RepuS Cic o f the PhiCippines COMMISSION ON AUDIT

Quezon City

INDEPENDENT AUDITOR’S REPORT

THE BOARD OF DIRECTORSPhilippine Reclamation Authority Makati City

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Report on the Financial Statements

We have audited the accompanying financial statements of Philippine Reclamation Authority (PRA), which comprise the statement of financial position as at December 31, 2014, and the statement of comprehensive income, statement of changes in equity, and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with state accounting principles generally accepted in the Philippines, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain 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 qualified audit opinion.

Basis for Qualified Opinion

We were not able to establish the correctness of the National Government share in the total amount of P2.553 billion from 1996 to 2014 on the proceeds of the Alabang Stock Farm (ASF) Joint Venture Project and of the PRA’s management fee of P214.724 million for the same period computed based on such proceeds because the Joint Venture financial statements were not examined/validated by PRA as the NG-authorized representative in the Project. Further, the Joint Venture Profit Share Distribution Reports and the Sales Profile Reports were not validated resulting in variances and discrepancies not yet resolved as disclosed in our audit of the ASF Project accounts. Consequently, we were not able to determine whether any adjustments were necessary on the Assets Held-in-Trust - Department of Environment and Natural Resources account and its corollary account, both with balances of P3.275 billion as of December 31, 2014, and on the management fee account for the year ended December 31, 2014 of P23.667 million and prior years’ (1996- 2013) of P191.057 million.

We were, likewise, not able to establish the correctness of the 10-90 sharing by the PRA and the UEM-MARA Philippines Corporation on the P2.226 billion income on the joint venture on the Manila-Cavite Toll Expressway Project covering the years 1998 to 2006 due to the non-submission of projects costs incurred by the JV partner.

Qualified Opinion

In our opinion, except for the possible effects of the matters discussed in the Basis for Qualified Opinion paragraphs, the financial statements present fairly, in all material respects, the financial position of the Philippine Reclamation Authority as at December 31, 2014, and of its financial performance and its cash flows for the year then ended in accordance with state accounting principles generally accepted in the Philippines.

Emphasis of Matter

As stated in Note 30, the Supreme Court (SC) en banc declared as null and void in 2002 the Amended Joint Venture Agreement (AJVA) between AMARI and PRA stating that there is a constitutional ban on private corporations from acquiring alienable lands of the public domain. Several Motions for Reconsideration were filed by PRA and the Office of the Solicitor General (OSG) and private parties in 2002 and 2003, but these were denied with finality by the SC. On January 14, 2004, the OSG, for and in behalf of PRA, filed a “Motion of Leave of this Honorable Court to File Motion for Clarification”, praying for a clarificatory resolution addressing the concerns raised in said motion.

Management believes that the SC decision pertains only to the AJVA between PRA and AMARI and does not by itself apply to other PRA reclamation contracts. For the decision to be applied to other similar projects, a separate case will have to be filed in court. However, the COA General Counsel, in its opinion dated January 24, 2005, opined that the pronouncement of the SC in Chavez vs. Public Estates Authority, et. al., 394 SCRA 152 similarly applies to other PRA contracts and projects. The financial implications of this contingent event could not presently be determined and, as such, no adjustments were made on the financial statements to provide for this uncertainty.

As further stated in Note 30, On February 5, 2003, PRA received from BIR a Formal Assessment Notice for alleged deficiency in Value Added Taxes (VAT) for the taxable years 1996 to 1999 in the total amount of P117.363 million including increments. On March 31, 2004, BIR issued its Final Decision on Disputed Assessment formally assessing PRA of VAT for P41.529 million including interests and surcharges for taxable year 2000. PRA, through the Office of Government Corporate Counsel (OGCC), filed a Petition for Arbitration with the Department of Justice. The case is now submitted for decision after the parties filed their respective Memorandum. The aforementioned VAT deficiencies for CYs 1996-2000 in the total amount of P69.324 million, exclusive of interest and surcharges, were settled/remitted to BIR in December 2010 after negotiation with the BIR. On^January 4, 2011, PRA filed with the BIR an application for the abatement or cancellation of PRA’s interest and surcharge tax liabilities on the said deficiencies in the amount of P89.034 million, and the same is now pending at BIR Quezon City.

Report on the Supplementary Information Required Under BIR Revenue Regulation 15-2010

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Our audit was conducted for the purpose of forming an opinion on the basic financial statements as a whole. The supplementary information on taxes, duties and license fees in Note 32 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 supplementary information is the responsibility of management. 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 whole.

COMMISSION ON AUDIT

TEODORA M. LACERNASupervising Auditor

April 29, 2015

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PHILIPPINE RECLAMATION AUTHORITY STATEMENT OF FINANCIAL POSITION December 31,2014(With comparative figures as of December 31,2013) (In Philippine Peso)

Note 2014 2013 (As Restated)

ASSETS y

Current AssetsCash and cash equivalents 4 4,478,030,238 6,480,065,907Short-term investments 5 4,558,542,610 4,577,087Trade and other receivables-net 6 1,444,125,284 2,429,682,705Inventories 7 885,480,667 886,549,693Prepaid expenses 8 47,083,991 4,076,590Other current assets <9 474,587 1,542,746Total current assets 11,413,737,377 9,806,494,728

Non-Current AssetsNon-current receivables-net 10 6,864,179,375 10,344,776,527Investments 11 532,338,288 535,631,009Property and equipment-net 12 174,469,129 109,305,085Investment property 13 9,088,342,945 9,657,726,575Other non-current assets 14 9,318,699 9,174,804Assets held-in-trust 15 3,277,643,928 3,021,245,291Total non-current assets 19,946,292,364 23,677,859,291

31,360,029,741 33,484,354,019

LIABILITIES AND EQUITY

Current LiabilitiesPayablesInter-agency payables Other liabilities

161718

2,460,477,11990,480,93232,268,495

2,491,369,36899,871,839

182,348,710Total current liabilities 2,583,226,546 2,773,589,917

Non-Current LiabilitiesTrust agreements 15 3,277,643,928 3,021,245,291Deferred tax liability - 19 1,130,514,446 1,347,530,514Due to National Treasury 20 116,970,185 118,286,341Total non-current liabilities 4,525,128,559 4,487,062,146Deferred credits 21 7,093,092,934 10,323,367,342Total Liabilities 14,201,448,039 17,584,019,405

Equity 17,158,581,702 15,900,334,614

31,360,029,741 33,484,354,019

See accompanying Notes to Financial Statements.

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PHILIPPINE RECLAMATION AUTHORITY STATEMENT OF COMPREHENSIVE INCOME For the Year Ended December 31, 2014(With comparative figures for the year ended December 31,2013) (In Philippine Peso)

Note 2014 2013

OPERATING INCOMEBusiness income 23 3,330,547,807 3,389,241,815Other business income 24 111,543,289 ,104,345,303Rent income 25 95,983,884 y 89,098,503Service income 26 27,688,015 54,555,833General income 1,040,960 1,825,476

3,566,803,955 3,639,066,930

OPERATING EXPENSESPersonal ServicesSalaries and wages 55,170,087 57,920,344Other compensation 31,414,437 25,774,787Personnel benefits contribution 7,999,184 8,412,324Other personnel benefits < 1,377,891 4,150,368

95,961,599 96,257,823Maintenance and Other Operating ExpensesProfessional services 33,432,425 30,297,613Bad debts, depreciation and amortization 13,548,970 10,236,053Travelling 8,506,384 3,296,787Representation 7,382,713 5,399,029Utility 6,650,772 6,704,999Communication 4,460,575 4,113,154Repairs and maintenance 3,952,476 5,361,051Taxes, insurance premiums and other fees 3,255,889 5,521,005Supplies and materials 3,133,370 3,871,260Rent 2,145,874 2,105,681Donations 2,025,786 5,000Demolition/relocation and desilting/dredging expenses 1,696,074 0Training 1,329,095 1,760,365Gender and development program 1,218,411 2,151,785Extraordinary and miscellaneous 762,653 475,319Advertising 333,175 859,111Subscription 141,208 127,029Printing and binding 87,881 567,849Program for Senior Citizens & Disabled 50,532 379,931Membership dues & contribution to organizations 25,850 25,850Other maintenance & other operating expenses 27 4,358,827 4,620,933

98,498,940 87,879,804TOTAL EXPENSES 194,460,539 184,137,627INCOME FROM OPERATIONS 3,372,343,416 3,454,929,303OTHER INCOME (EXPENSES)Interest income on savings & short-term investments 60,406,400 74,199,057Gain on sale of disposed assets 692,494 79,375Financial expenses (5,910,138) (5,258,881)

55,188,756 69,019,551NET PROFIT BEFORE TAX 3,427,532,172 3,523,948,854INCOME TAX EXPENSE 28 1,010,255,267 1,030,230,801NET PROFIT 2,417,276,905 2,493,718,053

OTHER COMPREHENSIVE INCOMERevaluation surplus in property, net 12 48,568,002 0

COMPREHENSIVE INCOME FOR THE YEAR 2,465,844,907 2,493,718,053

See accompanying Notes to Financial Statements.

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PHILIPPINE RECLAMATION AUTHORITY STATEMENT OF CHANGES IN EQUITY For the Year Ended December 31, 2014(With comparative figures for the year ended December 31,2013) (In Philippine Peso)

Revaluation RetainedNote Paid-up Capital Surplus Earnings Total Equity

(Note 22) (Note 12) (Note 29) /

Balance as of January 1, 2013 3,248,276,057 0 11,241,404,818T

14,489,680,875Correction of prior years' errors 29 0 0 155,971,149 155,971,149Balance as of January 1, 2013

as restated 3,248,276,057 0 11,397,375,967 14,645,652,024

Net profit for 2013, as restated 0 0 2,493,718,053 2,493,718,053Dividends for the year 0 0 (1,239,035,463) (1,239,035,463)Balance as of December 31, 2013 3,248,276,057 0 12,652,058,557 15,900,334,614

Revaluation surplus in property 01

65,261,106 4,121,754 69,382,860Deferred Tax Liability on revaluation

surplus in property 0 (19,578,332) 0 (19,578,332)Net profit for 2014 0 0 2,417,276,905 2,417,276,905Dividends for the year 0 0 (1,208,834,345) (1,208,834,345)

Balance as of December 31, 2014 3,248,276,057 45,682,774 13,864,622,871 17,158,581,702

See accompanying Notes to Financial Statements.

PHILIPPINE RECLAMATION AUTHORITYSTATEMENT OF CASH FLOWSFor the Year Ended December 31, 2014(With comparative figures for the year ended December 31,2013) (In Philippine Peso)

Note 2014 2013 (As Restated)

CASH FLOWS FROM OPERATING ACTIVITIESCollection of receivables Collection of incomeReceipts of tender deposits, performance bond Payment of operating expenses Remittance to GSIS/Pag-IBIG/BIR Payment of payablesRemittance to PEMPCO and insurance companies Payment of real property tax 1 Miscellaneous payments

3,506,639,5731,707,637,657

115,000(125,376,084)(247,780,716)

(22,104,781)(3,851,388)(1,609,500)2,440,640

2,587,743,4793,306,642,142

5,676,554(127,037,223)(621,961,573)(30,564,570)

(4,489,625)(1,281,098)7,523,710

Net cash generated from operations Payment of corporate income tax

4,816,110,401(1,047,827,817)

5,122,251,796(1,467,872,483)

Net cash provided by operating activities 3,768,282,584 3,654,379,313

CASH FLOWS FROM FINANCING ACTIVITIESRemittance of dividends to the BTr (1,239,035,463) (1,082,100,709)Net cash used in financing activities (1,239,035,463) (1,082,100,709)

CASH FLOWS FROM INVESTING ACTIVITIESInterest on short-term investmentsProceeds from sale of unserviceable vehicles and junk itemsShort-term investmentsDisbursement to projectsPurchase of property and equipmentAdvances to PRA employees

54,332,646775,611

(4,553,965,522)(19,785,816)

(6,459,767)(6,179,942)

75,320,58281,875

(4,577,087)(17,804,546)

(1,698,869)(370,796)

Net cash provided by (used in) investing activities (4,531,282,790) 50,951,159NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

(2,002,035,669)6,480,065,907

2,623,229,7633,856,836,144

CASH AND CASH EQUIVALENTS AT END OF YEAR 4 4,478,030,238 6,480,065,907

See accompanying Notes to Financial Statements.

PHILIPPINE RECLAMATION AUTHORITY NOTES TO FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The Philippine Reclamation Authority (PRA), formerly Public Estates Authority (PEA), was created on February 04, 1977 by virtue of Presidential Decree No. 1084. It serves primarily as a clearing house of all reclamation projects in the country and is mandated to be self-sustaining. It has also created assets for the government b$ converting under-utilized land into valuable and income-generating real estate properties. In addition, PEA is involved in a wide range of projects and delivery of services related to land development and urban renewal, infrastructure projects, as well as financing and construction of buildings, particularly for other government agencies. By virtue of Executive Order (E.O.) No. 380 issued on October 24, 2004, PEA was renamed Philippine Reclamation Authority (PRA).

On June 24, 2006, under E.O. No. 543, the power of the President of the Philippines to approve reclamation projects was delegated to PRA through its governing board, subject to compliance with existing laws and rules, and subject to the condition that reclamation contracts to be executed with any person or entity shall go through public bidding.

On October 19, 2007, E.O. No. 672 was issued defining and clarifying the responsibilities of Department of Environment and Natural Resources (DENR) and PRA in the approval and implementation of reclamation projects nationwide.

On May 14, 2009, E.O. No. 798 was issued transferring the PRA from the Department of Public Works and Highways to the DENR.

PRA has 134 permanent employees as of December 31, 2014.

The registered office address of PRA is at 7th Floor Legaspi Towers 200 Bldg., 107 Paseo de Roxas St., Legaspi Village, City of Makati, Metro Manila.

2. BASIS OF FINANCIAL STATEMENTS PREPARATION

The financial statements of the PRA have been prepared in accordance with state accounting principles generally accepted in the Philippines and are presented in Philippine pesos.

3. SIGNIFICANT ACCOUNTING POLICIES

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 maturities of 90 days or less from dates of acquisition and that are subject to an insignificant risk of change in value.

Short-term investments

Short-term investments consist of investments that are readily convertible to known amounts of cash with maturities of over 90 days but not more than one year from the date of acquisition.

Accounts Receivable

Accounts receivable are stated at face value net of allowance for doubtful accounts.

Allowance for doubtful accounts is maintained at a level considered adequate to provide for potentially uncollectible receivables. The level of allowance is provided at various approved rates based on aging of accounts receivable and specific identification.

Inventories

Completed buildings are recorded at cost. Expenditures incurred for their further development are added as part of the cost. Reclaimed lands are recorded at cost.

Investments

Investments in marketable securities, subsidiaries and stocks are stated at cost.

Investment property

Investment property is recorded using the Fair Market Value Model. Appraisal of investment property is made every five years and any gain or loss arising from the change in fair value is recognized in profit or loss. For prudence, the fair value considered is the latest lowest available appraisal of the property.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and any impairment in value except for building and structures and roads, highways and bridges. Depreciation is calculated on a straight-line basis over the estimated lives of the assets, 50 years for building and structures and 5-10 years for other properties.

The initial cost of property and equipment is comprised of purchase price and any costs directly attributable to bringing the asset to its working condition and location for its intended use. Expenditures incurred after the assets have been put into operations, such as repairs and maintenance and overhaul costs, are normally recognized in profit or loss. Any expenditure that prolongs the future economic benefits expected to be obtained from the use of the property and equipment is capitalized. Any resulting gain or loss from the retirement or disposition of the asset is recognized in profit or loss.

Building and structures are carried at current available appraised value using elimination method.

Roads, highways and bridges include road lot components of Seaside Channel Reclamation Project recorded at assessed value.

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Impairment of Assets

The carrying values of property and equipment, investments and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying values of the assets may not be recoverable. If any such indication exists, and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount and an impairment loss is recognized in profit or loss.

jBorrowing Costs

Borrowing costs are recorded as expense. These include interest and other financing charges incurred in connection with the borrowing of funds.

Revenue Recognition

Income from Lease-Purchase Agreements of completed building projects, where collectibility is reasonably assured, is accounted for under the full accrual method. Under this method, the difference between the cost and contract price on installment sale is deferred and accrued as rental income as the installments become due based on the agreed payment schedule. On the other hand, income from installment sale of condominium units, housing units and lots is recognized using the installment method. Under this method, the difference between the cost and contract price on installment sale is deferred but recognized as income from installment sales upon receipt of payment, computed based on the actual amount received multiplied by the gross profit rates of individual sales contract.

Revenues from rent, as well as management and regulatory fees derived from administrative and property management, are recognized when earned. Supervision fees are accrued as earned based on the actual development costs incurred for the period of supervised projects.

4. CASH AND CASH EQUIVALENTS

This account consists of:2014 2013

(As restated)Cash on hand and in banks 1,507,789,915 162,655,121Cash equivalents 2,970,240,323 6,317,410,786

4,478,030,238 6,480,065,907

Cash in banks earn interest at fixed rates based on the prevailing bank deposit rates.

Cash equivalents are short-term investments which are made for varying periods of up to 90 days depending on the immediate cash requirements, and earn interest at the prevailing short-term rates.

5. SHORT-TERM INVESTMENTS

This account consists of investments which are made for varying periods of over 90 days but not more than one year depending on the immediate cash requirements, and earn interest at the prevailing short-term rates.

TRADE AND OTHER RECEIVABLES

This account consists of receivables arising from:2014 2013

Trade receivables Accounts receivable Due from NGAs Due from GOCCs Due from subsidiaries/affiliates

33,529,468454,113,774935,796,813

1,576,524

262,694,0671,159,896,190

987,493,1221,512,561

< 1,425,016,579 2,411,595,940Non-trade receivables

Due from officers and employees Interest receivable Others

373,22811,249,0547,486,423

476,1065,266,558

12,344,10119,108,705 18,086,765

1,444,125,284 2,429,682,705

Accounts receivable includes collectibles from the buyers of Coastal PlazaCondominium Project (CPCP) and Central Business Park-1A (CBP-1A) lots. Likewise, included under this account are amounts due from various entities representing accrued supervision/regulatory fees equivalent to 2.5 per cent of the development costs of various reclamation projects and the Alabang Stock Farm (ASF) Project.

Trade receivables from National Government Agencies (NGAs) pertains to the current portion of receivables from:

2014 2013Department of Transportation and

Communication (DOTC) 416,380,160 0Bureau of Internal Revenue (BIR) 35,402,540 38,766,858Sandiganbayan (SB) 2,331,074 43,577,332Commission on Elections (COMELEC) 0 1,077,552,000

454,113,774 1,159,896,190

Receivable from DOTC pertains to the 20 per cent balance on the sale of a 46,471- square meter lot located at CBP-1A.

Trade receivables from Government Owned and/or Controlled Corporations (GOCCs) represents the current portion of receivables from:

2014 2013New PAGCORNational Development Company

935,796,8130

942,503,65144,989,471

— — ____ 935,796,813 987,493,122

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Receivable from New PAGCOR includes the current portion of the receivable arising from the sale by PRA of the 15-hectare property of the Nayong Pilipino Foundation (NPF) at MIA Road, Pasay City. Said property was the subject of exchange of properties between PRA and NPF.

Due from subsidiaries/affiliates pertains to the share of PRA from the earnings of the PEA Tollway Corporation (PEATC) under the new arrangement of nine per cent of the latter’s gross receipts.

Non-trade receivables - Others account pertains to the current portion of the^contractual mortgage loans for Pabahay 2000 housing units, motor vehicles and computers availed of by PRA officers and employees.

IN V E N T O R IE S

This account consists of the following:2 01 4 2013

(As restated)Reclaimed lands

Central Business Park IA 4 8 0 ,1 6 0 ,2 7 0 480,160,270Central Business Park II 0 8,284,370

Work in processBASECO Reclamation Project 2 1 6 ,4 8 8 ,9 7 5 216,488,975Offshore Quarrying 1 9 ,7 16 ,7 72 12,501,428

Finished goods inventoryCoastal Plaza Lots 1 6 9 ,1 1 4 ,6 5 0 169,114,650

8 8 5 ,4 8 0 ,6 6 7 886,549,693

Reclaimed lands - CBP IA represents PRA’s share in its Joint Venture Agreement with Shoemart Inc. recorded at assigned cost and share on the land reclaimed at Islands B and C out of the agreement with R-1 Consortium, which was booked at cost plus the additional development cost incurred to bring the property to its present state.

Reclaimed lands - CBP II represents the transfer cost of 9,770 sq. meters, more or less, lot at Manila-Cavite Coastal Road and Reclamation Project (MCCRRP). During the year 2014, CBP II was reclassified as an Investment Property; hence the amount recorded was transferred in the account Investment Property- R-1 Landstrips.

Work in process - BASECO Reclamation Project represents the disbursements relative to the reclamation, borehole testing, processing of Environmental Compliance Certificate (ECC) of the project and other related expenses.

Finished goods inventory - Coastal Plaza Lots pertain to the value of lots totaling 15,364 square meters. These properties were appraised by independent appraisers in June 2008. Fair market values range from P3,000 to P6,000 per square meter.

8. PREPAID EXPENSES

This account consists of:2014 2013

(As restated)Creditable withholding VAT 45,199,882 610,126Prepaid insurance 730,368 804,270Prepaid office supplies 449,451 401,643Advances to contractors 405,642 4-1,601,982Input VAT 257,712 617,633Prepaid rent 40,936 40,936

4 7 ,083,991 4,076,590

Advances to contractors represents advance payment to contractors for mobilization and to suppliers for purchases already paid but not yet delivered.

9. OTHER CURRENT ASSETS

This account substantially pertains to the guaranty deposits with MERALCO for power services connection.

10. NON-CURRENT RECEIVABLES

This account consists of the following:2014 2013

(As Restated)Non-current trade receivables Accounts receivable Due from GOCCs Due from NGAs Due from subsidiaries/affiliates

195,867,4176,197,032,828

149,149,1453,654,634

258,136,8889,587,293,988

190,222,2113,654,634

Allowance for doubtful accounts6,545,704,024

(9,751,671)10,039,307,721

(9,359,885)6,535,952,353 10,029,947,836

Non-current non-trade receivables Due from LGUs Due from GOCCs Due from NGAsDue from officers and employees Others

66,369,249187,365,05435,000,000

741,93838,750,781

66,369,249173,029,77235,000,000

992,50139,437,169

328,227,022 314,828,6916,864,179,375 10,344,776,527

Accounts receivable includes the P116.83 million due from R1 Consortium for supervision fees relative to the R1 Toll Expressway and CBP - B & C Projects.

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Trade receivables from Government Owned and/or Controlled Corporations (GOCCs) represents the non-current portion of the receivables arising from the sale of lots to the following:

2014 2013New PAGCOR 6,197,032,828 9,497,315,047National Development Company (NDC) 0 89,978,941

6,197,032,828 9,587,293,988

Trade receivables from National Government Agencies (NGAs) pertains \o the non- current portion of receivables from the following:

2014 2013________ (As Restated)

Bureau of Internal Revenue (BIR) 136,381,587 175,123,579Sandiganbayan (SB) 6,993,224 9,324,298Department of Labor & Employment (DOLE) 5,774,334 5,774,334

149,149,145 190,222,211

The amounts due from BIR and SB pertain to the Lease with Option to Purchase Agreements for the completed buildings financed and constructed by PRA for these agencies. Receivables from DOLE refer to the architectural and engineering services and other costs incurred preparatory to the construction of the DOLE Regional Office building in Davao City.

Due from subsidiaries/affiliates represents the 70 per cent share in the net revenue of the Port Center Development Corporation (PCDC).

Non-trade receivables from LGUs represents Value Added Tax (VAT) due from the City Government of Pasay for the property conveyed as payment of PRA’s real property tax obligations pursuant to the Compromise Agreement between PRA and the City of Pasay dated July 25, 2003. Under the said Agreement, the City will shoulder all costs and expenses including documentary stamp tax and VAT. Deeds of Conveyances were executed in 2004 to 2010 wherein a total of 12,661.19 square meters were conveyed to the City. In 2011, PRA conveyed 1,153.39 square meters to Pasay City Government as payment of real property tax for the year 2011.

Non-trade receivables - Others account pertains substantially to the non-current portion of the contractual mortgage loans for Pabahay 2000 housing units, motor vehicles and computers availed by PRA officers and employees amounting to P22.200 million and P18.706 million as of December 31,2014 and 2013, respectively.

11. INVESTMENTS

This account consists of investments in:

2014 2013Joint Venture-MCTEPSubsidiaries and affiliatesShares of stocks - Service Enterprises

523,112,6087,000,0002,225,680

527,338,8897,000,0001,292,120

532,338,288 535,631,009

Investment in Joint Venture - Manila Cavite Toll Expressway Project (MCTEP) pertains to PRA’s investment in the Project which includes the initial development costs incurred under the 1981 construction contract with the Philippine National Construction Corporation (PNCC) and the subsequent completion and upgrading costs under the 1989 R-1 Consortium contract. The total cost incurred is amortized over a period of 35 years.

In 1990, a Toll Operation Certificate was issued to PRA by the Republic of the Philippines (RP), through the Toll Regulatory Board (TRB), for the construction, operation and maintenance of R-1 Expressway and R-1 Expressway Extension as toll facilities for 25 years. Subsequently, in 1994, PRA and the Malaysian corporations, Majlis Amana Rakyat (MARA) and Renong Berhad (RENONG) entered into a JVA where they agreed to develop the MCTE, which now includes the C5 Link Expressway, and to operate the same for 35 years. In consideration of their respective obligations, the parties agreed that their proportionate share in the project income shall initially be 10 per cent - 90 per cent in favor of the Malaysian parties and, thereafter, 60 per cent - 40 per cent in favor of PRA.

In 1995, RENONG assigned its rights and obligations under the JVA to United Engineers (Malaysia) Berhad (UEM). The Malaysian parties, UEM and MARA, then incorporated and assigned their rights and obligations to UEM-MARA Philippines Corporation (UMPC), which represented them in the Toll Operation Agreement (TOA) executed with the RP and PRA. In 1999, UEM divested its entire equity interest in UMPC to Coastal Road Corporation (CRC), officially relinquishing all of UEM’s obligations and liabilities in the JVA and TOA.

On August 25, 2006, UMPC entered into a P3.5 Billion Omnibus Loan Agreement with a syndicate of lenders for the construction of Segment 4 of R-1 Expressway Extension of the MCTE Project. As one of the conditions of the lenders, the Project must have a strategic partner which is an Equity Contractor in the amount of P1.5 billion. The 14th Metallurgical Construction Company of China Nonferrous Metal Industry signed an agreement to provide the P1.5 billion equity.

On November 14, 2006, an Operations and Maintenance Agreement was executed between PRA, UMPC and TRB. Under this agreement, the revenue sharing was amended/modified temporarily wherein PRA shall receive 8.5 per cent of gross toll revenue while UMPC shall receive 91.5 per cent of the gross toll revenue absorbing all Operating and Maintenance costs and expenses. PRA’s share shall be increased by 0.5 per cent every periodic Toll Rate Adjustment under the TOA but not to exceed 10 per cent of gross toll revenue.

The amended revenue sharing arrangement shall be implemented during the period of the existence of the loan which is payable for a period of eight years under the Omnibus Loan Agreement of August 25, 2006 and the repayment of the equity of the Equity Contractor which shall be converted into subordinated debt pari passu with the Lenders for a period which shall not exceed an additional three years after the period of eight

On May 20, 2010, the PRA Board of Directors approved the extension of the effectivity of the Operations and Maintenance Agreement for a period of four years from August

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25, 2017 to August 25, 2021, or upon full settlement of the funding to be obtained, whichever comes first, subject to the compliance of several terms and conditions.

On March 5, 2012, the Securities and Exchange Commission (SEC) approved the application of UMPC for change of corporate name to Cavitex Infrastructure Corporation (CIC). On December 19, 2012, CIC advised PRA that Cavitex Holdings Inc. (CHI), formerly Coastal Road Corporation (CRC), entered into a financing and cooperation agreement with Metro Pacific Tollways Corporation (MPTC), a wholly-owned subsidiary of Metro Pacific Investments Corporation (MPIC). The agreement involves the issuance of a P6.7 billion bond convertible into non-voting redeemable preferred shares of CHI. Under the said agreement, MPTC will provide management assistance to CIC effective January 2, 2013.

Investment in subsidiaries/affiliates includes PRA’s investment in stocks in the following:

PEA Tollway Corporation (PEATC) - This is a wholly-owned subsidiary of PRA incorporated in 1997 to manage, operate, maintain the MCTEP and to collect toll fees therefrom. Its authorized capital stock consists of 50,000 shares with a par value of P100 per share, of which 20,000 shares had been subscribed and fully paid by PRA.

Bay Dredging, Inc. (BDI) - This is a subsidiary where PRA has 40 per cent equity interest. It was incorporated in 1998 to (a) own, lease, or hire dredging equipment suitable for dredging and reclamation under Philippine condition; (b) train and acquire modern, scientific, efficient, and environment-friendly dredging and reclamation technology from experts all over the world; (c) participate in dredging contracts in the Philippines; (d) enter into contracts to reclaim areas planned for reclamation; and (e) enter into contracts to supply dredge fill materials to all reclamation projects. Its authorized capital stock consists of 500,000 shares with a par value of P100 per share, of which 50,000 shares had been subscribed and fully paid by PRA.

Shares of stocks - Service Enterprises pertains to shares of stocks with MERALCO and PLDT.

12. PROPERTY AND EQUIPMENT

This account consists of the following:(A m o u n ts s ta ted in th o u s a n d pesos)

Building&

StructuresMotor

Vehicles

Furniture & Other

Equipment

Roads,Hways,Bridges Total

A t D e c e m b e r 31, 2013 (A s R e s ta te d )C ost/A ppra ised V a lue 99,127

(48,632)20,993

(18,064)24,082

(16,110)48,621

0192,823(82,806)

Carrying V alue A d justm en ts-C ost

-A ccum u la te d

50,495 2,929 7,972(801)

89

48,621 110,017(801)

89- ik y in g value, as Restated 50,495 2,929 7,260 48,621 109,305

(Amounts stated in thousand pesos)_ Building

&Structures

MotorVehicles

Furniture & Other

Equipment

Roads,Hways,Bridges Total

Year Ended December 31, 2014Opening Carrying Value Disposals/Adjustments-Cost -Accumulated Depreciation

Additions/Appraisal Increase Depreciation for the Year

50,4950

48,63220,750(7,121)

2,929(8,751)8,7513,439

(971)

7,260(8,213)8,1752,615(2,142)

48,6210000

109,305(16,964)65,55826,804(10,234)

Closing Carrying Value 112,756 5,397 7,695 48,621 ^ 174,469

A t December 31, 2014Cost/Appraised Value Accum ulated Depreciation

119,877(7,121)

15,681(10,284)

17,683(9,988)

48,6210

201,862(27,393)

Carrying value 112,756 5,397 7,695 48,621 174,469

Buildings and structures refers to the eight condominium units at the Legaspi Towers 200 with appraised value of P48,000 per squa/e meter or a total of P119,877,600 as of September 2013 as appraised by Cal-Fil Appraisal and Management, Inc. Revaluation Surplus in the amount of P69.383 million was recorded in January 1, 2014 to reflect the increase in the fair value in Buildings and Structures. As of December 31, 2014, Revaluation Surplus account has a balance of P45.683 million, with details shown as follows:

Revaluation Surplus recorded at January 1, 2014 Deferred Tax Liability on revaluation surplus in property

69,382,860(20,814,858)

Revaluation Surplus, net of taxRealization for CY 2014, transferred to Retained Earnings Amortization of Deferred Tax Liability for CY 2014

48,568,002(4,121,754)1,236,526

Balance, end of year 45,682,774

Roads, highways and bridges includes the roads and open spaces of Seaside Reclamation Project recorded at 50 per cent level of CY 2000 assessed value of P6,000 per square meter.

The costs of the detailed architectural and engineering design on the proposed PRA Building which were recorded under Construction-in-progress account were derecognized. Sometime in February 2009, a ground breaking ceremony was held at the proposed site of the building in Central Business Park 1-A. However, by virtue of a Supreme Court Decision dated May 5, 2010, ownership of the lot was made in favor of Benedicto Yujuico; hence, the proposed PRA Building was shelved.

13. INVESTMENT PROPERTY

Wfvestment property represents lands and other assets held for undetermined future use. l i p valuation used includes the latest lowest appraisal available for the property as

ppraised by independent appraisers. This account includes the following:

2014 2013 (As Restated)

Three Islands 6,704,979,000 6,704,979,000Esplanade 1,161,851,864 1,161,851,864R-1 Landstrips 641,103,970 632,819,600Bacolod Reclamation 534,848,000 323,868,000Libertad Channel 29,737,351 29,737,351R-1 Waste Transfer Station 15,822,760 15,822,760Asiaworld 0 788,648,000

9,088,342,945 9,657,726,575

Three Islands consists of the 157.844-hectare reclaimed land at various elevation in Paranaque City recorded at June 2008 appraisal conducted by Cal-Fil Appraisal and Management, Inc. and Asian Appraisal Co., Inc. The islands were valued at P4,000 - P4.500 per square meter or P6,704,979,000. The last appraisal was made in September 2013 by three reputable appraisal companies, namely: (1) Cal-Fil Appraisal and Management Co., In c - submerged and uqsubmerged areas- P9,391,056,300; (2) Topconsult, In c - submerged areas- P6,990,826,747; and (3) Royal Asia- unsubmerged areas- P2,690,360,000. If PRA will adopt the lowest appraisal value from the latest appraisal reports (submerged and unsubmerged), the value of the Three Islands will still be higher than the value per books ( or a gain of P285,847,747) as of September 2013. However, if submerged areas shall not be valued, there would be a loss on valuation even if the highest value is used for unsubmerged areas. Based on the latest appraisal reports, PRA opted to retain the value of the said properties as recorded per books considering that the three independent appraisers do not have the same opinions in their respective reports on whether or not to value the submerged areas. However, PRA will record the value of the properties at their current appraised value upon their final disposition.

Esplanade refers to a green belt along the bay edge of Boulevard 2000 located at the coastal strips of Central Business Park (CBP) 1A, CBP 1 Islands B & C and CBP II with a 50-meter wide open space and registered under the name of PRA.

R1 Landstrips pertains to the 154,272 square meter lots in Paranaque City along the Coastal Road area recorded at June 2007 and June 2008 appraisals ranging from P2,200 to P15,000 per square meter with a total value of P641,103,970.

Bacolod Reclamation represents land share from the Bacolod Reclamation Project in Bacolod City with an area of 46,793 square meters recorded at appraised value of P6,000 per square meter and the 8,622 square meters valued at P5,000 per square meter representing share of the JV partner conveyed to PRA in 2010 as payment of reclamation supervision fees.

Libertad Channel represents the transfer cost of 19,199 square meter-property in Pasay City from Pasay Hongkong Realty Development Corp. at P29,737,351 inclusive of the cost of relocating informal settlers in the area.

R-1 Waste Transfer Station (WTS) represents the unremitted construction cost of WTS in Las Pinas City by the Department of Public Works and Highways.

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Asiaworld represents Lots 2A & 2B in Paranaque City of the Reclamation Plan under TCT Nos. 010-2010002529 and 010-2010002530 from old TCT No. 162869 with areas of 10,524 square meters and 17,642 square meters or a total area of 28,166 square meters, recorded at appraised value of P28,000 per square meter. This was originally part of the Inland Channel and later reclaimed by Asiaworld. This property was sold to the Department of Transportation and Communication in 2014 at appraised value of P40.000 per square meter.

14. OTHER NON-CURRENT ASSETS

This account consists of:2014 2013

(As Restated)Restricted funds-PVB 8,248,565 8,248,565Other receivables 912,564 912,564Others 157,570 13,675

9,318,699 9,174,804

Restricted funds represents funds at Philippine Veterans Bank which was used as security for the Surety Bonds from insurance companies as a requirement in the execution of the awards in various cases against PRA.

Other receivables comprises of receivables from BIR San Pablo representing initial cost incurred by PRA for the construction of BIR-San Pablo Building such as architectural design, survey, appraisal, fencing and other expenses. PRA is negotiating for the collection of this account.

15. ASSETS HELD IN TRUST

This account consists of assets held in trust for:2014 2013

Dep’t. of Environment and Natural Resources (DENR)

Government Financial Institutions (GFIs) Ombudsman (OMB)

3,274,648,3412,668,687

326,900

3,018,275,8342,645,408

324,0493,277,643,928 3,021,245,291

Assets held-in-trust for DENR represents the National Government’s (NG) equity on the development of its 244-hectare Alabang Stock Farm (ASF) property which is the subject of the 1993 JVA between the Republic of the Philippines and Filinvest Development Corporation (FDC) then assigned to Filinvest Alabang, Inc. (FAI). PRA renders management and supervision services to the project for a management fee of 7.5 per cent of the NG’s share on the excess of revenue over expenses for distribution and supervision fee of 2.5 per cent of the project cost.

As of December 31, 2014, FAI has remitted to PRA the amount of P2.552 billion representing 26 per cent NG’s share from the proceeds of the ASF project. Out of this amount, P1.610 billion was remitted to the Bureau of the Treasury (BTr).

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FAI had also turned over to PRA a total of 21,000 housing units, of which 14,890 have been transferred/sold to the National Housing Authority (NHA), 3,201 to the Department of Environment and Natural Resources, 1,329 to the National Home Mortgage and Finance Corporation, 885 allocated to the Local Government Unit of San Pedro, Laguna, 493 sold to the employees of the PRA, 59 sold to the Bases Conversion and Development Authority, 27 sold to the members of the Armed Forces of the Philippines, 10 sold to the Laguna Lake Development Authority, 6 sold to the Philippine Ports Authority and 100 sold to the Nayong Pilipino. A total of P14.280 million was released in 2004 to the NHA as a start-up fund for the 14,890 housing units transferred to it. This fund shall cover the initial years’ operating cost of the proposed Project IVfanagement Offices.

The JVA also provides a P200 million Escrow Fund to finance the replication of the affected government facilities in the area. The Escrow Fund of P200 million earned interest in the amount of P206.610 million. A total of P277.951 million was disbursed to replicate the affected government facilities and a total of P56.814 million was remitted to the BTr, leaving a balance of P71.845 million as of December 31, 2014.

Breakdown of PRA’s accountability on the Assets Held in Trust for DENR is shown below:

2014 2013

AssetsCash and Cash EquivalentsReceivables from Housing Units SoldLand InventoryHousing Units InventoryFinished Goods Inventory - Saleable LotsRoads/Open SpacesNG ShareProperty, Plant and Equipment Other Assets

1,136,321,290148,358,156

77,922219,450

537.885.000 1,215,154,500

398.022.000 178,300

14,239,311

849,456,939164,440,414

77,922219,450

552.924.000 1,215,154,500

398.022.000 178,300

14,239,3123,450,455,929 3,194,712,837

LiabilitiesPayablesInter-Agency Payables Deferred Credits to Income Other Liabilities

6,153,372273,368

166,274,2933,106,555

5,953,179273,369

167,167,3703,043,085

175,807,588 176,437,003

EquityDENR/ASF ShareRemaining Housing Units Received from

FDC Without Cost Escrow Fund Income for the Year

2,336,576,827

219,45071,845,290

866,006,774

2,350,885,441

219,45067,847,550

599,323,393---------- 3,274,648,341 3,018,275,834

PRA had deferred the remittance of the Cash Held in Trust amounting to P792.171 million to the NG as share from the proceeds of the Joint Venture for the development of the Alabang Stock Farm, pending the resolution of the issue on the 175-hectare area declared by the NG as Bird Sanctuary. The value of the said area will be deducted from the dividends due to NG to enable PRA to recoup the value of the assets.

Assets held-in-trust for GFIs represents the balance of funds remitted by the GFIs to fund the relocation program of the squatters in their property at the Financial Center Area. j

yAssets held-in-trust for OMB represents the balances of funds remitted to PRA to defray the construction expenses on the OMB building.

The corresponding credit account of Assets held-in-trust is Trust Agreements presented under Liabilities.

16. PAYABLES

This account consists of:2014 2013

(As Restated)Dividends payable 1,697,927,479 1,728,128,597Accounts payable 762,440,730 763,133,873Due to officers and employees 108,910 106,898

2,460,477,119 2,491,369,368

Dividends payable represents dividends due to following periods:

NG out of PRA’s operations for the

2014 2013Current year 1,208,834,345 1,239,035,463Previous years 489,093,134 489,093,134

1,697,927,479 1,728,128,597

Republic Act No. 7279 (UDHA Law) promulgated in 1992 provides that 50 per cent of the annual net income of PRA shall be remitted to the NHA, to carry out its programs of land acquisition for resettlement purposes. Subsequently, RA No. 7656 (Dividends Law) was promulgated in 1993 requiring government-owned or controlled corporations to remit 50 per cent of their annual net earnings as dividends to the NG. Again another law was enacted in 1997, RA No. 8435, appropriating 50 per cent of PRA’s net earnings for the Agriculture and Fisheries Modernization.

In 1995, the Department of Justice (DOJ), in compliance with the Department of Finance’s (DOF) request for legal opinion on dividend distribution, issued DOJ Opinion No. 050 harmonizing the effects of RA 7279 and RA 7656 (RA 8435 was not then in existence). The DOJ opined that the profit distribution under RA 7279 should be deducted from the annual net profit of PRA for remittance to NHA. Thereafter, dividends corresponding to 50 per cent of the remaining balance of the annual net earnings of PRA should be declared and remitted to the NG under RA 7656.

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PRA has religiously complied with the payment to the NG of the dividends computed based on the DOJ opinion. It has not, however, complied with RA 7279 and RA 8435 pending action by Congress and Senate on PRA’s appeal to harmonize the three laws.

For the years 1993 to 1999, PRA computed dividends based on net earnings after deducting the 50 per cent appropriated by RA 7279 for NHA. The earnings for NHA, however, was not recorded and remitted. In 2003, PRA recomputed the dividends due on those years to comply with RA 7656 or Dividends Law only, considering that PRA under its charter is mandated to operate on a self-liquidating basis and does not get any subsidy from the NG for its operations. > '

On September 27, 2007, PRA and Light Rail Transit Authority (LRTA) signed a Memorandum of Agreement for the Grant of Right-of-Way by PRA to LRTA over a 2 7 ,355-square meter lot located in the City of Paranaque and the Municipality of Bacoor, Cavite for the implementation of the LRT Line 1 South Extension Project. The value of the PRA property acquired by LRTA for the right of way of LRT Line 1 South Extension Project in the amount of P571.586 million, was proposed to be credited against the PRA’s dividends due to NG.

PRA remitted P1.082 billion in 2013 and P1.239 billion in 2014 to the BTr representing dividends declared for CYs 2012 and 2013, respectively. In CY 2014, PRA’s declared dividends is P1.210 billion.

Accounts payable comprises of accounts due to the following:2014 2013

(As Restated)AMARI Coastal Bay Development Corp. 589,499,084 589,499,084Shoemart, Inc. 85,000,000 85,000,000Manila Bay Development Corp. 57,097,431 57,097,431Accrued Expenses 30,844,215 31,537,358

762,440,730 763,133,873

Due to AMARI Coastal Bay Development Corp. includes the P300 million initial reimbursement made by AMARI on PRA’s partially reclaimed land valued at P1.894 billion. With the final declaration by the Supreme Court in 2003 that the AJVA is null and void, the P300 million initial reimbursement was set up as a liability to AMARI. It also includes the P289.499 million estimated advances by AMARI for relocation expenses in the Three Islands and CBP-1 Projects of PRA, subject to adjustment upon validation of documents related thereto.

Due to Shoemart, Inc. refers to the loan availed by PRA from Shoemart, Inc., the proceeds of which were used to pay the relocation expense incurred in clearing the CBP-1A area and is payable in land.

Due to Manila Bay Development Corporation (MBDC) pertains to the difference amounting to P52.175 million between MBDC’s claim from PRA for reimbursement of the relocation expenses as against regulatory fee due to PRA pursuant to the Memorandum of Agreement executed between PRA and MBDC dated October 21, 1999 and the P4.922 million documentary stamp taxes advanced by MBDC.

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17. INTER-AGENCY PAYABLES

This account consists of the following:2014 2013

Due to BIR 89,392,300 98,790,204Due to GSIS 942,327 937,620Due to Pag-IBIG 73,643 76,090Due to PHILHEALTH 72,662 67,925

90,480,932 99,871,839

Due to BIR account consists of the following:2014 2013

Income tax 76,078,303 20,253,677Value-added tax 11,293,818 59,095,065Withholding taxes 2,020,179 19,441,462

89,392,300 98,790,204

The income tax payable as of December 31, 2014 and 2013 pertains to the balance of income tax due at year-end.

18. OTHER LIABILITIES

The account balance as of December 31, 2014 of P32.268 million pertains to guaranty deposits and bidders bonds. The substantial decrease in the account during 2014 pertains to adjustments on dormant liabilities.

19. DEFERRED TAX LIABILITY

This account consists of the following:2014 2013

Balance, beginning of year 1,347,530,514 1,347,530,514Deferred tax on revaluation of property 19,578,332 0Deferred tax on sale of Asiaworld property (236,594,400) 0Balance, end of year 1,130,514,446 1,347,530,514

This account is the deferred tax consequence attributable to a taxable temporary difference computed by multiplying the amount of taxable temporary difference by the tax rate. Temporary difference is the difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively.

In 2009, PRA recorded gain on investments arising from the increase in fair market value of investment property in the amount of P1.069 billion (PAS No. 40) which resulted in a Financial Income Higher than Taxable Income. The P3.403 billion prior years’ adjustments consist of the net increase in the value of land in Three Islands and along

Landstrip for 2007 and 2008 in the amount of P1.443 billion and P1.960 billion, respectively.

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In 2012, PRA made an adjustment of P5.958 million in deferred tax liability as a result of a P19.860 million increase in fair market value of property and equipment recorded in the books in 2010.

20. DUE TO NATIONAL TREASURY

This account consists of the following:2014 A 2013

Advances by the NG for the DebtServicing of the FCDU loan 110,459,528 110,459,528

Cost of Pabahay 2000 Housing UnitsAvailed of by PRA 6,510,657 7,826,813

116,970,185 118,286,341

Advances by the NG for the debt servicing of the Foreign Currency Deposit Unit (FCDU) loan pertains to the advances made by the BTr upon recommendation/approval from the Department of Finance (DOF), the loan being guaranteed by the RP. Requests for NG advances were resorted to by PRA due to the non-remittance by the Toll Regulatory Board of the amount actually disbursed by PRA for the right-of-way acquisition (ROWA) of the Manila-Cavite Toll Expressway Project (MCTEP).

Pursuant to DOF Memorandum Circular No. 7-97, guarantee fee is one per cent per annum based on the outstanding balance of the guaranteed borrowings. Likewise, pursuant to DOF Order No. 9-87, interest based on the average 364-day Treasury Bill

f rate is charged on net lending representing payments made by the BTr on the servicing of foreign and domestic loans.

The amount of P110.459 million consists of P62.014 million guarantee fee and P48.445 million unsettled portion of the interest on NG Advances.

Cost of Pahahay 2000 housing units account is decreased by the collections for the housing units sold which were deposited to the Pabahay bank account under the Land and Other Assets-DENR account.

21. DEFERRED CREDITS

This account consists of the deferred income on the following:2014 2013

(As Restated)Receivables on installment sales

Lots and Condominium Units PRA Housing Program

Investments in Joint Venture - MCTEP Receivables on lease

BIR Building Project Sandiganbayan Building Project

Unearned rent

6,464,488,64468,390

524,082,077

91,909,6932,167,238

10,308,91067,982

9,655,546,39268,390

525,386,730

127,054,9755,424,8639,818,010

67,9827,093,092,934 10,323,367,342

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Deferred credits on receivables on installment sales refers to the balance of the future income from sale of lots, condominium and housing units to various lot buyers at PRA’s condominium unit buyers at Coastal Plaza Condominium. CBP-1A lot buyers (including installment sales to PAGCOR) and awardees of PRA’s Pabahay 2000 Housing Program projects.

Deferred credits on investment in Joint Venture-MCTEP refers to the value of the unreclaimed land used in payment to R-1 Consortium for the upgrading of the R-1 Expressway, which is being amortized as income over the 35-year franchise period (see Note 11).

Deferred credits on receivables on lease refers to the balance of PRA’s future income from lease-purchase agreements with the Sandiganbayan and the Bureau of Internal Revenue.

Decreases in deferred credits represent realized income arising from collection of receivables.

22. PAID-UP CAPITAL

The details of this account are shown below:2014 2013

Initial Cash Releases 4,645,933 4,645,933Equity Releases in Payment of Notes

Payable to PNCC 545,116,700 545,116,700Equity Releases for the Mindanao

Railway System Project 5,000,000 5,000,000Conversion into Equity of the Balance

of Notes Payable to PNCC 43,592,980 43,592,980Conversion into Equity of PRA’s

Assumed Obligation with PNB Inclusive of Interest and Charges 2,649,920,444 2,649,920,444

3,248,276,057 3,248,276,057

PRA has an authorized capital stock divided into three million no par value shares pursuant to PD 1084 and 1085 both dated February 4, 1977. Two million shares were subscribed by the NG at a stated value of P734.139 million, payable by the transfer of all its rights and interests in the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP) with a fair value of P729.139 million and the payment of P5 million in cash. By virtue of PD No. 1085, PRA subrogated to the rights of the RP in respect to the 1973 contract entered by the latter with the PNCC on the reclamation works and construction of the MCCRRP.

On December 29,1981, PRA entered into a MOA with PNCC, with the latter giving up in favor of PEA/PRA all its rights and participation in and to the areas of reclaimed land and p m *a^6r Pay’n9 sum >517.959 million by assuming PNCC’s obligation with

NB of P788.820 million and by issuance of promissory notes of P729.139 million. ayments for the notes shall come from the equity releases from the NG.

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A total of P545.117 million was released by the BTr in payment for the notes. The balance of the notes of P43.593 million, which was assigned by PNCC to the Asset Privatization Trust (APT), was converted to NG equity in PRA in accordance with Administrative Order (AO) No. 397 issued on May 13, 1998. AO 397 further provided for the recognition by the Committee on Privatization (COP)/APT of PRA’s assumption of PNCC’s obligation with PNB in the amount of P788.820 million together with the accrued interests and charges of P1.861 billion as of June 30, 1986 and the conversion into NG equity in PRA of the resulting obligations as a consequence of the foregoing totaling P2.650 billion. /y

23. BUSINESS INCOME

This account consists of the following:2014 2013

(As Restated)Sale of lots < 3,329,453,272 3,385,442,686Sale of housing units 330,831 483,958Sale of Coastal Plaza Condominium Units 6,748 187,332Fines and penalties 756,956 3,127,839

3,330,547,807 3,389,241,815

Sale of lots includes sale of reclaimed lands on cash and installment basis to individuals and government entities.

24. OTHER BUSINESS INCOME

This account pertains to the nine per cent share of PRA from toll collections pursuant to the Joint Venture Agreement (JVA) between PRA and Cavitex Infrastructure Corporation (CIC) in the amount of P111.543 million and P104.345 million for CYs 2014 and 2013, respectively.

25. RENT INCOME

This account consists of rental income from the following2014 2013

(As Restated)UBP-1ABureau of Internal Revenue Sandiganbayan

_Waste Transfer Station

54,689,41935,145,2813,257,6242,891,560

42,475,71437,681,4776,152,9222,788,390

26. SERVICE INCOME

This account consists of the following:2014 2013

Reclamation income-Regulatory, processing, filing fees and penalties 15,188,447 14,990,504

Supervision & management fee- Alabang Stock Farm Project 12,499,568 39,565,329

27,688,015 54,555,833

27. OTHER MAINTENANCE AND OTHER OPERATING EXPENSES

This account consists of other non-recurring expenses which are not classified in any of the specific maintenance and other operating expense accounts.

28. INCOME TAX EXPENSE

This account is the Corporate Income Tax for the year equivalent to 30 per cent of the Net Profit Before Income Tax excluding income subjected to final tax.

The BIR Revenue Region No. 8 - Makati, in its 2014 Tax Campaign Kick-Off Activity with the theme “I Love the Philippines, I pay my Taxes Right” last February 18, 2014, has given a Plaque of Appreciation to PRA as second place in the Top Regional Collection Contributor with the Highest Recorded Tax Payments for CY 2013 in BIR Revenue Region No. 8.

29. RESTATEMENT OF RETAINED EARNINGS AT JANUARY 1, 2013

Retained Earnings at January 1, 2013 was restated for the following adjustments:

Adjustments on contracts payableDisallowances of prior years’ benefits and allowancesAdjustments on receivablesAdjustments on other payablesVarious correction entriesAdjustments on the following dormant accounts:

Due to other GOCCsOther non-current assetsConstruction in progress- PRA building (Note 12)Due from other GOCC

54,674,1433,324,4705,878,0761,025,2624,169,683

110,413,320(21,213,475)

(2,241,803)(58,527)

155 , 971,149

Supreme Court Decision on PRA-AMARIAJVA

In 2002, the Supreme Court en banc declared as null and void the Amended Joint Venture Agreement (AJVA) between AMARI and PRA stating that there is a constitutional ban on private corporations from acquiring alienable lands of the public domain.

ySeveral Motions for Reconsideration were filed by PRA and the Office of the Solicitor General (OSG) and private parties in 2002 and 2003, but these were denied with finality by the SC. On January 14, 2004, OSG, for and in behalf of PRA, filed a Motion of Leave of this Honorable Court to File Motion for Clarification, praying for a clarificatory resolution addressing the concerns raised in said motion.

Value-Added Tax Assessments<

On February 5, 2003, PRA received from BIR a Formal Assessment Notice for alleged deficiency in Value Added Taxes (VAT) for the taxable years 1996 to 1999 in the total amount of P117.363 million including increments. The following transactions were covered by the assessment: (a) the transfer of the 10 hectares undeveloped reclaimed property to Shoemart, Inc. as the transaction was made “in the course of trade or business”, (b) the supervision fee and management fee for services rendered by PRA to the DENR, (c) the refunds made to the buyer of units at the Coastal Plaza Condominium Project, and (d) rental payments for the buildings constructed by PRA for BIR. PRA, in its letters dated March 12 and April 14, 2003, contested the assessment of VAT on the above transactions and requested BIR to reconsider and/or re-evaluate the Formal Assessment. The same was, however, denied through a letter dated July 3, 2003.

On August 15, 2003, PRA, through the Office of the Government Corporate Counsel (OGCC), filed a case in the Court of Tax Appeals (CTA). On September 17, 2003, the BIR filed a Motion to Dismiss on the ground that the CTA has no jurisdiction over the case. An Opposition and Supplemental Opposition were filed by PRA on September 25, 2003 and October 2, 2003, respectively. On October 16, 2003, the CTA promulgated a Resolution dismissing the petition for lack of jurisdiction. PRA then filed a Motion for Reconsideration on November 6, 2003 which was denied on January 9, 2004. On February 16, 2004, PRA through the OGCC, filed a Petition (for arbitration/mediation appeal on disputed assessment) before the Department of Justice.

On March 31, 2004, BIR issued its Final Decision on Disputed Assessment formally assessing PRA of VAT for the taxable year 2000 amounting to P41.529 million including interest and surcharges. On April 29, 2004, PRA filed a Petition for Arbitration with the DOJ. On July 23, 2004, BIR and PRA, through OGCC, filed its Motion to Admit Reply to RlR^nSWer BIR ° n Au9ust 27', 2004. In a meeting held on June 10, 2005 between p.?. and PRA> the former proposed that during the pendency of the arbitration case,

Pay ttle princiPal amount of VAT less penalties and interests which was relayed v; GCC on August 5, 2005. Last hearing was held on January 26, 2006.

P69 ^ovementioned VAT deficiencies for CYs 1996-2000 in the total amount of Decpmh o n ’ exclusive of interest and surcharge, were settled/remitted to BIR in

er 2010 after negotiation with the BIR. PRA’s application for the abatement or

30. CONTINGENCIES

28

cancellation of interest and surcharge tax liabilities on the said deficiencies in the amount of P89.034 million was filed with the BIR on January 4, 2011 is now pending with BIR, Quezon City.

Romago, Inc.

This refers to CIAC Case No. 18-2004, filed by Romago on March 17, 2004 with the Construction Industry Arbitration Council (CIAC) against Heritage Park Management Corporation (HPMC) and PRA for a sum of money amounting to P24.468 million. This account represents unpaid accomplishment for electrical/lighting works at the Heritage Park Project. On December 20, 2004, PRA received a copy of the October 22, 2004 Decision of the CIAC holding both PRA and HPMC jointly and severally liable to ROMAGO in the amount of P16.211 million. PRA filed a Petition for Review to the Court of Appeals on January 3, 2005 which was denied on July 14, 2005. The parties filed their respective Memorandum and on December 20, 2005, the Court of Appeals promulgated its Decision reducing the amount of actual damages to P8.936 million.

PRA and Romago, Inc. filed their respective< Motions for Reconsideration which were both denied in a Resolution dated August 24, 2006. Petitions for Review were filed by PRA and Romago, Inc. before the Supreme Court on October 30, 2006 and November 17, 2006, respectively. In SC Resolution dated February 14, 2007, the Petitions for Review filed by PRA and Romago, Inc. were consolidated.

On September 25, 2007, PRA filed its Comment to Romago’s Petition for Review to which Romago, Inc. filed its Reply on September 22, 2010.

Comment was filed by Romago, Inc. to which PRA, through OGCC, filed its Reply dated December 18, 2009 in compliance with the Resolution dated October 10, 2007.

The Supreme Court, in its Notice dated March 2, 2011, required the parties to submit their respective Memoranda to which PRA and Romago, Inc. complied on June 3, 2011 and October 17, 2011, respectively.

On June 10, 2013, OGCC received a copy of the undated Manifestation/Motion for early Resolution filed by Romago, Inc. before the SC praying to resolve with dispatch the subject Petition. On September 18, 2013, the SC Third Division affirmed the Decision dated December 20, 2005 and Resolution dated August 24, 2006 of the CA in CA-G.R. SP No. 88059 with modification, directing PRA to pay Romago, Inc. in addition to the P8.936 million award of actual wages, legal interest of six per cent per annum from October 22, 2004 until the judgment against it is wholly paid; and the costs of arbitration in the amount of P 0.397 million.

^The OGCC filed a Motion for Reconsideration on the said SC Decision on October 30, 2013. This was denied with finality by the Supreme Court in its Resolution dated January 15, 2014. The Decision has become final and executory.

PRA, upon approval by its Board under Resolution No. 4438, Series of 2014, paidPOlT90, lnC' the SUm °f P14-335 million throu9h check number 1035493 dated April 10, .... • rePresenting actual damages, interests and arbitration fees. Said amount will be 1 e against the Bases Conversion and Development Authority.

29

Henry T. Sy, Jr.

Civil Case No. 05-575 was filed against PRA on June 29, 2005 at the Regional Trial Court of Makati, Branch 149 to compel PRA to execute the necessary deed of conveyance covering the 19,274 square meters parcel of land located in CBP 1A, relative to the Agreement entered into between PRA and SM Inc. dated May 12, 1994, the Joint Venture Agreement dated August 9, 1994 and the Deed of Undertaking dated June 29, 1995. Under the said Deed of Undertaking, SM Inc. shall advance P85 million to be used for the relocation of squatters at CBP 1 A, and PRA shall repay the same with lands at CBP 1A. The case was referred to mediation and was terminated on'October 5, 2005. On February 28, 2008, the Judgment was issued in favor of Mr. Henry Sy, Jr. ordering PRA to convey and transfer the title and ownership, including the delivery of possession to Henry Sy. Notice of Appeal was filed by PRA, through OGCC, on March 26, 2008. The Court of Appeals, in its resolution dated November 4, 2008, required PRA to file Appellant’s Brief, to which PRA, through OGCC, complied. The appeal is deemed submitted for decision and ordered re-raffled for study and report.

On March 10. 2011. the CA directed the oarties to manifest, within 10 davs from receiot

mm

submits that the correct amount due for reimbursement is P11.528 billion and not merely P1.004 billion as initially determined by PRA.

The issue now is whether or not Amari (Central Bay) is entitled to the total amount of P11.528 billion as cost for reimbursement of what it had incurred in implementing the voided JVA/Amended JVA.

On December 21, 2010, PRA received the Order dated December 15, 2010 of Director Fortunato M. Rubico, Director IV, Commission Secretary of the COA, direcjihg PRA to submit within 15 days from receipt the Answer to the Petition filed by Central Bay (Amari).

Several joint manifestations and motions for extension of time to file answer were filed in various dates, the latest of which was on January 13, 2014.

On April 11, 2014, PRA filed its Answer with COA, praying that judgment be rendered recognizing only the amount of P1.027 billion as validated by PRA and dismissing the other claims of Central Bay for lack of basis.

PRA is contingently liable for other lawsuits and claims filed by third parties, the outcomes of which are not presently determinable. In the opinion of Management, the eventual liability under these lawsuits, if any, will not have a material effect on the financial statements.

31. AUTHORIZATION FOR ISSUE

The Board of Directors approved and authorized for issue the Company's Financial Statements as of December 31, 2014 on April 21, 2015.

32. SUPPLEMENTARY INFORMATION REQUIRED UNDER BIR REVENUE REGULATION (RR) 15-2010

; In compliance with the requirements set forth by BIR pursuant to RR 15-2010, hereunder are the information on taxes, duties and license fees paid or accrued during the taxable year:

| Philippine Reclamation Authority is a VAT-registered government-owned or I f controlled corporation with VAT output tax declaration of P428.016 million for the

On January 11, 2011, the OGCC, in behalf of the PRA, filed its Entry of Appearance and Motion for Extension of Time to File Answer with COA.

Other Contingencies

year based on the amount reflected in the sales account of P3.567 billion.

31

ii) The amount of VAT input taxes claimed are broken down as follows:a) Beginning of the year 617,633b) Current year’s purchases:

1. Goods other than for resale ormanufacture 2,063,439

2. Services lodged under other accounts 3,896,201c) Claims for tax credit (6,319,562)d) Balance at the end of the year 257,711

Other taxes and licensesa) Local

Community Tax Certificate (CTC) 10,500b) National

BIR Annual Registration 50011,000

Amount of withholding taxes paid for the yearamounted to:

a) Tax on compensation 9,858,661b) Creditable withholding taxes 1,984,153c) Final withholding taxes 1,897,413

13,740,227

Corporate income taxes paida) Balance of CY 2013 20,230,635b) 1st quarter 2014 24,566,346c) 2nd quarter 2014 664,903,459d) 3rd quarter 2014 160,256,037e) 4th quarter 2014 134,876,099

1,004,832,576