SEC Number AS093-04369 TIN Number 002-825-058

BENPRES HOLDINGS CORPORATION

4th Floor, Benpres Building Exchange Road cor. Meralco Ave. Pasig City, Metro Manila

910 3040 (Telephone Number)

December 31 (Fiscal Year Ending)

FORM 17-A Annual Report (Form Type)

December 31, 2002

SECURITIES AND EXCHANGE COMMSSION

SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141 OF CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended December 31, 2002

2. SEC Identification No. AS 093004369 3. BIR Tax Identification No. 002-825-058

4. Exact name of the registrant as specified in its charter BENPRES HOLDINGS CORPORATION

5. Philippines 6. ______(SEC use only) Province, Country or other jurisdiction of Industry Classification code: Incorporation or organization

7. 4/F Benpres Building, Meralco Ave. corner Exchange Road, Pasig City, 1600 . Address of principal office Postal code

8. (632) 631-3111 Registrant’s telephone number, including area code

9. Not applicable Former name, former address, and former fiscal year, if changed since last year

10. Securities registered pursuant to Sections 8 and 12 of the SRC, OR Sec. 4 and 8 of the RSA

Title of Each Class Number of Shares of Common Stock Outstanding and Amount of Debt Outstanding Parent Consolidated

Common Stock 4,581,544,408 shares Long-term Commercial Papers P2,000,000,000 P3,000,000,000

11. Are any or all of these securities listed on the Philippine Stock Exchange?

Yes [x] No [ ]

12. Check whether the registrant:

a) has filed all reports to be filed by Section 17 of the SRC and SRC 17 thereunder or Section 11 of the RSA Rule 11(a)-1 thereunder and Sections 26 and 141 of the Corporation Code of the Philippines during the preceding 12 months (or for such shorter period that the registrant was required to file such reports): Yes [x] No [ ]

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

13. State the aggregate market value of the voting stock held by non-affiliates of the registrant: P1,420,278,766 (as of December 31, 2002)

(Note: Item No. 14 and 15 in the Form is not applicable) PART I – BUSINESS AND GENERAL INFORMATION

Business

The Company

Benpres Holdings Corporation (Benpres) was incorporated in 1993 by the Lopez family to serve as the holding company for investments in four major sectors: broadcasting and cable; telecommunications; power generation and distribution; and banking. It has since sold its interest in banking and added to its portfolio investments in other basic service sectors such as infrastructure, property development, information technology and health care delivery.

COMMUNICATIONS

Content

In 2002, ABS-CBN Broadcasting Corporation (ABS-CBN) faced the trials of a continuing economic slowdown and a more competitive business environment. It emerged a transformed organization, better prepared to face the future’s many changes and challenges.

2002 began with a global slowdown in advertising spending, an aftermath of the World Trade Center tragedy, that lingered until the first half of the year. It also saw ABS-CBN coping with the leading competitor’s copycat strategy to gain market share that forced the Company to compete in new and more innovative ways, but at the price of driving up costs.

This combination put pressure on ABS-CBN’s operating margins. Faced with such a demanding environment in 2002, ABS-CBN chose to (a) focus on its core operations, (b) strengthen its balance sheet, and (c) increase its free cash flow. By yearend, ABS-CBN had successfully managed to accomplish all three objectives and had become a leaner, stronger, and more resilient organization.

Consolidated gross revenues from airtime and other broadcasting-related revenues reached PhP9,914 million in 2002, relatively flat compared to the PhP9,923 million achieved in the prior year but showing strong recovery, given the weakness at the start of the year.

Net sales and services posted a 37% growth to PhP2,825 million from PhP2,056 million in 2001 primarily due to the strong revenue growth of most of the subsidiaries.

Consolidated cash operating expenses (opex), which consists of production costs, cost of sales and services, and general and administrative expenses, grew 17% to PhP7,173 million. Parent company cash operating expenses grew at a slightly slower pace at 12% to PhP5,633 million.

Net income for 2002 reached PhP166 million, compared to PhP1,378 million in the prior year. Excluding the impact of losses from discontinued operations, net income for 2002 would have amounted to PhP438 million, down 68% from the prior year.

Again excluding losses from discontinued operations, consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) would have amounted to PhP3,642 million, reflecting a more moderate decline of 15% from PhP4,267 million in 2001. Parent company operations accounted for PhP3,031 million of this amount, while the subsidiaries generated the balance of PhP610 million.

Cable

Beyond Cable Holdings, Inc. submitted a debt restructuring proposal to bank creditors in December 2002. The proposal asked for an additional two-year grace period, payment rescheduling, and reduction on interest rates. From then on, Beyond Cable has been in dialogue with the different creditor banks to explain further the business plan and to accelerate the approval of its debt restructuring proposal.

Meantime, operations continue consolidation and cost saving efforts to improve cash flow and overall financial viability of the business.

Key initiatives include: 1. Reduction of programming costs by streamlining channels between SKY and Home/Sun brands, renegotiating contracts to leverage on larger economies of scale, and moving from flat rates fees to cost per subscriber (CPS) fees; 2. 22% reduction of manpower (from 2,165 in April 2001) through voluntary retirement, retrenchment and closure of offices and departments; 3. Office co-location and other overhead cost savings measures; and 4. Improvement on overall collections through cleansing efforts on delinquent (60+ days) subscribers

Initially, the PhP100 price increase implemented in October 2001 for Home Cable and January 2002 for SKYCable and Sun Cable resulted in reductions in subscriber base. However, the return of the Star channels in April 2002, and the subsequent pull-out of the Star channels from key competitor Destiny Cable in October 2002 coupled with aggressive promotional offers, halted subscriber attrition and enabled Beyond Cable to maintain its 70+% market leadership. Net subscriber numbers have been positive since then, resulting in more than 200,000 subscribers (net of 90 days) as of end-2002.

Beyond Cable has also initiated discussions with its shareholders for additional equity infusion to fund the debt restructuring and to provide working capital.

Telecom

Bayan Telecommunications Inc. (BayanTel) ended 2002 with net revenues of PhP4.9 billion, or 4.0% below the PhP5.1 billion for 2001, mainly because of local exchange subscriber losses through most of the year.

The company was nonetheless able to implement sweeping reforms in its organization and operations based on a new set of core values and its overall strategy of “data for growth, voice for cash”, leading to a clear turnaround starting the end of the third quarter.

Local exchange carrier (LEC) revenues for the whole year contracted by 9.8% to PhP1.8 billion from PhP2.0 billion in 2001 due to a year-on-year decline in the subscriber base. During the fourth quarter of 2002, however, the downward trend in subscribed lines over the preceding months was reversed, as total subscriber count posted a 4% quarter-to-quarter growth. In addition, LEC revenues showed a slight uptick of 0.9%, or from PhP423.0 million in the third quarter to PhP427.0 million in the fourth quarter.

Among the programs implemented to stem the declining subscriber base were the launching of “Bayan 399” and “Bayan Business Deals”, the affordable fixed-rate basic local exchange service programs for residential and business markets respectively, and the “24-hour Quick Repair Guarantee” program which bound the company to respond to service-related problems within one day of receiving the customer’s complaint.

Data revenues, on the other hand, rose by 15.4% to PhP1.4 billion in 2002 from PhP1.2 billion in 2001. The growth was a result of: a) 13.6% rise in domestic and international leased line net revenues from PhP1.0 billion in 2001 to PhP1.2 billion in 2002, due to the reduction in outpayment for leased facility charges; b) improvement in customer take-up for the frame relay services translating into a 30.1% increase in revenue to PhP183.4 million; and c) launching and expansion of coverage of DSL (Digital Subscriber Line) services leading to an 8.2% rise in Internet revenues.

For the full year of 2002, Bayantel registered a significant expansion in the number of installed data and IP circuits. Year-on-year, installed data access circuits rose by 120.5%, from 16,192 in 2001 to 25,699 in 2002, while data IP circuits expanded by 433.3% to 3,829 during the same period.

The company’s international long distance (ILD) business posted a 7.8% year-on-year increase in call volumes, from 285 million minutes in 2001 to 307.2 minutes in 2002. Nonetheless, full year ILD revenues declined 17.4% to P=763.5 million from P=923.8 million in 2001. This was a result of the continuous decline in ILD rates. Revenue per minute fell by 23.3% year-on-year to PhP2.5 from PhP3.2 in 2001.

Domestic long distance (DLD) revenue decreased 15.7% year-on-year to PhP730.8 million from PhP867.0 million the previous year. This resulted from a) lower LEC subscriber levels in 2002 compared to the previous year; and b) a 37.5% reduction in DLD call volume from 360.1 million minutes in 2001 to 225.0 minutes in 2002, in part caused by a shift in long distance calling behavior to mobile phone usage.

Cost containment strategies also played an important role as these brought down operating expenses by 12.1%. General and administrative expenses contracted by 11.9% to PhP2.5 billion from PhP2.8 billion in 2001. The reduction was a result of: (a) the “own phone” option given to subscribers which helped reduce telephone installation costs and expenses by 36.0% year-on-year to PhP72.5 million; (b) a 20.0% drop in professional and other service fees due to lower debt restructuring expenses and consultancy fees; and (c) a 7.0% decline in occupancy and utilities expenses.

Lower operating expenses and provisions for doubtful accounts overcame revenue declines in order to increase EBITDA by 18.4% year-on-year to PhP2.1 billion for 2002.

BayanTel’s net loss increased slightly or by 0.3% year-on-year to PhP5.4 billion from PhP5.3 billion the year before.

Bayantel continues to accrue interest based on contractual rates, although it is optimistic that a favorable conclusion to negotiations for its debt restructuring program may be reached within 2003.

POWER

Power Generation

2002 marked the first full year of operations for all of First Gen’s power generation assets, contributing approximately 90% of First Philippine Holdings Corporation’s (FPHC’s) dividend income. FPHC currently owns 88.4% of First Gen, the company’s main vehicle for its power generation projects. Two financial investors, AIDEC FG, a wholly-owned subsidiary of Asian Infrastructure Development Co., and Sumitomo Corporation, one of the largest Japanese conglomerates, own the remaining 7.8% and 3.8% stake, respectively.

First Gen is still the third largest independent power producer in the Philippines, with approximately 1,800 megawatts (MW) of power generation projects, representing an estimated 12% of the total installed generating capacity in the country. First Gen’s portfolio of assets consists of four operating power plants: (i) the 1,000 MW gas-fired Santa Rita Power Plant (60% stake in First Gas Holdings Corporation), (ii) the 500 MW gas-fired San Lorenzo power plant (100% stake in Unified Holdings Corporation which owns 60% of FGP Corp.), (iii) the 225 MW diesel-fired Bauang Power Plant (37.3% stake in First Private Power Corporation) and (iv) the 72 MW diesel-fired Panay Power Plant (50% stake in Panay Power Corporation and an 8% indirect stake through First Private Power Corporation’s 20% stake in PPC).

First Gen also owns 100% of First Philippine Energy Corporation, which focuses on the renewable energy business. First Gen posted revenues of PhP5.7 billion, up 68% from 2001’s PhP3.4 billion. Santa Rita, in its second year of operation, contributed the largest earnings (PhP4.5 Billion), while Panay Power Corporation showed the highest growth (8%).

First Gen is aiming to be a world-class Filipino energy company. Its long-term goal is to become a power generation conglomerate as it has both power generation expertise and width of service areas. The company is primed to take on more stimulating prospects in the industry.

Power Distribution

Meralco’s electric capital projects in 2002 focused on the construction of new and upgrading/expansion of existing subtransmission, substation and distribution facilities with the objective of minimizing electric system disturbances and enhancing system efficiency.

Among major projects completed were subtransmission line projects in Marikina, Tutuban and south Metro Manila; new substations developed in Mandaluyong and Caloocan; existing substations expanded in Sta. Maria, Duhat, Los Baños, Rockwell and Kaybiga; uprating/replacement of power transformers in Tiaong and Malinta; installation of substation capacitor banks in Sta. Mesa and Malibay; and other distribution undertakings in Parañaque and Sta. Rosa, Laguna.

INFRASTRUCTURE

Tollways

As 2002 drew to a close, the fate of the Manila North Tollways Corporation (MNTC) hung in the balance due to creditor and shareholder shakeup.

The year in review was dominated by efforts to comply with 250-plus Conditions Precedent (CP) laid out by the consortium of foreign lenders following the financial closing in Hongkong on July 7, 2001 for US$253.5 million. Shareholder equity is US$117.5 million.

Foremost was Right-of-Way acquisition of land for new interchanges, flyovers, overpasses, toll barriers and operations and maintenance field offices. Government opinions, including one which declared the North Luzon Tollway Project as "not onerous", took much of the concerted effort to bring the Project to where it is today.

Will it be a go for Year 2003?

The answer came at the close of the year as fresh hopes carried MNTC through to an initial draw from the 12-year term loan on February 7, 2003, ending a gestation period of nearly seven years.

On February 11, 2003, the Government through the Toll Regulatory Board issued a Construction Notice to Proceed (CNTP) to MNTC.

The following day, MNTC broke ground with chairman Oscar M. Lopez leading the ceremonies at the site of the proposed new interchange in Mexico, Pampanga.

On the same day, civil works contractor Leighton Contractors Asia Ltd. began work on the North Luzon Tollway Project, a private sector undertaking led by MNTC in partnership with current toll road operator Philippine National Construction Corporation, Egis Projects S. A. (France) and Leighton Asia Ltd. (Australia).

Water Distribution

The Maynilad Investment Program has undergone major revisions in the span of five years. In 1998, Maynilad rolled out Business Program designed to attain the Service Targets specified in the Concession Agreement. Vital to the 1998 program was the technical assumptions in the 1997 bid, including the completion of the 300 MLD (million liters per day) BOT (build-operate-transfer) Project which would source raw water from Laguna de Bay.

Shaping the Investment Program of MWSI was the Concession Fee projects that Maynilad subsequently inherited from the Metropolitan Waterworks and Sewerage System (MWSS). These projects are water and sewerage infrastructures funded with multilateral loans. At the time of privatization, these projects are either ongoing, for completion or approved for implementation.

Despite the prolonged effects of the Asian Financial Crisis and the increasing pressure to service the dollar- denominated Concession Fees, Maynilad prepared a Water Master Plan in 1999 still designed to meet the Service Targets. When it became evident later that vital assumptions in the Technical Bid outside the control of Maynilad would not materialize, the company presented a new Business Plan to the government in 2001 as part of an agreement with MWSS to address urgent concerns and to ensure the viability and continued operation of the concession. The plan called for the payment of the past Concession Fees upon closure of the $350 Million Project Financing, resumption of capital expenditures program and revision of the Service Targets.

While the Business Plan underwent reviews by the MWSS Regulatory Office and its consultants, capital expenditures were kept within manageable levels, while maturing Concession Fees were paid depending on Maynilad cash flow pending restructuring proposal with the MWSS. Hence, Maynilad has invested PhP4,935 million and PhP3,538 million in infrastructure funded through Concession Fee and capital expenditures (capex), respectively, from 1997 to 2002. In terms of actual project costs, a total of PhP6,538 million has been paid out of a total contract price of PhP7,727 million for Concession Fee Projects, while a total of PhP1,559 million has been paid in the form of capital expenditures out of a total contract price of PhP2,621 million. For calendar year 2002, total accomplishment is estimated at 60% or PhP112.66 million while PhP76.82 million or about 41% have been disbursed out of a total contract amount of PhP188.47 million.

The Concession Fee Projects implemented by Maynilad by yearend-2002 translate to a total installation of 32,077 house service connection (HSC) stubouts and 491,025 LM (linear meter) of pipes, representing 74.81% and 80% of targets, respectively. Meanwhile, capex projects carried out translate to a total installation of 97,337 HSC stubouts and 331,179 LM of pipes, representing 64.73% and 61.94% of targets, respectively.

OTHER INVESTMENTS

Property Development

Rockwell’s consolidated gross revenues decreased 48% to PhP1.03 billion. Despite the reduced margin in residential sales, lower interest rates and effective implementation of cost containment measures led to a lower net loss of PhP378 million, 53% better than the 2001 loss of PhP791 million.

Mall occupancy was strong at 98% with 260 stores open in 2002 and generating PhP400 million in rental revenues, 46% higher than in 2001. Approximately seven million people visited the mall, up by 21% despite the increase in retail supply focusing on the same market during the second half of the year. Traffic and sales turnover of restaurants along Lopez Drive, where Rockwell started the al fresco street dining experience concept, were visibly affected by more competition.

The six-theater cinema, 26-lane bowling center and Play Underground continued to provide family entertainment contributing combined gross revenues of PhP180 million.

The opening to the public of the EDSA ramp in April 2002 improved access to Rockwell Center from the south with an average daily vehicle traffic of 5,000 cars.

The 620-unit The Manansala, a project designed to respond to the demand for smaller studio to two- bedroom units, broke ground in May 2002, with 67% market uptake by yearend valued at PhP2.5 billion.

Construction is on schedule with Sumitomo Construction Company expecting to complete the sub-structure by February 2003. Target completion and delivery is December 2005.

The next residential project, The Manansala II is now in the design concept stage and is expected to be launched simultaneously in the US and local market by the third quarter of 2003.

In the last two years, Rockwell made considerable headway in strengthening its balance sheet, supported by Powerplant Mall EBITDA, strong market uptake of The Manansala and lower interest rates. Rockwell restructured all maturing short-term debt for another three years to ease cash flow pressure from principal repayment. The stretched cash flow was due to lower residential sales and limited flexibility to raise capital either through asset divestment or land sales.

Rockwell’s performance in 2003 hinges on a more stable political and economic environment, its mid-market niche given the volatility in the property sector, the pricing and acceptability of the Manansala I and II residential projects to local and US-based Filipinos, and continuing consumer patronage of the Powerplant Mall. eLopez

Corporate Information Solutions (CIS) kicked off the year with its sights on the international market - leveraging on the Filipino skills and CIS’ extensive experience gained over its 27 years as a pioneer in the Philippine information technology (IT) industry. CIS continued to offer its 3 service lines: eSolutions, eSourcing and eTransactions (better known as “ Bayad Center”).

Fully aware of the ever-challenging standards brought about by competing in the global market, CIS focused its efforts into further improving the quality of its service by embarking on the CMM (Capability Maturity Model) Certification Program. Currently assessed at CMM level 3, this achievement represents CIS’ adherence to the highest international quality standards, which are now an integral part of CIS’ business processes.

For CIS flagship Payment and Collection Service, (CIS Bayad Center), the year showed significant growth in revenue transactions, third party agents (TPAs) and merchants. Bayad Center posted a 22 % growth in revenue transactions which reached 18.3 million bills processed for the year. The Bayad Center enjoys an undisputed lead for over-the-counter multiple bills payment, and is steadily expanding in its geographic coverage.

CIS continued to make inroads in the area of managed services. Procter and Gamble’s (P&G) engagement with CIS covers management of the global Lotus/Domino infrastructure on 24/7 basis.

CIS Business Recovery Service remains as a reliable backup for several top banks in the country, as well as for Meralco. Another significant project is the Armed Forces of the Philippines Retirement and Benefits System (AFP-RSBS) which covers delivery of a totally integrated financial management system and its core savings and loans system covering the front end and back office operations. Project deliverables include custom development, implementation of Oracle Financials and supply of Sun servers.

In a strategic partnership with Information Builders Inc. (IBI), CIS was assigned as the sole authorized reseller of IBI products for Philippines and South Asia. For US operations, CIS bagged the Brookshire project which involved legacy integration using IBI tools. CIS also provides IBI with on-site staff augmentation in furthering the testing and maintenance of IBI’s own products.

Customer Contact Center, Inc. (C-Cubed) achieved several milestones in 2002, winning several local customers, in addition to the overseas customers serviced by the joint venture with Source One (US), Source One Communications Asia.

Seat capacity increased to 440 as of end-2002 from 250 as of end-2001 while number of seats increased to 392 from 90 in the same period.

C-Cubed received its ISO certification during the pre-audit stage, a testament to operational excellence and high service quality. It was also the sole operator invited to represent the call center industry in the presidential visit to Silicon Valley in October 2002.

Despite 11% unsubscribed shares, BayanMAP Corporation was able to self-sustain its operations and even expand its data and content business from Metro Manila to the entire Philippines.

It provided the retail industry’s first GIS (geographic information system)-based Digital Selling Tool (DST), a full enterprise and web-enabled system that elevated Procter & Gamble’s business into a new level of application. Showcased during the 2002 ESRI Philippine Conference, BayanMAP demonstrated GIS capability in a previously unfamiliar commerce.

Living up to its business commitments, BayanMAP signed contracts with Meralco and Maynilad, providing GIS services toward operation enhancement and corporate synergy.

Aside for being the first GIS company to be government-accredited under the e-commerce law, 3rd and 4th quarter spelled lucrative opportunities with government agencies such as the Commission on Elections, Metro Manila Development Authority and at least five LGUs (Local Government Units).

BayanMAP also got SI (Systems Integrator) accreditation from Autodesk International.

CORPORATE SOCIAL RESPONSIBILITY

ABS-CBN Foundation

“Public Service--doing well by doing good. It may sound incredible or worse still, just an ingenious public relations line, but I see it as the single compelling reason I still go to work each day," thus wrote the late Eugenio Lopez Jr., way back in 1997.

Such is life at ABS-CBN Foundation Inc. (AFI). While many people in society have become jaded with regard to helping those in need, everyday life at AFI is defined by public service. And while an economic crisis pummeled the Country in 2002, AFI dared to increase its efforts in being of service to its number one priority, the Filipino Child.

Bantay Bata 163 (BB163) is a recognized leader in the fight against child abuse. Its 24-hour hotline operation provides counseling as well as legal advice and support. The hotline service works hand-in-hand with BB163 rescue operations that work with police and local officials in taking into custody confirmed victims of child abuse.

BB163 also assists children from needy families who need medical help. BB163 addresses the need to inform and educate families, parents and educators by conducting community training on parenting. In 2002 alone, the hotline received and acted upon 23,379 cases. In the same year 111 children were rescued from abusive homes or schools; while 991 children were served by the BB163 medical unit.

Bantay Kalikasan (BK) is AFI's environmental arm. It envisions a responsibly protected and preserved Philippine environment where future generations of Filipinos can lead a life of better quality. BB163 and BK have launched a texting program to aid in the reporting of child abuse and smoke belching. Bantay Kalikasan's Text Usok project alone has received 99,661 valid text reports since it was launched last June 6, 2002.

BK's Save the La Mesa Watershed Project is a rehabilitation, development and protection project of a 2,700- hectare forest where 12 million Filipinos residing in Metro Manila get their water. The immediate objective is to reforest 250 hectares of denuded areas of the watershed each year or a total of some 1,200 hectares open areas over five years to ensure the sustainability of the water source of Metro Manila. About 117,700 seedlings were planted in 261.74 hectares in 2002.

E-Media, through its educational television (ETV) project seeks to enable Filipino children to reach their full potential. The shows (Epol/Apple, Hirayamanawari, Sines'kwela, Mathtinik and Pahina), broadcast daily on ABS-CBN channel 2, are aimed at elementary and high school children. E-Media last year provided 333 TV and VCRs sets to public elementary schools in 35 provinces. E-Media conducted 17 Teachers' Training for ETV utilization from schools in the following areas: the provinces of Laguna, Benguet, Isabela, Ifugao, Cagayan, Masbate, Iloilo, Apayao, Pampanga, Antique and Legaspi City (Albay Province), Cebu City, Antipolo City, for a total of 850 teachers trained.

The Bago 'Yan, Ah! radio show (broadcast over DZMM 630 KHz) envisions the Filipino as a science information-conscious person prepared for global competition. In 2002, Bago 'Yan, Ah! partnered with private, government and university organizations to bring to its listeners the "Radyo Eskuwela sa Pag-Aalaga ng Tilapia" and the "Titser's Iskul on the Air."

The ABS-CBN Foundation Volunteers (AFV) is a group of dedicated young men and women who brave typhoons, lahar flows, volcanic eruption, armed conflict and other dangers in response to the distress calls of displaced families of various disasters and calamities. In 2002, AFV conducted 52 relief operations, serving a total of 18,463 families. In continuance of its family-friendly corporate services, AFI launched the new ABS- CBN Children's Center as part of its mission to provide better pre-school and elementary education.

In media advocacy for the rights of the child, clean air, poverty alleviation, and education, AFI's strength emerged. AFI continues to take a wholistic approach in child development, while at the same time keeping touch with the child's position within society as a whole. Using all its resources, including the power of media, AFI hopes to serve children from different fronts. And by doing so, AFI hopes that it is coming closer to its vision--that of creating a better world for the Filipino Child.

Sky Foundation

In 2002, Sky Foundation, Inc. (SFI) remained focused on its goal to improve the quality of education by providing universal access to quality and relevant education through the creative use of audiovisual production and transmission technology.

It is committed to bringing quality education closer to the Filipino through the Knowledge Channel (KCh), the only all-educational TV channel on cable. SFI through educational television hopes to equalize the learning field by making quality educational video materials available to students in Philippine public schools.

SFI’s intervention in the educational system is a complete integrated package. It programs 18 hours of daily airtime exclusively for educational purposes on its flagship project, KCh; and provides public schools free access to the channel through cable or wireless technology.

To ensure its utilization, reference materials and training workshop-seminars are organized for public school administrators and teachers. Regular monitoring and evaluation mechanisms are also in place to ensure maximum usage of the channel by students and to assure effectiveness of the intervention.

For the year, SFI conducted eight teacher-training workshops with 656 participants and 27 principals’ orientation seminars with 1,968 participants. SFI distributed 4,896 program calendars.

SFI has established partnerships among key stakeholders in the government, academic and private sectors of society. Among its primary partners is the Department of Education (DepEd) which contributes to the monitoring and implementation aspects of the program by declaring KCh as mandatory viewing for elementary and secondary students in the public school system under a 10-year Memorandum of Agreement.

SFI has also forged partnerships with corporate organizations like Citibank NA, Caltex Philippines Inc., Proctor and Gamble Philippines, Wyeth Philippines, Coca-Cola Export Corporation, Nestle Philippines, Jollibee Foods Corporation, RFM Foods Corporation and others that manifest corporate social responsibility through the value placed on education.

Strategic alliances are also in place with Give2Asia as conduit for US-based donations and Philippine Center for NGO Certification for Donee Institution Status. Network organizations include the League of Corporate Foundations and Association of Foundations.

Competition Benpres is the only large publicly-listed conglomerate which focuses on utilities and basic infrastructure. Its operating companies are among the leaders in their respective industries, commonly ranking either first or second. Its water and toll road businesses are based on concession agreements and are virtual monopolies in their areas of operation.

Customers Benpres has a broad customer base for its core businesses in communications and utilities. Major customers for FPHC’s generation concerns are the National Power Corporation and Meralco. Rockwell caters to the high-end property market.

Sources and availability of raw materials and names of suppliers Not Applicable.

Employees Benpres had 23 full-time employees as of December 31, 2002. ABS-CBN had 4,781 employees and talents. Maynilad had 2,428 employees, Customer Contact Center had 523 and Bayanmap had 30.

Agreements of labor contracts, including duration ABS-CBN management recognizes two labor unions, one for the supervisory level and the other one for the rank and file. The collective bargaining agreement (CBA) for the supervisory union will expire on 1 August 2003 while the CBA with the non-supervisory union expires on 11 December 2002.

Patents, trademarks, licenses, franchises, concessions, royalty Republic Act No. 7966, approved on March 30, 1995 granted ABS-CBN the franchise to operate TV and radio broadcasting stations in the Philippines through microwave, satellite or whatever means including the use of new technologies in television and radio systems. ABS-CBN is required to secure from the NTC appropriate permits and licenses for its stations and any frequency in the TV or radio spectrum. The franchise is for a term of 25 years.

Working Capital As a holding company, Benpres is involved in project financing. It did not conduct any major fund-raising exercises.

Effect of Existing or Probable Government Regulations in the Business The Electricity Power Industry Reform Act of 2001 (EPIRA) was enacted. FPHC, First Gen and Meralco, which represent interests in power generation and distribution are expected to comply with the requirements of the law toward a deregulated industry.

Estimate of the amount spent for research and development activities (3 years) Not Applicable. The Company is not engaged in research and development-intensive business.

Costs and Effects of Compliance with Environmental Laws All operating businesses are compliant with or are in the process of complying with environmental laws. The costs of compliance with these laws are effectively taken into account in their existing cost structure of the respective businesses.

Properties

Benpres owns the third and fourth floors and the roof deck of the PCCI Corporate Center located in Makati City. The following operating companies also own properties: ABS-CBN (for head office and subsidiary offices in Quezon City, TV and/or radio originating stations in Bacolod City, Cebu City, Davao City, Dagupan City, Naga City, Legaspi City, Zamboanga and General Santos); BayanTel (for exchange offices and transmission nodes in Quezon City and Valenzuela, provincial units in Naga, Legaspi, Tacloban, Cebu and Butuan); FPHC (for Philippine Electric Corp. in Rizal, First Sumiden Realty in Laguna, First Philippine Industrial Corp. in Batangas and Panay Power Corp. in Iloilo City); Maynilad (for commercial and technical operations in Quezon City, Manila and Cavite); FPIDC (for quality control laboratory in Bataan); Rockwell Land (for development); and The Medical City (for hospital and medical service delivery in Mandaluyong).

Facilities owned by the operating companies are generally in good condition. There are certain limitations on ownership with regards to certain affiliates' properties i.e., under the terms of agreements covering the liabilities under trust receipts of BayanTel in 1998, certain properties and equipment used in operations have been released to BayanTel in trust for the banks. The trusteed property and equipment will be returned to the banks in case of non-payment of the liabilities at maturity date. The Medical City’s parcel of land is used to secure its long-term debt.

Please also refer to Notes 10 and 14 of the Consolidated Financial Statements attached and incorporated herein by reference.

Legal Proceedings

A civil suit for damages alleging violations of the U.S. federal securities law and New York state law was filed on December 19, 2002 by AIG Asian Infrastructure Fund (AIG), L.P. against Benpres, BayanTel, certain of their officers and directors and others with a U.S. federal trial court in New York City.

The complaint alleges that the defendants, including the placement agent in the sale of the convertible preferred shares of BayanTel, failed to disclose to AIG at the time it purchased such shares that certain institutional stockholders of BayanTel had a pre-existing put right to Benpres of their common shares in BayanTel.

AIG also filed a motion for summary judgment in lieu of a complaint with the New York state court against Benpres and BayanTel and guaranteed by Benpres.

ABS-CBN is party to various legal actions, including claims from separated employees for illegal dismissal and counter-claims for specific performance and damages. In the opinion of management, the ultimate liability, if any, resulting from these matters will not have a material effect on ABS-CBN’s consolidated financial position. The significance of these matters on ABS-CBN’s future operating results depend on ABS- CBN’s level of future earnings as well as the timing and the amount of the ultimate disposition of these matters above the amounts covered by insurance.

Commitments and Contingencies of the Company’s affiliates and subsidiaries are described in Note 23 of the Consolidated Financial Statements, attached and incorporated herein by reference.

Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II – OPERATIONAL AND FINANCIAL INFORMATION

Market for Registrant’s Common Equity and Related Stockholder Matters

Market Information

Benpres common stock principally trades on the Philippine Stock Exchange.

Stock Prices High Low 2002 First Quarter P0.96 P0.51 Second Quarter 0.81 0.35 Third Quarter 0.38 0.22 Fourth Quarter 0.24 0.0825 2001 First Quarter P3.45 P2.36 Second Quarter 2.30 1.30 Third Quarter 1.90 0.98 Fourth Quarter 1.06 0.45 2000 First Quarter P 8.70 P6.50 Second Quarter 7.20 3.70 Third Quarter 4.60 3.65 Fourth Quarter 3.70 2.40

Shareholder Information

The number of shareholders of record as of December 31, 2002 was 13,779. Common shares outstanding as of December 31, 2002 were 4,581,544,408.

Top 20 stockholders as of December 31, 2002:

Name Number of Shares Held % to Total

1. Lopez, Inc. 2,660,898,402 58.08 2. PCD Nominee Corporation (Filipino) 759,255,474 16.57 3. PCD Nominee Corporation (Foreign) 636,537,018 13.89 4. Narcisa Ngo 39,004,000 0.85 5. Teresita A. de la Cruz 33,995,000 0.74 6. MJL Agro Development Corporation 30,432,121 0.66 7. Manuel M. Lopez &/or Ma. Teresa Lopez 10,985,000 0.24 8. Home Development Mutual Fund (Pag-ibig) 10,853,950 0.24 9. Abacus Capital & Investment Corporation 10,500,000 0.23 10. Gilbert Martirez 10,100,000 0.22 11. First Phil. Holdings Corp. Retirement Plan 8,999,456 0.20 12. Oscar M. Lopez 8,597,182 0.19 13. Angel Tan 8,000,000 0.17 14. Siao Tick Chong 7,128,500 0.16 15. Manuel M. Lopez 7,089,114 0.15 16. Carlos Ching 7,000,000 0.15 17. Allan L. Montelibano 6,629,604 0.14 18. Andrew Ramon L. Montelibano 6,089,604 0.13 19. Lopez, Inc. 6,006,990 0.13 20. Sim Chi Tat &/or Conching Tan Sim 5,574,220 0.12

Dividend Information

The Company is authorized to pay dividends on the shares in cash, in additional shares, in kind, or in a combination of the foregoing. Dividends paid in cash are subject to approval by the Board and no stockholder approval is required. Dividends paid in the form of additional shares are subject to approval by the Board and holders of at least two-thirds of the outstanding capital stock of the Company. Holders of outstanding Shares on a dividend record date for such Shares will be entitled to the full dividend declared without regard to any subsequent transfer of such Shares.

There were no dividends declared for years 2002, 2001 and 2000.

There were no restrictions that limit the ability to pay dividends on common equity.

There were no sales of unregistered securities.

Management Discussion and Analysis of Results of Operations and Financial Condition

The following discussion should be read in conjunction with the Consolidated Financial Statements of the Company that is incorporated to this Annual Report by reference. Such Consolidated Financial Statements have been prepared in accordance with Philippine GAAP.

Results of Operations of Benpres Holdings Corporation (Benpres) and its Subsidiaries for the year ended December 31, 2002 compared with December 31, 2001

Benpres Benpres posted consolidated revenues of PhP2,019 million in 2002, registering 14% growth from the year- ago level of PhP1,778 million. Although the corporation did not post any gain on sale of investments in 2002, this was offset by stronger net earnings of investee companies, particularly First Philippine Holdings Corporation (FPHC) and ABS-CBN Broadcasting Corporation (ABS-CBN). Consolidated costs and expenses fell from PhP11,773 million in 2001 to PhP3,194 million in 2002 due to provision for estimated liabilities from guarantee and commitments amounting to PhP6,358 million which were recognized in 2001. The corporation’s net loss was likewise reduced to PhP1,064 million in 2002 from PhP9,993 million in 2001.

Subsidiaries In spite of head-to-head competition, ABS-CBN managed to maintain its lead over rival GMA-7. However, consolidated airtime and broadcasting revenues remained flat at PhP9,923 million as the advertising market remained soft in the first half of 2002 and the company stopped airing advertisements sponsored by the government. However, revenues from affiliated businesses grew in 2002, mainly due to the continuing expansion of ABS-CBN Global to foreign markets. However, intense competition domestically drove operating expenses 18% higher in 2002 as the company increased the amount of original programming instead of increasing its replay pattern as is customary in a weak advertising market. Depreciation and amortization expenses also increased with the full-year impact of new broadcast facilities at the Eugenio Lopez Jr. Communications Center. As a result, ABS-CBN’s net earnings fell 88% to PhP166 million. This figure is net of PhP272 million in non-recurring charges which the company recognized as it wrote off investments in subsidiaries that ceased operations in 2002. On September 2, 2002, ABS-CBN successfully converted a substantial majority of its short-term loans into a long-term secured facility maturing in 2007. Of the two creditors that did not participate in the term-out, one has since decided to join while a replacement funder is being sought for the other. ABS-CBN’s outstanding loans with these two creditors are equivalent to only 1% of its total assets.

FPHC’s 2002 consolidated net income amounted to PhP1,958 million, a 49% reduction versus the previous year. In 2001, FPHC booked a one-time gain on dilution of equity interest amounting to PhP1,365 million arising from the purchase by AIDEC FG Power Corporation and the Sumitomo Corporation of newly issued shares in First Generation Holdings Corporation (FirstGen), a subsidiary of FPHC. FPHC’s net income, retained earnings and stockholders’ equity for 2002 would have decreased by a further PhP5.0 billion had its affiliate Manila Electric Company (Meralco) provided for estimated losses resulting from a Supreme Court decision ordering Meralco to refund its customers PhP0.617 per kilowatt-hour. In spite of the one-time gain on dilution of equity interest booked in 2001, FPHC’s 2002 consolidated revenues increased by 32% compared to year-ago levels as revenues from the sale of electricity rose by PhP8,111 million. This increase in the sale of electricity was due to the improvement in the dispatch of FirstGen’s Sta. Rita gas-power plant averaging 60% to 65% in 2002 from only 12% in 2001 as well as the start of commercial operations of FirstGen’s San Lorenzo plant in October 2002.

On December 9, 2002, Maynilad Water Services Inc. (Maynilad) issued a Notice of Early Termination notifying the Metropolitan Waterworks and Sewerage System (MWSS) of Maynilad’s intent to terminate the concession effective 60 days from the date of the notice on the grounds that MWSS had committed serious breaches of its obligations under the Concession Agreement. The termination of the concessions entitles Maynilad to an Early Termination Amount. However, the MWSS has challenged Maynilad’s right to terminate the concession and disputes that Maynilad is entitled to an Early Termination Amount. An Arbitration Panel has been constituted to rule on this issue.

Having satisfied the various conditions precedent to drawdown, the Manila North Tollways Corporation (MNTC) drew in early February 2003 US$83 million of the US$261 million facility approved by a syndicate of foreign lenders on July 7, 2001. The proceeds were immediately applied towards the rehabilitation of the Manila North Expressway, which is expected to be completed in early 2005. The successful drawdown by MNTC resulted in the settlement of PhP525 million and US$15 million in obligations which were guaranteed by Benpres, thereby reducing Benpres’ contingent obligations by the same amounts.

With the success of its Bayan399 program, Bayan Telecommunications Inc. (BTI) reversed the decline in its fixed line subscribers in the fourth quarter of 2002. It ended the year with 188,346 subscribed lines. Meanwhile, the company’s data business continued to thrive, with total data and IP circuits growing from 17,000 at the end of 2001 to 39,528 at the end of 2002. BTI’s parent company, Bayan Telecommunications Holding Corporation (BTHC), posted consolidated revenues of PhP4,895 million and a net loss of PhP5,335 million. BTI continues to accrue interest expenses at the contracted rates while its restructuring negotiations on US$417 million and PhP2,990 million of debts are ongoing. The company has proposed a restructuring of these debts into a US$275 million interest-bearing and amortizing redeemable note maturing in nine years (representing the sustainable portion of its debts) and the balance into a zero-coupon note convertible into equity in BTI. In late 2002, BTI’s secured creditors responded by submitting a term sheet containing the restructuring terms they were prepared to accept. These terms are currently being negotiated with the company’s unsecured creditors. On May 1, 2002, BTI appointed CLSA as its financial advisor for the restructuring, replacing Bank of America.

Sky Vision Corporation (Sky) and The Philippine Home Cable Holdings Inc. (Home) continue to negotiate with their respective creditors on the restructuring of PhP2,517 million of secured and unsecured debts as well as seek creditors’ consent to the pending consolidation of both entities under Beyond Cable Holdings Inc. as envisioned in the Master Consolidation Agreement signed by Benpres, Lopez Inc., ABS-CBN, the Philippine Long Distance Telephone Company, and Mediaquest Holdings Inc. on July 18, 2001. On January 29, 2003, Sky and Home jointly appointed Buenaventura Echauz and Partners as financial advisor for the restructuring, replacing a consortium of local firms earlier appointed for the role. In 2002, Sky and Home successfully concluded negotiations to reinstate carriage of certain cable TV channels of Hong Kong-based STAR TV. The new long-term carriage agreement with STAR strengthens the two companies’ program offerings and enhances their competitive advantage against rival operators.

In May 2002, Rockwell Land Corporation began construction of its latest residential development, The Manansala. It has since pre-sold more than 70% of the available units. As of this writing, the substructure has been completed while the contract for the superstructure has been awarded. Construction is expected to be fully completed in mid-2005. RLC’s revenues for 2002 reached PhP1.1 billion; however, it incurred a net loss of PhP481.3 million for the same period.

Customer Contact Center Inc. (C-Cubed) became profitable in the last quarter of 2002. Its partnership with Source One brought in many new international customers, including Chevron and Sony. At the end of 2002, the company utilized 361 seats and 585 full-time equivalent agents.

The GPS-based vehicle tracking system of Webcast Technologies, the company acquired by BayanMap in 2001, continues to gain acceptance as an effective fleet management tool and security device. It is now required by a large cement manufacturer for its haulers and is also a standard accessory for the high-end SUV model of a leading car manufacturer. Meanwhile, BayanMap has focused on selling applications of its digital maps to its traditional internal Lopez group clients as well as to local government entities who find that GPS/GIS mapping competencies can enhance management of their municipalities.

Liquidity and Capital Resources of Benpres (Parent Company Only) for the year ended December 31, 2002 compared with December 31, 2001

As of December 31, 2002, the company’s total assets stood at PhP48,490 million. Cash and cash equivalents stood at PhP1,859 million as of December 31, 2002, having increased from PhP629 million as of the end of 2001 due partly to the redemption in August 2002 of the convertible note issued by FPHC.

Benpres defaulted on an interest payment due on June 19, 2002 and on interest and principal payments due on December 19, 2002 related to its US$150 million Eurobond 7.875% Notes listed on the Luxembourg Stock Exchange, which matured on the latter date.

On October 24, 2002, the Asian Infrastructure Fund (AIF) and Chase Manhattan Overseas Banking Corporation (Chase) exercised a put option over their shares in BTHC. Under the put option, AIF and Chase have the right to require Benpres to buy back their BTHC shares at cost plus accrued interest. Benpres has recognized that US$44 million is owed to AIF and US$6 million to Chase in exchange for their respective shares in BTHC. However, both AIF and Chase have indicated that larger amounts are owed to them.

A civil suit for damages alleging violations of the U.S. federal securities law and New York state law was filed on December 19, 2002 by AIG Asian Infrastructure Fund (AIG), L.P. against Benpres, BTHC, and certain of their officers and directors with a U.S. federal trial court in New York City. The complaint alleges that the defendants, including the placement agent in the sale of the convertible preferred shares of BTHC, failed to disclose to AIG at the time it purchased such shares that certain institutional stockholders of BTHC had a pre-existing put right to Benpres of their common shares in BTHC.

AIG also filed a motion for summary judgment in lieu of a complaint with the New York state court against Benpres and BTHC for the payment of the amount of US$44 million under the convertible preferred shares issued by BTHC and guaranteed by Benpres. Benpres and BTHC filed a motion to dismiss which is still pending resolution.

On January 8, 2003, Benpres failed to settle US$165 million in obligations arising from its suretyship over convertible preferred shares issued by BTHC. The BTHC-related obligations arising from the AIF and Chase put options and the BTHC convertible preferred shares totalling US$216 million are included in the negotiations with creditors under Benpres’ Balance Sheet Management Plan (BSMP). As of December 31, 2002, Benpres had US$508 million and PhP4,218 million in direct and contingent obligations, detailed below, all of which are subject of the BSMP.

At Dec 31, 2001 At Dec 31, 2002 (In Millions) PhP US$ PhP US$ Direct Obligations Long-term Commercial Papers (LTCP) 2,000.0 2,000.0 Eurobond 7.875% Notes 150.0 150.0 Contingent Obligations Maynilad Water 1,880.0 132.8 1,713.0 126.0 MNTC 505.0 16.0 505.0 16.0 BayanTel 218.9 215.9

These direct and contingent obligations were reduced from their balances as of December 31, 2001 due to repayment by Maynilad of some of its obligations guaranteed by Benpres. In February 2003, MNTC likewise settled its bridge loans and other guaranteed obligations via drawdown on its project financing, thereby eliminating PhP505 million and US$16 million of Benpres contingent obligations.

On December 2, 2002, Benpres voluntarily made payments on its direct and contingent obligations that are subject of the BSMP (excluding contingent obligations arising from Maynilad which the latter continues to service). Pending an agreement with its creditors on the BSMP, the company has offered to make payments semi-annually using the following rates and based on the Company’s liabilities computed as of May 31, 2002:

(a) At LIBOR plus a spread of 1.0% on all of its US dollar obligations; and (b) At the 182-day Philippine Treasury Bill rate plus a spread of 1.0% on all of its peso obligations.

Year Ended 31st December 2001 Compared WITH YEAR ENDED 31ST DECEMBER 2000

Benpres In 2001, Benpres reported a 55% decline (PhP2,207 million) in its revenues from the previous year to PhP1,778 million. The fall in revenues is primarily attributable to lower accretion of earnings on Notes of PhP691 million compared to the previous year of PhP1,419 million and lower gain on sale of investments of PhP520 million compared to the previous year of PhP2,070 million. However, equity in net earnings of investees increased to PhP71 million due to the strong performance of FPHC.

Subsidiaries ABS-CBN maintained its dominance of the Philippine broadcasting industry with an average audience share and ratings of 45% and 19%, respectively, more than all its free-to-air competitors combined. Airtime revenues of ABS-CBN registered a growth rate of 5.4% year-on-year to PhP9,741 million despite a 10.6% decline in advertising minutes. Also, consolidated net revenues in 2001 increased by 12.8% to PhP10,512 million from the previous year. However, despite the increase in revenues, expense growth still outpaced revenue growth in 2001. Cost of sales and services (excluding depreciation and amortization expense) registered an increase of 28.7% from the previous year to PhP1,031 million which were driven mainly by the costs of ABS-CBN International. Also, depreciation and amortization expense grew by 59.5% to PhP1,083 million which is attributed to the purchase of new broadcast equipment and the completion of the company’s new broadcast complex in 2001. Lastly, there was a considerable increase in net interest expense to PhP629 million from PhP45 million in the previous year. The increase in financing costs primarily reflects the impact of higher borrowings used mainly for capital expenditures on broadcast equipment and the company’s new broadcast complex. As a result, net income declined by 34.4% to PhP1,484 million compared to prior year results of PhP2,261 million.

On the other hand, FPHC posted robust earnings growth. FPHC’s consolidated net income for the year ending December 31, 2001 reached PhP3,507 million which was higher by PhP2,417 million compared to the previous year. Recurring income increased by PhP965 million from the previous year to PhP2,055 million. Also, FPHC registered extraordinary income of PhP1,365 million from the gain on sale of investments. Last August 3, 2001, FPHC completed the sale of its 7.75% stake in First Generation Holdings Corporation (FirstGen) to AIDEC FG Power Corporation Limited for US$40 Million. Also, last December 21, 2001, FPHC completed the sale of its 3.81% stake in FirstGen to Sumitomo Corporation for US$20 Million.

In January 19, 2001, Bayan Telecommunications Inc. (BTI) submitted a standstill request letter to all bank creditors and bondholders. Since then, BTI has not made any principal payments to its bank creditors but continues to pay interest at a reduced rate and has made no interest payments to its bondholders. Last October 8, 2001 BTI together with its financial adviser, Bank of America, presented a business plan and restructuring proposal covering approximately US$477 million in debt to its creditors. No agreement could be reached on the initial proposal as banks and bondholders responded by raising certain issues regarding the proposed terms. Subsequently, the proposals were revised and a revised restructuring proposal was presented to the creditors last December 14, 2001. The highlights of the restructuring proposal being discussed with the creditors are as follows: (a) reduced tenor: secured creditors (8 years maturing in 2010) and unsecured creditors (10 years maturing in 2012); (b) introduction of refinance risk at year 8 and 10 for secured and unsecured creditors, respectively; (c) greater unsecured debt write-off (US$150 million) compared to previous proposal (US$56.5 million) in exchange for equity in restructured BTI; and (d) dilution of existing shareholder equity. The above proposal is under negotiation with the creditors of BTI.

Last July 18, 2001, Benpres, Lopez, Inc., ABS-CBN, PLDT and Mediaquest Holdings signed a “Master Consolidation Agreement” (MCA) wherein they agreed to consolidate Sky Vision Corporation (SKYCable) and The Philippine HomeCable Holdings Inc. (Home Cable). Under the agreement, the Lopez Group’s shares in SKYCable and Mediaquest’s interest in Home Cable shall be exchanged for a combination of new shares and convertible notes in a new holding company known as Beyond Cable Holdings Inc. (Beyond Cable). Beyond Cable shall be 66.5% owned by the Lopez group and 33.5% owned by the PLDT group. The MCA also contains a provision allowing the Lopez group to sell 33% of its stake in the new holding company to a strategic partner and/or financial investors who are envisaged to provide added value to the new company. On August 1, 2001 SKYCable and HomeCable jointly appointed PCI Capital and the investment banking units of United Coconut Planters Bank (UCPB) and Development Bank of the Philippines (DBP) to act as the companies’ financial advisers to assist the two companies in restructuring their bank debts. The two companies announced a debt moratorium last December 6, 2001 and correspondingly submitted a restructuring proposal to their creditors on the same date. In addition, Beyond Cable is in discussion with Star TV to reinstate the Star TV service channels that were suspended in mid-October 2001due to a trade dispute. Also, SKYCable and HomeCable increased their monthly subscription rates by approximately 27% to PhP 700 and PhP550 respectively in the fourth quarter of 2001 due to increased US dollar-based programming costs.

On October 1, 2001, the Metropolitan Waterworks and Sewerage System (MWSS) Board of Trustees issued Board Resolution No. 487-2001 approving, among others, the petition of Maynilad Water Services, Inc. (Maynilad Water) for a water rate increase and subsequently, on October 2, 2001, Amendment No.1 to the Concession Agreement became effective. Resolution 487-2001 allows Maynilad Water to implement the following rate adjustments: (a) Implement a rate adjustment of PhP4.21 per cubic meter during the period October 15, 2001 to December 31, 2002 to recover the FOREX losses incurred from August 1, 1997 up to December 31, 2000, with any unrecovered FOREX losses to be recovered through the special transitory mechanism; (b) Implement a special transitory mechanism to enable Maynilad Water to recover FOREX losses for the period beginning January 1, 2001 up to December 31, 2001 which will commence in July 2002; (c) Implement a rate adjustment with respect to present and future FOREX losses or gains, including all accruals and carrying costs thereof from the period January 1, 2002 until the Expiration date of the concession, on a quarterly basis (referred to as FCDA). On December 13, 2001, the MWSS Board of Trustees approved the following additional price adjustments effective January 2002: (a) Extraordinary price adjustment of PhP0.61 per cubic meter; and (b) FCDA of PhP4.07 per cubic meter. Maynilad Water also submitted its Rate Rebasing Proposal which contains its revised business plan to the MWSS Regulatory Office last October 31, 2001. As of this date, the framework for the rate rebasing mechanism is still being finalized. In addition, last February 28, 2002, Maynilad Water, together with Benpres and Suez SA as guarantors, entered into an amendment agreement (Agreement) relating to the US$100 million bridge loan which amended, among others, the Maturity Date of the bridge loan subject to certain conditions specified in the Agreement. The banks, however, have the put option to require Maynilad Water to pay all or a portion of the bridge loan on any day after August 31, 2001, provided that the banks give prior notice as defined in the Agreement.

The Manila North Tollways Corporation (MNTC) on the other hand signed its term loan agreement for US$261 Million last July 7, 2001.

Rockwell Land Corporation celebrated the first full year of operations of the Power Plant Mall in 2001. As of year-end 2001, the mall achieved a 95% occupancy rate. Also, the Rockwell Leisure Club was able to increase its club memberships to 1,515 as year end as compared to 500 memberships in the previous year.

Finally, in 2001, Benpres functionally converged the following Information Technology-related businesses: (a) Corporate Information Solutions, Inc. (CIS), an IT solutions provider; (b) Customer Contact Center, Inc. (C-Cubed) - a call center/customer care provider; and (c) BayanMAP Corporation (BayanMAP) - a logistics and facilities management service provider. CIS and C3 achieved their goals of penetrating the highly attractive international market by bagging large North American contracts and forging strategic alliances with international market leaders. Bayanmap, on the other hand, succeeded in expanding its capabilities and service offerings through the acquisition of Webcast Technologies, Inc. - a local technology leader in vehicle tracking service.

Liquidity and Capital Resources of Benpres (Parent Company Only) for the year ended December 31, 2001 compared with December 31, 2000

Last June 29, 2001, Benpres appointed Credit Suisse First Boston (CSFB) as financial adviser to review its capital structure and to assist the company in preparing a Balance Sheet Management Plan (BSMP) that will enable Benpres to address its maturing direct obligations including contingent obligations that may arise from the company’s guarantees and commitments. Benpres has identified and is evaluating a number of alternatives to address these maturing obligations, given the medium-term liquidity gap in the cashflow of the company. The BSMP may include, among others, reduction of debt, raising of cash, reduction of cost and investments and an asset-sale program. The BSMP is designed depending on the success of Benpres’ asset sale program and debt reduction initiative. As of this date, however, the details of the balance sheet management plan have not yet been finalized. Below is a schedule of the direct and contingent obligations of Benpres.

(in Millions) Less than 1 year 1-3 years PhP US$ PhP US$ Direct Obligations Long-term Commercial Papers (LTCP) 2,000.00 Eurobond 7.875% Notes 150.00 Contingent Obligations Maynilad Water 1,880.00 132.80 MNTC 269.30 12.00 255.8 2.70 BTHC 218.90

For the year-ended December 31, 2001, Benpres’ total assets amounted to PhP48,297 million. The decline in asset base is mainly due to the decline in the cash and cash equivalent account and the other non-current assets account. Benpres’ cash and cash equivalents as of December 31, 2001 declined to PhP629 million. The decline is primarily due to the following: (a) principal payment of LTCP last September 17, 2001 and October 1, 2001 amounting to PhP333 million and P667 million respectively; (b) interest payments amounting to approximately PhP1,136 million; and (c) advances to affiliates.

On January 21, 2002, Benpres informed the following lenders: (a) LTCP holders; (b) Maynilad Water Bridge lenders; and (c) Note Holders of US$150 million 7.875% Notes due in 2002 about the decline of its current ratio to 0.10x which is below the minimum level of 1.25x. The decline of Benpres’ current ratio is due to the reclassification of Benpres’ US$150 million 7.875% Notes due in 2002 as a current liability and is not the result of Benpres’ incurrence of new current liabilities.

Benpres has also set up a provision for the decline in value of its investments in and advances to BTHC, including recognition of its liability that may arise from its guarantee and commitments in BTHC amounting to PhP9,900 million in 2001 and PhP1,350 million in 2000. As a result, total liabilities increased by PhP5,896 million to PhP17,034 million. Also, stockholders’ equity of Benpres declined to PhP11,593 million as of December 31, 2001. Consequently the debt-to-equity ratio as of December 31, 2001 of 2.32x exceeded the covenant ratio of 1.5:1 under the LTCP and Maynilad Water guarantee agreements. In addition, Benpres’ net losses for the year ended December 31, 2001 amounted to P9,993 million.

Financial Statements

The consolidated financial statements of the company are incorporated herein by reference. The schedules listed in the accompanying Index to Supplementary Schedules are filed as part of this Form 17-A.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

There are no changes in and disagreements with the external auditors on accounting and financial disclosures.

PART lll – CONTROL AND COMPENSATION INFORMATION

Directors and Executive Officers of the registrant

DIRECTORS

Mr. Oscar M. Lopez, Chairman Mr. Felipe B. Alfonso Mr. Eugenio Lopez, III Mr. Manuel M. Lopez Mr. Steve E. Psinakis Mr. Washington Sycip

EXECUTIVE & CORPORATE OFFICERS

Oscar M. Lopez President and Chief Executive Officer Manuel M. Lopez Vice Chairman of the Board Eugenio L. Lopez III Treasurer Steve E. Psinakis Senior Adviser Elpidio L. Ibañez Chief of Staff with rank of Executive Vice President Peter D. Garrucho, Jr. EVP – Power Generation Augusto Almeda Lopez General Counsel with rank of EVP Federico R. Lopez EVP – Regulatory Management Felipe B. Alfonso EVP – Human Resource Development