will be unrelenting in offering of its shares in the near term. As the organization enhancing our organization, processes and systems grows, First Philec will ensure that strategic initiatives to ensure that we remain globally competitive. Our are in place to build a lasting and globally-competitive entrepreneurial spirit, coupled with our passion for organization. excellence and continuous learning, will be our key ingredients to success as we brave new horizons.

2010 Annual Report PROPERTY Breaker

PROPERTY

Setting the standard of quality

First Philippine Holdings 57

ROCKWELL LAND CORPORATION (ROCKWELL LAND) landscape, is now in full swing of construction for its first Rockwell Land formally launched in early 2010 the two towers. Superstructure works started in July 2010 and latest addition to its Rockwell Center community, the is expected to be completed by July 2012. With Towers A Edades Tower and Garden Villas. This iconic 50-storey and B almost fully sold, selling efforts are now focused on residential condominium project offered another first to the third and fourth tower. The project continues to attract the market—the Garden Villas, an exclusive landscaped more clients who want to make The Grove their home. cluster of premier loft apartments that complement the contemporary architecture of the main residential tower. The Rockwell Business Center (RBC), the company’s joint- Market reception has been very positive, resulting in a more venture office project in Ortigas, currently houses more than 50% sales take-up as of December 2010. Substructure than a dozen corporate offices and is now down to the last works started in August, and construction is already at the few floors for lease. More people have also discovered its basement 1 level as of end-2010. retail experience, now adding more food and beverage and services selections to the area. Year 2010 marked another milestone with the start of handover of its 7th residential project in Rockwell The Power Plant Mall also performed very well in 2010. Center, The Number One Rockwell. The Rockwell Center New stores such as Muji, Payless Shoesource, Chili’s, community welcomed the first unit owners who took Fred Perry, and The Spa added new choices to the delivery of the 817-unit East Tower in November. The 460- mall’s discriminating clientele. Renovated facilities such unit West Tower will start delivery in October 2011. as the restrooms and the car park area, as well as the introduction of two new 3D cinemas also enhanced The Grove, Rockwell Land’s first residential development the mall experience. These factors drove tenant sales project outside Makati which is changing the C5 area performance to new levels across categories.

Both revenue from condominium projects as well as recurring income from the Power Plant Mall experienced double-digit growth rates.

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Revenues for 2010 reached P4.9 billion, a 23% increase on the previous year’s. Both revenue from condominium projects as well as recurring income from the Power Plant Mall experienced double-digit growth rates. This resulted in a record high net income after tax of P801.3 million, representing a 26% year-on-year growth. Financial condition remains sound with a current ratio of 1.6x and a net debt to equity ratio of 0.4x.

This places Rockwell Land in a very good position to launch new projects in key locations in Metro Manila in the medium term. Be it a big community project or a small, quick turn-around project, these projects will carry that standard of quality that Rockwell Land is known for.

First Philippine Industrial Park, InC. (FPIP) First Philippine Industrial Park, Inc. (FPIP) generated revenues of P873.4 million in 2010 versus P1.2 billion in place. The record sales in land hectares sold were the 2009. FPIP’s revenue performance resulted in a 2010 net fruit of a sustained effort leveraging the backing of its income of P312.3 million compared to P726.5 million shareholders, as well as maintaining strong relationships the previous year. It was the second consecutive year of with both prospect and current customers. In its continuing unprecedented performance in the history of the company. drive to balance the cyclical land business with steady The recorded revenues were the second highest ever, while revenues, FPIP’s ready-built factory (RBF) leasing and water land hectares sold was the highest. business also posted record revenues. RBF leases increased with the expansion of current locators as well as the entry The global economy’s rebound from the economic crisis of new ones. The water business largely benefited from the two years before resulted in the expansion of many global steep increase in production from key customers in the companies especially those in the technology sectors high technology sector. specifically, information technology consumer products and renewable energy. The expansion of both prospective FPIP remains steadfast in making the Park the location of and existing locators spurred countries in Asia, specifically choice for business. Park development continued with directly competing nations like the Philippines and the construction of new RBFs with a total area of 12,000 Vietnam, to more vigorously attract customers. square meters. These facilities were practically leased out even before their completion. Water systems and capacity FPIP rode on the wave of global economic recovery and development continued with the construction of new wells quickly took advantage of opportunities in the market and pump stations.

First Philippine Holdings 59

These expansions are based on a world-class system FPIP achieved record performance in 2009 and 2010, and that ensures companies of a worry-free environment for looks forward to sustaining with strategic priorities set in their business. Thus, FPIP has maintained its excellent the expansion of landholdings, continued construction of quality standards for landscaping, security, maintenance, new Park infrastructure (RBFs, serviced apartments, and environment protection and overall Park management. water systems), and the development of new businesses These systems are anchored on the company’s world-class and Park features. International Standards Organization (ISO) certifications for quality management (ISO 9001), environment FPIP’s performance and expansion plans are part of its drive management (ISO 14001) and occupational health and to be a partner in economic development. Its community safety (OHSAS 18001). FPIP is also a lean and highly relation activities benefit its host communities through productive organization with people management ongoing programs in education, health, livelihood and practices that are Investors in People (IiP) standard certified. employment, and peace and order. FPIP is an advocate in This IiP certification remains unique in the Philippine its host communities, operating its business beyond just industrial property sector. It is part of the company’s pursuit profits, but more important contributing to nation-building. of retaining its status as an employer of choice.

Rockwell Land has consistently and successfully introduced several firsts to the market for the past 16 years—the country’s first master-planned community, new offerings to the market such as the Loft, Z-Loft, Garden Villas, and introduction of the real business class in office space. As we now face an extremely competitive industry, we constantly challenge and push ourselves to raise the bar in innovation and luxury, in order to be the preferred provider of high-end residential and commercial spaces.

Nestor J. Padilla President, ROCKWELL LAND

FPIP’s record success the past two years has allowed the company to firmly establish the Park as the preferred location for manufacturing investments. In the next couple of years, FPIP will accelerate its land banking activities, raise the inventory of ready-built factory clusters, and further expand its water generation capacity with more deep wells, pump stations, and even the construction of an overflow weir. With increasing employment and construction inside the Park, new amenities will include a premium class hotel and an expanded commercial center. FPIP takes on these new challenges anchored on strong fundamentals in quality systems and processes, and excellent people management practices. Exciting times are ahead for FPIP as we further Hector Y. Dimacali stabilize our core businesses and enhance the Park as we break new horizons. president, FPIP

2010 Annual Report OTHER BUSINESSES

PROPERTY INFRASTRUCTUREBreaker AND OTHERS

Continuing to transform and seek new opportunities

First Philippine Holdings FIRST BALFOUR, INC. (FIRST BALFOUR) In the energy market sector, First Balfour was also busy with 61 First Balfour turned in revenues of P934.0 million and a net a number of rehabilitation and capacity upgrade projects. income of P25.8 million for 2010. As major projects were It continued to work on the rehabilitation of the SN-Aboitiz winding down, revenues and profits were significantly Ambuklao hydropower project and Energy Development lower than the previous year. Nevertheless, the past Corporation’s (EDC) Bacman I and II geothermal power year allowed the company to prepare and position for plants. The company also continued to work on a number sustainable growth on a higher trajectory for the next five of geothermal pipeline projects in the Leyte, Southern years. Negros, and Bacman steam fields of EDC.

The foremost project completed for the year was the LRT In 2010, First Balfour began business development work on Line 1 North Extension project (in joint venture with DMCI), two property development ventures, both focusing on the with the operation of the Balintawak Station in March and affordable housing market segment: the Roosevelt Station in October.

Orders generated for 2010 reached P2.1 billion bringing the order book to more than double the previous year. Major orders came from prominent clients, as follows: • The Cambria is an 876-unit townhouse type For the high-value manufacturing building sector, First development located in Bay, Laguna. This 7.6-hectare Balfour bid and won two notable projects for the year: the former steel fabrication facility is being jointly Texas Instruments (TI) Clark expansion of its Bump wafer developed with the AGC Group of the Tanchi family. By fabrication facility and the Nestlé Philippines Frontier project middle 2011, the Cambria townhouses will be selling in Tanauan, Batangas. The TI Clark project, valued at about for under P1 million targeting the Los Baños, Bay, P318 million, is the first in a series of expansion projects Calauan, and Sta. Cruz market areas. the semiconductor company is implementing. The Nestlé Frontier project, already valued at about P900 million, is on a • The Prima Residences is an inner city affordable 27-hectare property and is the initial phase planned to build residential condominium project centrally located out over the next five years. along Quezon Avenue, in front of the Sto. Domingo Church. The first of three buildings, to be called the In the water infrastructure market, the company was Brisé, will be a 12-storey 341-unit building. With the awarded the construction of the new San Juan 111 ML target to break ground and start selling by the middle (million liters) water reservoir for Manila Water. This P490 of 2011, the studio units are priced at about P1.1 million structure will be the largest water reservoir in the million, aiming to cater to start-up families, yuppies, Metro Manila water system upon completion. students, and overseas workers. This P4 billion project will be constructed in phases over the next four years.

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With the objective of providing well drilling services to EDC, orders and revenues in areas where it exerts strong and First Balfour set up and registered ThermaPrime Well Drilling competitive market presence: power and energy projects Services, Inc. with the Securities and Exchange Commission (conventional and renewable); high-value buildings, with in late 2010. The new company is aiming to sign a two- increasing interest in projects that recognize global and year service agreement with EDC by the first quarter of local sustainable and environmental standards such as 2011. This venture, with aspirations of growing into an LEED (Leadership in Energy and Environmental Design) established globally competitive geothermal well-drilling and BERDE (Building for Ecologically Responsive Design service contractor over the next two years, is expected to Excellence); and water infrastructure projects. deliver stable streams of revenue and profit starting 2011. First Balfour will continue to invest considerable efforts in developing sustainable growth over the next five years. Other than the property development ventures and ThermaPrime, which both aim to provide a steady stream of revenue and margin for the coming years, the company is closely monitoring prospects on the government’s Business Excellence Initiatives Public-Private-Partnership (PPP) infrastructure program. First Balfour is on its 9th straight year of ISO recertification First Balfour will be looking at these PPP prospects as in Environmental Management System with ISO opportunities for significant construction business 14001:2009, Quality Management System with ISO revenues and even potential operations and maintenance 9001:2008, and Occupational Safety and Health System service contracts. with OHSAS 18001:2007. In March 2010, the company received its Investors in People (IiP) certification, the first FIRST PHILIPPINE INDUSTRIAL CORPORATION (FPIC) in the Philippine construction industry to be recognized In October 2010, Batangas-Pandacan pipeline operation for this human resource-based quality management of First Philippine Industrial Corporation (FPIC) was shut system. down on orders of the Makati City government after the latter suspected that the pipeline was found to be the source of petroleum seepage detected in a certain condominium located in Barangay Bangkal, Makati City. In November 2010, the Supreme Court (SC) issued a Writ of Kalikasan with Temporary Environmental Protection Order, ordering the company to immediately cease and With a strong order book to start the year and a solid desist from operating its pipeline until further orders list of major prospects under consideration, First Balfour from the court, to check the structural integrity of the is optimistic on the performance of its construction whole span of the 117-kilometer pipeline, and in the business for 2011. The company expects to generate its process to apply and implement sufficient measures to

First Balfour continues to transform itself and look for opportunities in new endeavors and new markets. We have developed a multi-pronged capability leveraged on its core competence as a technology packager and as a builder of large and complex infrastructures.

First Balfour continues to build on its base competence in high-value high-rise buildings, horizontal infrastructure and industrial plants. We are now involved in renewable energy projects, complex institutional buildings, mass rail transit systems, and the various PPP projects aggressively pursued by the government.

We continue to build global business relationships with competitive fit-for-purpose Dr. Fiorello R. Estuar and reliable technology suppliers for the proposed projects of the government and VICE CHAIRMAN AND CHIEF the private sector. We will also enhance our cooperation with affiliate companies EXECUTIVE OFFICER within the Lopez Group to provide them options for addressing their requirements first balfour for technology expertise for the engineering and project management requirements of their projects.

First Philippine Holdings Anthony M. Mabasa President FPIC and thermaprime FPIC’s difficulties in the past provide much impetus for it to brave new horizons to serve its stakeholders, especially the country which has benefited from the continuous operation of the pipeline for over 40 years. FPIC will continue to act responsibly, honor its commitments to society and aim for global excellence as it seeks to apply its expertise for the good of all.

prevent and avert any untoward incidents such as fire, remediation activities. An independent panel of health explosion or other destructive effects that may result experts from the University of the Philippines College of from any leak in the pipeline. Public Health Foundation reviews and provides input for the Human Health Risk Assessment activity. FPIC has been complying with these directives in coordination with various government agencies, such FPIC revenues for 2010 of P580.3 million is 12% lower than as the Makati City government and Barangay Bangkal the previous year. It incurred a loss of P45.6 million in 2010 officials, other local government units, the Bureau of Fire due to the expenses and provisions incurred or recognized Protection, the Department of Energy and its consultant related to the accidental petroleum seepage. Geoscience Foundation Inc.-University of the Philippines National Institute of Geological Sciences, the Department SECURITIES TRANSFER SERVICES, INC. (STSI) of Environment and Natural Resources, the Department For the year 2010, the company posted revenues of P11.1 of Health, and the Department of Public Works and million, lower by 22% compared to the previous year’s Highways. Operation of the pipeline cannot resume until P14.2 million. The decrease in revenues could be attributed after the Writ is lifted. to the softening of the equities market during the year, which led to a 42% year-on-year decline in transfer and FPIC has contracted the services of an international other fees to P4.5 million from P7.6 million. A decrease in engineering company, specializing in decommissioning, fees for printing services also contributed to the decline in decontamination and environmental engineering, to revenues. Net loss for the year increased to P18.0 million, undertake the remediation, engineering works and the with higher operating and other expenses. rehabilitation of the affected areas. The engineering and rehabilitation works are ongoing. STSI was re-certified to ISO 9001:2008 after an audit in September 2010. The company gained two new clients FPIC’s community relations team, which set up a liaison for 2010, namely, IP Converge Data and Lopez Holdings office in Bangkal, maintains full transparency through Corporation (Long-Term Commercial Papers). In addition, proactive communication, consultation, and participation a new back-end system, Stockholder Information System of local stakeholders (barangay council members, (SIS), was put in place. All issues except for Gotesco Land, barangay staff, barangay health workers, affected Inc. and Philtown Properties, Inc. have been completely residents, government agencies and other concerned migrated. groups) in the implementation of remediation activities including health concerns. An Inter-Agency Committee on By using this new system, STSI can now issue scripless Environmental Health (comprised of the Department of shares and integrate with the Electronic Direct Registry Health, Department of Environment and Natural Resources, System, the approval for which by the Securities and and Department of Energy) has been convened as a venue Exchange Commission was due in part to STSI’s continued for the review and evaluation of the implementation of efforts to implement the system, despite challenges from

2010 Annual Report 64

some stakeholders in the equities market. In connection ASIAN EYE INSTITUTE (Asian Eye) with the improvement of the back-end system, STSI Asian Eye achieved another set of milestones in its ninth has instructed its couriers to scan or digitize the proofs year of operation as an ambulatory clinic dedicated to of delivery, which can then be integrated in the SIS to eye care. In addition to serving over 70,000 patients since provide better customer service. 2001, it has continued to make its mark in the local and international ophthalmology communities through its STSI implemented a program of returning customer research and education efforts. property (i.e., dividend checks and stock certificates) to reduce operational risks. Cash dividend checks of Alaska 2010 was a banner year for clinical research, which allowed Milk Corporation, First Philippine Holdings Corporation, Asian Eye to educate itself on alternative treatment options ABS-CBN Corporation, and Manila Electric Company ahead of its commercial availability, and to equip itself in (Meralco) and stock certificates of Uniwide Holdings, Inc. tailoring solutions to many complex eye problems. These have already been returned. STSI is currently working studies were either internally funded or sponsored by on returning Meralco’s stock certificates (covering both industry partners. dividends and Employee Stock Option Plan). In addition, various records have been transferred to offsite storage Research studies form the basis of scientific papers to free up expensive storage space occupied in Benpres presented by Asian Eye doctors, contributing to the Building. Hotsite options are being evaluated to ensure body of knowledge of ophthalmology. In 2010, papers business continuity. by Dr. Harvey S. Uy, Uveitis and Retina Specialist, and the Cornea and Refractive Surgery team led by Dr. Robert STSI assisted Knowledge Channel with their KaRUNungan T. Ang, received awards from the American Academy 2010 Fun Run. of Ophthalmology and the Philippine Academy of Ophthalmology, respectively.

Ernesto B. Rufino, jr. President STSI

STSI is continuously reviewing and streamlining its processes and procedures to ensure consistency with actual practices. STSI is also adopting new practices for greater security for the shareholder, STSI, and the Issuer. An example of this is leveraging technology that will enable us to ensure delivery of documents to shareholders and track deliveries almost in real-time. This will enable us to reduce if not eliminate possible theft and fraud. The technology will also allow us to capture valuable data for analyses and further improvement. We are also looking at applying this technology for various transactions such as filling up of signature cards to allow for electronic capture and reducing the need for paper or hard copies, as well as easier on-line retrieval of information.

First Philippine Holdings 65

Asian Eye expanded its clinic to support its growing patient base, and now occupies the 8th to 10th floors of the PHINMA Plaza. The new clinic provides a better environment for patients, improves patient flow, and allocates areas for patient education. Asian Eye also expanded its pediatric service to include Pediatric Optometry, Vision Training, and Orthoptics to help screen children for vision disabilities and Benjamin K. correct these through therapy and training. Liboro President Asian Eye launched a new logo to reinforce and distinguish ASIAN EYE the brand of eye care it is known for. The new logo, As Asian Eye marks its tenth year in 2011, we reflect on reminiscent of the yin yang symbol for balance and our unique contributions to eye care in the Philippines harmony, represents a renewed commitment to deliver in the last decade: our pioneering spirit to find better excellent eye care that blends the art of caring, the human ways to heal patients, and our adherence to the touch, with the solid science of advanced and innovative founders’ vision of a center of excellence. It has always treatment strategies. been our passion to give hope of better vision and quality of life to our patients, and to be an instrument Asian Eye’s Quality, Environment, Safety and Health System of positive change in their lives. It is this passion that was re-certified to the ISO 9001:2008, 14001:2004, and will continue to drive us to bring in the latest treatment OHSAS 18001:2007 standards in June. technology, to contribute to the body of knowledge in eye care through research and education, and to These accomplishments demonstrate Asian Eye’s sustained achieve international standards for patient safety and efforts to be at the forefront of eye care for the benefit of its outcomes. patients and stakeholders.

2010 Annual Report 66 Corporate Directory

INVESTOR RELATIONS First Philippine Holdings Corporation 4th Floor Benpres Building Exchange Road corner Meralco Avenue Ortigas Center, Pasig City, 1605 Philippines Tel. No. (632) 631-8024 Fax No. (632) 631-4089 Website: www.fphc.com Email: [email protected]

LEGAL COUNSEL Quiason, Makalintal, Barot, Torres, Ibarra & Sison Law Firm 21st Floor Robinsons Equitable-PCI Tower ADB Avenue corner Poveda Road Ortigas Center, Pasig City, Philippines Tel. Nos. (632) 631-0981 to 85 Fax No. (632) 631-3847

Puno & Puno Law Offices 12th Floor East Tower Philippine Stock Exchange Center Exchange Road, Pasig City, Philippines Tel. Nos. (632) 631-1261 to 64 Fax No. (632) 631-2517

EXTERNAL AUDITOR Sycip, Gorres, Velayo & Co. 6760 Ayala Avenue Makati City, Philippines Tel. No. (632) 891-0307 Fax No. (632) 819-0872

STOCKHOLDER SERVICES AND ASSISTANCE Securities Transfer Services, Inc. Mr. Antonio R. Galvez General Manager Ground Floor Benpres Building Exchange Road corner Meralco Avenue Ortigas Center, Pasig City, 1605 Philippines P.O. Box 13951 Tel. Nos. (632) 490-0060 local 101 or 631-7152

CORPORATE OFFICE First Philippine Holdings Corporation 4th Floor Benpres Building Exchange Road corner Meralco Avenue Ortigas Center, Pasig City, 1605 Philippines Tel. No. (632) 631-8024 Fax No. (632) 631-4089 Website: www.fphc.com Email: [email protected]

Schedule of Annual Stockholders’ Meeting - Every Last Monday of May

First Philippine Holdings The Lopez Credo

We, as employees of the Lopez Group of companies, believe that our primary reason for being is to serve the Filipino people.

Thus, we shall always conduct ourselves in a manner that is mindful of the long-term mutual benefit of the Lopez Group, and the various publics we serve.

We will be responsible stewards of all our resources, and conscious of our obligation to present and future generations.

Since 1928, and in the years and generations to follow, our commitment to the distinctive Lopez values will not change as we remain committed to serve our stakeholders.

The Lopez Values In our service to the Filipino people, we will be guided by the following distinct Lopez values: - A pioneering entrepreneurial spirit - Business Excellence - Unity - Nationalism - Social Justice - Integrity - Concern for employee welfare and wellness

We know from generations of experience that it is by living according to these values that a company can be built to last.

Concept + Design by k2 Interactive (Asia) Inc. Cover Photography Compliments of Mr. Art Valdez, Sato Raypon and the Balangay Team Portraitures by Erik Liongoren Operational photos courtesy of First Gen, EDC, Meralco, First Philec, Rockwell Land, First Philippine Industrial Park, First Balfour, STSI, and Asian Eye