CONQUERINGCHALLENGES ANNUAL REPORT 2013 Contents 2 Financial Highlights 4 Chairman’s Message The LT Group Logo 6 President’s Message Strength and solidarity. This is the essence of the LT Group (LTG) 10 CFO’s Message logo. The clean balanced lines and curves are the central elements -- a mystical symmetrical tree. Drawn in 12 Subsidiaries an Eastern-Oriental style, it gives hint to the Company’s Chinese heritage. 22 Corporate Governance Report Tree is life. Life is growth. Like a tree, 30 Corporate Social Responsibility a company with rm roots, properly nurtured, will continuously grow 32 Statement of Management’s Responsibility and give value. for Financial Statements The tree’s trunk is upright, and the branches spread out -- 33 Independent Auditor’s Report a symbolic consolidation of the subsidiaries and stakeholders within two circles, one for continuity, 34 Consolidated Balance Sheets the outer one for solidarity. 36 Consolidated Statements of Income 37 Consolidated Statements of Comprehensive Income VISION A World-class conglomerate at the forefront of Philippine 38 Consolidated Statements economic growth, successfully maintaining a strong presence and dominant position in key Philippine industries while ensuring continuous benets to its of Changes in Equity consumers, communities, employees, business partners and shareholders. 40 Consolidated Statements of Cash Flows MISSION 41 Notes to Consolidated Anchored to its Vision, the LTG Group commits: To increase stockholder values through long term growth in its major business groups. Financial Statements To continuously improve the value of its products and 121 Investor Information services and to provide consumers with more and better choices. 122 Board of Directors To build the largest, most effective distribution network and widest customer reach in the Philippines. To leverage on synergies between its various businesses to continuously improve revenues and cost structure. (The Mission and Vision statements were updated in 2012) THE LT Group ASIA BREWERY, INC. ETON PROPERTIES PHILIPPINES, INC. PMFTC, INC. PHILIPPINE NATIONAL BANK TANDUAY DISTILLERS, INC. EBITDA (In Php Millions) 2013 18,099 2012 10,189 2011 7,500 Revenues Net Income (In Php Millions) (In Php Millions) 2013 2013 55,792 8,669 11,475 2012 37,067 2,808 2012 2011 36,806 8,740 7,513 1,227 2011 6,668 5,818 850 Net Income Attributable Non-controlling Interest to Owners of Parent Company Per Share Data (In Php) 2013 2012 2011 Earnings per share 0.85 0.85 0.68 Book value (at year end) 10.86 5.28 4.11 FINANCIAL HIGHLIGHTS Total Liabilities (In Php Millions) 2013 528,680 2012 44,989 2011 34,856 Total Assets Net Equity (In Php Millions) (In Php Millions) 2013 2013 678,450 149,771 2012 97,599 117,536 2012 2011 75,796 52,610 46,757 2011 39,941 35,296 Total Equity Equity Attributable to Equity Holders Ratios and Percentages 2013 2012 2011 Current 0.63 1.52 1.38 Debt to Equity 3.53 0.86 0.87 Return on Assets 1.3% 7.7% 7.8% Return on Equity 7% 16% 16% EBITDA (In Php Millions) FINANCIAL SUMMARY 2013 (in Php Millions) 2013 2012 (Actual) % change % change 18,099 2012 (Restated) INCOME STATEMENT 2012 10,189 Revenues 55,792 30,568 83% 62,657 -11% 2011 7,500 Operating costs and expenses 50,480 27,605 83% -56,344 -10% Operating profit 5,312 2,964 79% 6,313 -16% Equity in net earnings of an associate 3,704 6,499 -43% 6,499 -43% Revenues Net Income Other income 4,568 215 2025% 5,425 -16% (In Php Millions) (In Php Millions) Income before income tax 13,584 9,677 40% 18,237 -26% 2013 2013 Provision for income tax -2,109 -937 -2,691 -22% 55,792 8,669 11,475 Net income before 2012 2,808 37,067 non-controlling interests 11,475 8,740 31% 15,546 -26% 2012 2011 36,806 8,740 7,513 Non-controlling interests -2,806 -1,227 129% -2,789 1% 1,227 Net income attributable to equity 2011 6,668 5,818 holders of the Company 8,669 7,513 15% 12,757 -32% 850 EBITDA 18,099 12,611 44% 22,464 -19% Net Income Attributable Non-controlling Interest to Owners of Parent Company FINANCIAL CONDITION Total assets 678,450 97,599 595% 610,132 11% Per Share Data Total liabilities 528,680 44,989 1075% 516,426 2% (In Php) 2013 2012 2011 Non-controlling interests 32,235 5,854 451% 31,051 4% Earnings per share 0.85 0.85 0.68 Equity attributable to equity holders of the Company 117,536 46,757 151% 62,655 88% Book value (at year end) 10.86 5.28 4.11 RATIOS Per share (Php) Earnings 0.85 0.85 0% 1.44 41% Book value 10.86 5.21 108% 6.98 56% Cash dividend 0.15 0.00 0.00 Total Liabilities Return on equity 7.4% 16.1% 20.4% (In Php Millions) Current ratio 0.63 1.52 0.54 2013 528,680 Debt/equity 3.53 0.86 5.51 2012 Debt/equity -without PNB 0.28 0.86 0.86 44,989 Net debt/equity 0.12 0.20 0.24 2011 34,856 Note: Proforma includes LTG’s stake in PNB Total Assets Net Equity (In Php Millions) (In Php Millions) Income Contribution (in Php Millions) 2013 2013 678,450 149,771 2013 2012 (Actual) 2012 (Restated) 2012 OTHERS 0% PROPERTY 97,599 117,536 PROPERTY PROPERTY DEVELOPMENT 0% 2012 DEVELOPMENT 1% OTHERS 0% DEVELOPMENT 1% BEVERAGE 10% OTHERS 2% 2011 52,610 DISTILLED 75,796 SPIRITS 14% 46,757 2011 BANKING 40% BANKING 30%(a) 39,941 TOBACCO 45% TOBACCO 75% TOBACCO 54%(b) 35,296 Total Equity Equity Attributable to Equity Holders BEVERAGE 6% DISTILLED SPIRITS 2% BEVERAGE 12% DISTILLED SPIRITS 8% Ratios and Percentages BANKING 3,436 BANKING - BANKING 3,771 2013 2012 2011 BEVERAGE 1,042 BEVERAGE 786 BEVERAGE 786 Current 0.63 1.52 1.38 DISTILLED SPIRITS 185 DISTILLED SPIRITS 1,021 DISTILLED SPIRITS 1,021 TOBACCO 3,921 TOBACCO 5,686 TOBACCO 6,881 Debt to Equity 3.53 0.86 0.87 PROPERTY DEVELOPMENT 104 PROPERTY DEVELOPMENT 47 PROPERTY DEVELOPMENT 47 OTHERS (19) OTHERS (27) OTHERS 251 Return on Assets 1.3% 7.7% 7.8% Php 8.669 Billion Php 7.513 Billion Php 12.757 Billion Return on Equity 7% 16% 16% (a) In 2013, LTG acquired a stake in PNB, with beneficial ownership at 56.47% as of end-2013. The 2012 proforma figure is (b) LTG’s ownership of Fortune Tobacco Corporation (tobacco segment) was at 100% as of end-2013 and 82.32% as of end-2012. based on the pooling of interest method. The 2012 proforma figure is based on the pooling of interest method. ANNUAL REPORT 2013 2-3 MESSAGE FROM THE CHAIRMAN “We will persist in working toward a higher level of corporate governance.” – Dr. Lucio C. Tan he year 2013 was a milestone for LT Group, Inc. (LTG) as it completed the consolidation of its businesses with the acquisition of a Tstake in Philippine National Bank (PNB). It was the first year of LTG as a publicly listed company after its offering in April that raised US$920 million in fresh capital. However, 2013 was also a year when our individual businesses faced numerous challenges -- from substantial increases in excise taxes to a highly competitive environment. These challenges impacted on our profitability, but our management team and employees will continue to work as a team to hurdle these and emerge a stronger and better LTG. We will focus on growing our five core businesses, coupled with the fiscal prudence that enabled us to get to where we are today. The Philippine economy had a strong performance in 2013, growing by 7.2%, but it was also challenging because of the natural disasters that hit our country. A strong earthquake hit the Central Visayas Region in October, followed by Super Typhoon Yolanda (Haiyan) in November that devastated many parts of the Visayas. Many of our countrymen lost their homes and livelihood. Aside from providing relief goods, a lot still has to be done to rehabilitate the affected areas. We are thankful for our blessings and we share these with our less fortunate countrymen through the Tan Yan Kee Foundation, Inc. (TYKFI). To date, the Foundation, through its HOPE Caravan, has helped some 50,000 families affected by the typhoon. We continue to support our advocacies in Education, Health Services, Social Welfare and the Environment. We are mindful of our responsibilities to our stockholders, and we will strive even harder to preserve your trust and enhance our Company’s value. We will persist in working toward a higher level of corporate governance. Dr. Lucio C. Tan Thank you for your trust and support. Chairman & Chief Executive Officer ANNUAL REPORT 2013 4-5 MESSAGE FROM THE PRESIDENT he Philippine economy remained strong in 2013 with Gross Domestic Product (GDP) growing by 7.2%, while sustained Tconsumer spending pushed Household Final Consumption Expenditure (HFCE) by 5.6%. The strong economic performance, coupled with robust corporate earnings, pushed the stock market to reach an all-time high in May 2013. Amidst the bullish sentiment, LT Group, Inc. (LTG) was able to raise US$920 million in fresh capital in April. LTG’s offering was the Philippines’ largest ever capital raising activity targeted at public investors. The offering also featured the country’s first formal cornerstone tranche with eleven global long-only funds taking up the majority of the offering.