PESOS MONTHLY is what a family of five needs to meet their food and non-food needs

(Source: National Statistical Coordination Board, 2012)

Vision Mission Values

Communities where people are • Understanding community realities We have a deep love of country. productive, creative, self-reliant, and and engaging people in the change We believe in shared prosperity. proud to be Filipino. process We are creative and innovative. • Acting as catalyst for inclusion to We act with integrity. bridge community and business We strive for excellence. aspirations We collaborate and work as a team. • Building and nurturing partnerships with public and private groups, civil society and Ayala to achieve impact, scale, and sustainability for everyone involved CONTENTS

2 Message from the Chairmen 3 Message from the President 4 Ayala Foundation, As One We Can 6 Our Reach and Impact 7 Where We Are 8 Education Center of Excellence in Public Elementary Education, Text2Teach

12 Youth Leadership Ayala Young Leaders Congress, Leadership Communities, Careers for Street Youth, LEAD ASEAN Summit, Filipino American Young Leaders Program

16 Sustainable Livelihood Iraya-Mangyan Project; Calauan, Laguna; El Nido, Palawan; Product Fairs

20 Arts and Culture Ayala Museum, Filipinas Heritage Library

24 Special Projects Strengthening the Capacity of Civil Society Organizations in the Philippines, Buklod Bahayan Daycare Center

26 Disaster Response 28 Our Board of Trustees 30 Special Section: Ayala 180 Years 34 Report of Independent Auditors 88 Our Management and Staff 90 Directory

2013 Annual Report Message from the Chairmen

Throughout its 52 years in operation, the Ayala Foundation has continued to evolve from a purely philanthropic organization to an organization that seeks to provide viable, sustainable, and lasting solutions for the many communities it works with. This path was in large part shaped by the challenges and realities of our times. Today we are faced with the ever-increasing needs of marginalized communities and the challenge of addressing these in a sustainable manner over the long-term. The socioeconomic problems we face today call for more permanent solutions that must go beyond pure philanthropy. Increasingly, they require deeper community engagement and a We believe more holistic understanding of needs that result in integrated and systemic solutions that will put communities in a that developing sustainable path to progress. inclusive We believe that the Ayala Foundation can play a role in this cycle of sustainability and progress. As a bridge programs that between marginalized communities and the business sector, we are in a unique position to help bring together create value and business solutions and market discipline to addressing social issues. We aim to empower the broader base of the pyramid by working with communities through strategic planning, employing relevant programs, and bringing in the prosperity for right partnerships. all stakeholders Clearly, this involves multi-sectoral collaboration. Central to this is developing and strengthening our relations is the with an ever-widening network of stakeholders. Stakeholder engagement is imperative in crafting holistic community sustainable path solutions and it is an imperative that must be shared among the public, private, and socio-civic sectors. It is important forward. that we build a high level of trust in this process by demonstrating accountability and the responsible stewardship of resources. Ultimately, the Ayala Foundation believes that developing inclusive programs that create value and prosperity for all stakeholders is the sustainable path forward. This will require imagination and innovative thinking that result in effective and long-lasting programs. We hope to constantly foster a culture of innovation, creativity, and sustainability as we work with our many partners in bringing about progressive solutions to achieve more inclusive growth. Finally, we remain committed to our goals of enhancing the nation’s pride in its history and culture. We continue to celebrate our artistic achievements, our national cultural heritage and our emerging talent through our museum and Filipinas Heritage library activities. We thank our many partners, our management team and staff, and the multiple communities we have come to work with for sharing our aspirations and vision for a progressive and inclusive path forward.

Jaime Augusto Zobel de Ayala CO-CHAIRMAN

Fernando Zobel de Ayala CO-CHAIRMAN

2 Message from the President

Collaboration and Community Solutions—these defined our activities at Ayala Foundation in 2013, which we started by introducing our four program pillars. Focusing on Education, Youth Leadership, Sustainable Livelihood, and Arts and Culture, our end in mind is communities where people are productive, innovative, self-reliant, and proud to be Filipino. Aside from these program areas, we have defined certain criteria to guide us in conceptualizing, designing, and implementing projects. Two key factors were public–private partnerships and strategic alliances. Without these, combined with our other criteria, we would not have achieved the milestones of today. Our Center of Excellence in Public Elementary Education (CENTEX) has seen 39 alumni, out of 75 students that graduated 6th Grade in 2005, fresh out of college holding degrees in Mathematics, Psychology, Nursing, to name a few. The collaboration with the Department of Education was integral in the success of this endeavor. The Text2Teach alliance, a partnership with various local government units and community advocates, has reached 340 public elementary schools. The project has become an international model for tech-based learning intervention. In collaboration with the Ayala group of companies, we produced 81 alumni for the Ayala Young Leaders Congress (AYLC), bringing our alumni base to 1,124 in all sectors, all over the nation. Leadership Communities (LeadCom) is all about servant leadership and skill-building. Our partnership with the local government in Calauan, Laguna enabled us to reach out to the youth in that community. Strong relationships with private collectors and cultural institutions, both local and international, allowed the Ayala Museum to present imaginative exhibitions and compelling 7,890—This number is so educational programs, thus helping it exceed the 100,000 patronage mark. The Filipinas important that we put it Heritage Library also marked a milestone in its history. It reopened as “a contemporary space for the contemporary researcher” on the sixth floor of the Ayala Museum, with a stronger on the cover of our annual commitment to harnessing technology for Filipiniana research. report as a reminder Our most recent program pillar, Sustainable Livelihood, is an encouraging work in that we each have a role progress. Encouraging because, in just a year, we have taken the first steps in helping heads to play in helping our of families become more employable or gain diversified sources of income. We are excited to communities move past see what milestones 2014 and beyond will bring to El Nido (Palawan), Calauan (Laguna), and the threshold of poverty. Talipanan (Oriental Mindoro). According to the National Statistical Coordination Board, the monthly income of the average Filipino family must be at least =P7,890 to meet its basic needs. 7,890—This number is so important that we put it on the cover of our annual report as a reminder that we each have a role to play in helping our communities move past the threshold of poverty. Improving the quality of life of underserved Filipinos is, without a doubt, a collective effort. We are thankful to you, our partners and stakeholders. We look forward to our continued collaboration in providing integrated and sustainable solutions in Education, Youth Leadership, Sustainable Livelihood, and Arts and Culture, to provide that advantage our fellow Filipinos need to attain a brighter future. Maria Lourdes Heras-de Leon AS ONE, WE CAN. As ONE Nation, We Can. PRESIDENT

3 Every Filipino has their own vision of a better future. These visions may vary from Filipino to Filipino; each Filipino’s vision for a brighter future may even cover different areas of concern. If one takes these individual dreams and aspirations together, one would discover they are closely related—they form a bigger picture that breaks boundaries, multiplies possibilities, and includes virtually everybody. The challenge is to for everyone to come together and make their vision of a better future come true. This is why we developed our official tagline—“As One We Can.”

4 In August, the “Pilipinas: As One We Can” cinema ad premiered in Ayala Cinemas nationwide. This is our way of encouraging Filipinos from all walks of life to come together in building the nation’s future. The 45-second ad features artworks specially created by some of the most promising young artists in the country today. Each artwork displays a multiplicity of techniques, colors, and styles, and reflects each artist’s unique sensibility and approach to art. However, when the paintings are put beside one another, the word, “PILIPINAS” appears—a symbol for how Filipinos can harness their respective strengths and harmonize the elements together, so they can form a bigger, more compelling picture that celebrates both unity and diversity. We also launched the “Anthem” campaign in Ayala Cinemas nationwide. By flashing an image of the Philippine flag and the words of the Philippine National Anthem without any musical accompaniment, cinema goers are encouraged to sing the words aloud. By doing so, we hope to see Filipinos singing the National Anthem with pride and conviction.

5 Our Reach and Impact

We invested PhP292,444,798 in our program pillars across the country. Our group of Corporate Enablers—Finance and Corporate Services; Human Resources and Administration; and Strategy, Communications, and Partner Care—also ensured the smooth implementation of our projects.

Program Spending 2013 Education 18.5% • 54,025,914

Youth Leadership 18.5% 9.7% • 28,298,524 Corporate Enablers 9.7% 15.4% • 44,943,818 Sustainable Livelihood and Other 15.4% Community Development Projects Arts and Culture 27.1% • 79,175,567 29.4% • 86,000,975 27.1%

29.4 Total 292,444,798

EDUCATION YOUTH LEADERSHIP SUSTAINABLE LIVELIHOOD ARTS & CULTURE

Iraya Mangyan Calauan

Careers for Street Youth El Nido

*AFI as contractor Our Program Pillars

• Under Education, we have the Center of Excellence in Public Elementary Education (CENTEX) and Text2Teach. • Under Youth Leadership, we have the Ayala Young Leaders Congress (AYLC), Leadership Communities (LeadCom), and Careers for Street Youth. • We are implementing Sustainable Livelihood in the following areas—El Nido, Palawan; Calauan, Laguna; Talipanan, Oriental Mindoro, for the Iraya Mangyans; and for CENTEX parents in Tondo, Manila, and Bauan, Batangas. • Under Arts and Culture, we have the Ayala Museum and Filipinas Heritage Library. • We have a special project, Strengthening the Capacity of Civil Society Organizations in the Philippines, which we implement under a grant from the United States Agency for International Development (USAID).

6 We are in Where We Are 48 of the country’s 81 provinces

7 EDUCATION CENTEX

CENTEX offers quality education for bright children from economically disadvantaged families. CENTEX also provides teacher and principal training, with emphasis on thinking skills and classroom management techniques.

Project Partners Department of Education, City Government of Manila, Provincial Government of Batangas, and Private Donors

Geographic Reach Tondo, Manila Bauan, Batangas

Year Started 1998 (Manila) 2000 (Batangas)

8 EDUCATION EDUCATION

2013 Highlights PROJECT HIGHLIGHTS 1998-2013 TOTAL ENROLLMENT NAT SCORES 997 84.29 83.81 1,250 MANILA BATANGAS 162 Total CENTEX alumni GRADE 6 GRADUATES >95% Grade 6 cohort survival rate 2013 Timeline

High achievement scores Students recognized After Hours Music Program CENTEX students continued to internationally Twenty-four CENTEX Manila students participated in the “After Hours Music excel academically, exceeding Elwince Magbitang, a grade six Program” recital held at the Ayala Museum on March 23. Renowned violinist the national average of the CENTEX Manila student, was one Alfonso “Coke” Bolipata served as the mentor of the violin and cello students National Achievement Test (NAT) of the 18 finalists at the 2013 Asian in the program. Also serving as mentors were members of the Pundaquit administered by DepEd. CENTEX Grand Prix held in Hong Kong in Virtuosi, the resident string ensemble of Creative Alternatives for Social Manila students had an average August. He is a talented ballet Action (CASA) San Miguel Foundation. The After Hours Music Program score of 84.29, while CENTEX dancer under the mentorship of the Recital was supported by The Department of Education, JPMorgan Chase & Batangas students scored 83.81 (vs. STEPS Dance Studio. Co., CASA San Miguel, and Prospero World. 68.15, national average). Mikoy, a short film by four CENTEX Manila alumni (Timothy First batch of students Mendoza, Lowell Mongcal, Nichole Camille Castillo, and finish college Jomelle Tanudra), premiered at Thirty-nine students from the the Cinepambata Film Festival in first batch of 75 CENTEX Manila October, where it won the Special students have completed their Jury Prize. It was screened at the college education. The first was Auburn International Film Festival Lester Lampano, who graduated with (Australia) and the 20th Filipino a degree in Mathematics from the American Cine Festival (United De La Salle University. Asbel Elpos, States), and will be screened in 2014 a psychology major from the Far at the Los Angeles Asian Pacific Film Eastern University with a degree in Festival. Mikoy was made during a Principal and Teacher Training summer workshop in filmmaking Psychology, was the first CENTEX CENTEX held two major runs of its Principal and Teachers Training program and shadow play production at student to graduate magna cum laude. during the year. The first run was held in April, with 200 teachers and 50 CASA San Miguel in Zambales. principals. The summer training carried the theme “Breaking the Chains of Poverty through Education,” focusing on pedagogy, teaching methodology, and values integration with focus on classroom management, brain-based education, and values education. CENTEX also held the annual training for its teachers and partner schools in November. It carried the theme “Weaving Connections” and had 84 participating teachers. The focus of the training was on critical and caring thinking skills. The training program was supported by JPMorgan Chase & Co. and Prospero World.

9 EDUCATION

Text2Teach

Project Partners Nokia, Globe Telecom, Department The local version of the BridgeIT program, Text2Teach uses mobile of Education, Pearson Foundation, technology as a learning intervention for grade five and six students Toshiba, and Local Government Units from public elementary schools. The materials cover such subjects as Geographic Reach Nationwide English, Mathematics, Science, and Values Education. Year Started 2003

10 EDUCATION EDUCATION

2013 Highlights

PHASE 4 GOAL PROJECT 680 PHASE barangay captains / PTA 340 trained in sustainability NEW SCHOOLS REACHED 4 850SCHOOLS

STUDENTS REACHED TEACHERS REACHED 30,000 2,000

PROJECT HIGHLIGHTS 2003-2013 897 300,000 3,744 Total Text2Teach Schools Total Students Reached Total Teachers Trained

2013 Timeline

Antique Community Launch Silay City Launch Nominet 100 Together with the members of the Text2Teach alliance, we Thirteen LGUs in the Visayas signed up for Text2Teach made it to the list celebrated the connection of 116 public elementary schools in Text2Teach. This now brings the project to 172 of the 100 most inspiring social Antique province. On January 17, a community launch was held public elementary schools in the Visayas. This was tech innovations as compiled in partnership with local government units of the province of celebrated in a launch—the biggest to date—held on by UK funder for tech projects, Antique as well as the local Department of Education. August 27 in Silay City. Nominet Trust.

Text2Teach website ‘Exemplary ICT In May, Text2Teach launched its official website Innovation’ (www.text2teach.org.ph). Text2Teach was hailed as one of the “exemplary Information Communications Technology Partnership with ULAP (ICT) innovations for education” We signed an advocacy agreement with the the Union of at the Asia-Pacific Ministerial Local Authorities of the Philippines (ULAP), an organization Forum on ICT in Education of local government officials, on June 28. ULAP will serve as (AMFIE) 2013 in China. The Text2Teach’s advocate among LGUs. event was organised by the United Nations Educational, Scientific, and Cultural Organisation.

11 YOUTH LEADERSHIP

Ayala Young Leaders Congress

Project Partners Ayala group of companies The Ayala Young Leaders Congress (AYLC) is the flagship youth Geographic Reach leadership program of the Ayala group of companies. AYLC gathers Nationwide

81 of the most promising student leaders from the best colleges Year Started and universities in the country for a congress designed to hone their 1998 leadership skills, nurture their commitment to integrity and principled leadership, foster nationalism and idealism, and encourage faithful stewardship of their communities and the country’s future.

12 YOUTH LEADERSHIP YOUTH LEADERSHIP

2013 Highlights PROJECT HIGHLIGHTS 1998-2013

81 1,124 NUMBER OF Total Alumni DELEGATES 22 2,641 community-based community-based 22 LEADERSHIP CAMPS STUDENT LEADERS organized by alumni trained by alumni Number Of Alumni Chapters Nationwide

2013 Timeline

15th Congress Grand Alumni Homecoming Eighty-one students from 52 colleges and universities and To celebrate its 15th year, AYLC held the third AYLC Grand Reunion on February 9 at the representing 12 regions participated in the 15th Ayala Young Leaders Circuit, Makati, with more than 500 alumni present. The grand reunion was highlighted by Congress held on February 5 to 8. With the congress theme “The the Starfish Fair 2013, a showcase of 10 development projects AYLC alumni have initiated Leadership Imperative: Confronting and Adapting to Changing over the years. The fair served as an avenue for alumni to share best practices in running Realities,” the congress featured keynote speaker Justice Marvic community projects. Leonen, associate justice of the Supreme Court.

Ayala Young Leaders Alumni Association AYLC alumni shared the “AYLC experience” with other partner schools and organizations by way of the Ayala Young Leaders Alumni Association (AYLAA). Now an independent organization registered with the Securities and Exchange Commission, AYLAA has established its own Servant Leadership Camp pool of facilitators and trainers. In 2013 alone, it facilitated 23 camps and trained 2,641 youth leaders all over the country. This is one way for AYLC alumni to pay forward what they have learned from their own congress.

13 YOUTH LEADERSHIP

Leadership Communities

Project Partners Private Funders, Local Government Leadership Communities (LeadCom) empowers the youth to help Units, Local Colleges and Universities, Youth Organizations, and Youth- address pressing needs and issues in their local community through Serving Organizations projects they themselves will propose, plan, and implement. Geographic Reach Nationwide

2013 Highlights PROJECT Year Started HIGHLIGHTS 2011 4 25 2011-2013 YOUTH-LED YOUTH PROJECTS TRAINED IMPLEMENTED 11 833 Communities Reached Youth Trained 2013 Timeline

Project Update LeadCom Calauan During the year, LeadCom reached out to community-based LeadCom was brought to Southville 7, the resettlement site in Calauan, Laguna. In youth organizations, hoping to build in the youth a sense of partnership with the municipal government of Calauan and the Don Bosco Brothers, shared responsibility for their community. At the same time, LeadCom took the youth through the process of developing self-confidence and positive LeadCom challenges the youth to act on community concerns character, diagnosing community needs, identifying opportunities for youth-led action, rather than wait for others to do it for them. and mobilizing stakeholders and community resources for projects that address priority needs. We trained 25 young people and helped them identify community projects that they could work on.

14 YOUTH LEADERSHIP YOUTH LEADERSHIP

Careers for Street Youth

Through Careers for Street Youth (CSY), we establish and nurture partnerships that will help Filipino out-of-school youth develop skills, which can open up for them livelihood opportunities, including employment.

Project Partners PROJECT HIGHLIGHT Street Kids International, and Business In 2013, Ayala Foundation took on Process Association of the Philippines the program. The AFI-led project will be officially launched in 2014. Year Started 2012

LEAD ASEAN Youth Summit Filipino American Young Leaders Program

Project Partners The Filipino American Youth Embassy of the Leadership Program (FYLPro) was Philippines in staged in 2013, inviting a group of 10 exceptional young Filipino Project Partner Brunei Pre-Summit Washington, D.C. Americans from the United States United States Embassy in Manila Twenty-five ASEAN youth leaders met in Brunei and Guam. The delegates took part for a pre-event workshop on October 10. United Other Supporters in an immersive program in the Geographic Reach States Secretary of State John Kerry held a ABS-CBN–The Filipino Philippines from July 7 to 9, where Southeast Asia dialogue with the youth leaders. Channel (media they met some of the country’s highest officials and policymakers, partner), Ayala Manila Summit as well as other industry leaders, Year Started Corporation, Chevron, artists and cultural experts, 2013 One hundred fifty ASEAN youth leaders attended SGV and Co., Planters entrepreneurs both traditional a leadership summit in Manila on December 3 and social, as well as innovators in to 5. Geared toward building a youth network Bank, Philamlife, Phinma PROJECT HIGHLIGHTS Foundation, and CLSA different fields.FYLPro was started and addressing pressing issues in the region, in 2012 by Philippine Ambassador to the LEAD ASEAN Youth Summit featured Washington, D.C., Jose Cuisia. interactive sessions, inspirational talks, and Geographic Reach field trips focusing on economic development, Philippines, United environment, education and awareness, and States, and Guam PROJECT 150 human development. United States President Barack Obama delivered a special message for HIGHLIGHT 2012-2013 ASEAN the delegates via video. Year Started Youth Reached 2012 4 20 cross-country FYLPro Alumni collaborative projects

15 SUSTAINABLE LIVELIHOOD

We introduced our latest program pillar, Sustainable Livelihood, during the year, as part of our commitment to nurture communities where people are productive, creative, self-reliant, and proud to be Filipino. Through Sustainable Livelihood, we hope to establish and strengthen partnerships that will help families in our project communities have gainful employment or diversified sources of income. We believe that the bottom of the pyramid and other vulnerable groups can be engaged, even mainstreamed, into the socioeconomic life of their respective communities as providers, suppliers, and producers of human capital, goods, and services. Our Sustainable Livelihood projects are present in three main locations: Talipanan, Oriental Mindoro, among the Iraya-Mangyans; Calauan, Laguna; and El Nido, Palawan. Iraya-Mangyan

The Iraya-Mangyans are an indigenous people living at the foot of Mt. Malasimbo and near the coast of Puerto Galera, Talipanan, Oriental Mindoro. Many of them continue to live in poverty, with no access to basic services. Aside from providing interventions in health and education, we are implementing sustainable livelihood projects and skills training for the Mangyans.

Project Partners PROJECT HIGHLIGHTS Ayala group of companies, Sisters of Charity of St. Anne, Technical Education Skills Development Authority 3 56 Geographic Reach product fairs joined to showcase the Iraya-Mangyan students who Talipanan, Oriental Mindoro products of Iraya-Mangyan weavers received educational assistance Year Started 1991 2013 Timeline

Nito Weaving Additional Support We are helping our Iraya-Mangyan community revive its tradition With the assistance of the Sisters of Charity of St. of weaving beautiful and functional baskets made from nito, Anne, Mangyan children and youth receive early a locally growing vine. These baskets have been showcased childhood care, education, and feeding. Fifty- in several product fairs, and are available for retail buyers at six Mangyan students were given educational Greenbelt 5, Ayala Museum Shop, and Glorietta 1. assistance. A computer center was set up for Aside from growing the nito weaving enterprise, we also educational and additional livelihood-skills partnered with various organizations including TESDA to provide training. training in dressmaking, electrical skills, masonry, and agriculture, among others.

16 SUSTAINABLE LIVELIHOOD SUSTAINABLE LIVELIHOOD

Calauan, Laguna

Southville 7 in Calauan, Laguna, is a 107-hectare relocation site for families displaced by Typhoon Ondoy and the Pasig River rehabilitation. Owned by the National Housing Authority, the property is home to roughly 4,500 families. Together with partners, we are implementing sustainable livelihood projects for families in the area.

Project Partners Municipal Government of Calauan, Salesians of Don Bosco, Franciscan Sisters of the Sacred Heart, e-Skills PROJECT HIGHLIGHTS Network, Consuelo Foundation, Habitat for Humanity, and ABS-CBN Foundation 23 25 22 Geographic Reach Calauan, Laguna Calauan residents hired on the spot at Calauan residents families participating a specially organized job fair trained in landscaping in new enterprises Year Started 2013 2013 Timeline

Calauan Job Fair Landscape Mushroom and Ube Enterprises Avviare In partnership with the Municipal Training We piloted mushroom and ube-growing Avviare is the brand for our Government of Calauan, Makati Twenty-five residents enterprises in Calauan to provide residents and sustainable livelihood initiatives. Development Corporation, and other of Southville 7 received their families a sustainable source of income. From the Italian verb avviare, which partner organizations, we organized training in landscaping, We started our mushroom-growing means “to start, to launch,” the a job fair for residents of Southville in partnership with enterprise with 10 families, and our ube-growing brand signifies our commitment to 7. The job fair attracted over 200 job TESDA, Makati enterprise with 12 families. The goal is to expand helping these communities move aspirants, with 23 residents hired on Development these enterprises in 2014. toward progress. It will be launched the spot. Corporation, and in 2014. Dualtech. The training aimed to equip them with marketable skills and prepare them for employment.

17 SUSTAINABLE LIVELIHOOD

El Nido, Palawan

El Nido, Palawan is one of the prime tourist destinations in the country. We are working with local organizations in developing and strengthening local industries, such as weaving, cashew production, local tourism, and others.

Project Partners Department of Social Welfare and Development, El Nido Local Government, Barangay Council of Sibaltan, and the Sibaltan Heritage Council

Geographic Reach Barangay Sibaltan and Barangay Villa Libertad, El Nido, Palawan

Year Started 2013

PROJECT HIGHLIGHT

women weavers reached 50 through the Sibaltan Buri-Pandan Weavers Association

2013 Timeline

Sibaltan Buri-Pandan Weavers Skills Inventory Training and Scaling Up Tucked away in El Nido, Palawan, is Barangay We provided training for the weavers of Sibaltan in production scale. We also studied the production Sibaltan, known for its efforts toward discovery time for the weaving process to understand the products and their labor process. As a result, master and preservation of their rich heritage, customs, women weavers have been identified to help speed up the weaving process. and culture. We work with the women weavers Aside from working with women weavers, we also made initial steps toward supporting and of Sibaltan and leverage their weaving talents scaling up community-based enterprises focusing on cashew production and local “way of life” tourism, in producing beautiful buri bags and other buri in partnership with the Sibaltan Heritage Council. products. Our goal is to scale their production, improve production processes, and connect weavers to the market.

18 SUSTAINABLE LIVELIHOOD SUSTAINABLE LIVELIHOOD

Product Fairs

Part of our commitment to bringing the products of our communities closer to the public is through our participation in product fairs and other trade events. Through these events, we generate awareness on the products of our communities, while allowing our communities to gain an experience of what it’s like to sell to a larger market, and how to elevate their activities to the level of a sustainable enterprise or business.

PROJECT HIGHLIGHTS Project Partners Ayala group of companies, through the PRODUCTS SOLD: Ayala Group Sustainability Council • baskets and other woven products from the Iraya- Mangyan communities Geographic Reach • processed cashew from El Nido, Palawan P104,390 Metro Manila • bags and baskets made from buri-pandan, total sales in three from El Nido, Palawan product fairs Year Started • laundry soap and dish-washing liquid from Silang, Cavite 2013

2013 Timeline

Ayala Group Fair Share Store Maarte Fair The Ayala Group Sustainability Council launched the Ayala Group My Fair Share on July 18 at the Makati Stock Exchange Building Iraya-Mangyan and in Makati City, as a venue for Ayala-supported communities to showcase their products. Four of our communities—Iraya- CENTEX products Mangyan, El Nido, CENTEX, and Buklod Bahayan (Silang, Cavite) participated. were also showcased After the success of the initial run, a second Ayala Group Fair Share Store was held on October 10, coinciding with the at the Maarte Fair Ayala Group Sustainability Summit held at the Hotel Intercontinental. organized by the Museum Foundation of the Philippines on August 23 to 25 at the Rockwell Tent.

19 ARTS AND CULTURE

Ayala Museum

Project Partners Private Collectors, Japan Foundation, the Embassy of Japan in the As a leading private museum in the country, the Ayala Philippines, the Embassy of France in Manila, Australian Embassy Museum is committed to making history and art more Manila in the Philippines, and PowerMac Center accessible to the public through creative programming, Geographic Reach Nationwide and global innovative marketing, and strategic partnerships. Year Founded 1967

20 ARTS AND CULTURE ARTS AND CULTURE

2013 Highlights 37 2,743 111,501 workshops and other participants in educational TOTAL VISITORS educational programs programs

2013 Timeline

New Artist Space Botong Francisco: Film and Traveling Exhibit The new ArtistSpace opened on January 24, with In August, the short film Botong Francisco: A Nation Imagined, directed by Peque Gallaga was screened an exhibition of works by 50 Ilonggo artists. at the Cinemalaya Independent Film Festival. It was produced as part of the Botong Francisco exhibit (December 4, 2012 - March 31, 2013). Philippines: Archipel des Échanges We also launched the Botong Francisco traveling exhibition on August 27 at The District North Point Mall, Talisay, Negros Occidental. The exhibit featured 25 reproductions of Botong’s paintings Musée du quai Branly in Paris, France, hosted from institutional and private collections. It was also brought to the Museo Negrense de La Salle in Philippines: Archipel des Échanges, one of the largest Bacolod City, Negros Occidental and Museo Iloilo in Iloilo City, Iloilo. exhibitions of Philippine precolonial art and artifacts outside the Philippines. A total of 310 precolonial treasures were on display, including the Ayala Museum’s gold kinnari, limestone burial jars, and musical instruments.

Images of Nation: I Love Kusama ImaginArt Other Notable H.R. Ocampo The art of acclaimed Japanese Globe Telecom partnered with the Ayala Museum for Exhibitions and An exhibition on National artist Yayoi Kusama was ImaginArt, a competition that offered young artists the Educational Artist H.R. Ocampo ran the subject of our inaugural chance to exhibit at the Globe Art Gallery in Globe’s Programs Collectors’ Series. I Love headquarters in Bonifacio Global City. The winner was film from June to November, To keep art and Kusama featured pieces from and television makeup artist Leo Velasco. with pieces from the Paulino culture relevant and the private collection of Lito and Hetty Que collection. intriguing to the public, and Kim Camacho. Collectors Greenstallations The exhibit was supported we organized other Series, through curated by a ST’ART workshop. Nuvali, the Ayala Land development in Santa Rosa, Laguna, exhibitions, including thematic exhibitions, aims partnered with the Ayala Museum to bring art to nature Terrain: The Works of to expand the understanding Musical Performances in August through Greenstallations, featuring artworks by Nelfa Querubin, Media and appreciation of local and sculptors Mario Mallari Jr., Juan Carlo Calma, Michael Art Kitchen Sensorium With the Manila Chamber international art. It provides Cacnio, and Eduardo Castrillo. (with Japan Foundation), Orchestra Foundation the opportunity to view and Constancio Bernardo: (MCOF) and the Manila artworks that are usually not 1913-2013. Also popular Symphony Orchestra seen in public, especially a were the History Comes (MSO), we organized body of work of a single artist. musical performances to Alive series with historian put classical music in a new Ambeth Ocampo, light. These included the DesignTalks session with Chamber Music Festival ProudRace, the graphic (February to April), Rush design masterclass with Hour Concerts (6:30 to Lucille Tenazas of The 7:30 p.m., March and April), New School, and Design and Season’s Symphonies Co.Mission (design (December). solutions for social problems) with Plus63.

21 ARTS AND CULTURE

Filipinas Heritage Library

Project Partners Local Government Units, National Book A library of rare and contemporary volumes on Philippine Development Board, BPI Foundation, Ayala Land, and history, art, and culture, the Filipinas Heritage Library Globe Telecom has reinvented itself as a “contemporary space for the Geographic Reach Nationwide and global contemporary researcher,” as it moves to make its collections Year Started more accessible to the public through digital technology, 1996 community programs, and literary events.

22 ARTS AND CULTURE ARTS AND CULTURE

2013 Highlights 450 217 1,543 researchers served RARE RARE BOOKS FUMIGATED / RESTORED BOOKS DIGITIZED 323 350,341 people reached through total visitorship of five educational programs FHL-managed websites

2013 Timeline

FHL’s New Home Armengol Collection Herencia After 16 years at the The family of former Spanish Ambassador to the To help improve the skills of public school teachers in teaching art, BPI historic Nielson Tower, Philippines Pedro Ortiz Armengol turned over a Foundation and FHL partnered for the Herencia Lectures. Now on its the Filipinas Heritage prized collection of 573 books on April 20. Armengol fourth year, the lectures were held at the BenCab Museum in Baguio reopened on the sixth was a distinguished writer, historian, traveler, and City (April 24-25) with 49 teachers, and the Negros Museum in Bacolod floor of the Ayala Philippine scholar, and is considered the primary (October 23 to 25) with 41 teachers. The seminar was an offshoot of the Museum on March 19. Spanish scholar on the history and urbanity of Manila. Herencia book published in 2008, featuring BPI’s art collection. The new FHL offers enhanced services and facilities, with focus on digitization.

POPtastik Pinoy! OurLibrary Eat Bulaga! Grant With the National Book Development Board (NBDB), we hosted We help communities develop their The Filipinas Heritage Library received a grant the 4th Philippine International Literary Festival on November own libraries through the OurLibrary from TAPE Inc. to archive more than 30 years’ 15, where Filipino writers discussed folk and popular literature project. In February we signed a worth of video materials from the longest running as shown in komiks, TV, and film. Entitled “POPtastik Pinoy!,” memorandum of agreement with the noontime show in the country, Eat Bulaga! the event featured lectures and sharing sessions on Filipino pop Local Government Units of Gumaca, literature. It was supported by an exhibition of costumes from Atimonan, and Tagkawayan, GMA Television Network’s popular fantaseryes (fantasy serials). Quezon Province. OurLibrary The exhibit, held at Glorietta and Greenbelt 3, was supported hopes to improve the collection of by GMA and Ayala Malls. resource and reading materials in public or school libraries in cities and municipalities; improve library facilities and services; and set up activities that promote a love of reading and learning.

23 SPECIAL PROJECTS

Strengthening the Capacity of Civil Society Organizations in the Philippines A project supported by the United States Agency for International Development (USAID), SCCSOP seeks to strengthen the organizational effectiveness and accountability of at least 120 civil society organizations (CSOs), increase the pool of trainers and mentors who can assist CSOs in meeting good governance and organizational management standards, and develop the capacities of CSO networks to create mechanisms to proactively respond to capacity gaps of their members. 2013 Highlights Project Partners USAID, Association of Foundations, Caucus of Development NGO Networks (CODE NGO), Philippine Business for Social Progress, Philippine 131 747 22 Council for NGO Certification, University of the Philippines Public participants who training sessions CSOs who attended the training conducted across Administration Research and received sessions five training Extension Services Foundation organizational programs development Geographic Reach assistance from Nationwide SCCSOP Year Started 2011 2013 Timeline

Continuing provision of package of capacity- Midproject assessment Other workshops building interventions Fieldwork for the midproject Special workshops on organizational diagnosis, SCCSOP conducted training sessions in five capacity areas: assessment was conducted from strategic planning, and the Non-US Organization effective governance; resource mobilization and development; June to August. The project team Pre-Award Survey (NUPAS) training were also program design, implementation and management, monitoring facilitated the self-assessment held. NUPAS is an important tool to determine and evaluation; financial management; and administrative of 103 participating CSOs. They how fit a non-US nonprofit is to be considered for and personnel management. We also fielded one volunteer assessed how far they have a USAID grant. organizational development mentor per participating CSO, progressed in attaining their OD/ provided technical assistance and templates for manuals. capacity-buidling plans.

24 SPECIAL PROJECTS SPECIAL PROJECTS

Buklod Bahayan Daycare Center

Buklod Bahayan Project Partners Private Donors, Department of Social Daycare Center Welfare and Development, Local serves the children of Government of Silang, Residents residents of Buklod Geographic Reach Silang, Cavite Bahayan, a socialized Year Started housing project in 1998 Barangay Tartaria, Silang, Cavite.

Project Timeline

Daycare operations Livelihood project The daycare center had a total A hand-soap and laundry-soap- enrollment of 92 students, for whom making project was started for various activities were regularly residents of the community. implemented, such as educational trips, feeding program, and others.

Project Partners 57-75 Education Reform Movement (Ateneo Center The Entire Nation (TEN) Moves for Educational Development, Eugenia Apostol Foundation, League of Corporate Foundations, We implemented TEN Moves, a multi-stakeholder initiative Philippine Business for Education, Philippine Business for Social Progress, Synergeia Foundation) that raised funds for the construction of 10,000 public school Geographic Reach classrooms from 2011 to 2013. We officially turned it over to the Nationwide

Philippine Business for Social Progress (PBSP) this year. Year Started 2011

25 Disaster Response

We undertook fund-raising activities, using both traditional and innovative platforms, for the benefit of our communities. But as the country experienced one disaster after another in the last quarter of the year, we launched several disaster relief drives not only for communities in immediate need, but also for those in need of long-term rehabilitation.

26 DISASTER RESPONSE

2013 Highlights P 1,475,858 P40,041,118 CASH DONATIONS FOR BOHOL EARTHQUAKE cash donations for Typhoon Yolanda

cash donations sent through P 1,145,512 Laging Handa general disaster fund P267,6 45 cash donations for children affected by Zamboanga unrest

2013 Timeline

Laging Handa Tugon sa Bohol Typhoon Yolanda (Haiyan) We launched Laging Handa, a year-round disaster Bohol was one of the hardest-hit provinces during Dubbed the strongest typhoon in recent history, relief channel through which people could send the 7.2 earthquake that struck Central Visayas on Supertyphoon Yolanda brought unprecedented their cash donations, even before a calamity October 15. It resulted in deaths, injury, damage damage and destruction to many parts of strikes. Through Laging Handa, we received to property, and the destruction of several the Visayas in November. Immediately after a total of =P1,145,512, of which =P432,355 was heritage churches. In response, the Ayala group the typhoon struck, we opened our donation used for the needs of students displaced by the launched Tugon sa Bohol, a campaign to raise channels and mobilized funds for immediate Zamboanga siege in October. funds for the rehabilitation of a Bohol heritage relief. We partnered with the Department of church. We partnered with Ayala Land Inc. to hold Social Welfare and Development, World Food Zamboanga fund-raising the Tugon sa Bohol fund-raising concert, which Programme of the United Nations, and the Ayala brought to Metro Manila the acclaimed Loboc Business Club Cebu. We released =P5.058 million Conflict between extremist groups and the Children’s Choir. Under the leadership of the for immediate relief between November and military in Zamboanga displaced numerous Ayala Museum and in partnership with Executive December, and developed a plan for long-term families and put the lives of thousands of Secretary Paquito Ochoa Jr., we restaged the rehabilitation. Focusing on the cities of Sagay and children in danger. In response to the call from Kisame exhibition, featuring the ceiling paintings Cadiz in Negros Occidental, we are implementing the Department of Education to provide school of Bohol’s heritage churches. Many of these education and sustainable livelihood programs supplies and other educational needs for the paintings are now gone. Through the sale of over the long term. affected school kids. We raised =P267,645, commemorative items and outright donations, we By the end of the year, we received =P40.04 supplemented with =P432,355 raised through raised =P1,475,858. The funds were allocated for million in cash donations. the Laging Handa channel. Our partners for this the pre-rehabilitation work to be undertaken by We also joined the One Big Ayala Volunteer initiative were the DepEd, National Book Store the Diocese of Tagbilaran. Night to pack relief goods for Yolanda victims. Foundation, and LBC Foundation.

27 Our Board of Trustees

Jaime Augusto Zobel de Ayala Fernando Zobel de Ayala CHAIRMEN OF THE BOARD OF TRUSTEES

Maria Lourdes Heras-de Leon Alfredo Ayala MEMBER OF THE BOARD OF TRUSTEES PRESIDENT AND MEMBER OF THE BOARD OF TRUSTEES

28 Antonino Aquino Gerardo Ablaza John Philip Orbeta MEMBERS OF THE BOARD OF TRUSTEES

Victoria Garchitorena MEMBER OF THE BOARD OF TRUSTEES

Jaime Laya Mercedita Nolledo Ernest Cu MEMBERS OF THE BOARD OF TRUSTEES MEMBER OF THE BOARD OF TRUSTEES

29 SPECIAL SECTION A Brief History of the Philippines’ Oldest Business House

yala in 2014 celebrates its 180th year. How it evolved into A one of the largest and most innovative Philippine conglomerates— with businesses ranging from real estate, financial services, and telecommunications to investments in water, electronics, automotive, business process outsourcing, power, and transport infrastructure—is the longest narrative in the country’s business history.

30 The story begins in 1834 in what was Las Islas banking. Banco Español-Filipino—which issued the Filipinas. At a time when Manila’s business houses first Philippine paper currency—later became Bank of were engaged mainly in executing customers’ orders the Philippine Islands. for buying and selling of commodities for a fee, landowner and entrepreneur Domingo Roxas and his One of de Ayala’s sons-in-law was the multitalented young industrial partner Antonio de Ayala created a Jacobo de Zobel: businessman, numismatist, company that would engage in agribusiness. They archaeologist, writer; mayor of Manila at age 30; built a distillery to derive greater value from cane sugar. he read and spoke 11 languages, including Arabic It was small but it represented a Philippine step from and Etruscan. While engaged in the family business the purely agricultural to the little-unexplored realm and serving on the Banco Español-Filipino board, he of industry. introduced the first streetcar system in Manila.

When it had grown and become well known, the After the turn of the 20th century, the tramcar service distillery exported various products to Europe and was sold to an American company that renamed it garnered awards and recognition for their quality. Manila Electric Railway and Light Co., or MERALCO. This showed that an enterprise in the rural and The distillery was also sold, to businessman Carlos remote Philippines could compete in the international Palanca; at the time, it had 3,000 employees, arena and win. Its best selling brand, Ginebra San including Filipino and French scientists. It had Miguel, remains today. become a de facto incubator of the country’s chemical industry. When a Spanish royal decree established El Banco Español-Filipino de Isabela II, Southeast Asia’s first private commercial bank, Antonio de Ayala was appointed director representing the Manila business community. Thus began the Ayala involvement in

31 SPECIAL SECTION

INTO MODERN TIMES A decision attributed to Roxas’ son Jose Bonifacio was the purchase of land in San Pedro de Makati that extended all the way to the banks of the Pasig River. The property was deemed to have little value and had undergone a series of ownership changes when the company bought it for P52,800 in 1851.

When the family’s assets were apportioned in 1914, the Makati property went to the cousins Jacobo, Alfonso, and Mercedes Zobel de Ayala. They and their successors would bring Ayala to what it is today.

Mercedes’ husband, Col. Joseph McMicking, provided a new vision for Ayala, and for developing what remained of the Makati property. The venture was uncertain and at first difficult. When success came, it signified an unprecedented leap in the evolution of local real estate development. From it emerged the Philippines’ first modern Central Business District.

Ayala moved further from being a family business to being more corporate in character. After a century, it began to employ professional managers. It incorporated in 1968 and became publicly listed in 1976.

With professional teams, Colonel McMicking and his successors in management—Jacobo’s son Enrique Zobel and Alfonso’s son Jaime Zobel—steered Ayala to great success in the 20th century. Today, Jaime Augusto and Fernando Zobel de Ayala share leadership of a modern conglomerate with a much broader impact on the life of the nation.

32 BEYOND 180 YEARS: ENABLING ENTREPRENEURSHIP Ayala has found that the entrepreneurial spirit that has driven it for 18 decades is shared by many Filipinos, including merchants in its malls, retailers of Globe products, overseas workers’ families that bank with BPI, residents’ cooperatives in Manila Water’s distribution zone, and micro-entrepreneurs who benefit from BanKO’s microfinance services. As Ayala continues its expansion and diversification, it keeps an enthusiastic eye for the many thousands of people who will begin and build their own businesses through the ones it creates.

“By emphasizing a social purpose, we achieve a more complete form of doing business and generate a cycle of prosperity,” says the chairman and chief executive officer, Jaime Augusto Zobel de Ayala.

“We have always believed that the development of every individual foregrounds the development of the whole,” adds his brother Fernando, president and chief operating officer.

Ayala’s reputation for integrity, product and service quality, financial strength and prudence, and high professionalism has made it a partner of choice for major international corporations and the employer of choice for many of the best and brightest talents. The respect and trust it enjoys is deemed to have been earned by few other businesses in the Philippines, and these are the core values that it treasures the most.

The conglomerate’s leadership, with Jaime Zobel de Ayala as chairman emeritus, constantly promotes these values, including a deep commitment to Philippine development and to the Filipino.

Ayala’s narrative of pioneering innovation continues into a future full of new opportunity and promise.

33 FS divider choose pic from El Nido

Report of Independent Auditors

34 STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of Ayala Foundation, Inc. is responsible for the preparation and fair presentation of the financial statements for the years ended December 31, 2013 and 2012, including the additional components attached therein, in accordance with the Philippine Financial Reporting Standards. This responsibility includes designing and implementing internal controls relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

The Board of Trustees reviews and approves the financial statements and submits the same to the members.

Sycip Gorres Velayo & Co., the independent auditors appointed by the members, has examined the financial statements of the company in accordance with Philippine Standards on Auditing and in its report to the members, has expressed its opinion on the fairness of presentation upon completion of such examination.

JAIME AUGUSTO ZOBEL DE AYALA FERNANDO ZOBEL DE AYALA Co-Chairman Co-Chairman

MARIA LOURDES HERAS – DE LEON President

ADITAS VIVIAN L. SANTAMARIA Chief Financial Officer

Signed this____4th day of______March, 2014

35 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 28, 2012, valid until December 31, 2015 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-3 (Group A), Philippines November 15, 2012, valid until November 16, 2015

Opinion INDEPENDENT AUDITORS’ REPORT In our opinion, the financial statements present fairly, in all material respects, the financial position of Ayala Foundation, Inc. as at December 31, 2013 and 2012, and the statements of activities and its cash flows for the years then ended in accordance with Philippine Financial Reporting Standards.

The Board of Trustees Ayala Foundation, Inc. Report on the Supplementary Information Required Under Revenue Regulations 15-2010 10th Floor, BPI Main Building Ayala Avenue corner Paseo de Roxas Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information required under Revenue Regulations 15-2010 in Legaspi Village, Makati City Note 15 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of Ayala Foundation, Inc. The information has been subjected to the Report on the Financial Statements auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as We have audited the accompanying financial statements of Ayala Foundation, Inc. (a non-stock, non-profit corporation), which comprise the statements of financial position as at December 31, 2013 a whole. and 2012, and the statements of activities, statements of changes in fund balances and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. SYCIP GORRES VELAYO & CO.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards, and for such internal control as Jessie D. Cabaluna management determines is necessary to enable the preparation of financial statements that are free Partner from material misstatement, whether due to fraud or error. CPA Certificate No. 36317 SEC Accreditation No. 0069-AR-3 (Group A), Auditors’ Responsibility February 14, 2013, valid until February 13, 2016 Tax Identification No. 102-082-365 Our responsibility is to express an opinion on these financial statements based on our audits. We BIR Accreditation No. 08-001998-10-2012, conducted our audits in accordance with Philippine Standards on Auditing. Those standards require April 11, 2012, valid until April 10, 2015 that we comply with ethical requirements and plan and perform the audit to obtain reasonable PTR No. 4225155, January 2, 2014, Makati City assurance about whether the financial statements are free from material misstatement. March 4, 2014 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited 36 Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Ayala Foundation, Inc. as at December 31, 2013 and 2012, and the statements of activities and its cash flows for the years then ended in accordance with Philippine Financial Reporting Standards.

Report on the Supplementary Information Required Under Revenue Regulations 15-2010

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information required under Revenue Regulations 15-2010 in Note 15 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of Ayala Foundation, Inc. The information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Jessie D. Cabaluna Partner CPA Certificate No. 36317 SEC Accreditation No. 0069-AR-3 (Group A), February 14, 2013, valid until February 13, 2016 Tax Identification No. 102-082-365 BIR Accreditation No. 08-001998-10-2012, April 11, 2012, valid until April 10, 2015 PTR No. 4225155, January 2, 2014, Makati City

March 4, 2014

A member firm of Ernst & Young Global Limited 37 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 28, 2012, valid until December 31, 2015 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-3 (Group A),

Philippines November 15, 2012, valid until November 16, 2015 AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) STATEMENTS OF FINANCIAL POSITION

December 31 2013 2012 INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTARY SCHEDULE ASSETS

Current Assets Cash and cash equivalents (Notes 4 and 13) P=133,069,407 P=93,752,612 The Board of Trustees Receivables - net (Notes 5 and 13) 16,945,581 18,265,005 Ayala Foundation, Inc. Merchandise inventories - net (Note 6) 16,341,275 16,284,204 10th Floor, BPI Main Building Other current assets (Note 7) 7,832,928 8,501,607 Ayala Avenue corner Paseo de Roxas Total Current Assets 174,189,191 136,803,428 Legaspi Village, Makati City Noncurrent Assets Property and equipment (Note 8) 161,813,423 148,202,196 We have audited in accordance with Philippine Standards on Auditing, the financial statements of Available-for-sale financial assets Ayala Foundation, Inc. (the Foundation) as at December 31, 2013 and 2012 and for the years ended (Notes 9 and 13) 2,290,996,965 1,711,200,034 December 31, 2013 and 2012, and have issued our report thereon dated March 4, 2014. Our audits Total Noncurrent Assets 2,452,810,388 1,859,402,230 were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying schedule of all the effective standards and interpretations as of December 31, 2013 P=2,626,999,579 P=1,996,205,658 is the responsibility of the Foundation’s management. This schedule is presented for purposes of complying with Securities Regulation Code Rule 68, As Amended (2011) and is not part of the basic financial statements. This schedule have been subjected to the auditing procedures applied in the audit LIABILITIES AND NET ASSETS of the basic financial statements and, in our opinion, fairly state, in all material respects, the information required to be set forth therein in relation to the basic financial statements taken as a Current Liability whole. Accounts and other payables (Notes 10 and 13) P=75,126,583 P=70,190,540 Noncurrent Liability SYCIP GORRES VELAYO & CO. Pension liability (Note 11) 20,555,787 32,114,399 Total Liabilities 95,682,370 102,304,939

Net Assets (Note 12) Unrestricted 18,553,135 1,113,186 Jessie D. Cabaluna Temporarily restricted 288,317,350 190,570,834 Partner Permanently restricted 2,187,714,273 1,653,150,699 CPA Certificate No. 36317 Unrealized gain on available-for-sale financial assets (Note 9) 57,285,726 83,954,992 SEC Accreditation No. 0069-AR-3 (Group A), Remeasurement loss on defined benefit obligation (Note 11) (20,553,275) (34,888,992) February 14, 2013, valid until February 13, 2016 Total Net Assets 2,531,317,209 1,893,900,719 Tax Identification No. 102-082-365 P=2,626,999,579 P=1,996,205,658 BIR Accreditation No. 08-001998-10-2012, April 11, 2012, valid until April 10, 2015 See accompanying Notes to Financial Statements. PTR No. 4225155, January 2, 2014, Makati City

March 4, 2014

38 A member firm of Ernst & Young Global Limited

AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) STATEMENTS OF FINANCIAL POSITION

December 31 2013 2012

ASSETS

Current Assets Cash and cash equivalents (Notes 4 and 13) P=133,069,407 P=93,752,612 Receivables - net (Notes 5 and 13) 16,945,581 18,265,005 Merchandise inventories - net (Note 6) 16,341,275 16,284,204 Other current assets (Note 7) 7,832,928 8,501,607 Total Current Assets 174,189,191 136,803,428

Noncurrent Assets Property and equipment (Note 8) 161,813,423 148,202,196 Available-for-sale financial assets (Notes 9 and 13) 2,290,996,965 1,711,200,034 Total Noncurrent Assets 2,452,810,388 1,859,402,230 P=2,626,999,579 P=1,996,205,658

LIABILITIES AND NET ASSETS

Current Liability Accounts and other payables (Notes 10 and 13) P=75,126,583 P=70,190,540

Noncurrent Liability Pension liability (Note 11) 20,555,787 32,114,399 Total Liabilities 95,682,370 102,304,939

Net Assets (Note 12) Unrestricted 18,553,135 1,113,186 Temporarily restricted 288,317,350 190,570,834 Permanently restricted 2,187,714,273 1,653,150,699 Unrealized gain on available-for-sale financial assets (Note 9) 57,285,726 83,954,992 Remeasurement loss on defined benefit obligation (Note 11) (20,553,275) (34,888,992) Total Net Assets 2,531,317,209 1,893,900,719 P=2,626,999,579 P=1,996,205,658

See accompanying Notes to Financial Statements.

39 40

AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) STATEMENTS OF ACTIVITIES

December 31, 2013 Unrealized Remeasurement Gain (Loss) on Gain (Loss) on Temporarily Permanently AFS Financial Defined Benefit Unrestricted Restricted Restricted Assets Obligation (Note 12) (Note 12) (Note 12) (Note 9) (Note 11) Total Revenue, gains and other supports: Public support P=– P=266,377,033 P=528,000,000 P=– P=– P=794,377,033 Investment and interest (Notes 4 and 9) 85,300,000 38,452,054 – – – 123,752,054 Project – 2,024,914 – – – 2,024,914 Net assets released from restrictions 195,026,461 (195,026,461) – – – – Others – 1,545,876 – – – 1,545,876 280,326,461 113,373,416 528,000,000 – – 921,699,877 Expenses and losses: Project 221,547,505 – – – – 221,547,505 General and administrative 41,339,007 – – – – 41,339,007 Net loss from other activities (Note 14) – 9,063,326 – – – 9,063,326 262,886,512 9,063,326 – – – 271,949,838 Excess of revenue, gains and other supports over expenses and losses 17,439,949 104,310,090 528,000,000 – – 649,750,039 Fund allocation (disbursements) – (6,563,574) 6,563,574 – – – Unrealized loss on available-for-sale financial assets – – – (26,669,266) – (26,669,266) Remeasurement gain on defined benefit obligation – – – – 14,335,717 14,335,717 CHANGES IN NET ASSETS 17,439,949 97,746,516 534,563,574 (26,669,266) 14,335,717 637,416,490 NET ASSETS AT BEGINNING OF YEAR 1,113,186 190,570,834 1,653,150,699 83,954,992 (34,888,992) 1,893,900,719 NET ASSETS AT END OF YEAR P=18,553,135 P=288,317,350 P=2,187,714,273 P=57,285,726 (P=20,553,275) P=2,531,317,209

December 31, 2012 Unrealized Gain Remeasurement Temporarily Permanently on AFS Loss on Defined Unrestricted Restricted Restricted Financial Assets Benefit Obligation (Note 12) (Note 12) (Note 12) (Note 9) (Note 11) Total Revenue, gains and other supports: Public support P=– P=240,723,890 P=255,400,000 P=– P=– P=496,123,890 Investment and interest (Notes 4 and 9) 25,198,013 33,402,538 74,608,081 – – 133,208,632 Project – 5,533,084 – – – 5,533,084 Net assets released from restrictions 158,507,361 (158,507,361) – – – – Others – 945,947 – – – 945,947 183,705,374 122,098,098 330,008,081 – – 635,811,553 Expenses and losses: Project 266,167,312 – – – – 266,167,312 General and administrative 41,836,330 – – – – 41,836,330 Net loss from other activities (Note 14) – 9,042,956 – – – 9,042,956 308,003,642 9,042,956 – – – 317,046,598 Excess of revenue, gains and other supports over expenses and losses (expenses over revenue) (124,298,268) 113,055,142 330,008,081 – – 318,764,955 Fund allocation (disbursements) – (368,425,599) 368,333,034 – – (92,565) Unrealized gain on available-for-sale financial assets – – – 357,240 – 357,240 Remeasurement loss on defined benefit obligation – – – – (30,641,157) (30,641,157) CHANGES IN NET ASSETS (124,298,268) (255,370,457) 698,341,115 357,240 (30,641,157) 288,388,473 NET ASSETS AT BEGINNING OF YEAR 125,411,454 445,941,291 954,809,584 83,597,752 (4,247,835) 1,605,512,246 NET ASSETS AT END OF YEAR P=1,113,186 P=190,570,834 P=1,653,150,699 P=83,954,992 (P=34,888,992) P=1,893,900,719

See accompanying Notes to Financial Statements. December 31, 2012 Unrealized Gain Remeasurement Temporarily Permanently on AFS Loss on Defined Unrestricted Restricted Restricted Financial Assets Benefit Obligation (Note 12) (Note 12) (Note 12) (Note 9) (Note 11) Total Revenue, gains and other supports: Public support P=– P=240,723,890 P=255,400,000 P=– P=– P=496,123,890 Investment and interest (Notes 4 and 9) 25,198,013 33,402,538 74,608,081 – – 133,208,632 Project – 5,533,084 – – – 5,533,084 Net assets released from restrictions 158,507,361 (158,507,361) – – – – Others – 945,947 – – – 945,947 183,705,374 122,098,098 330,008,081 – – 635,811,553 Expenses and losses: Project 266,167,312 – – – – 266,167,312 General and administrative 41,836,330 – – – – 41,836,330 Net loss from other activities (Note 14) – 9,042,956 – – – 9,042,956 308,003,642 9,042,956 – – – 317,046,598 Excess of revenue, gains and other supports over expenses and losses (expenses over revenue) (124,298,268) 113,055,142 330,008,081 – – 318,764,955 Fund allocation (disbursements) – (368,425,599) 368,333,034 – – (92,565) Unrealized gain on available-for-sale financial assets – – – 357,240 – 357,240 Remeasurement loss on defined benefit obligation – – – – (30,641,157) (30,641,157) CHANGES IN NET ASSETS (124,298,268) (255,370,457) 698,341,115 357,240 (30,641,157) 288,388,473 NET ASSETS AT BEGINNING OF YEAR 125,411,454 445,941,291 954,809,584 83,597,752 (4,247,835) 1,605,512,246 NET ASSETS AT END OF YEAR P=1,113,186 P=190,570,834 P=1,653,150,699 P=83,954,992 (P=34,888,992) P=1,893,900,719

See accompanying Notes to Financial Statements. 41 42

AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) STATEMENTS OF CHANGES IN FUND BALANCES

Year Ended December 31, 2013 Unrealized Remeasurement Gain (Loss) on Gain (Loss) on Temporarily Permanently AFS Defined Benefit Unrestricted Restricted Restricted Financial Assets Obligation Total FUND BALANCES Net assets at beginning of year P=1,113,186 P=190,570,834 P=1,653,150,699 P=83,954,992 (P=34,888,992) P=1,893,900,719 Excess of revenue, gains and other supports over expenses and losses 17,439,949 104,310,090 528,000,000 – – 649,750,039 Fund allocation (disbursements) – (6,563,574) 6,563,574 – – – Net unrealized loss – – – (26,669,266) – (26,669,266) Remeasurement gain on defined benefit obligation – – – – 14,335,717 14,335,717 Net assets at end of year P=18,553,135 P=288,317,350 P=2,187,714,273 P=57,285,726 (P=20,553,275) P=2,531,317,209

Year Ended December 31, 2012 Unrealized Remeasurement Temporarily Permanently Gain on AFS Loss on Defined Unrestricted Restricted Restricted Financial Assets Benefit Obligation Total FUND BALANCES Net assets at beginning of year P=125,411,454 P=445,941,291 P=954,809,584 P=83,597,752 (P=4,247,835) P=1,605,512,246 Excess of revenue, gains and other supports over expenses and losses (expenses over revenue) (124,298,268) 113,055,142 330,008,081 – – 318,764,955 Fund allocation (disbursements) – (368,425,599) 368,333,034 – – (92,565) Net unrealized gain – – – 357,240 – 357,240 Remeasurement loss on defined benefit obligation – – – – (30,641,157) (30,641,157) Net assets at end of year P=1,113,186 P=190,570,834 P=1,653,150,699 P=83,954,992 (P=34,888,992) P=1,893,900,719

See accompanying Notes to Financial Statements. See accompanying Notes to FinancialNotes to Seeaccompanying Statements. CASH AND CASH EQUIVALENTS AT CASH AND CASH EQUIVALENTS AT NET INCREASE (DECREASE) INCASH AND CASH Net cash used in investing activities Investment Proceeds on disposal of property an Decrease restrictedin cash equivalents Net disposals (a CASH FLOWS FROM INVESTING Net cash provided by operating activities Increas Decrease (increase) in: Changes net in a Adjustments for: Changes net in assets CASH FLOWS FROM OPERATING ACTIVITIES FLOWS OFCASH STATEMENTS (A Non-Stock, Non-Profit Corporation) INC. AYALA FOUNDATION, END OF YEAR YEAR OF END BEGINNING OF EQUIVALENTS Property andequipment 8)(Note AFS financial assets Pension liability Accounts and other payables Other current assets Merchandise inventories Receivables Investment andinterest income Pension expense (Note 11) Unrealized loss (gain) Provision for doubtful acc Loss Depreciation and amortization (Note 8) Remeasurement loss e (decrease) in: (Note (Note 11)

(gain) and interest dditions on disposal of property andequipment

ssets before changes workingin capital

(Note 11)

(Note 4)

YEAR

income received ) to: )

(Note 9) (gain)

on AFS financial assets (Note 9)

ounts (Notes 5and 12)

on defined benefit

d equipment

(Notes 4and(Notes 9)

ACTIVITIES

obligation obligation

P P = = (506,100,886) ( (12 133,069,407 123,957,821 606,466,197 545,417,681 544,330,829 637,416,490 (23,834,376) (14,335,717) 93,752,612 39,316,795 26,669,26 10,223,149 (5,574,456) 4,936,043 1,113,657 8,351,561 3 Years Ended December 31 (241,866) , 241,866 668,679 752 (57,071) 201 , 054 – – 6 3 ) )

P= (268,690,884) (461,215,953) (649,989,264) ( P= 362,443,496 133,002,865 192,525,069 219,948,057 133,208,632 288,388,473 (13,129,554) (12,352,249) 93,752,612 68,900,000 10,665,840 15,492,425 30,641,157 (9,014,350) (3,386,162) (2,833,357) 3,043,024 5,283,010 (357,240) 163,130 2012 − )

AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) STATEMENTS OF CASH FLOWS

Years Ended December 31 2013 2012

CASH FLOWS FROM OPERATING ACTIVITIES Changes in net assets P=637,416,490 P=288,388,473 Adjustments for: Remeasurement loss (gain) on defined benefit obligation (Note 11) (14,335,717) 30,641,157 Depreciation and amortization (Note 8) 10,223,149 15,492,425 Loss (gain) on disposal of property and equipment (241,866) 10,665,840 Provision for doubtful accounts (Notes 5 and 12) – 5,283,010 Unrealized loss (gain) on AFS financial assets (Note 9) 26,669,266 (357,240) Pension expense (Note 11) 8,351,561 3,043,024 Investment and interest income (Notes 4 and 9) (123,752,054) (133,208,632) Changes in net assets before changes in working capital 544,330,829 219,948,057 Decrease (increase) in: Receivables 1,113,657 (2,833,357) Merchandise inventories (57,071) 163,130 Other current assets 668,679 (3,386,162) Increase (decrease) in: Accounts and other payables 4,936,043 (12,352,249) Pension liability (Note 11) (5,574,456) (9,014,350) Net cash provided by operating activities 545,417,681 192,525,069

CASH FLOWS FROM INVESTING ACTIVITIES Net disposals (additions) to: AFS financial assets (Note 9) (606,466,197) (649,989,264) Property and equipment (Note 8) (23,834,376) (13,129,554) Decrease in restricted cash equivalents – 68,900,000 Proceeds on disposal of property and equipment 241,866 − Investment and interest income received 123,957,821 133,002,865 Net cash used in investing activities (506,100,886) (461,215,953)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 39,316,795 (268,690,884)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 93,752,612 362,443,496

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) P=133,069,407 P=93,752,612

See accompanying Notes to Financial Statements.

43 AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) revoked by the Bureau of Internal Revenue (BIR) or upon withdrawal of the Certificate of NOTES TO FINANCIAL STATEMENTS Accreditation by PCNC. The Foundation’s registered office address is at 10th Floor, BPI Main Building, Ayala Avenue corner Paseo de Roxas, Legaspi Village, Makati City. 1. Organization and Tax Exemption The accompanying financial statements were approved and authorized for issue by the Board of Ayala Foundation, Inc. (the Foundation) was registered with the Securities and Exchange Trustees on March 4, 2014. Commission (SEC) on December 28, 1961 as a non-stock, non-profit corporation primarily for the following purposes: 2. Summary of Significant Accounting Policies a. To provide financial support, within the Philippines and abroad, for the studies of selected students and for the attendance at scientific conferences by qualified and competent scholars; Basis of Preparation The financial statements of the Foundation have been prepared using the historical cost basis, b. To undertake community development and livelihood projects designed to improve the quality except for available-for-sale (AFS) financial assets that have been measured at fair value. The of life of disadvantaged Filipinos; accompanying financial statements are presented in Philippine Peso (P=) which is the Foundation’s presentation and functional currency. All amounts are rounded off to the nearest peso unit unless c. To undertake ventures that will transfer appropriate technology to urban and rural groups that otherwise indicated. will give them additional income and allow them to put up profitable enterprises that will benefit themselves and the community; Consistent with the requirement of Philippine Accounting Standard (PAS) 8, Accounting Policies, Changes in Accounting Estimates and Errors, the Foundation applied Statement of Financial d. To provide scholarships to poor but deserving urban and rural youth in vocational, technical, Accounting Standards No. 117, Financial Statements of Not-for-Profit Organizations. This livelihood and entrepreneurial courses; Statement establishes standards for general-purpose external financial statements provided by a not-for-profit organization. It specifies that those statements include a statement of financial e. To preserve and enhance Philippine Art and Culture by, among other things, establishing and position, a statement of activities, statement of changes in fund balances and a statement of cash maintaining museums, supporting ethnic artisans and craftsmen, and undertaking related flows. activities that will encourage Filipinos, especially our youth, to appreciate their heritage; Statement of Compliance f. To organize, staff and finance research projects which may be established in furtherance of the The accompanying financial statements have been prepared in compliance with Philippine purposes and objectives of the Foundation; and Financial Reporting Standards (PFRS). g. To promote, support, and finance the publication of reports prepared under the auspices of the Adoption of New and Amended Accounting Standards and Interpretations Foundation. The Foundation will adopt the following amended standards and Philippine Interpretations enumerated below when these become effective on January 1, 2013. Except as otherwise On February 15, 2010, the Foundation amended its Articles of Incorporation: (a) extending the indicated, the adoption of the new and amended Standards and Interpretations did not have a term for which the Foundation is to exist for another fifty (50) years from December 28, 2011 and significant impact on the Foundation’s financial statements. (b) to declassify the Foundation as a science and research foundation.  PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and Financial As a non-stock, non-profit corporation, the Foundation falls under Section 30 (E) of the Republic Liabilities (Amendments) Act No. 8424 entitled, “An Act Amending the National Internal Revenue Code, as Amended, and These Amendments require an entity to disclose information about rights of set-off and related for Other Purposes”. The receipts from activities conducted in pursuit of the objectives for which arrangements (such as collateral agreements). The new disclosures are required for all the Foundation was established are exempt from income tax. However, any income arising from recognized financial instruments that are set off in accordance with PAS 32. These disclosures its real or personal properties, or from activities conducted for profit, regardless of the disposition also apply to recognized financial instruments that are subject to an enforceable master netting made of such income, is subject to income tax. arrangement or ‘similar agreement’, irrespective of whether they are set-off in accordance with PAS 32. The Amendments require entities to disclose, in a tabular format, unless another The Foundation is duly accredited by the Philippine Council for Non-Government Organization format is more appropriate, the following minimum quantitative information. This is Certification (PCNC) and renewed its registration as a donee institution on August 6, 2010 in presented separately for financial assets and financial liabilities recognized at the end of the accordance with the provisions of Revenue Regulation No. 13-98. Donations received shall entitle reporting period: the donors to full or limited deduction pursuant to Section 34 (H) (paragraphs 1 or 2) and a) The gross amounts of those recognized financial assets and recognized financial liabilities; exemption from donor’s tax pursuant to Section 101 (A) (3) of the National Internal Revenue b) The amounts that are set off in accordance with the criteria in PAS 32 when determining Code of 1997. The Certificate of Registration shall be valid until July 01, 2015 unless sooner the net amounts presented in the statement of financial position;

44 revoked by the Bureau of Internal Revenue (BIR) or upon withdrawal of the Certificate of Accreditation by PCNC.

The Foundation’s registered office address is at 10th Floor, BPI Main Building, Ayala Avenue corner Paseo de Roxas, Legaspi Village, Makati City.

The accompanying financial statements were approved and authorized for issue by the Board of Trustees on March 4, 2014.

2. Summary of Significant Accounting Policies

Basis of Preparation The financial statements of the Foundation have been prepared using the historical cost basis, except for available-for-sale (AFS) financial assets that have been measured at fair value. The accompanying financial statements are presented in Philippine Peso (P=) which is the Foundation’s presentation and functional currency. All amounts are rounded off to the nearest peso unit unless otherwise indicated.

Consistent with the requirement of Philippine Accounting Standard (PAS) 8, Accounting Policies, Changes in Accounting Estimates and Errors, the Foundation applied Statement of Financial Accounting Standards No. 117, Financial Statements of Not-for-Profit Organizations. This Statement establishes standards for general-purpose external financial statements provided by a not-for-profit organization. It specifies that those statements include a statement of financial position, a statement of activities, statement of changes in fund balances and a statement of cash flows.

Statement of Compliance The accompanying financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

Adoption of New and Amended Accounting Standards and Interpretations The Foundation will adopt the following amended standards and Philippine Interpretations enumerated below when these become effective on January 1, 2013. Except as otherwise indicated, the adoption of the new and amended Standards and Interpretations did not have a significant impact on the Foundation’s financial statements.

 PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities (Amendments) These Amendments require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are set off in accordance with PAS 32. These disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or ‘similar agreement’, irrespective of whether they are set-off in accordance with PAS 32. The Amendments require entities to disclose, in a tabular format, unless another format is more appropriate, the following minimum quantitative information. This is presented separately for financial assets and financial liabilities recognized at the end of the reporting period: a) The gross amounts of those recognized financial assets and recognized financial liabilities; b) The amounts that are set off in accordance with the criteria in PAS 32 when determining the net amounts presented in the statement of financial position;

45 c) The net amounts presented in the statement of financial position;  PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive d) The amounts subject to an enforceable master netting arrangement or similar agreement Income or OCI (Amendments) that are not otherwise included in (b) above, including: These Amendments introduce a grouping of items presented in OCI. Items that will be i. Amounts related to recognized financial instruments that do not meet some or all of reclassified (or “recycled”) to profit or loss at a future point in time (for example, upon the offsetting criteria in PAS 32; and derecognition or settlement) will be presented separately from items that will never be ii. Amounts related to financial collateral (including cash collateral); and recycled. The Amendments affect presentation only and have no impact on the Foundation’s e) The net amount after deducting the amounts in (d) from the amounts in (c) above. financial position or performance.

The Amendments have no impact on the Foundation’s financial position or performance.  PAS 19, Employee Benefits (Revised) For defined benefit plans, the revised PAS 19 requires all actuarial gains and losses to be  PFRS 10, Consolidated Financial Statements recognized in other comprehensive income and unvested past service costs previously PFRS 10 replaced the portion of PAS 27, Consolidated and Separate Financial Statements, recognized over the average vesting period to be recognized immediately in profit or loss that addressed the accounting for consolidated financial statements. It also included the issues when incurred. The Foundation applied revised PAS 19 for the first time in its financial raised in SIC 12, Consolidation - Special Purpose Entities. PFRS 10 established a single statements as at January 1, 2012. The Foundation changed its accounting policy to recognize control model that applied to all entities including special purpose entities. The changes all actuarial gains and losses in other comprehensive income and all past service costs in profit introduced by PFRS 10 require management to exercise significant judgment to determine or loss in the period they occur. which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in PAS 27. The revised PAS 19 replaced the interest cost and expected return on plan assets with the concept of net interest on defined benefit liability or asset which is calculated by multiplying  PFRS 11, Joint Arrangements the net balance sheet defined benefit liability or asset by the discount rate used to measure the PFRS 11 replaced PAS 31, Interests in Joint Ventures, PFRS 11 and SIC 13, Jointly employee benefit obligation, each as at the beginning of the annual period. Controlled Entities - Non-Monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities using proportionate consolidation. Instead, jointly The revised PAS 19 also amended the definition of short-term employee benefits and requires controlled entities that meet the definition of a joint venture must be accounted for using the employee benefits to be classified as short-term based on expected timing of settlement rather equity method. than the employee’s entitlement to the benefits. In addition, the revised PAS 19 modifies the timing of recognition for termination benefits. The modification requires the termination  PFRS 12, Disclosure of Interests in Other Entities benefits to be recognized at the earlier of when the offer cannot be withdrawn or when the PFRS 12 sets out the requirements for disclosures relating to an entity’s interests in related restructuring costs are recognized. subsidiaries, joint arrangements, associates and structured entities. The requirements in PFRS 12 are more comprehensive than the previously existing disclosure requirements for Changes to definition of short-term employee benefits and timing of recognition for subsidiaries (for example, where a subsidiary is controlled with less than a majority of voting termination benefits do not have any impact to the Foundation’s financial position and rights). financial performance.

 PFRS 13, Fair Value Measurement  PAS 27, Separate Financial Statements (as revised in 2011) PFRS 13 establishes a single source of guidance under PFRSs for all fair value measurements. As a consequence of the issuance of the new PFRS 10, Consolidated Financial Statements, PFRS 13 does not change when an entity is required to use fair value, but rather provides and PFRS 12, Disclosure of Interests in Other Entities, PAS 27 has been amended. What guidance on how to measure fair value under PFRS. PFRS 13 defines fair value as an exit remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and price. PFRS 13 also requires additional disclosures. associates in the separate financial statements.

As a result of the guidance in PFRS 13, the Foundation re-assessed its policies for measuring  PAS 28, Investments in Associates and Joint Ventures (as revised in 2011) fair values, in particular, its valuation inputs such as non-performance risk for fair value As a consequence of the issuance of the new PFRS 11, Joint Arrangements, and PFRS 12, measurement of liabilities. The Foundation has assessed that the application of PFRS 13 has Disclosure of Interests in Other Entities, PAS 28 has been renamed PAS 28, Investments in not materially impacted the fair value measurements of the Foundation. Additional Associates and Joint Ventures, and describes the application of the equity method to disclosures, where required, are provided in the individual notes relating to the assets and investments in joint ventures in addition to associates. liabilities whose fair values were determined. Fair value hierarchy is provided in Note 13.  Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine This Interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine. The Interpretation addresses the accounting for the benefit from the stripping activity. This new Interpretation is not relevant to the Foundation.

46  PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income or OCI (Amendments) These Amendments introduce a grouping of items presented in OCI. Items that will be reclassified (or “recycled”) to profit or loss at a future point in time (for example, upon derecognition or settlement) will be presented separately from items that will never be recycled. The Amendments affect presentation only and have no impact on the Foundation’s financial position or performance.

 PAS 19, Employee Benefits (Revised) For defined benefit plans, the revised PAS 19 requires all actuarial gains and losses to be recognized in other comprehensive income and unvested past service costs previously recognized over the average vesting period to be recognized immediately in profit or loss when incurred. The Foundation applied revised PAS 19 for the first time in its financial statements as at January 1, 2012. The Foundation changed its accounting policy to recognize all actuarial gains and losses in other comprehensive income and all past service costs in profit or loss in the period they occur.

The revised PAS 19 replaced the interest cost and expected return on plan assets with the concept of net interest on defined benefit liability or asset which is calculated by multiplying the net balance sheet defined benefit liability or asset by the discount rate used to measure the employee benefit obligation, each as at the beginning of the annual period.

The revised PAS 19 also amended the definition of short-term employee benefits and requires employee benefits to be classified as short-term based on expected timing of settlement rather than the employee’s entitlement to the benefits. In addition, the revised PAS 19 modifies the timing of recognition for termination benefits. The modification requires the termination benefits to be recognized at the earlier of when the offer cannot be withdrawn or when the related restructuring costs are recognized.

Changes to definition of short-term employee benefits and timing of recognition for termination benefits do not have any impact to the Foundation’s financial position and financial performance.

 PAS 27, Separate Financial Statements (as revised in 2011) As a consequence of the issuance of the new PFRS 10, Consolidated Financial Statements, and PFRS 12, Disclosure of Interests in Other Entities, PAS 27 has been amended. What remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in the separate financial statements.

 PAS 28, Investments in Associates and Joint Ventures (as revised in 2011) As a consequence of the issuance of the new PFRS 11, Joint Arrangements, and PFRS 12, Disclosure of Interests in Other Entities, PAS 28 has been renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates.

 Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine This Interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine. The Interpretation addresses the accounting for the benefit from the stripping activity. This new Interpretation is not relevant to the Foundation.

47  PFRS 1, First-time Adoption of International Financial Reporting Standards - Government  PAS 34, Interim Financial Reporting - Interim financial reporting and segment information Loans (Amendments) for total assets and liabilities These Amendments require first-time adopters to apply the requirements of PAS 20, The Amendment clarifies that the total assets and liabilities for a particular reportable segment Accounting for Government Grants and Disclosure of Government Assistance, prospectively need to be disclosed only when the amounts are regularly provided to the chief operating to government loans existing at the date of transition to PFRS. However, entities may choose decision maker and there has been a material change from the amount disclosed in the entity’s to apply the requirements of PAS 39, Financial Instruments: Recognition and Measurement, previous annual financial statements for that reportable segment. The Amendment affects and PAS 20 to government loans retrospectively if the information needed to do so had been disclosures only and has no impact on the Foundation’s financial position or performance. obtained at the time of initially accounting for those loans. These Amendments are not relevant to the Foundation. Future Changes in Accounting Policies The Foundation will adopt the following amended standards and Philippine Interpretations Annual Improvements to PFRSs (2009-2011 cycle) enumerated below when these become effective. Except as otherwise indicated, the Foundation The Annual Improvements to PFRSs (2009-2011 cycle) contain non-urgent but necessary does not expect the adoption of these new and amended PFRS and Philippine Interpretations to amendments to PFRSs. The Foundation adopted these amendments for the current year. have significant impact on the Foundation’s financial statements.

 PFRS 1, First-time Adoption of PFRS - Borrowing Costs Effective 2014 The Amendment clarifies that, upon adoption of PFRS, an entity that capitalized borrowing costs in accordance with its previous generally accepted accounting principles, may carry  PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets forward, without any adjustment, the amount previously capitalized in its opening statement of (Amendments) financial position at the date of transition. Subsequent to the adoption of PFRS, borrowing These Amendments remove the unintended consequences of PFRS 13 on the disclosures costs are recognized in accordance with PAS 23, Borrowing Costs. The Amendment does not required under PAS 36. In addition, these Amendments require disclosure of the recoverable apply to the Foundation as it is not a first-time adopter of PFRS. amounts for the assets or cash-generating units (CGUs) for which impairment loss has been recognized or reversed during the period. These Amendments are effective retrospectively for  PAS 1, Presentation of Financial Statements - Clarification of the requirements for annual periods beginning on or after January 1, 2014 with earlier application permitted, comparative information provided PFRS 13 is also applied. These Amendments clarify the requirements for comparative information that are disclosed voluntarily and those that are mandatory due to retrospective application of an accounting  Investment Entities (Amendments to PFRS 10, PFRS 12 and PAS 27) policy, or retrospective restatement or reclassification of items in the financial statements. An These Amendments are effective for annual periods beginning on or after entity must include comparative information in the related notes to the financial statements January 1, 2014 provide an exception to the consolidation requirement for entities that meet when it voluntarily provides comparative information beyond the minimum required the definition of an investment entity under PFRS 10. The exception to consolidation requires comparative period. The additional comparative period does not need to contain a complete investment entities to account for subsidiaries at fair value through profit or loss. set of financial statements. On the other hand, supporting notes for the third balance sheet (mandatory when there is a retrospective application of an accounting policy, or retrospective  Philippine Interpretation IFRIC 21, Levies restatement or reclassification of items in the financial statements) are not required. As a IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers result, the Foundation has not included comparative information in respect of the opening payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon statement of financial position as at January 1, 2012. The Amendments affect disclosures only reaching a minimum threshold, the interpretation clarifies that no liability should be and have no impact on the Foundation’s financial position or performance. anticipated before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods beginning on or after January 1, 2014.  PAS 16, Property, Plant and Equipment - Classification of servicing equipment The Amendment clarifies that spare parts, stand-by equipment and servicing equipment should  PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives and be recognized as property, plant and equipment when they meet the definition of property, Continuation of Hedge Accounting (Amendments) plant and equipment and should be recognized as inventory if otherwise. The Amendment These Amendments provide relief from discontinuing hedge accounting when novation of a does not have any significant impact on the Foundation’s financial position or performance. derivative designated as a hedging instrument meets certain criteria. These Amendments are effective for annual periods beginning on or after January 1, 2014.  PAS 32, Financial Instruments: Presentation - Tax effect of distribution to holders of equity instruments  PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial The Amendment clarifies that income taxes relating to distributions to equity holders and to Liabilities (Amendments) transaction costs of an equity transaction are accounted for in accordance with PAS 12, These Amendments clarify the meaning of “currently has a legally enforceable right to set- Income Taxes. The Amendment does not have any significant impact on the Foundation’s off” and also clarify the application of the PAS 32 offsetting criteria to settlement systems financial position or performance. (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The Amendments to PAS 32 are to be retrospectively applied for annual periods beginning on or after January 1, 2014.

48  PAS 34, Interim Financial Reporting - Interim financial reporting and segment information for total assets and liabilities The Amendment clarifies that the total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the entity’s previous annual financial statements for that reportable segment. The Amendment affects disclosures only and has no impact on the Foundation’s financial position or performance.

Future Changes in Accounting Policies The Foundation will adopt the following amended standards and Philippine Interpretations enumerated below when these become effective. Except as otherwise indicated, the Foundation does not expect the adoption of these new and amended PFRS and Philippine Interpretations to have significant impact on the Foundation’s financial statements.

Effective 2014

 PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets (Amendments) These Amendments remove the unintended consequences of PFRS 13 on the disclosures required under PAS 36. In addition, these Amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which impairment loss has been recognized or reversed during the period. These Amendments are effective retrospectively for annual periods beginning on or after January 1, 2014 with earlier application permitted, provided PFRS 13 is also applied.

 Investment Entities (Amendments to PFRS 10, PFRS 12 and PAS 27) These Amendments are effective for annual periods beginning on or after January 1, 2014 provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under PFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss.

 Philippine Interpretation IFRIC 21, Levies IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods beginning on or after January 1, 2014.

 PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting (Amendments) These Amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These Amendments are effective for annual periods beginning on or after January 1, 2014.

 PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities (Amendments) These Amendments clarify the meaning of “currently has a legally enforceable right to set- off” and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The Amendments to PAS 32 are to be retrospectively applied for annual periods beginning on or after January 1, 2014.

49  PAS 19, Employee Benefits -Defined Benefit Plans: Employee Contributions (Amendments)  PAS 16, Property, Plant and Equipment - Revaluation Method – Proportionate Restatement of The Amendments apply to contributions from employees or third parties to defined benefit Accumulated Depreciation plans. Contributions that are set out in the formal terms of the plan shall be accounted for as The Amendment clarifies that, upon revaluation of an item of property, plant and equipment, reductions to current service costs if they are linked to service or as part of the the carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall remeasurements of the net defined benefit asset or liability if they are not linked to service. be treated in one of the following ways: a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation Contributions that are discretionary shall be accounted for as reductions of current service cost of the carrying amount of the asset. The accumulated depreciation at the date of upon payment of these contributions to the plans. The Amendments to PAS 19 are to be revaluation is adjusted to equal the difference between the gross carrying amount and the retrospectively applied for annual periods beginning on or after July 1, 2014. carrying amount of the asset after taking into account any accumulated impairment losses. b. The accumulated depreciation is eliminated against the gross carrying amount of the asset. Annual Improvements to PFRSs (2010-2012 cycle) The Annual Improvements to PFRSs (2010-2012 cycle) contain non-urgent but necessary The Amendment is effective for annual periods beginning on or after July 1, 2014. The amendments to the following standards: Amendment shall apply to all revaluations recognized in annual periods beginning on or after the date of initial application of this amendment and in the immediately preceding annual  PFRS 2, Share-based Payment - Definition of Vesting Condition period. The amendment has no impact on the Foundation’s financial position or performance. The Amendment revised the definitions of vesting condition and market condition and added the definitions of performance condition and service condition to clarify various issues. This  PAS 24, Related Party Disclosures - Key Management Personnel Amendment shall be prospectively applied to share-based payment transactions for which the The Amendments clarify that an entity is a related party of the reporting entity if the said grant date is on or after July 1, 2014. This Amendment does not apply to the Foundation as it entity, or any member of a group for which it is a part of, provides key management personnel has no share-based payments. services to the reporting entity or to the parent company of the reporting entity. The Amendments also clarify that a reporting entity that obtains management personnel services  PFRS 3, Business Combinations - Accounting for Contingent Consideration in a Business from another entity (also referred to as management entity) is not required to disclose the Combination compensation paid or payable by the management entity to its employees or directors. The The Amendment clarifies that a contingent consideration that meets the definition of a reporting entity is required to disclose the amounts incurred for the key management personnel financial instrument should be classified as a financial liability or as equity in accordance with services provided by a separate management entity. The Amendments are effective for annual PAS 32. Contingent consideration that is not classified as equity is subsequently measured at periods beginning on or after July 1, 2014 and are applied retrospectively. The Amendments fair value through profit or loss whether or not it falls within the scope of PFRS 9 (or PAS 39, affect disclosures only and have no impact on the Foundation’s financial position or if PFRS 9 is not yet adopted). The Amendment shall be prospectively applied to business performance. combinations for which the acquisition date is on or after July 1, 2014.  PAS 38, Intangible Assets - Revaluation Method - Proportionate Restatement of Accumulated  PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of the Amortization Total of the Reportable Segments’ Assets to the Entity’s Assets The Amendments clarify that, upon revaluation of an intangible asset, the carrying amount of The Amendments require entities to disclose the judgment made by management in the asset shall be adjusted to the revalued amount, and the asset shall be treated in one of the aggregating two or more operating segments. This disclosure should include a brief following ways: description of the operating segments that have been aggregated in this way and the economic a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation indicators that have been assessed in determining that the aggregated operating segments share of the carrying amount of the asset. The accumulated amortization at the date of similar economic characteristics. The Amendments also clarify that an entity shall provide revaluation is adjusted to equal the difference between the gross carrying amount and the reconciliations of the total of the reportable segments’ assets to the entity’s assets if such carrying amount of the asset after taking into account any accumulated impairment losses. amounts are regularly provided to the chief operating decision maker. These Amendments are b. The accumulated amortization is eliminated against the gross carrying amount of the asset. effective for annual periods beginning on or after July 1, 2014 and are applied retrospectively. The Amendments are not applicable to the Foundation. The Amendments also clarify that the amount of the adjustment of the accumulated amortization should form part of the increase or decrease in the carrying amount accounted for  PFRS 13, Fair Value Measurement - Short-term Receivables and Payables in accordance with the standard. The Amendment clarifies that short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial. The Amendments are effective for annual periods beginning on or after July 1, 2014. The Amendments shall apply to all revaluations recognized in annual periods beginning on or after the date of initial application of this amendment and in the immediately preceding annual period. The Amendments have no impact on the Foundation’s financial position or performance.

50  PAS 16, Property, Plant and Equipment - Revaluation Method – Proportionate Restatement of Accumulated Depreciation The Amendment clarifies that, upon revaluation of an item of property, plant and equipment, the carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall be treated in one of the following ways: a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. The accumulated depreciation at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account any accumulated impairment losses. b. The accumulated depreciation is eliminated against the gross carrying amount of the asset.

The Amendment is effective for annual periods beginning on or after July 1, 2014. The Amendment shall apply to all revaluations recognized in annual periods beginning on or after the date of initial application of this amendment and in the immediately preceding annual period. The amendment has no impact on the Foundation’s financial position or performance.

 PAS 24, Related Party Disclosures - Key Management Personnel The Amendments clarify that an entity is a related party of the reporting entity if the said entity, or any member of a group for which it is a part of, provides key management personnel services to the reporting entity or to the parent company of the reporting entity. The Amendments also clarify that a reporting entity that obtains management personnel services from another entity (also referred to as management entity) is not required to disclose the compensation paid or payable by the management entity to its employees or directors. The reporting entity is required to disclose the amounts incurred for the key management personnel services provided by a separate management entity. The Amendments are effective for annual periods beginning on or after July 1, 2014 and are applied retrospectively. The Amendments affect disclosures only and have no impact on the Foundation’s financial position or performance.

 PAS 38, Intangible Assets - Revaluation Method - Proportionate Restatement of Accumulated Amortization The Amendments clarify that, upon revaluation of an intangible asset, the carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall be treated in one of the following ways: a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. The accumulated amortization at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account any accumulated impairment losses. b. The accumulated amortization is eliminated against the gross carrying amount of the asset.

The Amendments also clarify that the amount of the adjustment of the accumulated amortization should form part of the increase or decrease in the carrying amount accounted for in accordance with the standard.

The Amendments are effective for annual periods beginning on or after July 1, 2014. The Amendments shall apply to all revaluations recognized in annual periods beginning on or after the date of initial application of this amendment and in the immediately preceding annual period. The Amendments have no impact on the Foundation’s financial position or performance.

51 Annual Improvements to PFRSs (2011-2013 cycle) derivative bifurcation rules and the criteria for using the FVO. The adoption of the first phase of The Annual Improvements to PFRSs (2011-2013 cycle) contain non-urgent but necessary PFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, amendments to the following standards: but will potentially have no impact on the classification and measurement of financial liabilities.

 PFRS 1, First-time Adoption of Philippine Financial Reporting Standards – Meaning of On hedge accounting, PFRS 9 replaces the rules-based hedge accounting model of PAS 39 with a ‘Effective PFRSs’ more principles-based approach. Changes include replacing the rules-based hedge effectiveness The Amendment clarifies that an entity may choose to apply either a current standard or a new test with an objectives-based test that focuses on the economic relationship between the hedged standard that is not yet mandatory, but that permits early application, provided either standard item and the hedging instrument, and the effect of credit risk on that economic relationship; is applied consistently throughout the periods presented in the entity’s first PFRS financial allowing risk components to be designated as the hedged item, not only for financial items, but statements. This Amendment is not applicable to the Foundation as it is not a first-time also for non-financial items, provided that the risk component is separately identifiable and adopter of PFRS. reliably measurable; and allowing the time value of an option, the forward element of a forward contract and any foreign currency basis spread to be excluded from the designation of a financial  PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements instrument as the hedging instrument and accounted for as costs of hedging. PFRS 9 also requires The Amendment clarifies that PFRS 3 does not apply to the accounting for the formation of a more extensive disclosures for hedge accounting. joint arrangement in the financial statements of the joint arrangement itself. The Amendment is effective for annual periods beginning on or after July 1 2014 and is applied prospectively. PFRS 9 currently has no mandatory effective date. PFRS 9 may be applied before the completion of the limited amendments to the classification and measurement model and impairment  PFRS 13, Fair Value Measurement - Portfolio Exception methodology. The Company will not adopt the standard before the completion of the limited The Amendment clarifies that the portfolio exception in PFRS 13 can be applied to financial amendments and the second phase of the project. assets, financial liabilities and other contracts. The Amendment is effective for annual periods beginning on or after July 1, 2014 and is applied prospectively. The Amendment has no Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate significant impact on the Foundation’s financial position or performance. This Interpretation covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The SEC and the  PAS 40, Investment Property Financial Reporting Standards Council have deferred the effectivity of this interpretation until the The Amendment clarifies the interrelationship between PFRS 3 and PAS 40 when classifying final Revenue standard is issued by International Accounting Standards Board and an evaluation property as investment property or owner-occupied property. The Amendment stated that of the requirements of the final Revenue standard against the practices of the Philippine real estate judgment is needed when determining whether the acquisition of investment property is the industry is completed. acquisition of an asset or a group of assets or a business combination within the scope of PFRS 3. This judgment is based on the guidance of PFRS 3. This Amendment is effective for Cash and Cash Equivalents annual periods beginning on or after July 1, 2014 and is applied prospectively. The Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid amendment has no significant impact on the Foundation’s financial position or performance. investments that are readily convertible to known amounts of cash with original maturities of three months from dates of acquisitions or less and that are subject to an insignificant risk of changes in PFRS 9, Financial Instruments value. PFRS 9, as issued, reflects the first and third phases of the project to replace PAS 39 and applies to the classification and measurement of financial assets and liabilities and hedge accounting, Financial Instruments respectively. Work on the second phase, which relate to impairment of financial instruments, and Date of recognition the limited amendments to the classification and measurement model is still ongoing, with a view The Foundation recognizes a financial asset or a financial liability in the statement of financial to replace PAS 39 in its entirety. PFRS 9 requires all financial assets to be measured at fair value position when it becomes a party to the contractual provisions of the instrument. Purchases or at initial recognition. A debt financial asset may, if the fair value option (FVO) is not invoked, be sales of financial assets that require delivery of assets within the time frame established by subsequently measured at amortized cost if it is held within a business model that has the objective regulation or convention in the marketplace are recognized on the trade date. to hold the assets to collect the contractual cash flows and its contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal Initial recognition of financial instruments outstanding. All other debt instruments are subsequently measured at fair value through profit or All financial assets and financial liabilities are initially recognized at fair value. Except for loss. All equity financial assets are measured at fair value either through other comprehensive financial assets and financial liabilities at fair value through profit or loss (FVPL), the initial income (OCI) or profit or loss. Equity financial assets held for trading must be measured at fair measurement of financial assets and liabilities includes transaction costs. The Foundation value through profit or loss. For liabilities designated as at FVPL using the fair value option, the classifies its financial assets in the following categories: financial assets at FVPL, held-to-maturity amount of change in the fair value of a liability that is attributable to changes in credit risk must be (HTM) financial assets, available-for-sale (AFS) financial assets, and loans and receivables. The presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless Foundation classifies its financial liabilities into financial liabilities at FVPL and other financial presentation of the fair value change relating to the entity’s own credit risk in OCI would create or liabilities. The classification depends on the purpose for which the investments were acquired or enlarge an accounting mismatch in profit or loss. All other PAS 39 classification and measurement liabilities incurred and whether they are quoted in an active market. The Foundation determines requirements for financial liabilities have been carried forward to PFRS 9, including the embedded the classification of its investments at initial recognition and, where allowed and appropriate, re- evaluates such designation at every reporting date.

52 derivative bifurcation rules and the criteria for using the FVO. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but will potentially have no impact on the classification and measurement of financial liabilities.

On hedge accounting, PFRS 9 replaces the rules-based hedge accounting model of PAS 39 with a more principles-based approach. Changes include replacing the rules-based hedge effectiveness test with an objectives-based test that focuses on the economic relationship between the hedged item and the hedging instrument, and the effect of credit risk on that economic relationship; allowing risk components to be designated as the hedged item, not only for financial items, but also for non-financial items, provided that the risk component is separately identifiable and reliably measurable; and allowing the time value of an option, the forward element of a forward contract and any foreign currency basis spread to be excluded from the designation of a financial instrument as the hedging instrument and accounted for as costs of hedging. PFRS 9 also requires more extensive disclosures for hedge accounting.

PFRS 9 currently has no mandatory effective date. PFRS 9 may be applied before the completion of the limited amendments to the classification and measurement model and impairment methodology. The Company will not adopt the standard before the completion of the limited amendments and the second phase of the project.

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate This Interpretation covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The SEC and the Financial Reporting Standards Council have deferred the effectivity of this interpretation until the final Revenue standard is issued by International Accounting Standards Board and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed.

Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months from dates of acquisitions or less and that are subject to an insignificant risk of changes in value.

Financial Instruments Date of recognition The Foundation recognizes a financial asset or a financial liability in the statement of financial position when it becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the trade date.

Initial recognition of financial instruments All financial assets and financial liabilities are initially recognized at fair value. Except for financial assets and financial liabilities at fair value through profit or loss (FVPL), the initial measurement of financial assets and liabilities includes transaction costs. The Foundation classifies its financial assets in the following categories: financial assets at FVPL, held-to-maturity (HTM) financial assets, available-for-sale (AFS) financial assets, and loans and receivables. The Foundation classifies its financial liabilities into financial liabilities at FVPL and other financial liabilities. The classification depends on the purpose for which the investments were acquired or liabilities incurred and whether they are quoted in an active market. The Foundation determines the classification of its investments at initial recognition and, where allowed and appropriate, re- evaluates such designation at every reporting date.

53 The financial assets of the Foundation are of the nature of loans and receivables and AFS financial Loans and receivables assets, while its financial liabilities are of the nature of other financial liabilities (other than Loans and receivables are nonderivative financial assets with fixed or determinable payments and liabilities covered by other accounting standards such as pension liability). fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not designated as AFS financial assets or Determination of fair value financial assets at FVPL. This accounting policy relates to the statement of financial position The Foundation measures financial instruments at each statement of financial position date. Also, captions “Cash and cash equivalents” and “Receivables.” fair values of financial instruments measured at amortized cost are disclosed in Note 13. After initial measurement, the loans and receivables are subsequently measured at amortized cost Fair value is the price that would be received to sell an asset or paid to transfer a liability in an using the effective interest rate (EIR) method, less allowance for impairment. Amortized cost is orderly transaction between market participants at the measurement date. The fair value calculated by taking into account any discount or premium on acquisition and fees that are an measurement is based on the presumption that the transaction to sell the asset or transfer the integral part of the EIR. The amortization is included in the “Investment and interest” account in liability takes place either: the statement of activities. The losses arising from impairment of such loans and receivables are  in the principal market for the asset or liability, or recognized in the statement of activities.  in the absence of a principal market, in the most advantageous market for the asset or liability Loans and receivables are included in current assets if maturity is within twelve (12) months from the reporting date, otherwise these are classified as noncurrent assets. The principal or the most advantageous market must be accessible to by the Foundation. AFS financial assets The fair value of an asset or a liability is measured using the assumptions that market participants AFS financial assets are those nonderivative financial assets which are designated as such or do would use when pricing the asset or liability, assuming that market participants act in their not qualify to be classified in any of the other three categories. They are purchased and held economic best interest. indefinitely, and may be sold in response to liquidity requirements or changes in market conditions. AFS financial assets include equity investments. The Foundation uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable After initial measurement, AFS financial assets are measured at fair value. The unrealized gains inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair and losses arising from the fair valuation of AFS financial assets are excluded from reported value is measured or disclosed in the financial statements are categorized within the fair value earnings and are reported as “Unrealized gain (loss) on AFS financial assets” account in the hierarchy, as described in Note 13. statement of activities.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the When the security is disposed of, the cumulative gain or loss previously recognized in the Foundation determines whether transfers have occurred between Levels in the hierarchy by statement of activities are then included under the “Revenue, gains and other supports” account. reassessing categorization (based on the lowest level input that is significant to the fair value Where the Foundation holds more than one investment in the same security these are deemed to be measurement as a whole) at the end of each reporting period. disposed of on a first-in first-out basis. Interest earned on holding AFS financial assets are reported as investment income using the EIR. Dividends earned on holding AFS financial assets For the purpose of fair value disclosures, the Foundation has determined classes of assets and are recognized in the statement of activities when the right to receive payment is established. The liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level losses arising from impairment of such investments are recognized under “Unrealized gain (loss) of the fair value hierarchy as explained in Note 13. on AFS financial asset” account in the statement of activities.

“Day 1” difference When the fair value of AFS financial assets cannot be measured reliably because of lack of Where the transaction price in a non-active market is different to the fair value from other reliable estimates of future cash flows and discount rates necessary to calculate the fair value of observable current market transactions in the same instrument or based on a valuation technique unquoted equity instruments, these investments are carried at cost, less any allowance for whose variables include only data from observable market, the Foundation recognizes the impairment losses. difference between the transaction price and fair value (a “Day 1” difference) in the statement of activities under the “Investment and interest income” account. In cases where use is made of data AFS financial assets are classified as noncurrent assets unless the intention is to dispose such which is not observable, the difference between the transaction price and model value is only assets within twelve (12) months from reporting date. recognized in the statement of activities when the inputs become observable or when the instrument is derecognized. For each transaction, the Foundation determines the appropriate method of recognizing the “Day 1” difference amount.

54 Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not designated as AFS financial assets or financial assets at FVPL. This accounting policy relates to the statement of financial position captions “Cash and cash equivalents” and “Receivables.”

After initial measurement, the loans and receivables are subsequently measured at amortized cost using the effective interest rate (EIR) method, less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR. The amortization is included in the “Investment and interest” account in the statement of activities. The losses arising from impairment of such loans and receivables are recognized in the statement of activities.

Loans and receivables are included in current assets if maturity is within twelve (12) months from the reporting date, otherwise these are classified as noncurrent assets.

AFS financial assets AFS financial assets are those nonderivative financial assets which are designated as such or do not qualify to be classified in any of the other three categories. They are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market conditions. AFS financial assets include equity investments.

After initial measurement, AFS financial assets are measured at fair value. The unrealized gains and losses arising from the fair valuation of AFS financial assets are excluded from reported earnings and are reported as “Unrealized gain (loss) on AFS financial assets” account in the statement of activities.

When the security is disposed of, the cumulative gain or loss previously recognized in the statement of activities are then included under the “Revenue, gains and other supports” account. Where the Foundation holds more than one investment in the same security these are deemed to be disposed of on a first-in first-out basis. Interest earned on holding AFS financial assets are reported as investment income using the EIR. Dividends earned on holding AFS financial assets are recognized in the statement of activities when the right to receive payment is established. The losses arising from impairment of such investments are recognized under “Unrealized gain (loss) on AFS financial asset” account in the statement of activities.

When the fair value of AFS financial assets cannot be measured reliably because of lack of reliable estimates of future cash flows and discount rates necessary to calculate the fair value of unquoted equity instruments, these investments are carried at cost, less any allowance for impairment losses.

AFS financial assets are classified as noncurrent assets unless the intention is to dispose such assets within twelve (12) months from reporting date.

55 Other financial liabilities Evidence of impairment may include indications that the borrower or a group of borrowers is Other financial liabilities pertain to issued financial instruments that are not classified or experiencing significant financial difficulty, default or delinquency in interest or principal designated at FVPL and contain contractual obligations to deliver cash or other financial assets to payments, the probability that they will enter bankruptcy or other financial reorganization and the holder or to settle the obligation other than the exchange of a fixed amount of cash or another where observable data indicate that there is measurable decrease in the estimated future cash financial asset for a fixed number of own equity shares. After initial measurement, other financial flows, such as changes in arrears or economic conditions that correlate with defaults. liabilities are subsequently measured at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an Loans and receivables integral part of the EIR. For loans and receivables carried at amortized cost, the Foundation first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or This accounting policy applies primarily to the Foundation’s “Accounts and other payables” and collectively for financial assets that are not individually significant. If the Foundation determines other obligations that meet the above definition. that no objective evidence of impairment exists for individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk Derecognition of Financial Assets and Liabilities characteristics and collectively assesses for impairment. Those characteristics are relevant to the Financial asset estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability A financial asset (or, where applicable a part of a financial asset or part of a group of similar to pay all amounts due according to the contractual terms of the assets being evaluated. Assets financial assets) is derecognized when: that are individually assessed for impairment and for which an impairment loss is, or continues to a. the rights to receive cash flows from the asset has expired; be recognized are not included in a collective assessment for impairment. b. the Foundation retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ If there is objective evidence that an impairment loss has been incurred, the amount of the loss is arrangement; or measured as the difference between the asset’s carrying amount and the present value of the c. the Foundation has transferred its rights to receive cash flows from the asset and either (i) has estimated future cash flows (excluding future credit losses that have not been incurred). The transferred substantially all the risks and rewards of the asset, or (ii) has neither transferred nor carrying amount of the asset is reduced through use of an allowance account and the amount of retained substantially all the risks and rewards of the asset, but has transferred control of the loss is charged to the statement of activities. Interest income continues to be recognized based on asset. the original EIR of the asset. Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has Where the Foundation has transferred its rights to receive cash flows from an asset or has entered been realized. If, in a subsequent year, the amount of the estimated impairment loss decreases into a pass-through arrangement, and has neither transferred nor retained substantially all the risks because of an event occurring after the impairment was recognized, the previously recognized and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in the Foundation’s continuing involvement in the asset. Continuing involvement that takes the form statement of activities, to the extent that the carrying value of the asset does not exceed its of a guarantee over the transferred asset is measured at the lower of original carrying amount of amortized cost at the reversal date. the asset and the maximum amount of consideration that the Foundation could be required to repay. For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as industry, past-due status and term. Financial liability A financial liability is derecognized when the obligation under the liability is discharged or Future cash flows in a group of financial assets that are collectively evaluated for impairment are cancelled or expired. Where an existing financial liability is replaced by another from the same estimated on the basis of historical loss experience for assets with credit risk characteristics similar lender on substantially different terms, or the terms of an existing liability are substantially to those in the group. Historical loss experience is adjusted on the basis of current observable data modified, such an exchange or modification is treated as a derecognition of the original liability to reflect the effects of current conditions that did not affect the period on which the historical loss and the recognition of a new liability, and the difference in the respective carrying amounts is experience is based and to remove the effects of conditions in the historical period that do not exist recognized in the statement of activities. currently. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Foundation to reduce any differences between loss estimates and actual loss Impairment of Financial Assets experience. The Foundation assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is AFS financial assets deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one For AFS financial assets, the Foundation assesses at each reporting date whether there is objective or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) evidence that a financial asset or group of financial assets is impaired. and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

56 Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Loans and receivables For loans and receivables carried at amortized cost, the Foundation first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Foundation determines that no objective evidence of impairment exists for individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognized are not included in a collective assessment for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred). The carrying amount of the asset is reduced through use of an allowance account and the amount of loss is charged to the statement of activities. Interest income continues to be recognized based on the original EIR of the asset. Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has been realized. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in statement of activities, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as industry, past-due status and term.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Foundation to reduce any differences between loss estimates and actual loss experience.

AFS financial assets For AFS financial assets, the Foundation assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired.

57 In case of equity investments classified as AFS financial assets, this would include a significant or Leasehold improvements are amortized over the estimated useful life (EUL) of the improvements prolonged decline in the fair value of the investments below its cost. Where there is evidence of or the terms of the lease, whichever is shorter. impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the The useful lives and depreciation and amortization method are reviewed annually based on statement of activities - is removed from the “Unrealized gain (loss) on AFS financial assets” expected asset utilization to ensure that the period and method of depreciation and amortization account and recognized as an expense. Impairment losses on equity investments are not reversed are consistent with the expected pattern of economic benefits from items of property and through revenue. Increases in fair value after impairment are recognized directly under equipment. “Unrealized gain (loss) on AFS financial assets” account in the statement of activities. Construction in progress is stated at cost. This includes cost of construction of property and In the case of debt instruments classified as AFS financial assets, impairment is assessed based on equipment and other direct costs. Construction in progress is not depreciated until such time the the same criteria as financial assets carried at amortized cost. Future interest income is based on relevant assets are complete and are put into operational use. the reduced carrying amount and is accrued using the rate of interest used to discount future cash flows for the purpose of measuring impairment loss and is recorded as part of “Investment When property and equipment are retired or otherwise disposed of, the cost and the related income” account in the statement of activities. If, in subsequent year, the fair value of a debt accumulated depreciation and amortization are removed from the accounts and any resulting gain instrument increases and the increase can be objectively related to an event occurring after the or loss is credited to or charged against current operations. impairment loss was recognized in the statements of activities, the impairment loss is reversed through the statement of activities. Fully depreciated property and equipment are retained in the accounts until they are no longer used and no further depreciation and amortization is charged against current operations. Offsetting Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of Impairment of Non-financial Assets financial position if, and only if, there is a currently enforceable legal right to offset the recognized The Foundation assesses at each reporting date whether there is an indication that an asset may be amounts and there is an intention to settle on a net basis, or to realize the asset and settle the impaired. If any such indication exists, or when annual impairment testing for an asset is required, liability simultaneously. the Foundation makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its Merchandise Inventories value in use and is determined for an individual asset, unless the asset does not generate cash Merchandise inventories consist of books and other items held for sale. Merchandise inventories inflows that are largely independent of those from other assets or groups of assets. Where the are valued at the lower of cost or net realizable value (NRV). Cost is determined using the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and first-in, first-out method. NRV is the estimated selling price in the ordinary course of business is written down to its recoverable amount. In assessing value in use, the estimated future cash less estimated costs necessary to make the sale. flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of Property and Equipment continuing operations are recognized in the statement of activities in those expense categories Property and equipment except for land, are carried at cost less accumulated depreciation and consistent with the function of the impaired asset. amortization and any impairment in value. Land is carried at cost less any impairment in value. The initial cost of property and equipment comprises its purchase price and any directly An assessment is made at each reporting date as to whether there is any indication that previously attributable costs of bringing the asset to its working condition and location for its intended use. recognized impairment losses may no longer exist or may have decreased. If such indication Expenditures incurred after the property and equipment have been put into operation, such as exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed repairs and maintenance, are normally charged to expense in the period in which the costs are only if there has been a change in the estimates used to determine the asset’s recoverable amount incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in since the last impairment loss was recognized. If that is the case the carrying amount of the asset an increase in the future economic benefits expected to be obtained from the use of an item of is increased to its recoverable amount. That increased amount cannot exceed the carrying amount property and equipment beyond its originally assessed standard of performance, the expenditures that would have been determined, net of depreciation, had no impairment loss been recognized for are capitalized as an additional cost of property and equipment. the asset in prior years. Such reversal is recognized in the statement of activities unless the asset is carried at revalued amount, in which case, the reversal is treated as a revaluation increase. After Depreciation and amortization of property and equipment commences once the property and such reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised equipment are available for use and is computed using the straight-line method over the following carrying amount, less any residual value, on a systematic basis over its remaining EUL. estimated useful lives of the property and equipment:

Years Leasehold improvements 5-25 Office furniture and equipment 3-5 Transportation equipment 5

58 Leasehold improvements are amortized over the estimated useful life (EUL) of the improvements or the terms of the lease, whichever is shorter.

The useful lives and depreciation and amortization method are reviewed annually based on expected asset utilization to ensure that the period and method of depreciation and amortization are consistent with the expected pattern of economic benefits from items of property and equipment.

Construction in progress is stated at cost. This includes cost of construction of property and equipment and other direct costs. Construction in progress is not depreciated until such time the relevant assets are complete and are put into operational use.

When property and equipment are retired or otherwise disposed of, the cost and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is credited to or charged against current operations.

Fully depreciated property and equipment are retained in the accounts until they are no longer used and no further depreciation and amortization is charged against current operations.

Impairment of Non-financial Assets The Foundation assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Foundation makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognized in the statement of activities in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of activities unless the asset is carried at revalued amount, in which case, the reversal is treated as a revaluation increase. After such reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining EUL.

59 Provisions Museum Collections Provisions are recognized when the Foundation has a present obligation (legal or constructive) as a Artworks, ethnographic, archeological and rare book collections purchased for or donated to the result of a past event, it is probable (i.e., more likely than not) that an outflow of resources museum are not included in the accompanying financial statements. Gifts of cash or property used embodying economic benefits will be required to settle the obligation and a reliable estimate can for the purchase of the museum collections are classified as public support revenue when be made of the amount of the obligation. Where the Foundation expects a provision to be acquisitions are made in accordance with the terms of the gifts. The cost of objects purchased or reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement donated is reported as a project expense. is virtually certain. Provisions, if any, are reviewed at each reporting date and adjusted to reflect the current best estimate. Defined Benefit Plan Pension cost and net defined benefit liability or asset is calculated annually by independent Restricted Net Assets actuaries using the projected unit credit method. The Foundation reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that Pension costs comprise the following: is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily  Service cost restricted net assets are reclassified to unrestricted net assets and reported in the statement of  Net interest on the net defined benefit liability or asset activities as net assets released from restrictions.  Remeasurements of net defined benefit liability or asset

Donations consisting of long-lived assets with explicit restrictions that specify how the assets are Service costs which include current service costs, past service costs and gains or losses on non- to be used and gifts of cash or other assets that must be used to acquire long-lived assets are routine settlements are recognized as expense in profit or loss. Past service costs are recognized reported as restricted net assets. when plan amendment or curtailment occurs. These amounts are calculated periodically by independent actuaries. Revenue Recognition Revenue is recognized when it is probable that the economic benefits associated with the Net interest on the net defined benefit liability or asset is the change during the period in the net transaction will flow to the Foundation and the amount of the revenue can be reliably measured. defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on the zero-coupon bond yields to the net defined liability or Public support assets. Net interest on the net defined benefit liability or asset is recognized as expense or income Public support revenue represents contributions received by the Foundation. Unconditional in statement of activities. contributions received, including unconditional promises to give cash or other assets, are recognized as revenue in the period received at their fair value. Conditional promises to give are Remeasurements comprising actuarial gains and losses and return on plan assets are recognized recognized when the conditions are met. Assets received subject to conditions are accounted for immediately in other comprehensive income in the period in which they arise. Remeasurements as refundable advances until the conditions are met. are not reclassified to statement of activities in subsequent periods.

Investment and interest income Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not Investment income represents interest income earned on cash and cash equivalents and AFS available to the creditors of the Foundation, nor can they be paid directly to the Foundation. Fair financial assets and realized gains or losses on sale of investments. Income is recognized on a value of plan assets is based on market price information. When no market price is available, the time proportion basis computed on the outstanding principal using the applicable rate. fair value of plan assets is estimated by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal Project revenue date of those assets. If the fair value of the plan assets is higher than the present value of the Project revenue represents sales of hand-woven products of the Mindoro Mangyan communities, defined benefit obligation, the measurement of the resulting defined benefit asset is limited to the commemorative items such as plates, cards, program merchandise, and other similar items. It also present value of the economic benefits available in form of refunds from the plan or reductions in includes space rentals, and recoveries of telephone and internet expenses from locators at the UP the future contributions to the plan. Technology Business Incubator facility. The net defined benefit liability or asset recognized in the Foundation’s statement of financial Expenses position in respect of the defined benefit pension plan is the aggregate of the present value of the Expenses arise in the course of the ordinary operations of the Foundation. Expenses constitute defined benefit liability at the reporting date less the fair value of the plan assets. The present costs of administering the Foundation’s activities and are recognized in the Statement of Activities value of the defined benefit liability is determined by discounting the estimated future cash as incurred. These usually take the form of an outflow of assets. outflows using risk-free interest rates of government bonds that have terms to maturity approximating to the terms of the related pension liability.

60 Museum Collections Artworks, ethnographic, archeological and rare book collections purchased for or donated to the museum are not included in the accompanying financial statements. Gifts of cash or property used for the purchase of the museum collections are classified as public support revenue when acquisitions are made in accordance with the terms of the gifts. The cost of objects purchased or donated is reported as a project expense.

Defined Benefit Plan Pension cost and net defined benefit liability or asset is calculated annually by independent actuaries using the projected unit credit method.

Pension costs comprise the following:  Service cost  Net interest on the net defined benefit liability or asset  Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non- routine settlements are recognized as expense in profit or loss. Past service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated periodically by independent actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on the zero-coupon bond yields to the net defined liability or assets. Net interest on the net defined benefit liability or asset is recognized as expense or income in statement of activities.

Remeasurements comprising actuarial gains and losses and return on plan assets are recognized immediately in other comprehensive income in the period in which they arise. Remeasurements are not reclassified to statement of activities in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not available to the creditors of the Foundation, nor can they be paid directly to the Foundation. Fair value of plan assets is based on market price information. When no market price is available, the fair value of plan assets is estimated by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal date of those assets. If the fair value of the plan assets is higher than the present value of the defined benefit obligation, the measurement of the resulting defined benefit asset is limited to the present value of the economic benefits available in form of refunds from the plan or reductions in the future contributions to the plan.

The net defined benefit liability or asset recognized in the Foundation’s statement of financial position in respect of the defined benefit pension plan is the aggregate of the present value of the defined benefit liability at the reporting date less the fair value of the plan assets. The present value of the defined benefit liability is determined by discounting the estimated future cash outflows using risk-free interest rates of government bonds that have terms to maturity approximating to the terms of the related pension liability.

61 Termination benefits are employee benefits provided in exchange for the termination of an In addition, the Foundation classifies financial assets by evaluating, among others, whether the employee’s employment as a result of either an entity’s decision to terminate an employee’s asset is quoted or not in an active market. Included in the evaluation on whether a financial asset is employment before the normal retirement date , an employee’s decision to accept an offer of quoted in an active market is the determination on whether quoted prices are readily and regularly benefits in exchange for the termination of employment or termination beyond the employee’s available, and whether these prices represent actual and regularly occurring market transaction on control. an arm’s length basis.

A liability or expense for a termination benefit is recognized at the earlier of when the entity can Impairment of AFS financial assets no longer withdraw the offer of those benefits and when the entity recognizes related restructuring The Foundation treats AFS financial assets as impaired when there has been a significant or costs. Initial recognition and subsequent changes to termination benefits are measured in prolonged decline in the fair value below its cost or where other objective evidence of impairment accordance with the nature of the employee benefit, as either post-employment benefits or short- exists. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. The term employee benefits. Foundation treats ‘significant’ generally as 20% or more and ‘prolonged’ as greater than 6 months for quoted equity securities. In addition, the Foundation evaluates other factors, including normal Foreign Currency Transactions volatility in share price for quoted equities and the future cash flows and the discount factors for Transactions denominated in foreign currencies are recorded using the exchange rate at the date of unquoted equities. the transactions. Outstanding foreign currency-denominated monetary assets and liabilities at year-end are translated to Philippine peso at prevailing Philippine Dealing System (PDS) rate at If there is an objective evidence that an impairment loss on an unquoted equity instrument that is reporting dates. Exchange gains or losses arising from foreign currency transactions are credited not carried at fair value because its fair value cannot be reliably measured, the amount of the loss to or charged against changes in net assets. is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Contingencies Contingent liabilities are not recognized in the financial statements. These are disclosed unless the Management’s Use of Estimates possibility of an outflow of resources embodying economic benefits is remote. Contingent assets The key assumptions concerning the future and other key sources of estimation uncertainty at the are not recognized in the financial statements but disclosed when an inflow of economic benefits reporting date that have a significant risk of causing a material adjustment to the carrying amounts is probable. of assets and liabilities within the next financial year are discussed below:

Events After the Financial Reporting Period Estimating allowance for impairment losses Post year-end events that provide additional information about the Foundation’s position at the The Foundation maintains allowance for impairment losses based on the result of the individual reporting date (adjusting events) are reflected in the financial statements. Post year-end events and collective assessment under PAS 39. Under the individual assessment, the Foundation is that are not adjusting events are disclosed in the notes to financial statements when material. required to obtain the present value of estimated cash flows using the receivable’s original EIR. Impairment loss is determined as the difference between the receivables’ carrying balance and the computed present value. The collective assessment would require the Foundation to group its 3. Significant Accounting Judgments and Estimates receivables based on the credit risk characteristics (industry, past-due status and term) of the customers. Impairment loss is then determined based on historical loss experience of the The preparation of the accompanying financial statements in conformity with PFRS requires receivables grouped per credit risk profile. Historical loss experience is adjusted on the basis of management to make estimates and assumptions that affect the amounts reported in the financial current observable data to reflect the effects of current conditions that did not affect the period on statements and accompanying notes. The estimates and assumptions used in the accompanying which the historical loss experience is based and to remove the effects of conditions in the financial statements are based upon management’s evaluation of relevant facts and circumstances historical period that do not exist currently. The methodology and assumptions used for the as of the date of the financial statements. Actual results could differ from such estimates. individual and collective assessments are based on management's judgment and estimate. Therefore, the amount and timing of recorded expense for any period would differ depending on Judgments the judgments and estimates made for the year. In the process of applying the Foundation’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant The carrying values of receivables amounted to P=16.95 million and P=18.27 million as of effect on the amounts recognized in the financial statements: December 31, 2013 and 2012, respectively (see Note 5).

Classification of financial instruments Estimating allowance for inventory loss The Foundation exercise judgment in classifying a financial instrument, or its component parts, on The Foundation estimates its allowance for inventory loss based on periodic specific initial recognition as a financial asset, financial liability or an equity instrument in accordance with identification. The Foundation provides 100% for previous year calendar, 10% for books and the substance of the contractual agreement and the definitions of a financial asset, financial catalogs and 50% allowance for inventory loss for other specifically identified as obsolete liability or an equity instrument. The substance of a financial instrument, rather than its legal form, inventories. Merchandise inventories of the Foundation, net of allowance for inventory loss as of governs its classification in the statement of financial position. December 31, 2013 and 2012 amounted to P=16.34 million and P=16.28 million, respectively. Allowance for inventory loss amounted to P=0.76 million as of December 31, 2013 and 2012 (see Note 6).

62 In addition, the Foundation classifies financial assets by evaluating, among others, whether the asset is quoted or not in an active market. Included in the evaluation on whether a financial asset is quoted in an active market is the determination on whether quoted prices are readily and regularly available, and whether these prices represent actual and regularly occurring market transaction on an arm’s length basis.

Impairment of AFS financial assets The Foundation treats AFS financial assets as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. The Foundation treats ‘significant’ generally as 20% or more and ‘prolonged’ as greater than 6 months for quoted equity securities. In addition, the Foundation evaluates other factors, including normal volatility in share price for quoted equities and the future cash flows and the discount factors for unquoted equities.

If there is an objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Management’s Use of Estimates The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Estimating allowance for impairment losses The Foundation maintains allowance for impairment losses based on the result of the individual and collective assessment under PAS 39. Under the individual assessment, the Foundation is required to obtain the present value of estimated cash flows using the receivable’s original EIR. Impairment loss is determined as the difference between the receivables’ carrying balance and the computed present value. The collective assessment would require the Foundation to group its receivables based on the credit risk characteristics (industry, past-due status and term) of the customers. Impairment loss is then determined based on historical loss experience of the receivables grouped per credit risk profile. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for the individual and collective assessments are based on management's judgment and estimate. Therefore, the amount and timing of recorded expense for any period would differ depending on the judgments and estimates made for the year.

The carrying values of receivables amounted to P=16.95 million and P=18.27 million as of December 31, 2013 and 2012, respectively (see Note 5).

Estimating allowance for inventory loss The Foundation estimates its allowance for inventory loss based on periodic specific identification. The Foundation provides 100% for previous year calendar, 10% for books and catalogs and 50% allowance for inventory loss for other specifically identified as obsolete inventories. Merchandise inventories of the Foundation, net of allowance for inventory loss as of December 31, 2013 and 2012 amounted to P=16.34 million and P=16.28 million, respectively. Allowance for inventory loss amounted to P=0.76 million as of December 31, 2013 and 2012 (see Note 6).

63 Estimating useful lives of property and equipment Fair value of financial instruments The Foundation estimates the useful lives of its property and equipment based on the period over Where the fair values of financial assets and financial liabilities recorded and disclosed in the which these assets are expected to be available for use. The estimated useful lives of property and statement of financial position cannot be derived from active markets, they are determined using equipment are reviewed at least annually and are updated if expectations differ from previous internal valuation techniques using generally accepted market valuation models. The inputs to estimates due to physical wear and tear and technical or commercial obsolescence on the use of these models are taken from observable markets where possible, but where this is not feasible, these assets. It is possible that future results of operations could be materially affected by changes estimates are used in establishing fair values. These estimates may include considerations of in estimates brought about by changes in factors mentioned above. liquidity, volatility, and correlation. See Note 13 for the related balances.

As of December 31, 2013 and 2012, the carrying values of property and equipment amounted to P=161.81 million and P=148.20 million, respectively (see Note 8). 4. Cash and Cash Equivalents

Evaluation of asset impairment This account consists of: The Foundation reviews property and equipment and other current assets for impairment. This includes considering certain indications of impairment such as significant changes in asset usage, 2013 2012 significant decline in assets’ market value, obsolescence or physical damage of an asset, Cash on hand and in banks P=79,269,601 P=27,752,612 significant underperformance relative to expected historical or projected future operating results Cash equivalents 53,799,806 66,000,000 and significant negative industry or economic trends. If such indications are present and where the P=133,069,407 P=93,752,612 carrying amount of the asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Cash in banks earn interests at the respective bank deposit rates. Cash equivalents are made for varying periods of up to three months depending on the immediate cash requirements of the As described in the accounting policy, the Foundation estimates the recoverable amount as the Foundation and earn interest at the respective short-term investment rates 3.75% to 4.40% and higher of the net selling price and value in use. In determining the present value of estimated 2.93% to 4.40% in 2013 and 2012, respectively. future cash flows expected to be generated from the continued use of the assets, the Foundation is required to make estimates and assumptions that may affect property and equipment and other As of December 31, 2013 and 2012, interest income earned on cash in banks and cash noncurrent assets. The Foundation believes that the carrying amounts of its assets approximate the equivalents amounted to P1.41 million and P5.22 million, respectively. recoverable amounts and, as such, no impairment loss was recognized for the years ended December 31, 2013 and 2012.

Estimating pension obligation and other retirement benefits 5. Receivables The cost of defined benefit pension plans and other retirement benefits as well as the present value of the pension obligation are determined using actuarial valuations. The actuarial valuation This account consists of the following: involves making various assumptions. Those assumptions are described in Note 11 and include, among others, discount rates, future salary increases, mortality rates, turn-over rates and future 2013 2012 pension increases. Due to the complexity of the valuation, the underlying assumptions and its Trade: long-term nature, defined benefit liability are highly sensitive to changes in these assumptions. Services P=11,811,851 P=12,227,898 All assumptions are reviewed at each reporting dates. As of December 31, 2013 and 2012, the Products 471,799 1,915,152 pension liability amounted to P=20.56 million and P=32.11 million, respectively (see Note 11). Advances to cooperative 5,912,346 6,263,147 Nontrade 4,107,971 5,431,803 The discount rate used is the single-weighted uniform discount rate using bootstrapped-derived Advances to officers and employees 2,528,128 1,876,713 zero rates from PDST-R2 index, which when applied to the same cash flows, results in the same Accrued interest – 205,767 present value as of reporting date. Present values of cash flows as of reporting date was Others 2,388,896 1,995,929 determined using the rates from derived zero yield curve. 27,220,991 29,916,409 Less allowance for impairment losses 10,275,410 11,651,404 The mortality rate is based on unisex annuity table and is modified accordingly with estimates of P=16,945,581 P=18,265,005 mortality improvements (if any). Future salary increases are derived from the Foundation’s estimated salary expenses for the next period. Further details about the assumptions used are Trade receivables are collectibles from various entities arising from purchase of products and provided in Note 11. availment of program services provided by the Foundation. These are collectible within one year.

Advances to cooperative pertain to cash advance for social credits which are collectible within one year.

64 Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded and disclosed in the statement of financial position cannot be derived from active markets, they are determined using internal valuation techniques using generally accepted market valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimates are used in establishing fair values. These estimates may include considerations of liquidity, volatility, and correlation. See Note 13 for the related balances.

4. Cash and Cash Equivalents

This account consists of:

2013 2012 Cash on hand and in banks P=79,269,601 P=27,752,612 Cash equivalents 53,799,806 66,000,000 P=133,069,407 P=93,752,612

Cash in banks earn interests at the respective bank deposit rates. Cash equivalents are made for varying periods of up to three months depending on the immediate cash requirements of the Foundation and earn interest at the respective short-term investment rates 3.75% to 4.40% and 2.93% to 4.40% in 2013 and 2012, respectively.

As of December 31, 2013 and 2012, interest income earned on cash in banks and cash equivalents amounted to P=1.41 million and P=5.22 million, respectively.

5. Receivables

This account consists of the following:

2013 2012 Trade: Services P=11,811,851 P=12,227,898 Products 471,799 1,915,152 Advances to cooperative 5,912,346 6,263,147 Nontrade 4,107,971 5,431,803 Advances to officers and employees 2,528,128 1,876,713 Accrued interest – 205,767 Others 2,388,896 1,995,929 27,220,991 29,916,409 Less allowance for impairment losses 10,275,410 11,651,404 P=16,945,581 P=18,265,005

Trade receivables are collectibles from various entities arising from purchase of products and availment of program services provided by the Foundation. These are collectible within one year.

Advances to cooperative pertain to cash advance for social credits which are collectible within one year.

65 Nontrade receivables pertain to collectibles for activities outside the main revenue-generating Prepaid expenses include prepayments for insurance, rent, subscription fees, repairs and projects of the Foundation which are noninterest bearing and are due and demandable. maintenance and others.

Advances to officers and employees pertain to salary loans and advances made by regular employees of the Foundation for business related expenses and are subject for liquidation. This 8. Property and Equipment amount is collectible within one year. The rollforward analysis of this account follows: Others receivables are non-interest bearing and are due and demandable. December 31, 2013 Office Receivables amounting to P=10.28 million and P=11.65 million as of December 31, 2013 and 2012, Leasehold Furniture and Transportation Construction- respectively, were individually impaired and fully provided for. Movements in the allowance for Land Improvements Equipment Equipment in-Progress Total impairment losses follow: Cost At January 1 P=99,368,375 P=43,270,594 P=84,831,057 P=2,992,048 P=8,561,602 P=239,023,676 Additions 52,800 – 10,523,313 1,879,000 11,379,263 23,834,376 2013 2012 Disposals – – (1,264,372) (1,164,048) – (2,428,420) Balance at beginning of year P=11,651,404 P=6,368,394 Transfers – 19,879,337 – – (19,879,337) – Provisions during the year (Note 12) – 5,283,010 At December 31 99,421,175 63,149,931 94,089,998 3,707,000 61,528 260,429,632 Written off during the year (1,375,994) – Accumulated Depreciation and Amortization Balance at end of year P=10,275,410 P=11,651,404 At January 1 – 12,948,248 75,295,884 2,577,348 – 90,821,480 Depreciation and amortization – 2,799,735 7,170,497 252,917 – 10,223,149 Disposals – – (1,264,372) (1,164,048) – (2,428,420) At December 31 – 15,747,983 81,202,009 1,666,217 – 98,616,209 6. Merchandise Inventories Net Book Value P=99,421,175 P=47,401,948 P=12,887,989 P=2,040,783 P=61,528 P=161,813,423

Inventories consist of books, catalogs and other merchandise. December 31, 2012 Office Leasehold Furniture and Transportation Construction- Movements in the inventories account are as follows: Land Improvements Equipment Equipment in-Progress Total

Cost 2013 2012 At January 1 P=99,218,375 P=73,517,264 P=81,820,357 P=2,992,048 P=– P=257,548,044 Inventories at beginning of year P=17,042,064 P=17,205,194 Additions 150,000 331,135 4,086,817 – 8,561,602 13,129,554 Disposals – (30,577,805) (1,076,117) – – (31,653,922) Add: Net cost of purchases 9,409,125 3,996,613 At December 31 99,368,375 43,270,594 84,831,057 2,992,048 8,561,602 239,023,676 Total goods available for sale 26,451,189 21,201,807 Accumulated Depreciation Less cost of sales 9,352,963 4,159,743 and Amortization 17,042,064 At January 1 – 29,939,006 63,972,383 2,405,748 – 96,317,137 17,098,226 Depreciation and Less allowance for inventory loss 756,951 757,860 amortization – 3,105,355 12,215,470 171,600 – 15,492,425 P=16,341,275 P=16,284,204 Disposals – (20,096,113) (891,969) – – (20,988,082) At December 31 – 12,948,248 75,295,884 2,577,348 – 90,821,480 Net Book Value P=99,368,375 P=30,322,346 P=9,535,173 P=414,700 P=8,561,602 P=148,202,196

7. Other Current Assets Depreciation and amortization charged against unrestricted net assets amounted to P=10.22 million and P=15.49 million in 2013 and 2012, respectively. This account consists of: Transfers from construction in progress to leasehold improvements pertain to completed 2013 2012 renovations made in the Museum during the year. Input tax P=5,448,577 P=4,111,240 Deposits to suppliers 2,043,081 3,848,100 Land amounting to P=92.65 million, which was donated in 2003, is subject to a leasehold right Prepaid expenses 341,270 542,267 existing thereon with a third party. P=7,832,928 P=8,501,607 Fully depreciated property and equipment still being used by the Foundation amounted to Input VAT is applied against output VAT. The input VAT is recoverable in future periods. P=38.21 million in 2013 and P=35.15 million in 2012.

Deposits to suppliers pertain to advance payments made by the Foundation to suppliers and other entities.

66 Prepaid expenses include prepayments for insurance, rent, subscription fees, repairs and maintenance and others.

8. Property and Equipment

The rollforward analysis of this account follows:

December 31, 2013 Office Leasehold Furniture and Transportation Construction- Land Improvements Equipment Equipment in-Progress Total

Cost At January 1 P=99,368,375 P=43,270,594 P=84,831,057 P=2,992,048 P=8,561,602 P=239,023,676 Additions 52,800 – 10,523,313 1,879,000 11,379,263 23,834,376 Disposals – – (1,264,372) (1,164,048) – (2,428,420) Transfers – 19,879,337 – – (19,879,337) – At December 31 99,421,175 63,149,931 94,089,998 3,707,000 61,528 260,429,632

Accumulated Depreciation and Amortization At January 1 – 12,948,248 75,295,884 2,577,348 – 90,821,480 Depreciation and amortization – 2,799,735 7,170,497 252,917 – 10,223,149 Disposals – – (1,264,372) (1,164,048) – (2,428,420) At December 31 – 15,747,983 81,202,009 1,666,217 – 98,616,209 Net Book Value P=99,421,175 P=47,401,948 P=12,887,989 P=2,040,783 P=61,528 P=161,813,423

December 31, 2012 Office Leasehold Furniture and Transportation Construction- Land Improvements Equipment Equipment in-Progress Total

Cost At January 1 P=99,218,375 P=73,517,264 P=81,820,357 P=2,992,048 P=– P=257,548,044 Additions 150,000 331,135 4,086,817 – 8,561,602 13,129,554 Disposals – (30,577,805) (1,076,117) – – (31,653,922) At December 31 99,368,375 43,270,594 84,831,057 2,992,048 8,561,602 239,023,676

Accumulated Depreciation and Amortization At January 1 – 29,939,006 63,972,383 2,405,748 – 96,317,137 Depreciation and amortization – 3,105,355 12,215,470 171,600 – 15,492,425 Disposals – (20,096,113) (891,969) – – (20,988,082) At December 31 – 12,948,248 75,295,884 2,577,348 – 90,821,480 Net Book Value P=99,368,375 P=30,322,346 P=9,535,173 P=414,700 P=8,561,602 P=148,202,196

Depreciation and amortization charged against unrestricted net assets amounted to P=10.22 million and P=15.49 million in 2013 and 2012, respectively.

Transfers from construction in progress to leasehold improvements pertain to completed renovations made in the Museum during the year.

Land amounting to P=92.65 million, which was donated in 2003, is subject to a leasehold right existing thereon with a third party.

Fully depreciated property and equipment still being used by the Foundation amounted to P=38.21 million in 2013 and P=35.15 million in 2012.

67 9. Available-for-sale Financial Assets Trade payable and accrued expenses include payables to suppliers that are noninterest-bearing and are normally settled on 30 to 60 day terms. This account consists of investments in: Payable to consignors pertain to proceeds on sale of goods consigned to the Foundation. 2013 2012 Common trust fund P=1,510,389,977 P=1,137,494,118 Other payables are non-interest bearing and are normally settled within one year. Shares of stock: Quoted securities 777,956,544 571,774,215 Unquoted securities 2,650,444 1,931,701 11. Defined Benefit Plan P=2,290,996,965 P=1,711,200,034 The Foundation has funded, noncontributory defined benefit retirement plan covering substantially AFS financial assets consist of shares in various listed and unlisted companies held under a trust all of its regular permanent employees. The benefits are generally based on defined contribution fund and are carried at market value. formula with minimum lump-sum guarantee of 1.5 months’ basic salary per year of service.

The rollforward of unrealized gain on AFS financial assets are as follows: The Foundation’s annual contributions to the plan consist principally of payments which covers the current service cost for the year and the required funding relative to the guaranteed minimum 2013 2012 benefits as applicable. The funds are administered by a trustee bank of the Foundation and subject Balance at beginning of year P=83,954,992 P=83,597,752 to the investment objectives and guidelines established by the Foundation’s Employee Welfare Unrealized gain recognized directly and Retirement Fund Investment Committee (the Committee) and rules and regulations issued by in net assets 33,820,633 68,966,203 Bangko Sentral ng Pilipinas (BSP) covering assets under trust and fiduciary agreements. The Realized gain transferred to income (60,489,899) (68,608,963) Committee is responsible for investment strategy of the plan. Balance at end of year P=57,285,726 P=83,954,992 Republic Act 7641, The New Retirement Law, requires a provision for retirement pay to qualified The breakdown of investments’ income is as follow: private sector employees in the absence of any retirement plan in the entity, provided however that the employee’s retirement benefits under any collective bargaining and other agreements shall not 2013 2012 be less than those provided under the law. The law does not require minimum funding of the plan. Realized gain from AFS P=60,489,899 P=68,608,963 The components of pension expense included in salaries, wages and employee benefits under Debt instruments 33,342,110 28,462,130 “General and administrative expenses” in the statements of activities are as follows (see Note 12): Government securities 12,404,752 14,931,393 Dividends 9,169,990 10,124,631 2012 Loans 3,131,368 2,200,050 2013 Others 3,120,283 2,778,437 Current service cost P=6,488,926 P=5,312,448 P=121,658,402 P=127,105,604 Net interest expense 1,862,635 528,564 Transferred obligation – (2,797,988) Total pension expense P=8,351,561 P=3,043,024 10. Accounts and Other Payables The amounts recognized under pension liability in the statements of financial position are as follows: This account consists of: 2013 2012 2013 2012 Benefit obligations P=67,201,834 P=79,723,128 Accrued expenses P=34,615,161 P=23,503,551 Plan assets (46,646,047) (47,608,729) Trade 31,536,501 38,061,974 Payable to consignors 5,942,516 6,700,376 Liability to be recognized P=20,555,787 P=32,114,399 Others 3,032,405 1,924,639 P=75,126,583 P=70,190,540

Accrued expenses pertain to the unbilled balances for completed renovations in the Museum and other expenses incurred by the Foundation for its activities.

68 Trade payable and accrued expenses include payables to suppliers that are noninterest-bearing and are normally settled on 30 to 60 day terms.

Payable to consignors pertain to proceeds on sale of goods consigned to the Foundation.

Other payables are non-interest bearing and are normally settled within one year.

11. Defined Benefit Plan

The Foundation has funded, noncontributory defined benefit retirement plan covering substantially all of its regular permanent employees. The benefits are generally based on defined contribution formula with minimum lump-sum guarantee of 1.5 months’ basic salary per year of service.

The Foundation’s annual contributions to the plan consist principally of payments which covers the current service cost for the year and the required funding relative to the guaranteed minimum benefits as applicable. The funds are administered by a trustee bank of the Foundation and subject to the investment objectives and guidelines established by the Foundation’s Employee Welfare and Retirement Fund Investment Committee (the Committee) and rules and regulations issued by Bangko Sentral ng Pilipinas (BSP) covering assets under trust and fiduciary agreements. The Committee is responsible for investment strategy of the plan.

Republic Act 7641, The New Retirement Law, requires a provision for retirement pay to qualified private sector employees in the absence of any retirement plan in the entity, provided however that the employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided under the law. The law does not require minimum funding of the plan.

The components of pension expense included in salaries, wages and employee benefits under “General and administrative expenses” in the statements of activities are as follows (see Note 12):

2013 2012 Current service cost P=6,488,926 P=5,312,448 Net interest expense 1,862,635 528,564 Transferred obligation – (2,797,988) Total pension expense P=8,351,561 P=3,043,024

The amounts recognized under pension liability in the statements of financial position are as follows:

2013 2012 Benefit obligations P=67,201,834 P=79,723,128 Plan assets (46,646,047) (47,608,729) Liability to be recognized P=20,555,787 P=32,114,399

69 Changes in the present value of the defined benefit obligation are as follows: Below shows the sensitivity analysis determined based on reasonably possible changes of each significant assumptions stated above, assuming all other assumptions were held constant: 2013 2012 Balance at January 1 P=79,723,128 P=41,697,676 2013 Current service cost 6,488,926 5,312,448 Discount Rate Salary Increase Rate Interest expense 4,623,941 2,960,535 +.50% (.50%) +.50% (.50%) Benefits paid (9,867,755) (4,410,904) Accrued liability P=65,220,061 P=68,794,304 P=68,757,179 P=65,237,401 Remeasurement loss (gain) arising from changes in Current fund assets 46,646,047 46,646,047 46,646,047 46,646,047 financial assumptions (13,766,406) 34,970,452 Unfunded accrued liability P=18,574,014 P=22,148,257 P=22,111,132 P=18,591,354 Transferred obligation – (807,079) Balance at December 31 P=67,201,834 P=79,723,128 2012 Discount Rate Salary Increase Rate +.50% (.50%) +.50% (.50%) Changes in the fair value of plan assets are as follows: Accrued liability P=75,500,261 P=84,311,763 P=83,859,479 P=75,866,225 Current fund assets 47,608,729 47,608,729 47,608,729 47,608,729 2013 2012 Unfunded accrued liability P=27,891,532 P=36,703,034 P=36,250,750 P=28,257,496 Balance at January 1 P=47,608,729 P=34,253,108 Contributions 5,574,456 9,014,350 The Foundation does not perform any Asset-Liability Matching Study. The overall investment Interest income on plan assets 2,761,306 2,431,971 policy and strategy of the retirement plan is based on the suitability assessment, as provided by its Remeasurement gain on plan assets 569,311 4,329,295 trust bank, in compliance with the BSP requirements. It does not, however, ensure that there will Transferred asset – 1,990,909 be sufficient assets to pay the retirement benefits as they fall due while attempting to mitigate the Benefits paid (9,867,755) (4,410,904) various risks of the plan. For the current year, the allocation of assets consist of 26.37% of equity Balance at December 31 P=46,646,047 P=47,608,729 instruments, 52.88% of debt instruments and 20.75% of cash.

The fair value of plan assets by each classes as at the end of the reporting period are as follows: The Foundation expects to make additional contributions of P=5.93 million to its retirement fund in 2014. 2013 2012 Debt instruments P=24,666,430 P=35,468,503 The average duration of the defined benefit liability at the end of the reporting period is 13 years. Equity instruments 12,300,562 12,140,226 Cash 9,679,055 – Amounts for the current and the previous periods follow: Balance at end of year P=46,646,047 P=47,608,729 2013 2012 2011 2010 2009 All equity instruments held have quoted prices in active market while debt instruments do not Benefit obligation P=67,201,834 P=79,723,128 P=41,697,676 P=31,735,889 P=27,090,768 have quoted market prices in active market. The plan assets do not have any concentration on Plan assets (46,646,047) (47,608,729) (34,253,108) (24,982,336) (20,881,334) Deficit P=20,555,787 P=32,114,399 P=7,444,568 P=6,753,553 P=6,209,434 risk.

The assumptions used to determine pension benefits for the Foundation for the years ended The following table shows the maturity profile of the Foundation’s defined benefit obligation December 31, 2013 and 2012 are as follows: based on undiscounted benefit payments:

2013 2012 2013 2012 Discount rate 5.40% 5.80% More than 1 year to 5 years P=17,924,893 P=18,407,682 Salary increase rate 7.00 7.00 More than 5 years to 10 years 21,772,709 34,359,906 Turn-over rate 0.50 to 100.00 0.50 to 100.00 More than 10 years to 15 years – 28,288,108 Mortality rate 0.10 to 0.74 0.10 to 1.20 P=39,697,602 P=81,055,696

There were no changes from the previous period in the methods and assumptions used in Experience adjustments on plan assets and obligation are as follows: preparing sensitivity analysis. 2013 2012 2011 2010 Gain (loss) on experience adjustments on defined benefit obligation P=15,470,398 (P=24,665,252) P=1,339,268 P=294,644 Gain (loss) on experience adjustments on plan assets (1,703,992) (10,305,200) (6,051,845) 2,639,310

70 Below shows the sensitivity analysis determined based on reasonably possible changes of each significant assumptions stated above, assuming all other assumptions were held constant:

2013 Discount Rate Salary Increase Rate +.50% (.50%) +.50% (.50%) Accrued liability P=65,220,061 P=68,794,304 P=68,757,179 P=65,237,401 Current fund assets 46,646,047 46,646,047 46,646,047 46,646,047 Unfunded accrued liability P=18,574,014 P=22,148,257 P=22,111,132 P=18,591,354

2012 Discount Rate Salary Increase Rate +.50% (.50%) +.50% (.50%) Accrued liability P=75,500,261 P=84,311,763 P=83,859,479 P=75,866,225 Current fund assets 47,608,729 47,608,729 47,608,729 47,608,729 Unfunded accrued liability P=27,891,532 P=36,703,034 P=36,250,750 P=28,257,496

The Foundation does not perform any Asset-Liability Matching Study. The overall investment policy and strategy of the retirement plan is based on the suitability assessment, as provided by its trust bank, in compliance with the BSP requirements. It does not, however, ensure that there will be sufficient assets to pay the retirement benefits as they fall due while attempting to mitigate the various risks of the plan. For the current year, the allocation of assets consist of 26.37% of equity instruments, 52.88% of debt instruments and 20.75% of cash.

The Foundation expects to make additional contributions of P=5.93 million to its retirement fund in 2014.

The average duration of the defined benefit liability at the end of the reporting period is 13 years.

Amounts for the current and the previous periods follow:

2013 2012 2011 2010 2009 Benefit obligation P=67,201,834 P=79,723,128 P=41,697,676 P=31,735,889 P=27,090,768 Plan assets (46,646,047) (47,608,729) (34,253,108) (24,982,336) (20,881,334) Deficit P=20,555,787 P=32,114,399 P=7,444,568 P=6,753,553 P=6,209,434

The following table shows the maturity profile of the Foundation’s defined benefit obligation based on undiscounted benefit payments:

2013 2012 More than 1 year to 5 years P=17,924,893 P=18,407,682 More than 5 years to 10 years 21,772,709 34,359,906 More than 10 years to 15 years – 28,288,108 P=39,697,602 P=81,055,696

Experience adjustments on plan assets and obligation are as follows:

2013 2012 2011 2010 Gain (loss) on experience adjustments on defined benefit obligation P=15,470,398 (P=24,665,252) P=1,339,268 P=294,644 Gain (loss) on experience adjustments on plan assets (1,703,992) (10,305,200) (6,051,845) 2,639,310

71 Compensation of key management personnel by benefit type (included in the “Salaries, wages and Details of the Foundation’s expenses as of December 31 follow: employee benefits” account) in the Foundation expenses (see Note 12) follows: Project Expenses 2013 2012 Short term employee benefits P=16,949,890 P=11,338,022 2013 2012 Post-employment benefits 1,972,333 7,087,685 Project implementation: P=18,922,223 P=18,425,707 Special projects P=60,260,817 P=63,339,219 Education 46,080,537 59,175,764 Youth Development 18,387,632 10,375,782 Arts and Culture 17,527,135 19,398,527 12. Net Assets Sustainable Livelihood 4,610,655 4,561,989 Project management: Unrestricted net assets are those net assets that are neither temporarily restricted nor permanently Salaries wages, and employee benefits 43,375,404 55,557,955 restricted. It includes all net assets with uses not restricted by donors, by Board of Trustees or by Monitoring and administrative 5,035,930 20,218,528 law. Building overhead 26,269,395 33,539,548 P=221,547,505 P=266,167,312 Temporarily restricted net assets refer to those net assets whose use by the Foundation is limited by donors to later periods of time or after specified dates or specified purposes. General and Administrative Expenses Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by donors. 2013 2012 Salaries, wages and employee benefits (Note 11) P=30,615,181 P=22,644,711 Permanently restricted net assets are those assets that the donor stipulates must be maintained by Repairs and maintenance 2,775,714 5,284,867 the Foundation in perpetuity. Permanently restricted net assets increase when Foundation receives Advocacy and public information services 2,498,301 1,426,830 contributions for which donor-imposed restrictions limiting the Foundation’s use of an asset or its Professional and service fees 2,002,958 1,904,174 economic benefits neither expire with the passage of time nor can be removed by the Foundation’s Depreciation and amortization 898,220 1,240,857 meeting certain requirements. Permanently restricted net assets generally come from: Communication and postage 738,437 1,092,779 (1) contributions, with donor-imposed permanent restrictions; (2) increase or decrease in existing Supplies 489,031 343,443 assets that are subject to permanent restrictions by donor or by law (such as unrealized gains, Transportation and travel 201,625 322,723 interest income); and (3) reclassification from another net asset class as a result of donor Trainings and seminars 190,046 628,708 stipulation or by law. Taxes and licenses 64,920 27,319 Provision for doubtful accounts (Note 5) – 5,283,010 Details of the Foundation’s net assets are as follows: Miscellaneous 864,574 1,636,909 P=41,339,007 P=41,836,330 2013 2012 Unrestricted P=18,553,135 P=1,113,186 Capital management Temporarily restricted: The primary objectives of the Foundation’s capital management policies are to devote its funds to Property and equipment 161,813,424 148,202,196 charitable projects, scholarship grants and cultural activities, to afford the financial flexibility to Education programs 43,471,856 35,223,796 support its operations and to protect and preserve capital to ensure financial sustainability of the Programs for community development 83,032,070 7,144,842 Foundation. 288,317,350 190,570,834 Permanently restricted: The Foundation’s source of capital is its total net assets, which is composed of unrestricted, Investment in perpetuity, the temporarily restricted and permanently restricted net assets, plus the net unrealized gain on AFS income of which is expendable to support financial assets. education and other programs 2,187,714,273 704,994,160 Endowment requiring income to be 2013 2012 added to original gift to build up the fund – 948,156,539 Net Assets Unrestricted P=18,553,135 P=1,113,186 2,187,714,273 1,653,150,699 Temporarily restricted 288,317,350 190,570,834 Unrealized gain on AFS financial assets 57,285,726 83,954,992 Permanently restricted 2,187,714,273 1,653,150,699 Remeasurement loss on defined benefit obligation (20,553,275) (34,888,992) Unrealized gain on AFS financial assets (Note 9) 57,285,726 83,954,992 P=2,531,317,209 P=1,893,900,719 P=2,551,870,484 P=1,928,789,711

72 Details of the Foundation’s expenses as of December 31 follow:

Project Expenses

2013 2012 Project implementation: Special projects P=60,260,817 P=63,339,219 Education 46,080,537 59,175,764 Youth Development 18,387,632 10,375,782 Arts and Culture 17,527,135 19,398,527 Sustainable Livelihood 4,610,655 4,561,989 Project management: Salaries wages, and employee benefits 43,375,404 55,557,955 Monitoring and administrative 5,035,930 20,218,528 Building overhead 26,269,395 33,539,548 P=221,547,505 P=266,167,312

General and Administrative Expenses

2013 2012 Salaries, wages and employee benefits (Note 11) P=30,615,181 P=22,644,711 Repairs and maintenance 2,775,714 5,284,867 Advocacy and public information services 2,498,301 1,426,830 Professional and service fees 2,002,958 1,904,174 Depreciation and amortization 898,220 1,240,857 Communication and postage 738,437 1,092,779 Supplies 489,031 343,443 Transportation and travel 201,625 322,723 Trainings and seminars 190,046 628,708 Taxes and licenses 64,920 27,319 Provision for doubtful accounts (Note 5) – 5,283,010 Miscellaneous 864,574 1,636,909 P=41,339,007 P=41,836,330

Capital management The primary objectives of the Foundation’s capital management policies are to devote its funds to charitable projects, scholarship grants and cultural activities, to afford the financial flexibility to support its operations and to protect and preserve capital to ensure financial sustainability of the Foundation.

The Foundation’s source of capital is its total net assets, which is composed of unrestricted, temporarily restricted and permanently restricted net assets, plus the net unrealized gain on AFS financial assets.

2013 2012 Net Assets Unrestricted P=18,553,135 P=1,113,186 Temporarily restricted 288,317,350 190,570,834 Permanently restricted 2,187,714,273 1,653,150,699 Unrealized gain on AFS financial assets (Note 9) 57,285,726 83,954,992 P=2,551,870,484 P=1,928,789,711

73 13. Financial Instruments The Foundation’s risk management policies are summarized below:

Fair Value Measurement Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet The following table shows an analysis of the Foundation’s financial assets and liabilities by level commitments associated with financial instruments. Liquidity risk may result from either the of the fair value hierarchy follows: inability to sell financial assets quickly at their fair values; or the counterparty failing on repayment of a contractual obligation; or inability to generate cash inflows as anticipated. December 31, 2013 Fair value measurement using The Foundation maintains a level of cash and cash equivalents deemed sufficient to finance Quoted prices in Significant operations. As part of its liquidity risk management, the Foundation regularly evaluates its active markets observable inputs projected and actual cash flows. It also continuously assesses conditions in the financial markets Total (Level 1) (Level 2) for opportunities to pursue fund-raising activities. Fund-raising activities may include investments Assets measured at fair value: in quoted and unquoted securities. Available-for-sale Common trust fund P=1,510,389,977 P=1,510,389,977 P=− As of December 31, 2013 and 2012, the carrying amounts of accounts and other payables will be Quoted securities 777,956,544 777,956,544 − settled within one year. Unquoted securities 2,650,444 – 2,650,444 P=2,290,996,965 P=2,288,346,521 P=2,650,444 The following table shows the maturity profile of the Foundation’s financial assets and liabilities based on contractual undiscounted payments: The Foundation uses the following hierarchy for determining and disclosing the fair value of its assets and liabilities by valuation technique: December 31, 2013 More than Level 1: quoted (unadjusted prices) in active markets for identical assets and liabilities Within 1 Year 1-5 Years 5 Years Total Gross Level 2: other techniques for which all inputs which have a significant effect on the recorded Financial Assets fair value are observable, either directly or indirectly Loans and receivables Level 3: techniques which use inputs which have a significant effect on the recorded fair value Cash and cash equivalents that are not based on observable market data (excluding cash on hand) P=132,843,776 P=– P=– P=132,843,776 Receivables Trade 4,958,194 − − 4,958,194 The fair value of the financial assets and liabilities is included at the amount at which the Advances to cooperative 5,912,346 − − 5,912,346 instrument could be exchanged in a current transaction between willing parties, other than in a Nontrade 1,158,017 − − 1,158,017 forced or liquidation sale. The following methods and assumptions were used to estimate the fair Advances to officers and values: employees 2,528,128 − − 2,528,128 Others 2,388,896 – – 2,388,896 AFS quoted financial assets - Fair values are based on quoted prices published in markets. 149,789,357 – – 149,789,357 AFS financial assets Management assessed that the fair values of loans and receivables and other financial liabilities Common trust fund – 1,510,389,977 – 1,510,389,977 approximate their carrying amounts largely due to the short-term maturities of these instruments. Quoted securities – 777,956,544 – 777,956,544 Unquoted securities – – 2,650,444 2,650,444 There were no transfers between fair value categories for assets and liabilities measured at fair – 2,288,346,521 2,650,444 2,290,996,965 value in 2013 and 2012. Total Financial Assets P=149,789,357 P=2,288,346,521 P=2,650,444 P=2,440,786,322 Other Financial Liabilities Financial Risk Management Objectives and Policies Accounts and other payables Accrued expenses P=34,615,161 P=– P=– P=34,615,161 The Foundation has various financial instruments such as cash and cash equivalents, receivables, Trade 31,536,501 – – 31,536,501 AFS financial assets, accounts and other payables which arise directly from its operations. Payable to consignors 5,942,516 – – 5,942,516 Others 3,032,405 – – 3,032,405 The main purpose of the Foundation’s financial instruments is to fund its operational and capital Total Other Financial Liabilities P=75,126,583 P=– P=– P=75,126,583 expenditures. The main risks arising from the use of financial instruments are liquidity risk, credit risk and foreign exchange risk.

74 The Foundation’s risk management policies are summarized below:

Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from either the inability to sell financial assets quickly at their fair values; or the counterparty failing on repayment of a contractual obligation; or inability to generate cash inflows as anticipated.

The Foundation maintains a level of cash and cash equivalents deemed sufficient to finance operations. As part of its liquidity risk management, the Foundation regularly evaluates its projected and actual cash flows. It also continuously assesses conditions in the financial markets for opportunities to pursue fund-raising activities. Fund-raising activities may include investments in quoted and unquoted securities.

As of December 31, 2013 and 2012, the carrying amounts of accounts and other payables will be settled within one year.

The following table shows the maturity profile of the Foundation’s financial assets and liabilities based on contractual undiscounted payments:

December 31, 2013 More than Within 1 Year 1-5 Years 5 Years Total Gross Financial Assets Loans and receivables Cash and cash equivalents (excluding cash on hand) P=132,843,776 P=– P=– P=132,843,776 Receivables Trade 4,958,194 − − 4,958,194 Advances to cooperative 5,912,346 − − 5,912,346 Nontrade 1,158,017 − − 1,158,017 Advances to officers and employees 2,528,128 − − 2,528,128 Others 2,388,896 – – 2,388,896 149,789,357 – – 149,789,357 AFS financial assets Common trust fund – 1,510,389,977 – 1,510,389,977 Quoted securities – 777,956,544 – 777,956,544 Unquoted securities – – 2,650,444 2,650,444 – 2,288,346,521 2,650,444 2,290,996,965 Total Financial Assets P=149,789,357 P=2,288,346,521 P=2,650,444 P=2,440,786,322 Other Financial Liabilities Accounts and other payables Accrued expenses P=34,615,161 P=– P=– P=34,615,161 Trade 31,536,501 – – 31,536,501 Payable to consignors 5,942,516 – – 5,942,516 Others 3,032,405 – – 3,032,405 Total Other Financial Liabilities P=75,126,583 P=– P=– P=75,126,583

75 December 31, 2012 2013 2012 More than AFS financial assets Within 1 Year 1-5 Years 5 Years Total Gross Common trust fund P=1,510,389,977 P=1,137,494,118 Financial Assets Quoted securities 777,956,544 571,774,215 Loans and receivables Cash and cash equivalents Unquoted securities 2,650,444 1,931,701 (excluding cash on hand) P=93,486,592 P=– P=– P=93,486,592 P=2,440,786,322 P=1,822,942,444 Receivables Trade 5,812,177 − − 5,812,177 Market Risk Advances to cooperative 6,263,147 − − 6,263,147 Market risk is the risk that the fair value or future cash flows of a financial instrument will Nontrade 2,111,272 − − 2,111,272 fluctuate because of changes in market prices. Advances to officers and employees 1,876,713 − − 1,876,713 The Foundation’s exposure to the risk for change in market value relates primarily to the Accrued interest 205,767 – – 205,767 Others 1,995,929 – – 1,995,929 Foundation’s AFS financial assets. The Foundation’s AFS financial assets are managed by a P111,751,597= P=– P–= P111,751,597 trustee bank. AFS financial assets Common trust fund P=– P=1,137,494,118 P=– P=1,137,494,118 The following table demonstrates the sensitivity to a reasonably possible change in the market Quoted securities – 571,774,215 – 571,774,215 prices, with all variables held constant, of the Foundation’s equity on December 31, 2013 and Unquoted securities – – 1,931,701 1,931,701 2012. – 1,709,268,333 1,931,701 1,711,200,034 Total Financial Assets P111,751,597= P1,709,268,333= P1,931,701= P=1,822,951,631 Effect on Net Assets Increase (decrease) 2013 2012 Other Financial Liabilities Accounts and other payables 5% P=114,549,848 P=85,560,002 Accrued expenses P=23,503,551 P=– P=– P=23,503,551 (5%) (114,549,848) (85,560,002) Trade 38,061,974 – – 38,061,974 Advances 6,700,376 – – 6,700,376 Others 1,924,639 – – 1,924,639 Total Other Financial Liabilities P=70,190,540 P=– P=– P=70,190,540

Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Foundation’s holding of cash and cash equivalents exposes the Foundation to credit risk of the counterparty. Credit risk management involves dealing only with institutions for which credit limits have been established. The treasury policy sets credit limits for each counterparty. Given the Foundation’s diverse base of counterparties, it is not exposed to large concentrations of credit risk.

The table below shows the maximum exposure to credit risk for the components of the statements of financial position:

2013 2012 Cash and cash equivalents P=132,843,776 P=93,486,592 Receivables Trade 4,958,194 5,812,177 Advances to cooperative 5,912,346 6,263,147 Nontrade 1,158,017 2,102,085 Advances to officers and employees 2,528,128 1,876,713 Accrued interest receivable – 205,767 Others 2,388,896 1,995,929

(Forward)

76 2013 2012 AFS financial assets Common trust fund P=1,510,389,977 P=1,137,494,118 Quoted securities 777,956,544 571,774,215 Unquoted securities 2,650,444 1,931,701 P=2,440,786,322 P=1,822,942,444

Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

The Foundation’s exposure to the risk for change in market value relates primarily to the Foundation’s AFS financial assets. The Foundation’s AFS financial assets are managed by a trustee bank.

The following table demonstrates the sensitivity to a reasonably possible change in the market prices, with all variables held constant, of the Foundation’s equity on December 31, 2013 and 2012.

Effect on Net Assets Increase (decrease) 2013 2012 5% P=114,549,848 P=85,560,002 (5%) (114,549,848) (85,560,002)

77 78

The aging analysis of receivables presented per class, are as follows:

December 31, 2013 Neither Past Due nor Past Due but not Impaired Individually Impaired <30 Days 30-60 Days 61-90 Days 91-120 Days >120 Days Total Impaired Total Trade P=3,848,474 P=896,120 P=17,265 P=– P=69,369 P=126,966 P=1,109,720 P=7,325,456 P=12,283,650 Advances to cooperative 5,912,346 – – – – – – – 5,912,346 Nontrade 456,677 121,432 68,880 91,227 140,428 279,373 701,340 2,949,954 4,107,971 Advances to officers and employees 2,515,007 − − − − 13,121 13,121 − 2,528,128 Others 2,388,896 − − − − − − − 2,388,896 P=15,121,400 P=1,017,552 P=86,145 P=91,227 P=209,797 P=419,460 P=1,824,181 P=10,275,410 P=27,220,991

December 31, 2012 Neither Past Due nor Past Due but not Impaired Individually Impaired <30 Days 30-60 Days 61-90 Days 91-120 Days >120 Days Total Impaired Total Trade P=1,424,671 P=1,083,743 P=948,133 P=933,205 P=160,681 P=1,261,744 P=4,387,506 P=8,330,873 P=14,143,050 Advances to cooperative 6,263,147 – – – – – – – 6,263,147 Nontrade 4,155 127,092 177,150 48,924 203,241 1,550,710 2,107,117 3,320,531 5,431,803 Advances to officers and employees 1,822,574 50,365 − − 3,774 − 54,139 − 1,876,713 Accrued interest 205,767 – – – – – – – 205,767 Others 1,995,929 − − − − − − − 1,995,929 `` P=11,716,243 P=1,261,200 P=1,125,283 P=982,129 P=367,696 P=2,812,454 P=6,548,762 P=11,651,404 P=29,916,409

The table below shows the credit quality of the Foundation’s financial assets:

December 31, 2013 Neither Past Due nor Impaired Past Due but Individually High Grade Medium Grade Low Grade Total Not Impaired Impaired Total Cash and cash equivalents (excluding cash on hand) P=132,843,776 P=– P=– P=132,843,776 P=– P=– P=132,843,776 Receivables: Trade 2,986,170 832,904 29,400 3,848,474 1,109,720 7,325,456 12,283,650 Advances to cooperative 5,912,346 – – 5,912,346 – – 5,912,346 Nontrade 333,490 − 123,187 456,677 701,340 2,949,954 4,107,971 Advances to officers and employees 2,515,007 − − 2,515,007 13,121 − 2,528,128 Others 2,388,896 − – 2,388,896 − − 2,388,896 AFS financial assets: Common trust fund 1,510,389,977 – – 1,510,389,977 – – 1,510,389,977 Quoted securities 777,956,544 – – 777,956,544 – – 777,956,544 Unquoted securities 2,650,444 – – 2,650,444 – – 2,650,444 P2,437,976,650 P=832,904 P152,587 P2,438,962,141 P1,824,181 P=10,275,410 P=2,451,061,732

December 31, 2012 Neither Past Due nor Impaired Past Due but Individually High Grade Medium Grade Low Grade Total Not Impaired Impaired Total Cash and cash equivalents (excluding cash on hand) P=93,486,592 P=– P=– P=93,486,592 P=– P=– P=93,486,592 Receivables: Trade 616,481 754,114 54,076 1,424,671 4,387,506 8,330,873 14,143,050 Advances to cooperative 6,263,147 – – 6,263,147 – – 6,263,147 Nontrade 4,155 − − 4,155 2,107,117 3,320,531 5,431,803 Advances to officers and employees 1,822,574 − − 1,822,574 54,139 − 1,876,713 Accrued interest 205,767 – – 205,767 – – 205,767 Others 1,995,929 − – 1,995,929 − − 1,995,929 AFS financial assets: Common trust fund 1,137,494,118 – – 1,137,494,118 – – 1,137,494,118 Quoted securities 571,774,215 – – 571,774,215 – – 571,774,215 Unquoted securities 1,931,701 – – 1,931,701 – – 1,931,701 P=1,815,594,679 P=754,114 P=54,076 P=1,816,402,869 P=6,548,762 P=11,651,404 P=1,834,603,035 The table below shows the credit quality of the Foundation’s financial assets:

December 31, 2013 Neither Past Due nor Impaired Past Due but Individually High Grade Medium Grade Low Grade Total Not Impaired Impaired Total Cash and cash equivalents (excluding cash on hand) P=132,843,776 P=– P=– P=132,843,776 P=– P=– P=132,843,776 Receivables: Trade 2,986,170 832,904 29,400 3,848,474 1,109,720 7,325,456 12,283,650 Advances to cooperative 5,912,346 – – 5,912,346 – – 5,912,346 Nontrade 333,490 − 123,187 456,677 701,340 2,949,954 4,107,971 Advances to officers and employees 2,515,007 − − 2,515,007 13,121 − 2,528,128 Others 2,388,896 − – 2,388,896 − − 2,388,896 AFS financial assets: Common trust fund 1,510,389,977 – – 1,510,389,977 – – 1,510,389,977 Quoted securities 777,956,544 – – 777,956,544 – – 777,956,544 Unquoted securities 2,650,444 – – 2,650,444 – – 2,650,444 P=2,437,976,650 P=832,904 =P152,587 P2,438,962,141= P=1,824,181 P=10,275,410 P=2,451,061,732

December 31, 2012 Neither Past Due nor Impaired Past Due but Individually High Grade Medium Grade Low Grade Total Not Impaired Impaired Total Cash and cash equivalents (excluding cash on hand) P=93,486,592 P=– P=– P=93,486,592 P=– P=– P=93,486,592 Receivables: Trade 616,481 754,114 54,076 1,424,671 4,387,506 8,330,873 14,143,050 Advances to cooperative 6,263,147 – – 6,263,147 – – 6,263,147 Nontrade 4,155 − − 4,155 2,107,117 3,320,531 5,431,803 Advances to officers and employees 1,822,574 − − 1,822,574 54,139 − 1,876,713 Accrued interest 205,767 – – 205,767 – – 205,767 Others 1,995,929 − – 1,995,929 − − 1,995,929 AFS financial assets: Common trust fund 1,137,494,118 – – 1,137,494,118 – – 1,137,494,118 Quoted securities 571,774,215 – – 571,774,215 – – 571,774,215 Unquoted securities 1,931,701 – – 1,931,701 – – 1,931,701 P=1,815,594,679 P=754,114 P=54,076 P=1,816,402,869 P=6,548,762 P=11,651,404 P=1,834,603,035 79 The credit quality of the financial assets was determined as follows: 15. Supplementary Tax Information Under Revenue Regulations (RR) 15-2010

Cash and cash equivalents - based on the nature of the counterparty and the Foundation’s internal RR No. 15-2010 are promulgated to amend certain provisions of RR No. 21-2002 prescribing the rating system. manner of compliance with any documentary and/or procedural requirements in connection with the preparation and submission of financial statements accompanying tax returns. In addition to Receivables - high grade pertains to receivables from Ayala Group of Companies and debtors the disclosures mandated under PFRS, RR No. 15-2010 requires disclosures regarding information without past due accounts; medium grade pertains to receivables with past due accounts not on taxes, duties and license fees paid or accrued during the taxable year. exceeding 12 months; and low grade pertains to receivables with past due accounts exceeding 12 months. The Foundation also reported and/or paid the following types of taxes for 2013:

AFS financial assets - the quoted and unquoted financial assets are unrated. Value-added Tax (VAT) The NIRC of 1997 also provides for the imposition of VAT on sales of goods and services. Foreign exchange risk Accordingly, the Foundation’s sales from other activities are subject to output VAT while its The Foundation’s foreign exchange risk results primarily from movements of the Philippine Peso importations and purchases from other VAT-registered individuals or corporations are subject to against the United States Dollar (US$). input VAT. RA No. 9337 increased the value added tax rate from 10.0% to 12.0%, effective February 1, 2006. The Foundation’s foreign currency-denominated financial instruments are included in cash and cash equivalents amounting to US$0.01 million in 2013 and US$0.04 million in 2012. The a. Output VAT Philippine peso values of these instruments amounted to P=0.55 million and P=1.75 million in 2013 and 2012, respectively. Net Sales/ Receipts Output VAT In translating the foreign currency-denominated monetary assets into peso amounts, the exchange Taxable sales rate used was P=44.40:$1 and P=41.05:$1, based on the Philippine Peso - U.S. dollar exchange rate Leasing income P=11,916,608 P=1,429,993 as of December 31, 2013 and 2012, respectively. Sales of services 5,288,881 634,666 Sale of goods 3,289,471 394,737 The following table demonstrates the sensitivity to a reasonably possible change in the US dollar P=20,494,960 P=2,459,396 rate, with all variables held constant, of the Foundation’s result of activities (due to changes in the fair value of monetary assets) as of December 31, 2013 and 2012: The Foundation’s sales of services are based on actual collections received, hence, may not be the same as amounts accrued in the statement of activities. Effect on Net Assets US$ depreciates (appreciates) 2013 2012 b. Input VAT P=1.0 P=12,376 P=42,579 (1.0) (12,376) (42,579) Balance at January 1 P=4,111,240 Current year’s domestic purchases/payments for: Services lodged under other accounts 3,493,927 14. Other Activities Goods other than for resale or manufacture 337,608 7,942,775 Statements of revenue and expenses on the Foundation’s museum and library operations for the Claims for tax credit/refund and other adjustments 2,494,198 years ended December 31, 2013 and 2012 are as follows: Balance at December 31 P=5,448,577 2012 2013 c. Importations Revenue P=20,494,960 P=22,092,147 Expenses 29,558,286 31,135,103 The Foundation did not have any purchases from outside the country. Net loss P=9,063,326 P=9,042,956 d. Excise Tax

The Foundation did not enter into any transaction subject to excise tax.

80 15. Supplementary Tax Information Under Revenue Regulations (RR) 15-2010

RR No. 15-2010 are promulgated to amend certain provisions of RR No. 21-2002 prescribing the manner of compliance with any documentary and/or procedural requirements in connection with the preparation and submission of financial statements accompanying tax returns. In addition to the disclosures mandated under PFRS, RR No. 15-2010 requires disclosures regarding information on taxes, duties and license fees paid or accrued during the taxable year.

The Foundation also reported and/or paid the following types of taxes for 2013:

Value-added Tax (VAT) The NIRC of 1997 also provides for the imposition of VAT on sales of goods and services. Accordingly, the Foundation’s sales from other activities are subject to output VAT while its importations and purchases from other VAT-registered individuals or corporations are subject to input VAT. RA No. 9337 increased the value added tax rate from 10.0% to 12.0%, effective February 1, 2006.

a. Output VAT

Net Sales/ Receipts Output VAT Taxable sales Leasing income P=11,916,608 P=1,429,993 Sales of services 5,288,881 634,666 Sale of goods 3,289,471 394,737 P=20,494,960 P=2,459,396

The Foundation’s sales of services are based on actual collections received, hence, may not be the same as amounts accrued in the statement of activities.

b. Input VAT

Balance at January 1 P=4,111,240 Current year’s domestic purchases/payments for: Services lodged under other accounts 3,493,927 Goods other than for resale or manufacture 337,608 7,942,775 Claims for tax credit/refund and other adjustments 2,494,198 Balance at December 31 P=5,448,577

c. Importations

The Foundation did not have any purchases from outside the country.

d. Excise Tax

The Foundation did not enter into any transaction subject to excise tax.

81

AYALA FOUNDATION, INC. SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS e. Documentary stamp tax

The Foundation did not enter into any transaction which requires payment of any documentary PHILIPPINE FINANCIAL REPORTING STANDARDS AND stamp taxes. Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2013 f. All other local and national taxes Framework for the Preparation and Presentation of Financial This includes all other taxes, local and national, including real estate taxes, licenses and permit Statements  fees lodged under the ‘Project Expenses’ and ‘General and administrative expenses’ accounts Conceptual Framework Phase A: Objectives and qualitative both in the Foundation’s statement of activities: characteristics PFRS’s Practice Statement Management Commentary  Details consist of the following: Philippine Financial Reporting Standards

General and PFRS 1 First-time Adoption of Philippine Financial Reporting  Project Administrative (Revised) Standards Expenses Expenses Total Amendments to PFRS 1 and PAS 27: Cost of an Investment  Real estate taxes P=2,231,792 P=– P=2,231,792 in a Subsidiary, Jointly Controlled Entity or Associate License and permits fees 62,799 10,135 72,934 Amendments to PFRS 1: Additional Exemptions for First-  Others 26,058 54,785 80,843 time Adopters P=2,320,649 P=64,920 P=2,385,569 Amendment to PFRS 1: Limited Exemption from  Comparative PFRS 7 Disclosures for First-time Adopters g. Withholding Taxes Amendments to PFRS 1: Severe Hyperinflation and  Withholding taxes on compensation and benefits P=14,747,351 Removal of Fixed Date for First-time Adopters Expanded withholding taxes 2,937,960 Amendments to PFRS 1: Government Loans  P=17,685,311 PFRS 2 Share-based Payment 

h. Tax assessments Amendments to PFRS 2: Vesting Conditions and  Cancellations As of December 31, 2013, the Foundation has not received any final assessment notice from Amendments to PFRS 2: Group Cash-settled Share-based  the BIR. Payment Transactions

PFRS 3 Business Combinations  (Revised) PFRS 4 Insurance Contracts 

Amendments to PAS 39 and PFRS 4: Financial Guarantee  Contracts

PFRS 5 Non-current Assets Held for Sale and Discontinued  Operations PFRS 6 Exploration for and Evaluation of Mineral Resources  PFRS 7 Financial Instruments: Disclosures 

Amendments to PAS 39 and PFRS 7: Reclassification of  Financial Assets

Amendments to PAS 39 and PFRS 7: Reclassification of  Financial Assets – Effective Date and Transition

Amendments to PFRS 7: Improving Disclosures about  Financial Instruments

82

AYALA FOUNDATION, INC. SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2013 Framework for the Preparation and Presentation of Financial Statements  Conceptual Framework Phase A: Objectives and qualitative characteristics PFRS’s Practice Statement Management Commentary  Philippine Financial Reporting Standards

PFRS 1 First-time Adoption of Philippine Financial Reporting  (Revised) Standards

Amendments to PFRS 1 and PAS 27: Cost of an Investment  in a Subsidiary, Jointly Controlled Entity or Associate

Amendments to PFRS 1: Additional Exemptions for First-  time Adopters

Amendment to PFRS 1: Limited Exemption from  Comparative PFRS 7 Disclosures for First-time Adopters

Amendments to PFRS 1: Severe Hyperinflation and  Removal of Fixed Date for First-time Adopters Amendments to PFRS 1: Government Loans  PFRS 2 Share-based Payment 

Amendments to PFRS 2: Vesting Conditions and  Cancellations

Amendments to PFRS 2: Group Cash-settled Share-based  Payment Transactions

PFRS 3 Business Combinations  (Revised) PFRS 4 Insurance Contracts 

Amendments to PAS 39 and PFRS 4: Financial Guarantee  Contracts

PFRS 5 Non-current Assets Held for Sale and Discontinued  Operations PFRS 6 Exploration for and Evaluation of Mineral Resources  PFRS 7 Financial Instruments: Disclosures 

Amendments to PAS 39 and PFRS 7: Reclassification of  Financial Assets

Amendments to PAS 39 and PFRS 7: Reclassification of  Financial Assets – Effective Date and Transition

Amendments to PFRS 7: Improving Disclosures about  Financial Instruments

83 PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2013 PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted PAS 19 Employee Benefits Adopted Applicable  Effective as of December 31, 2013 (Amended) PAS 20 Accounting for Government Grants and Disclosure of Amendments to PFRS 7: Disclosures - Transfers of   Financial Assets Government Assistance Amendments to PFRS 7: Disclosures - Offsetting Financial PAS 21 The Effects of Changes in Foreign Exchange Rates  Not Early Adopted Assets and Financial Liabilities Amendment: Net Investment in a Foreign Operation  Amendments to PFRS 7: Mandatory Effective Date of Not Early Adopted PAS 23 Borrowing Costs  PFRS 9 and Transition Disclosures (Revised) PFRS 8 Operating Segments  PAS 24 Related Party Disclosures  PFRS 9 Financial Instruments  (Revised) Amendments to PFRS 9: Mandatory Effective Date of PAS 26 Accounting and Reporting by Retirement Benefit Plans  Not Early Adopted PFRS 9 and Transition Disclosures PAS 27 Consolidated and Separate Financial Statements  PFRS 10 Consolidated Financial Statements  PAS 27 Separate Financial Statements  PFRS 11 Joint Arrangements  (Amended) PFRS 12 Disclosure of Interests in Other Entities  PAS 28 Investment in Associates  PFRS 13 Fair Value Measurement Not Early Adopted PAS 28 Investments in Associates and Joint Ventures  (Amended) Philippine Accounting Standards PAS 29 Financial Reporting in Hyperinflationary Economies  PAS 1 Presentation of Financial Statements  (Revised) PAS 31 Interests in Joint Ventures  Amendment to PAS 1: Capital Disclosures  PAS 32 Financial Instruments: Disclosure and Presentation  Amendments to PAS 32 and PAS 1: Puttable Financial  Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation Not Early Adopted Instruments and Obligations Arising on Liquidation Amendments to PAS 1: Presentation of Items of Other Comprehensive Income  Amendment to PAS 32: Classification of Rights Issues Not Early Adopted Amendments to PAS 32: Offsetting Financial Assets and Not Early Adopted PAS 2 Inventories  Financial Liabilities PAS 7 Statement of Cash Flows  PAS 33 Earnings per Share  PAS 8 Accounting Policies, Changes in Accounting Estimates and  PAS 34 Interim Financial Reporting  Errors PAS 36 Impairment of Assets  PAS 10 Events after the Reporting Date  PAS 37 Provisions, Contingent Liabilities and Contingent Assets  PAS 11 Construction Contracts  PAS 38 Intangible Assets  PAS 12 Income Taxes  PAS 39 Financial Instruments: Recognition and Measurement  Amendment to PAS 12 - Deferred Tax: Recovery of  Underlying Assets Amendments to PAS 39: Transition and Initial Recognition  of Financial Assets and Financial Liabilities PAS 16 Property, Plant and Equipment  Amendments to PAS 39: Cash Flow Hedge Accounting of  PAS 17 Leases  Forecast Intragroup Transactions PAS 18 Revenue  Amendments to PAS 39: The Fair Value Option  PAS 19 Employee Benefits  Amendments to PAS 39 and PFRS 4: Financial Guarantee  Contracts Amendments to PAS 19: Actuarial Gains and Losses,  Group Plans and Disclosures

84 PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2013

PAS 19 Employee Benefits  (Amended)

PAS 20 Accounting for Government Grants and Disclosure of  Government Assistance PAS 21 The Effects of Changes in Foreign Exchange Rates  Amendment: Net Investment in a Foreign Operation 

PAS 23 Borrowing Costs  (Revised)

PAS 24 Related Party Disclosures  (Revised) PAS 26 Accounting and Reporting by Retirement Benefit Plans  PAS 27 Consolidated and Separate Financial Statements 

PAS 27 Separate Financial Statements  (Amended) PAS 28 Investment in Associates 

PAS 28 Investments in Associates and Joint Ventures  (Amended) PAS 29 Financial Reporting in Hyperinflationary Economies  PAS 31 Interests in Joint Ventures  PAS 32 Financial Instruments: Disclosure and Presentation  Amendments to PAS 32 and PAS 1: Puttable Financial Not Early Adopted Instruments and Obligations Arising on Liquidation Amendment to PAS 32: Classification of Rights Issues Not Early Adopted Amendments to PAS 32: Offsetting Financial Assets and Not Early Adopted Financial Liabilities PAS 33 Earnings per Share  PAS 34 Interim Financial Reporting  PAS 36 Impairment of Assets  PAS 37 Provisions, Contingent Liabilities and Contingent Assets  PAS 38 Intangible Assets  PAS 39 Financial Instruments: Recognition and Measurement 

Amendments to PAS 39: Transition and Initial Recognition  of Financial Assets and Financial Liabilities

Amendments to PAS 39: Cash Flow Hedge Accounting of  Forecast Intragroup Transactions Amendments to PAS 39: The Fair Value Option 

Amendments to PAS 39 and PFRS 4: Financial Guarantee  Contracts

85 PHILIPPINE FINANCIAL REPORTING STANDARDS AND PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not Not Not INTERPRETATIONS Adopted INTERPRETATIONS Adopted Adopted Applicable Adopted Applicable Effective as of December 31, 2013 Effective as of December 31, 2013 Introduction of the Euro  Amendments to PAS 39 and PFRS 7: Reclassification of  SIC-7 Financial Assets SIC-10 Government Assistance - No Specific Relation to Operating  Activities Amendments to PAS 39 and PFRS 7: Reclassification of  Financial Assets – Effective Date and Transition SIC-12 Consolidation - Special Purpose Entities  Amendments to Philippine Interpretation IFRIC–9 and  Amendment to SIC - 12: Scope of SIC 12  PAS 39: Embedded Derivatives SIC-13 Jointly Controlled Entities - Non-Monetary Contributions Amendment to PAS 39: Eligible Hedged Items   by Venturers PAS 40 Investment Property  SIC-15 Operating Leases - Incentives  PAS 41 Agriculture  SIC-25 Income Taxes - Changes in the Tax Status of an Entity or  Philippine Interpretations its Shareholders Evaluating the Substance of Transactions Involving the IFRIC 1 Changes in Existing Decommissioning, Restoration and  SIC-27  Similar Liabilities Legal Form of a Lease Service Concession Arrangements: Disclosures.  IFRIC 2 Members' Share in Co-operative Entities and Similar  SIC-29 Instruments SIC-31 Revenue - Barter Transactions Involving Advertising  IFRIC 4 Determining Whether an Arrangement Contains a Lease  Services Intangible Assets - Web Site Costs  IFRIC 5 Rights to Interests arising from Decommissioning,  SIC-32 Restoration and Environmental Rehabilitation Funds

IFRIC 6 Liabilities arising from Participating in a Specific Market -  Waste Electrical and Electronic Equipment

IFRIC 7 Applying the Restatement Approach under PAS 29  Financial Reporting in Hyperinflationary Economies IFRIC 8 Scope of PFRS 2  IFRIC 9 Reassessment of Embedded Derivatives 

Amendments to Philippine Interpretation IFRIC–9 and PAS  39: Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment  IFRIC 11 PFRS 2- Group and Treasury Share Transactions  IFRIC 12 Service Concession Arrangements  IFRIC 13 Customer Loyalty Programmes 

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding  Requirements and their Interaction

Amendments to Philippine Interpretations IFRIC- 14,  Prepayments of a Minimum Funding Requirement IFRIC 16 Hedges of a Net Investment in a Foreign Operation  IFRIC 17 Distributions of Non-cash Assets to Owners  IFRIC 18 Transfers of Assets from Customers  IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments  IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 

86 PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2013 SIC-7 Introduction of the Euro 

SIC-10 Government Assistance - No Specific Relation to Operating  Activities SIC-12 Consolidation - Special Purpose Entities  Amendment to SIC - 12: Scope of SIC 12 

SIC-13 Jointly Controlled Entities - Non-Monetary Contributions  by Venturers SIC-15 Operating Leases - Incentives 

SIC-25 Income Taxes - Changes in the Tax Status of an Entity or  its Shareholders

SIC-27 Evaluating the Substance of Transactions Involving the  Legal Form of a Lease SIC-29 Service Concession Arrangements: Disclosures. 

SIC-31 Revenue - Barter Transactions Involving Advertising  Services SIC-32 Intangible Assets - Web Site Costs 

87 Ayala Foundation Management and Staff

88 Jaime Augusto Zobel de Ayala Fernando Zobel de Ayala Arts and Culture Strengthening The Capacity Human Resources and Chairmen Of Civil Society Administration Ma. Elizabeth Gustilo Organizations In The Maria Lourdes Heras-de Leon Senior Director Philippines Tyne Dignadice Jr. President Director Kenneth Esguerra Socorro Camacho Senior Manager, Ayala Museum Chief of Party Erwin Ibarreta Programs Security Manager Suzanne Yupangco Gina Estipona Rowena Lopez Senior Manager, Senior Manager Sarah Sevilla Senior Director Filipinas Heritage Library Manager Ma. Victoria Alcoseba Ramon Miranda Maria Bernadette Samson Rhandy Rowan Francis Estolano Director, Education Adviser Aprille Tijam Managers Celeste Katigbak Managers Rosalinda Navera Mercedes Barcelon Liza Agullo Mary Grace Parungao Senior Manager, Miguel Carlos Acosta Candice Elaine Bismonte Kathleen Jan Plandano Sustainable Livelihood Adviser Verne Alexander Ahyong Valentina Gangl Maria Cindy Poyaoan Andre Grego Angeles III Michael Anthony Santos Roanna Sicat Dino Rey Abellanosa Maria Cecilia Ayson Staff Senior Manager, Visayas Operations Josie Viaña Alezza Marie Buenviaje Michael Villegas Maria Loreta Busto Archimedes Velasco Staff Roland Cruz Finance and Corporate Senior Manager, Services Mindanao Operations Faye Johanna Cura Ramona Velasco Consultant Gilbert de Jesus Aditas Vivian Santamaria Maria Paz Baylon Felicia Marie de Vera Senior Director and Julie Bergania Marie Julienne Ente Chief Financial Officer Lucky Esteban Strategy, Communications, Chiara Cruza and Partner Care Ireneo Demecais Jr. Paula Nikola Fernandez Ludette Christie Domingo Mariecar Fernando Rosemarie Figuerres Senior Manager, Finance Jin Paul de Guzman Cecilia Palma Carla Gamalinda Manager Joseph Anthony Quesada Jo Ann Gando Jose Barcelona Managers Micaella Angelica Gonzales Senior Manager and Bayani Alonto Jr. Chief Information Officer Arnaldo Legaspi Jennifer Bascoguin Zyriel Abejero Hannah Jade Lim Chaffee Alpha Elisabeth Baumgart Libby Josephine Abesamis Jaime Martinez Staff Erwin Gopez Francis Ian Agatep Marinella Andrea Mina  Managers Mary Rose Erika Barja Carla Margarita Muñoz John Tobit Cruz Julius Jacob Nolasco Joysen Accad Chester Lei Fabian Joy Kathleen Peña Christian Martin Andrada Maria Mia Farrah Falcis Elena Robles Arwin Ayson John Christopher Paul Gulay Pablo Ruiz Maureen Bañaga Dennis Mateo January Salvador Teresita Cailo Jessieree Anne Matienzo Ana Victoria Tamula Rizza Erika Dangan Pepito Rabago Arnold Torrecampo Philip Neri Dellosde Mary Ann Santiago Marjorie Villaflores Imelda Fatalla Christine Joy Sarigumba Staff Kristel Ann Galvez Melissa Yamson Shirley Grospe Staff Nina Huang Fiona Ting Jocelyn Hernandez Rosalina Acosta Consultants Escolastica Nonog Ebony Lautner Renie Pensotes Jessica Sandra Claudio Tirzah Salonga Maria Meliza Tuba April Tamayo Staff Marcia Czarina Medina Consultants

89 Ayala Foundation, Inc. Ayala Foundation, Inc. Directory 10F Ayala Wing, BPI Building Visayas Operations 6768 Ayala Avenue cor. Paseo de Roxas 4F Krizia Building Makati City, Philippines Gorordo Avenue, Lahug Tel (632) 717 5800 Cebu City, Philippines Fax (632) 813 4487 to 88 Tel/Fax (6332) 412 2405 www.ayalafoundation.org

90 Ayala Foundation, Inc. Ayala Museum Filipinas Heritage Library Mindanao Operations Makati Avenue corner De la Rosa Street 6F Ayala Museum 2F Climbs Building, Tiano Pacana Street Greenbelt Park Makati Avenue corner De la Rosa Street Cagayan de Oro City, Philippines Makati City, Philippines Greenbelt Park Tel (638822) 729 497 Tel (632) 759 8288 Makati City, Philippines Fax (632) 757 2787 Tel (632) 759 8288 local 36 www.ayalamuseum.org www.filipinaslibrary.org.ph

91 Editorial and Design Direction Cover Concept and Design Photography Ayala Foundation Strategy, Communications, and K2 Interactive (Asia) Inc. Erik Liongoren (Operations and Management and Staff) Partner Care Group Wig Tysmans, Paco Guerrero (Board of Trustees) Layout and Design Jay Fernando (El Nido, Palawan) Internal Audit Studio Dialogo Ayala Foundation Ayala Foundation Finance and Corporate Services Paper information The cover of the 2013 Ayala Foundation Annual Report is printed on Naturalis uncoated paper, made from 55-percent post-consumer waste. The main pages are printed on 100-percent wood-free Taiga, made from elemental chlorine free (ECF) unbleached pulp. Ayala Foundation, Inc. 10F Ayala Wing, BPI Building 6768 Ayala Avenue corner Paseo de Roxas Makati City, 1226 Philippines www.ayalafoundation.org