Annual Report 2007 First Pacific Company Limited · 3.0 2.5 2.0 1.5 1.0 0.5 0 200 160 120 80 40 06...

Stock Code : 00142

Annual Report 2007 First Pacific Company Limited

Financial Highlights

Recurring Profi t Market Capitalization Contribution from Operations

Inside front cover Financial Highlights

2 Corporate Profile

3 Chairman’s Letter

4 Managing Director and

Chief Executive Officer’s Letter

6 Goals

10 Board of Directors and Senior Executives

16 Review of Operations

16 First Pacific

18 PLDT

28 Indofood

38 MPIC

44 Financial Review

44 Liquidity and Financial Resources

46 Financial Risk Management

50 Adjusted NAV Per Share

51 Corporate Governance Report

51 Governance Framework

55 Remuneration Policy

56 Communications with Shareholders

56 Connected and Continuing Connected Transactions

Contents

Recurring Profi t

US$ millions

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Market Capitalization

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Contribution from Operations

US$ millions280

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FirstPacificCompanyLimitedAnnualReport2007 �

63 StatutoryReports,FinancialStatementsand

NotestotheFinancialStatements

141 GlossaryofTerms

143 InformationforInvestors

144 Ten-YearStatisticalSummary

Insidebackcover SummaryofPrincipalInvestments

US$ millions

Philippines 3,935.6Indonesia 1,201.8Total 5,137.4

AdjustedNetAssetValue byCountry 31December2007

23% 77%

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SharePricePerformance

HK$6.5

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Philippines

sustain growthand profitability

2

Corporate Profile

Creatinglong-termvalueinAsia

First Pacific is a Hong Kong-based investment and management company with operations located in Asia. Its principal business interests relate to Telecommunications, Consumer Food Products, Infrastructure and Natural Resources.

Listed in Hong Kong, First Pacific’s shares are also available in the United States through American Depositary Receipts.

As at 31 December 2007, First Pacific’s economic interest in PLDT is 26.3%, in Indofood 51.5% and in MPIC 85.6%.

First Pacific’s principal investments are summarized on the inside back cover.

Chairman’s Letter

First Pacific remains focused on its search for a transformational investment that will complement and balanceits current portfolio

DearShareholders

Ireportedlastyearthattheoutlookfor2007waspositive,andindeedtheperformanceofourtelecommunicationsandfoodbusinessesduringthisyearshowedsignificantprogress.

Indofoodachievedconsiderableadvancementduringtheyear.Theenhancementinouroperationalefficiencies,marketinganddistributionnetworkshavecontributedtosignificantimprovementinourperformance,despiterisingcostpressures.Asapremierfoodcompany,wecontinuetomaintainourmarketleadershippositionformostofourproductcategories.TheexpansionopportunitiesweconcludedintheAgribusinesspartofIndofood,inparticulartheacquisitionofa64.4percentinterestinLonsumplantation,haveallowedustomovetowardselfsufficiencyinourCPOrequirementandtobecomeamajorplayerintheoilpalmplantationindustry.Therisingtrendsofoilandsoftcommoditypricesareexpectedtocontinuein2008andpresentchallengestoIndofood.However,webelieveIndofoodasatotalfoodsolutionscompany,supportedbyfourcomplementaryStrategicBusinessGroupsanditsdynamicallyevolvingmanagementwillcontinuetodeliversustainableresults.

PLDT’sinnovativespiritindevelopingnewandbetterproductofferingsprovidedthebasisforanotheryearofsustainablegrowthinrevenues,whichamongstotherssawfurtherunprecedentedgainsincellularpenetration.Emphasisisnowbeinggiventonewgrowthareas:inbroadband,videoandmobilecommerce,withoutofcourseneglectingitstraditionalbusinesses.WeseeanothersuccessfulperformanceforPLDTin2008.

Theyear2007wasamilestoneforMPIC.Aftermanyyearsofrestructuringgainsandlosses,MPICreportedpositivecorenetincomeforthisyear.Indeed,excellentprogresshasbeenmadeinthewaterdistributionandhealthcarebusinessesthatwereacquiredearlierintheyear.Theoutlookfor2008suggeststhatcomplementaryinfrastructuralbusinesswillbeaddedtothisportfolioasthebusinesshasreturnedtoprofitability.

FirstPacificremainsfocusedonitssearchforatransformationalinvestmentthatwillcomplementandbalanceitscurrentportfolio.Theincreaseddividendflowsallowustoconsidervariouscapitalmanagementinitiativesandacquisitionopportunities

which,togetherwiththeongoingperformanceenhancementsofourexistingbusinesses,shouldoffersteadyimprovementinshareholderreturnsintheyearstocome.

Sincerely

AnthoniSalimChairman

3�March2008

4

Managing Director and Chief Executive Officer’s Letter

With real GDP continuing to grow –albeit forecasted to be at a lowerpace this year – in the emergingmarkets of Asia, we believe opportunities exist for long-termvalue creation

DearFellowShareholders

2007hasbeenayearofstrongoperatingperformanceandprofitresultsforyourCompany.Wereportedanhistorichighnetprofitfortheyear.Andourcoreincomein2007hasapproachedthehighestrecordedbyFirstPacificsince�996.Iaminfactconfidentthatin2008,wehavetheabilitytoachieveacorenetincomeatitshighesteverinourtwentysixyearshistory.

Allouroperatingbusinessesperformedaboveexpectationsduringtheyear:

• PLDTrecordeditsfifthconsecutiveyearofhistorichighprofits.

• Indofoodreporteditsfourthconsecutiveyearofsignificantlyimprovedperformance.

• MPICpostedprofitsafterseveralyearsofrestructuringlosses,signifyingaturnaroundinitsfortunes.

Duringtheyear,wehaveassessedanumberofsignificantinvestmentopportunitiesinlinewithourlong-terminvestmentstrategy,inaccordancewiththecriteriasetforthbelow.

InvestmentCriteria• Relatedtoexistingcorebusinesses• Strongcashflow• Enableasignificantmanagement

influence• Offerlong-termvalueappreciation• Growthandreturnpotential• EmergingmarketsinAsia

WebelievethatopportunitiescontinuetoexistinAsiaand,giventherecentadversedevelopmentsintheglobalandregionalequitiesmarkets–whereassetvalueshavebeenmarkeddown–itislikelythatanewwindowofinvestmentopportunitiesisopeningup.Itisofcoursenotclearhowlongthisinvestmentwindowwillstayopen.Wewillcontinuetoreviewandevaluatesuchopportunitiesinaccordancewiththeinvestmentcriteriadescribedabove.

Regrettably,oursharescurrentlytradeatanunacceptablysteepdiscount.Inthatlight,weneedtoconsidercapitalmanagementinitiativesshortly,havingregardtotheprogresswecanmakeaboutclosingvalueenhancingacquisitions,ouravailablecashandfundingresourceswhichmaybeavailableexternally.

�FirstPacificCompanyLimitedAnnualReport2007

With real GDP continuing to grow –albeit forecasted to be at a lowerpace this year – in the emergingmarkets of Asia, we believe opportunities exist for long-termvalue creation

Duringtheyear,PLDT’srobustcashflowsenabledittoraiseitscapitalexpenditurelevelandincreaseitsdividendpayoutto�00percentofcoreearnings.PLDTrecordeditsfifthconsecutiveyearofhistorichighprofits.Growthinthecellular,dataandbroadbandbusinessesareexpectedtocontinuein2008.ThestrategicchallengesatPLDTwillrevolvearounditscontinuedabilitytostayinnovativeandcompetitive,tosustaingrowthinprofitabilityandcashflows,andtomanagethetransitionofitsrevenuemixfromtraditionalvoicetodataandexpanditsrevenuebasebeyonditscurrent,organicbusinesses.Indeed,PLDThastore-inventitselfyetagain.

Theacquisitionofa64.4percentofPTPerusahaanPerkebunanLondonSumatraIndonesiaTbk(Lonsum)byIndofoodthroughIndoAgriwasconcludedinNovember2007.Thisinvestmentrepresentsasignificantearningsenhancementforourfoodbusinessatatimewhenthecostofrawmaterialsisputtingpressureonthemarginsofourprocessed,brandedproducts.Indofoodhasnowbecomeoneoftheworld’smajorpalmoilplantationcompaniesuponclosureoftheLonsumtransaction.Onthebrandedside,Indofoodwillcontinuetomaximizeitsextensivedistributionsystemin2008throughincreasedproductofferings,thirdpartyaswellasinhouse.However,itwillcontinueto

facecostpressuresfromrisingpricesoffuelandwheat,butwiththeenhancedsupplyofpalmoilthroughitsacquisitionofLonsum,therisksarisingfromincreasedpalmoilpricesisreduced.

TheturnaroundofMPIChasbeenaccomplishedintheyear2007.ItsfirsthealthcareinvestmentinMakatiMedicalCenterhasperformedaboveplandespitethestartofasignificantredevelopmentandrehabilitationofitsfacilitieswhichcancausebusinessinterruptionintheinterim.AsolidstartwasmadeinexecutingtheaggressiveplanswehavefortheMayniladWaterfranchise.InordertodeliverwatersupplytoagreaternumberofthepopulationwithinourMetroManilaconcessionarea,capitalexpendituresatMayniladhavebeenraised,withmorefundsbeingearmarkedtorolloutthenetworkexpeditiously.MayniladWatersuccessfullyexiteditsrehabilitationstatusinFebruary2008,thusincreasingtheflexibilityofitsfinancingoptionsandcontributingtobetterearningsinthefuture.Afterhavingachievedaprofitableposition,MPICcannowlookatothernewinvestmentareastoenhanceearningsinthecomingyears.

Ourcashpositionhas,asaresultofthesignificantlybetteroperatingperformancesofourbusinesses,improvedduring2007.Weenter2008withthesamecommitmentto

buildshareholdervaluebymakinginvestmentsincomplementarybusinessesintheemergingmarketsofAsia,andbyconsideringanycapitalmanagementinitiativesthatourfinancialpositionandpendinginvestmentplansalloworindeedcallfor.

Lookingaheadto2008,ourviewiscautiouslyoptimistic.Iseenoreasonwhyourcoreprofitsfor2008shouldnotriseabovewhatwereportedin2007.Ibelievethatthefundamentalstrengthsofourbusinesseswillwithstandthepressuresthatwillsurfaceinourmarketsasaresultofhigherrawmaterialcostsandthechallengesposedbytheturmoilinglobalfinancialmarkets,andtheconstraintsposedbyslowingeconomicgrowth.

Again,Iwouldliketothankourshareholdersmostsincerelyfortheircontinuedsupportandpatience.

Mostcordially

ManuelV.PangilinanManaging Director andChief Executive Officer

3�March2008

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6

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3�,000

30,000

2�,000

20,000

FirstPacificHK$

HSI

50%

FirstPacificSharePricevsHSI

39%

FirstPacific

HSI

6

Goals

GOALS FOR 2008

• Continuetoenhancetheprofitabilityofoperatingcompanies• Expandourbusinessportfoliowithcomplementaryinvestmentsintelecoms,infrastructure,naturalresources

andconsumerproductsintheemergingmarketsofAsia• Managecapitalwithinouroverallinvestmentplansandfinancialpositiontoenhanceshareholderreturns

Review OF 2007 GOALS

GOAL ACHIEVEMENT

Evaluatenewinvestmentopportunitiesintelecoms,consumerfoodproductsandinfrastructureintheemergingmarketsinAsia

AchievedFirst Pacific group invested a total of US$1,566 million for business through acquisitionAt head office level• Completed the acquisition of additional approximately 6.4 per cent interest in PLDTAt operating companies level• PLDT invested in Springfield and Blue Ocean• IndoAgri acquired 64.4 per cent interest in Lonsum and other plantations• MPIC secured an 84 per cent interest in Maynilad together with partners• MPIC invested in 33 per cent equity in Medical Doctors, Inc.

Continuetoenhancevalueinourcurrentoperatingbusinesses

Achieved• Recurring profit increased 29 per cent to US$193.7 million• First Pacific share price appreciated 50 per cent to close at HK$6.05 per share for

2007 while the Hang Seng Index rose 39 per cent

PLDT• Profit contribution to the Group increased 28 per cent to US$177.5 million driven by

continuous growth in cellular, knowledge processing solutions, customer interaction services businesses, and high demand in cellular and broadband services

• Share price appreciated 25 per cent to close at Pesos 3,175 per share for 2007 while the Philippine Composite Index rose 21 per cent

• Total cash dividends for 2007 is Pesos 184 (US$4.01) per share, representing 100 per cent payout of 2007 core earnings

Indofood• Profit contribution to the Group increased 32 per cent to US$72.0 million driven by

increased performance of the Agribusiness, flour and branded oil products• Share price appreciated 91 per cent to close at Rupiah 2,575 per share for 2007

while the Jakarta Composite Index rose by 52 per cent

MPIC• With improved performances at Maynilad, Landco and Makati Medical Center, the

turnaround gained momentum with a recurring profit contribution of US$2.3 million verses a recurring loss of US$3.7 million in 2006

• Share price declined 12 per cent to close at Pesos 4.4 per share for 2007 compared with the Philippine Composite Index up by 21 per cent

Strengthenbalancesheetinsupportofnewinvestmentopportunities

Partially achieved• At the head office level, short-term bank loans were fully refinanced by long-term

loans. Total bank loans of US$650 million will mature between 2011 and 2013• Net debt level increased 1.2 times to US$532.4 million of which approximately

US$510 million was employed to acquire the value-enhancing 6.4 per cent interest in PLDT

7FirstPacificCompanyLimitedAnnualReport2007

GOALS FOR 2008

• Sustainoverallservicerevenuegrowthandprofitability

• Accelerategrowthinwireless,broadbandandICT,bothorganically,aswellasthroughacquisitions

• Leveragecombinedstrengthsinproductinnovation,technologyexpertiseandnetworks

• Raiseservicequalitytosignificantlyimprovethecustomerexperienceacrossawiderangeofservicesandsolutions

• Continuecapitalmanagement,maintaindividendstocommonshareholdersat70percentof2008coreearnings

andretainthe“lookback”approach;implementsharebuybackprogramattimeswhenthemarketpricedoes

notreflectmanagement’sviewofshare’svalue


GOAL ACHIEVEMENT

Managetransitiontodataandnext

generationservices,andmaximize

theexistingmainstreamvoiceand

textbusinesses

Achieved

Service revenues of data/broadband and information and communications technology

increased 22 per cent in peso terms to Pesos 68.4 billion (US$1,491.5 million). Revenues

from traditional voice business down 2 per cent to Pesos 67.0 billion (US$1,461.0

million). Broadband subscribers more than doubled to 579,000 while cellular subscribers

increased 5.9 million to over 30 million by the end of 2007.

Acceleratetheexpansionof

knowledgeprocessingsolutionsand

customerinteractionservices

businesses(previouslynamed

businessprocessoutsourcingand

callcenter,respectively)

Achieved

Knowledge processing solutions unit, SPi Group revenues up 122 per cent to Pesos 5.3

billion (US$115.6 million). SPi expanded its healthcare services by acquiring the entire

equity interest of Springfield Service Corporation for a consideration of US$35.0 million.

SPi’s service seats increased to over 4,500 with facilities in the Philippines, India,

Vietnam and USA. ePLDT Ventus grew its customer interaction services revenues by 24

per cent to Pesos 3.3 billion (US$72.0 million) and service seats increased 14 per cent to

over 6,400.

Expandbothdomesticand

internationalm-commerce

businesses

Ongoing

Domestically, at the end of January 2008, Smart successfully introduced two initiatives

under the aegis of Land Bank of the Philippines and the Development Bank of the

Philippines. Both services cater to the overseas Filipino workers market. Internationally,

in February 2008, the National Commercial Bank of Saudi Arabia, the largest bank in the

Gulf region, launched QuickPay, its mobile remittance service powered by Smart Money.

Continuesegmentspecificprograms

tofurtherincreasenetwork

efficiency

Achieved

Consolidated service revenues increased 8 per cent in peso terms to Pesos 135.5 billion

(US$3.0 billion); GSM subscriber base grew by 5.9 million to over 30 million representing

approximately 55 per cent of the total cellular market in the Philippines based on

subscribers and approximately 59 per cent based on revenues. The broadband

subscriber base more than doubled to 579,000 representing a market share of over 70

per cent. Consolidated EBITDA margin stood at 61 per cent.

Raisedividendstocommon

shareholdersto70percentof2007

coreearnings

Achieved

The sustainable strong performance and robust free cash position enable PLDT to

declare a final dividend of Pesos 68 (US$1.48), representing the committed 70 per cent

payout of its 2007 core earnings and a special dividend of Pesos 56 (US$1.22) per share.

Together with the interim dividend of Pesos 60 (US$1.31) per share, total cash dividends

for 2007 is Pesos 184 (US$4.01) per share, representing substantially 100 per cent

payout of 2007 core earnings.

8

Goals

GOALS FOR 2008

• Enhancebrandequityandstrengthenmarketposition

• Principalbusinessgroupstocontinuetheirspecificproductionandcostefficiencyinitiatives

• IntegrationofIndoAgriandLonsum’soperations

• Refinanceshort-termdebtstolongertermfacilities


GOAL ACHIEVEMENT

Leveragebrandequityandmarket

positiontosustaingrowthand

profitability

Achieved

All principal business groups maintained their leading market positions, recorded

sales growth despite significant increases in raw material and fuel costs. In rupiah

terms, Indofood reported a 27.0 per cent improvement in consolidated sales to Rupiah

27,858.3 billion (US$3,040.3 million) (2006: Rupiah 21,941.6 billion; US$2,398.5 million)

supported by more effective segment specific marketing programs, an enhanced

stock point distribution system and products innovation.

Leveragestockpointnetworkto

expandproductsdistribution

coverage

Achieved

Covering of retail outlets increased to approximately 240 thousand. Sales grew 16.9

per cent to Rupiah 3,663.6 billion (US$399.8 million) (2006: Rupiah 3,132.9 billion;

US$342.5 million). EBIT margin improved to 1.5 per cent (2006: 0.2 per cent) reflecting

volume growth of both group and third party products, and higher prices.

Continuetoimplementcostcontrol

andoperationalefficiency

programs

Achieved

Overall selling expenses and general and administration expenses respectively

reduced to 8.4 per cent and 4.8 per cent of consolidated sales from previous year’s

9.5 per cent and 5.2 per cent. Gross margin remains at 23.6 per cent despite the

increases in raw material and fuel costs.

Accelerateplantationexpansion

organicallyorthroughacquisition

Achieved

Agribusiness group completed several plantation acquisitions in 2007 which included

the acquisition of a 64.4 per cent interest in an Indonesian listed plantation company

PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Lonsum) for a

consideration of approximately Rupiah 6.2 trillion (US$673.0 million). Indofood Group’s

plantation land bank increased to 406,519 hectares from 138,542 hectares.

Strengthenbalancesheetand

reduceforeigncurrencyexposure

Substantially achieved

Part of its foreign currency loans were refinanced by a five-year Rupiah 2.0 trillion

(US$212.3 million) rupiah bonds. The acquisition of a 64.4 per cent in Lonsum

increased net debt to Rupiah 7,850.6 billion (US$833.3 million) of which approximately

US$440 million will be refinanced by August 2008.


GOALS FOR 2008

• Securenewinvestmentopportunitiesintheinfrastructure,healthcareandhoteldevelopmentsectors

• Expandprojectportfolioofmiddle-andhigh-endurbanresidentialandluxuryresidentialresorts

• Securefundingforbusinessexpansion

• ContinuetoimproveprofitabilityofMaynilad,LandcoandMDI


GOAL ACHIEVEMENT

Developacomprehensivegrowth

andenhancedprofitstrategyfor

MayniladandMedicalDoctors,Inc.

(MDI)

Achieved

Strategies in place. Both companies exceeded financial targets for 2007.

Maynilad

• Revenue from water, sewerage and other services increased 8 per cent to Pesos

7.4 billion (US$161.4 million)

• Non-revenue water improved to an average of 66 per cent from 68 per cent in 2006

• Total billed water volume increased 9 per cent to 286 million cubic meters

• Total billed water service connections increased 4 per cent to 703,519

MDI

• Net income increased approximately 20 per cent to Pesos 269 million (US$5.9

million)

• Construction of a new 13-level medical building is on schedule to be completed in

August 2008

Raisenewcapitaltofundpotential

newinvestmentsandtocomply

withthePhilippineStock

Exchange’slistingrulesregarding

freefloatrequirement

Achieved

MPIC raised approximately US$78 million convertible/exchangeable notes from First

Pacific and the strategic investor, Ashmore, to fund its investments in Maynilad and

MDI. Approximately Pesos 144 million (US$3.1 million) was raised through the

conversion of MPIC warrants and 144 million new MPIC shares were issued. MPIC

complied with the Philippine Stock Exchange’s listing requirement concerning its free

float.

Manageprojectdevelopmentsat

Landcotobuildprofitablereturnsto

theshareholders

Achieved

Supported by the strong sales of its leisure and resort projects (including Amara en

Terrazas and Playa Calatagan), and the completion of these projects ahead of schedule,

Landco reported a profit of Pesos 261 million (US$5.7 million), a turnaround from a loss

of Pesos 13 million (US$0.3 million) in 2006.

Continuetoevaluatepotential

investmentopportunitiesinvarious

infrastructuresectors

Achieved

MPIC completed the acquisition of an 84 per cent interest in Maynilad through its 50

per cent owned joint venture, DMCI-MPIC Water Company Inc. and subscribed for

Pesos 750 million (US$18.2 million) subordinated convertible notes issued by MDI

which operates and manages Makati Medical Center (MMC). The Pesos 750 million

notes were fully converted in January 2008 and represent a 33.45 per cent equity

interest in MDI. New infrastructure projects: harbor, toll roads and medical care are

being reviewed.

�0

Board of Directors and Senior Executives

�0

Board of Directors

ANTHONISALIMChairman

Age�9,borninIndonesia.Mr.SalimisthesonofSoedono

Salim.HegraduatedfromEwellCountyTechnicalCollegein

London.Mr.SalimisthePresidentandCEOoftheSalimGroup,

PresidentDirectorandCEOofPTIndofoodSuksesMakmur

Tbk,andholdspositionsasCommissionerandDirectorin

variouscompanies,includingFuturisCorporationLimited,

Australia.

Mr.SalimservesontheBoardsofAdvisorsofseveral

multinationalcompanies.HewasamemberoftheGE

InternationalAdvisoryBoardfromSeptember�994,andis

currentlyamemberoftheAdvisoryBoardofALLIANZGroup,

aninsurancecompanybasedinGermany,andRaboBank

oftheNetherlands.HejoinedtheAsiaBusinessCouncilin

September2004.

Mr.SalimhasservedasaDirectorofFirstPacificsince�98�

andassumedtheroleofChairmaninJune2003.

MANUELV.PANGILINANManagingDirectorandChiefExecutiveOfficer

Age6�,borninthePhilippines.Mr.Pangilinanreceived

aBAfromAteneodeManilaUniversityandanMBAfrom

UniversityofPennsylvania’sWhartonSchoolbeforeworking

inthePhilippinesandHongKongforthePHINMAGroup,

BancomInternationalLimitedandAmericanExpressBank.

HeservedasFirstPacific’sManagingDirectorafterfounding

theCompanyin�98�,wasappointedExecutiveChairmanin

February�999andre-assumedtheroleofManagingDirector

andCEOinJune2003.

Mr.PangilinanalsoservedasPresidentandCEOofPLDT

sinceNovember�998andwasappointedChairmanof

PLDTinFebruary2004.HeistheChairmanofMetroPacific

InvestmentsCorporation,SmartCommunications,Inc.,Pilipino

TelephoneCorporation,LandcoPacificCorporationand

MedicalDoctorsInc.(MakatiMedicalCenter),aswellasthe

PresidentCommissionerofPTIndofoodSuksesMakmurTbk.

InMay2006,theOfficeofthePresidentofthePhilippines

awardedMr.PangilinantheOrderofLakandula,rankof

Komandanteinrecognitionofhiscontributionstothecountry.

HewasnamedManagementManoftheYear200�bythe

ManagementAssociationofthePhilippinesandwasawarded

HonoraryDoctoratesinHumanitiesbyXavierUniversityin

2007andbySanBedaCollegein2002inthePhilippines.He

wasamemberoftheBoardofOverseersofTheWharton

School,UniversityofPennsylvania,andholdschairmanships

intheBoardofTrusteesofAteneodeManilaUniversity,non-

profitorganizationsPhilippineBusinessforSocialProgressand

theHongKongBayanihanFoundation.Mr.Pangilinanisalso

thePresidentoftheBAP-SamahangBasketbolNgPilipinas(the

nationalassociationforbasketball).

��FirstPacificCompanyLimitedAnnualReport2007 ��

EDWARDA.TORTORICIExecutiveDirector

Age68,bornintheUnitedStates.Mr.Tortoricireceived

aBSfromNewYorkUniversityandanMSfromFairfield

University.Mr.Tortoricihasservedinavarietyofseniorand

executivemanagementpositions,includingCorporateVice

PresidentforCrockerBankandManagingDirectorpositionsat

OlivettiCorporationofAmericaandFairchildSemiconductor

Corporation.

Mr.TortoricisubsequentlyfoundedEAEdwardsAssociates,

aninternationalmanagementandconsultingfirmspecializing

instrategyformulationandproductivityimprovementwith

officesinUSA,EuropeandMiddleEast.

In�987Mr.TortoricijoinedFirstPacificasanExecutive

Directorforstrategicplanningandcorporaterestructuring,and

launchedtheGroup’sentryintothetelecommunicationsand

technologysectors.Presently,heoverseescorporatestrategy

forFirstPacificandguidestheGroup’sstrategicplanningand

corporatedevelopmentactivities.Mr.Tortoriciservesasa

CommissionerofPTIndofoodSuksesMakmurTbkwhichis

basedinIndonesia;aDirectorofMetroPacificCorporation,

MayniladWaterServices,Inc.andLandcoPacificCorporation,

andanExecutiveAdvisorofMetroPacificInvestments

Corporation,companieslocatedinthePhilippines.Healso

servesasaTrusteeoftheAsiaSocietyandtheMetropolitan

MuseumofManila.

ROBERTC.NICHOLSONExecutiveDirector

Age�2,borninScotland.Mr.Nicholsonqualifiedasasolicitor

inEnglandandWalesin�980andinHongKongin�982.

HewasaseniorpartnerofRichardsButlerfrom�98�to

200�whereheestablishedthecorporateandcommercial

department.Hehashadwideexperienceincorporate

financeandcross-bordertransactions,includingmergers

andacquisitions,regionaltelecommunications,debtand

equitycapitalmarkets,corporatereorganizationsandthe

privatizationofstate-ownedenterprisesinthePeople’s

RepublicofChina.

Mr.NicholsonwasasenioradvisortotheBoardofDirectorsof

PCCWLimitedbetweenAugust200�andSeptember2003.He

isanIndependentNon-executiveDirectorofQPLInternational

HoldingsLimitedandPacificBasinShippingLimited.In

November200�,hebecameaNon-executiveDirectorofIndia

CapitalGrowthFundLimitedwhichislistedontheAIMmarket

oftheLondonStockExchange.Mr.Nicholsonservesasa

CommissionerofPTIndofoodSuksesMakmurTbkandisa

DirectorofLevelUp!InternationalHoldingsPteLtd.Hejoined

FirstPacific’sBoardinJune2003andwasnamedanExecutive

DirectorinNovember2003.

�2


Board of Directors (cont’d)

PROFESSOREDWARDK.Y.CHEN,GBS, CBE, JP

IndependentNon-executiveDirector

Age63,borninHongKongandeducatedattheUniversity

ofHongKongandOxfordUniversity.ProfessorChenis

anIndependentNon-executiveDirectorofAsiaSatellite

TelecommunicationsandWharfHoldingsLimited.Hewas

atrusteeforEatonVanceManagementFunds.Formerly,

ProfessorChenservedasPresidentofLingnanUniversity

from�99�to2007,andProfessorandDirectoroftheCentre

ofAsianStudiesoftheUniversityofHongKong;Chairmanof

HongKong’sConsumerCouncil;asanExecutiveCouncillorof

theHongKongGovernment;andasaLegislativeCouncillor.

ProfessorChenjoinedFirstPacific’sBoardin�993.

GRAHAML.PICKLESIndependentNon-executiveDirector

Age��,borninAustralia.Mr.PicklesholdsaBachelorof

Businessdegree(majoringinaccounting).Heisamember

oftheCertifiedPractisingAccountantsofAustralia,andisa

FellowoftheAustralianInstituteofDirectors.

Mr.Pickleshassignificantexperienceinthedistributionand

technologysectors,runningseveraldistributionbusinesses

inAsiaandAustralasiaintheITandtelecommunications

industries,overacareerspanningmorethan20years.

Mr.PicklesservesasaCommissionerofPTIndofoodSukses

MakmurTbkandwasappointedChairmanofAsiaPacific

BrandsIndiaLimitedin200�.HewaspreviouslytheCEOof

TechPacificHoldingsLimited,awholly-ownedsubsidiary

ofFirstPacificCompanyLimiteduntilTechPacificwassold

in�997.Mr.Pickleswasalsoamemberoftheexecutive

committeeofHagemeyerN.V.inwhichFirstPacifichada

controllinginterestuntil�998.Mr.PicklesjoinedFirstPacific’s

Boardin2004.

SIRDAVIDW.C.TANG,KBE

IndependentNon-executiveDirector

Age�3,borninHongKong,Mr.Tangwaseducatedlocallyand

thenCambridge,LondonandBeijing,wherehealsotaught

EnglishandPhilosophy.Mr.TangisthefounderofShanghai

Tang;theChinaClubsinBeijing,HongKongandSingapore;

ChinaTanginLondonandPacificCigars.HejoinedFirst

Pacific’sBoardin�989.

AMBASSADORALBERTF.DELROSARIONon-executiveDirector

Age68,borninthePhilippines.TheformerAmbassador

oftheRepublicofthePhilippinestotheUnitedStatesof

AmericafromOctober200�toAugust2006.Ambassador

delRosarioearnedhisBachelor’sDegreeinEconomicsat

NewYorkUniversity.HeiscurrentlyChairmanofGotuaco,

delRosarioandAssociates,Inc.,BusinessWorldPublishing

Corporation,MakatiFoundationforEducationandStratbase,

Inc.,andisPresidentofPhilippineTelecommunications

InvestmentCorporation.AmbassadordelRosarioservesas

CommissionerorDirectorinnumerouscompaniesandnon-

profitorganizationsincludingPTIndofoodSuksesMakmur

Tbk,PhilippineLongDistanceTelephoneCompany,Infrontier

(Philippines),Inc.,MetroPacificInvestmentsCorporation,Asia

TradersInsuranceCorporation,LandcoPacificCorporation,

MediaQuestHoldings,Inc.andPhilippineCancerSociety,

andisamemberoftheBoardofTrusteesoftheInternational

GraduateUniversity,Washington,DC.Healsoheaded

thedevelopmentofPacificPlazaTowers,MetroPacific

Corporation’ssignatureprojectinFortBonifacio’sGlobalCity.

InSeptember2004,AmbassadordelRosariowasconferred

theOrderofSikatuna,RankofDatu,byH.E.PresidentGloria

Macapagal-Arroyoforhisoutstandingeffortsinpromoting

foreignrelations.HeismoreoverarecipientoftheEDSAII

PresidentialHeroesAwardinrecognitionofhisworkin

fosteringPhilippineDemocracyandthePhilippineArmyAward

fromH.E.PresidentCorazonAquinoforhisaccomplishments

asChairmanoftheMakatiFoundationforEducation.Hewas

elevatedtotheXavierHallofFameinNewYorkCityin2006.

AmbassadordelRosariojoinedFirstPacific’sBoardinJune

2003.

SUTANTODJUHARNon-executiveDirector

Age79,borninIndonesia.Mr.Djuharhasfoundednumerous

Indonesiancompaniesinvolvedprimarilyinrealestate

development.HeisaCommissionerofPTKartikaChandra

andservesasaDirectorofPTBogasariFlourMillsandPacific

IndustriesandDevelopmentLimited.Mr.Djuhar,whoisthe

fatherofTedyDjuhar,joinedFirstPacific’sBoardin�98�.

�3FirstPacificCompanyLimitedAnnualReport2007

TEDYDJUHARNon-executiveDirector

Age�6,borninIndonesia.Mr.DjuharreceivedaBachelor

ofEconomicsdegreefromtheUniversityofNewEngland

inAustralia.Mr.DjuharistheVicePresidentDirectorof

PTIndocementTunggalPrakarsaTbk,DirectorofPacific

IndustriesandDevelopmentLimited,andDirectorofanumber

ofotherIndonesiancompanies.HeisthesonofSutanto

Djuhar.Mr.DjuharjoinedFirstPacific’sBoardin�98�.

NAPOLEONL.NAZARENONon-executiveDirector(Appointed on 31 March 2008)

Age�8,borninthePhilippines.Mr.Nazarenograduatedin

�970attheUniversityofSanCarlosinCebuwithaBachelor

ofSciencedegreeinMechanicalEngineering.Heobtaineda

MasterinBusinessManagementdegreeattheAsianInstitute

ofManagement(AIM)in�973.HealsotooktheINSEAD

ExecutiveProgramattheEuropeanInstituteofBusiness

AdministrationinFountainbleau,Francein�983.

In�973,Mr.Nazarenoworkedasanassistantproduct

managerattheFlexiblePackagingDivisioninPhimco

Industries,Inc.andin�98�,hejoinedtheinternationalfirm

Akerlund&RausingasActingProductionManagerinthelocal

office.In�989,hewasnamedPresidentandCEOofAkerlund

&Rausing(Phils.).In�99�,Mr.NazarenomovedtoMetro

PacificCorporation,servingasPresidentandCEOuntil�999.

In�998,Mr.Nazarenomovedontothetelecommunications

industryasPresidentandCEOofPilipinoTelephone

Corporation,acellularaffiliateofPLDT.Mr.Nazarenobecame

PresidentandCEOofSmartCommunications,Inc.inJanuary

2000andsubsequentlyassumedthepresidencyatPLDTin

2004,positionshecontinuestoholdconcurrently.

IBRAHIMRISJADNon-executiveDirector

Age74,borninIndonesia.Mr.Risjadservesasa

CommissionerofPTIndofoodSuksesMakmurTbk.Hejoined

FirstPacific’sBoardin�98�.

BENNYS.SANTOSONon-executiveDirector

Age�0,borninIndonesia.Mr.SantosograduatedfromNgee

AnnCollegeinSingapore.HeservesasaDirectorofPT

IndocementTunggalPrakarsaTbk,andaCommissionerofPT

IndofoodSuksesMakmurTbkandPTIndosiarVisualMandiri

Tbk.HealsoservesasaDirectororaCommissionerofa

numberofotherIndonesiancompanies.Mr.Santosojoined

FirstPacific’sBoardinJune2003.

Advisors

SOEDONOSALIMHonoraryChairmanandAdvisortotheBoard

Age93,borninChina.Mr.SalimservedasFirstPacific’s

Chairmanfrom�98�untilFebruary�999,whenheassumed

hiscurrenttitles.HeservesasChairmanoftheSalimGroup.

SUDWIKATMONOAdvisortotheBoard

Age74,borninIndonesia.Mr.Sudwikatmonoservedasa

DirectorofFirstPacificfrom�98�untilFebruary�999,whenhe

assumedhiscurrenttitle.HeisaVicePresidentCommissioner

ofPTIndocementTunggalPrakarsaTbkandholdsboard

positionswithanumberofotherIndonesiancompanies.

�4


�4

Senior executives

RICHARDL.BEACHERExecutiveVicePresidentGroupFinancialController

Age49,borninUnitedKingdom.

Mr.BeacherreceivedaBA(Hons)

inEconomicsandAccountingfrom

UniversityofNewcastleUponTyne,

U.K.HeisamemberoftheInstituteof

CharteredAccountantsinEnglandand

WalesandamemberoftheHongKong

InstituteofCertifiedPublicAccountants.

Mr.BeachermovedtoHongKongin

�984withPriceWaterhouseandmost

recentlyservedinfinancialpositions

withHagemeyerCosaLieberman

andlatterlywithSiemensBuilding

TechnologiesasGlobalBusinessLine

Controller.HejoinedFirstPacific

in2006.

MAISIEM.S.LAMExecutiveVicePresidentGroupHumanResources

Age�3,borninHongKong.Ms.Lam

receivedaDiplomafromtheHong

KongPolytechnicUniversity/HongKong

ManagementAssociation.Shejoined

FirstPacificin�983.

JOSEPHH.P.NGExecutiveVicePresidentGroupFinance

Age4�,borninHongKong.Mr.Ng

receivedanMBAandaProfessional

DiplomainAccountancyfromtheHong

KongPolytechnicUniversity.Heisa

memberoftheHongKongInstituteof

CertifiedPublicAccountantsandof

theAssociationofCharteredCertified

Accountants.Mr.NgjoinedFirstPacific

in�988fromPriceWaterhouse’saudit

andbusinessadvisorydepartmentin

HongKong.Priortohisappointment

asExecutiveVicePresident,Group

FinanceinMay2002,Mr.NgwasGroup

TreasureroftheFirstPacificGroup

andservedinseveralseniorfinance

positionswithintheFirstPacificGroup.

��FirstPacificCompanyLimitedAnnualReport2007 ��

RICHARDP.C.CHANVicePresidentGroupFinance

Age38,borninHongKong.

Mr.ChanreceivedaBBA

(Hons)degreefromtheHong

KongBaptistUniversityand

anMBAfromtheChinese

UniversityofHongKong.

HeisaCertifiedPublic

Accountant(Practising),a

CFAcharterholderanda

fellowoftheHongKong

InstituteofCertifiedPublic

Accountantsandthe

AssociationofChartered

CertifiedAccountants.He

hasexperienceinauditing,

accounting,financeand

managementspanninga

diverserangeofbusiness

activities.Mr.Chanjoined

FirstPacificin�996from

KPMG.

SARAS.K.CHEUNGVicePresidentGroupCorporate Communications


Ms.Cheungreceiveda

BAinBusinessEconomics

fromUCLA(Universityof

California,LosAngeles)and

anMBAfromSouthernIllinois

University,Carbondale.She

isamemberoftheNational

InvestorRelationsInstitute.

Ms.CheungjoinedFirstPacific

in�997fromthePublicAffairs

departmentofWharfLimited

andWheelockandCompany

Limited.

NANCYL.M.LIVicePresidentCompanySecretary

Age�0,borninHongKong.

Ms.LireceivedaBAfrom

McMasterUniversityinCanada

andaMScinCorporate

GovernanceandDirectorship

fromHongKongBaptist

University.Sheisafellowof

theHongKongInstituteof

CompanySecretariesand

TheInstituteofChartered

Secretaries&Administratorsof

GreatBritain.Ms.LijoinedFirst

Pacificin�987fromtheHong

KongPolytechnicUniversity’s

academicsecretariat.

Priortothat,sheworked

inthecompanysecretarial

departmentofCoopers&

Lybrand.Ms.Liwasappointed

asFirstPacific’sCompany

SecretaryinMay2003.

PETERT.H.LINVicePresidentGroupTaxandTreasury


Mr.LinreceivedanMSc

inManagementSciences

andBScinEconomicsand

StatisticsfromtheUniversity

ofSouthamptonandCoventry

Universityrespectively.

HeisaFellowoftheHong

KongInstituteofCertified

PublicAccountantsandthe

AssociationofChartered

CertifiedAccountants.Heis

alsoamemberoftheInstitute

ofCharteredAccountantsin

EnglandandWalesandthe

HongKongTaxInstitute.Mr.

LinjoinedFirstPacificin�998

fromKPMGwherehewasa

TaxManagerspecializingin

CorporateTax.

�6

Review of Operations

profit contribution from operations ↑33.1%

ContributionSummary

Contributionto Turnover Groupprofit(i)

Fortheyearended3�December 2007 2006 2007 2006

US$millions

PLDT(ii) – – 177.5 �38.2

Indofood 3,040.3 2,398.� 72.0 �4.7

MPIC 34.7 76.3 2.3 (3.7)

Fromoperations 3,075.0 2,474.8 251.8 �89.2

HeadOfficeitems:

–Corporateoverhead (15.0) (�3.7)

–Netinterestexpense (36.3) (22.9)

–Otherexpenses (6.8) (2.7)

Recurringprofit 193.7 �49.9

Foreignexchangeandderivativegains/(losses)(iii) 30.1 (��.�)

Non-recurringitems(iv) 286.6 66.�

Profitattributabletoequityholdersoftheparent 510.4 �64.�

(i) Aftertaxationandminorityinterest,whereappropriate(ii) Associatedcompany(iii) 2007’sforeignexchangeandderivativegainsincludeagainofUS$27.7million(2006:US$3�.2

million)onchangesinthefairvalueofcertainPLDTsharesdesignatedasfinancialassetsatfairvaluethroughprofitorloss,gainsofUS$2�.6million(2006:US$7.0million)onthechangesinthefairvaluesofderivativesandforeignexchangetranslationdifferencesontheGroup’sunhedgedforeigncurrencydenominatedborrowingsandpayables,partlyoffsetbyalossofUS$23.2million(2006:US$89.7million)onrevaluationofoptionelementembeddedinHeadOffice’sExchangeableNotes.

(iv) 2007’snon-recurringgainsofUS$286.6millionmainlycompriseagainondivestmentoftheGroup’sinterestinPLDTofUS$�74.7milliononsettlementofcertainHeadOffice’sExchangeableNoteswithPLDTsharesandagainondilutionoftheGroup’seffectiveinterestinIndofood’soilsandplantationsbusinessesofUS$7�.9million.2006’snon-recurringgainsofUS$66.�millionmainlycompriseagainondivestmentoftheGroup’sinterestinPLDTofUS$�8.2milliononsettlementofcertainHeadOffice’sExchangeableNoteswithPLDTsharesandagainondilutionuponconversionofPLDT’sconvertiblepreferencesharesofUS$38.7million,partlyoffsetbyimpairmentprovisionsforcertainoftheGroup’sassets.

06 07Indonesia

ContributionbyCountry

US$ millions 200

160

120

80

40

006 07

Philippines

Duringtheyear,theGroup’soperating

businessesperformedabove

expectations,drivenbythestrong

growthandimprovedoperational

performanceofourbusinessesinthe

PhilippinesandIndonesia.Turnover

increased24percenttoUS$3,07�.0

million(2006:US$2,474.8million)whilst

profitcontributionsreachedUS$2��.8

million(2006:US$�89.2million),an

increaseof33percent.Recurring

profitgrew29percenttoUS$�93.7

millionfromUS$�49.9millionin2006.

TheGrouprecordedUS$30.�million

netforeignexchangeandderivative

gains(2006:lossesofUS$��.�million)

andUS$286.6million(2006:US$66.�

million)ofnetnon-recurringgains.Asa

result,theGrouprecordedanetprofit

for2007ofUS$��0.4million,about

threetimesasmuchprofitrecordedin

2006.


TheGroup’soperatingresultsaredenominatedinlocalcurrencies,principallythepesoandrupiah,whicharetranslatedand

consolidatedtoprovidetheGroup’sresultsinU.S.dollar.ThechangesofthesecurrenciesagainsttheU.S.dollarissummarizedbelow.

ExchangeratesagainsttheU.S.dollar

Oneyear

At3�December 2007 2006 change

Closing

Peso 41.28 49.06 +�8.8%

Rupiah 9,419 9,020 -4.2%

ExchangeratesagainsttheU.S.dollar

Fortheyear Oneyear

ended3�December 2007 2006 change

Average

Peso 45.86 ��.�6 +��.6%

Rupiah 9,163 9,�48 -0.2%

In2007,theGrouprecordednetforeign

exchangeandderivativegainsof

US$30.�million(2006:lossesofUS$��.�

million),whichmaybefurtheranalyzed

asfollows:

US$millions 2007 2006

HeadOffice 2.7 (�9.4)

PLDT 11.2 4.7

Indofood 2.0 3.8

MPIC 14.2 (0.7)

Others – 0.�

Total 30.1 (��.�)

Acquisitions

Attheheadofficelevel,FirstPacific

completedtheacquisitionofan

additional6.4percentinterestinPLDT

foraconsiderationofapproximately

US$��0millionfromthePhilippine

Government.Atoperatingcompany

level,FirstPacificparticipatedinthe

infrastructuresectorthroughMPIC’s

investmentsofapproximatelyUS$28�

millioninMayniladandMakatiMedical

Centerandinnaturalresources

throughIndoAgri’sacquisitionofa64.4

percentinterestinPTPerusahaan

PerkebunanLondonSumatraIndonesia

Tbk(Lonsum)andotherplantationsfor

atotalconsiderationofapproximately

US$694million.Indofoodalsoemployed

US$26milliontoincreaseitsinterestin

ashippingoperationwhichsupportsthe

flourbusinessandPLDTinvestedatotal

ofUS$��milliontoexpanditswireless

andinformationandcommunications

technologyoperations.Insummary,

theFirstPacificGroupinvestedatotal

ofapproximatelyUS$�,�66millionfor

businessexpansionthroughacquisitions

intheyear2007.

Operational

PLDTrecordeditsfifthconsecutiveyear

ofrecordprofits.Profitcontribution

totheGroupincreased28percentto

US$�77.�milliondrivenbycontinuous

growthincellular,knowledgeprocessing

solutionsandcustomeractivationservices

businesses,andhighdemandfor

broadbandservices.Totalcashdividends

declaredfor2007wasPesos�84

(US$4.0�)pershare,representing�00

percentpayoutof2007coreearnings.

Indofoodrecordeditsfourth

consecutiveyearofsignificantly

improvedperformance.Profit

contributiontotheGroupincreased

32percenttoUS$72.0milliondriven

byvolumegrowthofthenoodles

divisionandtheincreaseinaverage

sellingpricesofnoodles,flourand

brandedoilproducts.Dividendpayout

toshareholdersremainsat40percent

ofcoreearningswhichisrestricted

byIndofood’sloancovenants.Total

dividendofRupiah3�(U.S.0.34cent)

persharefor2006wasreceivedin2007.

MPIC’sinvestmentsinwater

distribution,secondhomedevelopment

andhealthcareallperformedaheadof

target.Drivenbyimprovedperformance

ofMayniladandLandco,MPIC’s

turnaroundgainedmomentumwitha

recurringprofitcontributionofUS$2.3

millionfromarecurringlossofUS$3.7

millionin2006.

2008Outlook

Despitetherecentturmoilinfinancial

marketsandtheexpectedslowdown

intheglobaleconomy,whichwill

undoubtedlyimpactAsia–ourviewof

2008prospectsiscautiouslyoptimistic.

Itisimportantthatouroperating

companiescontinuetoshowimproved

performanceinprofitsandincashflow

particularly–asasanctuaryagainst

uncertaineconomictimes.

Asequityanddebtvaluesare

anticipatedtodeclineinthecourseof

thisturbulence,opportunitiesforFirst

Pacifictoexpanditsinvestmentportfolio

shouldarise.

BoththeIndonesianandPhilippine

economiesshouldperformreasonably

wellunderthecircumstances.Whilst

theirrealgrowthisexpectedtoslow,

prospectsforourbusinesses’growth

remainreasonablyoptimistic.

changing lives


AnanalysisofPLDT’scontributiontotheFirstPacificGroup,adjustedforHongKong

GAAPandtranslatedintoU.S.dollars,follows.

Turnover Profit

% %

US$millions 2007 2006 change 2007 2006 change

Wireless 1,886.1 �,�32.2 +23.� 960.7 777.� +23.6

FixedLine 1,058.7 960.� +�0.2 251.9 3�9.� -2�.2

ICT* 219.3 �27.9 +7�.� 12.9 2.9 +344.8

Inter-segmentelimination (209.9) (�74.4) +20.4 – – –

Total 2,954.2 2,446.2 +20.8

Segmentresult 1,225.5 �,099.� +��.�

Netborrowingcosts (117.5) (�78.8) -34.3

Shareofprofitslesslossesofassociatesandjointventures (0.2) (�.4) -8�.7

Profitbeforetaxation 1,107.8 9�9.3 +20.�

Taxation (413.1) (3�4.3) +3�.4

Profitfortheyear 694.7 60�.0 +�4.8

Minorityinterest 0.6 (4.3) –

Profitattributabletoequityholders 695.3 600.7 +��.7

Preferencedividends (10.0) (8.9) +�2.4

Profitattributabletoordinaryshareholders 685.3 �9�.8 +��.8

Averageshareholding(%) 25.9 23.4 –

Contributiontogroupprofit 177.5 �38.2 +28.4

* InformationandCommunicationsTechnology

PLDTrecordeditsfifthconsecutive

yearofrecordprofitsin2007.Itsprofit

contributiontotheGroupincreased

28percenttoUS$�77.�million(2006:

US$�38.2million)representing70

percentofFirstPacific’saggregate

profitcontributionfromoperationsof

subsidiaryandassociatedcompanies

duringtheyear.

Inpesoterms,PLDT’sconsolidated

corenetincomebeforenon-recurring

items,foreignexchangetranslation

andderivativegainsincreasedby��

percenttoPesos3�.2billion(US$767.6

million)(2006:Pesos3�.�billion;

US$6��.7million)reflectinganincrease

inrevenuesandEBITDAandlower

interestexpenseswhichwerepartially

offsetbytheapproximately�0percent

appreciationofthepesoduring2007.

Reportednetincomeimprovedby2

percenttoPesos36.0billion(US$78�.0

million)(2006:Pesos3�.�billion;

US$686.�million)resultingfromhigher

foreignexchangegainsandlower

additionaldepreciationcharges,partly

offsetbyhigherprovisionforincome

taxes.

Dec

06

Mar

07

Jun

07

Sep

07

Dec

07

Mar

08


Peso3,200

3,000

2,800

2,600

2,400

2,200

Dec

03

Dec

04

Dec

05

Dec

06

Dec

07

35

30

25

20

15

10

Millions

SmartGSMSystemwide SubscriberNumbers

20


PLDTReview of Operations

PLDT

30million

GSMsubscribers

30million

GSMsubscribers

2�FirstPacificCompanyLimitedAnnualReport2007

consolidatedfree cash flow↑25% to US$1 billion

Consolidatedservicerevenues

increased8percenttoPesos�3�.�

billion(US$2,9�4.2million)(2006:Pesos

�2�.0billion;US$2,446.2million)mainly

duetohigherrevenuecontributions

fromitsdataandInformationand

CommunicationsTechnology(ICT)

businesses,whichwerereducedslightly

bythelowerrevenuesfromtheFixed

Linebusiness.Withapproximately38

percentofPLDTGroup’srevenues

linkedtotheU.S.dollar,consolidated

servicerevenueswouldhavebeen�3

percenthigherexcludingthenegative

impactoftheapproximately�0percent

appreciationofthepeso.Consolidated

PLDT’sconsolidatedfreecashflow

increased2�percenttoPesos46.�

billion(US$�,0�4.0million)

(2006:Pesos37.2billion;US$727.�

million)afterimplementationofcapital

expenditureofPesos24.8billion

(US$�40.8million)(2006:Pesos20.7

billion;US$404.6million).Consolidated

capitalexpenditureincreased20

percentwithprovisionofadditional

capacityforwirelessandbroadband

services(asdemandwashigher

thananticipated)andincremental

internationalcapacityandredundancy

togetherwithupgradingofthefixedline

network.

EBITDAimprovedby4percentto

Pesos82.9billion(US$�,807.7million)

(2006:Pesos79.8billion;US$�,��.9

million)andEBITDAmargindeclined

to6�percent(2006:64percent)of

servicerevenuesasaresultofforeign

exchangeimpactondollar-linked

revenuesandcertainnon-recurring

charges.

PLDTrepaiddebtsofapproximately

US$200millionduringtheyear.

Consequently,consolidateddebtand

netdebtwerereducedtoUS$�.6billion

andUS$0.9billion,respectively(2006:

totaldebtUS$�.8billion,netdebt

US$�.3billion).NetdebttoEBITDAand

netdebttoequityimprovedto0.42

timesand0.3�times,respectively.

22


PLDT

cellular penetration 55%

Thesustainablestrongperformance

androbustfreecashpositionenabled

PLDTtodeclareafinaldividendofPesos

68(US$�.48)andaspecialdividendof

Pesos�6(US$�.22)pershare.Together

withtheinterimdividendofPesos60

(US$�.3�)pershare,totalcashdividends

for2007isPesos�84(US$4.0�)per

share,representingsubstantially�00

percentpayoutof2007coreearnings.

Wireless:SmartandPiltel’s

consolidatedwirelessservicerevenues

increasedby�0percenttoPesos

86.�billion(US$�,886.�million)(2006:

Pesos78.4billion;US$�,�32.2million),

reflectinga�90percentanda�4

percentrevenuegrowthinwireless

broadbandanddatarevenues,

respectively.Twenty-fourpercentof

totalwirelessrevenuesarelinkedtothe

U.S.dollar.Wirelessrevenueswould

havegrownby�3percentover2006

hadthepesoremainedstable.Wireless

EBITDAincreasedby�0percentto

Pesos��.3billion(US$�,20�.8million)

(2006:Pesos�0.3billion;US$983.2

million)onaccountofthegrowthin

subscriberbase.EBITDAmarginswere

stableat64percent(2006:64percent).

Voiceservicerevenuesincreased3per

centtoPesos36.�billion(US$787.2

million)(2006:Pesos3�.2billion;

US$688.0million)reflectinganincrease

indomesticvoice,internationallong

distanceandvoiceroamingrevenues,

anddomesticandinternationalinbound

revenueswhichwerepartlyerodedby

theappreciationofpeso.Cellularvoice

servicesaccountedfor42percentof

cellularrevenues.

Dataservicerevenuesincreasedby�4

percenttoPesos44.�billion(US$96�.6

million)(2006:Pesos38.7billion;

US$7�6.�million)whichaccountedfor

��percentofcellularrevenues.Data

servicesincludealltextmessaging-

relatedservicesandvalue-added

services.

ThecombinedGSMsubscriberbaseof

SmartandPiltel’sTalk ’N Textgrewby

�.9millionto30.0million(2006:24.2

million)representingapproximately��

percentofthetotalcellularmarketin

thePhilippinesbasedonsubscribers

and�9percentintermsofrevenue.

Thesustainablesubscribergrowthwas

drivenbyanenhancedsegmentspecific

acquisitionprogram,attractivepackages

andthestrongeconomicgrowthof

thePhilippinesin2007.Attheendof

2007,thecellularpenetrationrateinthe

Philippineswasapproximately��per

cent.Prepaidsubscribersaccounted

forapproximately99percentofthe

totalsubscriberbaseasattheendof

2007.NetblendedARPUdecreased

��percenttoPesos248(US$�.4)


astheservicereacheddeeperinto

thelowerincomesegments.Prepaid

subscriberaverageacquisitioncostwas

approximatelyPesos63(US$�.4)with

marginsstableatabove60percent.

Churnrateremainedatapproximately

3percent.

Smart’swirelessbroadbandservice

SmartBro’ssubscriberbaseincreased

by�48percenttoapproximately

302,000(2006:�22,000).Itsbroadband

networkexpandedto2,780wireless

broadband-enabledbasestations

locatedthroughoutthePhilippines

whichenabledsubscribersin62�cities

competitivevaluedrivenpackagesto

stimulatetextandvoiceusageand

toimprovenetworkefficiency,italso

partneredwithoverseascarriersto

stimulateinternationalusageofits

services.Smart’s3Gservicesare

offeredatratessimilartothoseof

2Gservices.Its3Gnetworkis

capableforvideocalling,video

streaming,high-speedinternet

browsinganddownloadingof

special3Gcontent.

Smartexpandeditsrevenuebase

beyondthedomesticmarket.It

partneredwiththeglobalsatellite

communicationsserviceprovider

Immarsatplcofferingprepaidwireless

satellitephoneservicesunder

SMARTLinkbrand.SMARTLinkoffers

arangeofmoreaffordablevoiceand

dataservicesthroughitsglobalsatellite-

basedinfrastructure.Itscoveragewill

beexpandedtoIndia,theIndianOcean,

theMiddleEast,Africa,halfofthe

Australiancontinent,andpartofRussia

andthePacificOcean.Itplanstoreach

globalcoverageby2009.Thisprepaid

servicecanbetoppedupelectronically

andthroughtheweb.

andmunicipalitiestoaccesshighspeed

internetservices.

Wirelessandfixedlineinternetand

broadbandservicesareatanearly

stageofdevelopment.Demandfor

broadbandservicesisexpectedto

increasemorerapidlyoncepersonal

computerpenetrationincreaseson

accountofdecreasingprices.

Smartcontinueditssegment

specificmarketingandsubscriber

acquisitionapproach.Inadditionto

launchingvariousinnovativeand

24


PLDT

Asacomplementaryserviceto

SMARTLink,Smartacquireda30per

centequityinterestinBlueOcean

Wireless(BOW)foraconsiderationof

US$�6million.BOWisaDublin-based

companywhichownstheworld’sfirst

globalmaritimeGSMnetwork.Through

thisacquisition,Smartisabletooffer

itsvoiceandtextservicestoapotential

�.2millionseafarersthroughBOW’s

patentedGSMplatform,Altobridge.

BOWistargetingequipping�,200

vesselsbytheendof2008.

StartingMarch2008,NTTDoCoMo’s

i-modehasbeenmadeavailablein

thePhilippinesexclusivelytoSmart

subscriberswhichallowssubscribersto

accessemailandinternetservicesvia

theirhandsets.

FixedLine:FixedLineservicerevenues

decreased�percenttoPesos48.6

billion(US$�,0�8.7million)(2006:

Pesos49.2billion;US$960.�million)

resultingfromtheincreaseincorporate

dataanddigitalsubscriberline(DSL)

servicesrevenuesoffsetbythelower

revenuesofnationallongdistance,

localexchangeandinternational

longdistancecallservices,andthe

approximately�0percentappreciation

ofthepesoduringtheyear.FixedLine

EBITDAdecreased7percenttoPesos

26.4billion(US$�7�.7million)(2006:

Pesos28.4billion;US$��.�million)

reflectingforeignexchangeimpact

andhighercashoperatingexpensesin

relationtomanpowerrightsizing.Asa

result,EBITDAmarginsdecreasedto�4

percent(2006:�8percent).

Totalinternationallongdistanceservice

revenuesdecreased�3percentto

Pesos8.7billion(US$�89.7million)

(2006:Pesos9.9billion;US$�93.�

million)reflectingthenegativeimpactof

thepesoappreciationandadecreasein

averageterminationratesforinbound

callsslightlyreducedbyanincrease

incallvolumes.Itaccountedfor�8

percentofFixedLineservicerevenues

(2006:20percent).

Dataandothernetworkservices

revenuesincreased�6percentto

Pesos��.9billion(US$346.7million)

(2006:Pesos�3.7billion;US$267.8

million)primarilyduetoincreasesin

leasedlines,IP-basedandpacket-based

dataservices.Thisservicesegment

accountedfor33percentofFixedLine

servicerevenues(2006:28percent).

PLDT’sretailDSLsubscriberbasenearly

doubledto264,29�(2006:�33,��9),

whileVibedial-upinternetservicehas

230,99�(2006:297,2�0)subscribers.

Revenuesimproved�7percentto

Pesos4.�billion(US$89.4million)

(2006:Pesos3.�billion;US$68.4

million).PLDT’sconsolidatedDSL,

wirelessbroadbandandinternetservice

revenuesincreased46percentto

Pesos7.6billion(US$�6�.7million)

(2006:Pesos�.2billion;US$�0�.6

million).Broadbandsubscriberbase

morethandoubledto�79,000which

accountedformorethan

70percentofthemarketinthe

Philippines.

PLDTiscontinuingtheupgradeofits

FixedLinefacilitiestoNextGeneration

Network(NGN)tosupportthegrowing

demandfordata-capablefacilities

fromthesmallandmediumenterprise

market.TheNGNfacilitieshavebeen

rolledoutinkeyresidentialand

businessareasacrossthePhilippines.

TheexpansionofSmart’swireless

broadbandnetwork,theintegration

ofback-officesupportfunctions,


there-engineeringofprocessesand

there-orientationofitsemployees

willfurtherenhanceitscapabilityto

offerinnovativedataandothernext

generationcommunicationservices.

Inadditiontocapturingtheorganic

growthinthePhilippinemarket,PLDTis

lookingfortelecomsrelatedexpansion

opportunitiesintheinternational

market.Itpartneredwith�3companies

toconstructtheAsia-AmericaGateway

(AAG)whichwillprovidethefirstdirect

highcapacitycableconnectivityamong

SoutheastAsiancountriesandtheU.S.

mainland.Theprojectisexpectedtobe

completedin2008.

InformationandCommunicationsTechnology(ICT):ePLDTprovides

knowledgeprocessingsolutions(KPS)

(previouslynamedbusinessprocess

outsourcing)servicesprimarilythrough

theSPiGroupandcustomerinteraction

services(CIS)(previouslynamedcall

centerbusiness)undertheVentus

brand.ePLDT’sservicerevenues

rose�9percenttoPesos�0.�billion

(US$2�9.3million)(2006:Pesos6.3

billion;US$�27.9million)reflectingthe

consolidationoftheSPiGroupand

thecontinuedgrowthofthecustomer

interactionservices.Asapproximately

82percentofePLDT’srevenueswere

U.S.dollar-linked,itsrevenueswould

havefurtherincreasedby��percent

ifthepesohadremainedunchanged

year-on-year.ConsolidatedEBITDA

marginsdeclinedto��percent

(2006:��percent)resultingfromthe

appreciationofthepeso,thehigher

costsforthenewemployeeincentive

schemesandthelongerleadtimes

requiredtooffshorethemedical

transcriptionbusinessfromtheUnited

StatestothePhilippinesandIndia.

Duringtheyear,KPSservicerevenues

increased�22percenttoPesos�.3

billion(US$��.6million)(2006:Pesos

2.4billion;US$46.9million)reflectinga

fullyear’scontributionfromSPiGroup.

KPSaccountedfor�2percentofICT

totalservicerevenues.SPihasover

4,�00seats(2006:3,700seats)thebulk

ofwhicharelocatedinthePhilippines

andthebalanceinIndia,Vietnamand

theUSA.

ThebusinessoutlookforKPSand

CISispromisingasthePhilippine

governmentplanstoachievea�0per

centshareoftheglobaloutsourcing

marketby20�0fromthecurrent

fivepercent.Inordertoincreaseits

participationinthegrowingglobal

outsourcingbusinessandtodiversifyits

revenuebase,SPiacquiredtheentire

equityinterestofSpringfieldService

Corporation(Springfield)inApril2007

foraconsiderationofUS$3�.0million.

SpringfieldisUS-basedandoneofthe

largestplayersinthemedicalbillingand

revenuecyclemanagementmarket,

itscoreservicesincludingpatient

scheduling,codingandcompliance

assistance,consultingandspecial

reporting.

CISgroupservicesconsistofinbound

callsforcustomercare,product

inquiries,salesandtechnicalsupport

basedonactiveminutes,billablehours

andfull-timeequivalents;andoutbound

ePLDT combined service seats↑17% to 10,900

26


PLDT

capital expenditurefor 2008US$615.3 million

callsforsalesandcollectionbased

onactiveminutes,billablehoursand

full-timeequivalents.CIS’srevenues

increased24percenttoPesos3.3

billion(US$72.0million)(2006:Pesos

2.6billion;US$�0.8million)fromthe

expansionofitsfacilities.Thissegment

accountedfor32percent(2006:4�per

cent)ofICTtotalservicerevenues.CIS

groupownsandoperatesapproximately

whichwouldbeusedtoexpandthe

wireless,broadbandandinternational

bandwidthcapacities,andtocontinue

upgradingthefixedlinenetworkto

theNGN.

Growthwillcontinueberealizedin

thewirelessbusiness,broadbandand

ICT,aswellasinnewbusinesses.For

PLDTtosustainitsgrowth,itmust

6,400seats(2006:�,600seats)with

�,930(2006:�,�30)customerservice

representativesinninefacilitiesatthe

endof2007.

ePLDTcontinuestoimproveefficiency

byexpandingitsclientbaseand

increasingcapacityutilization.SPi

andVentusareundergoingfunctional

integrationforimprovingtheoverall

marginswhichincludescross-unitsales

andmarketingprogram,integratingthe

ITandtelecommunicationnetworks,

humanresources,financeand

accountingfunctions.

2008Outlook

AlthoughthePhilippineeconomy

remainsrobust,itsgrowthwillbe

constrainedbytheanticipated

slowdownintheUnitedStatesandthe

continuedincreaseofoilprices.

Capitalexpenditurefor2008isguided

atPesos2�.4billion(US$6��.3million)

transformitselfintoanintensely-

focused,customer-centricorganization,

deliveringhighqualityyetaffordable

servicestothegreatestnumberof

Filipinos.

ThePLDTgroupisundergoinga

strategicreorganizationofkeybusiness

andoperationalunitsinorderto

strengthenitsleadershippositionand

continuetobeanindustryinnovator

inthedynamicmarketenvironment.

Theongoingeffortsofmaximizing

thecombinedstrengthsacrossthe

wireless,fixedline,broadband,and

ICTbusinesseswillfurtherenhanceits

effectivenessandefficiency.

InJanuary2008,thePLDTboard

approvedasharebuybackprogramof

upto2millionPLDTshareswhichispart

ofPLDT’scapitalmanagementprogram.

ItsstrongfreecashflowallowsPLDT

toconcurrentlyimplementitscapital

managementprogramandbusiness

expansionplans.


ReconciliationofReportedResultsBetweenPLDTandFirstPacific

PLDT’soperationsareprincipallydenominatedinpeso,whichaveragedPesos4�.86

(2006:��.�6)totheU.S.dollar.ItsfinancialresultsarepreparedunderPhilippine

GAAPandreportedinpeso.FirstPacific’sfinancialresultsarepreparedunderHong

KongGAAPandreportedinU.S.dollars.PhilippineGAAPandHongKongGAAPare

largelybasedonIFRSs,however,certainadjustmentsneedtobemadetoPLDT’s

reportedpesoresultstoensurefullcompliancewithHongKongGAAP.Ananalysisof

theseadjustmentsfollows.

Pesomillions 2007 2006

NetincomeunderPhilippineGAAP 36,004 3�,��6

Preferencedividends(i) (457) (4�6)

Netincomeattributabletocommonshareholders 35,547 34,660

Differingaccountingtreatments(ii)

–Reclassificationofnon-recurringitems 1,134 (2,��9)

–Others (3,565) (�,08�)

Intragroupitems(iii) 300 300

AdjustednetincomeunderHongKongGAAP 33,416 3�,320

Foreignexchangeandderivativegains(iv) (1,987) (�,042)

PLDT’snetincomeasreportedbyFirstPacific 31,429 30,278

US$millions

Netincomeatprevailingaverageratesfor

2007:Pesos4�.86and2006:Pesos��.�6 685.3 �9�.8

ContributiontoFirstPacificGroupprofit,

atanaverageshareholdingof

2007:2�.9%and2006:23.4% 177.5 �38.2

(i) FirstPacificpresentsnetincomeafterdeductionofpreferencedividends.(ii) DifferencesinaccountingtreatmentunderPhilippineGAAP,comparedwithHongKongGAAP.The

principaladjustmentinclude:– Reclassificationofnon-recurringitems:Certainitems,throughoccurrenceorsize,arenot

consideredusual,operatingitemswhicharereallocatedandpresentedseparately.In2007,Pesos0.�billion(2006:Pesos�.�billion)additionalaccelerateddepreciationexpensesduetomigrationtoNextGenerationNetworkandPesos0.6billion(2006:Pesos�.4billion)assetimpairmentprovisions,nil(2006:Pesos�.�billion)deferredtaxassetsandbenefitsandnil(2006:Pesos3.�billion)reversalofprovisionsforanonerouscontractrelatingtoACeSsatellitewereexcludedandpresentedseparatelyasnon-recurringitems.

(iii) ThesearestandardconsolidationadjustmentstoensurethattransactionsbetweenGroupcompaniesareeliminatedtopresenttheGroupasasingleeconomicentity.

(iv) Toillustratetheunderlyingoperationalresultsandprofitcontributions,foreignexchangeandderivativegains(netofrelatedtax)areexcludedandpresentedseparately.

total food solutions


total food solutions

AnanalysisofIndofood’scontributiontotheFirstPacificGroup,adjustedforHong

KongGAAPandtranslatedintoU.S.dollars,follows.

Turnover Profit

% %


ConsumerBrandedProducts

–Noodles 920.5 80�.4 +�4.9 35.6 46.9 -24.�

–FoodSeasonings 50.6 39.6 +27.8 1.6 �.� +6.7

–SnackFoods 47.7 42.7 +��.7 1.4 �.6 -�2.�

–NutritionandSpecialFoods 43.8 39.7 +�0.3 1.9 0.2 +8�0.0

Subtotal 1,062.6 923.4 +��.� 40.5 �0.2 -�9.3

Bogasari 1,267.4 983.� +28.9 125.2 �03.9 +20.�

Agribusiness

–Plantations 292.2 �42.6 +�04.9 160.0 ��6.2 +37.7

–CookingOilsandFats 482.3 329.0 +46.6 9.3 0.7 +�,228.6

–Commodity 128.3 78.4 +63.6 2.3 (2.9) –

Subtotal 902.8 ��0.0 +64.� 171.6 ��4.0 +�0.�

Distribution 399.8 342.� +�6.7 5.2 2.4 +��6.7

Inter-segmentelimination (592.3) (400.9) +47.7 – – –

Total 3,040.3 2,398.� +26.8

Segmentresult 342.5 270.� +26.6

Netborrowingcosts (62.8) (82.6) -24.0

Shareofprofitslesslossesofassociatesandjointventures (0.3) (0.4) -2�.0

Profitbeforetaxation 279.4 �87.� +49.0

Taxation (89.4) (64.3) +39.0

Profitfortheyear 190.0 �23.2 +�4.2

Minorityinterest (118.0) (68.�) +72.3

Contributiontogroupprofit 72.0 �4.7 +3�.6

During2007,Indofoodrecordedits

fourthconsecutiveyearofsignificantly

improvedperformance.2007’s

performancereflectsthebenefit

realizedfromthechangesmadesince

2004inbuildingresilience,exacting

advantagefromthecompetitiveposition

ofthebusinessinsuchchallenging

markets.

Indofoodcompletedthelistingof

IndofoodAgriResourcesLimited

(IndoAgri)ontheSingaporeStock

Exchange;increasedtheplantation

landbankto406,��9hectaresthrough

variousacquisitionsandrefinancedpart

ofitsforeigncurrencydebtbyissuing

aRupiah2.0trillion(US$2�2.3million)

five-yearrupiahbond.


Rupiah3,200

2,800

2,400

2,000

1,600

1,200

Dec

06

Mar

07

Jun

07

Sep

07

Dec

07

Mar

08

OperatingProfit2007

50%

1% 12%

37%

US$ millionsConsumer Branded Products 40.5Bogasari 125.2Agribusiness 171.6Distribution 5.2Total 342.5

US$ millionsConsumer Branded Products 1,025.8Bogasari 1,033.0Agribusiness 581.7Distribution 399.8Total 3,040.3

*After inter-segment elimination

34%

19%

34%

13%

Turnover2007*

30


IndofoodReview of Operations

Indofood

consolidatednet sales

↑27%


Indofood’scontributiontotheGroup

increased32percenttoUS$72.0

million(2006:US$�4.7million).This

resultcomprisedimprovedoperating

resultsdrivenbyvolumegrowthand

highersellingpricesintheBogasari

andAgribusinessbusinesses.Inrupiah

terms,Indofoodreporteda27.0per

centimprovementinconsolidated

netsalestoRupiah27,8�8.3billion

(US$3,040.3million)(2006:Rupiah

2�,94�.6billion;US$2,398.�million)

duetoincreasesinsalesvolumeand

averagesellingprice.Volumegrowth

isdrivenbyeffectivesegmentspecific

marketingprograms,anenhanced

stockpointdistributionsystemand

productinnovation.Consumerbranded

products,Bogasari,Agribusinessand

Distributioncontributed34percent,34

percent,�9percentand�3percentto

consolidatednetsales,respectively.

Consolidatedoperatingexpenses

increased�4.8percenttoRupiah

3,682.�billion(US$40�.8million)(2006:

Rupiah3,208.�billion;US$3�0.7million)

asaresultofincreasedadvertisingand

promotionspending,transportationand

employee-relatedcosts.EBITmargin

increasedto�0.4percent(2006:9.0

percent)principallyduetohighersales

andsuccessinlimitingtheimpact

ofcostincreases.Netincomegrew

48.3percenttoRupiah980.4billion

(US$�07.0million)(2006:Rupiah66�.2

billion;US$72.3million)asaresultof

improvementinoperatingincome

offsetbyincreasedminorityinterest

followingtheplacementandlisting

ofIndoAgrisharesontheSingapore

StockExchangeinFebruary2007.

Consolidatednetdebtincreased43.9

percenttoRupiah7,8�0.6billion

(US$833.3million)fromRupiah�,4��.2

billion(US$604.7million)principally

reflectinghigherdebtatsubsidiary

levelinrelationtothePTPerusahaan

PerkebunanLondonSumatraIndonesia

Tbk(Lonsum)acquisition.Netgearing

wasmaintainedat�.�0timesthrough

theincreaseincashgeneratedfrom

operations.

ConsumerBrandedProducts

In2007,consumerbrandedproducts

groupimplementedvariousdivision

specificcostefficiencyprogramsto

improvesalesandstrengthenitsmarket

leadershipposition.Despitesignificant

increasesinrawmaterialandfuel

costsduringtheyear,totalsalesofthis

businessgroupimproved��.3percent

toRupiah9,737.0billion(US$�,062.6

million)(2006:Rupiah8,446.9billion;

US$923.4million).However,EBITmargin

wasadverselyaffectedanddecreased

to2.4percent(2006:3.9percent).

Indofood’sNoodlesincludeIndomie,

Sarimi, Supermi, Sakura, Pop MieandMi

Telur 3 ayamremainedpopularbrands.

Thisdivisioncompletedimprovements

toitsproductionplantsacross

Indonesiain2007increasingannual

productioncapacityto��.�billionpacks

from�3.7billionpacks.Duringtheyear,

thereweresignificantcostincreasesfor

flour,cookingoil,packagingandfuel.

GiventhestrengthofIndofood’smarket

position,brandloyaltyandproduct

quality,Indofoodincreasedselling

pricesseveraltimesforcertainmajor

brands.

Salesincreased��.�percenttoRupiah

8,434.2billion(US$920.�million)(2006:

Rupiah7,330.8billion;US$80�.4million)

reflectinghighersalesvolumeand

averagesellingprice.Salesvolumerose

6.6percentto�2.0billionpacksfrom

thecombinedeffectofanincreasein

productavailabilityfromtheenhanced

distributioncoverage,amoresegment

specificadvertisingandpromotion

campaignandtheintroductionofnew

productsandimprovedpackaging.

Therecordhighrawmaterialcosts,

mostnotablyflourandcookingoils,

depressedtheEBITmarginto2.�per

cent(2006:3.7percent)despitethe

successfulimplementationofcost

efficiencyprogramswhichincluded

usingcheaperenergysourcesfor

production.

0703

NoodlesSalesVolume

Billion Packs13.0

12.0

11.0

10.0

9.0060504

32


Indofood

noodles annual production capacity15.1 billion packs

Instantnoodlesremainthecheapest

convenientstaplefoodinIndonesia.

Rawmaterial,fuelandotherproduction

costsareexpectedtoincrease

furtherin2008.TheNoodlesdivision

willmaintainitscompetitivenessby

evaluatingstrategiesforproducts,

pricing,brandbuilding,marketingand

distribution.

FoodseasoningsSalesincreased

28.0percenttoreacharecordhighof

Rupiah463.2billion(US$�0.6million)

(2006:Rupiah362.0billion;US$39.6

million)principallyreflectingincreased

volumesoldtoIndofoodgroupand

PTNestleIndofoodCitarasaIndonesia

whichmarketsallIndofood’sculinary

products.SalesofIndofoodbrand

syrupsalsorecordedasignificant

improvementin2007resultingfrom

thelaunchofnewproductsand

effectivemarketingactivities.Sales

volumeincreased�9.2percentto6�.8

thousandtons(2006:��.8thousand

tons).EBITmargindecreasedto3.�

percentfrom3.6percentasaresult

ofsignificantlyhigherrawmaterial

costsdespiteeffectivecostefficiency

programsbeinginplace.Productivity

ofthisdivisionimprovedduring2007as

certainprocesseswereautomated.

Itisexpectedthatrawmaterialcosts

willcontinuetoincreasein2008,

thisdivisionwillcontinueitsspecific

productionandcostefficiency

programs.Inordertostrengthenits

marketposition,foodseasonings

divisionwillfurtherenhanceits

marketingstrategiesandproduct

quality.

Indofood’sSnackfoodsdivision

maintaineditsleadershipinwestern

stylesnackmarketinIndonesia,

supportedbyitsstrongbrandequity

andwideproductrange.

Salesincreased�2.0percentto

Rupiah437.7billion(US$47.7million)

(2006:Rupiah390.9billion;US$42.7

million)withcontributionimpactfrom

newproductlaunches,brand-focus

advertisingandpromotionprograms,

deeperandwidermarketpenetration

throughthestockpointsnetwork.Sales

volumeincreased�0.9percentto�0.3

thousandtons(2006:9.3thousand

tons),mainlydrivenbythesuccessful

launchofOtela,flavoredcassavachips

andincreaseinsalesofpotatochips.

EBITmargindecreasedto3.7percent

(2006:4.2percent)reflectinghigherraw

materialcostsforcookingoil,imported

potatoesandpackaging.Thisdivisionis

implementingvariousinitiatestocope

withtherisingcostswhichincludes

sourcingsuitablepotatoesfromlocal

farmers,usingalternativeenergy

sourcesandimprovingproduction

efficiency.


Indofoodplanstoincreaseproduction

capacityforbothpotatoandcassava

chipsasgrowthmomentumisexpected

tocontinuein2008.Thisdivisionwill

strengthenitsmarketpositionand

brandequitybylaunchingproductswith

newflavorsandintensifyingadvertising

andpromotionprograms.

NutritionandSpecialFoodsdivision

producesfoodforbabies,children

andexpectantmothersunder

twomajorbrands.Marketleadership

maintainedthroughtwomajorbrands–

divisionwillcontinuestrengthening

itsmarketpositionbyimplementing

acomprehensivestrategyinvolving

productinnovation,pricing,marketing

anddistribution.

Bogasari

Bogasarigroup’scurrentannualmilling

capacitycansupport3.8milliontons

offlour.Thisbusinessgroupalso

manufacturespastaforbothdomestic

andinternationalmarkets.Duringthe

yearthewheatharvestwasadversely

affectedbyglobalweatherchange

andthewheatpricereachedarecord

highasglobaldemandincreasedand

competitionincreasedforlandusefrom

othercrops.Theincreasesinfuelcost

addedfurtherpressuretothebusiness.

Indofoodcurrentlyimportsmostofits

wheatfromAustralia,UnitedStatesand

Canada.

Salesincreased29.�percenttoRupiah

��,6�3.�billion(US$�,267.4million)

(2006:Rupiah8,997.4billion;US$983.�

million)principallyreflectingaslightly

highervolumeandanincreasein

averagesellingpricesduetothehigher

wheatcosts.Salesvolumeofflourand

pastaincreasedby0.8percentto2.6

milliontons(2006:2.�milliontons)and

��.2percentto3�.9thousandtons

(2006:27.7thousandtons),respectively.

Bogasaristrengtheneditsleadershipin

Indonesia’sflourmarketbyintroducing

priceattractivebulkpackingbread

flourtoindustrialconsumersunderthe

Kastilbrand.Pastabusinesscontinues

itsdominantpositioninIndonesia,

productsarealsoexportedtothe

Philippines,KoreaandJapan.EBIT

marginincreasedto��.�percent(2006:

��.4percent)reflectingitsabilityto

passonincreasedcoststoconsumers.

Prominacaterstotheuppersegment,

whileSUNisforthemiddle-lower

segment.

During2007,thisdivisionemployednew

technologiestoimproveproductivity.

Despitehigherrawmaterialand

transportationcosts,salesincreased

�0.6percenttoRupiah40�.9billion

(US$43.8million)(2006:Rupiah363.2

billion;US$39.7million)reflectinga

23.6percentincreaseinsalesvolume

to��.8thousandtons(2006:�2.8

thousandtons)drivenbyincreased

salestoinstitutionalcustomersand

SUN’sproducts.EBITmarginimproved

to7.4percentfrom7.0percent.This

34


Indofood

Productioncostsforflourandpasta

areexpectedtoincreasefurtherin

2008.Thepressureontheglobalwheat

marketremainsassupplyisimpacted

byuncertaintiesofsupplyduetothe

unstableweatherconditionsand

demandincreasesfromhighgrowth

countries.Fuelcostremainshighand

Indonesialaborcostisexpectedto

increasein2008.Weakpurchasing

powerwilladdpressuretothe

operatingenvironment.Bogasariwill

continueimplementingitsefficiency

enhancementprogramandbuild

brandequitythroughadvertisingand

promotionactivitiesinordertomaintain

itscompetitivenessandmarket

leadership.

Agribusiness(previouslynamed

EdibleOilsandFats)

Agribusinessoperatesmainlyunder

PTSalimIvomasPratama,asubsidiary

ofIndoAgriwhichwaslistedon

theSingaporeStockExchangein

February2007.Indofoodcurrently

holdsapproximately�8percent

effectiveinterestinIndoAgri.Through

itsthreeoperationaldivisions–

plantations,cookingoilsandfats

(COF)andcommodities–IndoAgri’s

principalactivitiesinvolveresearch

anddevelopment,oilpalmseed

breeding,cultivationaswellasrefining,

brandingandmarketingofcookingoils,

margarineandshortening.

Agribusinessconsolidatedsales

increased64.4percenttoRupiah

8,272.8billion(US$902.8million)(2006:

Rupiah�,03�.�billion;US$��0.0million)

reflectingahigheraverageselling

priceasaresultofhigherCrudePalm

Oil(CPO)price.EBITmarginimproved

to�6.6percentfrom�0.4percent

resultingfromtheimprovedmarginsof

alloperationaldivisions.

Plantations’salesdoubledtoRupiah


Rupiah�,304.7billion;US$�42.6million)

resultingfromasignificantincrease

ofCPOpriceandhighersalesvolume.

Salesvolumeincreased�7.9percent

to469.0thousandtons.EBITmargin

improvedto46.4percentfrom4�.�per

cent(thesefiguresincludedtwomonths

ofLonsum’s).


SynergieswithLonsum• Secured stable supply of high quality

seeds for plantings

• Combined strengths of R&D and breeding

• Combined strength of management expertise

• Towards self sufficiency in CPO requirements and quality assurance

IndoAgricompleteditsacquisition

ofa64.4percentequityinterest

inIndonesianlistedplantation

companyLonsumforaconsideration

ofapproximatelyRupiah6.2trillion

(US$673.0million)inNovember2007.

Rubber,teaandcocoawereadded

toitsplantationsportfolio.Postthe

transaction,IndoAgri’splantationland

bankincreasedto406,��9hectares

from�38,�42hectaresandhas

becomeoneofthemajorplayersinthe

plantationssector.

Agribusinessplanstoexpandplanted

areaofitsoilpalmplantationsto

2�0,000hectaresby20�0from�6�,4�7

hectaresattheendof2007,ofwhich

37,000hectaresaretobeplantedin

2008.

CookingOilsandFats’sales

increased46.9percenttoRupiah

4,4�9.7billion(US$482.3million)(2006:

3,009.�billion;US$329.0million)mainly

resultingfromhigheraverageselling

price.Salesvolumegrew�.�percent

to��4.�thousandtons(2006:�48.6

thousandtons).EBITmarginimproved

to�.9percentfrom�.0percentasCOF

wasabletoadjusttheaverageselling

pricesofcookingoilsandmargarineto

reflecthigherCPOprices.

TheacquisitionofLonsumaccelerates

selfsufficiencyinCPO.Italsosecures

astablesupplyofhighqualityCPOfor

premiumbrandedproducts,aswellas

offeringmarginprotection.IndoAgriwill

furtherstrengthenitsmarketleadership

andbrandequitythroughbrandidentity

andloyaltyprograms.

Commodity’ssalesincreased63.9

percenttoRupiah�,�7�.2billion

(US$�28.3million)(2006:Rupiah7�6.9

billion;US$78.4million)reflecting

higherCPOandcoconutoil(CNO)

basedproductsprices.Salesvolume

ofpalmoilbasedproductsincreased

by�.7percentto44.�thousandtons

whileCNOincreased3�.7percent

to�08.7thousandtons.EBITmargin

improvedto3.9percentfroma

negativeof6.�percentin2006through

businessrestructuringandoperational

improvements.IndoAgriwillcontinueto

strengthenthebusinessmodelinorder

toimproveprofitability,whichincludes

anincreasedutilizationofthecopra

mill(s)andexploringadditionalexport

opportunities.

36


Indofood

the most extensive distribution network in Indonesia

Distribution

Indofoodhasestablished,throughstock

points,themostextensivedistribution

networkinIndonesia.Itdistributes

themajorityofIndofood’sconsumer

productsandthird-partyproducts.

Thestockpointmanagementsystem

employsanimprovedinformation

technologyapplicationwhichenhances

supplyanddeliveryefficienciesand

offerswideranddeepermarket

penetration.

In2007,moststockpointswere

upgradedwiththenewITsystem

whichoffersbettercommunication

withtheheadoffice.Thisispartof

thecompany’sinternalcontroland

efficiencyprogramwhichaimsto

improveinventory,productivityand

customerservices.Theincreasesinfuel

pricescontinuetoaddpressuretothe

operatingcostsofthisbusinessgroup.

Salesgrew�6.9percenttoRupiah


Rupiah3,�32.9billion;US$342.�million).

EBITmarginimprovedto�.�percent

(2006:0.2percent)reflectingvolume

growthofbothgroup’sandthirdparty

products,andhigherprices.

Indofoodplanstocompletetheupgrade

ofallstockpointswiththenewIT

systemin2008,furtherexpanding

distributioncoverageinruralareasand

deepeningmarketpenetration.

2008Outlook

Theupwardtrendofoilandsoft

commoditycostsandcontinuing

lowpurchasingpowerinIndonesia

willremainchallengestoIndofood.

However,Indofoodgroup’svertically

integratedstructurewithitsbranded

productsiswellpositionedtorespond

tomarketchanges.

IndoAgriwillfocusontheoperational

integrationwithLonsum,whichwill

includecombiningpurchasesof

fertilizerandfuel;sharingexpertisein

R&D,breedingandtransportaswellas

overheadrationalization.Otherprincipal

businessgroupswillcontinuetheir

specificproductionandcostefficiency

initiativestocopewithrawmaterialcost

increases.


ReconciliationofReportedResultsBetweenIndofoodandFirstPacific

Indofood’soperationsareprincipallydenominatedinrupiah,whichaveraged

Rupiah9,�63(2006:9,�48)totheU.S.dollar.Itsfinancialresultsarepreparedunder

IndonesianGAAPandreportedinrupiah.FirstPacific’sfinancialresultsareprepared

underHongKongGAAPandreportedinU.S.dollars.Accordingly,certainadjustments

needtobemadetoIndofood’sreportedrupiahresultstoensurecompliancewith

HongKongGAAP.Ananalysisoftheseadjustmentsfollows.

Rupiahbillions 2007 2006

NetincomeunderIndonesianGAAP 980 66�

Differingaccountingtreatments(i)

–Reclassificationofnon-recurringitems 235 �0�

–Gainonrevaluationofplantations 115 27�

–Foreignexchangeaccounting 54 �4

–Others (69) (�6)

AdjustednetincomeunderHongKongGAAP 1,315 �,039

Foreignexchangeandderivativegains(ii) (35) (67)

Indofood’snetincomeasreportedbyFirstPacific 1,280 972

US$millions

Netincomeatprevailingaverageratesfor

2007:Rupiah9,�63and2006:Rupiah9,�48 139.7 �06.3



2007:��.�%and2006:��.�% 72.0 �4.7

(i) DifferencesinaccountingtreatmentunderIndonesianGAAP,comparedwithHongKongGAAP.Theprincipaladjustmentsinclude:– Reclassificationofnon-recurringitems:Certainitems,throughoccurrenceorsize,arenot

consideredusual,operatingitemswhicharereallocatedandpresentedseparately.Adjustmentfor2007ofRupiah23�billionrepresentsRupiah�89billionofimpairmentprovisionsforgoodwillandvariousassetsandRupiah46billionofmanpowerrightsizingcosts.Adjustmentfor2006ofRupiah�0�billionrepresentsRupiah62billionofmanpowerrightsizingcosts,Rupiah29billionwrite-offofdeferredtaxassetsasaconsequenceofagrouprestructuringamongsubsidiarycompanieswithinIndofood’sedibleoilsandfatsdivisionandRupiah�4billionofimpairmentprovisionforgoodwill.

– Gainonrevaluationofplantations:UnderIndonesianGAAP,Indofoodmeasuresitsplantations(biologicalassets)onahistoricalcostbasis.HKAS4�“Agriculture”requiresthemeasurementofplantationsatfairvaluelessestimatedpoint-of-salecosts.Theadjustmentrelatestothechangeinfairvalueofplantationsduringtheyear.

– Foreignexchangeaccounting:TheadjustmentrelatestothereversaloftheamortizationofforeignexchangelossesthatwerepreviouslycapitalizedbyIndofoodoncertainfixedassetsunderconstruction,astheoriginatingcapitalizedforeignexchangelosseshasalreadybeenwrittenoffbyFirstPacific.

(ii) Toillustratetheunderlyingoperationalresultsandprofitcontributions,foreignexchangeandderivativegains(netofrelatedtax)areexcludedandpresentedseparately.

on the rise


AnanalysisofMPIC’scontributiontotheFirstPacificGroup,adjustedforHongKong

GAAPandtranslatedintoU.S.dollars,follows.

Turnover Profit

% %


Property

–Landco 34.2 34.0 +0.6 1.8 2.6 -30.8

–Otherproperties 0.5 7.8 -93.6 – �.6 –

Subtotal 34.7 4�.8 -�7.0 1.8 4.2 -�7.�

Nenaco – 34.� – – (2.3) –

Corporateoverhead – – – (2.0) (�.8) +��.�

Total 34.7 76.3 -�4.�

Segmentresult (0.2) 0.� –

Netinterestincome/(borrowingcosts) 4.3 (�.�) –

Shareofprofitslesslossesofassociatesandjointventures 3.0 0.4 +6�0.0

Profit/(loss)beforetaxation 7.1 (�.0) –

Taxation (1.4) (�.4) –

Profit/(loss)fortheyear 5.7 (2.4) –

Minorityinterest (3.4) (�.3) +�6�.�

Contributiontogroupprofit/(groupshareofloss) 2.3 (3.7) –

Peso

Dec

06

5.2

4.8

4.4

4.0

3.6

Sep

07

Dec

07

Mar

08

Jun

07

Mar

07


During2007,MPICcompletedthe

acquisitionofan84percentinterestin

MayniladWaterServices,Inc.(Maynilad)

throughits�0percentownedjoint

venture,DMCI-MPICWaterCompany

Inc.(DMCI-MPIC)andsubscribedfor

Pesos7�0million(US$�8.2million)

five-yearconvertiblenotesissued

byMedicalDoctors,Inc.(MDI)which

operatesandmanagesMakatiMedical

Center(MMC)during2007.ThePesos

7�0millionnoteswerefullyconverted

intoequityinJanuary2008toa33.4�

percentownershipinMDI.MPIC’s

interestinLandcoPacificCorporation

(Landco)remainsat��percent.

MPICachievedaprofitturnaroundin

2007.NetincomereachedPesos�68

million(US$3.7million)(2006:lossof

Pesos686million,US$�3.4million)

reflectingcoreincomecontributionof

Pesos680million(US$�4.8million)from

Mayniladandasignificantlyimproved

coreincomecontributionfromLandco

ofPesos�39million(US$3.0million)

fromanon-recurringlossofPesos27

million(US$0.6million)in2006.MPIC

parentcompany’soperatingexpenses

decreased��percenttoPesos92

million(US$2.0million)(2006:Pesos

�08.0million;US$2.�million)asthe

reorganizationandrecapitalization

programofMetroPacificCorporation

tookplacein2006.

40


MPICReview of Operations

MPIC

turnaround toprof itability


billed watervolume ↑ 9% to286 million m3

InMarch2008,MPICenteredintoaloan

agreementwithInframetroInvestments

PteLtd.(“Inframetro”,anaffiliateof

AshmoreInvestmentManagement

Limited).Theloanofapproximately

Pesos�.4billion(US$34.6million)is

exchangeabletoapproximately20per

centissuedsharesofDMCI-MPIC.The

conversionissubjecttothefulfillment

ofcertainconditionsandapprovals

fromspecificthirdpartycreditors.

FullconversionofInframetro’s

exchangeableloanwillreduceMPIC’s

interestinDMCI-MPICtoapproximately

30percent.

MPICandDMCI.NetincomeofPesos

�.2�billion(US$27.3million)(2006:

Pesos�.00billion;US$�9.�million)

reflectedimprovementsinnewwater

supplyconnectionsandlowernon-

revenuewater.Non-revenuewaterwas

reducedtoanaverageof66percent

from68percentin2006throughthe

managementofredirectionofexcess

waterinoneareatootherareasinneed

ofwater.Totalbilledwatervolumerose

9percentto286millioncubicmeters

andtotalbilledcustomersincreased4

percentto703,��9.

In2007,Maynilad’scapitalexpenditure

wasapproximatelyPesos3.0billion

(US$6�.4million)whichinvolved

replacementofoldpipes,enhanced

meteringandimprovementsin

watersupplyconnectionsacrossthe

concession.

Mayniladacceleratedandcompleted

inFebruary2008therepaymentof

approximatelyUS$23�millionof

loansduein20�3tobanksandthe

MetropolitanWaterworksandSewerage

System(MWSS)andconsequentlywas

MPIC’sacquisitionofMaynilad,a

waterconcessionuntil2022through

DMCI-MPICwascompletedinJanuary

2007.Mayniladachievedencouraging

operationalimprovementsduring

2007reflectingthemanagementand

technicalimprovementsintroducedby

MPIC’sshareinDMCI-MPIC’sfinancial

andoperatingexpenseswasPesos

��million(US$�2.0million)principally

reflectinginterestexpensesforloans

fromFirstPacificandAshmorefor

theacquisitionofMayniladwhichwas

partiallyoffsetbyinterestincomefrom

cashdeposits.

releasedfromcorporaterehabilitation.

ThishasenabledMayniladtoaccelerate

theexecutionofitsmulti-yearservice

improvementprogramandachieve

greaterfinancialflexibility.

42


MPIC

Mayniladplanstoinvestapproximately

Pesos8.0billion(US$�93.8million)in

2008forrepairingandrehabilitating

pipelines,layingnewpipes,

constructionofnewsewagetreatment

plants,pumpingstationsandreservoirs.

Withthisinvestmentandoperational

efficiencyprograms,Mayniladwill

furtherreducenon-revenuewater,

increase24-hourwaterservicesand

upgradecustomerservicesinits

concessionareaduring2008.

Operatingexpensesincreased27per

centtoPesos884million(US$�9.3

million)(2006:Pesos696million,

US$�3.6million)asthemarketingcosts

associatedwithnewprojectswere

higherin2007.Netfinanceincome

increased27percenttoPesos�7�

million(US$3.7million)(2006:Pesos

�3�million;US$2.6million)asaresult

ofhigherinterestreceivedfromthe

accretionofinstallmentreceivables.

Landcoexperiencedstrongdemand

foritsluxuryresidentialresort

developmentsanditsfirstresidential

projectinMetroManila.Thesuccess

ofTribeca,PonderosaLeisureFarms,

AmaraenTerrazas,PlayaCalataga,

TerrazasdePuntaFuegoandMontelago

contributedtoanincreaseinLandco’s

reportednetincome,whichreached

Pesos26�million(US$�.7million)from

alossofPesos�3.0million(US$0.3

million)in2006.Itscontributionto

MPIC’scorenetincomewasPesos�39

million(US$3.0million)(2006:Pesos�7

million,US$0.3million).

MDI’snetincomeincreased

approximately2�percenttoPesos269

million(US$�.9million)(2006:Pesos

223million;US$4.4million)resulting

froma3percentincreaseinaverage

occupancyrateandtheimplementation

ofcostmanagementprograms.

ThePesos96�million(US$23.3million)

subordinatedconvertiblenotesissued

inMay2007willfunditsmulti-year

facilitiesimprovementprogramwhich

includestheconstructionofanew

�3-levelmedicalbuildingandupgrade

ofitsexistingfacilitiesandequipment.

Thenewfacilitieswillfurtherstrengthen

MMC’spositionasaspecialist

treatmentcenter,aninternational-

standardhealthcareserviceprovider

anddevelopitsbrand.

2008Outlook

MPIC’sencouragingresultsin2007

setagoodplatformforgrowth.Itcan

focusonidentifyingandpursuing

opportunitiesintheareasofnatural

resources,infrastructure,healthcare

andhoteldevelopmentbusinesses.The

demandforhighstandardhealthcareis

increasingasthePhilippineseconomy

improvesandthereisanexpansionin

themiddleclassaspirationforsuch.

Thegrowthpotentialofthisbusiness

isfurthersupportedbypromotingthe

Philippinesasanidealretirementand

medicaltourismdestination.MPIC

managementiscurrentlyevaluating

possibleinvestmentopportunities

toexpanditshealthcarebusiness

followingtheturnaroundofMDIand

thesynergiesofsharingmedicaland

managementexpertise.


ReconciliationofReportedResultsBetweenMPICandFirstPacific

MPIC’soperationsareprincipallydenominatedinpeso,whichaveragedPesos4�.86

(2006:��.�6)totheU.S.dollar.ItsfinancialresultsarepreparedunderPhilippine

GAAPandreportedinpeso.FirstPacific’sfinancialresultsarepreparedunderHong

KongGAAPandreportedinU.S.dollars.PhilippineGAAPandHongKongGAAPare

largelybasedonIFRSs,however,certainadjustmentsneedtobemadetoMPIC’s

reportedpesoresultstoensurefullcompliancewithHongKongGAAP.Ananalysisof

theseadjustmentsfollows.

Pesomillions 2007 2006

Netincome/(loss)underPhilippineGAAP 168 (686)

Differingaccountingtreatments(i)

–Reclassification/reversalofnon-recurringitems 1,152 302

–Revenuerecognitionregardingpre-completion

contractsforsaleofdevelopmentproperties (79) 79

Adjustednetincome/(loss)underHongKongGAAP 1,241 (30�)

Foreignexchangeandderivative(gains)/losses(ii) (1,125) 36

MPIC’snetincome/(loss)asreportedbyFirstPacific 116 (269)

US$millions

Netincome/(loss)atprevailingaverageratesfor

2007:Pesos4�.86and2006:Pesos��.�6 2.5 (�.3)



2007:92.�%forMPICand

2006:99.6%forMPICand77.3%forMetroPacificCorporation 2.3 (3.7)

(i) DifferencesinaccountingtreatmentunderPhilippineGAAP,comparedwithHongKongGAAP.Theprincipaladjustmentsinclude:– Reclassification/reversalofnon-recurringitems:Certainitems,throughoccurrenceorsize,

arenotconsideredusual,operatingitemswhicharereallocatedandpresentedseparately.Adjustmentfor2007ofPesos�.2billionprincipallyrepresentsPesos3.9billionofinterestexpensesaccretedfortheconvertiblenotesissuedtoFirstPacificandAshmoreInvestmentManagementLimited(Ashmore)andtransactionandfinancingexpensesrelatedtotheacquisitionofMayniladandPesos0.�billionprovisionsforaninvestmentinarealestateassociatedcompanyandvariousassetsandliabilities,partlyoffsetbytherecognitionofPesos2.�billionexcessofthefairvalueovertheacquisitioncostasincomeforDMCI-MPIC’sacquiredinterestinMayniladandPesos�.�billiongainonsettlementofconvertiblenotes.Adjustmentfor2006ofPesos0.3billionlossesprincipallyrelatestoprovisionsforavesselandaninvestmentinarealestateassociatedcompany.

– Revenuerecognitionregardingpre-completioncontractsforsaleofdevelopmentproperties:UnderPhilippineGAAP,MPICrecognizesrevenuefrompre-completioncontractsforsaleofdevelopmentpropertiesbasedonthepercentageofcompletionmethod.HKAS�8“Revenue”andHongKongInterpretation3“Revenue–Pre-completionContractsfortheSaleofDevelopmentProperties”requirestherecognitionofrevenueforsuchcontractsbasedonthesatisfactionofcertainconditions,whichincludesthetransferofsignificantrisksandrewardsofownershipofthepropertiestothebuyersandtheabsenceofcontinuingmanagerialinvolvementtothedegreeusuallyassociatedwithownershipandeffectivecontroloverthepropertiessold.

(ii) Toillustratetheunderlyingoperationalresultsandprofitcontributions,foreignexchangeandderivativegains/losses(netofrelatedtax)areexcludedandpresentedseparately.

44

Financial Review

LiquidityandFinancialResources

NetDebtandGearing(A) Head Office Net Debt

Theincreaseinnetdebtismainlyattributabletothepaymentsforthe

acquisitionofanadditional6.4percentinterestinPLDTandadvancesto

DMCI-MPICtofundDMCI-MPIC’sacquisitionofMaynilad.TheHeadOffice’s

borrowingsat3�December2007comprisebankloansofUS$64�.�million

(withanaggregatedfacevalueofUS$649.9million)duebetweenJuly20��and

November20�3andExchangeableNotesofUS$4.4million(withafacevalueof

US$3.9million).

ChangesinHeadOfficeNetDebt

Cash

andcash

US$millions Borrowings equivalents Netdebt

At�January2007 30�.4 (63.�) 237.9

Movement 344.� (49.6) 294.�

At31December2007 645.5 (113.1) 532.4

HeadOfficeCashFlow


Netcashinflowfromoperatingactivities 128.6 4�.2

Netinvestments (467.8) (��3.4)

Financingactivities

–Netborrowings 489.0 98.8

–Repaymentfrom/(advancesto)

subsidiarycompanies,net 20.0 (43.�)

–Proceedsfromtheissueofsharesupon

theexerciseofshareoptions 5.3 3.6

–Loanstoajointventure (96.0) –

–Dividendspaid (26.5) (�2.3)

–Repurchaseofshares (3.0) –

–Repaymentofsecuredbonds – (�08.0)

–SettlementofExchangeableNotes – (4.4)

Increase/(decrease)incashandcashequivalents 49.6 (�33.6)


(B) Group Net Debt and Gearing

Ananalysisofnetdebtandgearingforprincipalconsolidatedandassociated

companiesfollows.

Consolidated

Net Total Gearing Net Total Gearing

debt equity (times) debt(i) equity (times)

2007 2007 2007 2006 2006 2006

US$millions (Restated) (Restated)

HeadOffice 532.4 1,542.8 0.35x 237.9 �,446.3 0.�6x

Indofood 833.3 1,361.4 0.61x 604.7 742.7 0.8�x

MPIC 78.1 70.5 1.11x �4.6 �9.4 0.7�x

Groupadjustments(ii) – (845.0) – – (�,�7�.6) –

Total 1,443.8 2,129.7 0.68x 8�7.2 �,032.8 0.83x

Associated

Net Total Gearing Net Total Gearing

debt equity (times) debt equity (times)

US$millions 2007 2007 2007 2006 2006 2006

PLDT 1,046.3 2,725.6 0.38x �,272.� 2,�26.3 0.60x

(i) Includespledgeddepositsandrestrictedcash(ii) Groupadjustmentsmainlyrepresentseliminationofgoodwillarisingfromacquisitionsprior

to�January200�againsttheGroup’sretainedearnings/accumulatedlossesandotherstandardconsolidationadjustmentstopresenttheGroupasasingleeconomicentity.

HeadOffice’sgearingincreasedprincipallybecauseofpaymentsforthe

additional6.4percentinterestinPLDTandadvancestoDMCI-MPICtofund

DMCI-MPIC’sacquisitionofMaynilad.Indofood’sgearingdeclinedmainly

becauseofthegrowthinitstotalequity,despiteanincreaseinitsnetdebt

principallyasaresultofthepaymentfortheacquisitionandconsolidationof

a64.4percentinterestinLonsum.MPIC’snetdebtincreasedprincipallydue

toitsissuanceofconvertiblenotestoAshmoreandadditionalborrowings

arrangedforfinancingconstructionofnewpropertyprojects.PLDT’sgearing

declinedasstrongfreecashflowswereusedtoreducedebtsandprofits

enhancedtotalequity.

TheGroup’sgearingcontinuedtoimproveto0.68timeslevelprincipallyasa

resultofthegrowthoftheGroup’stotalequityasaresultoftherecordedprofit

fortheyear.

NetDebtandGearing

Net debt

US$ billions Gearing(times)

1.0

0.8

0.6

0.4

0.2

006

Gearing (times)

Net debt31 December 2007

31 December 2006

07

1.5

1.2

0.9

0.6

0.3

0

46

Financial Review

MaturityProfileThematurityprofileofdebtofconsolidatedandassociatedcompaniesfollows.

Consolidated

Carryingamounts Nominalvalues US$millions 2007 2006 2007 2006

Withinoneyear 1,000.1 �08.9 1,000.4 �09.0Onetotwoyears 169.8 223.6 170.0 223.8Twotofiveyears 825.2 3�9.� 834.7 3�3.4Overfiveyears 49.5 �03.9 49.9 �04.9

Total 2,044.6 �,��.9 2,055.0 �,��.�

ThechangeintheGroup’sdebtmaturityprofileat3�December2007principallyreflectsIndofood’sissuanceofRupiah2.0trillion(US$2�2.3million)RupiahbondsdueinMay20�2,reclassificationofRupiah�.2trillion(US$�30.2million)ofRupiahbondsdueinJune2008andthearrangementofapproximatelyUS$440millionnewshort-termdebtsforfinancingitsacquisitionofthe64.4percentinterestinLonsum,togetherwithHeadOffice’ssettlementofUS$�42.4millionExchangeableNotesdueinJanuary20�0andnewbankloansofUS$300.0millionandUS$200.0milliondueinDecember20��andDecember20�2,respectively.

TheincreaseintheGroup’sshort-termdebts(principallyasaresultoftheincreaseatIndofoodasmentionedabove)hasresultedintheGroupreportinganetcurrentliabilitiespositionat3�December2007.Indofoodisplanningtorefinanceitsshort-termdebtsthroughthearrangementofnewlong-termdebts,equityandotherrelatedfundraisingduring2008.

Associated

PLDT

Carryingamounts NominalValues US$millions 2007 2006 2007 2006

Withinoneyear 176.1 334.0 178.4 336.9Onetotwoyears 286.5 ��6.3 288.8 ��8.3Twotofiveyears 484.9 424.2 490.0 430.2Overfiveyears 521.5 7�9.� 620.1 829.9

Total 1,469.0 �,634.0 1,577.3 �,7��.3

FinancialRiskManagement

ForeignCurrencyRisk(A) Company Risk

AstheHeadOfficedebtsarecurrentlydenominatedinU.S.dollars,foreigncurrencyriskrelatesmainlytothereceiptofcashdividendsandtothetranslationofnon-U.S.dollardenominatedinvestmentsinsubsidiaryandassociatedcompanies.

TheCompanyactivelyreviewsthepotentialbenefitsofhedgingbasedonforecastdividendflowsandentersintohedgingarrangements(includingtheuseofforwardexchangecontracts)formanagingitsforeigncurrencyexposureinrespectofdividendincomeandpaymentsinforeigncurrencyonatransactionalbasis.However,theCompanydoesnotactivelyseektohedgerisksarisingonthetranslationofforeigncurrencydenominatedinvestmentsduetothenon-cashnatureofsuchinvestmentsandthehighcostsassociatedwithsuchhedging.Accordingly,theCompanyisexposedtotheimpactofforeigncurrencyfluctuationsonthetranslatedU.S.dollarvalueofitsforeigncurrencydenominatedinvestments.

44%

MaturityProfileofConsolidatedDebt2006

28%

9%

19%

US$ millionsWithin one year 1,000.1One to two years 169.8Two to five years 825.2Over five years 49.5Total 2,044.6

MaturityProfileofConsolidatedDebt2007

40%

3%

49%

8%

US$ millionsWithin one year 508.9One to two years 223.6Two to five years 319.5Over five years 103.9Total 1,155.9


WiththeexceptionoftheHeadOffice,theprincipalcomponentsoftheGroup’s

NAVrelatetoinvestmentsdenominatedinthepesoandrupiah.Accordingly,

anychangeinthesecurrencies,againsttheirrespective3�December2007

exchangerates,wouldhaveaneffectontheGroup’sNAVinU.S.dollarterms.

ThefollowingtableillustratestheestimatedeffectontheGroup’sadjustedNAV

foraonepercentchangeofthepesoandrupiahagainsttheU.S.dollar.

Effecton

Effecton adjustedNAV

adjustedNAV(i) pershare

Company US$millions HKcents

PLDT 38.� 9.22

Indofood �2.0 2.9�

MPIC �.3 0.30

Total 51.4 12.43

(i) Basedonquotedsharepricesasat3�December2007appliedtotheGroup’seconomicinterest

(B) Group Risk

TheGroup’soperatingresultsaredenominatedinlocalcurrencies,principally

thepesoandrupiah,whicharetranslatedandconsolidatedtogivetheGroup’s

resultsinU.S.dollars.

NetDebtbyCurrencyItisoftennecessaryforoperatingentitiestoborrowinU.S.dollars,whichresultsin

theriskofatranslationimpactonlocalcurrencyresults.Asummaryofconsolidated

andassociatedcompanies’netdebtbycurrencyfollows.

Consolidated

US$millions US$ Rupiah Peso Others Total

Totalborrowings 934.� �,026.6 83.9 – 2,044.6

Cashandcashequivalents (342.2) (236.�) (9.7) (�2.4) (600.8)

Netdebt/(cash) �9�.9 790.� 74.2 (�2.4) 1,443.8

Representing:

HeadOffice �37.4 – (3.6) (�.4) 532.4

Indofood �4.2 790.� – (��.0) 833.3

MPIC 0.3 – 77.8 – 78.1

Netdebt/(cash) �9�.9 790.� 74.2 (�2.4) 1,443.8

Associated

US$millions US$ Peso Others Total

PLDT 99�.6 �3.0 (2.3) 1,046.3

DetailsofchangesinHeadOfficenetdebtaresetoutonpage44.

AnalysisofTotalBorrowingsbyCurrency

50%46%

4%

US$ millionsRupiah 1,026.6US$ 934.1Peso 83.9Total 2,044.6

48

Financial Review

PLDTcarriesU.S.dollardebtprimarilybecauseinternationalvendorsof

telecommunicationsequipmentquotepricesandrequirepaymentinU.S.dollars.In

addition,largefundingrequirementsoftencannotbesatisfiedinlocalcurrencydue

toinherentconstraintswithinthefinancialmarketsinthePhilippines.Asaresult,

financingfrequentlyneedstobesourcedfromtheinternationalcapitalmarket,

principallyinU.S.dollars.PLDThasactivelyhedgedapproximately68.2percent

ofitsU.S.dollarnetborrowings.Inaddition,substantialrevenuesofPLDTare

eitherdenominatedin,orlinkedto,theU.S.dollar.Forexample,PLDT’sU.S.dollar

denominatedinternationalinboundrevenueaccountedforapproximatelyUS$��.4

millionor�.3percentofPLDT’stotalrevenuesin2007.Inaddition,undercertain

circumstances,PLDTisabletoadjustthemonthlyrecurringratesforitsfixedline

servicebyonepercentforeveryPeso0.�changeintheU.S.dollarexchangerate.

AsaresultofunhedgedU.S.dollarnetdebt,theGroup’sresultsaresensitiveto

fluctuationsinU.S.dollarexchangerates.Thefollowingtableillustratestheestimated

effectontheGroup’sreportedprofitabilityforaonepercentchangeintheprincipal

operatingcurrenciesofsubsidiaryandassociatedcompanies.Thisdoesnotreflect

theindirecteffectoffluctuatingexchangeratesonrevenuesandinputcostsatthe

operatingcompanylevel.

Profiteffect

of�% Group

TotalUS$ Hedged Unhedged currency netprofit

US$millions exposure amount amount change effect

PLDT 99�.6 678.7 3�6.9 3.2 0.5

Indofood �4.2 – �4.2 0.� 0.2

MPIC 0.3 – 0.3 – –

HeadOffice(i) �37.4 – �37.4 – –

Total �,�87.� 678.7 908.8 3.7 0.7

(i) AstheGroupreportsitsresultsinU.S.dollars,unhedgedU.S.dollardebtattheHeadOfficedoesnotgiverisetoanysignificantexchangeexposure.

EquityMarketRiskAsthemajorityoftheCompany’sinvestmentsarelisted,theCompanyisexposedto

fluctuationsintheequitymarketvaluesofsuchinvestments.Inaddition,thevalue

oftheCompany’sinvestmentsmaybeimpactedbysentimenttowardsspecific

countries.

FirstPacific’slistedinvestmentsarelocatedinthePhilippinesandIndonesia.

Accordingly,inadditiontooperatingfactorswithintheCompany’scontrol,the

Companyalsohasanequitymarketriskinrespectofgeneralinvestorsentiment

towardsthesecountries.ChangesinthestockmarketindicesofthePhilippinesand

Indonesiaissummarizedasfollows.

Philippine Jakarta

Composite Composite

Index Index

At3�December2006 2,982.� �,80�.�

At31December2007 3,621.6 2,745.8

Increaseduring2007 2�.4% �2.�%

At3�March2008 2,984.7 2,447.3

Decreaseover2008to3�March2008 -�7.6% -�0.9%

PesoandRupiah ClosingRatesagainst theU.S.Dollars

Peso

Dec

06

40

42

44

46

48

50

52

54

56

8,700

8,800

8,900

9,000

9,100

9,200

9,300

9,400

9,500

Sep

07

Dec

07

Mar

08

Jun

07

Mar

07

Rupiah

Peso

Rupiah

StockMarketIndices

JCI

Dec

06

4,000

3,800

3,600

3,400

3,200

3,000

2,800

2,800

2,600

2,400

2,200

2,000

1,800

1,600

Sep

07

Dec

07

Mar

08

Jun

07

Mar

07

Philippine Composite Index (PCI)

Jakarta Composite Index (JCI)

PCI


InJanuary200�,awholly-ownedHeadOfficesubsidiarycompanyissuedazero

coupon�-yearUS$�99millionExchangeableNotesguaranteedbytheCompany.

ExchangeableNoteswithfaceamountofUS$�9�.�millionwereconvertedduring

2006and2007,leavinganoutstandingprincipalamountofUS$3.9millionasat3�

December2007.TheholdersoftheExchangeableNoteshavetherighttoexchange

theExchangeableNotestotheunderlyingapproximately0.�percentinterestinPLDT

andtheCompanyhastheoptiontosettlesuchexchangeobligationincashorshares

inPLDT.PursuanttoHKAS39“FinancialInstruments:RecognitionandMeasurement”,

theexchangeableoptionembeddedintheExchangeableNotesissubjecttomark-to-

marketfairvalueaccountingwhichhasastrongcorrelationtothechangesinPLDT’s

sharepriceandwhichgeneratedanon-cashaccountinglossofUS$23.2millionin

2007.Thechangeofsuchoptionliabilityiseconomicallyhedgedbyacorresponding

changeinthevalueofPLDTsharesheldbytheGroupgenerallyandspecificallywith

respecttotheapproximately0.�percentPLDTsharesunderlyingtheExchangeable

Notes.SuchanaturalhedgeandthecorrespondingchangeinvalueoftheGroup’s

shareholdinginPLDT,however,isnottobereflectedintheGroup’sfinancialresults

underHKAS28“InvestmentsinAssociates”astheGroup’sinvestmentsinand

resultsofPLDTareequityaccountedfor.TheGroupdesignatedapproximately0.�

percentinterestinPLDTasfinancialassetsatfairvaluethroughprofitorlossto

provideeconomichedgeagainstthechangesinoptionliability.Thechangeinfair

valueofsuchinterestinPLDTresultedintheGrouprecordinganaccountinggainof

US$27.7millionduringtheyear.InFebruary2008,alltheremainingUS$3.9million

ExchangeableNoteshavebeenconvertedintoPLDTshares.

During2007,MPICissuedU.S.dollardenominatedconvertiblenotes(USDNotes)

totalingUS$37.9milliontoAshmore.AshmorehastherighttoconverttheUSD

NotestoMPICcommonsharesatanexercisepriceofPeso�pershare.Pursuantto

HKAS39,theconversionoptionembeddedintheUSDNotesissubjecttomark-to-

marketfairvalueaccountingwhichhasastrongcorrelationtothechangesinMPIC

sharepriceandwhichgeneratedanon-cashaccountinggainofUS$4.9millioninthe

year.InDecember2007,MPICfullysettledthesaidUSDNotes.

InterestRateRiskTheCompanyanditsoperatingentitiesareexposedtochangesininterestratesto

theextentthattheyimpactthecostofvariableinterestrateborrowings.Ananalysis

ofthisforconsolidatedandassociatedcompaniesfollows.

Consolidated

Fixed Variable Cashand

interestrate interestrate cash

US$millions borrowings borrowings equivalents Netdebt

HeadOffice 4.4 64�.� (��3.�) 532.4

Indofood 444.� 870.9 (48�.7) 833.3

MPIC 43.� 40.6 (6.0) 78.1

Total 492.0 �,��2.6 (600.8) 1,443.8

Associated

Fixed Variable Cashand

interestrate interestrate cash

US$millions borrowings borrowings equivalents Netdebt

PLDT �,�38.7 330.3 (422.7) 1,046.3

InterestRateProfile

76%

24%

US$ millionsFixed 492.0Floating 1,552.6Total 2,044.6

�0

Financial Review

ThefollowingtableillustratestheestimatedeffectontheGroup’sreported

profitabilityforaonepercentchangeinaverageannualinterestratesinrespectof

thevariableinterestrateborrowings.

Profiteffect

Variable of�% Group

interestrate changein netprofit

US$millions borrowings interestrates effect

HeadOffice 64�.� 6.4 6.4

Indofood 870.9 8.7 3.1

MPIC 40.6 0.4 0.2

PLDT 330.3 3.3 0.6

Total �,882.9 �8.8 10.3

AdjustedNAVPerShare

TherefollowsacalculationoftheGroup’sunderlyingworth.

At3�December 2007 2006

US$millions Basis

PLDT (i) 3,813.0 2,307.3

Indofood (i) 1,201.8 6�8.0

MPIC (i) 122.6 ��7.2

HeadOffice

–Receivables (ii) 138.9 60.3

–Netdebt (532.4) (237.9)

–Derivativeliability (iii) (6.3) (99.6)

Totalvaluation 4,737.6 2,80�.3

Numberofordinarysharesinissue(millions) 3,224.1 3,204.8

Valuepershare

–U.S.dollar 1.47 0.88

–HKdollars 11.46 6.83

Company’sclosingshareprice(HK$) 6.05 4.04

SharepricediscounttoHK$valuepershare(%) 47.2 40.8

(i) BasedonquotedsharepricesappliedtotheGroup’seconomicinterest(ii) RepresentsreceivablesfromDMCI-MPICandMPIC(iii) RepresentsthefairvalueofoptionelementembeddedintheExchangeableNotes

SharePricevs AdjustedNAVPerShare

HK$

Adjusted net asset value per share

Share price

Dec

03

Dec

06

Dec

07

Dec

05

Dec

04

12

10 8 6 4 2 0

��FirstPacificCompanyLimitedAnnualReport2007

Corporate Governance Report

GovernanceFramework

FirstPacificiscommittedtobuildingandmaintaininghighstandardsofcorporategovernancepractices.TheCompanyhas

adopteditsownCodeonCorporateGovernancePractices(theFirstPacificCode),whichincorporatestheprinciplesand

requirementssetoutintheCodeonCorporateGovernancePractices(CGCode)containedinAppendix�4oftheListingRules.

FirstPacifichasappliedtheseprinciplesandcompliedwithalltheCGCodemandatoryprovisionsandhasalsometallofthe

recommendedbestpracticesintheCGCodethroughoutthecurrentfinancialperiod,exceptforthefollowing:–

�. TheappointmentofIndependentNon-executiveDirectors(INEDs)representingatleastone-thirdoftheboard(asat

3�December2007,onlythreeoutoftwelveDirectorsareINEDs).

2. Thedisclosureofdetailsofremunerationpayabletomembersofseniormanagementonanindividualandnamedbasisin

theannualreportsandaccounts.

3. Theannouncementandpublicationofquarterlyfinancialresultswithin4�daysaftertheendoftherelevantquarter.

FirstPacificBoardconsidersthatitfunctionseffectivelywiththecurrentBoardandwillconsidertheappointmentofadditional

INEDasandwhenitisconsiderednecessary.Inaddition,theCompanydoesnotissuequarterlyfinancialresultsbasedonour

judgmentthatweshouldemphasizethequality,ratherthanthefrequencyofdisclosureofthefinancialinformation.Furthermore,

weareconcernedthatquarterlyreportingmightleadinvestorsandmanagementtofocusonshort-termfinancialperformance,

possiblyattheexpenseoflongertermfinancialperformanceoftheCompany.Thedisclosureofdetailsofremunerationpayableto

membersofseniormanagementonanindividualandnamedbasiswouldnotprovide,inourview,anypertinentinformationtothe

readersinassessingtheperformanceoftheCompany.

BoardofDirectorsTheCompanyisledandcontrolledthroughtheBoardofDirectorswhichcomprised�2Directorsasat3�December2007and

theyarecollectivelyresponsibleforpromotingthesuccessoftheCompanybydirectingandsupervisingtheCompany’saffair.

TheBoardofDirectorshasabalanceofskillandexperienceappropriatefortherequirementsoftheGroup’sbusinesses.At3�

December2007,threeoftheDirectorsareExecutiveandnineoftheDirectorsareNon-executive,ofwhomthreeareIndependent.

TheCompanyhasreceivedannualconfirmationsofindependencefromMr.GrahamL.Pickles,Prof.EdwardK.Y.ChenandSir

DavidTangandconsidersthemtobeindependent.Non-executiveDirectorshavethesamedutiesofcareandskillandfiduciary

dutiesasExecutiveDirectors.ThebiographiesoftheDirectorsaresetoutonpages�0to�3.

TheBoardofDirectorsusuallymeetsformallyatleastfourtimesayeartoreviewoperationalperformanceandfinancialplans,

monitorstheimplementationofstrategyandanyothersignificantmattersthataffecttheoperationsoftheGroup,andapproves

mattersspecificallyreservedtotheBoardofDirectorsforitsdecision.Datesoftheregularboardmeetingsarescheduledinthe

prioryear(subjecttoamendment)toprovidesufficientnoticetoDirectorsenablingthemtoattend.Forspecialboardmeetings,

reasonablenoticewillbegiven.Directorsareconsultedastomatterstobeincludedintheagendaforregularboardmeetings.

DirectorshaveaccesstotheadviceandservicesoftheCompanySecretarytoensurethatBoardprocedures,andallapplicable

rulesandregulations,arefollowed.Adequateandappropriateinformation,intheformofagendas,boardpapersandrelated

materials,arepreparedandprovidedtotheDirectorspriortothescheduleddatesfortheBoardmeetinginatimelymanner.

MinutesoftheBoardmeetingsandmeetingsoftheAuditCommittee,theRemunerationCommittee,theNominationCommittee

andotherBoardCommitteesarekeptbytheCompanySecretary.Minutesareopenforinspectionatanyreasonabletimeon

reasonablenoticebyanyDirector.

�2


MinutesoftheBoardmeetingsandBoardCommitteemeetingshaverecordedinsufficientdetailsthemattersconsideredbythe

BoardandtheCommittees,decisionsreached,includinganyconcernsraisedbytheDirectorsordissentingviewsexpressed.

DraftandfinalversionsofminutesoftheBoardmeetingsandmeetingsoftheBoardCommitteesaresenttoallDirectorsfortheir

commentsandrecordsrespectivelywithinareasonabletimeafterthemeeting.TheExecutiveDirectors,ledbytheManaging

DirectorandChiefExecutiveOfficer,areresponsiblefortheday-to-daymanagementoftheCompany’soperations.Inaddition,

thereareregularmeetingswiththeseniormanagementofsubsidiaryandassociatedcompanies,atwhichoperatingstrategies

andpoliciesareformulatedandcommunicated.

TheCompanyhasestablishedapolicyenablingallDirectorstoseekindependentprofessionaladviceinappropriatecircumstances,attheCompany’sexpense.TheBoardwillprovideseparateindependentprofessionaladvicetoDirectorstoassisttherelevantdirectorordirectorstodischargehis/theirdutiestotheCompanyasandwhenrequestedornecessary.

IfasubstantialshareholderoraDirectorhasaconflictofinterestinamattertobeconsideredbytheBoardwhichtheBoardhasdeterminedtobematerial,themattershallnotbedealtwithbywayofcirculationorbyaCommittee(exceptanappropriateBoardCommitteesetupforthatpurposepursuanttoaresolutionpassedinaBoardmeeting)butaBoardmeetingshallbeheld.IndependentNon-executiveDirectorswho,andwhoseassociates,havenomaterialinterestinthetransactionshallbepresentatsuchBoardmeeting.

Currently,Mr.AnthoniSalimistheChairmanoftheCompanyandMr.ManuelV.PangilinanistheManagingDirectorandChiefExecutiveOfficeroftheCompany.Accordingly,therolesofthechairmanandchiefexecutiveofficeroftheCompanyaresegregatedandarenotexercisedbythesameindividual.ThedivisionofresponsibilitiesbetweenthechairmanandthechiefexecutiveofficeroftheCompanyaresetoutintheFirstPacificCode.

InaccordancewiththeCompany’sbye-lawsandFirstPacificCode,ateachAGMone-thirdoftheDirectorsforthetimebeing(or,iftheirnumberisnotamultipleofthree,thenthenumbernearesttobutnotgreaterthanone-third)shallretirefromofficebyrotation.AretiringDirectorshallbeeligibleforelection.

AttheCompany’s2007AGM,Mr.ManuelV.Pangilinan,Mr.EdwardA.Tortorici,SirDavidTangandProf.EdwardK.Y.Chen,whohavebeenlongestinofficesincetheirappointment,retiredbyrotationbutbeingeligible,werere-electedasDirectorsofFirstPacificforafixedtermofnotmorethanthreeyears,commencingonthedateoftheirre-election(being�June2007)andendingon(�)thedateoftheCompany’sAGMtobeheldin20�0,or(2)on3�May20�0,or(3)thedateonwhicheachDirectorretiresbyrotationpursuanttotheFirstPacificCodeand/orthebye-laws,whicheveristheearlier.

Asadecentralizedorganizationinwhichlocalmanagementhavesubstantialautonomytorunanddeveloptheirbusinesses,theGroupviewswelldevelopedreportingsystemsandinternalcontrolsasessential.TheBoardofDirectorsplaysakeyroleintheimplementationandmonitoringofinternalfinancialcontrols.Theirresponsibilitiesinclude:

• regularboardmeetingsfocusingonbusinessstrategy,operationalissuesandfinancialperformance• activeparticipationontheboardsofsubsidiaryandassociatedcompanies• approvalofannualbudgetsforeachoperatingcompanycoveringstrategy,financialandbusinessperformance,keyrisksand

opportunities• monitoringthecompliancewithapplicablelawsandregulations,andalsowithcorporategovernancepolicies• monitoringthequality,timeliness,andcontentofinternalandexternalreporting• monitoringrisksandtheeffectivenessofinternalcontrols


During2007,therewerefiveboardmeetingsandthoseDirectorswhoattendedaresetoutbelow.

Numberofmeetingsattended

Chairman

AnthoniSalim �/�

ExecutiveDirectors

ManuelV.PangilinanManaging Director and Chief Executive Officer �/�

EdwardA.Tortorici �/�

RobertC.Nicholson �/�

Non-executiveDirectors

AmbassadorAlbertF.delRosario �/�

BennyS.Santoso �/�

SutantoDjuhar 0/�

TedyDjuhar 4/�

IbrahimRisjad 0/�

IndependentNon-executiveDirectors

GrahamL.Pickles �/�

Prof.EdwardK.Y.ChenGBS, CBE, JP �/�

SirDavidW.C.TangKBE 3/�

AuditCommitteeTheAuditCommitteeiscurrentlycomposedofthreeIndependentNon-executiveDirectors,withMr.GrahamL.Pickles,who

possessesappropriateprofessionalqualificationsandexperienceinfinancialmatters,actingaschairmanoftheAuditCommittee.

ThisisincompliancewithRule3.2�oftheListingRules.

TheAuditCommittee’swrittentermsofreference,whichdescribeitsauthorityandduties,areregularlyreviewedandupdatedby

theBoardofDirectors.ReportingtotheBoardofDirectors,theAuditCommitteereviewsmatterswithinthepurviewofaudit,such

asFinancialStatementsandinternalcontrols,toprotecttheinterestsoftheCompany’sshareholders.TheAuditCommitteealso

performsanindependentreviewoftheinterimandannualFinancialStatements.

TheAuditCommitteemeetsregularlywiththeCompany’sexternalauditorstodiscusstheauditprocessandaccountingissues,

andreviewstheeffectivenessofinternalcontrolsandriskevaluation.Specialmeetingsarealsoconvened,whereappropriate,

toreviewsignificantfinancialorinternalcontrolissues.During2007,thereweretwoAuditCommitteemeetingsandthoseAudit

Committeememberswhoattendedaresetoutbelow.


GrahamL.Pickles 2/2

Prof.EdwardK.Y.ChenGBS, CBE, JP 2/2

SirDavidW.C.TangKBE 2/2

�4


RemunerationCommitteeTheRemunerationCommittee,whichcomprisesAmbassadorAlbertF.delRosario(whoalsoactsasthechairmanofitreplacing

Mr.ManuelV.Pangilinanon�September2007),Prof.EdwardK.Y.ChenandSirDavidTang,hasspecificwrittentermsofreference

whichdealclearlywithitsauthorityandduties.ThetermsofreferenceoftheRemunerationCommitteehaveincludedthespecific

dutiessetoutinparagraphsB.�.3(a)to(f)oftheCGCode,withappropriatemodificationswherenecessary.

TheRemunerationCommitteemakesrecommendationstotheBoardofDirectorsregardingtheremunerationoftheExecutive

Directors,seniorexecutivesandthefeesandemolumentsofNon-executiveDirectorsbasedonadvicefromcompensationand

benefitsconsultants.NoDirectororanyofhisassociatesisinvolvedindecidinghisownremuneration.During2007,therewere

fourRemunerationCommitteemeetingsandthoseRemunerationCommitteememberswhoattendedaresetoutbelow.


ManuelV.Pangilinan* �/4

AmbassadorAlbertF.delRosario* 3/4

Prof.EdwardK.Y.ChenGBS, CBE, JP 4/4

SirDavidW.C.TangKBE 3/4

* ChangeofRemunerationCommitteememberon�September2007

NominationCommitteeTheNominationCommittee,whichcomprisesMr.AnthoniSalim(whoalsoactsasthechairmanofit),AmbassadorAlbertF.del

Rosario,Prof.EdwardK.Y.Chen,SirDavidTangandMr.GrahamL.Pickles,hasspecificwrittentermsofreferencewhichdeal

clearlywithitsauthorityandduties.ThetermsofreferenceoftheNominationCommitteehaveincludedthespecificdutiessetout

inparagraphsA.4.�(a)to(d)oftheCGCode,withappropriatemodificationswherenecessary.

Thecommitteeperformsthefollowingduties:

• reviewsthestructure,sizeandcomposition(includingtheskills,knowledgeandexperience)oftheBoardofDirectorsona

regularbasisandmakesrecommendationstotheBoardofDirectorsregardinganyproposedchanges;

• establishesrecruitment,selectionandnominationstrategiestoattracttherightindividualstobecomeExecutiveor

Non-executiveDirectors;and

• makesrecommendationstotheBoardofDirectorsonrelevantmattersrelatingtotheappointmentorre-appointmentof

DirectorsandsuccessionofplanningforDirectors.

TheselectionofindividualstobecomeExecutiveorNon-executiveDirectorsarebasedonassessmentoftheirprofessional

qualificationsandexperience.During2007,theNominationCommitteehasnotheldanyformalmeeting.

IndependentBoardCommitteeWheretherearemattersinvolvingconnectedorcontinuingconnectedtransactionsorothertransactions,sofarasrequired

undertheListingRules,anIndependentBoardCommittee,comprisingwhollytheIndependentNon-executiveDirectors,willbe

establishedwithspecificwrittentermsofreferencewhichdealclearlywiththeIndependentBoardCommittee’sauthorityand

dutiesandindependentfinancialadviserswillbeappointedtoprovideadvicestotheIndependentBoardCommittee.When

appropriate,theIndependentBoardCommitteewillthenadviseshareholdersonhowtovoteafterconsideringadvices(ifany)

fromindependentfinancialadvisers.

Director’sServiceContractMr.EdwardA.TortoricihasaservicecontractwiththeCompanyfora2-yeartermwhichexpireson3�December2009.Apart

fromthat,nootherDirectorhasanunexpiredservicecontractwiththeCompanywhichisnotdeterminablebytheCompany

withinoneyearwithoutpaymentofcompensation,otherthanstatutorycompensation.


ModelCodeforSecuritiesTransactionsHavingmadespecificenquiry,theCompanycanconfirmthatalloftheDirectorshavecompliedwiththeCompany’scodeof

conductregardingdirectors’securitiestransactions,preparedandadoptedontermsnolessexactingthantherequiredstandard

setoutintheModelCode.

FinancialReportingInordertoenabletheDirectorstopresentabalanced,clearandcomprehensibleassessmentoftheCompany’sperformance,

positionandprospectstoitsshareholders,financialreportswithadequateinformationandexplanationsarepreparedbythe

Company’smanagementtotheBoardofDirectorsonatimelyandregularbasis.

Directors’ResponsibilityfortheFinancialStatementsTheHongKongCompaniesOrdinancerequirestheDirectorstoprepareFinancialStatementsforeachfinancialyearthatgive

atrueandfairviewoftheCompany’sstateofaffairsasattheendofthefinancialyearandofitsprofitorlossfortheyearthen

ended.InpreparingtheFinancialStatements,theDirectorsarerequiredto:

• selectsuitableaccountingpoliciesandapplythemonaconsistentbasis,makingjudgmentsandestimatesthatareprudent,

fairandreasonable;

• statethereasonsforanysignificantdeparturefromtherelevantaccountingstandards;and

• preparetheFinancialStatementsonagoingconcernbasis,unlessitisnotappropriatetopresumethattheCompanywill

continueinbusinessfortheforeseeablefuture.

TheDirectorsareresponsibleforkeepingproperaccountingrecords,forsafeguardingtheassetsoftheCompanyandfortaking

reasonablestepsforthepreventionanddetectionoffraudandotherirregularities.

Directors’TrainingDuringthecourseoftheyear,theBoardwasinformedofupdatesofaccountinganddisclosurechangesasandwhennecessary.

VotingbyPollTheCompany’sshareholdersareadequatelyinformedoftheproceduresforandtheirrightstodemandvotingbypollin

shareholders’meetingsatwhichtheirapprovalsaresoughtthroughdisclosureintheCompany’scirculars.

Atthe2007AGMandSGM,thechairmandemandedapollonallresolutions.Theproceduresfordemandingapollbythe

shareholderswereincorporatedintherespectivecircularssenttotheshareholdersinthetimestipulated.ComputershareHong

KongInvestorServicesLimited,theCompany’sHongKongBranchRegistrar,wasengagedasscrutineertoensurethevoteswere

properlycounted.

RemunerationPolicy

DetailsofDirectors’remunerationfortheyeararesetoutinNote3�(A)totheFinancialStatements.Theremunerationofsenior

executives,includingDirectors,consistsofthefollowing:

SalaryandBenefitsSalaryreflectsanexecutive’sexperience,responsibilityandmarketvalue.Increasesarebasedoneffectivemanagementofthe

Companyandonincreasedresponsibility.Benefitsprincipallycomprisehousingallowance,educationalsupportandhealthcare,

andareconsistentwiththoseprovidedbycomparablecompanies.

BonusandLong-termIncentivesBonusesarebasedontheachievementofindividualperformancetargets,anddonotnecessarilycorrelatewithannualprofit

movements.Long-termincentivescomprisemonetarypaymentsand/orshareoptionsthatlinkrewardtotheachievementof

pre-determinedobjectives.Thevalueofthelong-termincentiveofferedtoeachexecutiveisrelatedtojobgradeandcontribution

tothemanagementofthebusiness.

�6


FeesItistheCompany’spolicythatitpaysnofeestotheCompany’sExecutiveDirectors.

PensionContributionsTheCompanyoperatesdefinedcontributionschemes,inrespectofwhichcontributionsaredeterminedonthebasisofbasic

salariesandlengthofservice.

ShareOptionsShareoptionsaregrantedtocertainDirectorsandseniorexecutivesaspartofthelong-termincentivearrangements.Detailsof

theCompany’sshareoptionsgrantedtoDirectorsandseniorexecutivesaresetoutinNote3�(D)(a)totheFinancialStatements.

CommunicationswithShareholders

FirstPacificencouragesanactiveandopendialoguewithallofitsshareholders;privateandinstitutional,largeandsmall.The

Boardacknowledgesthatitsroleistorepresentandpromotetheinterestsofshareholdersandthatitsmembersareaccountable

toshareholdersfortheperformanceandactivitiesoftheCompany.AssuchFirstPacificisalwaysresponsivetotheviewsand

requestsofitsshareholders.

Theformalchannelsofcommunicatingwithshareholdersaretheannualandinterimreports,pressreleases,published

announcements,shareholders’circularsandtheAGM.Theannualandinterimreportsseektocommunicate,bothtoshareholders

andthewiderinvestmentcommunity,developmentsintheCompany’sbusinesses.Inaddition,theannualreportsetsoutstrategic

goalsforthecomingyearandmanagement’sperformanceagainstpredeterminedobjectivesarereportedandassessed.Allof

theseinitiativesaredesignedtobetterinformshareholdersandpotentialinvestorsabouttheCompany’sactivitiesandstrategic

direction.

TheAGMistheprincipalforumforformaldialoguewithshareholders,wheretheBoardisavailabletoanswerquestionsabout

specificresolutionsbeingproposedatthemeetingandalsoabouttheGroupingeneral.Inaddition,whereappropriate,the

CompanyconvenesSGMtoapprovetransactionsinaccordancewiththeListingRulesandtheCompany’scorporategovernance

procedures.Theseprovidefurtheropportunitiesforshareholderstocommentandvoteonspecifictransactions.

Atthe2007AGM,aseparateresolutionwasproposedbythechairmaninrespectofeachseparateissue,includingproposals

relatingtogeneralmandatestoissuesharesandtorepurchaseshares,re-electionoftheretiringdirectorsandadoptionofnew

executivestockoptionplanforMPIC.

Inordertopromoteeffectivecommunication,theCompanyalsomaintainsawebsite(www.firstpacco.com)whichincludespast

andpresentinformationrelatingtotheGroupanditsbusinesses.

ConnectedandContinuingConnectedTransactions

AttheCompany’sSGMheldon28February2007,theCompany’sshareholdersapprovedtheGroup’sacquisitionofshares

representingapproximately46percentinterestinPhilippineTelecommunicationsInvestmentCorporation(PTIC)fromthe

PhilippineGovernment,whichrepresentsanattributableeconomicinterestofapproximately6.4percentofPLDT,fora

considerationofPesos2�.2billion(equivalenttoapproximatelyUS$��0million).

On�6April2007,theCompanyannouncedthatIndofoodhadenteredintoasaleandpurchaseagreementwithPacificCarriers

Ltd.asthevendorforthepurchasebyIndofoodfromthevendorofsharesrepresenting3�percentoftheissuedsharecapitalof

PacsariPte.Ltd.(Pacsari)foranaggregateconsiderationofUS$2�.6million,tobesatisfiedincashfromtheinternalresourcesof

Indofood.Pacsari,whichisprincipallyengagedinshippingoperations,wasanexistingsubsidiarycompanyofIndofoodpriorto

theacquisition,withIndofoodholding��percentoftheissuedsharecapitalofPacsari.Followingcompletionoftheacquisition,

Indofoodowns90percentoftheissuedsharecapitalofPacsari.


On�8April2007,theCompanyannouncedthatIndofoodintendedto(�)enterintonewcontinuingconnectedtransactionswith

SalimWazaranBrinjikjiLimited(SAWAB)inrelationtoitsNoodlesBusinessTransactionandsettheapplicableannualcapsin

respectofthefinancialyearsending3�December2007,2008and2009,(2)reviseannualcapsforexistingNoodlesBusiness

TransactionsandrenewcertainexistingNoodlesBusinessTransactionsandannualcapsfor2009inrespectofNoodlesBusiness

Transactions,(3)enterintonewDistributionBusinessTransactionsandsettheannualcapsfor2009inrespectofDistribution

BusinessTransactions,(4)closingofConnectedTransactionrelatingtotheacquisitionof60percentinterestinthePlantation

Companieson9March2007,(�)enterintoexistingandnewPlantationBusinessTransactions,(6)enterintoNoodlesSupplyand

ServicesAgreementinrespectoftheNoodlesBusiness,and(7)enterintoSnackFoodSupplyandServicesAgreementinrespect

oftheSnackFoodBusiness.TheaggregateoftheproposedannualcapsforalltheNoodlesBusinessTransactions(Transactions

(�),(2)and(6))fortheyearsending3�December2007,2008and2009areUS$�3.�million,US$62.�millionandUS$76.6million

respectively.Astherelevantpercentageratios(asdefinedintheListingRules)applicabletotheaggregateannualcapsinrespect

oftheNoodlesBusinessTransactionsexceed2.�percent,thesetransactionsweresubjecttoindependentshareholders’approval

attheSGM.

AttheCompany’sSGMheldon20June2007,theCompany’sindependentshareholdersapprovedTransaction(�),(2)and(6)

referredtoaboveinrelationto(�)newcontinuingconnectedtransactionsrelatingtothetransactionsbetweenIndofoodand

SAWABandtheapplicableannualcapsinrespectofthefinancialyearsending3�December2007,2008and2009,(2)revision

ofcapsforexistingNoodlesBusinessTransactions,renewalofcertainexistingNoodlesBusinessTransactionsandannualcaps

for2009inrespectofNoodlesBusinessTransactionsand(3)NoodlesSupplyandServicesAgreementinrespectoftheNoodles

Business,detailsassetoutintheCompany’scirculardated30May2007.

Therelevantpercentageratios(asdefinedintheListingRules)applicabletotheaggregateannualcapsinrespectofeachofthe

DistributionBusinessTransactions,thePlantationBusinessTransactionsandtheSnackFoodBusinessTransactionsdonotexceed

2.�percentand,therefore,eachofthosecontinuingconnectedtransactionsisnotrequiredtobeapprovedbytheindependent

shareholdersattheSGM.

UponobtainingtheCompany’sshareholdersapprovalattheSGMheldon�2October2007,SIMPcompletedtheacquisitionfrom

FirstDurangoSingaporePte.LimitedandtheAshmoreFunds(apossibleconnectedparty)ofordinarysharesandnotesconvertible

intoordinarysharesofLonsum,representingapproximately�6.3percentoftheenlargedissuedsharecapitalofLonsumforan

aggregateconsiderationofapproximatelyRupiah�.0trillion(equivalenttoapproximatelyUS$��2.�million),whichisequivalentto

Rupiah6,�00(equivalenttoapproximatelyUS$0.7�)pershareon3�October2007.

On29November2007,theCompanyannouncedtherevisionofannualcapsrelatingtothenewdistributionbusinesstransactions

betweenPTTristaraMakmurandPTBuanaDistrindoaswellassettingtheannualcapforotherpackagingbusinesstransactions.

EachoftheabovecontinuingconnectedtransactionswillbesubjecttoannualreviewbytheIndependentNon-executiveDirectors

oftheCompanypursuanttoRule�4A.37oftheListingRulesandconfirmationoftheauditorsoftheCompanypursuanttoRule

�4A.38oftheListingRules.

TheDirectors(includingtheIndependentNon-executiveDirectors)consideredthatthetermsofeachoftheTransactionsforthe

financialyearended3�December2007arefairandreasonableandthattheyareinthebestinterestsoftheCompany,Indofood

andtheirrespectiveshareholders.

�8


DetailsofthosecontinuingconnectedtransactionsrequiredtobespecifiedbyRule�4A.4�oftheListingRulesaresetoutbelow:

A. TransactionsrelatingtotheNoodlesBusinessoftheIndofoodGroup

TransactionPartiestotheagreement/arrangement amountforthe

Nameofconnected Periodcoveredbythe yearendedNameofentity partyandrelationship agreement/arrangement 31December2007

ofthegroup betweentheparties Natureofagreement/arrangement From To (US$millions)

PTIndofoodSukses MakmurTbk(ISM) –FoodIngredients Division(ISM–FID)

DeUnitedFood IndustriesLtd. (DUFIL),anassociate ofMr.AnthoniSalim

Salesandsupplyofnoodle seasoningsfromISM–FIDtoDUFIL

�April200� 3�March2008 (Automaticextension

uponexpiry)

6.7

PTCiptakemas Abadi(CKA)

DUFIL,anassociateof Mr.AnthoniSalim

Salesandsupplyofpackaging materialsfromCKAtoDUFILforthe productionofinstantnoodles

Agreementexecuted on�April200�,

Addendumexecuted on3October200�

2October2008 3.0

ISM DUFIL,anassociateof Mr.AnthoniSalim

Trademarklicensingforthe exclusiveusebyDUFILof the“Indomie”trademarkowned byISMintheNigerianmarketand provisionofrelatedtechnical servicesinconnectionwithDUFIL’s instantnoodlemanufacturing operationsinNigeria

30November2006 29November20�0 2.2

ISM–FID PinehillArabianFood Ltd.(Pinehill), anassociateof Mr.AnthoniSalim

Salesandsupplyofnoodle seasoningsfromISM–FIDtoPinehill

�April200� 3�March2008 (Automaticextension

uponexpiry)

��.6

CKA Pinehill,anassociateof Mr.AnthoniSalim

Salesandsupplyofpackaging materialsfromCKAtoPinehillfor theproductionofinstantnoodles

�April200� 3�March2008 �.2

ISM Pinehill,anassociateof Mr.AnthoniSalim

Trademarklicensingfortheexclusive usebyPinehillofthe“Indomie”and “Supermi”trademarksownedby ISMintheSaudiArabianand MiddleEastmarkets

�January2006 3�December20�0 (Automaticextension

uponexpiry)

0.7

PTPrimaIntipangan Sejati(PIPS)

Pinehill,anassociateof Mr.AnthoniSalim

Technicalservicesagreement wherebyPIPSprovidestechnical assistancetoPinehillinconnection withthelatter’sinstantnoodle manufacturingoperationsinSaudi ArabiaandtheMiddleEast

�January2006 3�December20�0 (Automaticextension

uponexpiry)

�.6

ISM–FID SalimWazaran BrinjikjiLtd.(SAWAB), anassociateof Mr.AnthoniSalim

Salesandsupplyofnoodle seasoningsfromISM–FIDtoSAWAB

�August2007 3�December2009 (Automaticextension

uponexpiry)

–

CKA SAWAB,anassociate ofMr.AnthoniSalim

Salesandsupplyofpackaging materialsfromCKAtoSAWABfor theproductionofinstantnoodles

�August2007 3�December2009 (Automaticextension

uponexpiry)

0.6

ISM SAWAB,anassociate ofMr.AnthoniSalim

Trademarklicensingforthe non-exclusiveusebySAWABofthe “Indomie”trademarkownedbyISM intheSyrianArabRepublicmarket

20June2007 3�December2009 (Automaticextension

uponexpiry)

–

ISM SAWAB,anassociate ofMr.AnthoniSalim

Technicalservicesagreement wherebyISMprovidestechnical assistancetoSAWABinconnection withthelatter’sinstantnoodle manufacturingoperationsinthe SyrianArabRepublicmarket

20June2007 3�December2009 (Automaticextension

uponexpiry)

–

Aggregatetransactionamount 3�.6


B. TransactionsrelatingtotheDistributionBusinessoftheIndofoodGroup




PTIndomarcoAdi

Prima(IAP)

PTLionSuperindo(LS),

anassociateof

Mr.AnthoniSalim

IAPdistributesvariousconsumer

productstoLS

�April2006 �April2007

(Automaticextension

uponexpiry)

6.8

IAP PTBuanaDistrindo

(BD),anassociateof

Mr.AnthoniSalim

Asasub-distributorofBD,IAP

purchasesPepsicolaandtea

beverageproductsforsalein

tradeoutletsinIndonesia

�January2007 3�December2007

(Automaticextension

uponexpiry)

8.6

PTPutriDaya

Usahatama(PDU)

LS,anassociateof

Mr.AnthoniSalim

PDUdistributesvariousconsumer

productstoLS

�9April2007 3�December2009

(Automaticextension

uponexpiry)

0.6

PTTristaraMakmur

(TRM)

BD,anassociateof

Mr.AnthoniSalim

Asasub-distributorofBD,TRM

purchasesPepsicolaandtea

beverageproductsforsalein

tradeoutletsinIndonesia

�9April2007 3�December2007

(Automaticextension

uponexpiry)

0.�

Aggregatetransactionamount �6.�

C. TransactionsrelatingtotheInsurancePoliciesoftheIndofoodGroup




ISMandsubsidiaries PTAsuransiCentral

Asia(ACA),anassociate

ofMr.AnthoniSalim

ISMandsubsidiariestakesout

insurancepolicieswithACA

3�December2006

(propertyallrisksand

earthquakeinsurance)

�July2007

(vehicleinsurance)

3�December2007

(Automaticextension

uponexpiry)

�July2008

2.7

Aggregatetransactionamount 2.7

60


D. TransactionsrelatingtothePlantationBusinessoftheIndofoodGroup




PTSalimIvomasPratama

(SIMP)

PTAdithyaSuramitra

(ADS),a�00%owned

subsidiaryoftheSalim

Group

SIMPhasenteredintoa20-yearlease

contractwithADSfortheuseof

landpropertywhichisthefactory

siteofSIMP

�June�996 3�May20�6 0.�

SIMPanditssubsidiaries PTSaranaTempaPerkasa

(STP),anassociate

oftheSalimGroup

STPprovidespumpingservicesto

SIMPanditssubsidiariestoload

crudepalmoil(CPO)andits

derivativeproductstotheshipping

vessels

�January2007 3�December2007 0.3

PTGuntaSamba(GS) PTRimbaMutiaraKusuma

(RMK),a�00%owned


Group

GSpurchasessparepartsfromRMK 2January2007 3�December2009 –

GS RMK,a�00%owned


Group

GSleasesheavyequipmentfrom

RMK

2January2007 3�December2009

(Automaticextension

uponexpiry)

0.3

GS RMK,a�00%owned


Group

GSrentsofficespacefromRMK 2January2007 3�December2009

(Automaticextension

uponexpiry)

–

PTMultiPacific

International(MPI)

RMK,a�00%owned


Group

MPIleasesheavyequipmentfrom

RMK

2January2007 3�December2009

(Automaticextension

uponexpiry)

0.�

PTSaranaIntiPratama

(SIP)

PTMentariSuburAbadi

(MSA),anassociateof

Mr.AnthoniSalim

SIPsellsseedlingstoMSAtobe

usedforitsoperations

20April2007 3�December2009

(Automaticextension

uponexpiry)

0.�

SIP PTSwadayaBhakti

Negaramas(SBN),

anassociateof

Mr.AnthoniSalim

SIPsellsseedlingstoSBNtobe



(Automaticextension

uponexpiry)

0.2

SIP PTAgrosuburPermai

(ASP),a99.��%owned

subsidiaryofMSA,

anassociateof

Mr.AnthoniSalim

SIPsellsseedlingstoASPtobe



(Automaticextension

uponexpiry)

–

SIP GS,a99.99%owned

subsidiaryofPTMega

CiptaPerdana(MCP),

anassociateof

Mr.AnthoniSalim

SIPsellsseedlingstoGStobe



(Automaticextension

uponexpiry)

–

SIP MPI,a99.97%owned

subsidiaryofMCP,

anassociateof

Mr.AnthoniSalim

SIPsellsseedlingstoMPItobe



(Automaticextension

uponexpiry)

–





SIP MSA,oneoftheplantation

companies,anassociate

ofMr.AnthoniSalim

SIPprovidesresearchservices

toMSAinconnectionwithits

operations


(Automaticextension

uponexpiry)

–

SIP SBN,anassociateof

Mr.AnthoniSalim


toSBNinconnectionwithits

operations


(Automaticextension

uponexpiry)

–

SIP ASP,anassociateof

Mr.AnthoniSalim


toASPinconnectionwithits

operations


(Automaticextension

uponexpiry)

–

SIMP MSAandASP,each

anassociateof

Mr.AnthoniSalim

SIMPwillextendfinancialassistance

toMSAandASP(maximum60%

portionfromtotalShareholderloan

andcorporateguarantee)

24April2007 23April20�0 8.0

SIMP SBN,anassociateof

Mr.AnthoniSalim


toSBN(maximum60%portion

fromtotalShareholderloanand

corporateguarantee)

3�October2007 3�October2009 0.6

SIMP MCP,MPIandGS,each

anassociateof

Mr.AnthoniSalim


toMCP/MPI/GS(maximum60%

portionfromtotalShareholder

loanandcorporateguarantee)

2�April2007 24April20�0 7.8

Aggregatetransactionamount �7.9

EachoftheabovecontinuingconnectedtransactionshasbeensubjecttoannualreviewbytheIndependentNon-executive

DirectorsoftheCompanypursuanttoRule�4A.37oftheListingRulesandconfirmationoftheauditorsoftheCompany

pursuanttoRule�4A.38oftheListingRules.

Inrespectofthefinancialyearended3�December2007,theIndependentNon-executiveDirectorsoftheCompanyhave

concludedthateachcontinuingconnectedtransactionhasbeenenteredinto:

• intheordinaryandusualcourseofbusinessoftheCompany;

• eitheronnormalcommercialtermsor,inthoseinstanceswheretherearenotsufficientcomparabletransactionsto

judgewhethertheyareonnormalcommercialterms,ontermsnolessfavorabletoIndofoodthantermsavailabletoor

from(asappropriate)independentthirdparties;

• inaccordancewiththerelevantagreementgoverningthem,ortherelevantwrittenmemorandumrecordingtheir

terms,subjecttoanexceptionsetoutbelow,asreferredtointheletterfromErnst&Youngreferredtobelow;and

• ontermsthatarefairandreasonableandintheinterestsoftheshareholdersoftheCompanyasawhole.

Ernst&YounghasprovidedalettertotheBoard(withacopytoHKSE)confirmingthat,subjecttoanexceptionwhichhas

beendrawntotheattentionoftheBoard,thecontinuingconnectedtransactionshavebeencarriedoutinthemannerstated

inRule�4A.38oftheListingRules.TheexceptioncontainedinErnst&Young’sletterrelatedtocertainconnectedparty’slate

settlementofinvoices.

D. TransactionsrelatingtothePlantationBusinessoftheIndofoodGroup(cont’d)

62


RiskManagementandInternalControlTheBoardisresponsibleformaintaininganadequatesystemofinternalcontrolsintheGroupandreviewingitseffectiveness

throughtheAuditCommittee.

Inaddition,duringtheyearended3�December2007,theAuditCommitteereviewedandadvisedthat:

• TheinternalcontrolsandaccountingsystemsoftheGroupfunctioneffectivelyandaredesignedtoprovidereasonable

assurancethatmaterialassetsareprotected,businessrisksattributabletotheGroupareidentifiedandmonitored,material

transactionsareexecutedinaccordancewithmanagement’sauthorizationandthefinancialstatementsarereliablefor

publicationandcompliantwithallrelevantlawsandregulations.

• Thereisaprocessinplaceforidentifying,evaluatingandmanagingthematerialbusinessrisksfacedbytheGroup.Such

processesareincorporatedinalltheGroup’sbusinesses.

• Thereareinitiativestoimprovecertainprocessestofurtherstrengtheninternalcontrolsandenhanceriskmanagement

withintheGroup.

• Standardgovernancepractices;establishmentofaudit,nominationandremunerationcommitteeshavebeenmadeatMetro

PacificInvestmentsCorporationanditsmajorinvestments.


Statutory Reports, Financial Statements and Notes to the Financial Statements

Contents

StatutoryReports

ReportoftheDirectors 64

IndependentAuditors’Report 69

FinancialStatements

ConsolidatedProfitandLossStatement 70

ConsolidatedBalanceSheet 7�

CompanyBalanceSheet 72

ConsolidatedStatementofChangesinEquity 73

CompanyStatementofChangesinEquity 7�

ConsolidatedCashFlowStatement 76

NotestotheFinancialStatements

GeneralInformation

�. CorporateInformation 78

2. BasisofPreparation,SummaryofPrincipal 78

AccountingPoliciesandChanges

3. SignificantAccountingJudgmentsandEstimates 92

ConsolidatedProfitandLossStatement

4. TurnoverandSegmentalInformation 9�

�. NetBorrowingCosts 98

6. ProfitBeforeTaxation 99

7. Taxation �00

8. ProfitAttributabletoEquityHoldersoftheParent �0�

9. OrdinaryShareDividends �0�

�0. EarningsPerShareAttributabletoEquityHolders �02

oftheParent

ConsolidatedandCompanyBalanceSheets

��. Property,PlantandEquipment �02

�2. Plantations �04

�3. SubsidiaryCompanies �0�

�4. AssociatedCompaniesandJointVentures �06

��. Goodwill �07

�6. FinancialAssetsatFairValueThrough �08

ProfitorLoss

�7. AccountsReceivable,OtherReceivablesand �08

Prepayments

�8. PrepaidLandPremiums ��0

�9. Available-for-saleAssets ��0

20. DeferredTax ��

2�. OtherNon-currentAssets ��3

22. CashandCashEquivalents ��3

23. Inventories ��3

24. AccountsPayable,OtherPayablesandAccruals ��

2�. Borrowings ��

26. ProvisionforTaxation ��9

27. DeferredLiabilitiesandProvisions ��9

28. ShareCapital �20

29. OtherReserves �20

30. MinorityInterest �2�

3�. DerivativeLiability �2�

ConsolidatedCashFlowStatement

32. NotestotheConsolidatedCashFlowStatement �22

OtherFinancialInformation

33. CommitmentsandContingentLiabilities �23

34. Employees’Benefits �24

3�. Directors’andSeniorExecutives’Remuneration �28

36. RelatedPartyTransactions �34

37. CapitalandFinancialRiskManagement �36

38. SubsequentEvents �40

39. ComparativeAmounts �40

40. ApprovaloftheFinancialStatements �40

64

Statutory Reports

Report of the Directors

TheDirectorspresenttheirreportandtheauditedfinancialstatementsofFirstPacificCompanyLimited(theCompany)andits

subsidiarycompanies(togethertheGroup)(theFinancialStatements)fortheyearended3�December2007.

PrincipalBusinessActivitiesandGeographicalMarketAnalysisofOperations

FirstPacificCompanyLimitedisaHongKong-basedinvestmentandmanagementcompanywithoperationslocatedinAsia.Its

principalbusinessinterestsrelatetotelecommunications,consumerfoodproductsandinfrastructureandproperty.Therewere

nosignificantchangesinthenatureoftheGroup’sprincipalbusinessactivitiesduringtheyear.

AnanalysisoftheGroup’sturnoverandsegmentalinformationfortheyear,byprincipalbusinessactivityandprincipal

geographicalmarket,issetoutinNote4totheFinancialStatements,andasummaryofitsprincipalinvestmentsissetoutonthe

insidebackcover.

Incorporation

TheCompanywasincorporatedon2�May�988inBermudawithlimitedliability.

ShareCapitalandShareOptions

TherewerenomovementsintheCompany’sauthorizedsharecapitalduringtheyear.DetailsofmovementsintheCompany’s

sharecapital,shareoptionsissuedbytheGroupduringtheyear,togetherwiththeirreasons,aresetoutinNotes28and3�(D)to

theFinancialStatements.

Reserves

DetailsofmovementsinthereservesoftheGroupandtheCompanyduringtheyeararesetoutintheFinancialStatementson

pages73to7�.

Purchase,SaleorRedemptionofListedSecuritiesoftheCompany

Duringtheyear,theCompanyrepurchasedcertainofitssharesontheSEHKandthesesharesweresubsequentlycancelledby

theCompany.FurtherdetailsofthesetransactionsaresetoutinNote28(B)totheFinancialStatements.

Exceptasdisclosedabove,neithertheCompany,noranyofitssubsidiarycompanies,hasmadeanypurchase,saleor

redemptionofanyoftheCompany’slistedsecuritiesduringtheyear.

ResultsandAppropriations

TheconsolidatedprofitoftheGroupfortheyearended3�December2007andthestateofaffairsoftheCompanyandtheGroup

atthatdatearesetoutintheFinancialStatementsonpages70to�40.

AninterimdividendofU.S.0.26cent(2006:U.S.0.�3cent)perordinaryshare,totalingUS$8.2million(2006:US$4.�million),was

paidon26October2007.TheDirectorsrecommendthepaymentofaspecialdividendofU.S.0.38cent(2006:U.S.0.�2cent

declared)andfinaldividendofU.S.0.64cent(2006:U.S.0.4�cent)perordinaryshare,totalingUS$�2.3million(2006:US$3.9

million)andUS$20.6million(2006:US$�4.4million),respectively.

CharitableContributions

TheGroupmadecharitablecontributionstotalingUS$8.0millionin2007(2006:US$6.�million).

Property,PlantandEquipment

DetailsofmovementsintheGroup’sproperty,plantandequipmentduringtheyearareprovidedinNote��totheFinancial

Statements.


Borrowings

DetailsoftheborrowingsoftheGroupareprovidedinNote2�totheFinancialStatements.

DistributableReserves

At3�December2007,theCompany’sreservesavailablefordistribution,calculatedinaccordancewiththeprovisionsofthe

CompaniesAct�98�ofBermuda(asamended)amountedtoUS$�2�.9million(2006:US$439.4million).TheCompany’sshare

premiumaccount,intheamountofUS$97�.7million(2006:US$964.2million),maybedistributedintheformoffullypaidbonus

shares.

Pre-emptiveRights

Therearenoprovisionforpre-emptiverightsundertheCompany’sbye-lawsorthelawsofBermudawhichwouldobligethe

Companytooffernewsharesonaproratabasistoexistingshareholders.

Directors

ThenamesoftheDirectorsoftheCompanywhoheldofficeat3�December2007aresetoutonpages�0to�3.Detailsofa

Director‘sservicecontractareprovidedintheCorporateGovernanceReportonpage�4,andtheremunerationpolicyand

otherdetailsareprovidedintheCorporateGovernanceReportonpages��and�6andNote3�(A)totheFinancialStatements,

respectively.

InterestsofDirectorsintheCompanyanditsAssociatedCorporations

At3�December2007,theinterestsandshortpositionsoftheDirectorsandchiefexecutiveoftheCompanyinthesharesof

theCompany,underlyingsharesanddebenturesoftheCompanyoranyassociatedcorporation(withinthemeaningofPartXV

oftheSFO)which(a)wererequiredtobenotifiedtotheCompanyandSEHKpursuanttoDivisions7and8ofPartXVoftheSFO

(includinginterestsandshortpositionswhichtheyaretakenordeemedtohaveundersuchprovisionsoftheSFO);or(b)were

required,pursuanttoSection3�2oftheSFOtobeenteredintheregisterreferredtotherein;or(c)wererequired,pursuantto

theModelCode,tobenotifiedtotheCompanyandSEHKwereasfollows:

(A) LongPositionsinSharesintheCompany

Approximate

percentageof Ordinary

issuedshare share

Name Ordinaryshares capital(%) options

AnthoniSalim �,4�8,�2�,963(C)(i) 44.00 –

ManuelV.Pangilinan 6,0�2,7�9(P) 0.�9 62,000,000

EdwardA.Tortorici 28,3�2,�3�(P) 0.88 28,820,000

RobertC.Nicholson – – 29,�00,000

AmbassadorAlbertF.delRosario 600,000(P) 0.02 6,000,000

BennyS.Santoso – – 6,000,000

GrahamL.Pickles – – 3,�60,000

Prof.EdwardK.Y.ChenGBS, CBE , JP – – 4,�00,000

SirDavidW.C.TangKBE – – 3,�60,000

(C) = Corporate interest, (P) = Personal interest

(i) Anthoni Salim owns 100 per cent of First Pacific Investments (BVI) Limited which, in turn, is interested in 628,296,599 shares in the Company. Of this, 33.334 per cent is held by Anthoni Salim directly, and 66.666 per cent by Salerni International Limited (a company which Anthoni Salim directly holds 100 per cent of the issued share capital). Anthoni Salim also owns 56.8 per cent of First Pacific Investments Limited which, in turn, is interested in 790,229,364 shares in the Company. Of this, 10 per cent is held by Anthoni Salim directly, and 46.8 per cent by Salerni International Limited. The remaining 43.2 per cent interest in First Pacific Investments Limited is owned as to 30 per cent by Sutanto Djuhar, 10 per cent by Tedy Djuhar and 3.2 per cent by a company controlled by Ibrahim Risjad, all of whom are Non-executive Directors of the Company.

66

Statutory Reports

(B) LongPositionsinSharesinAssociatedCorporations• ManuelV.Pangilinanowned�,248,404commonshares(P)(0.09%)*inMPIC,202,933commonshares(P)(0.��%)*in

PLDTand360preferredshares(P)(lessthan0.0�%)*inPLDTasbeneficialownerandafurther��,4�7commonshares

(0.0�%)*inPLDTasnominee.

• EdwardA.Tortoriciowned69,�96commonshares(C)and660,000commonshares(P)inMPIC(collectively0.0�%)*in

MPICand�04,874commonshares(P)(0.06%)*inPLDT.

• SutantoDjuharowned��,�20,33�shares(C)(0.�8%)*inIndofood.

• TedyDjuharowned��,�20,33�shares(C)(0.�8%)*inIndofood.

• IbrahimRisjadowned6,406,�80shares(C)(0.08%)*inIndofood.

• AnthoniSalimowned632,370shares(C)(0.0�%)*inIndofoodandadirectinterestof2,007,788shares(0.�4%)*in

IndofoodAgriResourcesLtd.throughhiscontrolledcorporationsotherthantheCompanyandanindirectinterestof

998,200,000shares(68.9�%)*throughFirstPacificGroupcompanies.

• AmbassadorAlbertF.delRosarioowned��9,99�commonshares(P)(0.06%)*inPLDT,�,�60preferredshares(P)

(lessthan0.0�%)*inPLDT,32,23�,970preferredshares(�2.20%)*inPrimeMediaHoldings,Inc.(PMH)asnominee,

4commonshares(P)(lessthan0.0�%)*inPMHasbeneficialowner,4,922commonshares(P)(2.46%)*inCostade

MaderaCorporation,��,000commonshares(P)(�.00%)*inMetroPacificLandHoldingsInc.,and80,000common

shares(P)(20.00%)*inMetroStrategicInfrastructureHoldings,Inc.

(P) = Personal interest, (C) = Corporate interest

* Approximate percentage of the issued capital of the respective class of shares in the respective associated corporation as at 31 December 2007.

At3�December2007,saveasdisclosedabove,noneoftheDirectorsandchiefexecutiveoftheCompanywereinterested,or

weredeemedtobeinterestedinthelongandshortpositionsintheshares,underlyingsharesanddebenturesoftheCompany

oranyassociatedcorporation(withinthemeaningoftheSFO)which(a)wererequiredtobenotifiedtotheCompanyandSEHK

pursuanttoDivisions7and8ofPartXVoftheSFO;or(b)wererequired,pursuanttoSection3�2oftheSFO,tobeenteredinthe

registerreferredtotherein;or(c)wererequired,pursuanttotheModelCode,tobenotifiedtotheCompanyandSEHK.

InterestsofSubstantialShareholdersintheCompany

TheregisterofinterestsinsharesandshortpositionsofsubstantialshareholdersmaintainedunderSection336oftheSFOshows

thatat3�December2007,theCompanyhadbeennotifiedthatthefollowingpersonswereinterestedinfivepercentormoreof

theCompany’sissuedsharecapital:

(a) SalerniInternationalLimited(Salerni),whichwasincorporatedintheBritishVirginIslands,wasinterestedin�,4�8,�2�,963

ordinarysharesoftheCompany(longposition)at3�December2007,representingapproximately44.00percentofthe

Company’sissuedsharecapital,bywayofits46.80percentinterestinFirstPacificInvestmentsLimited(FPIL-Liberia)and

its66.666percentinterestinFirstPacificInvestments(BVI)Limited(FPIL-BVI).

(b) FPIL-Liberia,whichwasincorporatedintheRepublicofLiberia,beneficiallyowned790,229,364ordinarysharesat

3�December2007,representingapproximately24.��percentoftheCompany’sissuedsharecapitalatthatdate.FPIL-

LiberiaisownedbytheChairman(AnthoniSalim)andthreeNon-executiveDirectors(SutantoDjuhar,TedyDjuharand

IbrahimRisjad),intheproportionspecifiedinnote(i)ofthetableonpage6�.AnthoniSalimistakentobeinterestedinthe

sharesownedbyFPIL-Liberia.


(c) FPIL-BVI,whichwasincorporatedintheBritishVirginIslands,beneficiallyowned628,296,�99ordinarysharesat

3�December2007,representingapproximately�9.49percentoftheCompany’sissuedsharecapitalatthatdate.Anthoni

Salim,theChairmanoftheCompany,beneficiallyownstheentireissuedsharecapitalofFPIL-BVIand,accordingly,istaken

tobeinterestedinthesharesownedbyFPIL-BVI.

(d) BrandesInvestmentPartners,L.P.(Brandes),aU.S.company,notifiedtheCompanythatitheld�9�,822,�73ordinaryshares

oftheCompanyinDecember2007,representingapproximately�.9�percentoftheCompany’sissuedsharecapitalat

thattime.At3�December2007,theCompanyhasnotreceivedanyothernotificationfromBrandesofanychangetosuch

holding.

(e) MarathonAssetManagementLimited(Marathon),aU.K.incorporatedcompany,notifiedtheCompanythatitheld

226,27�,�73ordinarysharesoftheCompanyinJuly2007,representingapproximately7.04percentoftheCompany’s

issuedsharecapitalatthattime.InJanuary2008,MarathonnotifiedtheCompanythatitheld2�0,489,�73ordinaryshares

oftheCompany,representingapproximately6.�3percentoftheCompany’sissuedsharecapitalatthattime.

Saveasdisclosedabove,theDirectorsandchiefexecutiveoftheCompanyarenotawareofanypersonat3�December2007

whohadaninterestorshortpositioninthesharesorunderlyingsharesanddebenturesoftheCompanywhichwouldbe

requiredtobedisclosedtotheCompanyundertheprovisionsofDivisions2and3ofPartXVoftheSFO,orwhowasinterested,

directlyorindirectly,infivepercentormoreofthenominalvalueofanyclassofsharecapitalcarryingrightstovoteinall

circumstancesatthegeneralmeetingsoftheCompany.

ContractsofSignificance

ExceptfortheconnectedandcontinuingconnectedtransactionssetoutintheCorporateGovernanceReportonpages�6to6�,

therewerenocontractsofsignificanceinrelationtotheCompany’sbusinesstowhichtheCompanyoritssubsidiarycompanies

wereparties,andinwhichaDirectoroftheCompanyhadamaterialinterest,whetherdirectlyorindirectly,subsistedattheend

oftheyearoratanytimeduringtheyear.

NoneoftheDirectorshadanydirectorindirectinterestinanyassetswhichhavebeenacquired,disposedofby,orleasedto,

orareproposedtobeacquiredordisposedofby,orleasedtotheCompanyoranyofitssubsidiarycompaniesattheendofthe

yearoratanytimeduringtheyear.

Directors’RightstoAcquireSharesorDebentures

Apartfromasdisclosedundertheheading“InterestsofDirectorsintheCompanyanditsAssociatedCorporations”aboveand

“ShareOptions”inNote3�(D)totheFinancialStatements,atnotimeduringtheyearwastheCompanyoranyofitssubsidiary

companiesapartytoanyarrangementtoenabletheDirectorsoftheCompanytoacquirebenefitsbymeansoftheacquisition

ofsharesin,ordebenturesof,theCompanyoranyotherbodycorporateandnoneoftheDirectorsoftheCompanyortheir

spousesorminorchildrenhadanyrighttosubscribeforsecuritiesoftheCompany,orhadexercisedanysuchrightduringthe

year.

SummaryFinancialInformation

Asummaryofthepublishedresults,assets,liabilitiesandminorityinterest,andvariousinformationandfinancialratiosof

theCompanyandtheGroupforthelasttenfinancialyears,asextractedfromtheauditedFinancialStatementsandrestated/

reclassifiedasappropriate,issetoutonpage�44.ThissummarydoesnotformpartoftheauditedFinancialStatements.

MajorCustomersandSuppliers

In2007,salestotheGroup’sfivelargestcustomersaccountedforlessthan30percentofthetotalsalesfortheyear,whereas

purchasesfromtheGroup’sfivelargestsuppliersaccountedfor�7percentofthetotalpurchasesfortheyearofwhich

purchasesfromthelargestsupplierincludedthereinaccountedfor33percentofthetotalpurchases.

68

Statutory Reports

ConnectedandContinuingConnectedTransactions

ConnectedandcontinuingconnectedtransactionsrequiredtobedisclosedinaccordancewithChapter�4AoftheListingRules,

aredisclosedintheCorporateGovernanceReportonpages�6to6�.

SufficiencyofPublicFloat

BasedoninformationthatispubliclyavailabletotheCompanyandwithintheknowledgeoftheDirectors,atleast2�percentof

theCompany’stotalissuedsharecapitalwasheldbythepublicatboth3�December2007andthedateofthisreport.

Directors’andOfficers’LiabilityInsurance

Duringtheyear,theCompanyhasmaintainedappropriateDirectors’andofficers’liabilityinsuranceforallDirectorsandofficers

oftheCompanyanditsrelatedcompanies,saveinthoseinstanceswhereindividualcompanieshavemaintainedtheirown

coverage.

EmploymentPolicy

TheCompanyhasapolicyofnon-discriminationinrespectoftheage,religion,gender,race,disabilityormaritalstatusof

employeesandprospectiveemployees.Thisensuresthatindividualsaretreatedequally,giventheirskillsandabilities,interms

ofcareerdevelopmentandopportunitiesforadvancement.

SubsequentEvents

DetailsofthesignificantsubsequenteventsoftheGrouparesetoutinNote38totheFinancialStatements.

Auditors

Ernst&YoungretireandaresolutionfortheirreappointmentasauditorsoftheCompanywillbeproposedattheforthcoming

AGM.

OnbehalfoftheBoardofDirectors

NancyL.M.LiCompany Secretary

HongKong

3�March2008


independent Auditors’ Report

TOTHESHAREHOLDERSOFFIRSTPACIFICCOMPANYLIMITED(IncorporatedinBermudawithlimitedliability)

WehaveauditedtheFinancialStatementsofFirstPacificCompanyLimitedsetoutonpages70to�40,whichcomprisetheconsolidatedandcompanybalancesheetsasat3�December2007,andtheconsolidatedprofitandlossstatement,theconsolidatedandcompanystatementsofchangesinequityandtheconsolidatedcashflowstatementfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotes.

Directors’ResponsibilitiesfortheFinancialStatements

TheDirectorsoftheCompanyareresponsibleforthepreparationandthetrueandfairpresentationoftheseFinancialStatementsinaccordancewithHongKongFinancialReportingStandardsissuedbytheHongKongInstituteofCertifiedPublicAccountantsandthedisclosurerequirementsoftheHongKongCompaniesOrdinance.Thisresponsibilityincludesdesigning,implementingandmaintaininginternalcontrolrelevanttothepreparationandthetrueandfairpresentationofFinancialStatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.

Auditors’Responsibility

OurresponsibilityistoexpressanopinionontheseFinancialStatementsbasedonouraudit.Ourreportismadesolelytoyou,asabody,inaccordancewithSection90oftheBermudaCompaniesAct�98�,andfornootherpurpose.Wedonotassumeresponsibilitytowardsoracceptliabilitytoanyotherpersonforthecontentsofthisreport.

WeconductedourauditinaccordancewithHongKongStandardsonAuditingissuedbytheHongKongInstituteofCertifiedPublicAccountants.ThosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceastowhethertheFinancialStatementsarefreefrommaterialmisstatement.

AnauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheFinancialStatements.Theproceduresselecteddependontheauditors’judgment,includingtheassessmentoftherisksofmaterialmisstatementoftheFinancialStatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorsconsiderinternalcontrolrelevanttotheentity’spreparationandtrueandfairpresentationoftheFinancialStatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.AnauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebytheDirectors,aswellasevaluatingtheoverallpresentationoftheFinancialStatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

Inouropinion,theFinancialStatementsgiveatrueandfairviewofthestateofaffairsoftheCompanyandoftheGroupasat3�December2007andoftheGroup’sprofitandcashflowsfortheyearthenendedinaccordancewithHongKongFinancialReportingStandardsandhavebeenproperlypreparedinaccordancewiththedisclosurerequirementsoftheHongKongCompaniesOrdinance.

ERNST&YOUNGCertified Public Accountants

�8thFloor,TwoInternationalFinanceCentre8FinanceStreet,Central,HongKong

3�March2008

70

Financial Statements

Consolidated Profit and Loss Statement

Fortheyearended3�December 2007 2006

US$millions Notes (Restated)(i)

Turnover 4 3,075.0 2,474.8

Costofsales (2,315.2) (�,836.�)

GrossProfit 759.8 638.3

Gainondivestmentsanddilutions 356.1 �04.0

Distributioncosts (261.4) (229.6)

Administrativeexpenses (180.9) (��0.8)

Otheroperatingexpenses,net (18.9) (�03.9)

Netborrowingcosts � (133.0) (�06.�)

Shareofprofitslesslossesofassociatedcompaniesandjointventures 245.7 �4�.8

ProfitBeforeTaxation 6 767.4 293.3

Taxation 7 (95.7) (7�.6)

ProfitfortheYear 671.7 22�.7

Attributableto: Equityholdersoftheparent 8 510.4 �64.�

Minorityinterest 161.3 �7.2

671.7 22�.7

OrdinaryShareDividends 9

Interim–U.S.0.26cent(2006:U.S.0.�3cent)pershare 8.2 4.�

Proposed/declaredspecial–U.S.0.38cent(2006:U.S.0.�2cent)pershare 12.3 3.9

Proposedfinal–U.S.0.64cent(2006:U.S.0.4�cent)pershare 20.6 �4.4

Total 41.1 22.4

EarningsPerShareAttributabletoEquityHoldersoftheParent(U.S.cents) �0

Basic 15.89 �.��

Diluted 15.46 �.06

(i) Refer to Note 2(C)

TheNotesonpages78to�40formanintegralpartoftheFinancialStatements.


Consolidated Balance Sheet

At3�December 2007 2006US$millions Notes (Restated)(i)

Non-currentAssets Property,plantandequipment �� 784.1 7�6.8 Plantations �2 881.5 27�.0 Associatedcompaniesandjointventures �4 1,311.4 �32.3 Goodwill �� 347.2 34.8 Financialassetsatfairvaluethroughprofitorloss �6 79.8 �04.9 Accountsreceivable,otherreceivablesandprepayments �7 37.0 ��.9 Prepaidlandpremiums �8 151.4 4�.8 Available-for-saleassets �9 6.0 4.9 Deferredtaxassets 20 45.0 20.3 Othernon-currentassets 2� 110.0 �06.�

3,753.4 �,8�7.2

CurrentAssets Cashandcashequivalents 22 600.8 267.4 Pledgeddepositsandrestrictedcash 32(D) – 3�.3 Available-for-saleassets �9 24.1 �02.� Accountsreceivable,otherreceivablesandprepayments �7 355.5 2�8.� Inventories 23 494.0 367.4

1,474.4 �,026.3

CurrentLiabilities Accountspayable,otherpayablesandaccruals 24 485.6 300.� Short-termborrowings 2� 1,000.1 �08.9 Provisionfortaxation 26 52.9 23.� Currentportionofdeferredliabilitiesandprovisions 27 17.4 �6.6

1,556.0 848.7

NetCurrent(Liabilities)/Assets (81.6) �77.6

TotalAssetsLessCurrentLiabilities 3,671.8 2,034.8

Equity Issuedsharecapital 28 32.2 32.0 Otherreserves 29 1,048.8 97�.� Retainedearnings/(accumulatedlosses) 56.1 (424.8)

Equityattributabletoequityholdersoftheparent 1,137.1 �82.7 Minorityinterest 30 992.6 4�0.�

TotalEquity 2,129.7 �,032.8

Non-currentLiabilities Long-termborrowings 2� 1,044.5 647.0 Deferredliabilitiesandprovisions 27 180.5 92.� Deferredtaxliabilities 20 310.8 �63.3 Derivativeliability 3� 6.3 99.6

1,542.1 �,002.0

3,671.8 2,034.8




MANUELV.PANGILINAN EDWARDA.TORTORICIManaging Director and Chief Executive Officer Executive Director

3�March2008

72

Company Balance Sheet


At3�December 2007 2006

US$millions Notes

Non-currentAssets Subsidiarycompanies �3 906.2 784.2

Loanstoajointventure 104.3 –

Amountsduefromsubsidiarycompanies �3(A) – �,��9.9

1,010.5 2,344.�

CurrentAssets Cashandcashequivalents 22 106.3 62.4

Amountsduefromsubsidiarycompanies �3(A) 1,781.8 –

Otherreceivablesandprepayments 0.2 0.�

1,888.3 62.�

CurrentLiabilities Amountsduetosubsidiarycompanies �3(B) 814.5 –

Otherpayablesandaccruals 0.6 0.�

815.1 0.�

NetCurrentAssets 1,073.2 62.0

TotalAssetsLessCurrentLiabilities 2,083.7 2,406.�

Equity Issuedsharecapital 28 32.2 32.0

Otherreserves 1,162.5 �,�48.7

Retainedearnings 348.1 26�.6

Equityattributabletoequityholdersoftheparent 1,542.8 �,446.3

Non-currentLiabilities Loansfromsubsidiarycompanies �3(C) 540.9 9�9.8

2,083.7 2,406.�



MANUELV.PANGILINAN EDWARDA.TORTORICIManaging Director and Chief Executive Officer Executive Director

3�March2008


Consolidated Statement of Changes in equity

Equityattributabletoequityholdersoftheparent

Unrealized

Unrealized gains/ Retained

Issued Share gainson (losses)on earnings/

share Share options available-for– cashflow Exchange Capital (accumulated Minority Total

US$millions Notes capital premium issued saleassets hedges reserve reserve losses) Total interest equity

Balanceat�January2006 3�.9 9�9.� 9.3 6.4 4.0 (�0.9) – (�77.0) 382.8 323.9 706.7

Changesinequityfor2006:

Exchangedifferenceson

translatingforeignoperations – – – – – �.7 – – �.7 29.2 34.9

Unrealizedgainson

available-for-saleassets – – – 4�.� – – – – 4�.� 3.7 49.2

Unrealizedlosseson

cashflowhedges – – – – (�0.6) – – – (�0.6) – (�0.6)

Netincomeandexpense

recognizeddirectlyinequity – – – 4�.� (�0.6) �.7 – – 40.6 32.9 73.�

Profitfortheyear – – – – – – – �64.� �64.� �7.2 22�.7

Totalrecognizedincomeand

expensefortheyear – – – 4�.� (�0.6) �.7 – �64.� 20�.� 90.� 29�.2

Divestmentanddilutionofinterest

inanassociatedcompany – – – – – 2.� – – 2.� – 2.�

Restructuringtransactionsamong

entitiesundercommoncontrol – – – – – – (2.6) – (2.6) 2.6 –

Acquisitionofsubsidiarycompanies 32(A) – – – – – – – – – 3�.9 3�.9

Sharesissuedtominorityinterest

byasubsidiarycompany – – – – – – – – – 2.� 2.�

Changeinattributableinterests – – – – – – – – – (2.4) (2.4)

Dividendspaidto

minorityshareholders – – – – – – – – – (2.�) (2.�)

Issueofsharesupon

theexerciseofshareoptions 28(A) 0.� �.� (�.6) – – – – – 3.6 – 3.6

Equity-settledshareoption

arrangements – – 3.6 – – – – – 3.6 – 3.6

200�finaldividend – – – – – – – (8.2) (8.2) – (8.2)

2006interimdividend 9 – – – – – – – (4.�) (4.�) – (4.�)

Balanceat3�December2006 32.0 964.2 ��.3 ��.9 (6.6) (42.7) (2.6) (424.8) �82.7 4�0.� �,032.8

74

Consolidated Statement of Changes in equity (cont’d)


Equityattributabletoequityholdersoftheparent

Unrealized

Unrealized gains/ Retained

Issued Share gainson (losses)on earnings/

share Share options available-for– cashflow Exchange Capital (accumulated Minority Total

US$millions Notes capital premium issued saleassets hedges reserve reserve losses) Total interest equity

Balanceat�January2007 32.0 964.2 ��.3 ��.9 (6.6) (42.7) (2.6) (424.8) �82.7 4�0.� 1,032.8

Changesinequityfor2007:

Exchangedifferenceson

translatingforeignoperations – – – – – 84.4 – – 84.4 (29.�) 54.9Unrealizedgainson

available-for-saleassets – – – 3.9 – – – – 3.9 2.2 6.1Realizedgainson

available-for-saleassets – – – (4�.�) – – – – (4�.�) (3.3) (48.8)Unrealizedgainson

cashflowhedges – – – – �3.4 – – – �3.4 – 13.4

Netincomeandexpense

recognizeddirectlyinequity – – – (4�.6) �3.4 84.4 – – �6.2 (30.6) 25.6Profitfortheyear – – – – – – – ��0.4 ��0.4 �6�.3 671.7

Totalrecognizedincomeand

expensefortheyear – – – (4�.6) �3.4 84.4 – ��0.4 �66.6 �30.7 697.3Divestmentanddilutionofinterest

inanassociatedcompany – – – – 0.� 3.3 – – 3.8 – 3.8Dilutionofinterestin

subsidiarycompanies – – – – – (0.8) 0.3 – (0.�) – (0.5)Acquisitionofsubsidiarycompanies 32(A) – – – – – – – – – 203.� 203.5Changeinattributableinterests – – – – – – – – – 223.3 223.3Dividendspaidto

minorityshareholders – – – – – – – – – (��.0) (15.0)Issueofsharesupon

theexerciseofshareoptions 28(A) 0.2 7.� (2.4) – – – – – �.3 – 5.3Repurchaseand

cancellationofshares 28(B) – – – – – – – (3.0) (3.0) – (3.0)Equity-settledshareoption

arrangements – – 8.7 – – – – – 8.7 – 8.72006specialdividend 9 – – – – – – – (3.9) (3.9) – (3.9)2006finaldividend 9 – – – – – – – (�4.4) (�4.4) – (14.4)2007interimdividend 9 – – – – – – – (8.2) (8.2) – (8.2)

Balanceat31December2007 32.2 971.7 17.6 10.3 7.3 44.2 (2.3) 56.1 1,137.1 992.6 2,129.7



Company Statement of Changes in equity

Issued Share

share Share options Contributed Retained

US$millions Notes capital premium issued surplus earnings Total

Balanceat1January2006 3�.9 9�9.� 9.3 �73.8 24�.� �,4�9.2

Profitfortheyear – – – – 32.8 32.8

Issueofsharesupontheexercise

ofshareoptions 28(A) 0.� �.� (�.6) – – 3.6

Equity-settledshareoption

arrangements 34(A) – – 3.0 – – 3.0

200�finaldividend – – – – (8.2) (8.2)

2006interimdividend 9 – – – – (4.�) (4.�)

Balanceat31December2006 32.0 964.2 �0.7 �73.8 26�.6 1,446.3Profitfortheyear – – – – ��2.0 112.0Issueofsharesupon

theexerciseofshareoptions 28(A) 0.2 7.� (2.4) – – 5.3Repurchaseand

cancellationofshares 28(B) – – – – (3.0) (3.0)Equity-settledshareoption

arrangements 34(A) – – 8.7 – – 8.72006specialdividend 9 – – – – (3.9) (3.9)2006finaldividend 9 – – – – (�4.4) (14.4)2007interimdividend 9 – – – – (8.2) (8.2)

Balanceat31December2007 32.2 971.7 17.0 173.8 348.1 1,542.8


76

Consolidated Cash Flow Statement




ProfitBeforeTaxation 767.4 293.3

Adjustmentsfor:

Interestexpenses � 169.9 �24.0

Depreciation 6 64.5 67.2

Impairmentlossesrecognized 38.7 37.6

Equity-settledshareoptionexpense 34(A) 8.7 3.0

Recognitionofprepaidlandpremiums 6 2.8 2.�

Gainondivestmentanddilutionof

interestinanassociatedcompany 6 (206.5) (96.9)

Shareofprofitslesslossesofassociatedcompanies

andjointventures (245.7) (�4�.8)

Gainondilutionofinterestinsubsidiarycompanies 6 (149.6) –

Interestincome � (36.9) (�7.�)

Realizedgainonsaleofavailable-for-saleassets 6 (25.0) (2.2)

Gainonchangesinfairvalueofplantations 6 (22.0) (�3.4)

Foreignexchangeandderivative(gains)/losses,net 6 (20.0) 49.7

(Increase)/decreaseinothernon-currentassets (10.4) 2�.�

Dividendincomefromfinancialassetsatfairvalue

throughprofitorloss 6 (2.9) (2.2)

Increaseinaccountsreceivable,otherreceivables

andprepayments(Non-current) (2.3) (�4.7)

(Gain)/lossonsaleofproperty,plantandequipment 6 (0.2) 3.3

Lossonchangesinfairvalueofnon-currentassetsheldforsale 6 – 0.6

Dividendincomefromavailable-for-saleassets 6 – (0.�)

Gainondisposalofsubsidiarycompanies 6 – (7.�)

Others 30.2 (4.9)

360.7 26�.9

Increase/(decrease)inaccountspayable,

otherpayablesandaccruals 137.1 (��.9)

Increaseininventories (116.1) (34.7)

(Increase)/decreaseinaccountsreceivable,

otherreceivablesandprepayments(Current) (84.4) 46.3

Netcashgeneratedfromoperations(ii) 297.3 2�7.6

Interestreceived 30.3 �4.�

Interestpaid (113.6) (�04.7)

Taxpaid (83.3) (40.3)

NetCashInflowfromOperatingActivities 130.7 �27.�

(i) Refer to Note 2(C)(ii) Changes in working capital are stated excluding movements due to acquisition and disposal of subsidiary companies.


Consolidated Cash Flow Statement (cont’d)



Dividendreceivedfromanassociatedcompany �4(B) 155.0 62.�

Proceedsfromdivestmentprincipallyoffinancialassetsat

fairvaluethroughprofitorloss 49.1 –

Proceedsfromdisposalofavailable-for-saleassets 31.2 3.�

Proceedsfromsaleofproperty,plantandequipment 7.8 4.7

Dividendreceivedfromfinancialassetsat

fairvaluethroughprofitorloss 2.9 2.2

Acquisitionofsubsidiarycompanies 32(A) (517.6) (3�.6)

Increasedinvestmentinassociatedcompanies 32(B) (514.8) (37.3)

Loansandadvancestoajointventure (96.0) (�.4)

Purchaseofproperty,plantandequipment (69.5) (43.7)

Investmentinplantations (36.8) (7.�)

Increasedinvestmentinasubsidiarycompany 32(C) (25.6) –

Acquisitionofassetsdesignatedasfinancialassetsat

fairvaluethroughprofitorloss – (73.7)

Investmentinajointventure – (60.7)

Proceedsfromdisposalofsubsidiarycompanies – (0.8)

NetCashOutflowfromInvestingActivities (1,014.3) (�83.8)

Proceedsofnewborrowings 1,793.8 688.0

Sharesissuedtominorityinterestbysubsidiarycompanies 264.0 2.�

Decrease/(increase)inpledgeddepositsandrestrictedcash 31.3 (26.6)

Issueofsharesupontheexerciseofshareoptions 5.3 3.6

Borrowingsrepaid (824.1) (637.0)

Dividendspaidtoshareholders (26.5) (�2.3)

Dividendspaidtominorityinterestbysubsidiarycompanies (15.0) (2.�)

Paymentsinrespectoffinancingarrangements (6.0) –

Repurchaseofshares (3.0) –

NetCashInflowfromFinancingActivities 1,219.8 ��.7

NetIncrease/(Decrease)inCashandCashEquivalents 336.2 (4�.0)

Cashandcashequivalentsat�January 267.4 296.0

Exchangetranslation (2.8) �2.4

CashandCashEquivalentsat31December 600.8 267.4



78

Notes to the Financial Statements

1. CorporateInformation

FirstPacificCompanyLimitedisaHongKong-basedinvestmentandmanagementcompanywithoperationslocatedinAsia.

Itsprincipalbusinessinterestsrelatetotelecommunications,consumerfoodproductsandinfrastructureandproperty.

TheGroupcomprisestheCompanyanditssubsidiarycompanies.

TheCompanyisalimitedliabilitycompanyincorporatedinBermuda.TheaddressofitsregisteredofficeisCanon’sCourt,22

VictoriaStreet,HamiltonHM�2,Bermuda.

TheCompany’sordinarysharesarelistedontheSEHK.ItssharesarealsoavailableintheUnitedStatesthroughADRs.

2. BasisofPreparation,SummaryofPrincipalAccountingPoliciesandChanges

(A) BasisofPreparationTheFinancialStatementshavebeenpreparedinaccordancewithHKFRSs(whichincludeallHKFRSs,HKASsand

Interpretations)issuedbytheHKICPA,HongKongGAAPandthedisclosurerequirementsoftheHongKongCompanies

OrdinanceandtheListingRules.TheFinancialStatementshavebeenpreparedunderthehistoricalcostconvention

exceptforplantations,financialassetsatfairvaluethroughprofitorloss,available-for-saleassetsandderivative

financialinstrumentswhich,asdisclosedintheaccountingpoliciesbelow,arestatedatfairvalue.TheseFinancial

StatementsarepresentedinUnitedStates(U.S.)dollarsandroundedtothenearestmillion(US$millions)withone

decimalplaceexceptwhenotherwiseindicated.

(B) ImpactofNewandRevisedHKFRSsCertainchangestoHongKongGAAPhavebeenimplementedduring2007asaconsequenceofthefollowingnewand

revisedHKASs,HKFRSsandHK(IFRIC)-IntsissuedbytheHKICPA:

HKAS�Amendment “CapitalDisclosures”(i)

HKFRS7 “FinancialInstruments:Disclosures”(i)

HK(IFRIC)-Int7 “ApplyingtheRestatementApproachunderHKAS29FinancialReporting

inHyperinflationaryEconomies”(ii)

HK(IFRIC)-Int8 “ScopeofHKFRS2”(iii)

HK(IFRIC)-Int9 “ReassessmentofEmbeddedDerivatives”(iv)

HK(IFRIC)-Int�0 “InterimFinancialReportingandImpairment”(v)

(i) Effective for annual periods commencing on or after 1 January 2007(ii) Effective for annual periods commencing on or after 1 March 2006(iii) Effective for annual periods commencing on or after 1 May 2006(iv) Effective for annual periods commencing on or after 1 June 2006(v) Effective for annual periods commencing on or after 1 November 2006

Theadoptionoftheabovepronouncementshashadnoeffectonboththeprofitattributabletoequityholdersofthe

parentfortheyearsended3�December2007and3�December2006andequityattributabletoequityholdersofthe

parentat3�December2007and3�December2006.


(C) SummaryoftheImpactofChangeinAccountingPolicyDuring2007,theDirectorshavereviewedtheGroup’saccountingtreatmentforitsjointventuresfollowingDMCI-MPICWaterCompanyInc.(DMCI-MPIC)’sacquisitionofan84.0percentinterestinMayniladWaterServices,Inc.(Maynilad)inJanuary2007.DMCI-MPICisa�0.0percent-ownedjointventurecompanyofMPIC.Duringsuchareview,theDirectorsconsideredthattheGroup’spreviouslyadoptedaccountingpolicyofapplyingtheproportionateconsolidationmethodforthefinancialresultsandfinancialpositionforitsinvestmentsinjointventureswhichrecognizedassetsthatwerenotcontrolledandliabilitiesthatwerenotpresentobligationstogetherwithassetsthatitcontrolledanditspresentobligations,mightnotbemeaningfulfortheusersoftheGroup’sFinancialStatements.Asaresult,theGroupchangeditsaccountingpolicyforthetreatmentofitsinvestmentsinjointventuresfromtheapplicationofproportionateconsolidationmethodtotheequitymethodofaccounting.The2006comparativeshavebeenrestatedinaccordancewiththischange.

(a) Effectontheconsolidatedbalancesheetat31December2006

At3�December2006Increase/(decrease)US$millions

Assets Associatedcompaniesandjointventures 6�.3 Cashandcashequivalents (60.3) Accountsreceivable,otherreceivablesandprepayments(Current) (�.4)

(0.4)

Liabilities Accountspayable,otherpayablesandaccruals (0.4)

(0.4)

(b) Effectontheconsolidatedprofitandlossstatementfortheyearsended31December2007and2006

Fortheyearended3�December 2007 2006US$millions

Decreaseinturnover (77.1) –Decreaseincostofsales 43.3 –Decreaseinadministrativeexpenses 8.5 –(Increase)/decreaseinotheroperatingexpenses,net (44.0) �.3Decrease/(increase)innetborrowingcosts 29.0 (0.�)Increase/(decrease)inshareofprofitslesslossesof associatedcompaniesandjointventures 39.4 (�.2)Increaseintaxation (1.1) –

Decreaseinprofitfortheyear (2.0) –

Attributableto: Equityholdersoftheparent – – Minorityinterest (2.0) –

Decreaseinprofitfortheyear (2.0) –

Thechangeinaccountingpolicyhashadnoeffectonboththebasicanddilutedearningspershareattributabletoequityholdersoftheparentfortheyearsended3�December2007and3�December2006.

80


(D) ImpactofIssuedButNotYetEffectiveHKFRSsTheGrouphasnotappliedthefollowingnewandrevisedHKFRSs,thathavebeenissuedbutarenotyeteffective,in

theseFinancialStatements.

HKAS�(Revised) “PresentationofFinancialStatements”

HKAS23(Revised) “BorrowingCosts”

HKAS27(Revised) “ConsolidatedandSeparateFinancialStatements”

HKFRS2Amendment “Share-basedPayment–VestingConditionsandCancellations”

HKFRS3(Revised) “BusinessCombinations”

HKFRS8 “OperatingSegments”

HK(IFRIC)–Int�� “HKFRS2–GroupandTreasuryShareTransactions”

HK(IFRIC)–Int�2 “ServiceConcessionArrangements”

HK(IFRIC)–Int�3 “CustomerLoyaltyProgrammes”

HK(IFRIC)–Int�4 “HKAS�9–TheLimitonaDefinedBenefitAsset,MinimumFundingRequirements

andtheirInteraction”

HKAS�(Revised)shallbeappliedforannualperiodsbeginningonorafter�January2009.Themainchangerelates

totheseparationofownerandnon-ownerchangesinthestatementofchangesinequity.Ownersrepresentthe

holdersoffinancialinstrumentsclassifiedasequity.Therevisedstandardrequiresthestatementofchangesinequity

toincludeonlydetailsoftransactionswithowners,withallnon-ownerchangesinequitypresentedasasingleline.In

addition,therevisedstandardintroducesthestatementofcomprehensiveincomewhichpresentsallitemsofincome

andexpenserecognizedinprofitorlosstogetherwithallotheritemsofrecognizedincomeandexpense.

HKAS23(Revised)shallbeappliedforannualperiodsbeginningonorafter�January2009.Themainchangeisthe

removaloftheoptionofimmediatelyrecognizingasanexpenseforborrowingcoststhatrelatetoassetsthattakea

substantialperiodoftimetogetreadyforuseorsale.Anentityis,therefore,requiredtocapitalizeborrowingcostsas

partofthecostofsuchassets.

HKAS27(Revised)shallbeappliedforannualperiodsbeginningonorafter�July2009.Therevisedstandardreplaces

theterm“minorityinterest”with“non-controllinginterest”andrequireschangesinaparent’sownershipinterestina

subsidiarycompanythatdonotresultinalossofcontroltobeaccountedforasequitytransactions.

HKFRS2Amendmentshallbeappliedforannualperiodsbeginningonorafter�January2009.Theamendmentclarifies

thatvestingconditionsareserviceconditionsandperformanceconditionsonlyandthatallcancellations,whetherby

theentityorbyotherparties,shouldreceivethesameaccountingtreatment.

HKFRS3(Revised)shallbeappliedforannualperiodsbeginningon�July2009.Therevisedstandardrequires(a)

forpartialacquisitions,non-controllinginterestsshallbemeasuredeitherastheirproportionateinterestinthenet

identifiableassetsoratfairvalue;(b)forstepacquisitions,goodwillshallbemeasuredasthedifferenceatacquisition

datebetweenthefairvalueofanyinvestmentinthebusinessheldbeforetheacquisition,theconsiderationtransferred

andthenetassetsacquired;(c)therecognitionofacquisition-relatedcostsasexpenses,ratherthanincludedin

goodwilland(d)therecognitionofcontingentconsiderationmeasuredatfairvalueattheacquisitiondate.

HKFRS8shallbeappliedforannualperiodsbeginningonorafter�January2009.Thestandardadoptsamanagement

approachtoreportingsegmentinformation.Theinformationreportedwouldbethatwhichmanagementuses

internallyforevaluatingtheperformanceofoperatingsegmentsandallocatingresourcestothosesegments.HKFRS8

willreplaceHKAS�4“SegmentReporting”.


HK(IFRIC)–Int��shallbeappliedforannualperiodsbeginningonorafter�March2007.Thisinterpretationrequires

arrangementswherebyanemployeeisgrantedrightstoanentity’sequityinstrumentstobeaccountedforasan

equity-settledschemebytheentityevenif(a)theentitychoosesorisrequiredtobuythoseequityinstruments(e.g.,

treasuryshares)fromanotherparty,or(b)theshareholder(s)oftheentityprovidetheequityinstrumentsneeded.

HK(IFRIC)–Int�2shallbeappliedforannualperiodsbeginningonorafter�January2008.Thisinterpretationcovers

contractualarrangementsarisingfromprivateentitiesprovidingpublicservices.

HK(IFRIC)–Int�3shallbeappliedforannualperiodsbeginningonorafter�July2008.Thisinterpretationrequiresthat

loyaltyawardcreditsgrantedtocustomersaspartofasalestransactionareaccountedforasaseparatecomponentof

thesalestransaction.Theconsiderationreceivedinthesalestransactionisallocatedbetweentheloyaltyawardcredits

andtheothercomponentsofthesale.Theamountallocatedtotheloyaltyawardcreditsisdeterminedbyreferenceto

theirfairvalueandisdeferreduntiltheawardsareredeemedortheliabilityisotherwiseextinguished.

HK(IFRIC)–Int�4shallbeappliedforannualperiodsbeginningonorafter�January2008.Thisinterpretationaddresses

howtoassessthelimitunderHKAS�9“EmployeeBenefits”,ontheamountofarefundorareductioninfuture

contributionsinrelationtoadefinedbenefitschemethatcanberecognizedasanasset,inparticular,whenaminimum

fundingrequirementexists.

TheGrouphasnotearlyadoptedtheabovenewandrevisedHKFRSsfortheyearended3�December2007.The

CompanyhasalreadycommencedanassessmentoftheimpactofthesenewandrevisedHKFRSsbutisnotyetina

positiontostatewhetherthesenewandrevisedHKFRSswouldhaveasignificantimpactonitsresultsofoperations

andfinancialpositionandpresentationofconsolidatedfinancialstatements.TheCompanyhasconcludedthatthe

adoptionofHK(IFRIC)-Int�2willaffectitsresultsofoperationsandfinancialpositionfortheannualperiodsbeginning

on�January2008asaresultofachangeinitsaccountingtreatmentinrelationtoMaynilad’sserviceconcession

arrangement.However,theCompanyiscurrentlynotabletoabsolutelyquantifytheimpactyet.

(E) SummaryofPrincipalAccountingPolicies(a) Basisofconsolidation

TheFinancialStatementsincludethefinancialstatementsoftheCompanyanditssubsidiarycompaniesforthe

yearended3�December2007.AllsignificantintercompanytransactionsandbalanceswithintheGroupare

eliminatedonconsolidation.

AsubsidiarycompanyisanentitycontrolledbytheCompany.ControlexistswhentheCompanyhasthepower

togovernthefinancialandoperatingpoliciesoftheentitysoastoobtainbenefitsfromitsactivities.

Theresultsofsubsidiarycompaniesacquiredordisposedofduringtheyearareincludedintheconsolidated

profitandlossstatementfromtheeffectivedateofacquisition,beingthedateonwhichtheGroupobtains

control,oruptotheeffectivedateofdisposal,asappropriate.Thegainorlossondisposalofasubsidiary

companyrepresentsthedifferencebetweenthenetproceedsfromsaleandtheGroup’sshareofitsnetassets,

includingtheattributablecarryingamountofgoodwill.

Theacquisitionofsubsidiarycompaniesduringtheyearhasbeenaccountedforusingthepurchasemethod

ofaccounting.Thismethodinvolvesallocatingthecostofthebusinesscombinationstothefairvalueofthe

identifiableassetsacquired,andliabilitiesandcontingentliabilitiesassumedatthedateofacquisition.Thecostof

theacquisitionismeasuredattheaggregateofthefairvalueoftheassetsgiven,equityinvestmentsissuedand

liabilitiesincurredorassumedatthedateofexchange,pluscostsdirectlyattributabletotheacquisition.

MinorityinterestrepresentstheinterestsofminorityshareholdersnotheldbytheGroupintheresultsandnet

assetsoftheCompany’ssubsidiarycompanies.Allacquisitionofaminorityinterestisaccountedforusingthe

parententityextensionmethodwherebythedifferencebetweentheconsiderationandtheexistingcarrying

amountoftheshareofthenetassetsacquiredisrecognizedasgoodwill.

82


Forbusinesscombinationsinvolvingentitiesorbusinessesundercommoncontrol(abusinesscombinationinwhichallofthecombiningentitiesorbusinessesareultimatelycontrolledbythesamepartyorpartiesbothbeforeandafterthebusinesscombination,andthatcontrolisnottransitory),theyareaccountedforapplyingtheprinciplesofmergeraccountingwhichisconsistentwithAccountingGuideline�“MergerAccountingforCommonControlCombinations”issuedbytheHKICPA.Themethodrequiresthecombinedentityrecognizingtheassets,liabilitiesandequityofthecombiningentitiesorbusinessesatthecarryingamounts(i.e.,existingbookvaluesfromthecontrollingparties’perspective)intheconsolidatedfinancialstatementsofthecontrollingpartyorpartiespriortothecommoncontrolcombination.Thereisnorecognitionofanygoodwillorexcessoftheacquirer’sinterestinthenetfairvalueoftheacquiree’sidentifiedassets,liabilitiesandcontingentliabilitiesoverthecostatthetimeofthecommoncontrolcombinationtotheextentofthecontrollingparty’sorparties’interests.

IntheCompany’sbalancesheet,investmentsinsubsidiarycompaniesarestatedatcostlessanyprovisionforimpairmentlosses.TheresultsofsubsidiarycompaniesareaccountedforbytheCompanyonthebasisofdividendsreceivedandreceivable.

(b) CashandcashequivalentsForthepurposeofthebalancesheets,cashandcashequivalentscomprisecashonhandandatbanks,includingtermdeposits,whicharenotrestrictedastouse.

Forthepurposeoftheconsolidatedcashflowstatement,cashandcashequivalentscomprisecashonhandanddemanddeposits,andshort-termhighlyliquidinvestmentswhicharereadilyconvertibleintoknownamountsofcash,aresubjecttoaninsignificantriskofchangesinvalue,lessbankoverdraftswhicharerepayableondemandandwhichformanintegralpartoftheGroup’scashmanagement.

(c) InventoriesInventoriesarestatedatthelowerofcostandnetrealizablevalue.Costiscalculatedusingthefirst-in,first-outmethod,theweightedaveragemethodorthemovingaveragemethod,andinthecaseofworkinprogressandfinishedgoods,comprisesdirectmaterials,directlabourandanappropriateproportionofoverheads.Thecostofgoodspurchasedforresaleincludescostsincurredinbringingthegoodstotheirpresentlocation.Netrealizablevalueisdeterminedonthebasisofcurrentanticipatedsellingpriceslessestimatesofcoststocompletionandsellingexpenses.

(d) Property,plantandequipmentFreeholdlandisstatedatcostandisnotdepreciated.Otherproperty,plantandequipmentisstatedatcostlessaccumulateddepreciationandanyimpairmentlosses,calculatedonthestraight-linebasisatannualratesestimatedtowriteofftheirbookvaluestoresidualvaluesovertheirexpectedusefullives.DetailsofdepreciationratesaresetoutinNote��(A).

Theinitialcostofproperty,plantandequipmentcomprisesitspurchasepriceandanycostsdirectlyattributableinbringingtheassettoitsworkingconditionandlocationforitsintendeduse.Costalsoincludesassetretirementobligation,interestonborrowedfundsusedduringtheconstructionperiodandqualifiedborrowingcostsfromforeignexchangelossesrelatedtoforeigncurrencydenominatedliabilitiesusedtoacquiresuchassets.Majorcostsincurredinrestoringproperty,plantandequipmenttotheirnormalworkingconditionarechargedtotheprofitandlossstatement.ImprovementsarecapitalizedanddepreciatedovertheirexpectedusefullivestotheGroup.Whenassetsaresoldorretired,theircostsandaccumulateddepreciation,amortizationandimpairmentlosses,ifany,areeliminatedfromtheaccountsandanygainorlossresultingfromtheirdisposalisincludedintheprofitandlossstatement.

Wherepartsofanitemofproperty,plantandequipmenthavedifferentusefullives,thecostofthatitemisallocatedonareasonablebasisamongthepartsandeachpartisdepreciatedseparately.

Residualvalues,usefullivesandthedepreciationmethodarereviewedperiodicallytoensurethattheperiodsandmethodofdepreciationareconsistentwiththeexpectedpatternofeconomicbenefitsfromitemsofproperty,plantandequipment.


(e) PlantationsPlantations,whichprimarilycompriseoilpalmandrubberplantations,arestatedatfairvaluelessestimated

point-of-salecosts.Gainsorlossesarisingoninitialrecognitionofplantationsatfairvaluelessestimated

point-of-salecostsandfromthechangeinfairvaluelessestimatedpoint-of-salecostsofplantationsateach

reportingdateareincludedintheprofitandlossstatementfortheperiodinwhichtheyarise.

Thefairvalueoftheoilpalmplantationsisestimatedbyreferencetoindependentprofessionalvaluationsusing

thediscountedcashflowsoftheunderlyingplantations.Theexpectedcashflowsfromthewholelifecycleofthe

oilpalmplantationsisdeterminedusingthemarketpriceoftheestimatedyieldofthefreshfruitbunches(FFB),

netofmaintenanceandharvestingcosts,andanycostsrequiredtobringtheoilpalmplantationstomaturity.The

estimatedyieldoftheoilpalmplantationsisdependentontheageoftheoilpalmtrees,thelocation,soiltype

andinfrastructure.ThemarketpriceoftheFFBislargelydependentontheprevailingmarketpriceofthecrude

palmoil(CPO)andpalmkerneloil(PKO).

Oilpalmtreeshaveanaveragelifethatrangesfrom20to2�years,withthefirstthreetofouryearsasimmature

andtheremainingasmature.

Rubbertresshaveanaveragelifethatrangesfrom20to2�years,withthefirstfivetosixyearsasimmatureand

theremainingyearsasmature.Rubberplantationsareconsideredmaturewhenatleast70percentofthetrees

perblockaretapableand,thecircumferenceofthetrunkofthetreeis4�centimetersormoreattheheightof

�60centimetersfromtheground.

(f) AssociatedcompaniesAnassociatedcompanyisanentity,notbeingasubsidiarycompanyorajointventure,inwhichtheGrouphasa

long-terminterestofgenerallynotlessthan20percentoftheequityvotingrightsandoverwhosemanagement

theGroupisinapositiontoexercisesignificantinfluence,includingparticipationinthefinancialandoperating

policydecisions.

Investmentsinassociatedcompaniesareaccountedforbytheequitymethodofaccountingandareinitially

recognizedatcost.TheGroup’sinvestmentsinassociatedcompaniesincludegoodwill(netofanyaccumulated

impairmentlosses)identifiedonacquisition.TheGroup’sshareofitsassociatedcompanies’post-acquisition

profitsandlossesisrecognizedintheconsolidatedprofitandlossstatement,anditsshareofpost-acquisition

movementsinreservesisrecognizedinconsolidatedreserves.Thecumulativepost-acquisitionmovements

areadjustedagainstthecarryingamountoftheinvestment.Incomefromassociatedcompaniesisstatedin

theconsolidatedprofitandlossstatementastheGroup’sshareofprofitslesslossesofassociatedcompanies.

Forthosesharesofassociatedcompanies’postacquisitionmovementsinreservesrecognizedintheGroup’s

consolidatedreserves,theGroupwilldisclosethem,whenapplicableintheconsolidatedstatementofchangesin

equity.

Equityaccountingisdiscontinuedwhenthecarryingamountoftheinvestmentinanassociatedcompany

reacheszero,unlesstheGrouphasincurredobligationsorguaranteedobligationsinrespectoftheassociated

company.

(g) JointventuresTheGrouprecognizeditsinterestinjointventuresusingtheequitymethodofaccounting.Undertheequity

methodofaccounting,suchinterestisstatedatcostpluspost-acquisitionchangesintheGroup’sproportionate

shareinthenetassetsofthejointventures,lessanyimpairmentlosses.Theprofitandlossstatementreflects

theGroup’sproportionateshareoftheresultsofoperationofthejointventuresfromthedateofincorporationof

thejointventures.

84


(h) AssetretirementobligationsThenetpresentvalueoflegalobligationsassociatedwiththeretirementofanitemofproperty,plantand

equipmentthatresultedfromtheacquisition,constructionordevelopmentandthenormaloperationofproperty,

plantandequipmentisrecognizedintheperiodinwhichitisincurred.

(i) IncometaxIncometaxcomprisescurrentanddeferredtaxes.Incometaxisrecognizedintheprofitandlossstatement,orin

equityifitrelatestoitemsthatarerecognizeddirectlyinequity.

Currenttaxassetsandliabilitiesforthecurrentandpriorperiodsaremeasuredattheamountexpectedtobe

recoveredfromorpaidtothetaxationauthorities.

Deferredtaxliabilitiesareprovided,usingtheliabilitymethod,onalltaxabletemporarydifferences(withlimited

exceptions)arisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingvaluesforfinancialreporting

purposes.

Deferredtaxassetsarerecognizedforalldeductibletemporarydifferences,carryforwardofunusedtaxassets

andunusedtaxlosses(withlimitedexceptions).Thecarryingamountofdeferredtaxassetsisreviewedateach

balancesheetdateandreducedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitwillbe

availabletoallowallorpartofthedeferredtaxassettobeutilized.Conversely,previouslyunrecognizeddeferred

taxassetsarerecognizedtotheextentthatitisprobablethatsufficienttaxableprofitwillbeavailabletoallowall

orpartofthedeferredtaxassettobeutilized.

Deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplytotheperiodwhen

theassetisrealizedortheliabilityissettled,basedontaxrates(andtaxlaws)thathavebeenenactedor

substantivelyenactedatthebalancesheetdate.

(j) ProvisionsandcontingentliabilitiesAprovisionisrecognizedwhentheGrouphasapresentlegalorconstructiveobligationasaresultofapast

event,itisprobablethatanoutflowofresourceswillberequiredtosettletheobligation,andareliableestimate

oftheamountcanbemade.Whentheeffectofdiscountingismaterial,theamountrecognizedforaprovision

isthepresentvalue,atthebalancesheetdate,ofthefutureexpendituresexpectedtoberequiredtosettlethe

obligation.Theincreaseinthediscountedpresentvalueamount,arisingfromthepassageoftime,isincludedin

netborrowingcostsintheprofitandlossstatement.

Whereitisnotprobablethatanoutflowofeconomicbenefitswillberequired,ortheamountcannotbe

estimatedreliably,theobligationisdisclosedasacontingentliability,unlesstheprobabilityofoutflowisremote.


(k) ImpairmentofassetsAnassessmentismadeateachbalancesheetdateofwhetherthereisanyindicationofimpairmentofassets

includingproperty,plantandequipment,certaininvestments,goodwillandotherlong-livedassets,orwhether

thereisanyindicationthatanimpairmentlosspreviouslyrecognizedforanassetinprioryearsmaynolonger

existormayhavedecreased.Ifanysuchindicationexists,theasset’srecoverableamountisestimated.An

asset’srecoverableamountiscalculatedasthehigheroftheasset’sfairvaluelesscoststosellandvalueinuse.

Animpairmentlossisrecognizedonlyifthecarryingamountofanassetexceedsitsrecoverableamount.An

impairmentlossischargedtotheprofitandlossstatementintheperiodinwhichitarises,unlesstheasset

iscarriedatarevaluedamount,thentheimpairmentlossisaccountedforinaccordancewiththerelevant

accountingpolicyforthatrevaluedasset.

Apreviouslyrecognizedimpairmentlossofallassetsotherthangoodwillisreversedonlyiftherehasbeena

changeintheestimatesusedtodeterminetherecoverableamountoftheasset.However,thisislimitedand

willnotgiverisetoanamounthigherthanthecarryingamountthatwouldhavebeendetermined(netofany

depreciation/amortization),hadnoimpairmentlossbeenrecognizedfortheassetinprioryears.

Areversalofanimpairmentlossiscreditedtotheprofitandlossstatementintheperiodinwhichitarises,unless

theassetiscarriedatarevaluedamount,inwhichcasethereversaloftheimpairmentlossisaccountedforin

accordancewiththerelevantaccountingpolicyforthatrevaluedasset.

(l) Accountingforacquisitionanddisposal(I) Results

Theresultsofsubsidiaryorassociatedcompaniesacquiredordisposedofareaccountedforfromortothe

effectivedateofacquisitionordisposal.

(II) Fair value adjustments

Ontheacquisitionofasubsidiarycompanyoraninterestinanassociatedcompany,theacquisitioncostis

allocatedtothefairvaluesoftheidentifiableassets,liabilitiesandcontingentliabilitiesacquired.

(III) Goodwill

GoodwillrepresentstheexcessofthecostoftheacquisitionovertheGroup’sshareofthefairvaluesof

theidentifiableassets,liabilitiesandcontingentliabilitiesacquiredasatthedateofacquisition.Following

initialrecognition,goodwillismeasuredatcostlessanyaccumulatedimpairmentlosses.Goodwillisnot

amortizedbutreviewedforimpairment,annuallyormorefrequentlyifeventsorchangesincircumstances

indicatethatthecarryingvaluemaybeimpairedanditsamountwillbewrittendownforimpairmentwhen

itisconsiderednecessary.Apreviouslyrecognizedimpairmentlossforgoodwillisnotreversed.

AnyexcessoftheGroup’sinterestinthenetfairvalueoftheacquirees’identifiableassets,liabilitiesand

contingentliabilitiesoverthecostoftheacquisition,afterreassessment,isrecognizedimmediatelyinthe

consolidatedprofitandlossstatement.

Inthecaseofassociatedcompaniesandjointventures,goodwillisincludedinthecarryingamountthereof,

ratherthanasaseparatelyidentifiedassetontheconsolidatedbalancesheet.

(m) Foreigncurrencies(I) Functional and presentational currency

ItemsincludedinthefinancialstatementsofeachoftheGroup’sentitiesaremeasuredusingthecurrency

oftheprimaryeconomicenvironmentinwhichtheentityoperates(the“functionalcurrency”).TheFinancial

StatementsarepresentedinthecurrencyofUnitedStatesdollars,whichistheCompany’sfunctionaland

presentationcurrency.

86


(II) Transactions and balances

Foreigncurrencytransactionsaretranslatedintothefunctionalcurrencyusingtheexchangerates

prevailingatthedatesofthetransactions.Foreignexchangegainsandlossesresultingfromthesettlement

ofsuchtransactionsandfromthetranslationatyear-endexchangeratesofmonetaryassetsandliabilities

denominatedinforeigncurrenciesarerecognizedintheprofitandlossstatement.Non-monetaryitems

thataremeasuredintermsofhistoricalcostinaforeigncurrencyaretranslatedusingtheexchangerates

atthedatesoftheinitialtransactions.Non-monetaryitemsmeasuredatfairvalueinaforeigncurrencyare

translatedusingtheexchangeratesatthedatewhenthefairvaluewasdetermined.

(III) Group companies

Theresultsandfinancialpositionofallthegroupentities(noneofwhichhasthecurrencyofa

hyperinflationaryeconomy)thathaveafunctionalcurrencydifferentfromthepresentationcurrencyare

translatedintothepresentationcurrencyasfollows:

(i) assetsandliabilitiesforeachbalancesheetpresentedaretranslatedattheclosingrateatthedateof

thatbalancesheet;

(ii) incomeandexpensesforeachprofitandlossstatementaretranslatedataverageexchangerates;

and

(iii) allresultingexchangedifferencesarerecognizedasaseparatecomponentofequity.On

consolidation,exchangedifferencesarisingfromthetranslationofthenetinvestmentinforeign

entities,andofborrowingsandothercurrencyinstrumentsdesignatedashedgesofsuch

investments,aretakentoequity.Whenaforeignoperationissold,suchexchangedifferencesare

recognizedintheprofitandlossstatementaspartofthegainorlossondisposal.

Goodwillandfairvalueadjustmentsarisingontheacquisitionofaforeignentityaretreatedasassetsand

liabilitiesoftheforeignentityandaretranslatedattheclosingrate.

(IV) Cash flow statement

Forthepurposeoftheconsolidatedcashflowstatement,thecashflowsofoverseassubsidiarycompanies

aretranslatedintoUnitedStatesdollarsattheexchangeratesrulingatthedatesofthecashflows.

Frequentlyrecurringcashflowsofoverseassubsidiariesandjointly-controlledentitieswhicharise

throughouttheyeararetranslatedintoUnitedStatesdollarsataverageexchangeratesoftheyear.

(n) TurnoverandrevenuerecognitionTurnoverrepresentstheamountsreceivedandreceivablefromthesaleofgoodsandpropertiesandthe

renderingofservicestothirdparties,fallingwithintheordinaryactivitiesoftheGroup’sbusinesses.Turnover

fromsalesisrecognizedwhentheownershipofgoodssoldhasbeentransferredtothebuyer.Turnoverfrom

servicesisrecognizedwhenitcanbemeasuredreliablybyreferencetostagesofcompletionfortherenderingof

thesaidservices.

DividendincomeisrecognizedwhentheGroup’srighttoreceivepaymenthasbeenestablished.Interestincome

isrecognizedasitaccruestakingintoaccounttheprincipalamountoutstandingandtheeffectiveinterestrate.


(o) SegmentalinformationAsegmentisadistinguishablecomponentoftheGroupthatisengagedeitherinprovidingcertainproducts

orservices(businesssegment),orinprovidingproductsorserviceswithinaparticulareconomicenvironment

(geographicalsegment),whichissubjecttorisksandrewardsthataredifferentfromthoseofothersegments.

Segmentrevenue,expenses,results,assetsandliabilitiesincludeitemsdirectlyattributabletoasegmentaswell

asthosethatcanbeallocatedonareasonablebasistothatsegment.Theyaredeterminedbeforeintragroup

balancesandintragrouptransactionsareeliminatedaspartoftheconsolidationprocess.

Segmentcapitalexpenditureisthetotalcostincurredduringtheyeartoacquiresegmentassetsthatare

expectedtobeusedformorethanoneyear.TheHeadOfficeandotheritemsmainlycomprisetheHeadOffice’s

assets,borrowingsandoverheads.

(p) LeasesLeases,wheresubstantiallyalloftherisksandrewardsofownershipofassetsremainwiththelessor,are

accountedforasoperatingleases.WheretheGroupisthelessee,rentalspayableunderoperatingleasesare

recordedintheprofitandlossstatementonthestraight-linebasisovertheleaseterms.

Prepaidlandpremiumsforlandleasepaymentsunderoperatingleasesareinitiallystatedatcostand

subsequentlyrecognizedasexpensesonthestraight-linebasisovertheleaseterms.

LeasesthattransfersubstantiallyalltherewardsandrisksofownershipofassetstotheGroup,otherthan

legaltitle,areaccountedforasfinanceleases.Attheinceptionofafinancelease,thecostoftheleasedasset

iscapitalizedatthepresentvalueoftheminimumleasepaymentsandrecordedtogetherwiththeobligation,

excludingtheinterestelement,toreflectthepurchaseandfinancing.Financeleasepaymentsareapportioned

betweenthefinancechargesandreductionoftheleaseliabilitysoastoachieveaconstantrateofintereston

theremainingbalanceoftheliability.Afinanceleasegivesrisetoadepreciationexpensefortheassetaswellas

aborrowingcostforeachperiod.Financechargesarechargeddirectlytocurrentoperations.Thedepreciation

policyforleasedassetsisconsistentwiththatfordepreciableassetsthatareowned.

(q) Employeebenefits(I) Pension obligations

TheGroupoperatesdefinedcontributionanddefinedbenefitretirementschemes.

ContributionstodefinedcontributionschemesbytheGroupandemployeesarecalculatedasapercentage

oftheemployees’basicsalaries.TheGroup’scontributionstodefinedcontributionschemesareexpensed

asincurredandarereducedbycontributionsforfeitedbythoseemployeeswholeavetheschemespriorto

thecontributionsvestingfully.

Contributionstodefinedbenefitschemesaredeterminedbasedonthevalueoftheretirementscheme

assetsandestimatesoftheeffectsoffutureeventsontheactuarialpresentvalueofaccruedpension

obligations,andaredeterminedonthebasisofactuarialvaluationsusingtheprojectedunitcreditmethod.

Thecostsofdefinedbenefitschemesarechargedagainstprofitonasystematicbasissoastobespread

overtheexpectedremainingservicelivesoftheemployeesaffected.Actuarialgainsandlossesare

recognizedimmediatelyintheprofitandlossstatementasandwhentheyoccur.

(II) Long service payments

CertainoftheGroup’semployeesareeligibleforlongservicepaymentsintheeventofthetermination

oftheiremployment.Aprovisionisrecognizedinrespectoftheprobablefuturelongservicepayments

expectedtobemade.Theprovisionisthebestestimateoftheprobablefuturepaymentsthathavebeen

earnedbytheemployeesfromtheirservicetotheGroupatthebalancesheetdate.

88


(III) Equity-settled transactions

Thecostofequity-settledtransactionswithemployeesismeasuredbyreferencetothefairvalueofthe

shareoptionsatthedateatwhichtheyaregranted.Fairvalueisdeterminedusinganoptionpricingmodel.

Invaluingequity-settledtransactions,noaccountistakenofanyperformanceconditions,otherthan

conditionslinkedtothepriceoftherelevantshares(marketconditions).

Thecostofequity-settledtransactionsisrecognized,togetherwithacorrespondingincreaseinequity,

overtheperiodinwhichtheperformanceconditionsarefulfilled,endingonthedateonwhichtherelevant

employeesbecomefullyentitledtotheaward(vestingdate).Thecumulativeexpenserecognizedforequity-

settledtransactionsateachreportingdateuntilthevestingdatereflectstheextenttowhichthevesting

periodhasexpiredandthenumberofawardsthatwillultimatelyvest,basedonthebestavailableestimate.

Noexpenseisrecognizedforawardsthatdonotultimatelyvest,exceptforawardswherevestingis

conditionaluponamarketcondition,whicharetreatedasvestingirrespectiveofwhetherornotthemarket

conditionissatisfied,providedthatallotherperformanceconditionsaresatisfied.

Wherethetermsofanequity-settledawardaremodified,anexpense,asaminimum,isrecognizedasifthe

termshadnotbeenmodified.Anexpenseisrecognizedforanyincreaseinthevalueofthetransactionsas

aresultofthemodification,asmeasuredatthedateofmodification.

Whereanequity-settledawardiscancelled,itistreatedasifithadvestedonthedateofcancellation,

andanyexpensenotyetrecognizedfortheawardisrecognizedimmediately.However,ifanewawardis

substitutedforthecancelledaward,anddesignatedasareplacementawardonthedatethatitisgranted,

thecancelledandnewawardsaretreatedasiftheywereamodificationoftheoriginalaward,asdescribed

inthepreviousparagraph.

(IV) Cash-settled transactions

TheGroup’sassociatedcompaniesgrantshareappreciationrights(SARs)toeligiblekeyexecutivesand

advisors,andrecognizetheservicesreceivedandtheliabilitytopayforthoseservices,astheeligiblekey

executivesandadvisorsrenderservicesduringthevestingperiod.Theliabilityismeasured,initiallyandat

eachreportingdateuntilsettled,atthefairvalueoftheSARs,byapplyinganoptionvaluationmodel,taking

intoaccountthetermsandconditionsonwhichtheSARsweregranted,andtheextenttowhichtheeligible

keyexecutivesandadvisorshaverenderedservicetodate.Untilsettled,anychangesinfairvalueateach

reportingdatewillberecognizedintheprofitandlossstatement.

(V) Paid leave carried forward

TheGroupprovidespaidannualleavetoitsemployeesundertheiremploymentcontractsonacalendar

yearbasis.Undercertaincircumstances,suchleavewhichremainsuntakenasatthebalancesheetdateis

permittedtobecarriedforwardandutilizedbytherespectiveemployeesinthefollowingyear.Anaccrual

ismadeatthebalancesheetdatefortheexpectedfuturecostofsuchpaidleaveearnedduringtheyearby

theemployeesandcarriedforward.

(r) BorrowingcostsBorrowingcostsareinterestandothercostsincurredinconnectionwiththeborrowingoffunds.Othercosts

includeexchangedifferencesonforeigncurrencyborrowings.Exchangedifferencesarisingfromforeigncurrency

borrowingsareincludedinborrowingcoststotheextentthattheyareregardedasanadjustmenttointerest

costs.

Borrowingcostsareexpensedintheprofitandlossstatementintheyearinwhichtheyareincurred,exceptto

theextentthattheyarecapitalizedasbeingdirectlyattributabletotheacquisition,constructionorproductionof

anassetwhichnecessarilytakesasubstantialperiodoftimetoprepareforitsintendeduseorsale.


(s) FinancialassetsandfinancialliabilitiesTheGrouprecognizesafinancialassetorafinancialliabilityintheconsolidatedbalancesheetwhentheGroup

becomesapartytothecontractualprovisionsoftheinstrumentandderecognizesafinancialassetwhenthe

Groupnolongercontrolsthecontractualrightstothecashflowsthatcomprisethefinancialinstrumentwhichis

normallythecasewhentheinstrumentissold,orallthecashflowsattributabletotheinstrumenthavealready

expiredorarepassedthroughtoanindependentthirdparty.Afinancialliability(orapartofafinancialliability)

isderecognizedwhentheobligationisextinguished.TheGroupdeterminestheclassificationofitsfinancial

assetsafterinitialrecognitionand,whereallowedandappropriate,re-evaluatesthisdesignationatthebalance

sheetdate.Inthecaseofaregularwaypurchaseorsaleoffinancialassets,recognitionandderecognition,as

applicable,aredoneusingthetradingdateaccounting,whichmeans,theaccountingbasedonthedatethatthe

Groupcommitstopurchaseorselltheasset.

FinancialassetsinthescopeofHKAS39“FinancialInstruments:RecognitionandMeasurement”areclassified

asfinancialassetsatfairvaluethroughprofitorloss,loansandreceivables,held-to-maturityinvestments,and

available-for-salefinancialassets,asappropriate.Financialassetsatfairvaluethroughprofitorlossinclude

financialassetsheldfortradingandfinancialassetsdesignateduponinitialrecognitionasatfairvaluethrough

profitorloss.Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepayments

thatarenotquotedinanactivemarket.Non-derivativefinancialassetswithfixedordeterminablepayments

andfixedmaturityareclassifiedasheldtomaturitywhentheGrouphasthepositiveintentionandabilitytohold

tomaturity.Available-for-salefinancialassetsarenon-derivativefinancialassetsinlistedandunlistedequity

securitiesthataredesignatedasavailableforsaleorarenotclassifiedinanyoftheotherthreecategories.

Afinancialassetorfinancialliabilitycanbedesignatedasafinancialassetorfinancialliabilityatfairvaluethrough

profitorlossonlyuponitsinitialrecognition.TheGroupmayusethisdesignationonlyinthecaseofacontract

containingoneormoreembeddedderivatives(asdescribedbelow)orwhendoingsoresultsinmorerelevant

information,becauseeither

(i) iteliminatesorsignificantlyreducesameasurementorrecognitioninconsistencythatwouldotherwise

arisefrommeasuringassetsorliabilitiesorrecognizingthegainsandlossesonthemondifferentbases;or

(ii) agroupoffinancialassets,financialliabilitiesorbotharemanagedandtheirperformanceisevaluated

onafairvaluebasis,inaccordancewithadocumentedriskmanagementorinvestmentstrategy,and

informationaboutthegroupisprovidedinternallyonthatbasistotheGroup’skeymanagementpersonnel.

Foracontractcontainingoneormoreembeddedderivatives,theGroupmaydesignatetheentirehybrid

(combined)contractasafinancialassetorfinancialliabilityatfairvaluethroughprofitorlossunless:

(i) theembeddedderivative(s)doesnotsignificantlymodifythecashflowsthatotherwisewouldberequired

bythecontract;or

(ii) itisclearwithlittleornoanalysiswhenasimilarhybrid(combined)instrumentisfirstconsideredthat

separationoftheembeddedderivative(s)isprohibited,suchasaprepaymentoptionembeddedinaloan

thatpermitsthatholdertoprepaytheloanforapproximatelyitsamortizedcost.

Financialassetsorfinancialliabilitiesarerecognizedinitiallyatfairvalue.Transactioncostsareincludedinthe

initialmeasurementofallfinancialassetsandliabilities,exceptforfinancialinstrumentsmeasuredatfairvalue

throughprofitorloss.Fairvalueisdeterminedbyreferencetothetransactionpriceorothermarketprices.If

suchmarketpricesarenotreliablydeterminable,thefairvalueoftheconsiderationisestimatedasthesumofall

futurecashpaymentsorreceipts,discountedusingtheprevailingmarketratesofinterestforsimilarinstruments

withsimilarmaturities.

90


Afterinitialrecognition,thefollowingfinancialassetsandliabilitiesaremeasuredatamortizedcostusingthe

effectiveinterestratemethod:(i)loansandreceivables;(ii)held-to-maturityinvestments;and(iii)financial

liabilitiesotherthanliabilitiesmeasuredatfairvaluesthroughprofitorloss,whereasavailable-for-saleassets

aremeasuredatfairvaluewithgainsorlossesbeingrecognizedasaseparatecomponentofequityuntilthe

investmentisderecognizedoruntiltheinvestmentisdeterminedtobeimpairedatwhichtimethecumulative

gainorlosspreviouslyreportedinequityisincludedintheprofitandlossstatement.Amortizedcostiscalculated

takingintoaccountanydiscountorpremiumonacquisitionandincludesfeesthatareanintegralpartofthe

effectiveinterestrateandtransactioncosts.Amortizedcostforheld-to-maturityinvestmentsiscomputedas

theamountinitiallyrecognizedminusprincipalrepayments,plusorminusthecumulativeamortizationusingthe

effectiveinterestmethodofanydifferencebetweentheinitiallyrecognizedamountandthematurityamount.

Investmentsinunquotedequitysecuritiesandderivativeslinkedthereonaremeasuredatcost.

Amortizationofdiscountsandpremiumsistakendirectlytotheconsolidatedprofitandlossstatement.Changes

inthefairvalueoffinancialassetsandliabilitiesmeasuredatfairvalueof(i)allderivatives(exceptforthose

eligibleforhedgeaccounting);(ii)otheritemsintendedtobeactivelytraded;and(iii)anyitemdesignatedas

“atfairvaluethroughprofitorloss”atorigination,aretakendirectlytotheprofitandlossstatement.Changes

inthefairvalueofavailable-for-salefinancialassetsarerecognizedinequity,exceptfortheforeignexchange

fluctuationsonavailable-for-saledebtsecuritiesandtheinterestcomponentwhichistakendirectlytonetprofit

orlossfortheperiodbasedontheasset’seffectiveyield.

Financialassetsandliabilitiesincludefinancialinstrumentswhichmaybeaprimaryinstrument,suchas

receivables,payablesandequitysecurities,oraderivativeinstrument,suchasfinancialoptions,futuresand

forwards,interestrateswapsandcurrencyswaps.

Financialinstrumentsareclassifiedasafinancialliabilityorafinancialassetoranequityinaccordancewiththe

substanceofthecontractualarrangement.Financialinstrumentsthatcontainbothliabilityandequityelements

areclassifiedseparatelyasfinancialliabilities,orequityinstruments.Interest,dividends,gainsandlosses

relatingtoafinancialinstrumentoracomponentthatisafinancialliability,arereportedasexpenseorincome.

Distributionstoholdersoffinancialinstrumentsclassifiedasequityarechargeddirectlytoequity.Financial

instrumentsareoffsetwhentheGrouphasalegallyenforceablerighttooffsetandtheGroupintendstosettle

eitheronanetbasisortorealizetheassetandsettletheliabilitysimultaneously.

TheGroupassessesateachbalancesheetdatewhetherthereisanyobjectiveevidencethatafinancialassetis

impaired.

(I) Assets carried at amortized cost

Ifthereisobjectiveevidencethatanimpairmentlossonloansandreceivablesorheld-to-maturity

investmentscarriedatamortizedcosthasbeenincurred,theamountofthelossismeasuredasthe

differencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows

(excludingfuturecreditlossesthathavenotbeenincurred)discountedatthefinancialasset’soriginal

effectiveinterestrate(i.e.,theeffectiveinterestratecomputedatinitialrecognition).Thecarryingamount

oftheassetisreducedeitherdirectlyorthroughtheuseofanallowanceaccount.Theamountofthe

impairmentlossisrecognizedintheprofitandlossstatement.

If,inasubsequentperiod,theamountoftheimpairmentlossdecreasesandthedecreasecanbe

relatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognized,thepreviouslyrecognized

impairmentlossisreversed.Anysubsequentreversalofanimpairmentlossisrecognizedintheprofitand

lossstatement,totheextentthatthecarryingvalueoftheassetdoesnotexceeditsamortizedcostatthe

reversaldate.


(II) Assets carried at cost

Ifthereisobjectiveevidencethatanimpairmentlossonanunquotedequityinstrumentthatisnotcarried

atfairvaluebecauseitsfairvaluecannotbereliablymeasuredhasbeenincurred,theamountofthelossis

measuredasthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuture

cashflowsdiscountedatthecurrentmarketrateofreturnforasimilarfinancialasset.Impairmentlosses

ontheseassetsarenotreversed.

(III) Available-for-sale financial assets

Ifanavailable-for-saleassetisimpaired,anamountcomprisingthedifferencebetweenitscost(netof

anyprincipalpaymentandamortization)anditscurrentfairvalue,lessanyimpairmentlosspreviously

recognizedintheprofitandlossstatement,istransferredfromequitytotheprofitandlossstatement.

Impairmentlossesonequityinstrumentsclassifiedasavailableforsalearenotreversedthroughtheprofit

andlossstatement.

(t) DerivativeinstrumentsTheGroupusesderivativefinancialinstrumentssuchaslong-termcurrencyswaps,foreigncurrencyoptions,

interestrateswapsandforwardcurrencycontractstohedgeitsrisksassociatedwithforeigncurrencyand

interestratefluctuations.Suchderivativefinancialinstrumentsarestatedatfairvalue.

Thecriteriaforaderivativeinstrumenttobeclassifiedasahedgeinclude:(i)thehedgetransactionisexpected

tobehighlyeffectiveinoffsettingchangesinfairvalueorcashflowsattributabletothehedgedrisk,(ii)the

effectivenessofthehedgecanbereliablymeasured,(iii)thereisadequatedocumentationofthehedging

relationshipsattheinceptionofthehedge,and(iv)forcashflowhedges,theforecasttransaction,whichisthe

subjectofthehedge,mustbehighlyprobableandmustpresentanexposuretovariationsincashflowsthat

couldultimatelyaffectprofitorloss.

Forthepurposeofhedgeaccounting,hedgesareclassifiedaseitherfairvaluehedgeswheretheyhedgethe

exposuretochangesinthefairvalueofarecognizedassetorliabilityandfirmcommitment;orcashflowhedges

wheretheyhedgeexposuretovariabilityincashflowsthatiseitherattributabletoaparticularriskassociated

witharecognizedassetorliabilityoraforecastedtransaction.

Inrelationtofairvaluehedgeswhichmeettheconditionsforspecialhedgeaccounting,anygainorlossfrom

remeasuringthehedginginstrumentatfairvalueisrecognizedimmediatelyintheprofitandlossstatement.Any

gainorlossonthehedgeditemattributabletothehedgedriskisadjustedagainstthecarryingamountofthe

hedgeditemandrecognizedintheprofitandlossstatement.

Inrelationtocashflowhedges,theportionofthegainorlossonthehedginginstrumentthatisdeterminedtobe

aneffectivehedgeisrecognizeddirectlyinequityandtheineffectiveportionisrecognizedintheconsolidated

profitorlossstatement.Thegainsorlossesthatareaccumulatedinequityaretransferredtotheprofitandloss

statementinthesameperiodinwhichthehedgeditemaffectstheprofitorloss.

Forderivativesthatdonotqualifyforhedgeaccounting,anygainsorlossesarisingfromchangesinfairvalueare

takendirectlytotheprofitandlossstatement.

(u) DividendsFinaldividendsproposedbytheDirectorsarerecognizedasaliabilitywhentheyhavebeenapprovedbythe

shareholdersanddeclaredinanannualgeneralmeeting.

Interimdividendsaresimultaneouslyproposedanddeclared,becausetheCompany’smemorandumand

bye-lawsgranttheDirectorstheauthoritytodeclareinterimdividends.Consequently,interimdividendsare

recognizedimmediatelyasaliabilitywhentheyareproposedanddeclared.

92


(v) RelatedpartiesApartyisconsideredtoberelatedtotheGroupif:

(I) directly,orindirectlythroughoneormoreintermediaries,theparty(i)controls,iscontrolledby,orisunder

commoncontrolwith,theGroup;(ii)hasaninterestintheGroupthatgivesitsignificantinfluenceoverthe

Group;or(iii)hasjointcontrolovertheGroup;

(II) thepartyisanassociate;

(III) thepartyisajointventureinwhichtheentityisaventurer;

(IV) thepartyisamemberofthekeymanagementpersonneloftheGroup;

(V) thepartyisaclosememberofthefamilyofanyindividualreferredtoin(I)or(IV);

(VI) thepartyisanentitythatiscontrolled,jointlycontrolledorsignificantlyinfluencedbyorforwhich

significantvotingpowerinsuchentityresideswith,directlyorindirectly,anyindividualreferredtoin(IV)or

(V);or

(VII) thepartyisapost-employmentbenefitplanforthebenefitofemployeesoftheGroup,orofanyentitythat

isarelatedpartyoftheGroup.

3. SignificantAccountingJudgmentsandEstimates

(A) JudgmentsIntheprocessofapplyingtheGroup’saccountingpolicies,managementhasmadethefollowingjudgments,apartfrom

thoseinvolvingestimations,whichhavesignificanteffectontheamountsrecognizedintheFinancialStatements:

(a) ClassificationoffinancialassetsandfinancialliabilitiesTheGroupdeterminestheclassificationofcertainofassetsandliabilitiesasfinancialassetsandfinancial

liabilitiesbyjudgingwhethertheymeetthedefinitionoffinancialassetsandfinancialliabilitiessetoutinHKAS

39.Accordingly,thefinancialassetsandfinancialliabilitiesareaccountedforinaccordancewiththeGroup’s

accountingpoliciessetoutinNote2(E)(s).

(b) DesignationoffinancialassetsatfairvaluethroughprofitorlossTheGroupdesignatedcertaininterestsinPLDTacquiredduring2006asfinancialassetsatfairvaluethrough

profitorlosstopartiallyoffsetagainsttheexposurearisingfromchangesinthefairvalueoftheoptionelement

embeddedintheHeadOffice’sExchangeableNotes.PleaserefertoNote�6fordetails.


(B) EstimationUncertaintyThekeyassumptionsconcerningthefutureandotherkeysourcesofestimationuncertaintyatthebalancesheetdate,

thathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthe

nextfinancialyeararediscussedbelow.

(a) Estimatingusefullivesandresidualvaluesofproperty,plantandequipmentTheGroupestimatestheusefullivesandresidualvaluesofitsproperty,plantandequipmentbasedontheperiod

overwhichtheassetsareexpectedtobeavailableforuse.Theestimatedusefullivesandresidualvaluesof

theproperty,plantandequipmentarereviewedannuallyandareupdatedifexpectationsdifferfromprevious

estimatesduetophysicalwearandtear,technicalorcommercialobsolescenceandlegalorotherlimitson

theuseoftheassets.Inaddition,theGroup’sestimationoftheusefullivesandresidualvaluesofitsproperty,

plantandequipmentisbasedonitscollectiveassessmentofindustrypractice,internaltechnicalevaluation

andexperiencewithsimilarassets.Itispossible,however,thatfutureresultsofoperationscouldbematerially

affectedbychangesinthoseestimatesbroughtaboutbychangesinfactorsmentionedabove.Theamountsand

timingofrecordedexpensesforanyperiodwouldbeaffectedbychangesinthesefactorsandcircumstances.A

reductionintheestimatedusefullivesandresidualvaluesoftheGroup’sproperty,plantandequipmentwould

increaseitsrecordeddepreciationexpensesanddecreaseitsnon-currentassets.

(b) AssetsimpairmentHongKongGAAPrequiresthatanimpairmentreviewshouldbeperformedwhencertainimpairmentindication

ispresent.Incaseofgoodwill,suchassetsaresubjecttoyearlyimpairmenttestandwheneverthereisan

indicationthatsuchassetsmaybeimpaired.

Purchaseaccountingrequiresextensiveuseofaccountingestimatestoallocatethepurchasepricetothefair

marketvaluesoftheassetsandliabilitiespurchased,includingintangibleassetsandcontingentliabilities.The

Group’sbusinessacquisitionshaveresultedingoodwill,whichissubjecttoaperiodicimpairmenttest.

Determiningthefairvalueofproperty,plantandequipmentatthedateofacquisitionofbusiness,whichrequires

thedeterminationoffuturecashflowsexpectedtobegeneratedfromthecontinueduse(i.e.,valueinuse)and

ultimatedispositionofsuchassets,requirestheGrouptomakeestimatesandassumptionsthatcanmaterially

affectitsconsolidatedfinancialstatements.FutureeventscouldcausetheGrouptoconcludethatproperty,plant

andequipmentassociatedwithanacquiredbusinessisimpaired.Anyresultingimpairmentlosscouldhavea

materialadverseimpactonitsfinancialconditionandresultsofoperations.

Thepreparationofestimatedfuturecashflowsinvolvessignificantestimations.WhiletheGroupbelievesthat

itsassumptionsareappropriateandreasonable,significantchangesinitsassumptionsmaymateriallyaffectits

assessmentofrecoverablevaluesandmayleadtofutureadditionalimpairmentchargesunderHongKongGAAP.

(c) DeferredtaxassetsTheGroupreviewsthecarryingamountsateachbalancesheetdateandreducesdeferredtaxassetstothe

extentthatitisnolongerprobablethatsufficienttaxableprofitwillbeavailabletoallowallorpartofthedeferred

taxassetstobeutilized.However,thereisnoassurancethattheGroupwillgeneratesufficienttaxableprofitto

allowallorpartofitsrecognizeddeferredtaxassetstobeutilized.

(d) FinancialassetsandliabilitiesHongKongGAAPrequiresthattheGroupcarriescertainofitsfinancialassetsandliabilitiesatfairvalue,which

requiresextensiveuseofaccountingestimates.Whilesignificantcomponentsoffairvaluemeasurementwere

determinedusingverifiableobjectiveevidence(i.e.,foreignexchangeratesandinterestrates),theamountof

changesinfairvaluewoulddifferiftheGrouputilizeddifferentvaluationmethodologies.Anychangesinfairvalue

ofthesefinancialassetsandliabilitieswouldaffectdirectlytheGroup’sconsolidatedprofitandlossandequity.

94


(e) EstimatingallowancesforaccountsreceivableTheGroupestimatestheallowanceforaccountsreceivablerelatedtoitstradereceivablesbasedontwo

methods.Theamountscalculatedusingeachofthesemethodsarecombinedtodeterminethetotalamount

itprovides.First,theGroupevaluatesspecificaccountswhereithasinformationthatcertaincustomersare

unabletomeettheirfinancialobligations.Inthesecases,theGroupusesjudgment,basedonthebestavailable

factsandcircumstances,includingbutnotlimitedto,thelengthofitsrelationshipwiththecustomerandthe

customer’scurrentcreditstatusbasedonthirdpartycreditreportsandknownmarketfactors,torecordspecific

provisionsforcustomersagainstamountsduetoreduceitsreceivableamountsthattheGroupexpectsto

collect.Thesespecificprovisionsarere-evaluatedandadjustedasadditionalinformationreceivedaffectsthe

amountsestimated.Second,aprovisionisestablishedasacertainpercentageofageofstatusofreceivables.

Thispercentageisbasedonacollectiveassessmentofhistoricalcollection,write-off,experienceandchangesin

itscustomerpaymentterms.

TheamountsandtimingofrecordedexpensesforanyperiodwoulddifferiftheGrouputilizeddifferent

estimates.AnincreaseintheGroup’sallowanceforaccountsreceivablewouldincreaseitsrecordedoperating

expensesanddecreaseitsassets.

(f) EstimatingallowancesforinventoriesTheGroupestimatestheallowanceforinventoriesbasedonthebestavailablefactsandcircumstances,including

butnotlimitedto,theinventories’ownconditions(i.e.,whethertheyaredamagedorbecomewhollyorpartially

obsolete),theirmarketsellingprices,estimatedcostsofcompletionandestimatedcoststobeincurredfor

theirsale.Theprovisionsarere-evaluatedandadjustedasadditionalinformationreceivedaffectstheamount

estimated.

(g) PensionandotherretirementbenefitsThedeterminationoftheGroup’sobligationandcostfordefinedbenefitsisperformedbyindependentactuaries

engagedbytheGroupanddependentontheselectionofcertainassumptionsusedbythemincalculatingsuch

amounts.Thoseassumptionsincludeamongothers,discountrates,expectedreturnsonplanassets,ratesof

salaryandpensionincreaseandaverageremainingworkinglivesofemployees.InaccordancewithHongKong

GAAP,actualresultsthatdifferfromtheGroup’sassumptionsarerecognizedimmediatelyintheprofitandloss

statementasandwhentheyoccur.WhiletheGroupbelievesthattheactuaries’assumptionsarereasonable

andappropriate,significantdifferencesintheGroup’sactualexperienceorsignificantchangesintheGroup’s

assumptionsmaymateriallyaffectitspensionandotherretirementobligations.

(h) MeasurementoffairvalueofplantationsHongKongGAAPrequiresthattheGroupcarriesitsplantationsatfairvaluelessestimatedpoint-of-salecosts,

whichrequiresextensiveuseofaccountingestimates.Thedeterminationofsuchfairvaluelessestimated

point-of-salecostsisperformedbyindependentvaluersengagedbytheGroup.Significantcomponentsoffair

valuemeasurementweredeterminedusingassumptionsincludingaveragelifeofplantations,yieldperhectare,

plantationareaanddiscountrates.TheamountofchangesinfairvaluewoulddifferiftheGrouputilizeddifferent

assumptions.AnychangesinfairvalueoftheseplantationswouldaffectdirectlytheGroup’sprofitandlossand

equity.

(i) DerivativeliabilitiesHongKongGAAPrequiresthattheGroupcarriesitsoptionembeddedintheExchangeableNotesissuedat

fairvalueandtheoptionelementembeddedinMPIC’sU.S.dollardenominatedconvertiblenotes(USDNotes),

whichrequireextensiveuseofaccountingestimates.Significantcomponentsoffairvaluemeasurementwere

determinedusingassumptionsincludingthetradingpriceoftheExchangeableNotesandMPIC’sshareprice,

expectedvolatilityoftheunderlyingPLDT’sandMPIC’sshareprices,andtheaveragemarketinterestrate.The

amountofchangesinfairvaluewoulddifferiftheGrouputilizeddifferentassumptions.Anychangesinfairvalue

oftheoptionelementembeddedintheExchangeableNotesandtheoptionelementembeddedinMPIC’sUSD

NoteswouldaffectdirectlytheGroup’sprofitandlossandequity.At3�December2007,MPIChasfullysettled

theUSDNotes.


(j) Equity-settledshareoptionexpenseHongKongGAAPrequiresthattheGroupmeasuresitsshareoptionsatfairvalueatthedateatwhichtheyare

granted,whichrequiresextensiveuseofaccountingestimates.Thedeterminationofsuchfairvalueisperformed

byanindependentvaluerengagedbytheGroup.Significantcomponentsoffairvaluemeasurementwere

determinedusingassumptionsincludingexpectedvolatilityanddividendyieldandaveragerisk-freeinterest

rate.TheamountoffairvaluedeterminedatthedateofwhichtheoptionsaregrantedwoulddifferiftheGroup

utilizeddifferentassumptions.Anychangesinfairvalueoftheshareoptionsdeterminedatthedateofwhich

theyaregrantedwouldaffectdirectlytheGroup’sprofitandlossinsubsequentperiodswhenthesefairvalues

arerecognizedasexpensesovertheshareoptions’vestingperiod.

4. TurnoverandSegmentalInformation


TurnoverSaleofgoodsandproperties 3,014.3 2,440.3

Renderingofservices 60.7 34.�

Total 3,075.0 2,474.8

SegmentalInformationSegmentalinformation,relatingtotheGroup’sbusinessandgeographicsegments,isanalyzedasfollows.Analysisby

businesssegmentistheGroup’sprimarysegmentreportingformatasthisismorerelevanttotheGroupwhenmaking

operationalandfinancialdecisions.DetailsoftheGroup’sprincipalinvestmentsareprovidedontheinsidebackcover.

96


ByPrincipalBusinessActivity–2007

Telecom– Consumer Infrastructure Head 2007US$millions munications FoodProducts andProperty Office Total

ProfitandLossSegmentrevenue–turnover – 3,040.3 34.7 – 3,075.0

Segmentresults – 4�0.8 4�.� 202.8 654.7Netborrowingcosts (133.0)Shareofprofitslesslossesof

associatedcompaniesandjointventures 209.� (0.3) 36.9 – 245.7

Profitbeforetaxation 767.4Taxation (95.7)

Profitfortheyear 671.7

AssetsandLiabilitiesSegmentassets – 3,49�.� ��0.4 �9�.4 3,841.3Associatedcompaniesandjointventures �,078.9 2.3 230.2 – 1,311.4Unallocatedassets 75.1

Totalassets 5,227.8

Segmentliabilities – �32.2 83.� 74.� 689.8Unallocatedliabilities 2,408.3

Totalliabilities 3,098.1

OtherInformationCapitalexpenditure – 67.7 �.6 0.2 69.5Depreciation – 63.4 0.7 0.4 64.5Foreignexchangeandderivativelosses,net – – – – –Impairmentlossesrecognized – 3�.8 2.9 – 38.7Othernon-cashexpenses – 2.8 – �2.3 15.1


ByPrincipalGeographicalMarket–2007

The Head 2007US$millions Philippines Indonesia Others Office Total

Segmentrevenue–turnover 34.7 3,040.3 – – 3,075.0

Segmentassets ��0.4 3,49�.� – �9�.4 3,841.3Associatedcompaniesandjointventures �,303.4 2.3 �.7 – 1,311.4Unallocatedassets 75.1

Totalassets 5,227.8

Capitalexpenditure �.6 67.7 – 0.2 69.5

ByPrincipalBusinessActivity–2006

2006

Telecom– Consumer Infrastructure Head (Restated)

US$millions munications FoodProducts andProperty Office Total

ProfitandLossSegmentrevenue–turnover – 2,398.� 76.3 – 2,474.8

Segmentresults – 26�.� (�4.8) 7.3 2�8.0

Netborrowingcosts (�06.�)

Shareofprofitslesslossesof

associatedcompaniesandjointventures �43.0 (0.4) (0.8) – �4�.8

Profitbeforetaxation 293.3

Taxation (7�.6)

Profitfortheyear 22�.7

AssetsandLiabilitiesSegmentassets – �,940.7 ��2.3 �70.9 2,223.9

Associatedcompaniesandjointventures 4�9.8 2.6 69.9 – �32.3

Unallocatedassets �27.3

Totalassets 2,883.�

Segmentliabilities – 277.8 �6.� �74.� �08.4

Unallocatedliabilities �,342.3

Totalliabilities �,8�0.7

OtherInformationCapitalexpenditure – 38.6 �.6 2.� 46.3

Depreciation – 62.9 4.� 0.2 67.2

Foreignexchangeandderivativelosses,net – – 0.7 �9.4 60.�

Impairmentlossesrecognized – 8.0 �8.� ��.� 37.6

Othernon-cashexpenses – – – �4.� �4.�

98


ByPrincipalGeographicalMarket–2006

2006

The Head (Restated)

US$millions Philippines Indonesia Others Office Total

Segmentrevenue–turnover 76.3 2,398.� – – 2,474.8

Segmentassets ��2.3 �,940.7 – �70.9 2,223.9

Associatedcompaniesandjointventures �26.4 2.6 3.3 – �32.3

Unallocatedassets �27.3

Totalassets 2,883.�

Capitalexpenditure �.6 38.6 – 2.� 46.3

5. NetBorrowingCosts

2007 2006

US$millions (Restated)

Bankloansandotherloans

–Whollyrepayablewithinfiveyears 162.1 ��4.6

–Notwhollyrepayablewithinfiveyears 8.1 9.4

Lessborrowingcostscapitalizedininventories (0.3) –

TotalBorrowingCosts 169.9 �24.0

Lessinterestincome (36.9) (�7.�)

NetBorrowingCosts 133.0 �06.�

Thecapitalizationrateofborrowingcostsfor2007is�4.6percent(2006:Nil).


6. ProfitBeforeTaxation

US$millions Notes 2007 2006

ProfitBeforeTaxationisStatedafter (Charging)/CreditingCostofinventoriessold (1,886.8) (�,480.8)

Employees’remuneration 34(A) (280.7) (237.2)

Depreciation �� (64.5) (67.2)

Costofservicesrendered (28.0) (3�.2)

Impairmentlosses

–Goodwill(i) �� (16.7) (6.4)

–Othernon-currentassets(i) (12.4) –

–Property,plantandequipment(i) �� (4.2) (2.7)

–Associatedcompaniesandjointventures(i) (2.9) (�9.2)

–Accountsreceivable(ii) �7(C) (2.5) (9.3)

Operatingleaserentals

–Landandbuildings (10.1) (�8.0)

–Hireofplantandequipment (0.4) (0.8)

Recognitionofprepaidlandpremiums �8 (2.8) (2.�)

Auditors’remuneration

–Auditservices (1.9) (�.6)

–Otherservices (0.6) (0.8)

Gainondivestmentanddilutionofinterestin

anassociatedcompany 206.5 96.9

Gainondilutionofinterestinsubsidiarycompanies 149.6 –

Realizedgainonsaleofavailable-for-saleassets 25.0 2.2

Gainonchangesinfairvalueofplantations �2 22.0 �3.4

Foreignexchangeandderivativegains/(losses),net 8 20.0 (49.7)

Dividendincomefromfinancialassetsat

fairvaluethroughprofitorloss 2.9 2.2

Gain/(loss)onsaleofproperty,plantandequipment 0.2 (3.3)

Lossonchangesinfairvalueofnon-currentassetsheldforsale – (0.6)

Gainondisposalofsubsidiarycompanies – 7.�

Dividendincomefromavailable-for-saleassets – 0.�

(i) Included in other operating expenses, net(ii) Included in distribution costs

�00


7. Taxation

NoHongKongprofitstax(2006:Nil)hasbeenprovidedastheGrouphadnoestimatedassessableprofits(2006:Nil)inHong

Kongfortheyear.TaxationonassessableprofitsgeneratedoutsideHongKonghasbeenprovidedattheratesoftaxation

prevailinginthecountriesinwhichtheCompany’ssubsidiarycompaniesoperate.


SubsidiaryCompanies–OverseasCurrenttaxation(Note26) 96.5 �2.�

Deferredtaxation(Note20) (0.8) �9.�

Total 95.7 7�.6

IncludedwithintheshareofprofitslesslossesofassociatedcompaniesandjointventuresistaxationofUS$�07.9million

(2006:US$24.3million)andwhichisanalyzedasfollows.


AssociatedCompaniesandJointVentures–OverseasCurrenttaxation 60.4 44.�

Deferredtaxation 47.5 (�9.8)

Total 107.9 24.3

Areconciliationbetweenprofitbeforetaxationmultipliedbytheapplicabletaxratesandthetaxationamountasshownin

theconsolidatedprofitandlossstatementisasfollows.

2007 2006

US$millions % %

ProfitBeforeTaxation 767.4 293.3

Notionaltaxonprofitbeforetaxation,calculated

attheratesapplicabletoprofitsinthe

taxjurisdictionsconcerned 261.4 34.1 ��2.6 38.4

Taxeffectof:

–Non-deductibleexpenses 16.3 2.1 2�.8 8.8

–Incomenotsubjecttotax (109.6) (14.3) (��.0) (�.�)

–Shareofprofitslesslossesofassociatedcompanies

andjointventures (92.7) (12.1) (�8.3) (�9.9)

–Others 20.3 2.7 6.� 2.2

Taxation 95.7 12.5 7�.6 24.4

�0�FirstPacificCompanyLimitedAnnualReport2007

8. ProfitAttributabletoEquityHoldersoftheParent

TheprofitattributabletoequityholdersoftheparentincludesUS$30.�millionofnetforeignexchangeandderivativegains

(2006:lossesofUS$��.�million),whichcompriseagainofUS$27.7million(2006:US$3�.2million)onchangesinthefairvalue

ofcertainPLDTsharesdesignatedasfinancialassetsatfairvaluethroughprofitorlossandagainofUS$2.4million(2006:

lossesofUS$82.7million)onthechangesinthefairvaluesofderivativesandforeignexchangetranslationdifferencesonthe

Group’sunhedgedforeigncurrencydenominatedborrowingsandpayablesandUS$286.6million(2006:US$66.�million)of

netnon-recurringgains.

AnalysisofForeignExchangeandDerivativeGains/(Losses)


Foreignexchangeandderivativegains/(losses)

–Subsidiarycompanies(Note6) 20.0 (49.7)

–Associatedcompaniesandjointventures 19.9 7.4

Subtotal 39.9 (42.3)

Attributabletotaxationandminorityinterest (9.8) (9.2)

Total 30.1 (��.�)

Thenon-recurringgainsofUS$286.6millionfor2007mainlycompriseagainondivestmentoftheGroup’sinterestinPLDTof

US$�74.7milliononsettlementofcertainHeadOffice’sExchangeableNoteswithPLDTsharesandagainondilutionofthe

Group’seffectiveinterestinIndofood’soilsandplantationsbusinessesofUS$7�.9million.Thenon-recurringgainsofUS$66.�

millionfor2006mainlycompriseagainondivestmentoftheGroup’sinterestinPLDTofUS$�8.2milliononsettlementof

certainHeadOffice’sExchangeableNoteswithPLDTsharesandagainondilutionuponconversionofPLDT’sconvertible

preferencesharesofUS$38.7million,partlyoffsetbyimpairmentprovisionsforcertainoftheGroup’sassets.

Includedwithintheprofitattributabletoequityholdersoftheparentfortheyearended3�December2007isaprofitof

US$��2.0million(2006:US$32.8million)attributabletotheCompany.

9. OrdinaryShareDividends

U.S.centperordinaryshare US$millions

2007 2006 2007 2006

Interim 0.26 0.�3 8.2 4.�

Proposed/declaredspecial 0.38 0.�2 12.3 3.9

Proposedfinal 0.64 0.4� 20.6 �4.4

Total 1.28 0.70 41.1 22.4

TheproposedspecialandfinaldividendsfortheyeararesubjecttotheapprovaloftheCompany’sshareholdersatthe

forthcomingAGM.

�02


10. EarningsPerShareAttributabletoEquityHoldersoftheParent

Thecalculationofbasicearningspershareisbasedontheprofitfortheyearattributabletoequityholdersoftheparentof

US$��0.4million(2006:US$�64.�million),andtheweightedaveragenumberof3,2��.4million(2006:3,�93.0million)ordinary

sharesinissueduringtheyear.

Thecalculationofdilutedearningspershareisbasedon:(i)theprofitfortheyearattributabletoequityholdersofthe

parentofUS$��0.4million(2006:US$�64.�million)reducedbythedilutiveimpactof(a)US$4.2million(2006:Nil)inrespect

oftheconvertiblenotesissuedbyDMCI-MPICand(b)US$0.�million(2006:US$0.3million)inrespectoftheexerciseof

shareoptionsissuedbyitsassociatePLDTand(ii)asharebaseequaltotheaggregateoftheweightedaveragenumber

of3,2��.4million(2006:3,�93.0million)ordinarysharesinissueduringtheyear(asusedinthebasicearningspershare

calculation)andtheweightedaverageof62.�million(2006:49.�million)ordinarysharesassumedtohavebeenissuedatno

considerationonthedeemedexerciseofallshareoptionsoftheCompanyduringtheyear.

TheimpactuponfullconversionoftheHeadOffice’sExchangeableNotesandMPIC’sconvertiblenoteshasnotbeentaken

intoaccountincalculatingthedilutedearningspersharebecausetheiranti-dilutiveeffectonthebasicearningspershare

fortheyearwouldactuallyincreasetheearningspershare.

11. Property,PlantandEquipment

Machinery,

Landand equipment

US$millions buildings andvessels Consolidated

CostAt�January2007 280.� 8�3.0 1,133.1Exchangetranslation (��.0) (38.�) (53.1)Additions 29.� 40.4 69.5Acquisitionofsubsidiarycompanies(Note32(A)) 23.7 8�.0 108.7Disposals (�.7) (6.�) (7.8)

At31December2007 3�6.2 934.2 1,250.4

AccumulatedDepreciationandImpairmentAt�January2007 76.� 339.8 416.3Exchangetranslation (3.3) (��.2) (18.5)Chargefortheyear(Note6) �3.3 ��.2 64.5Impairment(Note6) – 4.2 4.2Disposals – (0.2) (0.2)

At31December2007 86.� 379.8 466.3

NetBookAmountat31December2007 229.7 ��4.4 784.1


Machinery,

Landand equipment

US$millions buildings andvessels Consolidated

CostAt�January2006 246.0 76�.9 �,0��.9

Exchangetranslation 23.3 64.6 87.9

Additions ��.6 30.7 46.3

Acquisitionofsubsidiarycompanies(Note32(A)) �.� 93.� 9�.0

Disposalofsubsidiarycompanies (�.6) (��.6) (6�.2)

Disposals (0.7) (�8.0) (�8.7)

Reclassification(i) – (28.�) (28.�)

At31December2006 280.� 8�3.0 �,�33.�

AccumulatedDepreciationandImpairmentAt�January2006 63.0 326.0 389.0

Exchangetranslation �.6 26.8 32.4

Chargefortheyear(Note6) �2.8 �4.4 67.2

Impairment(Note6) – 2.7 2.7

Disposals (0.6) (�0.�) (�0.7)

Disposalofsubsidiarycompanies (4.3) (36.3) (40.6)

Reclassification(i) – (23.7) (23.7)

At31December2006 76.� 339.8 4�6.3

NetBookAmountat31December2006 203.6 ��3.2 7�6.8

(i) To Non-current assets held for sale

(A) Theprincipalannualratesofdepreciation:

Freeholdland Nil

Freeholdbuildings 2.�%to20.0%

Leaseholdbuildings Lesserofperiodoflease,or2.�%to20.0%

Machinery,equipmentandvessels 2.�%to�0.0%

(B) ThelandandbuildingsarefreeholdandleaseholdpropertiesheldoutsideHongKong.

(C) Property,plantandequipmentwithanetbookamountofUS$8�.8million(2006:US$34.7million)waspledgedas

securityforcertainoftheGroup’sbankingfacilities(Note2�(C)).

�04


12. Plantations

ConsolidatedUS$millions 2007 2006

At�January 275.0 �69.0

Exchangetranslation (29.3) �8.7

Additions 36.8 7.�

Acquisitionofsubsidiarycompanies(Note32(A)) 577.0 26.4

Gainarisingfromchangesinfairvaluelessestimatedpoint-of-salecosts,net(Note6) 22.0 �3.4

At31December 881.5 27�.0

Physicalmeasurementofoilpalm,rubberandotherplantationsat3�Decemberisasfollows.

ConsolidatedHectares 2007 2006

Oilpalm

–Matureplantations 118,029 �9,23�

–Immatureplantations 43,427 7,66�

Rubber

–Matureplantations 18,956 �,0��

–Immatureplantations 3,048 –

Cocoa,teaandothers

–Matureplantations 2,800 –

–Immatureplantations 722 –

Total 186,982 7�,9��

(A) TheGroup’splantationsmainlyrepresentpalmtreesandrubbertreesownedbyIndofood.Thepalmtreesareplanted

fortheproductionofFFB,whichareusedintheproductionofCPOandPKO.Therubbertreesareplantedforthe

productionofcuplump.Thefairvaluesofoilpalmplantationsaredeterminedbyanindependentvaluerusingthe

discountedfuturecashflowsoftheunderlyingplantations.Theexpectedfuturecashflowsoftheoilpalmplantations

aredeterminedusingtheforecastmarketpriceofFFBwhichislargelydependentontheprojectedsellingpricesof

CPOandPKOinthemarket.Thefairvaluesofrubberplantationsaredeterminedusingthediscountedfuturecash

flowsoftheunderlyingplantations.Theexpectedfuturecashflowsoftherubberplantationsaredeterminedusing

theforecastmarketpriceofcuplumpwhicharebasedontheprojectedsellingpriceofRubberSmokeSheet�(RSS�).

Significantassumptionsmadeindeterminingthefairvalueoftheplantationsare:

(a) Nonewplanting/re-plantingactivitiesareassumed.

(b) Thepalmtreeshaveanaveragelifethatrangesfrom20to2�years,withthefirstthreetofouryearsasimmature

andtheremainingyearsasmatureorproductiveunderawell-establishedplantingsystem.Therubbertreeshave

anaveragelifeofthatrangesfrom20to2�years,withthefirstfivetosixyearsasimmatureandtheremaining

yearsasmature.

(c) TheyieldperhectareofpalmtreesisbasedonguidelinesfromtheIndonesianOilPalmResearchInstitutewhich

varieswiththeaverageageofpalmtrees.Theyieldperhectareofrubbertreesisbasedonestimationmadeby

Indofood’sagronomistsandreviewedbyanindependentvaluer.


(d) Thediscountratesof�8.�percent(2006:�7.4percent)and�7.7percent(2006:�7.0percent),whichrepresent

therespectiveassetspecificratesforIndofood’spalmtreesandrubbertreesplantationoperations,wereapplied

inthediscountedcashflowcalculations.

(e) TheprojectedsellingpriceofCPOovertheprojectionperiodisbasedontheconsensusofreputableindependent

forecastingservicefirmsfortheshorttermandonthestudiesonhistoricalactualCPOpriceforthelast20years

fortheremainingprojectedperiod.TheprojectedsellingpriceofRSS�overtheprojectedperiodisbasedonthe

referenceissuedbytheWorldBankandhistoricalsellingpricesoftheGroup.

(B) During2007,Indofood’spalmtreesproduced�.�milliontons(2006:�.3milliontons)ofFFBandrubbertreesproduced

7.9thousandtons(2006:4.6thousandtons)ofrubber.ThefairvalueofFFBandrubberharvestedduring2007,

determinedatthepointofharvest,amountedtoUS$206.6million(2006:US$�02.�million)andUS$8.3million(2006:

US$3.6million),respectively.

(C) PlantationswithanetbookamountofUS$�46.2million(2006:US$6.4million)werepledgedassecurityforcertainof

theGroup’sbankingfacilities(Note2�(C)).

13. SubsidiaryCompanies

CompanyUS$millions 2007 2006

Unlistedsharesatcost 1,176.6 �,�84.7

Lessprovisionforimpairmentloss (270.4) (400.�)

Total 906.2 784.2

TheCompany’slistedsubsidiarycompaniesareheldthroughtheintermediateholdingcompanies.

(A) Theamountsduefromsubsidiarycompaniesareunsecured,interest-bearingatarangeofzeropercentto8.3

percentperannum(2006:zeropercentto8.3percentperannum)andrepayablewithinoneyear(2006:notrepayable

withinoneyear).ThecarryingvalueoftheCompany’samountsduefromsubsidiarycompaniesapproximatestotheir

fairvalue.

(B) Theamountsduetosubsidiarycompaniesareunsecured,non-interest-bearingandhavenofixedtermsofrepayment.

ThecarryingvalueoftheCompany’samountsduetosubsidiarycompaniesapproximatestotheirfairvalue.

(C) Theloansfromsubsidiarycompaniesareunsecured,interest-bearingatarangeofzeropercentto7.�percentper

annum(2006:zeropercentto8.4percentperannum)andnotrepayablewithinoneyear.Thecarryingvalueofthe

Company’sloansfromsubsidiarycompaniesapproximatestotheirfairvalue.

(D) Detailsoftheprincipalsubsidiarycompanieswhich,intheopinionoftheDirectors,materiallyaffecttheresultsornet

assetsoftheGroup,aresetoutontheinsidebackcover.

�06


14. AssociatedCompaniesandJointVentures

Associatedcompanies Jointventures Consolidated 2007 2006 2007 2006 2007 2006


Shares,atcost

–Listed 1,785.9 �,33�.8 – – 1,785.9 �,33�.8

–Unlisted 56.9 47.3 63.4 63.4 120.3 ��0.7

Shareofpost-acquisitionreserves

(Note29) (750.1) (909.6) 53.1 (3.�) (697.0) (9�3.�)

Loans(from)/toassociatedcompanies

andajointventure (2.1) (2.�) 104.3 �.4 102.2 (�.�)

Total 1,090.6 47�.0 220.8 6�.3 1,311.4 �32.3

(A) At3�December2007,boththelistedandunlistedinvestmentswerelocatedoutsideHongKong.

(B) At3�December2007,themarketvaluationoflistedinvestmentswasUS$3,8��.9million(2006:US$2,3�0.9million)and

thenetdividendsreceivedduring2007wereUS$��.0million(2006:US$62.�million).

(C) Theloansfromassociatedcompaniesareunsecured,interest-bearingatarangeofzeropercentto20.0percentper

annum(2006:zeropercentto20.�percentperannum)andhavenofixedtermsofrepayment.Thecarryingamountof

theloansfromassociatedcompaniesapproximatestotheirfairvalue.

(D) Theloanstoajointventurearesecured,interest-bearingatarangeof�.6percentto�0.4percent(2006:Nil)and

repayableinJanuary20�0.Thecarryingvalueoftheloanstoajointventureapproximatestotheirfairvalue.

(E) DetailsoftheGroup’sprincipalassociatedcompany,PLDT,which,intheopinionoftheDirectors,materiallyaffectthe

resultsornetassetsoftheGroup,aresetoutontheinsidebackcover.

(F) PLDTwasincorporatedunderthelawsofthePhilippineson28November�928toprovidetelephoneservicesinthe

Philippines.PLDT’scharterwasinitiallylimitedtoaperiodof�0yearsbuthassincebeenextendedtwicefor2�years

each,thelastextensionbeingforanadditional2�-yearperiodendingin2028.Underitsamendedcharter,which

becameeffectiveon24August�99�,PLDTisauthorizedtoprovidevirtuallyeverytypeoftelecommunicationservice,

bothwithinthePhilippinesandbetweenthePhilippinesandothercountries.PLDToperatesunderthejurisdictionof

thePhilippineNationalTelecommunicationsCommissionwhichjurisdictionextends,amongotherthings,toapproving

majorservicesofferedbyPLDTandcertainrateschargedbyPLDT.

(G) TheGroup’sjointventuresprincipallyrepresentDMCI-MPIC,a�0.0percent-ownedjointventurecompanyofMPIC,

whichacquiredan84.0percentinterestinMayniladinJanuary2007.Mayniladwasincorporatedunderthelawsofthe

Philippineson22January�997.ThecompanyhasbeengrantedtheconcessionofanexclusiverightbyMetropolitan

WaterworksandSewerageSystem(MWSS)onbehalfofthePhilippineGovernmenttosupplywaterandsewerage

servicesintheareaofWestMetroManilafora2�-yearperiodendingin2022.


(H) AdditionalfinancialinformationinrespectoftheGroup’sprincipalassociatedcompany,PLDT,andajointventure,DMCI-MPIC,aspreparedunderHongKongGAAP,aresetoutbelow.

PLDT DMCI-MPICUS$millions 2007 2006 2007 2006

OperatingResultsTurnover 3,088.3 2,446.2 154.3 –Profit/(loss)beforetaxation 1,724.4 �,�82.3 80.6 (2.4)Profit/(loss)aftertaxation 1,459.1 9�2.� 82.8 (2.4)

Profit/(loss)fortheYear 832.6 6�6.6 82.8 (2.4)

NetAssetsCurrentassets 1,192.1 87�.9 331.9 �23.4Non-currentassets 4,613.7 4,��.3 860.8 –

TotalAssets 5,805.8 4,99�.2 1,192.7 �23.4

Currentliabilities (1,165.6) (�,�27.9) (304.7) (3.6)Non-currentliabilitiesandprovisions (2,004.3) (�,892.�) (623.9) –

TotalLiabilities (3,169.9) (3,020.0) (928.6) (3.6)

Minorityinterest (33.9) (3�.8) (34.3) –

NetAssetsat31December 2,602.0 �,939.4 229.8 ��9.8

(I) TheGrouphasdiscontinuedtherecognitionofitsshareoflossesofPrimeMediaHoldings,Inc.,anassociatedcompany,becausetheshareoflossesofthisassociatedcompanyfullyerodedtheGroup’sinvestment.TheamountsoftheGroup’sunrecognizedshareoflossesofthisassociatedcompanyforthecurrentyearandcumulativelywereUS$0.6million(2006:US$0.�million)andUS$8.6million(2006:US$8.0million),respectively.

15. Goodwill


At�January 34.8 32.7Exchangetranslation (9.6) �.2Acquisitionofsubsidiarycompanies(Note32(A)) 335.1 7.3Increasedinvestmentinasubsidiarycompany 3.6 –Impairment(Note6) (16.7) (6.4)

NetBookAmountat31December 347.2 34.8

(A) GoodwillisallocatedtotheGroup’scash-generatingunitsidentifiedaccordingtothebusinessandgeographicalsegments.Allofthegoodwillamountsat3�December2007and3�December2006relatetoIndofood’sbusinesseswhichcontributetotheGroup’sconsumerfoodproductsbusinesssegmentlocatedinIndonesia.

(B) Inassessingtheimpairmentforgoodwill,theGroupcomparesthecarryingamountoftheunderlyingassetsagainsttheirrecoverableamounts(calculatedasthehigheroftheasset’sfairvaluelesscoststosellanditsvalueinuse).TherecoverableamountsofIndofood’sbusinesseshavebeendeterminedbasedonavalueinusecalculationusingcashflowprojectionscoveringfrom�yearsupto2�years(fortheplantationcompanies).Thediscountratesappliedtocashflowprojectionsrangefrom�2.8percentto23.7percent(2006:�2.9percentto�4.9percent).

�08


16. FinancialAssetsatFairValueThroughProfitorLoss

Theamountrepresentsthefairvalue,determinedbasedonaquotedmarketprice,ofcertainPLDTsharesdesignatedas

financialassetsatfairvaluethroughprofitorlosstooffsetagainsttheexposurearisingfromchangesinthefairvalueof

theoptionelementembeddedintheHeadOffice’sExchangeableNotes.TheDirectorsconsiderthatsuchadesignationis

appropriatesincethechangeinvalueofsuchassetswillhaveastrongcorrelationwithanychangeinthefairvalueofthe

optionembeddedintheExchangeableNotes.

17. AccountsReceivable,OtherReceivablesandPrepayments

Consolidated 2007 2006


Tradereceivables 263.3 �73.�

Otherreceivables 100.8 73.�

Prepayments 28.4 27.8

Total 392.5 274.0

Presentedas:Non-currentPortion 37.0 ��.9

CurrentPortion 355.5 2�8.�

Total 392.5 274.0

(A) Thecarryingamountofthecurrentportionofaccountsreceivable,otherreceivablesandprepaymentsapproximates

totheirfairvalue.Thefairvalueofthenon-currentportionofaccountsreceivable,otherreceivablesandprepayments

isUS$42.0million(2006:US$�9.0million)whichisdeterminedbasedoncashflowsdiscountedusingaweighted

averageprevailinginterestrateof9.9percent(2006:7.0percent).Theweightedaverageeffectiveinterestrateofthe

non-currentportionofaccountsreceivable,otherreceivablesandprepaymentsis�2.2percent(2006:��.6percent).

(B) Theageingprofileoftradereceivablesisanalyzedasbelow.


0to30days 218.6 �48.4

3�to60days 4.8 4.8

6�to90days 5.5 2.8

Over90days 34.4 �7.�

Total 263.3 �73.�



Neitherpastduenorimpaired 225.2 ��4.�

Pastduebutnotimpaired

–0to30dayspastdue 6.0 �.2

–3�to60dayspastdue 5.5 3.�

–6�to90dayspastdue 13.8 7.2

–Over90dayspastdue 12.8 2.7

Total 263.3 �73.�

Receivablesthatwereneitherpastduenorimpairedrelatetoawiderangeofcustomersforwhomtherewasno

recenthistoryofdefault.

Receivablesthatwerepastduebutnotimpairedrelatetoanumberofcustomersthathaveagoodtrackrecordwith

theGroup.Basedonpastexperience,managementbelievesthatnoimpairmentallowanceisnecessaryinrespectof

thesebalancesastherehasnotbeenasignificantchangeincreditqualityandthebalancesarestillconsideredfully

recoverable.

(C) At3�December2007,tradereceivablesofUS$4.�million(2006:US$�.8million)werecollectivelyimpairedandfully

providedfor.Movementsintheprovisionforimpairmentoftradereceivableswereasfollows.


At�January (1.8) (3.7)

Exchangetranslation 0.2 (0.3)

Chargefortheyear(Note6) (2.5) (9.3)

Uncollectableamountswrittenoff – ��.�

At31December (4.1) (�.8)

(D) AstheGroup’stradereceivablesrelatetoalargenumberofdiversifiedcustomers,thereisnoconcentrationofcredit

risk.

(E) Indofoodallowsexportcustomers60daysofcreditandlocalcustomersanaverageof30daysofcredit.MPICcollects

contractreceivablesrelatedtopropertysalesbyinstallmentsoverperiodsrangingbetweenonetofiveyears.

(F) AccountsreceivablewithanetbookamountofUS$�6.6million(2006:US$3.9million)werepledgedassecurityfor

certainoftheGroup’sbankingfacilities(Note2�(C)).

��0


18. PrepaidLandPremiums


At�January 48.4 37.3

Exchangetranslation (4.1) 4.2

Additions 2.3 7.�

Acquisitionofsubsidiarycompanies(Note32(A)) 112.9 �.9

Recognitionduringtheyear(Note6) (2.8) (2.�)

TotalPrepaidLandPremiums 156.7 48.4

Currentportionincludedinaccountsreceivable,

otherreceivablesandprepayments (5.3) (2.6)

At31December 151.4 4�.8


Overseas,HeldOn:Leasesofbetween�0and�0years 153.4 44.�

Leasesoflessthan�0years 3.3 3.9

Total 156.7 48.4

19. Available-for-saleAssets


Listedinvestments,atfairvalue:

–Equityinvestments–Overseas 24.4 �0�.6

–Debentureswithafixedinterestof�4.0%(2006:�4.0%)and

amaturitydateof�October20�4(2006:�October20�4)–Overseas 0.4 0.�

Unlistedinvestment,atcostlessimpairmentprovisions:

–Equityinvestment–Overseas 3.0 3.8

Unlistedinvestment,atfairvalue:

–Clubdebentures–HongKong 2.3 �.�

Total 30.1 �07.0

Presentedas:Non-CurrentPortion 6.0 4.9

CurrentPortion 24.1 �02.�

Total 30.1 �07.0


(A) Thefairvaluesofthelistedequityinvestmentsanddebenturesarebasedonquotedmarketprices.Thefairvalue

oftheunlistedinvestmentinclubdebentureshasbeenestimatedbyreferencetorecentmarkettransactionprices.

TheDirectorsbelievethattheestimatedfairvaluesbyreferencetomarketprices,whicharerecordedinthecarrying

amountsoftheavailable-for-saleassets,andtherelatedchangesinfairvalues,whicharerecordeddirectlyinthe

Group’sequity,arereasonable,andthattheyarethemostappropriatevaluesatthebalancesheetdate.

(B) None(2006:US$0.4million)oftheunlistedequityinvestmentshavebeenpledgedtosecureanyoftheGroup’sbanking

facilities(Note2�(C)).

20. DeferredTax

Themovementsindeferredtaxassetsduringtheyearareasfollows.

Liabilitiesfor

Taxloss Allowance employee

carry fordoubtful retirement

US$millions forward accounts benefits Others Consolidated

DeferredTaxAssetsAt�January2007 2.4 0.4 4.9 �2.6 20.3Exchangetranslation (0.�) – (0.7) 0.� (0.3)Acquisitionofsubsidiarycompanies(Note32(A)) – – �.3 0.� 5.4Credit/(charge)totheprofitandlossstatement(Note7) �.3 0.9 �2.8 (�.4) 17.6Transferfromprovisionfortaxation(Note26) – – – 2.0 2.0

At31December2007 7.6 �.3 22.3 �3.8 45.0

Liabilitiesfor

Taxloss Allowance employee

carry fordoubtful retirement

US$millions forward accounts benefits Others Consolidated

DeferredTaxAssetsAt�January2006 4.2 �.2 2.2 7.8 ��.4

Exchangetranslation 0.3 0.� 0.2 0.8 �.4

Acquisitionofsubsidiarycompanies(Note32(A)) 0.3 – – �.0 �.3

(Charge)/credittotheprofitandlossstatement(Note7) (2.4) (0.9) 2.� 2.2 �.4

Transferfromprovisionfortaxation(Note26) – – – 0.8 0.8

At3�December2006 2.4 0.4 4.9 �2.6 20.3

��2


Themovementsindeferredtaxliabilitiesduringtheyearareasfollows.

Withholding taxon Allowance undistributed inexcess earningsof ofrelated subsidiary depreciationof Changein and property,plant fairvalueof associatedUS$millions andequipment plantations companies Others Consolidated

DeferredTaxLiabilitiesAt�January2007 (96.6) (60.6) (4.3) (�.8) (163.3)Exchangetranslation 4.8 �.7 – 3.9 14.4Acquisitionofsubsidiarycompanies(Note32(A)) (26.8) (�08.�) – (8.9) (143.8)Credit/(charge)totheprofitandlossstatement(Note7) 0.8 (6.6) (�9.2) 8.2 (16.8)Transferto/(from)provisionfortaxation(Note26) – – �.� (2.8) (1.3)

At31December2007 (��7.8) (�69.6) (22.0) (�.4) (310.8)

Withholding taxon Allowance undistributed inexcess earningsof ofrelated subsidiary depreciationof Changein and property,plant fairvalueof associatedUS$millions andequipment plantations companies Others Consolidated

DeferredTaxLiabilitiesAt�January2006 (79.0) (40.�) (�.7) 6.7 (��4.�)Exchangetranslation (3.8) (3.8) – �.3 (6.3)Acquisitionofsubsidiarycompanies(Note32(A)) (��.3) – – (9.�) (24.8)Disposalofsubsidiarycompanies – – – 4.9 4.9Credit/(charge)totheprofitandlossstatement(Note7) 4.9 (�6.7) (4.3) (4.4) (20.�)Transfer(from)/toprovisionfortaxation(Note26) (3.4) – �.7 (0.8) (2.�)

At3�December2006 (96.6) (60.6) (4.3) (�.8) (�63.3)

At3�December2007,taxlossesavailabletoreducefutureincometax,arisingintheentitiestowhichtheyrelate,amountedtoUS$7.4million(2006:US$37.0million)inrespectofnon-HongKongtaxlosses,andUS$30.2million(2006:US$39.�million)inrespectofHongKongtaxlosses.Thenon-HongKongtaxlossesareavailableforoffsettingagainstfuturetaxableprofitsofthecompaniesinwhichthelossesaroseforthreetofiveyears,whereasHongKongtaxlossesareavailableindefinitelyforoffsettingagainstfuturetaxableprofitsofthecompaniesinwhichthelossesarose.Nodeferredtaxassetshavebeenrecognizedinrespectoftheselossesastheyhaveariseninsubsidiarycompaniesthathavebeenloss-makingforsometime.Exceptforthis,deferredtaxassetshavebeenproperlyrecognized.

TherearenoincometaxconsequencesattachingtothepaymentofdividendsbytheCompanytoitsshareholders.

��3FirstPacificCompanyLimitedAnnualReport2007

21. OtherNon-currentAssets


Depositsforacquisitionofassets 34.2 44.0

Claimsfortaxrefund 5.6 29.8

Deferredcharges 9.0 7.0

Others 61.2 2�.7

Total 110.0 �06.�

ThedepositsforacquisitionofassetsmainlyrepresentIndofood’sdepositsfortheacquisitionofcertainlandrights.

TheclaimsfortaxrefundrelatestothetaxpaymentinadvancemadebyIndofoodinrespectofwheatimportationwhichis

creditableagainstIndofood’scorporateincometaxpayable.

ThedeferredchargesmainlyrepresentdeferredcostsandexpensesrelatingtoIndofood’ssystemsimplementation.

22. CashandCashEquivalents

Consolidated Company 2007 2006 2007 2006


Cashatbanksandonhand 492.1 204.9 0.1 –

Short-termtimedeposits 108.7 62.� 106.2 62.4

Total 600.8 267.4 106.3 62.4

Cashatbanksearnsinterestatfloatingratesbasedondailybankdepositrates.Short-termtimedepositsaremadefor

varyingperiodsofbetweenthreedaysandonemonthdependingontheimmediatecashrequirementsoftheGroup,and

earninterestattherespectiveshort-termtimedepositrates.Thebankbalancesandtimedepositsaredepositedwith

creditworthybankswithnorecenthistoryofdefault.Thecarryingamountsofthecashandcashequivalentsapproximateto

theirfairvalues.

23. Inventories


Rawmaterials 281.5 2�6.�

Workinprogress 6.3 �.9

Finishedgoods 154.9 �07.8

Propertiesheldforsale 51.3 37.6

Total 494.0 367.4

��4


(A) TheprincipalpropertiesheldbytheMPICgroupforsale,includedinpropertiesheldforsale,at3�December2007are

asfollows:

Group’s Approximategross Estimated

economic developmentarea completion

Location interest(%) (sq.m.)(i) Type Status date

Tiaong,Quezon(HaciendaEscudero) 26.2 3,226,873 F,C Underconstruction 20�3

Batulao,Batangas 82.7 2,�07,0�0 R Planning –

Lemery,Batangas(LeisureFarms) 43.7 �,46�,024 F Completed –

Calatagan,Batangas(PlayaCalatagan) 26.2 98�,�98 R,RO Underconstruction 20�0

Nasugbu,Batangas(Terrazas) ��.7 897,440 RO Underconstruction 2008

Guadalupe,Cebu(MonterrazasdeCebu) 24.0 72�,000 R Underconstruction 2008

Nasugbu,Batangas(PuntaFuego) 24.0 4��,238 RO Completed –

Silang,Cavite(Ponderosa) �7.0 366,627 F Underconstruction 2008

SanPablo,Laguna(Montelago) 26.2 338,43� R Underconstruction 20��

Talisay,Cebu(PacificHeights) �7.� 332,000 R Completed –

Davao/Zamboanga/lloilo(ForestLake) 26.2 3��,200 MP Underconstruction 20�4

SanPedro,Laguna(Stonecrest) 2�.8 297,986 R Completed –

Baliuag,Bulacan(Waterwood�) 28.9 264,�74 R Completed –

Cabanatuan,NuevaEcija(Courtyard) 30.2 228,83� R Underconstruction 20�0

CagayandeOro/SanFernandoLaUnion

(ForestLakeCDO) �8.3 �20,000 MP Underconstruction 20�0

MuntinlupaCity(Tibeca) 34.9 97,000 R Underconstruction 20�3

Baliuag,Bulacan(Waterwood2) 3�.4 88,33� R Underconstruction 20�0

LucenaCity,Quezon(Ridgewood) 7�.� 40,076 R Completed –

Nasugbu,Batangas(AmaraCondo) 26.2 29,993 H Underconstruction 2008

Baliuag,Bulacan(Waterwood3) 43.7 �7,382 R Completed –

Bajada,Davao(LandcoCorporateCenter) 43.7 �3,326 C Underconstruction 20�3

LegaspiCity,Albay(LandcoBusinessPark) 2�.4 ��,022 C Completed –

R = Residential, RO = Resort, F = Leisure Farms, C = Commercial, MP = Memorial Park, H = Hotel

(i) The total area for sale as subdivisions and land designated for parks and open spaces

(B) At3�December2007,inventorieswithacarryingamountofUS$63.8million(2006:US$4�.8million)werecarriedatnet

realizablevalue.

(C) At3�December2007,inventorieswithacarryingamountofUS$�3.8million(2006:US$8.7million)werepledgedas

securityforcertainoftheGroup’sbankingfacilities(Note2�(C)).


24. AccountsPayable,OtherPayablesandAccruals

Consolidated 2007 2006


Tradepayables 213.0 �3�.�

Accruedexpenses 140.9 79.�

Otherpayables 131.7 8�.�

Total 485.6 300.�

Theageingprofileoftradepayablesisanalyzedasfollows:


0to30days 189.4 �29.0

3�to60days 2.0 0.4

6�to90days 5.9 0.7

Over90days 15.7 �.0

Total 213.0 �3�.�

Alloftheaccountspayable,otherpayablesandaccrualsareexpectedtobesettledwithinoneyear.Thecarryingamountof

theGroup’saccountspayable,otherpayablesandaccrualsapproximatetotheirfairvalue.

25. Borrowings

ConsolidatedUS$millions Effectiveinterestrate(%) Maturity Notes 2007 2006

Short-term Bankloans �.9–��.0(2006:�.9–��.3) 2008 819.6 �0�.�

Otherloans 2.�–�3.�(2006:2.�–�3.�) 2008 180.5 3.4

Subtotal 1,000.1 �08.9

Long-term Bankloans 7.3–��.0(2006:7.6–��.3) 2009–20�3 (A) 722.4 247.7

Otherloans 7.8–�8.3(2006:7.8–��.0) 2009–20�0 (B) 322.1 399.3

Subtotal 1,044.5 647.0

Total 2,044.6 �,��.9

Thebalanceofshort-termborrowingsincludesUS$202.�million(2006:US$��0.3million)ofcurrentportionoflong-term

borrowings.

��6


ThematurityprofileoftheGroup’sborrowingsisasfollows:

Bankloans Otherloans ConsolidatedUS$millions 2007 2006 2007 2006 2007 2006

Notexceedingoneyear 819.6 �0�.� 180.5 3.4 1,000.1 �08.9

Morethanoneyearbut

notexceedingtwoyears 64.0 88.0 105.8 �3�.6 169.8 223.6

Morethantwoyearsbut

notexceedingfiveyears 608.9 �7.� 216.3 262.4 825.2 3�9.�

Morethanfiveyears 49.5 �02.6 – �.3 49.5 �03.9

Total 1,542.0 7�3.2 502.6 402.7 2,044.6 �,��.9

Representingamountsrepayable

–whollywithinfiveyears 1,246.0 6�0.6 502.6 40�.4 1,748.6 �,0�2.0

–notwhollywithinfiveyears 296.0 �02.6 – �.3 296.0 �03.9

Total 1,542.0 7�3.2 502.6 402.7 2,044.6 �,��.9

Thecarryingamountsoftheborrowingsaredenominatedinthefollowingcurrencies:


Rupiah 1,026.6 642.3

U.S.dollar 934.1 4�9.�

Peso 83.9 �0.6

Others – 3.9

Total 2,044.6 �,��.9

Ananalysisofthecarryingamountsofborrowingsintofixedandvariableinterestratesisasfollows:


Fixedinterestrate 492.0 44�.4

Variableinterestrate 1,552.6 7�4.�

Total 2,044.6 �,��.9


Thecarryingamountsandfairvaluesofthelong-termborrowingsareasfollows:

Carryingamounts FairvaluesUS$millions 2007 2006 2007 2006

Bankloans 722.4 247.7 731.3 249.3

Otherloans 322.1 399.3 332.9 �08.3

Total 1,044.5 647.0 1,064.2 7�7.6

ThefairvaluesarebasedonpublishedpricequotationsforlistednotesandbondsissuedbytheGroupandprojectedcash

flowsdiscountedusingtheborrowingratesrangingfrom�.9percentto�0.0percent(2006:7.9percentto��.3percent)for

theotherfixedinterestrateborrowings.ThecarryingamountsoftheGroup’svariableinterestrateborrowingsapproximate

totheirfairvaluesduetofrequentrepricing.

Thecarryingamountsoftheshort-termborrowingsapproximatetotheirfairvalues.

Detailsoftheborrowingsaresetoutbelow.

(A) Long-termBankLoansThebalanceincludesUS$64�.�million(withanaggregatefacevalueofUS$649.9million)ofbankloans(2006:US$�48.3

million)borrowedbyvariouswholly-ownedsubsidiarycompaniesoftheCompanywithdetailssummarizedasfollows:

(a) AUS$49.�million(withafacevalueofUS$�0.0million)bankloan(2006:US$49.4million)drawninNovember200�

securedbytheGroup’s�.�percent(2006:�.7percent)interestinPLDT,subjecttoavariableLondonInter-bank

OfferRates(LIBOR)basedinterestrate,whichisrepayableinNovember20�2.

(b) AUS$49.�million(withafacevalueofUS$�0.0million)bankloan(2006:US$49.4million)drawninJuly2006

securedbytheGroup’s�.0percent(2006:�.�percent)interestinPLDT,subjecttoavariableLIBORbased

interestrate,whichisrepayableinJuly20��.

(c) AUS$49.�million(withafacevalueofUS$49.9million)bankloan(2006:US$49.�million)drawninNovember

2006securedbytheGroup’s�.�percent(2006:�.�percent)interestinPLDT,subjecttoavariableLIBORbased

interestrate,whichisrepayableinNovember20�3.

(d) AUS$29�.6million(withafacevalueofUS$300.0million)bankloan(2006:Nil)drawninJanuary2007securedby

theGroup’s6.6percentinterestinPLDT,subjecttoavariableLIBORbasedinterestrate,whichisrepayablein

December20��.

(e) AUS$�97.0million(withafacevalueofUS$200.0million)bankloan(2006:Nil)drawninAugust2007securedby

theGroup’s3.9percentinterestinPLDT,subjecttoavariableLIBORbasedinterestrate,whichisrepayablein

December20�2.

��8


(B) Long-termOtherLoansThebalanceprincipallyincludesUS$4.4million(withafacevalueofUS$3.9million)ofExchangeableNotes(2006:

US$��3.�millionwithafacevalueofUS$�46.3million)issuedbyFirstPacificFinanceLimited(FPF),awholly-owned

subsidiarycompanyoftheCompany,andthreeseriesofbondsissuedbyIndofood.

(a) DetailsoftheExchangeableNotesissuedbyFPFaresummarizedasfollows:

On�8January200�,theCompanyissuedUS$�99.0millionfive-yearzerocouponExchangeableNotesthrough

FPF.TheExchangeableNotesareunsecuredobligationsofFPFandareunconditionallyandirrevocably

guaranteedbytheCompany.TheExchangeableNoteswithafaceamountofUS$�9�.�millionwereconvertedor

settledduring2006and2007,leavinganoutstandingprincipalamountofUS$3.9million.InJanuaryandFebruary

2008,theremainingExchangeableNoteshavebeenexchangedintoapproximately0.�percentinterestinPLDT.

TheExchangeableNoteshaveayieldtomaturityof�.62�percentperannum.Unlesspreviouslyredeemed,

exchanged,orpurchasedandcancelled,FPFwillredeemtheExchangeableNotesat�3�.97percentoftheir

principalamounton�8January20�0.ThenoteholdershavetheoptiontoputtheExchangeableNotestoFPFat

��8.��percentoftheirprincipalamountonthethirdanniversaryoftheExchangeableNotes.TheExchangeable

Notescarryaninitialconversionpremiumof2�percent,whichtranslatestheconversionpriceintoUS$29.33per

PLDTshare.

(b) DetailsofthebondsissuedbyIndofoodaresummarizedasfollows:

(I) Rupiah�.2trillion(withafacevalueofUS$�30.2million)ofRupiahbonds(whichrepresentstheoriginal

amountissuedinJune2003ofRupiah�.�trillion(US$��9.3million)lessrepurchaseofthebondswitha

facevalueofRupiah0.3trillion(US$29.�million)during200�)(2006:facevalueofUS$�36.0million),witha

couponrateof�3.�percent,arepayablequarterly,andmatureinJune2008;

(II) Rupiah�.0trillion(withafacevalueofUS$�03.6million)ofRupiahbonds(whichrepresentstheoriginal

amountissuedinJuly2004ofRupiah�.0trillion(US$��0.9million)lessrepurchaseofthebondswithaface

valueofRupiah24billion(US$2.7million)during200�)(2006:facevalueofUS$�08.2million),withacoupon

rateof�2.�percent,arepayablequarterly,andmatureinJuly2009;and

(III) Rupiah2.0trillion(withafacevalueofUS$2�2.3million)ofRupiahbonds(2006:Nil)issuedinMay2007,with

acouponrateof�0.0percent,arepayablequarterly,andmatureinMay20�2.

(C) ChargesonGroupAssetsAt3�December2007,thetotalborrowingsincludesecuredbankandotherborrowingsofUS$773.6million(2006:

US$�93.9million).SuchbankandotherborrowingsweresecuredbytheGroup’sproperty,plantandequipment,

plantations,accountsreceivable,pledgeddepositsandinventoriesequatingtoanetbookvalueofUS$6�8.4million

(2006:US$84.�million)andtheGroup’sinterestof�3.7percent(2006:4.3percent)inPLDT.

(D) BankCovenantsTheGrouphascompliedwithallofitsbankcovenants,exceptforthoserelatedtoMetroPacificCorporation(Metro

Pacific).Sincethefourthquarterof200�,MetroPacifichasbeenunabletomeetitsdebtobligations.At3�December

2007,MetroPacifichadPesos4��million(US$�0.9million)(2006:Pesos48�millionorUS$9.9million)outstandingdebt

obligations.MetroPacifichasreachedagreementswithcertainofitscreditorsforthesettlementofsomeofthedebt

obligationsandanticipatestofurtherreducetheoutstandingdebtobligationsduring2008.


26. ProvisionforTaxation


At�January 23.1 ��.2

Exchangetranslation (1.7) �.2

Acquisitionofsubsidiarycompanies(Note32(A)) 17.6 0.3

Disposalofsubsidiarycompanies – (0.�)

Provisionfortaxationonestimatedassessableprofitsfortheyear(Note7) 96.5 �2.�

Transferfrom/(to)deferredtaxation(Note20) 0.7 (�.7)

Total 136.2 63.4

Taxpaid (83.3) (40.3)

At31December 52.9 23.�

27. DeferredLiabilitiesandProvisions

Deferred Long-term ConsolidatedUS$millions Pension income liabilities Others 2007 2006

At�January 62.8 22.4 9.8 �3.7 108.7 �08.0

Exchangetranslation (3.4) – (0.�) 0.� (3.0) 6.�

Additions ��.8 – 0.� 3.6 59.9 22.�

Acquisitionofsubsidiarycompanies(Note32(A)) 37.2 – – – 37.2 0.2

Disposalofsubsidiarycompanies – – – – – (�.8)

Paymentandutilization – (�.3) (�.9) (�.7) (4.9) (26.3)

At31December ��2.4 2�.� 8.3 �6.� 197.9 �08.7

Presentedas:CurrentPortion – �.3 – �6.� 17.4 �6.6

Non-currentPortion ��2.4 �9.8 8.3 – 180.5 92.�

Total ��2.4 2�.� 8.3 �6.� 197.9 �08.7

Thepensionrelatestoaccruedliabilitiesinrelationtoretirementschemesandlongservicepayments.

ThedeferredincomerelatestoanupfrontservicefeereceivedbyAsiaLinkB.V.(ALBV),awholly-ownedsubsidiarycompany

oftheCompany,fromSmartCommunications,Inc.(Smart),awholly-ownedsubsidiarycompanyofPLDT,inrespectoftheir

arrangementforaserviceagreement(Note36(C)).

Thelong-termliabilitiesmainlyrelatetoIndofood’saccruedliabilitiesfordismantlement,removalorrestorationinrelationto

property,plantandequipment.

Theothersmainlyrelatetoarestructuringprovision.TherestructuringprovisionrelatestotherestructuringoftheGroup’s

shareholdingstructureinPLDT.Theamountoftheprovisionfortherestructuringisestimatedbasedontheanticipated

transactioncostsrequiredtocompletetherestructuring.Theestimationbasisisreviewedonanongoingbasisandrevised

asappropriate.

�20


28. ShareCapital

Consolidated andCompanyUS$millions 2007 2006

Authorized�,000,000,000(2006:�,000,000,000)ordinarysharesofU.S.�centeach 50.0 �0.0

IssuedandfullypaidAt�January 32.0 3�.9Issueofsharesupontheexerciseofshareoptions 0.2 0.�Repurchaseandcancellationofshares – –

At31December3,224,�43,003(2006:3,204,793,003)ordinarysharesofU.S.�centeach 32.2 32.0

Duringtheyear,themovementsintheCompany’ssharecapitalwereasfollows.

(A) 23,3�4,000(2006:��,960,000)shareoptionswereexercisedattheexercisepriceofHK$�.76pershare(2006:HK$�.76pershare),resultingintheissueof23,3�4,000(2006:��,960,000)newordinarysharesofU.S.�centeachforatotalcashconsiderationofHK$4�.0million(US$�.3million)(2006:HK$28.�millionorUS$3.6million).DetailsoftheCompany’sshareoptionschemearesetoutinNote3�(D)(a)totheFinancialStatements.

(B) Duringtheyear,theCompanyrepurchased3,964,000ordinarysharesonSEHKatanaggregateconsiderationofHK$23.3million(US$3.0million)beforeexpenses.Thesesharesweresubsequentlycancelled.Detailsoftherepurchasearesummarizedasfollows:

Purchaseprice Numberof paidpershare Aggregate ordinaryshares Highest Lowest considerationpaidMonthofrepurchases repurchased HK$ HK$ HK$millions US$millions

September2007 �,006,000 �.78 �.�� .7 0.7October2007 2,9�8,000 6.2� �.70 �7.6 2.3

Total 3,964,000 23.3 3.0

TherepurchaseswereeffectedbytheDirectorswithaviewtobenefitingtheshareholdersasawholebyenhancingtheCompany’snetassetsandearningspershare.

29. OtherReserves

AnanalysisoftheGroup’sexchangereserve,byprincipaloperatingcompany,issetoutbelow.


PLDT 51.0 (44.7)Indofood (17.4) (2.6)Others 10.6 4.6

Total 44.2 (42.7)


Ananalysisoftheaccumulatedreservesofassociatedcompaniesandjointventures,includedwithinconsolidatedreserves,issetoutbelow.

AssociatedCompanies Jointventures Consolidated 2007 2006 2007 2006 2007 2006


AssociatedCompaniesand JointVenturesRevenuereserve (808.5) (8�8.2) 37.1 (2.3) (771.4) (860.�)

Exchangereserve 51.1 (44.8) 16.0 (�.2) 67.1 (46.0)

Unrealizedgains/(losses)

oncashflowhedges 7.3 (6.6) – – 7.3 (6.6)

Total(Note�4) (750.1) (909.6) 53.1 (3.�) (697.0) (9�3.�)

ThecontributedsurplusoftheCompanyarosefromareorganizationoftheGroupin�988andrepresentsthedifference

betweenthenominalvalueofthesharecapitalissuedbytheCompanyandtheaggregatenetassetvalueofthesubsidiary

companiesacquiredatthedateofacquisition.UndertheCompaniesAct�98�ofBermuda(asamended),theCompanymay

makedistributionstoitsshareholdersoutofthecontributedsurplusprovidedcertainconditionsaremet.

30. MinorityInterest

AnanalysisoftheGroup’sminorityinterest,byprincipaloperatingcompany,issetoutbelow.


Indofood 949.9 420.2

MPIC 42.7 29.9

Total 992.6 4�0.�

31. DerivativeLiability

ThederivativeliabilityrepresentsthefairvalueoftheexchangeableoptionembeddedintheHeadOffice’sExchangeable

Notes.DetailsregardingtheissueoftheExchangeableNotesissetoutinNote2�(B)(a).

TheexchangeableoptionoftheExchangeableNotesqualifiedasanembeddedderivativeunderHKAS39“Financial

Instruments:RecognitionandMeasurement”.Uponinitialrecognition,thefairvalueoftheoptionofUS$�3.9millionis

identifiedandaccountedforseparatelyfromthefairvalueofthebondinstrument.Thefairvalueoftheoptionliabilitywas

remeasuredtoUS$6.3million(2006:US$99.6million)onamark-to-marketbasisat3�December2007.Thedecreaseduring

theyearprimarilyreflectsanamountrealizeduponpartialsettlementoftheExchangeableNotes,partlyoffsetbyanincrease

inPLDTshareprice.

�22


32. NotestotheConsolidatedCashFlowStatement(A) AcquisitionofSubsidiaryCompanies

Carryingamount immediatelybefore Fairvaluerecognizedonacquisition theacquisition

2006 Indofood’s Indofood’sacquisitionof Indofood’s acquisitionof PTSwadayaBhakti acquisitionofPT PacsariPteLtd Negaramas(SBN),PT Perusahaan (PPL),PT MentariSuburAbadi Perkebunan SaranaIntiPratama (MSA)andPTMega LondonSumatra anditssubsidiary CitraPerdana(MCP) (Lonsum)andits companiesand andtheirsubsidiary subsidiary 2007 others 2007 2006US$millions companies companies Others Total Total Total Total

ConsiderationCashandcashequivalents �3.8 ��2.� 7.3 573.6 42.2SharesissuedbyIndoAgri – �20.� ��.6 132.1 –Associatedcompanies – – – – 0.6Accountsreceivable,otherreceivablesand prepayments(Current) – – – – ��.�Othernon-currentassets – – – – �.2

Total �3.8 673.0 �8.9 705.7 63.�

NetAssetsProperty,plantandequipment(Note��) 2.4 �02.0 4.3 108.7 9�.0 80.8 39.0Plantations(Note�2) �6.9 �43.4 �6.7 577.0 26.4 198.1 3.6Accountsreceivable,otherreceivablesand prepayments(Non-current) – �4.9 – 14.9 2.9 14.9 2.9Prepaidlandpremiums(Note�8) �0.3 �00.2 2.4 112.9 �.9 54.0 �.4Deferredtaxassets(Note20) 0.2 �.2 – 5.4 �.3 0.2 �.3Othernon-currentassets 0.7 0.� 8.7 9.5 6.0 9.5 �.�Cashandcashequivalents 0.7 �0.6 4.7 56.0 �0.6 56.0 �0.6Accountsreceivable,otherreceivablesand prepayments(Current) �.3 �3.2 3.3 17.8 4.8 17.8 4.8Inventories 0.7 �7.7 �.� 19.9 �.� 19.9 �.�Accountspayable,otherpayablesandaccruals (8.0) (33.6) (�7.6) (59.2) (�3.7) (59.2) (�3.7)Short-termborrowings (0.�) (27.4) – (27.5) (��.�) (27.5) (��.�)Provisionfortaxation(Note26) – (�6.6) (�.0) (17.6) (0.3) (17.6) (0.3)Long-termborrowings – (�6.9) (�.8) (62.7) (4.2) (62.7) (4.2)Deferredliabilitiesandprovisions(Note27) – (37.2) – (37.2) (0.2) (19.7) (0.2)Deferredtaxliabilities(Note20) (4.�) (�36.2) (3.�) (143.8) (24.8) (8.2) –

TotalNetAssets 2�.0 �39.4 �3.7 574.1 92.� 256.3 36.7

Minorityinterest (8.4) (�9�.9) (3.2) (203.5) (3�.9)

TotalNetAssetsAcquiredatFairValue �2.6 347.� �0.� 370.6 �6.2

Goodwill(Note��) �.2 32�.� 8.4 335.1 7.3

NetCashOutflowPerthe ConsolidatedCashFlowStatement (�3.�) (�0�.9) (2.6) (517.6) (3�.6)


InMarch2007,PTSalimIvomasPratama(SIMP),asubsidiarycompanyofIndofood,acquireda60.0percentinterest

inSBN,MSAandMCPandtheirsubsidiarycompaniesatRupiah�2�billion(US$�3.8million).SBN,MSAandMCPand

theirsubsidiarycompaniesengageinplantationoperationsinIndonesiaandownapproximately8�,�00hectaresof

plantationland.

DuringOctoberandNovember2007,SIMPandIndofoodAgriResourcesLtd(IndoAgri),anothersubsidiarycompanyof

Indofood,acquiredanaggregate64.4percentinterestinLonsumanditssubsidiarycompaniesatRupiah�.�trillion

(US$��2.�million)and6.8percentnewsharesissuedbyIndoAgri.Lonsumanditssubsidiarycompaniesengagein

plantationoperationsinIndonesiaandownapproximately�69,2�7hectaresofplantationland.

Thegoodwillismainlyattributabletothesynergiesexpectedtoarisefromtheacquisitionoftheabovecompanies.

ItisnotpracticabletodisclosetheturnoverandprofitfortheyearoftheGroup,asiftheacquisitionshadtakenplace

atthebeginningoftheyear,astheinformationoffairvalueofplantationsoftheacquiredcompaniesatthebeginning

oftheyearisnotavailabletomanagement.Thesubsidiarycompaniesacquiredduringtheyearhadnetcashinflows

fromoperatingandfinancingactivitiesofUS$�0.4millionandUS$2�.4million,respectively,andhadanetcashoutflow

ofUS$�9.2millioninrespectofinvestingactivitiesduringtheyear.

(B) IncreasedInvestmentinAssociatedCompaniesThecashoutflowofUS$��4.8million(2006:US$37.3million)mainlyrelatestotheGroup’sincreasedinvestmentin

PLDT.

(C) IncreasedInvestmentinaSubsidiaryCompanyThecashoutflowofUS$2�.6millionrelatestoIndofood’sincreasedinterestinPPL,ashippingcompany,from��.0

percentto90.0percentinApril2007.

(D) PledgedDepositsandRestrictedCashAt3�December2007,theGrouphadno(2006:US$30.0million)pledgedbankdepositsandno(2006:US$�.3million)

cashwhichwasrestrictedastouse.

(E) MajorNon-cashTransactionDuringtheyear,theGroupsettledUS$�42.4millionoftheHeadOffice’sExchangeableNotesthroughthetransferof

2.7percentPLDTshares.

33. CommitmentsandContingentLiabilities

(A) CapitalExpenditure


Commitmentsinrespectofsubsidiarycompanies:

Authorized,butnotcontractedfor 185.6 �79.�

Contracted,butnotprovidedfor 41.9 4.8

Total 227.5 �83.9

TheGroup’scapitalexpenditurecommitmentsprincipallyrelatetoIndofood’spurchaseofproperty,plantand

equipment.

At3�December2007,theCompanyhasnocommitmentsinrespectofcapitalexpenditures(2006:Nil).

�24


(B) LeasingCommitmentsAt3�December2007,theGrouphadtotalfutureminimumleasepaymentsundernon-cancelableoperatingleases

fallingdueasfollows:


LandandBuildings –Withinoneyear 1.9 �.2

–Betweentwoandfiveyears,inclusive 1.9 9.4

–Afterfiveyears 3.2 3.6

Subtotal 7.0 �8.2

PlantandEquipment –Withinoneyear 0.3 0.�

–Betweentwoandfiveyears,inclusive 0.3 2.�

–Afterfiveyears 0.8 0.�

Subtotal 1.4 3.�

Total 8.4 2�.3

At3�December2007,theCompanydidnothaveanyleasingcommitments(2006:Nil).

(C) ContingentLiabilitiesAt3�December2007,exceptforUS$73.4million(2006:US$7�.9million)guaranteesgivenbyIndofoodtoloanfacilities

obtainedbycertainplantationfarmersinrelationtoarrangementsforthosefarmers’productionandsaleoffreshfruit

bunchestoIndofood,neithertheGroupnortheCompanyhadanysignificantcontingentliabilities(2006:Nil).

34. Employees’Benefits

(A) Remuneration


Basicsalaries 179.7 �49.3

Bonuses 28.5 3�.4

Benefitsinkind 41.4 3�.�

Pensioncontributions 14.1 8.3

Retirementandseveranceallowances 8.3 �0.�

Equity-settledshareoptionexpense 8.7 3.0

Total(Note6) 280.7 237.2

AverageNumberofEmployees 51,722 48,382

TheaboveincludestheremunerationoftheDirectors.DetaileddisclosuresinrespectofDirectors’remunerationare

setoutinNote3�(A)totheFinancialStatements.


(B) RetirementBenefitsTheGroupoperatesbothdefinedcontributionanddefinedbenefitschemes.Inaddition,theGrouphasmade

provisionsforestimatedliabilitiesforemployeebenefitsformeetingtheminimumbenefitsrequiredtobepaidtothe

qualifiedemployeesasrequiredunderIndonesian’slabourlaw.

(a) DefinedcontributionschemesTheGroupoperatesfive(2006:five)definedcontributionschemescoveringapproximately�9,398(2006:

22,907)employees.TheassetsoftheseschemesareheldseparatelyfromtheGroupandareadministeredby

independenttrustees.Contributionstotheschemes,eitherbytheGrouporbytheemployees,aredetermined

byreferencetotheemployees’salariesandlengthofserviceandrangefromzeropercentto�0percent

(2006:zeropercentto�0percent).Underthetermsoftheschemes,theGroupcannotberequestedtomake

additionalpaymentsoverandabovetheselevelsofcontributions.Inthree(2006:three)oftheschemes,forfeited

contributionsmaybeusedtoreducetheexistinglevelsofemployercontributionsand,in2007,noamount(2006:

Nil)wasusedforthispurpose.At3�December2007,theforfeitedcontributionshadbeenfullyutilized.

(b) DefinedbenefitschemesandestimatedliabilitiesforemployeebenefitsTheGroupoperatesthree(2006:three)definedbenefitschemescoveringapproximately7�3(2006:837)

employees.TheassetsoftwooftheseschemesareheldseparatelyfromtheGroupandareadministeredby

independenttrustees.Benefitsaredeterminedbyreferencetoemployees’finalsalariesandlengthofservice,

andtheschemeshaveundergoneindependentvaluations.Theseactuarialvaluations,performedbytheactuaries

ofPTSentraJasaAktuaria(amemberoftheFellowSocietyofActuaryofIndonesiaandExpertinLifeInsurance

inIndonesia)andActuarialAdvisers,Inc.andInstitutionalSynergy,Inc,FASP(membersofActuarialSocietyof

thePhilippines),werebasedontheprojectedunitcreditmethod.Theplanassetsdonotincludeanyfinancial

instrumentsoftheGrouporpropertyoccupiedby,orotherassetsusedby,theGroup.At3�December2007,the

Group’sleveloffundinginrespectofitsdefinedbenefitschemeswas�7.3percent(2006:64.8percent).

TheGrouphasmadeprovisionsforestimatedliabilitiesforemployeebenefitscoveringapproximately3�,839

(2006:�9,�0�)employees.Theamountsofsuchprovisionsweredeterminedbyreferencetoemployees’final

salariesandlengthofserviceandbasedonactuarialcomputationspreparedbytheactuariesofPTSentraJasa

Aktuariausingtheprojectedunitcreditmethod.

(I) Theamountofliabilityunderdefinedbenefitschemesandestimatedliabilitiesforemployeebenefits

includedinthebalancesheetisasfollows:

Estimated

Defined liabilities

benefit foremployee ConsolidatedUS$millions schemes benefits 2007 2006

Presentvalueofdefined

benefitobligations (��.0) (�43.9) (154.9) (67.2)

Fairvalueofplanassets 6.3 – 6.3 6.8

LiabilityintheBalanceSheet (4.7) (�43.9) (148.6) (60.4)

�26


(II) Thechangesinthepresentvalueofthedefinedbenefitobligationsduringtheyearareasfollows:

Estimated

Defined liabilities


At�January (�0.�) (�6.7) (67.2) (63.7)

Exchangetranslation 0.3 2.8 3.1 (�.6)

Currentservicecost (0.�) (7.6) (8.1) (�.�)

Pastservicecost – – – 0.9

Interestcostonobligation (�.�) (7.7) (8.8) (�.7)

Actuarial(losses)/gains (0.�) (40.8) (41.3) (0.7)

Liabilitiesextinguished

onsettlements – – – 0.�

Acquisitionofsubsidiary

companies – (37.2) (37.2) –

Disposalofsubsidiary

companies – – – 0.�

Benefitpaid �.3 3.3 4.6 4.�

At31December (��.0) (�43.9) (154.9) (67.2)

(III) Thechangesinthefairvalueofplanassetsunderdefinedbenefitschemesduringtheyearareasfollows:


At�January 6.8 6.2

Exchangetranslation (0.2) 0.�

Expectedreturn 0.9 0.6

Actuariallosses – (0.2)

Contributionsbyemployer 0.1 2.6

Disposalofsubsidiarycompanies – (0.2)

Benefitpaid (1.3) (2.3)

At31December 6.3 6.8

Theoverallexpectedrateofreturnonassetsisdeterminedbasedonthemarketpricesprevailingonthat

dateapplicabletotheperiodoverwhichtheobligationistobesettled.

(IV) Themajorcategoriesofplanassetsasapercentageofthefairvalueofthetotalplanassetsunderdefined

benefitschemesareasfollows:


Indonesianequities 99% 99%

Philippinesdebtsecurities 1% �%


(V) Amountsforthecurrentandpreviousfouryearsfordefinedbenefitschemesareasfollows:

ConsolidatedUS$millions 2007 2006 200� 2004 2003

Definedbenefitobligations (11.0) (�0.�) (��.0) (9.0) (��.0)

Planassets 6.3 6.8 6.2 6.4 6.8

Deficit (4.7) (3.7) (4.8) (2.6) (4.2)

Experienceadjustmentsonplanliabilities (0.7) (0.�) (2.3) (�.0) –

Experienceadjustmentsonplanassets – – – – –

(VI) Theamountrecognizedintheprofitandlossstatementisanalyzedasfollows:

Estimated

Defined liabilities


Currentservicecost 0.� 7.6 8.1 �.�

Pastservicecost – – – (0.9)

Interestcostonobligation �.� 7.7 8.8 �.7

Expectedreturnonplanassets (0.9) – (0.9) (0.6)

Netactuariallossesrecognized

intheyear 0.� 40.8 41.3 0.9

Total(i) �.2 �6.� 57.3 2.6

ActualReturnonPlanAssets �3% – 13% �0%

(i) Included in cost of sales, distribution costs, administrative expenses and other operating expenses, net

(VII) Principalactuarialassumptions(weightedaverage)at3�Decemberareasfollows:

2007 2006

Discountrate 9% ��%

Expectedreturnonplanassets 8% �0%

Futuresalaryincreases 9% 9%

Futurepensionincreases 9% 9%

Averageremainingworkinglivesofemployees(years) 18.9 �9.�

(VIII) TheGroupexpectstocontributeUS$�.8million(2006:US$0.�million)toitsdefinedbenefitplansinthenext

year.

(C) LoanstoOfficersDuring2007and2006,therewerenoloansmadebytheGrouptoofficerswhichrequiredisclosurepursuantto

Section�6�BoftheHongKongCompaniesOrdinance.

�28


35. Directors’andSeniorExecutives’Remuneration

(A) Directors’RemunerationThetablebelowshowstheremunerationofDirectorsonanindividualbasis.

Directors’Remuneration–2007

Non-performancebased Performance Equity-settled

Other Pension based shareoption 2007US$’000 Salaries benefits contributions payments(i) expense Fees(ii) Emoluments(iii) Total

Chairman AnthoniSalim 464 – – – – – – 464ExecutiveDirectors ManuelV.PangilinanManaging Director and Chief Executive Officer �,6�0 4�9 96 2,0�8 �,8�4 – – 5,997 EdwardA.Tortorici �,03� �49 �,073 – �,284 – – 3,541 RobertC.Nicholson 947 2� 2 7�6 �,062 – – 2,788Non-executiveDirectors AmbassadorAlbertF.delRosario – – – – 342 �2� – 467 SutantoDjuhar – – – – – – – – TedyDjuhar – – – – – – – – IbrahimRisjad – – – – – – – – BennyS.Santoso – – – – 342 3� – 373IndependentNon-executiveDirectors GrahamL.Pickles – – – – 342 �� – 457 Prof.EdwardK.Y.ChenGBS, CBE, JP – – – – 342 �20 – 462 SirDavidW.C.TangKBE – – – – 342 7� 77 494

Total 4,0�6 �89 �,�7� 2,774 �,9�0 466 77 15,043


Directors’Remuneration–2006

Non-performancebased Performance Equity-settled

Other Pension based shareoption 2006

US$’000 Salaries benefits contributions payments(i) expense Fees(ii) Emoluments(iii) Total

Chairman AnthoniSalim 464 – – – – – – 464

ExecutiveDirectors ManuelV.PangilinanManaging Director and Chief Executive Officer �,�02 89 9� �,4�� 729 – – 3,866

EdwardA.Tortorici �,076 ��3 �,284 – 729 – – 3,242

RobertC.Nicholson 8�7 27 2 478 �62 – – �,886

Non-executiveDirectors AmbassadorAlbertF.delRosario – – – – – 92 – 92

SutantoDjuhar – – – – – – – –

TedyDjuhar – – – – – – – –

IbrahimRisjad – – – – – – – –

BennyS.Santoso – – – – – – – –

IndependentNon-executiveDirectors GrahamL.Pickles – – – – – 9� – 9�

Prof.EdwardK.Y.ChenGBS, CBE, JP – – – – – 60 – 60

SirDavidW.C.TangKBE – – – – – 4� 77 �22

Total 3,8�9 269 �,377 �,933 2,020 292 77 9,827

(i) Performance based payments comprise performance bonuses and long-term monetary incentive awards(ii) For meetings attended(iii) For consultancy services provided to the Company

IncludedwithinthetotalDirectors’remunerationisanamountofUS$�.2million(2006:US$�.�million)paidbyPLDT,an

associatedcompany,inrespectoftheservicesoftheManagingDirectorandChiefExecutiveOfficer.

�30


(B) SeniorExecutives’RemunerationAssimilarremunerationschemesoperatefortheseniorexecutivesoftheGroup,theirremunerationmayexceed

thoseoftheCompany’sDirectors.Two(2006:Two)seniorexecutiveswereamongtheGroup’sfivehighestearning

employees.Theremainingthree(2006:three)ofthefivehighestearningemployees,aretheCompany’sDirectors.


Non-performancebased

–Salariesandbenefits 0.7 0.7

Performancebased

–Bonusesandlong-termmonetaryincentiveawards 0.3 0.3


Total 2.1 �.3

Thetablebelowshowstheremunerationofthetwo(2006:two)seniorexecutiveswhowereamongtheGroup’sfive

highestearningemployeesin2007.

2007 2006

Remunerationbands Number Number

US$�73,00�–US$637,000 – �

US$637,00�–US$70�,000 – �

US$893,00�–US$9�7,000 1 –

US$�,�49,00�–US$�,2�3,000 1 –

Total 2 2

(C) KeyManagementPersonnelCompensation


Non-performancebased

–Salariesandbenefits 16.3 �3.3

–Pensioncontributions 2.0 �.�

Performancebased

–Bonusesandlong-termmonetaryincentiveawards 7.4 �.2


Total 34.4 23.0


(D) ShareOptionsParticularsoftheshareoptionsoftheCompanyanditssubsidiarycompanygrantedtotheDirectorsandsenior

executivesoftheCompanyanditssubsidiarycompanyat3�December2007aresetoutbelow.

(a) ParticularsoftheCompany’sshareoptionscheme

Market Share Share Share Share Share Market price options options options options options price duringthe heldat granted exercised heldat exercise atdate periodof Fully �January during during 31December price ofgrant exercise vested Exercisable ExercisableCompany 2007 theyear theyear 2007 (HK$) (HK$) (HK$) Grantdate by from until

ExecutiveDirectorsManuelV.Pangilinan 3�,800,000 – – 31,800,000 �.76 �.76 – �June2004 December2008 June200� May20�4 – 30,200,000 – 30,200,000 �.33 �.33 – �September2007 September20�2 September2008 September20�7

EdwardA.Tortorici �7,680,000 – (7,060,000) 10,620,000 �.76 �.76 �.72 �June2004 December2008 June200� May20�4 – �8,200,000 – 18,200,000 �.33 �.33 – �September2007 September20�2 September2008 September20�7

RobertC.Nicholson 24,�00,000 – (�0,�00,000) 14,000,000 �.76 �.76 �.80-6.00 �June2004 December2008 June200� May20�4 – ��,�00,000 – 15,500,000 �.33 �.33 – �September2007 September20�2 September2008 September20�7

Non-ExecutiveDirectorsAmbassadorAlbertF.delRosario 2,840,000 – – 2,840,000 �.76 �.76 – �June2004 June200� June200� May20�4 – 3,�60,000 – 3,160,000 �.33 �.33 – �September2007 September2008 September2008 September20�7

BennyS.Santoso 2,840,000 – – 2,840,000 �.76 �.76 – �June2004 June200� June200� May20�4 – 3,�60,000 – 3,160,000 �.33 �.33 – �September2007 September2008 September2008 September20�7

IndependentNon-ExecutiveDirectorsGrahamL.Pickles �,000,000 – (�,000,000) – �.76 �.76 �.�8-�.39 �June2004 June200� June200� May20�4 – 3,�60,000 – 3,160,000 �.33 �.33 – �September2007 September2008 September2008 September20�7

Prof.EdwardK.Y.ChenGBS, CBE, JP 2,840,000 – (�,�00,000) 1,340,000 �.76 �.76 �.60-�.96 �June2004 June200� June200� May20�4 – 3,�60,000 – 3,160,000 �.33 �.33 – �September2007 September2008 September2008 September20�7

SirDavidW.C.TangKBE – 3,�60,000 – 3,160,000 �.33 �.33 – �September2007 September2008 September2008 September20�7

SeniorExecutives 32,286,000 – (3,2�4,000) 29,032,000 �.76 �.76 4.42-6.0� �June2004 December2008 June200� May20�4 4,�00,000 – – 4,500,000 3.27� 3.2� – 7June2006 December20�0 June2007 June20�6 – 42,220,000 – 42,220,000 �.33 �.33 – �September2007 September20�2 September2008 September20�7

Total �20,286,000 �2�,920,000 (23,3�4,000) 218,892,000

AttheAGMheldon24May2004,theCompany’sshareholdersapprovedashareoptionscheme(Scheme)under

whichtheDirectorsmay,attheirdiscretion,atanytimeduringtheperiodoftheScheme,grantDirectorsand

executivesoftheCompany’sshareoptionsaspartoftheCompany’slong-termincentiveprogram.TheScheme,

whichcomplieswiththeprovisionssetoutinChapter�7oftheListingRules,becameeffectiveon24May2004.

TheSchemewillbevalidfor�0yearsandwillexpireon23May20�4.

Themaximumnumberofsharesonwhichoptionsmaybegrantedmaynotexceed�0percentoftheCompany’s

issuedsharecapital,excludinganysharesissuedontheexerciseofoptionsatanytime.Themaximumnumber

ofsharesinrespectofwhichoptionsmaybegrantedundertheSchemetoanyoneparticipantinany�2-month

periodislimitedtoonepercentoftheaggregatenumberofsharesoftheCompanyinissueatthetimeofthe

proposedgrantofoptionstosuchparticipant.

�32


TheexercisepriceinrelationtoeachshareoptionoffershallbedeterminedbytheDirectorsattheirabsolutediscretion,butinanyeventshallnotbelessthanthehighestof(i)theclosingpriceoftheCompany’ssharesasstatedinthedailyquotationsheetoftheSEHKonthedateofgrant;(ii)theaverageclosingpriceoftheCompany’ssharesasstatedinthedailyquotationsheetsoftheSEHKforthefivetradingdaysimmediatelyprecedingthedateofgrant;and(iii)thenominalvalueofaCompany’sshareonthedateofgrant.ThetermsoftheSchemeprovidethatsubjecttoanyotherrestrictionsonvestingimposedbytheDirectors,shareoptionsmaybeexercisedundertheSchemeatanytimefromthedateofacceptanceuntilthedateofexpiry.AlloptionspresentlyoutstandingundertheSchemearesubjecttocertainrestrictionsonexerciseincludingaprohibitiononexerciseatanytimeduringtheperiodcommencingoneyearafterthedateonwhichanyoptionisaccepted.Optionswhichlapseorarecancelledpriortotheirexpirydatearedeletedfromtheregisterofoptions.

On�June2004,�34,�86,000shareoptionsundertheCompany’sSchemeweregranted.TheaveragefairvalueofoptionsgrantedascalculatedbyWatsonWyattHongKongLimited,basedonthebinomialmodel,wasHK$0.849oranaggregatevalueofUS$�4.6millionforalloptionsgranted.Theassumptionsusedwereasfollows:

Sharepriceatthedateofgrant HK$�.76Exerciseprice HK$�.76Expectedvolatility(basedonhistoricalvolatilityoftheCompany’ssharescommensuratewith theaverageexpectedlifeoftheoptionsgranted) ��percentOptionlife �0yearsExpecteddividendyield �percentperannumAveragerisk-freeinterestrate(basedontheHongKongExchangeFundNotes) 4.06percentperannum

TakingintoaccounttheexpectedturnoverrateoftheDirectorsandseniorexecutivesandtheearlyexercisebehavior,theaverageexpectedlifeoftheoptionsgrantedwasestimatedtobe6.6�years.Theearlyexercisebehaviorassumesthatoptionholderswillexercisetheoptionswhenthesharepriceisatleast7�percenthigherthantheexerciseprice.

On�June2006,4,�00,000shareoptionsundertheSchemeweregranted.TheaveragefairvalueofoptionsgrantedascalculatedbyWatsonWyattHongKongLimited,basedonthebinomialmodel,wasHK$�.��4oranaggregatevalueofUS$0.9millionforalloptionsgranted.Theassumptionsusedwereasfollows:

Sharepriceatthedateofgrant HK$3.2�Exerciseprice HK$3.27�Expectedvolatility(basedonhistoricalvolatilityoftheCompany’ssharescommensuratewith theaverageexpectedlifeoftheoptionsgranted) �0percentOptionlife �0yearsExpecteddividendyield �percentperannumAveragerisk-freeinterestrate(basedontheHongKongExchangeFundNotes) 4.7�percentperannum

Takingintoaccounttheexpectedturnoverrateoftheseniorexecutivesandtheearlyexercisebehavior,theaverageexpectedlifeoftheoptionsgrantedwasestimatedtobe6.79years.Theearlyexercisebehaviorassumesthatoptionholderswillexercisetheoptionswhenthesharepriceisatleast�00percenthigherthantheexerciseprice.

On�September2007,�2�,920,000shareoptionsundertheSchemeweregranted.TheaveragefairvalueofoptionsgrantedascalculatedbyWatsonWyattHongKongLimited,basedonthebinomialmodel,wasHK$2.�96oranaggregatevalueofUS$40.6millionforalloptionsgranted.Theassumptionsusedwereasfollows:

Sharepriceatthedateofgrant HK$�.33Exerciseprice HK$�.33Expectedvolatility(basedonhistoricalvolatilityoftheCompany’ssharescommensuratewith theaverageexpectedlifeoftheoptionsgranted) 4�percentOptionlife �0yearsExpecteddividendyield �percentperannumAveragerisk-freeinterestrate(basedontheHongKongExchangeFundNotes) 4.40percentperannum


TakingintoaccounttheexpectedturnoverrateoftheDirectorsandseniorexecutivesandtheearlyexercise

behavior,theaverageexpectedlifeoftheoptionsgrantedwasestimatedtobe7.60years.Theearlyexercise

behaviorassumesthatoptionholderswillexercisetheoptionswhenthesharepriceisatleast��0percent

higherthantheexerciseprice.

Thebinomialmodel,appliedfordeterminingtheestimatedvaluesoftheshareoptionsgrantedunderthe

Scheme,wasdevelopedforuseinestimatingthefairvalueofthetradedoptionsthatarefullytransferable.

Suchanoptionpricingmodelrequiresinputofhighlysubjectiveassumptions,includingtheexpectedstockprice

volatility.AstheCompany’sshareoptionshavecharacteristicssignificantlydifferentfromthoseofthetraded

options,changesinthesubjectiveinputassumptionscanmateriallyaffecttheestimatedvalueoftheoptions

granted.

DetailsoftheGroup’saccountingpolicyinrespectofshareoptionsgrantedaresetoutinNote2(E)(q)(III)tothe

FinancialStatements.

(b) ParticularsofMetroPacific’sshareoptionscheme

Share Share Share Share Market

options options options option price

heldat canceled heldat exercise atdate

�January duringthe 31December price(i) ofgrant(i) Exercisable Exercisable

MetroPacific 2007 year 2007 (Peso) (Peso) Grantdate from until

SeniorExecutives 2,40� (2,40�) – 69.2 7�.4 �August�997 August�997 August2007

(i) Price adjusted for the 20-to-1 share consolidation occurred in August 2006

(c) ParticularsofMPIC’sshareoptionschemeOn�4June2007,theshareholdersofMPICapprovedashareoptionschemeunderwhichMPIC’sdirectorsmay,

attheirdiscretion,inviteexecutivesofMPICupontheregularizationofemploymentofeligibleexecutives,totake

upshareoptionsofMPICtoobtainanownershipinterestinMPICandforthepurposeoflong-termemployment

motivation.Theschemebecameeffectiveon�4June2007andisvalidfor�0years.

Themaximumnumberofsharesonwhichoptionsmaybegrantedundertheschememaynotexceed�0

percentoftheissuedsharecapitalofMPICfromtimetotime.Theaggregatenumberofshareswhichmaybe

issueduponexerciseoftheoptionsgrantedandtobegrantedtoanyeligibleparticipant(whetherornotalready

anoptionholder)inany�2-monthperiodshallnotexceedonepercentofthesharesinissueattherelevant

time.

TheexercisepriceinrelationtoeachoptiongrantedundertheschemeshallbedeterminedbyMPIC’sdirectors

attheirabsolutediscretion,butinanyeventshallnotbelessthan(i)theclosingpriceofMPIC’ssharesforone

ormoreboardlotsofsuchMPICsharesonthePhilippineStockExchange(PSE)ontheoptiongrantdate;(ii)the

averageclosingpriceofMPIC’sshareforoneormoreboardlotsofsuchMPIC’ssharesonthePSEforthefive

businessdaysonwhichdealingsintheMPIC’ssharesaremadeimmediatelyprecedingtheoptiongrantdate;or

(iii)theparvalueoftheMPIC’sshares,whicheverishigher.

Upto3�March2008,noshareoptionshavebeengrantedunderthescheme.

�34


36. RelatedPartyTransactions

SignificantrelatedpartytransactionsenteredintobytheGroupduringtheyeararedisclosedasfollows:

(A) During2007,theCompany(i)advancedUS$76.0milliontoDMCI-MPICand(ii)subscribedforUS$20.0millionconvertible

notesissuedbyDMCI-MPICforthepurposeoffundingDMCI-MPIC’sacquisitionofMaynilad.Theconvertiblenotes

issuedbyDMCI-MPIChaveamaturityperiodofthreeyearsandcanbeconvertedintoDMCI-MPIC’scommonsharesat

theirparvalueofPeso�perDMCI-MPIC’scommonshareduringthetermsofthenotes.

(B) On9March2007,SIMPpurchaseda60.0percentinterestinseveralplantationcompaniesowningapproximately

8�,�00hectaresofplantationlandataconsiderationofRupiah�2�billion(US$�3.8million)fromRascalHoldings

Limited,acompanyownedbytheChairmanoftheCompany.

(C) ALBVhasatechnicalassistanceagreementwithSmartforALBVtoprovideSmartwithtechnicalsupportservicesand

assistanceintheoperationsandmaintenanceofcellularmobiletelecommunicationservicesforaperiodoffouryears

from23February2004,subjecttorenewaluponmutualagreementbetweentheparties.Theagreementprovidesfor

paymentsoftechnicalservicefeesequivalenttoonepercent(2006:onepercent)oftheconsolidatednetrevenueof

Smart.

ALBValsohasaserviceagreementwithSmartforaperiodof2�yearsstartingfrom�January�999,whichshallexpire

unlessrenewedbymutualagreementofbothparties.Undertheagreement,ALBVprovidesadviceandassistanceto

Smartinsourcingcapitalequipmentandnegotiatingwithinternationalsuppliers,arranginginternationalfinancingand

otherservicesthereinconsistentwithandforthefurtheranceoftheobjectivesoftheservices.Serviceagreementfees

wereprepaidforthewhole2�-yearperiod.

ThetotalfeesunderthesearrangementsamountedtoPesos688million(US$��.0million)fortheyearended

3�December2007(2006:Pesos�9�millionorUS$��.6million).At3�December2007,theoutstandingprepaid

technicalserviceandmanagementfeesamountedtoPesos94�million(US$22.8million)(2006:Pesos869millionor

US$�7.7million).At3�December2006,ALBVhadanoutstandingreceivableunderthetechnicalassistanceagreement

amountingtoPesos�28million(US$2.6million).


(D) Intheordinarycourseofbusiness,Indofoodhasengagedintradetransactionswithcertainofitsassociatedcompanies,jointventuresandaffiliatedcompanies,themajorityofwhicharerelatedtotheSalimFamilyeitherthroughdirectand/orcommonshareownershipandcommonmanagement.Mr.AnthoniSalimistheChairmanandasubstantialshareholderoftheCompanyandisthePresidentDirectorandChiefExecutiveOfficerofIndofood.

Allsignificanttransactionswithrelatedparties,whetherornotconductedundernormaltermsandconditionssimilartothosewithnon-relatedparties,aredisclosedasfollows:

Natureoftransactions ConsolidatedFortheyearended3�December 2007 2006US$millions

ProfitandLossItemsSalesoffinishedgoods –toassociatedcompaniesandjointventures 28.1 4�.9 –toaffiliatedcompanies 48.6 36.�Purchasesofrawmaterials –fromassociatedcompaniesandjointventures 43.2 40.� –fromaffiliatedcompanies 8.8 �.0Managementandtechnicalservicesfeeincomeandroyaltyincome –fromassociatedcompaniesandjointventures 0.9 0.8 –fromaffiliatedcompanies 4.6 3.7Insuranceexpenses –toaffiliatedcompanies 2.7 3.2Rentalexpenses –toaffiliatedcompanies 1.3 �.3Transportationandpumpservicesexpenses –toaffiliatedcompanies 0.3 0.�

Approximatelythreepercent(2006:threepercent)ofIndofood’ssalesandtwopercent(2006:threepercent)ofitspurchasesweretransactedwiththeserelatedcompanies.

Natureofbalances ConsolidatedAt3�December 2007 2006US$millions

BalanceSheetItemsAccountsreceivable–trade –fromassociatedcompaniesandjointventures 3.4 �.6 –fromaffiliatedcompanies 8.7 4.8Accountsreceivable–non-trade –fromassociatedcompaniesandjointventures 0.2 – –fromaffiliatedcompanies 8.8 7.�Accountspayable–trade –toassociatedcompaniesandjointventures 6.3 4.8 –toaffiliatedcompanies 1.2 �.�Accountspayable–non-trade –toaffiliatedcompanies 5.9 0.8Otherpayables–non-trade –toaffiliatedcompanies 5.8 –

CertainoftheaboveIndofood’srelatedpartytransactionsalsoconstitutecontinuingconnectedtransactionsasdefinedinChapter�4AoftheListingRulesandtheirdetailsaredisclosedintheCorporateGovernanceReportonpages�6to

6�.

�36


37. CapitalandFinancialRiskManagement

(A) CapitalManagementTheprimaryobjectivesoftheGroup’scapitalmanagementistosafeguardtheGroup’sabilitytocontinueasagoingconcernandensurethatitmaintainsanoptimalcapitalstructureforsupportingthestabilityandgrowthofitsbusinessandmaximizingshareholdervalue.

TheGroupmanagesitscapitalstructure,andmakesadjustmentstoit,inlightofchangesineconomicconditions.Tomaintainoradjustthecapitalstructure,theGroupmayadjustthedividendpaymenttoshareholders,returncapitaltoshareholdersorissuenewshares.Nochangesweremadeintheobjectives,policiesorprocessesduringtheyearsended3�December2007and3�December2006.

TheGroupmonitorscapitalusingagearingratio,whichisnetdebtdividedbytotalequity.TheGroup’spolicyistokeepthegearingratioatanoptimallevelwhichsupportsitsbusiness.TheGroupincludeswithinnetdebt,short-termborrowingsandlong-termborrowings,lesscashandcashequivalentsandpledgeddepositsandrestrictedcash.Thetotalequityincludesequityattributabletoequityholdersoftheparentandminorityinterest.

Consolidated 2007 2006US$millions (Restated)

Short-termborrowings 1,000.1 �08.9Long-termborrowings 1,044.5 647.0Lesscashandcashequivalents (600.8) (267.4)Lesspledgeddepositsandrestrictedcash – (3�.3)

Netdebt 1,443.8 8�7.2

Equityattributabletoequityholdersoftheparent 1,137.1 �82.7Minorityinterest 992.6 4�0.�

Totalequity 2,129.7 �,032.8

Gearingratio(times) 0.68 0.83

(B) FinancialRiskManagementTheGroup’sprincipalfinancialinstrumentsincludethevariousfinancialassets(whichcomprisefinancialassetsatfairvaluethroughprofitorloss,accountsreceivables,otherreceivablesandprepayments,available-for-saleassets,cashandcashequivalentsandpledgeddepositsandrestrictedcash)andfinancialliabilities(whichcompriseaccountspayable,otherpayablesandaccruals,short-termborrowings,long-termborrowingsandderivativeliability).Themainpurposeofthecashandcashequivalents,andshort-termandlong-termborrowingsistofinancetheGroup’soperations.Theotherfinancialassetsandliabilitiessuchasaccountsreceivableandaccountspayablemainlyarisedirectlyfromitsoperations.

TheGroupalsoentersintoderivativetransactions,includingprincipallyforeignexchangecontractsandinterestrateswap.ThepurposeistomanagethecurrencyandinterestraterisksarisingfromtheGroup’ssourcesoffinanceanditsoperations.

Itis,andhasbeen,throughouttheyear,theGroup’spolicythatnotradinginfinancialinstrumentsshallbeundertaken.

ThemainrisksarisingfromtheGroup’sfinancialinstrumentsaremarketrisk(includingcurrencyriskandpricerisk),creditrisk,liquidityriskandfairvalueandcashflowinterestraterisk.TheCompany’sBoardofDirectorsreviewsandagreespoliciesformanagingeachoftheserisksandtheyaresummarizedbelow.TheGroup’saccountingpoliciesin

relationtoderivativesaresetoutinNote2(E)(t)totheFinancialStatements.


(a) Marketrisk(I) Currency risk

TomanagetheGroup’sforeignexchangeriskarisingfromfuturecommercialtransactions,recognized

assetsandliabilities,andimproveinvestmentandcashflowplanning,inadditiontonaturalhedges,the

Groupentersintoandengagesinforeignexchangecontractsforthepurposeofmanagingitsforeign

exchangerateexposuresemanatingfrombusiness,transactionspecific,aswellascurrencytranslation

risksandreducingand/ormanagingtheadverseimpactofchangesinforeignexchangeratesonthe

Group’soperatingresultsandcashflows.However,theaforementionedderivativeinstrumentsoftheGroup

donotqualifyaseffectivehedgesandthereforearenotdesignatedascashflowhedgesforaccounting

purposesinaccordancewiththeprovisionsofHKAS39.

ThefollowingtabledemonstratesthesensitivityarisingfromtheGroup’sfinancialassetsandliabilities(as

describedonpage�36)atthebalancesheetdatetoareasonablypossiblechangeintheexchangerates

oftherupiahandpeso,withallothervariablesheldconstant,oftheGroup’sprofitattributabletoequity

holdersoftheparentandretainedearnings(duemainlytoforeignexchangegains/lossesontranslation

oftheU.S.dollardenominatedfinancialassetsandliabilities).Thereisnosignificantimpactontheother

componentsoftheGroup’sequity.

2007 2006

Effectonprofit Effectonprofit

attributableto (Depreciation)/ attributableto

Depreciation equityholders appreciation equityholders

againstthe oftheparent againstthe oftheparent

U.S.dollars andretained U.S.dollars andretained

US$millions (%) earnings (%) earnings

Rupiah (0.9) (0.3) (4.2) (�.�)

Peso (3.0) – �8.8 6.9

(II) Price risk

TheGroupisexposedto(i)priceriskofPLDT’ssharepriceand(ii)commoditypricerisk,especiallyCPO,

whicharetherawmaterialsusedtomanufacturetheGroup’sproducts,whichdependsonthelevelof

demandandsupplyinthemarket,andtheglobaleconomicenvironment.TheGroupisexposedtotheprice

riskofPLDT’ssharepriceaschangesinthefairvaluesofthePLDTsharesheldbytheGroupanddesignated

asfinancialassetsatfairvaluethroughprofitorlossaredirectlyrecognizedtotheprofitandlossstatement.

TheGroupisalsoexposedtocommoditypriceriskaschangesinfairvaluesoffuturecommoditycontracts

usedbycertainsubsidiarycompaniestomanagetheirexposuresoncommoditypricefluctuationsare

directlyrecognizedtotheprofitandlossstatement.Suchfuturecommoditycontractsalsodonotqualifyas

effectivehedgesandthereforenotdesignatedascashflowhedgesforaccountingpurposesinaccordance

withtheprovisionsofHKAS39.

�38



describedonpage�36)atthebalancesheetdatetoareasonablypossiblechangeinthepriceofPLDT

sharesandCPO,withallothervariablesheldconstant,oftheGroup’sprofitattributabletoequityholdersof

theparentandretainedearnings(duetochangesinthefairvalueofrelatedderivativeassetsandliabilities).

ThereisnosignificantimpactontheothercomponentsoftheGroup’sequity.

2007 2006


attributableto attributableto

equityholders equityholders

oftheparent oftheparent

Increase andretained Increase andretained

US$millions (%) earnings (%) earnings

PLDTshareprice 5.0 4.0 48.� 27.7

CPOprice 10.0 0.6 �0.0 –

(b) CreditriskFortheconsumerfoodproductsbusiness,theGrouphascreditriskarisingfromthecreditgiventothe

customers,butithaspoliciesinplacetoensurethatwholesalesofproductsaremadetocreditworthycustomers

withanappropriatecredithistory.TheGrouphaspoliciesthatlimittheamountofcreditexposuretoany

particularcustomer,suchasrequiringsub-distributorstoprovidebankguarantees.Forthepropertybusiness,

transfersofpropertytitleareeffecteduponfullpaymentofthepurchaseprice.Inaddition,receivablebalances

aremonitoredonanongoingbasistoreducetheGroup’sexposuretobaddebts.

WithrespecttocreditriskarisingfromtheGroup’sotherfinancialassets,whichincludecashandcash

equivalentsandcertaininvestmentsindebtsecuritiesclassifiedasavailable-for-saleassets,theGroup’s

exposuretocreditriskarisesfromdefaultofthecounterparty,withamaximumexposureequaltothecarrying

amountsoftheseinstrumentsandtheunrealizedlossesonavailable-for-saleassetschargeddirectlytothe

Group’sequity.

TheGrouphasnosignificantconcentrationsofcreditrisk.

(c) LiquidityriskTheGroupmanagesitsliquidityprofiletobeabletofinanceitscapitalexpenditureandserviceitsmaturingdebts

bymaintainingsufficientcashandmarketablesecurities,andtheavailabilityoffundingthroughanadequate

amountofcommittedcreditfacilities.

TheGroupregularlyevaluatesitsprojectedandactualcashflowinformationandcontinuouslyassesses

conditionsinthefinancialmarketsforopportunitiestopursuefund-raisinginitiatives.Theseinitiativesmay

includebankloans,anddebtcapitalandequitycapitalissues.


ThematurityprofileoftheGroup’sfinancialliabilitiesat3�December2007basedoncontractualundiscounted

paymentsisasfollows.

Accountspayable,

otherpayables

andaccruals Borrowings Derivativeliability ConsolidatedUS$millions 2007 2006 2007 2006 2007 2006 2007 2006

Notexceedingoneyear 485.6 300.� 1,000.4 �09.0 – – 1,486.0 809.�

Morethanoneyearbut

notexceedingtwoyears – – 170.0 223.8 6.3 – 176.3 223.8

Morethantwoyearsbut

notexceedingfiveyears – – 834.7 3�3.4 – 99.6 834.7 4�3.0

Morethanfiveyears – – 49.9 �04.9 – – 49.9 �04.9

Total 485.6 300.� 2,055.0 �,��.� 6.3 99.6 2,546.9 �,��0.8

At3�December2007,theGroupreportedanetcurrentliabilitiesposition,principallyasaresultofIndofood’s

arrangementofapproximatelyUS$440millionnewshort-termborrowingsforfinancingitsacquisitionofa64.4

percentinterestinLonsum.Indofoodisplanningtorefinanceitsshort-termdebtsthroughthearrangementof

newlong-termdebts,equityandotherrelatedfundraisingduring2008.

(d) FairvalueandcashflowinterestraterisksTheGroup’sinterestrateriskarisesfrominterest-bearingborrowingsandcashandcashequivalents.Borrowings

andcashandcashequivalentswithvariableratetermsexposetheGrouptocashflowinterestraterisk.

BorrowingsandcashandcashequivalentswithfixedinterestratetermsexposetheGrouptofairvalueinterest

raterisk.At3�December2007,24.�percent(2006:38.2percent)oftheGroup’sborrowingswereatfixedrates.


describedonpage�36)atthebalancesheetdatetoareasonablypossiblechangeininterestrates,withallother

variablesheldconstant,oftheGroup’sprofitattributabletoequityholdersoftheparentandretainedearnings

(throughtheimpactonvariablerateborrowingsandcashandcashequivalents).Thereisnosignificantimpacton

theothercomponentsoftheGroup’sequity.

2007 2006


attributableto attributableto

equityholders equityholders

(Decrease)/ oftheparent (Decrease)/ oftheparent

increase andretained increase andretained

US$millions (Basispoints) earnings (Basispoints) earnings

Interestratesfor

–U.S.dollar (300) 16.6 (�0) 0.4

–Rupiah (50) 0.6 (�00) �.�

–Peso 100 (0.2) �0 (0.�)

�40


38. SubsequentEvents

(A) On3March2008,asubsidiarycompanyoftheCompanyconvertedapproximatelyPesos2.0billion(US$49.2million)of

pesodenominatedconvertiblenotesissuedbyMPICintocommonsharesofMPIC.Theconversionhasincreasedthe

Group’seconomicinterestinMPICfrom8�.6percentto94.0percent.

(B) On3March2008,MPICenteredintoaloanagreementwithInframetroInvestmentsPteLtd.(Inframetro),anaffiliate

ofAshmoreInvestmentManagementLimited,intheamountofapproximatelyPesos�.4billion(US$34.6million)

(InframetroLoan).TheInframetroLoanretiredpesodenominatedconvertiblenotesofthesameamountpreviously

issuedbyMPICtoInframetroandisexchangeableinto�.2billioncommonsharesofDMCI-MPIC.Theexerciseofthe

exchangeright,however,issubjecttothefulfillmentofcertainconditions,includingthesecuringofconsentsfrom

specificthirdpartycreditors.IntheeventthattheInframetroLoanisfullyexchangedintosharesofDMCI-MPIC,MPIC’s

interestinDMCI-MPICwillbereducedto30percentfromthecurrentlyheld�0percent.TheInframetroLoanhasthe

firstprincipalrepaymentdateon9May2008,extendabletoafinalprincipalrepaymentdateon3�January2009.

39. ComparativeAmounts

AsexplainedinNote2(C)totheFinancialStatements,duetothechangeintheGroup’saccountingpolicyforitsjoint

venturesduringthecurrentyear,theaccountingtreatmentandpresentationofcertainitemsandbalancesintheFinancial

Statementshavebeenrevisedtocomplywithsuchachange.Accordingly,certaincomparativeamountshavebeen

reclassifiedandrestatedtoconformwiththecurrentyear’spresentationandaccountingtreatment.

40. ApprovaloftheFinancialStatements

TheFinancialStatementswereapprovedandauthorizedforissuebytheBoardofDirectorson3�March2008.


Glossary of Terms

Financial Terms

DEFINEDBENEFITSCHEMEAretirementschemeinwhichtherulesspecifythebenefitstobepaidandtheschemeisfinanced

accordingly.Generally,benefitsaredeterminedbyaformulathattakesintoaccountofthefinalsalaryandthenumberofyearsof

serviceofeachmember

DEFINEDCONTRIBUTIONSCHEMEAretirementschemeunderwhichthebenefitsaredirectlydeterminedbythevalueof

contributionspaidinrespectofeachmember

EBITEarningsbeforeinterestandtax

EBITDAEarningsbeforeinterest,tax,depreciationandamortization

IMPAIRMENTPROVISIONProvisionmadetoreducethecarryingamountofanassettoitsrecoverableamount

NAVNetAssetValue

NETASSETSTotalassetslesstotalliabilities,equivalenttototalequity

NETCURRENTASSETS/LIABILITIESCurrentassetslesscurrentliabilities

NETDEBTTotalofshort-termandlong-termborrowings,netofcashandcashequivalentsandpledgeddepositsandrestricted

cash

RECURRINGPROFITProfitattributabletoequityholdersoftheparentexcludingforeignexchangeandderivativegains/lossesand

non-recurringitems

Financial Ratios

BASICEARNINGSPERSHAREProfitattributabletoequityholdersoftheparent/weightedaveragenumberofsharesinissue

duringtheyear

CURRENTRATIOCurrentassets/currentliabilities

DILUTEDEARNINGSPERSHAREProfitattributabletoequityholdersoftheparentadjustedfortheeffectofassumedconversion

ofalldilutivepotentialordinaryshares/weightedaveragenumberofsharesinissueduringtheyearplustheweightedaverage

numberofordinaryshareswhichwouldbeissuedontheassumedconversionofalldilutivepotentialordinaryshares

DIVIDENDPAYOUTRATIOOrdinarysharedividendspaidandrecommended/recurringprofit

GEARINGRATIONetdebt/totalequity

INTERESTCOVERProfitbeforetaxation(excludingforeignexchangeandderivativegains/lossesandnon-recurringitems)andnet

borrowingcosts/netborrowingcosts

RETURNONAVERAGEEQUITYATTRIBUTABLETOEQUITYHOLDERSOFTHEPARENTRecurringprofit/averageequity

attributabletoequityholdersoftheparent

RETURNONAVERAGENETASSETSProfitfortheyear(excludingforeignexchangeandderivativegains/lossesand

non-recurringitems)/averagenetassets

�42

Glossary of Terms

Other

ADRAmericanDepositaryReceipts

AGMAnnualGeneralMeeting

DSLDigitalSubscriberLine

GAAPGenerallyAcceptedAccountingPrinciples

GSMGlobalSystemforMobileCommunications

HKASHongKongAccountingStandards

HKFRSHongKongFinancialReportingStandards

HKICPAHongKongInstituteofCertifiedPublicAccountants

IDXIndonesiaStockExchange

IFRICInternationalFinancialReportingInterpretationsCommittee

IFRSInternationalFinancialReportingStandards

INTInterpretations

LISTINGRULESTheRulesGoverningtheListingofSecuritiesonSEHK

MODELCODEModelCodeforSecuritiesTransactionsbyDirectorsofListedIssuers

NYSETheNewYorkStockExchange

PSEThePhilippineStockExchange,Inc.

SEHKTheStockExchangeofHongKongLimited

SFOSecuritiesandFuturesOrdinance(Chapter�7�oftheLawsofHongKong)

SGMSpecialGeneralMeeting

2GThesecondgenerationofmobilephonetechnology

3GThethirdgenerationofmobilephonetechnology


Information for Investors

Financial DiaryAnnouncementof2007results 3�March2008Annualreportpostedtoshareholders 30April2008Lastdaytoregisterforfinaland 30May2008 specialdividendsAnnualGeneralMeeting 4June2008Paymentoffinalandspecialdividends 30June2008Preliminaryannouncementof 2008interimresults 27August2008*Interimreportpostedtoshareholders 30September2008*Financialyear-end 3�December2008Preliminaryannouncementof2008results 2�March2009*

* Subject to confirmation

Head Office24thFloor,TwoExchangeSquare8ConnaughtPlaceCentral,HongKongSARTelephone : (8�2)28424388Fax : (8�2)284�9243Email : [email protected]

Registered OfficeCanon’sCourt22VictoriaStreetHamiltonHM�2,BermudaTelephone : (�44�)29�2244Fax : (�44�)29�8666

Share informationFirstPacificsharesarelistedonTheStockExchangeof HongKongLimitedandaretradedoverthecounterinthe UnitedStatesintheformofAmericanDepositaryReceiptsListingdate : �2September�988Parvalue : U.S.�centpershareLotsize : 2,000sharesNumberofordinarysharesissued:3,224,�43,003

Stock CodesSEHK : 00�42Bloomberg : �42HKReuters : 0�42.HK

American Depositary Receipts (ADRs) informationLevel:�ADRsCode:FPAFYCUSIPreferencenumber:33�889200ADRstoordinarysharesratio:�:�ADRsdepositarybank:TheBankofNewYork

To Consolidate ShareholdingsWritetoourprincipalshareregistrarand transferofficeinBermudaat: ButterfieldFundServices(Bermuda)Limited RosebankCentre ��BermudianaRoad PembrokeHM08,Bermuda

OrtheHongKongbranchregistrarat: ComputershareHongKongInvestorServicesLimited

RegistrarOffice 46thFloor,HopewellCentre �83Queen’sRoadEast Wanchai,HongKongSAR Telephone : (8�2)28628�� Fax : (8�2)286�0990/(8�2)2�296087 Email : [email protected]

TransferOffice Shops�7�2-�7�6,�7thFloor,HopewellCentre �83Queen’sRoadEast Wanchai,HongKongSAR

A Chinese version of this Report, or Additional informationAvailableatwww.firstpacco.com

Orcontact:SaraCheungVicePresidentGroupCorporateCommunicationsFirstPacificCompanyLimited24thFloor,TwoExchangeSquare8ConnaughtPlaceCentral,HongKongSARTelephone : (8�2)28424374Fax : (8�2)284�9243Email : [email protected]

web Sitewww.firstpacco.com

AuditorsErnst&Young�8thFloor,TwoInternationalFinanceCentre8FinanceStreetCentral,HongKongSAR

SolicitorsRichardsButlerinassociationwithReedSmithLLP20thFloor,AlexandraHouse�6-20ChaterRoadCentral,HongKongSAR

Principal BankersCalyonCorporateandInvestmentBankMizuhoCorporateBank,Ltd.StandardCharteredBankJPMorganChaseBank,N.A.StandardBankAsiaLimitedUBSAGBancoDeOroUnibank,Inc.

�44

Ten-Year Statistical Summary

2007 2006 200� 2004 2003 2002 200� 2000 �999 �998

Results(US$millions)Turnover 3,075.0 2,474.8 �,986.� 2,0�4.6 2,�6�.8 �,892.3 �,8��.7 2,299.2 �,67�.9 2,894.4Profit/(loss)fortheyear 671.7 22�.7 �38.8 �68.2 �34.9 79.6 (2,�92.4) �20.4 236.3 427.�Profit/(loss)attributabletoequity holdersoftheparent 510.4 �64.� �03.0 �23.9 74.� 38.2 (�,797.7) ��.9 �38.2 360.�Recurringprofit 193.7 �49.9 �07.4 ��6.8 8�.0 49.2 46.7 ��.7 4�.4 40.�Ordinarysharedividends 41.1 22.4 �2.3 – – – – 7.7 ��.0 �3.8

PerOrdinaryShareData(U.S.cents)Earnings/(loss) –Basic 15.89 �.�� 3.23 3.89 2.33 �.2� (�7.26) �.78 �.34 ��.2� –Diluted 15.46 �.06 3.�7 N/A N/A N/A N/A N/A �.32 ��.�2 –Basicrecurring 6.03 4.69 3.37 3.67 2.�4 �.�6 �.49 �.76 �.60 �.7� –Dilutedrecurring 5.91 4.6� 3.3� N/A N/A N/A N/A N/A �.60 �.70Dividends 1.28 0.70 0.39 – – – – 0.26 0.�2 0.�8Equity/(deficit)attributabletoequity holdersoftheparent 35.27 �8.�8 �2.00 7.�4 �.60 (0.8�) (4.87) �3.00 22.08 34.4�

FinancialRatiosReturnonaveragenetassets(%) 19.92 2�.2� 22.�3 32.62 27.0� 2�.04 �2.�8 8.90 �.44 �.2�Returnonaverageequityattributable toequityholdersoftheparent(%) 22.53 3�.0� 3�.20 83.89 637.87 N/A 36.�9 9.84 �.66 8.92Dividendpayoutratio(%) 21.22 �4.94 ��.4� – – – – �4.89 36.26 34.�4Dividendcover(times) 4.71 6.69 8.73 – – – – 6.72 2.76 2.93Interestcover(times) 4.12 3.7� 2.72 2.94 2.43 2.36 2.6� 3.�0 2.96 2.38Currentratio(times) 0.95 �.2� �.4� �.43 �.7� �.02 0.82 �.23 0.9� 0.90Gearingratio(times) –Consolidated 0.68 0.83 �.�2 �.4� 2.�2 2.46 2.84 0.76 0.77 0.�9 –Company 0.35 0.�6 0.�� 0.�0 0.�2 0.�� 0.09 0.�0 0.28 0.38

ConsolidatedBalanceSheet Data(US$millions)Capitalexpenditure 69.5 46.3 �6.6 �0�.� 72.6 92.2 �48.2 2��.� 3�4.7 374.�Totalassets 5,227.8 2,883.� 2,347.� 2,�68.7 2,2�3.� 2,469.� 2,�86.4 3,�99.2 8,39�.7 7,646.3Netdebt 1,443.8 8�7.2 788.� 8�4.3 907.7 �,�36.7 8�0.4 �,06�.0 �,796.8 �,296.3Totalliabilities 3,098.1 �,8�0.7 �,640.4 �,�77.6 �,78�.7 2,007.� �,886.9 2,�93.7 6,0�8.� �,442.8Netcurrent(liabilities)/assets (81.6) �77.6 29�.6 2�6.4 443.6 20.6 (234.�) 2�6.4 (8�.6) (�06.0)Totalassetslesscurrentliabilities 3,671.8 2,034.8 �,697.0 �,�7�.2 �,�89.4 �,4�6.0 899.� 2,644.2 6,644.6 6,�98.�Equity/(deficit)attributableto equityholdersoftheparent 1,137.1 �82.7 382.8 227.4 ��.� (2�.7) (��2.8) 408.� 642.7 8�8.3Minorityinterest 992.6 4�0.� 323.9 363.7 376.7 488.� 4�2.3 997.4 �,694.9 �,38�.2Totalequity 2,129.7 �,032.8 706.7 �9�.� 427.8 462.4 299.� �,40�.� 2,337.6 2,203.�

CompanyBalanceSheet Data(US$millions)Totalassets 2,898.8 2,406.6 2,47�.2 �,89�.� �,782.8 �,867.6 2,39�.� 2,938.0 2,�68.9 �,904.6Netdebt(i) 532.4 237.9 ��2.6 �03.3 96.9 ��2.� 83.3 ��0.0 4�6.2 408.0Totalliabilities 1,356.0 960.3 �,0�2.0 824.4 8�0.8 847.9 �,42�.� �,374.9 �,08�.6 820.�Equityattributableto equityholdersoftheparent 1,542.8 �,446.3 �,4�9.2 �,066.7 932.0 �,0�9.7 970.0 �,�63.� �,487.3 �,084.�

OtherInformation(at3�December)Numberofsharesinissue(millions) 3,224.1 3,204.8 3,�88.8 3,�86.0 3,�86.0 3,�86.0 3,�39.8 3,�39.8 2,9�0.8 2,37�.6Weightedaveragenumberof sharesinissue(millions) –Basic 3,211.4 3,�93.0 3,�86.7 3,�86.0 3,�86.0 3,��2.2 3,�39.8 2,923.9 2,�86.9 2,370.9 –Diluted 3,273.5 3,242.� 3,2��.� N/A N/A N/A N/A N/A 2,603.3 2,383.7Shareprice(HK$) 6.050 4.040 3.000 2.07� �.690 0.700 0.960 2.22� 6.000 3.700Marketcapitalization(US$millions) 2,500.7 �,6�9.9 �,226.� 847.6 690.3 28�.9 386.4 89�.6 2,239.� �,�26.9Numberofshareholders 4,736 4,989 �,�67 �,32� �,4�2 �,�76 �,�8� �,�8� �,632 6,��6Numberofemployees 62,395 �0,087 46,693 49,�6� 46,9�� 44,820 48,046 49,493 60,972 30,673

N/A: Not applicable(i) Includes the net debt of certain wholly-owned financing and holding companiesSee pages 141 and 142 for a glossary of terms

Note: The Group has changed its accounting policy for the accounting treatment of its investments in joint ventures from the application of the proportionate consolidation method to the equity method of accounting. Details regarding the change are provided in Note 2(C) of the Financial Statements. Figures for 2006 have been restated for such a change accordingly.

FirstPacificCompanyLimitedAnnualReport2007

Summary of Principal Investments

Philippine Long Distance Telephone CompanyPLDT(PSE:TEL;NYSE:PHI)istheleadingtelecommunicationsserviceproviderinthePhilippines.Ithascommonshares

listedonthePhilippineStockExchangeandAmericanDepositaryReceipts(ADRs)listedontheNewYorkStockExchange.Ithas

oneofthelargestmarketcapitalizationsamongPhilippinelistedcompanies.Throughitsthreeprincipalbusinessgroups,PLDT

offersawiderangeoftelecommunicationsservices:Wireless(principallythroughwholly-ownedsubsidiarycompany,Smart

Communications,Inc.);FixedLine(principallythroughPLDT);andInformationandCommunicationsTechnology(principallythrough

wholly-ownedsubsidiarycompany,ePLDT).PLDThasdevelopedthePhilippines’mostextensivefiberopticbackbone,cellular,

fixedlineandsatellitenetworks.

Sector : Telecommunications

Placeofincorporation/businessarea : ThePhilippines

Issuednumberofshares : �88.7million

Particularsofissuedsharesheld : CommonsharesofPesos�parvalue

Economicinterest : 26.3percent

FurtherinformationonPLDTcanbefoundatwww.pldt.com.ph

PT indofood Sukses Makmur TbkIndofood(IDX:INDF)isthepremierprocessed-foodcompanyinIndonesia.ItisbasedinJakartaandislistedontheIndonesia

StockExchange.Throughitsfourstrategicbusinessgroups,Indofoodoffersanddistributesawiderangeoffoodproducts

throughoutIndonesia:ConsumerBrandedProducts(noodles,nutritionandspecialfoods,snackfoodsandfoodseasonings),

Bogasari(flourandpasta),Agribusiness(cookingoils,margarineandshortening)andDistribution.Indofoodisoneoftheworld’s

largestinstantnoodlemanufacturersbyvolume,andthelargestflourmillerinIndonesia.Indofood’sflourmillinJakartaisoneof

thelargestintheworldintermsofproductioncapacityinonelocation.Italsohasanextensivedistributionnetworkinthecountry.

Sector : ConsumerFoodProducts

Placeofincorporation/businessarea : Indonesia

Issuednumberofshares : 9.4billion

Particularsofissuedsharesheld : SharesofRupiah�00parvalue

Economicinterest : ��.�percent

FurtherinformationonIndofoodcanbefoundatwww.indofood.co.id

Metro Pacific investments CorporationMPIC(PSE:MPI)isaPhilippine-based,publiclylisted,investmentandmanagementcompanywithholdingsinwaterutility,real

estatedevelopmentandhealthcareenterprises.

Sector : Infrastructure,PropertyandHealthCare

Placeofincorporation/businessarea : ThePhilippines

Issuednumberofshares : �,342.9million

Particularsofissuedsharesheld : CommonsharesofPeso�parvalue

Economicinterest : 8�.6percent

FurtherinformationonMPICcanbefoundatwww.mpic.com.ph

24th Floor, Two Exchange Square,

8 Connaught Place, Central, Hong Kong SAR

Telephone : (852) 2842 4388

Fax : (852) 2845 9243

Email : [email protected]

Website : www.firstpacco.com

First Pacific Company Limited

A Chinese version of this annual report is available at www.firstpacco.com or from the Company on request.

本年報之中文版可瀏覽 www.firstpacco.com 或向本公司索取。

This report is printed on environmentally friendly paper

Concept and design: Format Limited and iOne Financial Press Limited

Management portrait: Alan P. K. Soo

Annual Report 2007 First Pacific Company Limited · 3.0 2.5 2.0 1.5 1.0 0.5 0 200 160 120 80 40 06...

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Transcript of Annual Report 2007 First Pacific Company Limited · 3.0 2.5 2.0 1.5 1.0 0.5 0 200 160 120 80 40 06...