Financial Highlights 1 · STSI is the Lopez group’s stock transfer agent. MAJOR COMPANIES 1....

TABLE OF CONTENTSBusiness Mission, Credo and Commitments IFCFinancial Highlights 1Investment Summary 2Organizational Structure 3At a Glance 4FPH at Fifty 6Message of the Chairman Emeritus and Chief Strategic Officer 8Message of the Chairman and Chief Executive Officer 14Message of the President and Chief Operating Officer 16Message of the Chief Finance Officer 20Board of Directors 24Senior Management 28Key Officers 30Corporate Governance 32Board Committees 35 Business Excellence 36Corporate Social Responsibility 40Operations Review Power Generation First Gen Corporation (First Gen) 44 Power Distribution Manila Electric Company (Meralco) 48 Panay Electric Company (PECO) 51 Manufacturing First Philippine Electric Corporation (First Philec) 52 Property Rockwell Land Corporation (Rockwell Land) 56 First Philippine Industrial Park (FPIP) 58 Other Businesses First Balfour, Inc. (First Balfour) 60 First Philippine Industrial Corporation (FPIC) 62 Securities Transfer Services, Inc. (STSI) 63 Asian Eye Institute (Asian Eye) 64Corporate Directory 66Lopez Credo and Acknowledgements IBC

ABOuT Our COvErOn the cover is the Balangay team raising the Philippine flag.

The Balangay team, consisting of a hardy crew of 40, journeyed

throughout Southeast Asia in 14 months, using three replicas of

ancient Filipino boats and relying on the sun, the stars, the wind,

cloud formations, wave patterns, and bird migrations to navigate.

The team covered 14,000 kilometers and braved unfamiliar, even

stormy seas thereby showcasing the best of the Filipino to the

world.

First Philippine Holdings renews its commitment to Philippine

development, as it braves new horizons through pioneering and

sustainable undertakings. The Company will continue to represent

the best of the Filipino, united by shared values and consistently

adhering to global best practices in clean and renewable energy

generation, power distribution, property and infrastructure

development, and manufacturing for the electrical and solar

power industries, while consciously and deliberately protecting

the environment for the benefit of future generations.

BuSiNESS MiSSiONOur basic purpose is to create new wealth for our stakeholders.

Our businesses will focus on vital needs for national development in the areas of energy, infrastructure, manufacturing and supporting industries.

CrEdOWe believe in the Filipino’s ability to innovate, to seize developmental opportunities borne from the real needs of domestic and overseas markets.

We affirm our partnership with the Filipino in their endeavor of ever pushing the social development frontiers beyond currently known limits.

We share the Filipino’s vision of spreading gainful employment to all who are willing to put their talents in the total betterment of the Filipino.

ThE FPh COMMiTMENTSWe at the First Philippine Holdings commit to the Filipino nation:• Our continuing search for innovative ventures and technology

that optimize human and natural resources bringing out the best from the Filipino mind and skills; and

• Our thrust towards the development of communities and persons we influence in our work.

We commit to our suppliers of goods and services:• Our adherence to conducting business transactions with

integrity, fairness, and professionalism;• Our willingness to assist in their development; and• Our continuous assistance in improving the quality of such

services.

We commit to our stockholders:• Our untiring efforts to give competitive returns on their

investments while exercising prudence in our decisions.

We commit to our customers:• Our unceasing quest to meet their needs; and• Our uncompromising struggle for excellence in meeting their

expectations.

We commit to all members of the FPH family:• Our institution of better and more comprehensive programs

that allow for total personal development; and• Our constant search for more effective ways to foster

teamwork and employee participation to attain higher levels of productivity and creativity.

The First Philippine Holdings 2010 Annual Report is printed on 9Lives Silk, a paper made of carbon neutral quality composed of 55% post-consumer waste.

2010AnnualReport

FiNANCiAL highLighTS

December 31OPERATINGRESULTS(InmillionPhp)1 2010 2009 (as restated)Revenues 64,285 59,094 Sale of electricity 52,973 48,243 Sale of merchandise 6,076 4,341 Equity in net earnings of associates 2,777 2,097 Contracts and services 1,697 1,390 Sale of real estate 657 1,044 Share in project revenue of joint ventures 105 1,979 Finance costs (5,594) (6,897)Foreign exchange loss (241) (442)Provision for income tax 1,935 2,027 Gain on sale of investment in an associate 23,560 8,957 Net income for the year 28,372 13,074 Net income attributable to equity holders of the parent 24,850 8,731 FINANCIALPOSITION(InmillionPhp)2

Total assets 160,534 149,027 Investments and deposits in associates 57,222 63,529 Total debt 66,437 86,236 Total long-term debt 42,311 54,852 Total liabilities 69,154 88,920 Total equity attributable to equity holders of the parent 63,679 38,691 Total equity attributable to equity holders of the parent - adjusted3 80,984 53,863 Total equity 91,380 60,107 Total equity - adjusted3 108,685 75,279 FINANCIALRATIOSReturn on equity4 36.86% 17.60%Dividend payout ratio5 13.28% 39.18%Current Ratio (times)6 1.87 1.41 Debt to equity (times)7 0.61 1.15 PERSHAREDATA(InPhp)Earnings per share8

Basic 41.076 13.837 Diluted 40.652 13.779 Book value per share9 133.55 83.39 Price earnings ratio10 1.52 3.47 Market price 62.60 48.00 Cash dividend per share11 1.96 0.79 Number of common shares issued, subscribed and outstanding 574,194,048 594,326,513 Weighted average number of shares Basic 591,270,907 590,355,623 Diluted 597,441,198 592,805,699 Number of stockholders 12,899 13,019

1 The statements of income for the years ended December 31, 2010 and 2009 are set out on the consolidated financial statements. 2 The statement of financial position as of December 31, 2010 and 2009 are set out on the consolidated financial statements.3 Equity - adjusted excludes cumulative translation adjustments (CTA), share in other comprehensive income of associates, and equity reserve pertaining to effect of dilution

of a subsidiary and effect of acquisition of minority interests4 Return on equity = net income for the year attributable to equity holders of the parent / average total equity attributable to equity holders of the parent - adjusted5 Dividend payout ratio = dividends paid to common shareholders by parent / last year’s net income attributable to equity holders of the parent6 Current ratio = current assets / current liabilities7 Debt to equity ratio = total debt / total equity - adjusted. The details of the total debt are set out on the notes to consolidated financial statements (Note 32).8 The EPS computation for the years ended December 31, 2010 and 2009 are set out on the notes to the consolidated financial statements (Note 29).9 Book value per share = (total equity attributable to equity holders of the parent - adjusted less preferred equity) / number of common shares, subscribed and outstanding10 Price-Earnings ratio = market value per share / basic earnings per share11 Cash dividend per share = cash dividends paid to common shareholders / weighted average number of common shares (basic)

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FirstPhilippineHoldings

2010 iNvESTMENT SuMMAryAmountsinThousandsPhp %Ownership5 Revenues NetIncome

(loss)6Total

AssetsTotal

LiabilitiesTotal

Equity6

POWERGENERATIONANDPOWERRELATED1

First Gas Power Corporation 4 39.75 34,768,088 3,538,814 35,633,853 26,778,524 8,855,329

Energy Development Corporation 28.54 24,901,616 4,115,747 81,303,593 49,064,612 30,669,891

FGP Corp. 4 39.75 18,166,689 2,358,288 16,023,695 7,043,291 8,980,405

First Gen Hydro Power Corporation 43.62 2,139,536 704,552 9,016,116 5,087,161 3,928,955

Bauang Private Power Corporation 4 24.71 457,194 (7,286) 251,452 13,639 237,813

FG Bukidnon Power Corp. 66.25 37,359 7,282 163,703 26,565 137,138

POWER DISTRIBUTION

Manila Electric Company2 6.60 245,461,000 9,685,000 178,968,000 115,772,000 58,969,000

Panay Electric Company 7 30.00 3,790,867 321,561 2,358,706 1,195,494 1,163,212

MANUFACTURING3

First Philec Solar Corporation 7 74.54 4,424,633 200,953 5,239,488 3,299,732 1,939,756

First Sumiden Circuits, Inc. 4 40.00 2,647,529 (97,318) 1,715,188 1,322,889 392,299

Philippine Electric Corporation 99.15 1,353,999 43,406 1,086,026 652,479 433,547

First Philec Manufacturing Technologies Corporation

100.00 399,542 26,350 361,836 249,579 112,257

First Philippine Power Systems, Inc. 100.00 178,424 26,577 148,602 42,587 106,016

First Electro Dynamics Corporation 100.00 77,764 (4,603) 151,989 100,439 51,550

PROPERTY

Rockwell Land Corporation 49.00 4,949,367 801,307 13,955,404 5,708,330 8,247,074

First Philippine Industrial Park, Inc. 70.00 873,432 312,250 3,054,392 131,378 2,923,014

First Philippine Realty Corporation 100.00 95,143 (16,788) 1,583,900 21,918 1,561,983

First Sumiden Realty, Inc.3, 4 60.00 17,861 8,514 127,085 7,259 119,826

OTHERBUSINESSES

First Balfour, Inc. 100.00 933,961 35,819 1,924,979 1,346,641 578,337

First Philippine Industrial Corporation 60.00 580,275 (45,595) 1,797,565 698,516 1,099,048

Securities Transfer Services, Inc. 100.00 11,149 (17,997) 19,150 15,946 3,204

1 Through First Gen2 Direct and through FPUC3 Through First Philec4 Dollar denominated results of operations and financial conditions were converted to Php using the conversion rate of US$1:Php45.309 and US$1:Php43.840, respectively.5 Effective economic interest6 Meralco and EDC's net income and equity are attributable to equity holders of the parent.7 Figures are unaudited

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OrgANizATiONAL STruCTurE

Media

SkyVisionCorporation

SkyCable

57.3%

ABS-CBNCorporation

Power

44.8%FirstPhilippineHoldings

Manufacturing PropertyPowerGeneration

66.25%FirstGen

Corporation

43.08%Energy

DevelopmentCorp.

PowerDistribution

6.61%ManilaElectric

Company

30%PanayElectric

Company

100%FirstPhilippine

ElectricCorporation

49%RockwellLand

Corporation

70%FirstPhilippineIndustrialPark

OtherBusinesses

100%SecuritiesTransfer

Services,Inc.

100%FirstBalfour,Inc.

60%FirstPhilippineIndustrialCorp.

FirstPhilecSolarCorporation

PhilippineElectricCorporation

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POWERDISTRIBUTIONMeralco is the largest electricity distributor in the Philippines. It serves almost 4.8 million customers in 31 cities and 80 municipalities.

PECO is the largest electricity distributor in the island of Panay.

MAJOR COMPANIES1. Manila Electric Company (Meralco)2. Panay Electric Company (PECO)

2010 FINANCIAL HIGHLIGHTSMeralco’s consolidated net income attributable to Parent increased by 61%.

PECO posted a net income of P321.6 million, higher by 5% over that of the previous year’s net income of P307.5 million.

PROPERTYFPIP operates the country’s leading industrial park hosting prominent multinational companies in consumer, electronics, and technology industries. Rockwell Land is a premier mixed-use inner city developer.

MAJOR COMPANIES1. Rockwell Land Corporation (Rockwell Land) 2. First Philippine Industrial Park (FPIP)

2010 FINANCIAL HIGHLIGHTSRockwell Land’s net income grew by 26% year-on-year.

For FPIP, the recorded revenues were the second highest ever, while land hectares sold was the highest in the company’s history.

POWERGENERATIONFirst Gen is the country’s leading clean and renewable energy producer with power plants that use geothermal, hydro, and natural gas for fuel. It has a total installed capacity of 2,833 MW, or 18.2% of the country’s total installed capacity.

MAJOR COMPANIES1. First Gen Corporation (First Gen) 2. Energy Development Corporation (EDC)3. First Gas Power Corporation (FGPC) 4. FGP Corp. 5. First Gen Hydro Power Corporation (FGHPC)

2010 FINANCIAL HIGHLIGHTSFirst Gen’s net income attributable to Parent soared by 319% year-on-year primarily due to higher earnings posted by EDC.

AT A gLANCE4

OTHERBUSINESSESFirst Balfour is a Triple-A construction and engineering company. FPIC is the country’s largest commercial oil pipeline system.

Asian Eye Institute is a leading eye care center in the country.

STSI is the Lopez group’s stock transfer agent.

MAJOR COMPANIES1. First Balfour Inc. (First Balfour) 2. First Philippine Industrial Corporation (FPIC) 3. Securities and Transfer Services, Inc. (STSI) 4. Asian Eye Institute (AEI)

2010 FINANCIAL HIGHLIGHTSFirst Balfour completed the LRT Line 1 North Extension project. First Balfour earnings dropped due to the completion of major projects.

FPIC incurred losses of P45.6 million arising from the significant expenses and provisions for the repair and remediation works in connection with the pipeline leak.

MANUFACTURINGFirst Philec is the holding company for the manufacturing businesses of First Philippine Holdings. Its major investments are grouped into three sectors: Electrical, Electronic, and Photovoltaics (Solar).

MAJOR COMPANIES1. First Philippine Electric Corporation (First Philec) 2. First Philec Solar Corporation (FPSC)3. Philippine Electric Corporation (Philec) 4. First Electro Dynamics Corporation (FEDCOR) 5. First Philippine Power Systems (FPPS)6. First Philec Manufacturing Technologies Corporation

(FPMTC) 7. First Sumiden Circuits, Inc. (FSCI) 8. First Philec Nexolon Corporation (FPNC)

2010 FINANCIAL HIGHLIGHTSFirst Philec’s net income grew threefold from P55.3 million to P159.9 million.

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Don Eugenio Lopez Sr. and other leading Filipino businessmen formed Meralco Securities Corporation (MSC), forerunner of FPH. MSC was the corporate vehicle which acquired Meralco from its American owners. From managing Meralco, MSC diversified into other pioneering ventures—building the country’s first commercial pipeline, manufacturing distribution and power transformers, and exploring design and construction of power generation stations.

1961

Pushing the frontiers of technology is one of the company’s early advocacies. From a transformer manufacturer in the 1970s, Philippine Electric Corporation (Philec) grew and was put back on its feet in 1989. Today, FPH grows its investments in manufacturing through First Philec—bringing its core competencies in the service of the Filipino. It houses the country’s pioneer manufacturer of high quality flexible-printed circuits and the first silicon wafer-slicing company in the Philippines.

Energy is the future. FPH saw this opportunity before others had seen it. It re-entered the power generation business through Bauang Power and took part in developing the Malampaya Project, the largest industrial investment in Philippine history—signaling the birth of the country’s natural gas industry. By 1994, First Gas Power Corporation forged an alliance with British Gas and Siemens to build two new plants in Batangas producing 1,500 MW.

More than a tradition, CSR is a way of life. It is a defining characteristic of FPH and its people, believing that value should be grown responsibly. Our projects are aligned with the United Nations Millennium Development Goals, particularly education, environment, health and poverty alleviation. We believe that in engaging the community, we empower people and do our share in uplifting the nation’s quality of life.

2005Business Excellence is the foundation on which organizations are built to last. FPH journeys toward excellence every day. The challenge lies in consistently doing the right things right. By this discipline embedded in its people, processes, and policies, FPH can successfully adjust to the perpetually changing business landscape.

2003

1989 1994

In 1961, Eugenio H. Lopez, Sr. founded First Philippine

Holdings (FPH), then known as Meralco Securities

Corporation, as the vehicle for a group of Filipino

investors to buy Manila Electric Company (Meralco)

from its American owners. The FPH portfolio grew,

aligned with the needs of the nation, as the Company invested heavily

in power plants, pipeline operations, distribution

transformer manufacturing, and construction.

Stripped of its power generation assets during Martial

Rule, FPH re-entered the power generation business

in the 1990s in response to the government’s

urgent call to power the Philippines’ recovering

commercial and industrial sectors. Over the last two

decades, it has successfully refocused

its main investment from power distribution

to power generation. At the same time, it has

maintained its competitiveness in manufacturing, property development, construction

and infrastructure among other pursuits.

For the next 50 years, FPH commits to

strengthen the strategic position of all its businesses;

integrate sustainability in all its endeavors; enhance

financial performance by adhering to global best practices, achieving operational

excellence and building brand value; and pursue

overseas opportunities. An environment of openness,

a culture of learning and innovation, and a spirit of

unity enable FPH to believe in, partner with, and

share the Filipino vision

of development and true progress.

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FPh at fifty

2010AnnualReport

The Philippines was confronted with economic and political crises that lasted for 25 years. When the entire country was placed under Martial Law in 1972, Meralco, then MSC’s cornerstone, was one of the hardest hit. Shortly after midnight of September 22, the military entered the Meralco compound and took over the power company.

Recognizing the opportunities in the fast-growing solar energy industry, another defining moment came in 2008. The first large-scale silicon wafer-slicing plant was inaugurated in the Philippines—First Philec Solar Corp. This subsidiary, a joint venture between First Philec and the Sunpower Manufacturing Ltd. of the United States, aims to develop the country’s potential for this global industry.

2008

The new decade marked the company’s entry into infrastructure with the development of the North Luzon Expressway (NLEX), an 84-kilometer world-class highway and the longest toll road in the country in terms of lane-kilometers. Another pioneering venture in the industry is the group’s construction and engineering company—First Balfour. Created in1969, First Balfour expanded its market leadership from the construction of power plants and water infrastructure to buildings and transport infrastructure such as the St. Luke’s Medical Center in Bonifacio Global City with Makati Development Corporation and the six-kilometer LRT 1 North Extension Project with DMCI.

The Lopez Group had a vision of a mixed-use community where one can live, work, play, and learn. For a company completely unfamiliar with real estate, the vision was neither cheap nor quick to achieve, but with an undaunted spirit, seasoned management, and dedicated people, that dream came into fruition—Rockwell Land.

20001998First Holdings opened the First Philippine Industrial Park (FPIP) through a joint venture with Sumitomo Corporation. FPIP is a 300-hectare estate in Batangas, with world-class facilities designed to have minimum impact on the environment. Today, it has grown to become the country’s premier industrial park hosting prominent multinational companies in consumer, electronics, and technology industries.

1999

The dark days had ended, and democracy was reborn. Filipinos from all walks of life gathered and gave birth to the historic EDSA Revolution. The chain of events pulled the Lopezes back into business. In 1986, Oscar M. Lopez took the helm of a battered company, nearly bankrupt and bleeding with debt. But with an undaunted leadership and team, he led the company’s stunning recovery to where it is today.

1986

2007We build where opportunities are great. In 2007, another global leader in renewable energy became part of the company—Energy Development Corporation (EDC). As the second largest geothermal producer in the world, EDC strengthens the company’s thrust in providing clean, renewable, and reliable energy here and abroad.

As FPH turns 50, we witness the passing of the torch from Oscar M. Lopez to Federico R. Lopez to continue braving new horizons. This decade marks two significant milestones—the new leadership and FPH’s growth from managing the country’s largest power company to growing a portfolio of clean and renewable energy. This is our warm welcome to a broader vision and an exciting future.

1972

2010

7


FellowStockholders:

In a meeting of your Board of Directors immediately following our Annual Stockholders’ Meeting last June 2010, I stepped down from my role as Chairman and Chief Executive Officer of First Philippine Holdings (FPH), a position I had held for close to 25 years. In my place, my son, Federico R. Lopez was elected Chairman and Chief Executive Officer while I was conferred the title of Chairman Emeritus.

Our new Chairman and Chief Executive Officer, our President and Chief Operating Officer, and our Chief Financial Officer will share the honor of reporting to you on FPH’s performance for its operating year 2010, as well as to provide you with essential updates on the conduct and future of our business. I, for my part, already delivered my valedictory to you during last year’s annual stockholders’ meeting.

This year marks the 50th anniversary of the establishment of our Corporation, an event that we will be celebrating with modest pomp later in the year. Inasmuch as I am the sole remaining employee of FPH who has been on the scene since shortly after it started life as Meralco Securities Corporation on June 30, 1961, I thought it’s appropriate to share with you the insights and perspectives that I have gained from watching FPH grow into adulthood, that they may serve as a beacon to help illuminate its way into the next 50 years.

Our world was very different in 1961. Most large and important businesses were still under foreign control, having been established during our colonial period, although the shift to Filipino ownership was beginning, partly in compliance with the terms of the Laurel-Langley Agreement. The Filipino executive class had just begun to emerge, as our first graduates from Western business schools began returning to the Philippines; nevertheless, the highest management and board positions in Philippine companies remained largely in the hands of

expatriates. The age of the large public corporation had not yet dawned on this country. Most businesses were small, proprietary and entrepreneurial in nature. Larger business enterprises tended to be owned and controlled by moneyed families whose wealth, more often than not, was derived from ownership of land. Even the monopolies, such as they were, were quite small when compared to today. Meralco only had some 360,000 customers and it was, by far, the largest public utility we had. After all, the country’s population was only 27,087,685 according to a 1960 census, compared to over 92 million today.

But if industry was quite undeveloped in 1961 because we still largely lived off the fruits of the land, and if spending power was still relatively low, we could nevertheless feel the stirrings of a sense of economic nationalism, a sense that Filipinos had the right and responsibility to, and were capable of, ownership of its industries. All it took was for the most daring and capable Filipinos to prove that it could be done.

In 1961, a group of Filipino businessmen led by my father, Eugenio Lopez, Sr., did just that. They dared to purchase ownership and control of Meralco for what was then an inconceivable amount of US$62 million, inconceivable because the largest corporate acquisitions then being contemplated were in the US$10 million range. This acquisition proved to be the catalyst that triggered a wave of transfers of ownership of large businesses from foreign hands to Filipinos. But what Eugenio Lopez, Sr. and his associates did in 1961 was truly a pioneering precedent in the annals of Philippine business.

FPH, or Meralco Securities Corporation as it was initially called, was formed to serve as the corporate vehicle for this historic Filipinization. The new owners had to prove to skeptics, and there were many doubters, that they could manage Meralco just as well as the Americans could, and that Meralco, under Filipino management, could provide

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2010AnnualReport

MESSAgE OF ThE ChAirMAN EMEriTuS

ANd ChiEF STrATEgiC OFFiCEr

service to its customers just as well as it could under American management. As it turned out, they proved that they could run Meralco even better. What followed, over the next 10 years, was a period of unprecedented growth, profitability and service that we fondly speak of as Meralco’s “golden years.”

Meralco flourished under a set of values and principles by which my father lived his life and managed his businesses. I will now use his words in describing Meralco’s formula for success during its golden period.

• “We all here wish to restate the policy of the Company. We believe in the welfare and advancement of the employees. As the Company grows, so must the condition and welfare of our employees improve. The expansion and growth of the Company must run parallel with the betterment and upliftment of our employees.”

• “The company must make profits, yes. But a good portion of this must be returned to the public in the form of improvements and better service and our employees should share in these profits. A company cannot be called progressive if it accumulates only profits, with utter disregard to its moral and social obligations to the public and its employees. A company of that kind cannot and should not deserve the support of the public.”

• “…we believe that its ownership should not be a monopoly of a family or a group of families. Neither should it be a monopoly of a group of interests. Rather, it should be spread as much as possible to the greatest number of people…”

• “…the Manila Electric Company is far from being perfect, and it is our constant preoccupation to continue improving its service to the public. We welcome all criticism, whether fair or unfair, because we believe that only in this way can we know our defects and thus improve our service.”

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• “…we believe that Meralco must be completely independent from the Government… It must not depend on the Government for guarantees, subsidies, or any special privileges. On the other hand, it shall be the Company’s duty to cooperate fully with the Government in its economic program…”

These tenets were paraphrased in many different ways on many different occasions by my father during his period of stewardship. Their essence remains constant to this day, and we remain faithful to them to this day because they have never let us down: to provide the best service to consumers; to be the best employer in the country; to broaden ownership so as to counteract the monopolistic tendencies of the industry; and to demonstrate a strong sense of nationalism by being Government’s partner in economic development.

Unfortunately, this golden period lasted for only a fleeting 10 years. Meralco, like a shooting star, burst upon the firmament in all its glory and spectacle, then abruptly disappeared into darkness and obscurity. Like the Philippines as a whole, its democratic institutions, its nationalistic and patriotic values, its youth and its innocence, Meralco was devastated by the 14 years of martial law. And like my father and all the executives loyal to him, I was forced out of our businesses into an exile of sorts during the martial law period.

When I was asked to return to FPH following the EDSA Revolution in early 1986, what I encountered was an organization that was a mere shadow of what it used to be. FPH was virtually bankrupt, saddled by more than P2.0 billion in liabilities, but without sufficient cash flow to even meet the monthly payroll. It had been forced to

sell its shares in Meralco to Meralco Foundation. Meralco, for its part, was struggling after many consecutive years of financial losses; a quarter of the power that it distributed was categorized as non-revenue power. It had been stripped of its power plants and its ability to generate power.

The first thing we had to do was to recover our ownership in Meralco. Although FPH’s creditors gave us the time and space to restructure our debt, it was clear that we would not be able to revive the business without recovering Meralco. Yet, it took the better part of five years for us to do so. At that, we were not permitted to recover the full ownership in Meralco that had been taken from us under duress; indeed, we were only permitted to recover the so-called unpaid balance equivalent to about 30% of Meralco, and even then, we were compelled by Government to donate half of what we recovered for the benefit of the country’s land reform program. I don’t know how much, if any, of those donated shares ever went towards supporting land reform. I am fairly certain that at least some of those very shares were, 20 years later, used by the previous administration to try to wrest control of Meralco away from us.

So, in 1990, we were left with the daunting task of rebuilding our businesses. Meralco was still at the center of our solar system, the sun around which our other major businesses revolved. We were absolutely convinced, however, that we would be up to the task, guided by the same values and principles passed down from my father.

We would have to do it in a world vastly different from that which my father encountered in 1961. Even though the dictator had been banished, economic power now

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A utility like Meralco, far from being regarded by the consuming public as its friendly utility and service provider, had come to be regarded, in this new era of soaring fuel prices and power rates, in this new era of frequent rotating brown-outs, in this new era where disconnection was an immediate consequence of delinquency, as the enemy. It was viewed as oppressive, uncaring and remote, and was an easy target for politicians and economic managers looking for a scapegoat for their lack of performance.

But even if consumer attitudes in the early 1990s were not welcoming and friendly, the large gaps in our economy provided us ample opportunity to rebuild our businesses. The power crisis of the late 1980s provided us a way back into power generation, first with the Bauang diesel power plant, then later with the much cleaner and more efficient gas-fired plants that provide an anchor market for our indigenous Malampaya gas. Over the past 10 years, we have further parlayed this into other major investments in clean and renewable power generation, including hydroelectric, geothermal, and soon, wind, and solar. Today, we are the second largest privately-owned power generating company in the country, and certainly the greenest.

largely resided in the hands of crony capitalists who had made hay during the martial law era. Many of the leading industrialists of the ‘60s had not survived the martial law era and had disappeared for good. Our population had more than doubled to over 60 million, but it was a population in which poverty and illiteracy now predominated. As an economy, the Philippines had fallen far behind its neighbors in the region. We had failed to develop and maintain our infrastructure in a manner competitive with what countries like Singapore, Taiwan, and Thailand had done. Investment in our human capital, by way of high standards of education, nutrition, and healthcare had fallen to neglect. As a result, our productivity fell below that of our competitors, and we were unable to attract investments in manufacturing and technology. Government had become the largest employer, and competed with the private sector for ownership and control of large segments of the economy.

A new attitude of entitlement had also emerged. Major sectors of our population demanded the best, but were unwilling to pay the price or do the work. We had, to coin the words of the late great Don Claro M. Recto, become a mendicant society. Worse, the dismantling of martial law did little to inhibit the graft and corruption that had flourished during that era.

“Today, we are the second largest privately-owned power-generating company in the country, and certainly the greenest.”

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The same gaps enabled us to invest in large-scale infrastructure projects such as the North Luzon Expressway. In other parts of the wider Lopez Group, we have endeavored to fill obvious gaps in water supply and distribution, telecommunications and digital media, not always successfully, I might add. In fact, our over-exuberance and over-ambitious expansion programs at Lopez Group-level during the 1990s ultimately brought us a lot of grief in the form of heavy indebtedness that took us the better part of 10 years, the first decade of the 21st century, to restructure and repay.

The last several years of my period of stewardship at FPH have not been without great excitement and suspense. In 2007, we bid for and won the Government’s auction of its geothermal power assets in a privatization that could potentially be every bit as historic as the privatization of Meralco. Our foreign partner in this endeavor backed out at the last minute and the onus fell on us to borrow even more heavily in order to fund our winning bid. Then, the global financial crisis of 2008 descended upon us with appalling suddenness. As fate would also have it, our major new undertaking coincided with a takeover bid for control of Meralco launched by powerful hostile parties with the backing and support of a hostile administration. Funding our acquisition of EDC and defending our controlling interest in Meralco stretched our financial capabilities ever so close to the breaking point. In the end, we had to fall back upon the support of a “white knight” in order to protect the value of our stake in Meralco.

“i thank all of you for the faith, friendship, and support that you have constantly gifted me in the close to 25 years that i have served as your Chairman and CEO. i cannot remember a single moment, a single annual stockholders’ meeting of FPh, when i did not feel the support and affection of my fellow stockholders and employees.”

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OSCARM.LOPEZChairman Emeritus and Chief Strategic Officer

will potentially allow us to be players in a global arena. Not immediately, perhaps, but quickly enough so that we are not left behind, stranded in our past. Geothermal and solar energy know-how are not competencies that can easily be acquired and mobilized. We have significantly reduced and termed out our indebtedness, and we have the means to mobilize a hefty war-chest for new investments. I leave it to my successor to describe to you precisely how we move into this very promising future.

I thank all of you for the faith, friendship, and support that you have constantly gifted me in the close to 25 years that I have served as your Chairman and CEO. I cannot remember a single moment, a single annual stockholders’ meeting of FPH, when I did not feel the support and affection of my fellow stockholders and employees. I look forward to doing my utmost to serve you as your Chairman Emeritus for as long as you will have me, as a senior statesman of the Corporation, perhaps, and certainly as custodian of our history, traditions, and values.

And so we close the chapter on the first 50 years of FPH. And wonder what we might expect of the next 50 years.

It is my belief that our Corporation will have to operate in an environment that, progressively, will be very unlike the economic environment that we know today. Already, large corporations are crowding each other and encroaching upon each other’s traditional domains in looking for space to grow. As trade barriers continue to be dismantled and as we are drawn further into the regional and global economies, we will have to compete against regional and global giants and we will have to survive that competition, or be eaten up by them. Many will not survive this process. The competition for scarce resources will be even stiffer —for capital, for political capital, but most of all, for talent and expertise. The rules of competition are also being rewritten, most particularly in aspects of transparency and governance, environmental responsibility and corporate social responsibility. In the next 50 years, it will not be enough for FPH to be just a Filipino company operating in the Philippines. But for those businesses that are able to transition into the wider, global marketplace, I believe that the opportunities will be much, much greater.

For the first time, we look to the future without Meralco at the center of our universe. As difficult as that may be from a sentimental viewpoint, it poses a tremendous challenge and opportunity for us to re-define our place in the world at just the right time. Today, we have, I believe, the core businesses, technologies and key personnel that

13


The year 2010 was a special one for me. As I assumed the mantle of leadership at First Philippine Holdings (FPH), I did so at a time when its finances were rock-solid and our platform of businesses were enviably strong and raring for more growth. Of course, the last decade for FPH was not an easy one but I attribute the crucial shaping, pruning, and forging of our current platform of businesses to the decisiveness of our Chairman Emeritus at critical junctures these last few years. We were admittedly in crisis, and it forced us to make difficult choices. But when those tough, painful decisions were taken to sell our controlling stakes in Meralco and Manila North Tollways Corporation we found that we closed a door but unlocked many new windows not previously open to us before. Today, our businesses are less reliant on government-regulated franchises but have more involvement in industries where we constantly have to compete for the attention of customers. In the power business, our sights are no longer just set on growing domestically but also now positioned to compete internationally in new markets where we can bring Energy Development Corporation’s (EDC) geothermal expertise. Even many of our businesses that are located in the country, like First Philec Solar and First Philippine Industrial Park for example, are in fact serving tough global customers with options to source their requirements anywhere in the world. Thus, quite a number of our businesses are already compelled to benchmark the products and services they offer against the best in the world if they want to prosper.

As we grow, we also seek to align our strategic goals with that of the country. We have always believed that as a nation striving to be competitive we must develop more clean and indigenous sources of energy. Today all the power we produce at First Gen and its subsidiaries are from such sources, and we will relentlessly continue to develop more. But we will also align our goals with that of the Filipino aspiring to go global and to bring our unique talents and expertise to that global arena. Amidst an international arena that’s already crowded with bigger rivals we can only do that credibly if we bring something unique to the table. For the First Gen group of companies,

MESSAgE OF ThE ChAirMAN ANd

ChiEF ExECuTivE OFFiCEr

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that means taking our “35-year headstart” in integrated geothermal power development expertise to new markets abroad that are clearly in search of more indigenous, low-carbon energy alternatives.

At First Philec Solar we are among the best producers of silicon wafers for the growing solar photovoltaic industry. Today we supply some of the world’s leading PV companies helping them to improve performance efficiencies and drive costs down towards their holy grail of grid parity.

At First Philippine Industrial Park, we are creating a platform to attract firms to invest and locate their manufacturing businesses in the Philippines and make it easy for them to access the best resources our country has to offer.

At Rockwell Land, we will continue to raise the bar for real estate development in the country. We know that this industry has many bigger, better-heeled players but what began as an opportunistic foray into a new industry for us has now turned into strong brand synonymous with success and high-end quality. We will continue to build on that success profitably.

Not all has gone well for our group of businesses last year. Our oil products pipeline First Philippine Industrial Corp. (FPIC) had an unfortunate accident last year when a leak was discovered along a highly urbanized section of its pipeline in Barangay Bangkal, Makati. Although the ultimate liability is still to be established we believe that it is our duty to ensure that public health and safety are not compromised and that the environment is protected. From the onset of the crisis, FPIC has always sought to act with integrity and “do the right thing.” We believe this is the only way a company emerges stronger from a crisis. Though it was an unfortunate accident no one wanted to happen, it’s a fact that an oil products pipeline such as FPIC remains the safest, most efficient way to transport oil products to the metropolis. Prior to shutdown, it was supplying close to 60% of the requirements of Metro Manila and surroundings and took on the role of more than 800 truck trips daily

between the Batangas refinery and Pandacan oil depots in the heart of Manila at a fraction of the cost per liter. But to play that role effectively it must also earn the public’s confidence that safety is not an issue. This we will do.

Taking all challenges in stride, it’s evident that the year indeed ushered in many new changes. In fact last year, the cover of our Annual Report was entitled “New Beginnings.” And as we celebrate our 50th year in 2011 and face this new beginning with anticipation and excitement we also thought it fitting to start it with a new, fresh corporate logo that will hopefully convey our journey and vision for the next 50 years.

Our new logo has us envision a green road through vibrant blue oceans and leading towards a golden sunrise. We want the imagery to be a constant reminder that as we seek growth we must plan to ingrain sustainability in the business models we choose, that in the spirit of the great explorers, we should incessantly be in search of new, blue oceans, and never forgetting that staying relevant means we are always watchful, ready and willing to reinvent ourselves for a constantly changing world.

So on our 50th year, it’s a good time to take stock of where we will take FPH in the next 50 years. But our Chairman Emeritus constantly reminds us to make sure we build an FPH that will last more than 400 years into the future. So we shouldn’t just think about the kind of world we want, we should begin making that world now.

FEDERICOR.LOPEZChairman and Chief Executive Officer

“...never forgetting that staying relevant means we are always

watchful, ready and willing to reinvent ourselves for a constantly

changing world.”

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FellowShareholders:

2010 marked a new era for the Company. In March we completed the sale of another 6.6% interest in Meralco. This transaction, together with the initial sale of 20% in 2009, brought the total proceeds realized by the Company to P42.5 billion, from an investment carried in our books at P20.4 billion. Prior to this, we sold our interest in the tollway business. We made these critical decisions to reduce our financial burden and regulatory vulnerability. We, instead, chose to expand our core business in power generation, a less regulated but more competitive sector. Likewise, we increased our investments in solar wafer manufacturing and property development, businesses with big international and local players. We will have to compete with these strong players. But we have the organization; we have the people; and we now have the balance sheet.

First Philippine Holdings (FPH) reported net earnings of P28.4 billion for the year ended December 31, 2010, compared with P13.1 billion for the year ended December 31, 2009. This reflected the much higher gain on our divestment of the 6.6% ownership in Meralco and the improved performance of our operating subsidiaries. Net income attributable to Parent amounted to P24.9 billion this year, against P8.7 billion last year.

• First Gen reported a strong year, with its net income reaching US$121 million (P5.5 billion), considerably better than the US$95 million (P4.5 billion) reported in 2009. The 27% growth was driven by higher earnings posted by Energy Development Corp. (EDC), First

Gas Power Corp. (FGPC), and FG Hydro and lower finance costs. EDC’s net income grew 31% to P4.4 billion resulting principally from revenue growth from new acquisitions and lower finance costs. FGPC’s net income grew by 10% to US$78 million (P3.5 billion) against the previous year driven by the reimbursement of expenses related to the Gas Sale and Purchase Agreement and the decline in professional fees and interest. FG Hydro posted higher earnings due to favorable Wholesale Electricity Spot Market (WESM) prices. Its net income for the year amounted to P704.6 million against only P114.1 million in 2009.

First Gen is fully engaged in cultivating its investment in EDC by focusing on operational and financial performance. EDC has:- Embarked on a capital expenditure program to

achieve optimum availability and reliability for all of its operating steamfields and power-generating assets.

- Re-denominated its loan portfolio into Philippine peso, reducing its exposure to foreign exchange movements. EDC’s JPY debt as of yearend was down to 12% of total debt, from 79% and 37% in 2008 and 2009, respectively. This has been further brought down in 2011 to JPY 543.6 million, representing 0.58% of total outstanding loans.

First Gen’s bunker-fired power plant, the Bauang Plant, was turned over to the National Power Corporation (NPC) on July 26, 2010 following the expiration of the

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15-year Cooperation Period covering the project. The 225 MW plant was constructed pursuant to a Build-Operate-Transfer (BOT) Agreement entered into with the NPC during the power crisis in the early 1990s.

The Santa Rita and San Lorenzo power plants both reached their 75,000 Equivalent Operating Hours (EOH, a major maintenance milestone) during the year. Now on their 11th and 9th contract year respectively, the two natural gas-fired power plants continue to deliver stable and exceptional returns to First Gen. FGPC (for Santa Rita) and FGP (for San Lorenzo) entered into new long-term agreements with Siemens Power Operations, Inc. (Siemens) for the operation and maintenance (O&M) of the two power plants. The O&M Agreements have nominal terms of 15 years and replaced the original agreements with Siemens which expired on July 31, 2010. Siemens has been operating and maintaining the Santa Rita power plant since 2000 and the San Lorenzo power plant since 2002.

In line with its debt reduction program, First Gen fully paid its P5.0 billion bonds on July 30, 2010. The bonds were issued on June 24, 2005 at an effective interest rate of 12.03%. On February 11, 2011, holders of First Gen’s Convertible Bonds (CBs) amounting to US$72.5 million exercised their option to require First Gen to redeem the CBs at a price of 115.6% of the face value. The total put value amounting to US$83.8 million (with a face value of US$72.5 million and a carrying value of US$83.1 million) was paid on February 11, 2011.

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ChiEF OPErATiNg OFFiCEr

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• First Philec, likewise, posted significant growth. Earnings attributable to Parent reached P160 million this year from P55 million last year, reflecting the robust performance of First Philec Solar Corp. (FPSC), its wafer slicing business. Now on its second year of operation, FPSC posted a net income of US$4.4 million (P201.0 million) from US$336.1 thousand (P16.1 million) last year. Its revenues reached US$97.7 million (P4.4 billion) from the US$51.8 million (P2.5 billion) year-ago level.

• Rockwell Land registered a 26% growth in its net income to P801.3 million due to the completion of One Rockwell and higher contributions of new projects—Edades and The Grove.

Our other businesses, however, did not fare as well.• First Balfour posted a net income of P35.8 million,

down from P138.2 million in 2009. Profits fell by 74% as revenues declined sharply, by 62% to P934.0 million, due to the absence of major projects.

• First Philippine Industrial Park (FPIP) failed to equal the previous year’s record-breaking results with its net income showing a significant downturn (57%) to P312.3 million in 2010 compared to P726.5 million in 2009.

• First Philippine Industrial Corp.’s (FPIC) operating results

suffered due to the shutdown of its operations from October 2010, when a leak was discovered along its pipeline. In 2010, FPIC recognized provisions totaling P274 million representing the estimated cost for

engineering and rehabilitation works and, by way of contingency, for any damages which have yet to be established, subject to the company’s rights and defenses.

We are committed to global business practices in safety, security, health and environmental standards. And while risks are inherent in all businesses, we continue to take the measures necessary to strengthen our business continuity planning and emergency preparedness. Insofar as FPIC is concerned, it has completed the repair and taken responsibility for the clean-up. It has contracted a US firm to perform an assessment of the environmental impact of the leak. As of December 31, 2010 FPIC’s net loss amounted to P45.6 million. Its expenses related to the pipeline leak have exceeded P300 million as of March 2011.

Despite the various challenges, we made progress in other areas. As we announced last year, we will focus on rebuilding our portfolio through the expansion of power generation and further investments in our manufacturing and property businesses:

• First Gen has completed a rights offering generating proceeds of P15 billion, which were used to repay its convertible bonds and other debts. First Philippine Holdings purchased 1,420,681,182 First Gen shares amounting to P10.0 billion. Our ownership interest in First Gen remains at 66.25%.

• FPH bolstered its manufacturing portfolio with additional investments throughout 2010. Through First

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Philec, we have invested an additional P463.9 million (US$ 10.1 million) in the solar wafer slicing business. We remain bullish on the long-term growth of our manufacturing sector. In fact, First Philec just signed a joint venture with Nexolon of Korea to put up a 400-MW solar wafer facility in Laguna, which is expected to commence operation in the third quarter of 2011.

• Rockwell Land continues to capitalize on the healthy demand in the high end market. The 2010 revenues were driven by One Rockwell, the first two towers of The Grove and Edades. Rockwell is set to launch the next two towers of The Grove in 2011.

Our ending cash balance is at P26 billion. In view of our strong financial position, we have declared cash dividends of P1.00 to our common and P4.36 to our preferred shareholders. The Company also initiated a P6.0 billion two-year share buyback program between July 2010 and 2012. As of December 31, 2010, First Philippine Holdings had repurchased 25,689,440 common shares at an average price of P63.10/share for a total consideration of P1.6 billion. By end April 2011, we have bought back 33,391,150 shares at a total cost of P2.1 billion. We will continue to buy back our shares in 2011. Over the past five years, we have utilized over P6.0 billion for dividend payments and share re-purchases.

The Group’s total debt fell from P74.7 billion at the end of 2009 to P55.8 billion. The Group received P22.4 billion from the additional divestment of Meralco and spent over P9.0 billion on investments during the year, mostly on First Gen and EDC.

ELPIDIOL.IBAÑEZPresident andChief Operating Officer

“FPh is celebrating its 50th anniversary

in 2011. As we celebrate this milestone, we continue to explore opportunities in the businesses we are in and to invest

cautiously to make sure that we derive the maximum benefits from them.”

Moving forward, our sell-down of Meralco will negatively impact our recurring earnings. Our shareholdings are now treated as Investment in Equity Securities which is measured at fair value. Any gains or losses from the assets are no longer reported in the Consolidated Statement of Income until such time that the investments are sold or determined to be impaired.

FPH is celebrating its 50th anniversary in 2011. As we celebrate this milestone, we continue to explore opportunities in the businesses we are in and to invest cautiously to make sure that we derive the maximum benefits from them.

Once again, we would like to thank you, our fellow shareholders, for your continued support.

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MESSAgE OF ThE ChiEF FiNANCE OFFiCEr

HISTORICGAINS2010 saw considerable improvements in the financial results of the Company driven by the strong operational performance and financial contribution of our power generation, manufacturing, and real estate portfolio. Our Company achieved a record consolidated income attributable to Parent of P24.9 billion representing 287% year-on-year increase.

The financial results were supplemented by significant one-time gains from the additional sale of Meralco shares.

In March, First Philippine Holdings (FPH) received P22.42 billion from Beacon Electric for the P300.0 per share acquisition of an additional 6.6% of Meralco shares. The remaining 6.6% investment in Meralco shares will now be booked as investment in equity securities subject to mark-to-market adjustments. Consequently, FPH recognized a net gain of P23.6 billion in consolidated statement of income following a P9.0 billion gain from the initial 20% Meralco shares sale in 2009.

Notwithstanding the reduced Meralco stake, consolidated revenues increased by 9% to P64.38 billion, primarily driven by power generation (P53 billion) and the increased capacity of the manufacturing businesses (P6.1 billion). First Gen, our power generation subsidiary, delivered improved results from its deleveraging program and the consistent performance of its First Gas operating subsidiaries and its affiliate, Energy Development Corporation (EDC). The growth of EDC came from the increased contribution of the 192 MW Palinpinon and 112 MW Tongonan plants acquired in 2009 while the acquisition of the Bacon-Manito plants

“The substantial improvement in the

group’s liquidity position allowed

us to carry on our deleveraging

program and to undertake certain

share value-enhancing

initiatives.”

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in 2010 that is going through a complete rehabilitation is expected to deliver 130 MW of generating capacity in 2012.

Following an investment increase in the manufacturing business, First Philec recorded a substantial growth in net income (P215.1 million versus P64.1 million in 2009) as a result of its increasing capacity in its solar wafer slicing operations. Further growth will be facilitated by additional investment in First Philec’s other joint venture company, First Philec Nexolon Corporation, to increase its solar wafer slicing capacity to approximately 1.1 gigawatts.

Meanwhile, the contribution from the property sector likewise remained healthy. Rockwell Land’s good performance coupled with the increase in our stake to 49% allowed us to recognize higher share in associates’ earnings. Meanwhile, First Philippine Industrial Park (FPIP) also enjoyed two major land sales in 2010.

IMPROVEDLEVERAGEANDVALUEENHANCINGINITIATIVESThe substantial improvement in the Group’s liquidity position allowed us to carry on our deleveraging program and to undertake certain share value-enhancing initiatives. The Parent company ended the year with a considerable cash balance of P19.6 billion. It generated P6.1 billion cash dividend from its subsidiaries and associates. In July 2010, our Board approved a two-year common share buyback program of up to P6.0 billion to take advantage of the mismatch of our share price compared to our net asset value. We bought back 25.7 million of our common shares for P1.63 billion equivalent to 4.47% of the total outstanding common shares of 574.7 million as of end of 2010. The short-term loans of P11.2 billion from Metro

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Pacific Investments Corporation (MPIC) were settled after the sale of Meralco shares in March 2010. At the end of 2010, the Parent Company’s debt dropped to P10.4 billion from P11.5 billion in 2009.

Total interest bearing debt of the Group went down from P74.7 billion in 2009 to P55.8 billion in 2010. The ratio of consolidated long-term debt to total equity improved from 1.02:1:00 in 2009 to 0.54:1.00. The decrease in long-term debt was due to loan repayments, partial buyback of First Gen’s convertible bonds, as well as the reclassification to current portion of First Gen’s remaining convertible bonds scheduled to be redeemed in February 2011. Current ratio went up from 1.41:1.00 in 2009 to 1.87:1.00 in 2010 due to P6.5 billion reduction in current liabilities and P1.5 billion increase in current assets.

Comparativeconsolidatedinterestbearingdebt(Amount in Million Php)

2010 2009

Current Noncurrent Total Current Noncurrent Total

Parent 1,722 8,667 10,389 1,039 10,492 11,531

Power 10,981 31,981 42,962 7,137 44,186 51,323

Manufacturing 495 1,550 2,045 309 156 465

Others 329 113 442 11,322 18 11,340

Total 1,722 42,311 55,838 19,807 54,852 74,659

First Philippine Holdings fully subscribed to its prorata share of P10.0 billion out of First Gen’s successful P15.0 billion Rights Offer in January 2010. For the remaining part of the year, First Gen signed three new loans to prepay higher interest loans and to refinance short-term debt. First Gen fully paid its P5.0 billion bond on July 30, 2010 and bought back a total of US$74.0 million of its convertible bond. In February 2011, First Gen redeemed US$72.5 million of its convertible bond at the pre-agreed put price of 115.6%. As

“We will continue to focus on the success of our current business platform to deliver a steady increase in revenues, earnings, and operating results of the portfolio.”

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a result, First Gen’s consolidated debt level declined by 11% or US$130.0 million from US$1.13 billion in 2009 to US$1.00 billion in 2010. The face value of the remaining First Gen convertible bonds amounting to US$113.5 million will mature in February 2013.

First Gen’s affiliate, EDC, likewise issued a US$175.0 million three-year loan and prepaid its Japanese Yen loans to further re-denominate its foreign currency exposure to Philippine Peso and US Dollar. EDC has a natural hedge since more than 40% of its revenues are linked to US Dollars. On April 19, 2010, First Gen entered into Call Option Agreements to purchase 585 million EDC common shares. These call options can be exercised at the applicable exercise price ranging from P5.67 per share to P6.76 per share on or before April 2013.

LOOKINGAHEADWe will continue to focus on the success of our current business platform to deliver a steady increase in revenues, earnings and operating results of the portfolio. We will utilize our excess cash balances to reduce our negative carry and will implement an investment and funding strategy for the Parent Company that is coordinated with our subsidiaries and affiliates. We are evaluating our options to refinance our remaining debts to take advantage of the favorable debt market.

As of the first quarter of 2011, total buyback of FPH common shares reached 33.4 million shares for a total of P2.1 billion or 5.89% of the total outstanding shares of the Company since the program started. In March and April 2011, First Gen fully exercised its call option over 585 million EDC common shares that resulted in increasing its

economic interest in affiliate EDC to over 46%. EDC began the year with a successful launch of a 10-year Regulation-S non-rated US$300 million bond at a fixed coupon of 6.5% that was close to four times oversubscribed.

The Parent Company’s remaining cash may be used to continue its share buyback program, maintain its P2.0 per annum cash dividend, reduce debt and/or redeem Preferred Shares and make further investments in (a) power generation through First Gen for its potential expansion and acquisition opportunities, (b) manufacturing through First Philec for the expansion of its solar wafer slicing business, (c) First Balfour for its projects in drilling services and middle-income housing, and (d) other existing business expansions and/or opportunities.

We would like to express our sincere appreciation to our stakeholders for their continued trust and confidence in FPH.

FRANCISGILESB.PUNOTreasurer and Chief Finance Officer

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Board of directors


AUGUSTOALMEDA-LOPEZDirector


MANUELM.LOPEZVice Chairman

ELPIDIOL.IBAÑEZPresident and Chief Operating Officer

FRANCISGILESB.PUNOChief Finance Officer

EUGENIOL.LOPEZIIIDirector

ARTEMIOV.PANGANIBANIndependent Director


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PETERD.GARRUCHO,JR.Director

OSCARJ.HILADOIndependent Director

CESARB.BAUTISTAIndependent Director

ARTHURA.DEGUIADirector

ERNESTOB.RUFINO,JR.Director

WASHINGTONZ.SYCIPIndependent Director

JUANB.SANTOSIndependent Director

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OSCAR M. LOPEZChairman Emeritus and Chief Strategic Officer

Mr. Oscar M. Lopez is also the Chairman Emeritus of Lopez Holdings Corp. and Chairman of Lopez Group Foundation, Inc. Mr. Lopez finished his Masters of Public Administration at the Littauer School of Public Administration (now the John F. Kennedy School of Government) at Harvard University, where he also earned his Bachelor of Arts, cum laude.

FEDERICO R. LOPEZChairman and Chief Executive Officer

Mr. Federico R. Lopez is also the Chairman and Chief Executive Officer of First Gen Corporation and Energy Development Corporation. He graduated with a Bachelor of Arts Degree with a Double Major in Economics and International Relations, cum laude from the University of Pennsylvania in 1983.

MANUEL M. LOPEZVice Chairman

Mr. Manuel M. Lopez is the Philippine Ambassador to Japan. Ambassador Lopez retains his position as the Chairman of the Board of the Manila Electric Company where he served as its Chairman and Chief Executive Officer from 2001 to May 2010. He also serves as the Chairman and Chief Executive Officer of Lopez Holdings Corporation. He obtained his Bachelor of Science Degree in Business Administration from the University of the East, and pursued advanced studies in financial and management development from the Harvard Business School.

AUGUSTO ALMEDA-LOPEZDirector

Mr. Augusto Almeda-Lopez is Vice Chairman of ABS-CBN Corporation among others. He graduated with an Associate in Arts Degree from the Ateneo de Manila University and a Bachelor of Laws Degree from the University of the Philippines. He placed fourth in the 1952 Bar Exams. CESAR B. BAUTISTAIndependent Director

Mr. Cesar B. Bautista is a member of the Risk Management Committee and the Compensation and Remuneration Committee. He was an Ambassador Extraordinary and

Plenipotentiary to the United Kingdom of Great Britain and Northern Island, Republic of Ireland and Republic of Iceland. He was a Permanent Representative to the United Nations International Maritime Organization and a Special Presidential Envoy to Europe. He was also the Secretary of the Department of Trade and Industry. He graduated with a Degree in Bachelor of Science in Chemical Engineering from the University of the Philippines and pursued his Master’s Degree in Chemical Engineering at the Ohio State University.

ARTHUR A. DE GUIADirector

Mr. Arthur A. De Guia has been the Managing Director for Manufacturing and Portfolio Investments since he joined the corporation in June 1997 and is currently the President of First Philippine Electric Corp. He completed his B.S. Electrical Engineering in Mapua Institute of Technology and his Masters of Engineering Degree in Industrial Management from the Asian Institute of Technology and received the Alumni Award for Academic Excellence. He pursued his Doctor of Engineering Degree at the University of California (Berkeley) under the Fulbright Hayes Fellowship Program.

PETER D. GARRUCHO, JR.Director

Mr. Peter D. Garrucho, Jr. was the Managing Director of the Corporation from 1994 to January 2008. He is also a Board Member of First Gen Corp and Energy Development Corp. He was former Executive Secretary and Secretary of the Department of Trade and Industry and Tourism. He has an AB-BSBA Degree from De La Salle University (1966) and an MBA Degree from Stanford University (1971).

OSCAR J. HILADOIndependent Director

Mr. Oscar J. Hilado sits as Chairman of the Audit Committee and a member of the Nomination, Election and Governance Committee. Mr. Hilado is the Chairman of the Philippine Investment Management, Inc. He is also the Chairman of Holcim Phils., Inc. He graduated with Highest Honors and with a Gold Medal for General Excellence and a Bachelor of Science in Commerce Degree from De La Salle College (Bacolod). He pursued his Degree of Masters in Business Administration at the Harvard Graduate School of Business Administration from 1960-1962.

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2010AnnualReport

ELPIDIO L. IBAÑEZPresident and Chief Operating Officer

Mr. Elpidio L. Ibañez is Director of the Board of various FPH subsidiaries and affiliates. He graduated with an AB Economics Degree from Ateneo de Manila University and obtained his MBA at the University of the Philippines in 1975.

EUGENIO L. LOPEZ IIIDirector

Mr. Eugenio L. Lopez III is the Chairman of the Board of ABS-CBN Corporation. He graduated with a Bachelor of Arts Degree in Political Science from Bowdoin College and has a Master’s Degree in Business Administration from the Harvard Business School.

ARTEMIO V. PANGANIBANIndependent Director

Mr. Artemio V. Panganiban is the Chairman of the Risk Management Committee. He was the Chief Justice of the Philippines from 2005 to 2006. He was Justice of the Supreme Court from 1995 to 2005. At present, he is a columnist of the Philippine Daily Inquirer, and acts as adviser, consultant or independent director of several business, civic, non-government, and religious groups. He graduated with an Associate in Arts with Highest Honors from the Far Eastern University in 1956 and with a Bachelor of Laws Degree, cum laude and as the Most Outstanding Student in 1960. He placed 6th in the 1960 Bar Examinations.

FRANCIS GILES B. PUNODirector

Mr. Francis Giles B. Puno is President and Chief Operating Officer of First Gen. He is also a director and officer of First Gen, its subsidiaries and affiliates. He has a Bachelor of Science Degree in Business Management from the Ateneo de Manila University and a Master in Business Administration Degree from Northwestern University’s Kellogg Graduate School of Management in Chicago, Illinois.

ERNESTO B. RUFINO, JR.Director

Mr. Ernesto B. Rufino, Jr. is Chairman and Chief Executive Officer of Health Maintenance, Inc. He is President of Securities Transfer Services, Inc. He has AB and BSBA Degrees, cum laude from De La Salle University and an MBA Degree from Harvard University.

JUAN B. SANTOSIndependent Director

Mr. Juan B. Santos is a member of the Audit, Nomination, Election and Governance Committee. He is Chairman of the Social Security System. He was former Chairman and President of Nestlé Philippines, Inc. and Secretary of Trade and Industry. Mr. Santos obtained his BSBA Degree from the Ateneo de Manila University and pursued post-graduate studies at the Thunderbird Graduate School of Management in Arizona, U.S.A. He completed the Advanced Management Course at IMD in Lausanne, Switzerland.

WASHINGTON Z. SYCIPIndependent Director

Mr. Washington Z. Sycip is a member of the Audit Committee, Nomination, Election and Governance Committee, and the Compensation and Remuneration Committee. Mr. Sycip is the founder of the SGV group, auditors and management consultants, with operations throughout East Asia. He is the Chairman Emeritus of the Board of Trustees and Board of Governors of the Asian Institute of Management. He graduated with a Bachelor of Science in Commerce Degree, summa cum laude and a Master of Science in Commerce Degree (Meritissimus) from the University of Santo Tomas. He pursued his Master of Science in Commerce at Columbia University.

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ELPIDIOL.IBAÑEZPresident and Chief Operating Officer

FRANCISGILESB.PUNOTreasurer and Chief Finance Officer


RICARDOB.YATCOVice President

OSCARR.LOPEZ,JR.Vice President

BENJAMINR.LOPEZVice President

RAMONT.PAGDAGDAGANVice President/ Internal Auditor


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ELIZABETHM.CANLASVice President

ENRIqUEI.qUIASONCompliance Officer and Corporate Secretary

RODOLFOR.WAGA,JR.Vice President and Assistant Compliance Officer

Senior Management

PERLAR.CATAHANVice President and Comptroller

LEONIDESU.GARDEVice President

ARTHURA.DEGUIAManaging Director for Manufacturing and Portfolio Investments Group

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POWERGENERATION

FEDERICOR.LOPEZChairman and CEO, First Gen

FRANCISGILESB.PUNOPresident and COO, First Gen

PROPERTY

NESTORJ.PADILLAPresident, Rockwell Land

HECTORY.DIMACALIPresident and General Manager, FPIP

DR.FIORELLOR.ESTUARVice Chairman and CEO, First Balfour

ANTHONYL.FERNANDEZPresident, First Balfour

ANTHONYM.MABASAPresident, FPIC and Therma Prime

VICTOREMMANUELB.SANTOS,JR.Senior Vice President, First Gen

RICHARDB.TANTOCOPresident and Chief Operating Officer, EDC

OTHERBUSINESSES

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Key OfficersMANUELM.LOPEZ

Chairman

POWERDISTRIBUTION

MANUFACTURING

ARTHURA.DEGUIAPresident, First Philec

DANILOC.LACHICAManaging Director for Electronics Division, First Philec

ARIELC.ONGManaging Director for Electrical Division, First Philec

ERNESTOB.RUFINO,JR.President, STSI

BENJAMINK.LIBOROPresident, Asian Eye

OTHERBUSINESSES

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Corporate governance

GovernanceInitiativesFirst Philippine Holdings (FPH) adopted a Manual on Corporate Governance (the Manual) on January 1, 2003 as amended last March 29, 2010. In compliance with the requirements of the Securities and Exchange Commission (SEC), FPH filed on March 11, 2011, an amended Manual enhancing and clarifying its provisions. FPH also has in place a Corporate Code of Conduct.

The Corporate Code of Conduct reiterates the values and principles instilled by its founder and carried on by the Company, namely: nationalism, integrity, entrepreneurship and innovation, teamwork, and a strong work ethic. It embodies the principles and guidelines for the conduct of the business of the Company and in dealing with its shareholders, customers, joint venture partners, suppliers/service providers, the government, creditors, and employees. The Code also affirms the Company’s commitment to pursue civic, charitable, and social projects and undertakings. The Corporate Code of Conduct, the Business Mission, the Company Credo and its Commitments are made part of the Manual of Corporate Governance.

To further flesh out its commitment to sound corporate governance, FPH has been active with the Institute of

Corporate Directors (ICD) and has accredited some of its officers as fellows of the ICD.

FPH is likewise active in the Good Governance Advocates and Practitioners of the Philippines which is composed of a number of companies dedicated towards corporate governance, among other things. It is also a member of the Philippine Association of Publicly-Listed Companies.

ComplianceApart from its own governance initiatives, FPH has sought to be in compliance with legal requirements. It has filed the certificate required by the SEC certifying its compliance, as well as that of its directors, officers and employees, with the Manual. FPH has likewise submitted to the Philippine Stock Exchange (PSE) its responses to the Disclosure Template on Corporate Governance Guidelines for Listed Companies.

GovernanceAwardsIn recognition of its continuing pursuit to enhance shareholder value, FPH has received the platinum award for its performance in the Corporate Governance Scorecard (CGS) administered by ICD. FPH received a gold award for two consecutive years in 2009 and 2008 for garnering the highest ratings (a rating between 95% to 99%) among 169 publicly-listed companies. CGS is jointly conducted with the PSE and SEC.

FPh has consistently advocated that corporate governance is an indispensable component of sound strategic business management ...

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BOARDATTENDANCEThe record of attendance of the Directors in the Board meetings and stockholders’ meetings for the calendar year 2010 is

as follows:

DIRECTORS FEB 4 MAR 4 APR 8 MAY 6 MAY

311

MAY

312

JUN 8 JUL 8 AUG 5 SEP 2 OCT 7 NOV 4 DEC 2

O.M. Lopez √ √ √ √ √ √ √ √ X √ X √ √

F.R. Lopez √ √ √ √ √ √ √ √ √ √ √ √ √

M.M. Lopez √ √ √ √ √ √ √ √ X X X √ √

A.A. Lopez √ √ √ √ √ √ √ √ X √ X √ √

C.B. Bautista √ √ √ √ √ √ √ X √ √ √ √ √

T.Y. Cunanan √ √ X √ √ √ √ √ √ ** ** ** **

A.A. De Guia * * * * * * * * √ √ √ X √

J.P. De Jesus √ √ X √ √ √ √ ** ** ** ** ** **

P.D. Garrucho, Jr. √ √ X √ √ √ √ √ √ √ √ √ √

O.J. Hilado √ √ √ √ √ √ √ √ √ √ √ √ √

E.L. Ibañez √ √ √ √ √ √ √ √ √ √ √ √ √

E.L. Lopez III √ √ √ √ √ √ X X √ √ √ X √

A.V. Panganiban √ √ √ √ √ √ X √ √ √ √ √ √

E.B. Rufino Jr. √ √ X X X X X √ √ √ √ √ √

J.B. Santos √ √ √ √ √ √ X √ √ √ √ √ √

W.Z. Sycip X √ X X √ √ X √ √ √ X √ √

Legend: √ -Present X –Absent * - Not a Board Member Yet **-No Longer a Board Member 1 - Annual Stockholders’ Meeting 2 - Organizational Board Meeting

As stated by its President and COO, Mr. Elpidio L. Ibañez, “This award validates our group’s advocacy to espouse integrity, transparency, and fairness in all our business practices. We are indeed very honored, and would like to thank the ICD for this award.”

The companies reviewed under the Corporate Governance Scorecard were graded based on: (1) rights of shareholders; (2) equitable treatment of shareholders; (3) role of stakeholders; (4) disclosure and transparency; and (5) board responsibilities. ICD was formally established in 2004 and is chiefly made up of individual corporate directors and reputational agents committed to the professional practice of corporate directorship in the Philippines in line with global principles of modern corporate governance.

FPH has consistently advocated that corporate governance is an indispensable component of “sound strategic business management to improve the economic and commercial prosperity of the corporation and enhance shareholder value.”

TheBoardTo this end, the Company endeavors to have a board of directors composed of individuals with proven competence, probity, and integrity. FPH tries to insure that they are provided with the structures and support that will enable them to effectively fulfill their duties.

FPH’s Board of Directors are: Messrs. Oscar M. Lopez (Chairman Emeritus and Chief Strategic Officer), Federico R. Lopez (Chairman and Chief Executive Officer), Manuel M. Lopez (Vice Chairman), Augusto Almeda-Lopez, Elpidio L. Ibañez (President and COO), Peter D. Garrucho, Jr., Oscar J. Hilado, Eugenio Lopez III, Arthur A. De Guia, Washington Z. Sycip, Ernesto B. Rufino, Jr., Juan B. Santos, Cesar B. Bautista, Artemio V. Panganiban, and Francis Giles B. Puno.

StandingCommitteesThe Board has constituted standing committees from among its ranks which exercises the duties and functions provided for in the Manual for Corporate Governance.

The Nomination Election and Governance Committee passes upon the nomination and election of directors as well as oversees the implementation of the Manual. The members of the Committee are as follows: Mr. Oscar M. Lopez as Chair, with Messrs. Federico R. Lopez, Manuel M. Lopez, Oscar J. Hilado, Juan B. Santos, and Washington Z. Sycip, as members. This committee performs a crucial function, as it selects the directors and passes upon their qualifications, seeking to entrust management to those who can “bring prudent judgment to bear on the decision making process.” In addition, it reviews recommendations with respect to governance, the relevant trainings of the Board and Senior Management, as well as the charters of the different committees.

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The Compensation and Remuneration Committee oversees the appropriate corporate rewards system. It is composed of the following: Messrs. Augusto Almeda-Lopez (Chairman), with Washington Z. Sycip and Cesar B. Bautista as members. It seeks to promote a culture that supports enterprise and innovation, with suitable performance-related rewards that help motivate management and the employees to be effective and productive.

The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities for the financial reporting process, the system of internal controls, the maintenance of an effective audit process, and the process for monitoring compliance with laws and regulations. The Audit Committee is composed of six (6) members chaired by Independent Director Mr. Oscar J. Hilado and with the following members: Messrs. Juan B. Santos (Independent Director); Washington Z. Sycip (Independent Director); Manuel M. Lopez; Augusto Almeda-Lopez; and Peter D. Garrucho, Jr.

FPH has an Internal Audit Group (IAG) composed of Certified Public Accountants (CPA), Certified Internal Auditors (CIA), Certified Information Systems Auditor (CISA), among others. The IAG reports to the Board through the Audit Committee. The IAG provides assurance and consulting functions for FPH and its subsidiaries in the areas of internal control, corporate governance, and risk management. It conducts its internal audit activities in accordance with the International Standards for the Professional Practice of Internal Auditing (ISPPIA) under the International Professional Practices Framework (IPPF).

As a company focused on financing and business prospects, FPH has a Finance and Investment Committee composed of Messrs. Federico R. Lopez (Chairman), Elpidio L. Ibañez, Peter D. Garrucho, Jr., Eugenio L. Lopez III, Ernesto B. Rufino, Jr., and Francis Giles B. Puno as members. This committee reviews the investments and financing efforts of the Company, investment objectives and strategies,

fund raising, major capital expenditures, investment opportunities as well as divestments, among other things.

The Company has constituted a Risk Management Committee headed by Mr. Artemio V. Panganiban as Chairman with Messrs. Manuel M. Lopez, Peter D. Garrucho, Jr., Arthur A. De Guia, Ernesto B. Rufino, Jr. and Cesar B. Bautista, as members. This committee is tasked to: (a) oversee the formulation and establishment of an enterprise-wide risk management system; (b) review, analyze, and recommend the policy, framework, strategy, method and/or system of or used by the company to manage risks, threats or liabilities; (c) review with management the corporate performance in the areas of legal risks and crisis management; and (d) review and assess the likelihood and magnitude of the impact of material events on the Company and/or to recommend measures, responses, or solutions to avoid or reduce risks or exposure.

TransparencyandCompliance,ManagementStandardsComplete, prompt, and timely disclosures of material information have been made by the Company to the Exchange and to the SEC for the benefit of the investing public.

The law only requires two (2) independent directors for covered companies. FPH has over the years had and continues to have five (5) such directors and the requirement for independent directors is likewise enshrined in its by-laws. The independent directors are also members of their respective Board committees.

Atty. Enrique I. Quiason has been designated as Compliance Officer and Atty. Rodolfo R. Waga, Jr. as Asst. Compliance Officer, specifically for corporate governance. Both are FPH’s Corporate Secretary and Assistant Corporate Secretary, respectively.

The Corporate Code of Conduct reiterates the values and principles instilled by its founder and carried on by the Company: nationalism, integrity, entrepreneurship and innovation, teamwork, and a strong work ethic.

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FPH likewise implements corporate excellence initiatives both at the parent and subsidiary levels such as ISO certification, Environment, Safety and Health programs, Risk Management, Six Sigma and Knowledge Management, the Oscar M. Lopez Award for Performance Excellence and the Lopez Achievement Award, among others. Last August 16, 2010, it successfully hurdled the requirements of the surveillance audit for its transition to the standards for an integrated management system under ISO 9001:2008. ISO 9001:2008 specifies the requirements for a quality management system.

OtherOfficesThe Board of Trustees of the FPH Retirement Fund which administers the retirement fund of the Company is composed of Mr. Elpidio L. Ibañez as Chairman and Messrs. Francis Giles B. Puno, Arthur A. De Guia, Ms. Perla R. Catahan, and Ms. Elizabeth M. Canlas as members.

The Employee Stock Purchase Plan Board of Administrators which administers the Company’s stock option plan is composed of Mr. Elpidio L. Ibañez as Chairman and Mr. Francis Giles B. Puno and Ms. Perla R. Catahan as members.

TheSevenLopezValuesGroup-wide, the Lopez Credo has likewise been launched. It is a statement of purpose that puts all Lopez Group businesses in the service of the Filipino and articulates the seven Lopez values to guide corporate decisions and operations as well as employees.

The distinct Lopez values are: • A pioneering entrepreneurial spirit • Business excellence • Unity • Nationalism • Social justice • Integrity • Employee welfare and wellness

Board CommitteesExecutiveCommitteeOscar M. Lopez Chairman Federico R. Lopez MemberManuel M. Lopez MemberAugusto Almeda-Lopez Member Elpidio L. Ibañez Member

AuditCommitteeOscar J. Hilado Chairman Manuel M. Lopez Member Augusto Almeda-Lopez Member Peter D. Garrucho, Jr. MemberWashington Z. Sycip MemberJuan B. Santos Member

CompensationandRemunerationCommitteeAugusto Almeda-Lopez Chairman Washington Z. Sycip Member Cesar B. Bautista Member

FinanceandInvestmentCommitteeFederico R. Lopez Chairman Peter D. Garrucho, Jr. Member Eugenio L. Lopez III Member Ernesto B. Rufino, Jr. MemberFrancis Giles B. Puno Member

Nomination,Election,andGovernanceCommitteeOscar M. Lopez Chairman Manuel M. Lopez MemberFederico R. Lopez MemberJuan B. Santos MemberWashington Z. Sycip MemberOscar J. Hilado Member

RiskManagementCommitteeArtemio V. Panganiban ChairmanManuel M. Lopez MemberCesar B. Bautista Member Ernesto B. Rufino, Jr. Member Peter D. Garrucho, Jr. MemberArthur A. De Guia Member

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Business ExcellenceThe need to transform the First Philippine Holdings (FPH) group of companies into globally competitive and sustainable businesses prompted its journey into Business Excellence. It began in 1998 from modest initiatives in environment, safety and health (ESH) that later served as a platform for other programs. The ESH program was based on ISO standards which in turn led to a mandatory requirement for ISO 9001 certification. By 1999, its companies were urged to pursue Integrated Management System certification covering ISO 9001:Quality Management System; ISO 14001:Environmental Management System; and OHSAS 18001:Occupational Health and Safety Management System.

Through these international standards, group companies strengthened their business processes and learned the necessity of continuous improvement. Yet, global competitiveness still looked daunting. Companies journeyed further in search for a broader, more encompassing and rigorous standard for world-class performance, finding it in the Baldrige.

Patterned after the US Malcolm Baldrige National Quality Award, the Oscar M. Lopez Award for Performance Excellence or the “Oscars” was launched in February 2002, as the group’s highest level of recognition for organizations with a mature culture of excellence, as evidenced by role model integrated business systems and sustained positive results that more than satisfy stakeholder requirements. The exacting requirements of the Baldrige framework, adopted as Oscars criteria, cover all aspects of an organization: leadership; strategic planning; customer and market focus; measurement, analysis and knowledge management; workforce focus; process management; and business results.

At the Business Excellence Awards for 2010, engineering and construction company First Balfour was cited for submitting an application to the Oscars Award program. Petroleum pipeline operator First Philippine Industrial Corporation (FPIC) was conferred the Oscar M. Lopez Award for Performance Excellence. It was FPIC’s fourth application with the Oscars, and twice with the Philippine Quality Award, which uses the same Baldrige criteria.

Organizations take an average of five to six years to reach the performance level deserving the Oscars. The Lopez

Achievement Awards or LAA was developed to recognize companies who are in the process of improving their work systems, while at the same time enhancing cross functional alignment. The six categories of the LAA mirror the Baldrige categories. These are: business management, customer focus, operations management, human resource focus, corporate image building, and public responsibility. The LAA is bestowed to outstanding individual and team achievements that contribute to the Group’s business objectives and exemplify its core values.

For the 2009-2010 cycle, six teams were honored with the Lopez Achievement Awards, of which, five are from the FPH Group, as follows:

• Management Team of First Sumiden Circuits, Inc. (FSCI) for “FSCI: Resilient in the Midst of Global Financial Crisis”;

• Mahanagdong Geothermal Power Plant Exciter Team, Energy Development Corporation (EDC) for “EDC’s Fast Track Restoration of its MGPP-2 Exciter”;

• Operations Team, First Philec Solar Corporation for “Braving the Uncharted Territory: In Pursuit of Global Leadership in PhotoVoltaic Industry”;

• Bacon Manito Geothermal Production Field Labor Management Council, EDC for “The Labor Management Council as Tool for Lasting Industrial Peace in the Workplace”; and

• Management Coordinating Council, First Philippine Industrial Corporation for “The Golden Transformation to Achieve Profitability and Superior Performance.”

To further enhance competitiveness programs in 2010, four learning sessions introduced the Balanced Scorecard (BSc) to group executives and functional managers. This may pave the way to another full-blown excellence program or as a systematic approach in strategy deployment as defined in Baldrige. BSc measures an organization’s performance in four integrated strategic perspectives: financial; customer satisfaction; internal capability; and learning and growth.

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Two other executive learning sessions were on Investors-in-People (IiP), in collaboration with Group HR and the People Management Association of the Philippines. IiP is the emerging international standard on people management leading to improvement in business performance.

To cap Business Excellence highlights for 2010, Lopez Group Business Excellence, through FPH’s membership in the Philippine Business for the Environment, served as the convenor of the Clean Fleet Cluster of the Philippine Imperative on Climate Change, in collaboration with the Asian Development Bank-funded Clean Air Initiative for Asian Cities.

Lopez Group Business Excellence was conferred the Philippine Quill Award of Merit by the local chapter of the International Association of Business Communicators, for its effective and efficient deployment of internal communications strategies for its advocacy in process improvement, business competitiveness, and performance excellence.

IntegratedManagementSystemIn 2010, FPH tested the efficacy of its Integrated Management System (IMS) by hurdling two audits. First was the IMS Surveillance Audit, on March 2, 2010, which focused on the effectiveness of its Quality and Environmental, Occupational Health and Safety Management Systems assimilated under its IMS. Second was the transition to the new standard of ISO 9001:2008 Quality Management System (QMS), on August 16, 2010, which reflected the Company’s responsiveness to its changing business and customer requirements.

The standards embedded in the IMS influence a way of life, an attitude that each officer and staff member of FPH has to imbibe and live, as the Company continues its search of opportunities for improvement. It is a united journey to become a world-class company.

RiskManagementAs part of enhancing corporate governance, the First Philippine Holdings Corporation Board of Directors formed a Risk Management Committee (RMC) in late 2007, initially composed of independent directors, former Chief Justice Artemio V. Panganiban, Ambassador Cesar B. Bautista and another director, Ernesto B. Rufino, Jr. The RMC was initially tasked to evaluate the manner in which risks were being assessed and managed by the corporation. Chaired by the former Chief Justice, the FPH’s RMC is supported by a team composed of the FPH Enterprise Risk Management (ERM) champion Benjamin K. Liboro, RMC secretariat Atty. Rodolfo R. Waga, and ERM coordinator Ronaldo C. Sabella. In late 2010, three other directors joined the RMC namely, Ambassador Manuel M. Lopez, Peter D. Garrucho, and Dr. Arthur A. De Guia. The addition of these new members augmented the RMC’s capabilities to assess the emerging risks in the fields currently pursued by the FPH in areas of power generation, manufacturing (electronics, electrical and solar power), and property.

EnterpriseRiskManagement(ERM)FrameworkFPH’s ERM efforts, started six years ago, coordinate efforts both at the operating and holding company levels in managing business operating risks, and in exploiting opportunities derived from managing these risks well.

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A staple activity in the Company’s planning and review sessions, sector holding and operating companies now report their top 10 risks and mitigating strategies during the yearly one-on-one sessions with the Executive Committee (ExCom), in the Annual Lopez Group Budget Conference and during the Mid-year Review Sessions. Strategy implementation monitorings are tackled during monthly board meetings, bi-monthly CEO meetings, and also through informal sessions called “strategic conversations” with members of the ExCom. In addition, calibration meetings called “strategic discussions” with the Board of Directors are also done yearly. Here, discussion about the company’s key result areas and five-year plans are deliberated by both the functional heads and the Board of Directors, before cascading them to the rest of the organization. In 2011, FPH Chairman Federico R. Lopez introduced a forum called “Strategy and Synergies Discussions” with the various sector and subsidiaries heads to fully explore synergies, and harmonize these synergies across the different operating companies in executing their respective goals and strategies.

On the RMC level, one-on-one sessions with the various FPH sectors and subsidiaries are also conducted to give sector and subsidiary risk management champions the opportunity to solicit feedback on their risk strategies from RMC members, who have both extensive knowledge and experience from their respective stints in the government and private sectors. An output of this exercise is the risk map of the FPH portfolio. The RMC also conducts special sessions in order to validate the approaches and methods the Company will adopt in addressing specific operational risks or issues.

Another component of the FPH’s ERM system is its Environment, Safety and Health (ESH) Management Systems certified under ISO 14001 and 18001. Through

its ESH system, the corporation was able to respond properly to safety and health-related risk events like the AH1N1 pandemic and the devastating effects brought about by Typhoon Ondoy where in the latter, response and relief operations were conducted to help employees and their respective families. FPH obtained its Integrated Management System (IMS) Certificate for its Quality, Environment, Safety and Health (QESH) System in February 2009.

ContinualImprovementoftheFirstPhilippineHoldingsERMFrameworkandSystemAs further enhancement of the Company ERM Framework and Systems, the RMC spearheaded an initiative for an ERM system rollout at FPH, tapping SGV as consultant. This initiative, which started in 2010, will equip risk owners and the Executive Risk Management Unit (ERMU) composed of the corporate group heads with the necessary tools to enhance their existing controls, policies, procedures and systems to better manage the Company’s risks. The SGV ERM methodology, patterned after the COSO (Committee of Sponsoring Organizations of the Treadway Commission) and ISO (International Organization for Standardization) standards, has been adopted by most of the FPH group companies. FPH expects to complete this initiative in the first half of 2011. Consistent with its adherence to world-class standards, and as part of its continual improvement, the Company is also looking at aligning its ERM approach with the recently established ISO 31000 (Risk Management Standards) and ISO 31010 (Risk Assessment Techniques), as well as other globally accepted standards on business continuity and crisis management. Currently, the Lopez Group is eyeing the formation of a group-wide crisis management team to be championed by Rafael Alunan III. All these efforts to improve are consistent with the Company’s goal of attaining competitiveness and corporate resiliency.

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KNOWLEDGEMANAGEMENT

TalentManagementFirst Philippine Holdings (FPH) strongly believes that putting the right people in the right place at the right time is a key ingredient in managing business complexities. It takes a deliberate process that is anchored on the Company’s vision, mission and values, as well as its strategic directions. Hence, the adoption by the Company of Talent Management and Competency-based Human Resource (HR) Systems in managing its human resources focusing on specific HR programs such as career management, succession management, and performance management, among others. These are all meant to reinforce and ensure excellence in the attraction, development, and retention of great talents. After all, great talents are what separate high-performing organizations or “stand-outs’” from the rest.

Talent Management starts from employee attraction and selection. Those who are equipped with the required job competencies, who show strong potential for growth and whose personal values are aligned with the corporate values, are given priority in the selection process. The Company recognizes that empowering and providing talents with opportunities for growth and development, and providing them with an equitable compensation and benefits package are critical for employee retention. Talents are given deliberate exposure to real-life scenarios by deploying them to the group’s various operating subsidiaries.

FPH continues to build and develop its leadership pipeline. High potential employees are sent to the Asian Institute of Management (AIM) for an Executive Masters in Business Administration (EMBA) program. It also provides programs such as Coaching for High Performance, values formation, project management, among others. The Company likewise levels up on its various functional and technical capabilities by encouraging and supporting high potential employees to pursue specialized training programs and

certifications, such as Certified Internal Auditor, Certified Information Systems Auditor, Certified Financial Analyst, Certified Management Accountant, Certificate in Human Resource Management, Mandatory Continuing Legal Education and Financial Modeling.

The Company has established the groundwork for both the Career Management and the Performance Management System (PMS). These include defining the core competency framework, updating and refining the job profiles which cover job roles and responsibilities, core competencies and functional/technical competencies, and the required competency levels.

HR Management Group is now ready to assess the employees’ career goals and objectives, career aspirations, and competency levels. Expected deliverable at the end of the project is a career path or roadmap per position, which also defines the competencies, experience, and training requirements.

The PMS project is now in the final phase. This includes building PMS-related skills across levels, i.e., goal-setting process, rating orientation, coaching and giving performance feedback; creating the communication strategy; and integrating competencies and the Lopez values in the appraisal form.

The Company has also defined its Succession Management framework, identified the critical roles in the organization, and defined its talent management strategy and the succession pool eligibility criteria, using current company practice, market practice and company aspirations as bases. Success profiles were also developed for each critical role. Candidates have been identified for each critical role and will go through assessment to identify current strengths and areas of growth, and will continuously be developed until such time that an appropriate role for them becomes available.

The need to transform the First Philippine holdings group of companies

into globally competitive and sustainable businesses prompted its

journey into Business Excellence.

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COrPOrATE SOCiAL rESPONSiBiLiTy ANd giviNg

For First Philippine Holdings (FPH), corporate social responsibility (CSR) is a way of life. It is a defining characteristic of the Company and its employees, believing that engaging the community empowers people and helps uplift the nation’s quality of life.

FPH’s CSR and corporate giving activities are linked to the United Nations Millennium Development goals particularly on education, environment, health, and poverty alleviation.

EDUCATIONANDCULTUREFPH puts a premium on giving the gift of knowledge and nurturing the seeds of culture by supporting programs aligned with these advocacies.

TheAsianInstituteofManagement(AIM).In keeping with its commitment to promoting higher education in the country, FPH donated funds for the Lopez Group Foundation Inc.’s (LGFI) renovation of AIM’s case rooms. The case rooms were named after Lopez Holdings Corporation, ABS-CBN, and First Philippine Holdings. Also renovated were the Alumni Relations Office, the Student Services Admissions and Registration Office, and the lobby among others. The AIM building was donated by the Eugenio Lopez Foundation in 1968. At that time, it was considered the single biggest donation made by private business to an educational institution. More than 40 years later, the Lopez Group, reaffirmed their strong support to AIM through the donation.

TheOut-of-SchoolYouthandMatureLearners(OML)InstituteforAlternativeLearning.To help address the growing problem of illiteracy among Filipinos, FPH supported Knowledge Channel Foundation, Inc. in establishing the OML Institute for Alternative Learning, an initiative that provides access to quality education through media. This initiative is in partnership with the Department of Education’s Bureau of Alternative Learning System and the ABS-CBN Bayan Academy for Social Entrepreneurship and Human Resource Development. The institute aims

AIM inauguration of renovated spaces

Lopez Museum’s ‘Unfolding: Half a Century’

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to nurture its beneficiaries as productive members of the society through gainful employment or as entrepreneurs.

Undaunted:TheLopezLegacy. LGFI also published the Anvil award-winning coffee-table book Undaunted in cooperation with FPH. Undaunted is the visual chronicle of the Lopez Group’s resilience. It is a testament to what makes the family and its businesses continue to live—the belief in certain basic values and principles that guide its existence beyond mere bottom-line results.

Unfolding:HalfACentury. FPH supported the publishing of the book Unfolding, a book chronicling 50 years of the Lopez Memorial Museum and Library. Unfolding contains chapters on the history of the museum, the rare and important works in the library, and the new directions envisioned for the museum. It represents what the Eugenio Lopez Foundation is today and shares its most important tenets: to preserve its collections and make them accessible, engaging and relevant for future generations.

ENVIRONMENTAligned with its advocacy on environmental stewardship, FPH continues to support the work of First Philippine Conservation, Inc. (FPCI) in protecting Philippine biodiversity. In 2010, FPCI continued streamlining its operations and pragmatic work, focusing on what it does best.

CoastalResourceConservation. Strengthening the Capacity of Resource Managers to Protect and Conserve Marine Biodiversity with the German Technical Cooperation (GTZ).

Under this project, a book entitled Red List Status of Marine Endemic Teleosts (Bony Fishes) of the Philippines was launched and distributed to relevant government agencies, schools, and other non-governmental organizations. The Red List is a worldwide initiative to provide taxonomic, conservation status, and distribution information on

taxa that are facing a high risk of global extinction. The book contains information on the conservation status of 29 endemic marine fishes, many of which were last recorded 30-100 years ago. It also contains a section on management and policy actions to address the conservation needs of endemic marine fishes.

Global Marine Species Assessment (GMSA) funded by the Foundation for Philippine Environment (FPE). This year, more than 500 marine species were entered into the International Union for Conservation of Nature (IUCN)database for the Red List Process, which would undergo extensive analysis and validation. Once done, the marine species will be categorized accordingly. This exercise helped identify 150 potential endemic species in the Philippines.

The project was able to push the institutionalization of the use of the IUCN Criteria and Categories in the Department of Agriculture–Bureau of Fisheries and Aquatic Resources (DA-BFAR) through the latter’s Implementing Rules and Regulations (IRR) of the Wildlife Protection and Conservation Act.

FPCI also trained 12 Filipino coastal resource management practitioners on the Red List Assessment, with local and international experts who served as mentors to the group. The experts also assessed three marine species groups: Acanthuridae, Tripterygiidae, and Clinidae. The value of

41


Calauan. In this project where informal settlers are relocated to Barangay Dayap in Calauan, Laguna to reduce overall risk posed by future typhoons in the metropolis. To date, 4,897 more families from Estero de Paco have been relocated. Another 10,000 families are expected to be moved from Pasig River and other major tributary rivers.

The LGFI coordinated with FPH in the rehabilitation of a school later named Oscar M. Lopez Dayap Elementary School and donated funds for the construction of the school’s basketball center. Subsidiary First Gen sponsored construction of various class rooms and a canteen.

Its construction arm First Balfour, took charge of rehabilitating the school buildings, construction of basketball court, and the design and building of two Livelihood and Training Centers. Rockwell Land is handling design and construction for the 500-seat Chapel of Two Hearts, and Lopez Group company Adtel provided solar lighting for a number of streets in the site.

CORPORATEPROGRAMSEmployeeWellnessProgram.The Company’s award winning flagship program, Employee Wellness, is now on its 12th year. The program was recognized in the Asian CSR Forum as one of the best CSR in the workplace programs. The program ensures that FPH employees are able to lead a well-balanced life as the Company continues to provide holistic wellness activities. These cover the physical, mental, emotional, and spiritual aspects of life. Wellness courses, learning sessions, and various fitness and sports activities are regularly offered to all employees.

the Red List Assessment lies on the fact that it highlights taxonomic groups and regions under particular threat.

The data gathered is the most up-to-date information available on each species, and the expert participants contribute relevant information on each species assessed. Without it, the on-the-ground knowledge collected would be near impossible to obtain. Thus, sound and important decisions can be made, e.g., the designation of Marine Protected Areas (MPAs). The trainees found the training useful in line with their work. Moreover, they saw the relevance of their work in the global context of marine species conservation, particularly on data integration, identifying data gaps, and influencing decision making in terms of coastal conservation efforts.

To date, FPCI has completed a manuscript on another publication of the Red List status of an additional 30 species of fish.

ForestRestoration.FPCI has completed the biophysical and socio-economic surveys of five forest restoration sites in Luzon and the Visayas that could serve as pilot sites for the joint collaboration with Energy Development Corp. (EDC) and the Philippine Native Plant Conservation Society Inc. headed by (the late) prominent botanist Mr. Leonard Co.

DISASTERRELIEFANDREHABILITATION/POVERTYALLEVATIONBayaniJuansaCalauan. FPH increased its participation in the clearing of Pasig River tributaries through active support of ABS-CBN Foundation Inc.’s BayaniJuan sa

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Employee volunteerism, one of the Company’s employee engagement programs, is anchored on the Lopez values of social justice, nationalism, and concern for employee wellness and welfare.

EMPLOYEEVOLUNTEERISMEmployee Volunteerism, one of the Company’s employee engagement programs, is anchored on the Lopez values of social justice, nationalism, and concern for employee wellness and welfare. The program allows employees to share their time, talent, and resources to help improve the quality of life of needy Filipinos including victims of calamities, protect the environment, and provide educational assistance, among others.

Treeplanting.Employees planted trees of rare species at the Oscar M. Lopez (OML) Binhi Tree Park in the BayaniJuan resettlement. Energy Development Corporation (EDC) established the Binhi Tree Park, a 1,000-square-meter lot planted with 80 species of 14 endangered and premium native species. The park is part of EDC’s Binhi program, a greening legacy program which aims to rescue and secure the gene pool of the country’s endangered premium trees by planting and growing seedlings into so called mother trees in school grounds, public parks, and safe havens. Volunteers also planted mahogany saplings at the Eugenio Lopez Center in Antipolo City.

Provisionofmedicalanddentalcare.For the last seven years, the Company has been maintaining medical and dental clinics in Paliparan, Dasmariñas and General Trias in Cavite, providing medical and dental care to the Alay Kapwa Christian Community and neighboring communities.

PhilippineBusinessforSocialProgress(PBSP).The Company continues to partner with PBSP through its active involvement in the Luzon and Membership Committees.

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POWERGENERATION

Delivering reliable, renewable, and clean energy for the country

2010AnnualReport

FIRSTGENCORPORATION(FIRSTGEN)First Gen remains the country’s leading clean and renewable energy producer with power plants that use geothermal, hydro, and natural gas for fuel. At the end of 2010, the total installed capacity stood at 2,832.6 MW, or 18.2% of the country’s total installed capacity. The year 2010 marked First Gen’s continued growth as its assets provided strong and steady operational results complemented by a successful financial deleveraging program. First Gen reported a sharply higher attributable net income to parent of US$70.2 million for 2010, up by 319% from US$16.7 million posted last year. First Gen’s consolidated revenues likewise jumped by US$222.2 million, or 22% to US$1.2 billion in 2010 from last year’s US$1.0 billion. “The substantial increase in earnings was driven by the strong operating performance of the First Gas group, First Gen Hydro Power Corporation (FG Hydro) and Energy Development Corporation (EDC). These developments were complemented by the positive effects of the Company’s deleveraging program,” First Gen President Francis Giles B. Puno said.

The reliable dispatch of First Gas’ 1,000-MW Santa Rita and the 500-MW San Lorenzo natural gas-fired power plants was the main contributor for the increase in revenues from the sale of electricity by US$159.2 million, or 16% to US$1.2 billion in 2010 from US$1.0 billion in 2009. The higher revenues were offset by corresponding increases in the cost of natural gas and higher operations and maintenance fees paid to Siemens Power Operations, Inc. For 2010, the First Gas plants delivered stable earnings of US$130.1 million. There was also a notable increase in equity in net earnings from associates EDC and FG Hydro in 2010. EDC, the country’s largest operator of geothermal-fired power plants, provided higher earnings to First Gen of US$52.5 million in 2010, up by US$21.5 million, compared to US$31.0 million in the previous year. This improvement resulted from the full year effect of the operation of the 192.5-MW Palinpinon and 112-MW Tongonan geothermal power plants, EDC’s receipt of VAT Tax Credit Certificates and its lower deferred taxes. The improvement in earnings was partially offset by the impairment booked for EDC’s 49-MW Northern Negros geothermal power plant and lower revenues from EDC’s Unified Leyte geothermal power plant complex.

The year 2010 marked First gen Corporation’s continued growth as its assets provided

strong and steady operational results complemented by a successful financial

deleveraging program.

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FG Hydro’s income went up by US$8.4 million from US$1.5 million in 2009 to US$9.9 million in 2010. This increase was due to better prices in the Wholesale Electricity Spot Market and higher dispatch of the hydro plants. MILESTONES In May 2010, Bacman Geothermal, Inc. (BGI), a wholly owned subsidiary of EDC, won the bidding for the 150-MW Bacon-Manito geothermal power plants in Bicol. With the Bacman acquisition, EDC achieved full integration—from steam to power generation—in its geothermal production fields. Also in 2010, FG Hydro completed an enhancement and rehabilitation project to increase the installed capacity of the Pantabangan hydroelectric plant by 20 MW. The Pantabangan hydro plant originally consisted of two 50-MW generating units, excluding the downstream Masiway facility, which consists of a single 12-MW generating unit. The contract for the enhancement work was signed in January 2008, and site work for the first unit to boost Pantabangan’s capacity by 10 MW was completed in December 2009. The completion of the second phase added another 10 MW to Pantabangan’s capacity bringing the total capacity of the Pantabangan-Masiway complex to 132 MW. In July 2010, Bauang Private Power Corporation turned over its 225-MW diesel bunker-fired power plant in Bauang, La Union, to National Power Corporation / Power Sector Assets and Liabilities Management Corporation following the expiration of the 15-year cooperation period covering the project.

FRANCISGILESB.PUNOPresidentandChiefOperatingOfficerFirst Gen has a track record in natural gas, geothermal, and hydroelectric energy development on which to anchor its foray into new horizons. Focused on clean, green and renewable energy, First Gen pursues wind and solar projects and braves the international arena purposely seeking ventures that require its expertise in power asset management.

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2010AnnualReport

First Gen took additional steps in 2010 to further boost the Company’s capital base and support its investment program, capital requirements and growth initiatives. First Gen raised P14.997 billion in equity by offering to stockholders 2.14 billion shares through a rights offer which was conducted and completed in January 2010. In May 2010, First Gen signed a P3.75-billion 5-year Facility Agreement with the Banco de Oro group. In September 2010, First Gen signed a US$142-million, 6- and 7-year syndicated term loan that was arranged by BDO Capital and Investment Corporation (BDO Capital) with a bank consortium. In December 2010, First Gen signed a US$100-million Notes Facility Agreement with Banco de Oro Unibank, Inc., with BDO Capital also as the arranger. CSR/AWARDSFirst Gen, on its own or through subsidiaries, continues to implement corporate social responsibility (CSR) and community relations projects in an effort to develop and improve the quality of life of host-communities and promote their level of self-reliance.

Likewise, as part of its commitment to enhance and protect the environment, First Gas has committed to support the Centennial Tree Planting Program of the Archdiocese of Lipa

which covers the whole Batangas Province by supplying 20,000 seedlings per year for five years. A Memorandum of Understanding (MOU) was signed among the Provincial Government of Batangas, First Gas, and Department of Environment and Natural Resources (DENR). In recognition of First Gas efforts to protect and enhance the environment, First Gas bagged the Silver Award for the Best Environmental Company of the Year when Asian Power Magazine held the Asian Power Awards 2010 in November 2010 at the Ritz Carlton Hotel in Singapore. Asian Power, a leading trade publication in the region, holds the Asian Power Awards to recognize independent power producers in Asia for their outstanding performances and contributions to the power sector. A total of 54 entries competed for the 10 categories of the Asian Power Awards in 2010. First Gen also received an Award of Excellence for its 2009 Annual Report “More with Less” as well as an Award of Merit for a special feature story “Making a Difference” in its annual report during the 2010 Philippine Quill Awards of the International Association of Business Communicators (IABC). The prestigious annual awarding ceremony is being held by the IABC to recognize outstanding corporate communication programs and tools.

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POWERDISTRIBUTION

Attaining sterling operational performance

2010AnnualReport

The volume of energy sold grew by an unprecedented 10% to 30,247 gWh and

the record 3% increase in number of billed customers now stands at P4.8 million.

election spending in the first half of 2010, business expansion within the franchise area throughout 2010 and the record 3% increase in the number of billed customers, which now stands at P4.8 million. Marked savings in financing charges were generated as favorable financial markets ushered significantly lower interest rates and most of Meralco’s long-term debt was refinanced at reduced rates. The company has negligible foreign exchange exposure.

The company’s liquidity position has never been stronger. Total cash as at December 31, 2010 was P24.4 billion, 43% higher than in 2009. Current ratio was at 1.26:1.0 while net cash was negative P3.1 billion. Meralco has intensified its collection activities, realizing notable improvement in days-sales outstanding from 29 days to 24 days in 2010, despite the much higher pass-through generation and transmission costs.

MANILAELECTRICCOMPANY(MERALCO)Meralco ended 2010 with record results. Consolidated revenues amounted to P245.5 billion while consolidated net income attributable to the parent of Meralco amounted to P9.7 billion, 33% and 61% higher compared with the amounts delivered in 2009, respectively.

The robust financial results stem from record energy sales volumes, operational performance and the delayed implementation of the distribution rate adjustment for the 3rd Regulatory Year (July 1, 2009–June 30, 2010) of the 2nd Regulatory Period (4 years ending June 30, 2011). Consolidated revenues reflect the significantly higher pass-through power purchase charge.

The volume of energy sold grew by an unprecedented 10% to 30,247 GWh as a result of the unusually high temperatures, higher consumption brought about by

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In recognition of Meralco’s exceptional performance, Standard & Poor’s upgraded its credit rating to ‘B+’ with ‘stable’ outlook to reflect the significant and sustained improvement in its financial risk profile arising from stronger electricity sales and improved tariffs. Earnings per share was P8.59. In February 2010, the company implemented a dividend pay-out policy where the regular cash dividend is set at 50% of audited Core Net Income, which may be supplemented by a special dividend determined on a ‘look-back’ basis. In 2010, the company declared total cash dividends of P6.45 per share, equivalent to 60% of Core Net Earnings.

Total capital expenditures in 2010 amounted to P10.1 billion, with electric capital projects committed for the 2nd Regulatory Period accounting for 51% of the total amount spent for the year. The major capital projects include the development of substations, construction of the NAIA 115 kV-line, replacement of substation power transformers and relocation of sub-transmission and distribution facilities to pave the way for the construction of major government infrastructure.

The company continues to reap the benefits of its System Loss Management Program. The 12-month moving average system loss as at December 31, 2010 was 7.94%, remarkably lower than the 8.5%-cap imposed by the Energy Regulatory Commission beginning January 2010. This marks the third consecutive year where system loss

is below the cap, resulting in lower system loss charge to consumers. The cumulative savings to customers was P2.9 billion or P3.4 centavos per kWh from 2008 to 2010. The steady improvement in Meralco’s system loss is attributable to the institutionalization of loss-reduction activities, improved pilferage management, and the effort to expand its partnership with local government units within the franchise area. In addition, the continued growth of energy sales particularly those taken at primary voltage levels, and the steady decline of the losses attributed to informal settlers due to the resettlement programs implemented by the government have also contributed significantly to system loss management. Actual system loss charge of Clark Electric Distribution Corporation, Meralco’s distribution subsidiary is at 3.81% as at end-2010.

System reliability and availability performance are major service priorities of Meralco. The number or frequency of interruptions and cumulative interruption time has improved to record low rates. Unplanned interruption was also reduced to levels lower than in 2009. These are largely due to efficient preventive maintenance procedures to address system reliability performance issues. Customers continue to benefit from speedy power restoration through the use of distribution automation for prompt detection and isolation of line troubles.

Part of the future for Meralco will be its re-entry into power generation to help address the anticipated power

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2010AnnualReport

MANUELM.LOPEZCHAIRMAN

Meralco braves new horizons in attaining sterling operational performance with record-setting technical accomplishments such as lower system loss, lower interruption frequency rate and lower cumulative interruption time, all with the end of providing superior customer care and becoming the preferred service provider of industrial, commercial, and residential customers alike.

increase application before moving to Performance-Based Regulation (PBR). Its application was filed in September 2010.

The island of Panay was hit by daily brownouts last year owing to the tight supply. PECO is looking forward to the full commercial operations of Panay Electric Development Corporation’s coal-fired power plant in May 2011.

supply deficiency issue. The generation portfolio consists of baseload, mid-merit, and peaking plants of various fuel sources. Likewise, the company seeks to further improve customer satisfaction and convenience with its innovative products and services.

Meralco was awarded for “Best Investor Relations” in the Philippines at the 1st Asian Excellence Recognition Awards of Corporate Governance Asia based on the results of a regional survey conducted between August and December 2010 among investors in Asia.

AWARDSAlso, in 2010, Meralco was recognized in the Platts Top 250 Global Energy Company Rankings. The ranking measures a company’s financial performance using asset worth, revenues, profits and return on investment capital. Meralco ranked 215th globally, 59th in Asia, and 5th in the Philippines.

ENHANCEDCORPORATESOCIALRESPONSIBILITYMeralco renewed its Corporate Social Responsibility framework along four pillars: Rural/Missionary Electrification, Grassroot Partnership, Sports and Youth Advocacy, and Disaster Relief and Emergency Preparedness. The programs and initiatives are designed to bolster Meralco’s commitment to its customers, community, and country.

PANAYELECTRICCOMPANY(PECO)PECO is one of the oldest private electricity distribution utilities in the Philippines, having been established in 1951, and remains to be the only private electricity distributor in the island of Panay.

In 2010, the company posted a net income of P321.6 million, higher by 5% over that of the previous year’s net income of P307.5 million largely due to increase in income from interest—from P2.5 million last year to P168.0 million this period.

Revenue on sale of energy went up by 18% because of the 6% increase in kilowatt-hour sales combined with the increase by over 30% in average bunker fuel prices over last year. Operating income contracted by 2% as the increase in cost of sales and operations outweighed the increase inrevenues.

PECO is still waiting for the Energy Regulatory Commission’s decision on its last Return on Rate Base (RORB) rate


MANUFACTURING

Ensuring a culture of excellence, discipline, and accountability

2010AnnualReport

FPSC has grown impressively since its inception, ramping its production facilities

to full capacity two years ahead of its original business plan in order to respond to the rising

global demand for solar energy.

FIRSTPHILIPPINEELECTRICCORPORATION(FIRSTPHILEC)The year 2010 witnessed the ability of First Philec to compete in the global arena as it continued to grow its investments in the solar/photovoltaic (PV) industry and enhance the strategic position of its more mature businesses. Net income attributable to parent grew threefold from P55 million in 2009 to P160 million in 2010. Total managed revenues for 2010 were at P9.6 billion, better by 13% from the previous year’s revenues of P8.5 billion, despite the negative effects of foreign exchange fluctuations.

In mid-2008, First Philec, the intermediate holding company for the manufacturing businesses of First Philippine Holdings, expanded its portfolio when it ventured into the PV space. It made its initial investment in First Philec Solar Corporation (FPSC) through a joint venture with SunPower Corporation, an established technology leader in the industry. FPSC manufactures silicon wafers that form the core in the production of high-efficiency solar cells and panels. Located in Batangas, FPSC has grown impressively since its inception, ramping its production facilities to full capacity two years ahead of its original business

plan in order to respond to the rising global demand for solar energy. In December 2010, FPSC inaugurated its second production facility to house the additional highly automated machines that would bring capacity to 240 million wafers a year, capable of supporting approximately 720 MW of solar energy.

A PV Technology Center was set up in 2010 to further enhance the sector’s competitiveness. Alliances with foreign research institutes are being developed to gain access to cutting edge technology. At FPSC, process improvements are being undertaken to continuously bring down the cost per wafer, and to increase the value proposition of the company to its customers. All these contributed to FPSC’s capturing the majority of its primary customer’s wafer demands and to its developing additional third party customers.

FPSC is the first company in First Philec’s newly established PV Sector. In 2010, another company was established to cater to the downstream segment of the PV value chain. First Philec Solar Solutions (FPSS) was incorporated in June 2010 to focus on the “end of line” applications on both the utility and commercial scale photovoltaic systems. It

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successfully completed its first commercial scale solar photovoltaic installation that is expected to generate up to 200 peak kilowatts with the expansion plans. Several projects are in the pipeline awaiting the feed-in-tariff implementation in the country. FPSS is First Philec’s vehicle for the power generation business.

In December 2010, First Philec, through First PV Ventures, entered into another joint venture agreement with Nexolon Corporation, the leading manufacturer of solar wafers in Korea. First Philec Nexolon Corporation will be a 400-MW wafer-slicing facility in the Philippines. Operations are expected to commence in the last quarter of 2011, with full ramp up the following year. This brings the total wafer-slicing capacity of First Philec to 1.1 GW. Estimated project cost is around US$100 million.

Leveraging on its partnership with SunPower and Nexolon, First Philec’s prospects to create the first and the biggest Filipino solar company shines brighter. It will continue to actively explore opportunities in the PV value chain, specifically focusing on integrating upward to ingot growing and gearing for an overseas venture.

The other leg of the manufacturing portfolio of First Philec is the Electrical Utilities Sector which is engaged in the manufacture of products and packaging of

solutions for the electrical transmission and distribution industry. Philippine Electric Corporation (Philec) has been manufacturing transformers since 1969. The recognized industry leader pioneered the manufacture of amorphous transformers in Southeast Asia. These transformers are the most efficient products in their class. First Electro Dynamics Corporation (FEDCOR) complements the operations of Philec through the production and services for transformers and distribution line equipment. First Philippine Power Systems, Inc. (FPPS) supplies dry-type transformers for uninterrupted power supply units of American Power Conversion, a major global original equipment manufacturer. First Philec Manufacturing Technologies Corporation (FPMTC) currently serves as an incubation company that constantly develops new products and product lines for the sector. It is the only local producer of amorphous core in the country. This development was in response to distribution utilities’ desire to reduce their system losses and to improve operating cost through energy savings.

The Electrical Utilities Sector has been operating in a mature industry. Year 2010 was considered pivotal in gearing the company toward entering potential growth markets. Significant steps were undertaken to rationalize operations and processes, aiming to maintain leadership in current markets and break new ground as opportunities

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open up with the growth of the renewable energy industry and the substation markets in the Philippines. Similar to the PV Sector, strategic alliances are in the development stage to further enhance the sector’s competitiveness not just locally, but within the Southeast Asian region.

First Philec’s manufacturing plants have integrated quality management systems (IMS) which ensure a culture of excellence, discipline, and accountability. In addition to being IMS certified, FPSC was also the first Filipino private entity to be awarded the Palladium Hall of Fame for Strategy Execution.

With a mandate to grow manufacturing into a core business of First Philippine Holdings in the medium term, First Philec will continue with its three-pronged strategy of enhancing the profitability of its businesses, growing its revenue base and establishing a culture of excellence across the organization. With its existing businesses, First Philec estimates revenues to grow to P20 billion and net income to P1.5 billion within the next five years. To fuel further growth, First Philec plans to go for an initial public offering of its shares in the near term. As the organization grows, First Philec will ensure that strategic initiatives are in place to build a lasting and globally-competitive organization.

Arthur De GuiA PresiDentFirst Philec’s continued growth will be fueled by the profitable operations of our existing businesses and our entry into new product and geographical markets. Our goal is to become a recognized global player particularly in the photovoltaics industry; our achievements, thus far, prove that the Filipino has what it takes to compete in this arena. Indeed, working as one, the First Philec team will be unrelenting in enhancing our organization, processes and systems to ensure that we remain globally competitive. Our entrepreneurial spirit, coupled with our passion for excellence and continuous learning, will be our key ingredients to success as we brave new horizons.

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PROPERTYBreaker

PROPERTY

Setting the standard of quality

2010AnnualReport

ROCKWELLLANDCORPORATION(ROCKWELLLAND)Rockwell Land formally launched in early 2010 the latest addition to its Rockwell Center community, the Edades Tower and Garden Villas. This iconic 50-storey residential condominium project offered another first to the market—the Garden Villas, an exclusive landscaped cluster of premier loft apartments that complement the contemporary architecture of the main residential tower. Market reception has been very positive, resulting in a more than 50% sales take-up as of December 2010. Substructure works started in August, and construction is already at the basement 1 level as of end-2010.

Year 2010 marked another milestone with the start of handover of its 7th residential project in Rockwell Center, The Number One Rockwell. The Rockwell Center community welcomed the first unit owners who took delivery of the 817-unit East Tower in November. The 460-unit West Tower will start delivery in October 2011.

The Grove, Rockwell Land’s first residential development project outside Makati which is changing the C5 area

landscape, is now in full swing of construction for its first two towers. Superstructure works started in July 2010 and is expected to be completed by July 2012. With Towers A and B almost fully sold, selling efforts are now focused on the third and fourth tower. The project continues to attract more clients who want to make The Grove their home.

The Rockwell Business Center (RBC), the company’s joint-venture office project in Ortigas, currently houses more than a dozen corporate offices and is now down to the last few floors for lease. More people have also discovered its retail experience, now adding more food and beverage and services selections to the area.

The Power Plant Mall also performed very well in 2010. New stores such as Muji, Payless Shoesource, Chili’s, Fred Perry, and The Spa added new choices to the mall’s discriminating clientele. Renovated facilities such as the restrooms and the car park area, as well as the introduction of two new 3D cinemas also enhanced the mall experience. These factors drove tenant sales performance to new levels across categories.

Both revenue from condominium projects as well as recurring income

from the Power Plant Mall experienced double-digit growth rates.

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Revenues for 2010 reached P4.9 billion, a 23% increase on the previous year’s. Both revenue from condominium projects as well as recurring income from the Power Plant Mall experienced double-digit growth rates. This resulted in a record high net income after tax of P801.3 million, representing a 26% year-on-year growth. Financial condition remains sound with a current ratio of 1.6x and a net debt to equity ratio of 0.4x. This places Rockwell Land in a very good position to launch new projects in key locations in Metro Manila in the medium term. Be it a big community project or a small, quick turn-around project, these projects will carry that standard of quality that Rockwell Land is known for.

FIRSTPHILIPPINEINDUSTRIALPARK,INC.(FPIP)First Philippine Industrial Park, Inc. (FPIP) generated revenues of P873.4 million in 2010 versus P1.2 billion in 2009. FPIP’s revenue performance resulted in a 2010 net income of P312.3 million compared to P726.5 million the previous year. It was the second consecutive year of unprecedented performance in the history of the company. The recorded revenues were the second highest ever, while land hectares sold was the highest.

The global economy’s rebound from the economic crisis two years before resulted in the expansion of many global companies especially those in the technology sectors specifically, information technology consumer products and renewable energy. The expansion of both prospective and existing locators spurred countries in Asia, specifically directly competing nations like the Philippines and Vietnam, to more vigorously attract customers.

FPIP rode on the wave of global economic recovery and quickly took advantage of opportunities in the market

place. The record sales in land hectares sold were the fruit of a sustained effort leveraging the backing of its shareholders, as well as maintaining strong relationships with both prospect and current customers. In its continuing drive to balance the cyclical land business with steady revenues, FPIP’s ready-built factory (RBF) leasing and water business also posted record revenues. RBF leases increased with the expansion of current locators as well as the entry of new ones. The water business largely benefited from the steep increase in production from key customers in the high technology sector.

FPIP remains steadfast in making the Park the location of choice for business. Park development continued with the construction of new RBFs with a total area of 12,000 square meters. These facilities were practically leased out even before their completion. Water systems and capacity development continued with the construction of new wells and pump stations.

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NESTORJ.PADILLAPRESIDENT, ROCKWELL LAND

Rockwell Land has consistently and successfully introduced several firsts to the market for the past 16 years—the country’s first master-planned community, new offerings to the market such as the Loft, Z-Loft, Garden Villas, and introduction of the real business class in office space. As we now face an extremely competitive industry, we constantly challenge and push ourselves to raise the bar in innovation and luxury, in order to be the preferred provider of high-end residential and commercial spaces.

HECTORY.DIMACALIPRESIDENT, FPIP

FPIP’s record success the past two years has allowed the company to firmly establish the Park as the preferred location for manufacturing investments. In the next couple of years, FPIP will accelerate its land banking activities, raise the inventory of ready-built factory clusters, and further expand its water generation capacity with more deep wells, pump stations, and even the construction of an overflow weir. With increasing employment and construction inside the Park, new amenities will include a premium class hotel and an expanded commercial center. FPIP takes on these new challenges anchored on strong fundamentals in quality systems and processes, and excellent people management practices. Exciting times are ahead for FPIP as we further stabilize our core businesses and enhance the Park as we break new horizons.

These expansions are based on a world-class system that ensures companies of a worry-free environment for their business. Thus, FPIP has maintained its excellent quality standards for landscaping, security, maintenance, environment protection and overall Park management. These systems are anchored on the company’s world-class International Standards Organization (ISO) certifications for quality management (ISO 9001), environment management (ISO 14001) and occupational health and safety (OHSAS 18001). FPIP is also a lean and highly productive organization with people management practices that are Investors in People (IiP) standard certified. This IiP certification remains unique in the Philippine industrial property sector. It is part of the company’s pursuit of retaining its status as an employer of choice.

FPIP achieved record performance in 2009 and 2010, and looks forward to sustaining with strategic priorities set in the expansion of landholdings, continued construction of new Park infrastructure (RBFs, serviced apartments, and water systems), and the development of new businesses and Park features.

FPIP’s performance and expansion plans are part of its drive to be a partner in economic development. Its community relation activities benefit its host communities through ongoing programs in education, health, livelihood and employment, and peace and order. FPIP is an advocate in its host communities, operating its business beyond just profits, but more important contributing to nation-building.

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INFRASTRUCTUREAND OTHERS

PROPERTYBreaker

OTHERBUSINESSES

Continuing to transform and seek new opportunities

2010AnnualReport

FIRSTBALFOUR,INC.(FIRSTBALFOUR)First Balfour turned in revenues of P934.0 million and a net income of P25.8 million for 2010. As major projects were winding down, revenues and profits were significantly lower than the previous year. Nevertheless, the past year allowed the company to prepare and position for sustainable growth on a higher trajectory for the next five years.

The foremost project completed for the year was the LRT Line 1 North Extension project (in joint venture with DMCI), with the operation of the Balintawak Station in March and the Roosevelt Station in October.

Orders generated for 2010 reached P2.1 billion bringing the order book to more than double the previous year. Major orders came from prominent clients, as follows:

For the high-value manufacturing building sector, First Balfour bid and won two notable projects for the year: the Texas Instruments (TI) Clark expansion of its Bump wafer fabrication facility and the Nestlé Philippines Frontier project in Tanauan, Batangas. The TI Clark project, valued at about P318 million, is the first in a series of expansion projects the semiconductor company is implementing. The Nestlé Frontier project, already valued at about P900 million, is on a 27-hectare property and is the initial phase planned to build out over the next five years.

In the water infrastructure market, the company was awarded the construction of the new San Juan 111 ML (million liters) water reservoir for Manila Water. This P490 million structure will be the largest water reservoir in the Metro Manila water system upon completion.

In the energy market sector, First Balfour was also busy with a number of rehabilitation and capacity upgrade projects. It continued to work on the rehabilitation of the SN-Aboitiz Ambuklao hydropower project and Energy Development Corporation’s (EDC) Bacman I and II geothermal power plants. The company also continued to work on a number of geothermal pipeline projects in the Leyte, Southern Negros, and Bacman steam fields of EDC.

In 2010, First Balfour began business development work on two property development ventures, both focusing on the affordable housing market segment:

• The Cambria is an 876-unit townhouse type development located in Bay, Laguna. This 7.6-hectare former steel fabrication facility is being jointly developed with the AGC Group of the Tanchi family. By middle 2011, the Cambria townhouses will be selling for under P1 million targeting the Los Baños, Bay, Calauan, and Sta. Cruz market areas.

• The Prima Residences is an inner city affordable residential condominium project centrally located along Quezon Avenue, in front of the Sto. Domingo Church. The first of three buildings, to be called the Brisé, will be a 12-storey 341-unit building. With the target to break ground and start selling by the middle of 2011, the studio units are priced at about P1.1 million, aiming to cater to start-up families, yuppies, students, and overseas workers. This P4 billion project will be constructed in phases over the next four years.

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orders and revenues in areas where it exerts strong and competitive market presence: power and energy projects (conventional and renewable); high-value buildings, with increasing interest in projects that recognize global and local sustainable and environmental standards such as LEED (Leadership in Energy and Environmental Design) and BERDE (Building for Ecologically Responsive Design Excellence); and water infrastructure projects.

First Balfour will continue to invest considerable efforts in developing sustainable growth over the next five years. Other than the property development ventures and ThermaPrime, which both aim to provide a steady stream of revenue and margin for the coming years, the company is closely monitoring prospects on the government’s Public-Private-Partnership (PPP) infrastructure program. First Balfour will be looking at these PPP prospects as opportunities for significant construction business revenues and even potential operations and maintenance service contracts.

FIRSTPHILIPPINEINDUSTRIALCORPORATION(FPIC)In October 2010, Batangas-Pandacan pipeline operation of First Philippine Industrial Corporation (FPIC) was shut down on orders of the Makati City government after the latter suspected that the pipeline was found to be the source of petroleum seepage detected in a certain condominium located in Barangay Bangkal, Makati City. In November 2010, the Supreme Court (SC) issued a Writ of Kalikasan with Temporary Environmental Protection Order, ordering the company to immediately cease and desist from operating its pipeline until further orders from the court, to check the structural integrity of the whole span of the 117-kilometer pipeline, and in the process to apply and implement sufficient measures to

With the objective of providing well drilling services to EDC, First Balfour set up and registered ThermaPrime Well Drilling Services, Inc. with the Securities and Exchange Commission in late 2010. The new company is aiming to sign a two-year service agreement with EDC by the first quarter of 2011. This venture, with aspirations of growing into an established globally competitive geothermal well-drilling service contractor over the next two years, is expected to deliver stable streams of revenue and profit starting 2011.

BusinessExcellenceInitiativesFirst Balfour is on its 9th straight year of ISO recertification in Environmental Management System with ISO 14001:2009, Quality Management System with ISO 9001:2008, and Occupational Safety and Health System with OHSAS 18001:2007. In March 2010, the company received its Investors in People (IiP) certification, the first in the Philippine construction industry to be recognized for this human resource-based quality management system.

With a strong order book to start the year and a solid list of major prospects under consideration, First Balfour is optimistic on the performance of its construction business for 2011. The company expects to generate its

First Balfour continues to transform itself and look for opportunities in new endeavors and new markets. We have developed a multi-pronged capability leveraged on its core competence as a technology packager and as a builder of large and complex infrastructures.

First Balfour continues to build on its base competence in high-value high-rise buildings, horizontal infrastructure and industrial plants. We are now involved in renewable energy projects, complex institutional buildings, mass rail transit systems, and the various PPP projects aggressively pursued by the government.

We continue to build global business relationships with competitive fit-for-purpose and reliable technology suppliers for the proposed projects of the government and the private sector. We will also enhance our cooperation with affiliate companies within the Lopez Group to provide them options for addressing their requirements for technology expertise for the engineering and project management requirements of their projects.

DR.FIORELLOR.ESTUARVICE CHAIRMAN AND CHIEF EXECUTIVE OFFICERFIRST BALFOUR

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prevent and avert any untoward incidents such as fire, explosion or other destructive effects that may result from any leak in the pipeline.

FPIC has been complying with these directives in coordination with various government agencies, such as the Makati City government and Barangay Bangkal officials, other local government units, the Bureau of Fire Protection, the Department of Energy and its consultant Geoscience Foundation Inc.-University of the Philippines National Institute of Geological Sciences, the Department of Environment and Natural Resources, the Department of Health, and the Department of Public Works and Highways. Operation of the pipeline cannot resume until after the Writ is lifted. FPIC has contracted the services of an international engineering company, specializing in decommissioning, decontamination and environmental engineering, to undertake the remediation, engineering works and the rehabilitation of the affected areas. The engineering and rehabilitation works are ongoing.

FPIC’s community relations team, which set up a liaison office in Bangkal, maintains full transparency through proactive communication, consultation, and participation of local stakeholders (barangay council members, barangay staff, barangay health workers, affected residents, government agencies and other concerned groups) in the implementation of remediation activities including health concerns. An Inter-Agency Committee on Environmental Health (comprised of the Department of Health, Department of Environment and Natural Resources, and Department of Energy) has been convened as a venue for the review and evaluation of the implementation of

remediation activities. An independent panel of health experts from the University of the Philippines College of Public Health Foundation reviews and provides input for the Human Health Risk Assessment activity.

FPIC revenues for 2010 of P580.3 million is 12% lower than the previous year. It incurred a loss of P45.6 million in 2010 due to the expenses and provisions incurred or recognized related to the accidental petroleum seepage.

SECURITIESTRANSFERSERVICES,INC.(STSI)For the year 2010, the company posted revenues of P11.1 million, lower by 22% compared to the previous year’s P14.2 million. The decrease in revenues could be attributed to the softening of the equities market during the year, which led to a 42% year-on-year decline in transfer and other fees to P4.5 million from P7.6 million. A decrease in fees for printing services also contributed to the decline in revenues. Net loss for the year increased to P18.0 million, with higher operating and other expenses.

STSI was re-certified to ISO 9001:2008 after an audit in September 2010. The company gained two new clients for 2010, namely, IP Converge Data and Lopez Holdings Corporation (Long-Term Commercial Papers). In addition, a new back-end system, Stockholder Information System (SIS), was put in place. All issues except for Gotesco Land, Inc. and Philtown Properties, Inc. have been completely migrated.

By using this new system, STSI can now issue scripless shares and integrate with the Electronic Direct Registry System, the approval for which by the Securities and Exchange Commission was due in part to STSI’s continued efforts to implement the system, despite challenges from

ANTHONYM.MABASAPRESIDENT FPIC AND THERMAPRIME

FPIC’s difficulties in the past provide much impetus for it to brave new horizons to serve its stakeholders, especially the country which has benefited from the continuous operation of the pipeline for over 40 years. FPIC will continue to act responsibly, honor its commitments to society and aim for global excellence as it seeks to apply its expertise for the good of all.


some stakeholders in the equities market. In connection with the improvement of the back-end system, STSI has instructed its couriers to scan or digitize the proofs of delivery, which can then be integrated in the SIS to provide better customer service.

STSI implemented a program of returning customer property (i.e., dividend checks and stock certificates) to reduce operational risks. Cash dividend checks of Alaska Milk Corporation, First Philippine Holdings Corporation, ABS-CBN Corporation, and Manila Electric Company(Meralco) and stock certificates of Uniwide Holdings, Inc. have already been returned. STSI is currently working on returning Meralco’s stock certificates (covering both dividends and Employee Stock Option Plan). In addition, various records have been transferred to offsite storage to free up expensive storage space occupied in Benpres Building. Hotsite options are being evaluated to ensure business continuity.

STSI assisted Knowledge Channel with their KaRUNungan 2010 Fun Run.

ASIANEYEINSTITUTE(ASIANEYE)Asian Eye achieved another set of milestones in its ninth year of operation as an ambulatory clinic dedicated to eye care. In addition to serving over 70,000 patients since 2001, it has continued to make its mark in the local and international ophthalmology communities through its research and education efforts.

2010 was a banner year for clinical research, which allowed Asian Eye to educate itself on alternative treatment options ahead of its commercial availability, and to equip itself in tailoring solutions to many complex eye problems. These studies were either internally funded or sponsored by industry partners.

Research studies form the basis of scientific papers presented by Asian Eye doctors, contributing to the body of knowledge of ophthalmology. In 2010, papers by Dr. Harvey S. Uy, Uveitis and Retina Specialist, and the Cornea and Refractive Surgery team led by Dr. Robert T. Ang, received awards from the American Academy of Ophthalmology and the Philippine Academy of Ophthalmology, respectively.

ERNESTOB.RUFINO,JR.PRESIDENT STSI

STSI is continuously reviewing and streamlining its processes and procedures to ensure consistency with actual practices. STSI is also adopting new practices for greater security for the shareholder, STSI, and the Issuer. An example of this is leveraging technology that will enable us to ensure delivery of documents to shareholders and track deliveries almost in real-time. This will enable us to reduce if not eliminate possible theft and fraud. The technology will also allow us to capture valuable data for analyses and further improvement. We are also looking at applying this technology for various transactions such as filling up of signature cards to allow for electronic capture and reducing the need for paper or hard copies, as well as easier on-line retrieval of information.

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BENJAMINK.LIBOROPRESIDENT ASIAN EYE

As Asian Eye marks its tenth year in 2011, we reflect on our unique contributions to eye care in the Philippines in the last decade: our pioneering spirit to find better ways to heal patients, and our adherence to the founders’ vision of a center of excellence. It has always been our passion to give hope of better vision and quality of life to our patients, and to be an instrument of positive change in their lives. It is this passion that will continue to drive us to bring in the latest treatment technology, to contribute to the body of knowledge in eye care through research and education, and to achieve international standards for patient safety and outcomes.

Asian Eye expanded its clinic to support its growing patient base, and now occupies the 8th to 10th floors of the PHINMA Plaza. The new clinic provides a better environment for patients, improves patient flow, and allocates areas for patient education. Asian Eye also expanded its pediatric service to include Pediatric Optometry, Vision Training, and Orthoptics to help screen children for vision disabilities and correct these through therapy and training.

Asian Eye launched a new logo to reinforce and distinguish the brand of eye care it is known for. The new logo, reminiscent of the yin yang symbol for balance and harmony, represents a renewed commitment to deliver excellent eye care that blends the art of caring, the human touch, with the solid science of advanced and innovative treatment strategies.

Asian Eye’s Quality, Environment, Safety and Health System was re-certified to the ISO 9001:2008, 14001:2004, and OHSAS 18001:2007 standards in June.

These accomplishments demonstrate Asian Eye’s sustained efforts to be at the forefront of eye care for the benefit of its patients and stakeholders.

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Corporate directoryINVESTORRELATIONSFirst Philippine Holdings Corporation4th Floor Benpres BuildingExchange Road corner Meralco AvenueOrtigas Center, Pasig City, 1605 PhilippinesTel. No. (632) 631-8024 Fax No. (632) 631-4089Website: www.fphc.comEmail: [email protected]

LEGALCOUNSELQuiason, Makalintal, Barot, Torres,Ibarra & Sison Law Firm21st Floor Robinsons Equitable-PCI TowerADB Avenue corner Poveda RoadOrtigas Center, Pasig City, PhilippinesTel. Nos. (632) 631-0981 to 85Fax No. (632) 631-3847

PUNO&PUNOLAWOFFICES12th Floor East TowerPhilippine Stock Exchange CenterExchange Road, Pasig City, PhilippinesTel. Nos. (632) 631-1261 to 64Fax No. (632) 631-2517

EXTERNALAUDITORSycip, Gorres, Velayo & Co.6760 Ayala AvenueMakati City, PhilippinesTel. No. (632) 891-0307Fax No. (632) 819-0872

STOCKHOLDERSERVICESANDASSISTANCESecurities Transfer Services, Inc.Mr. Antonio R. GalvezGeneral ManagerGround Floor Benpres BuildingExchange Road corner Meralco AvenueOrtigas Center, Pasig City, 1605 PhilippinesP.O. Box 13951Tel. Nos. (632) 490-0060 local 101 or 631-7152

CORPORATEOFFICEFirst Philippine Holdings Corporation4th Floor Benpres BuildingExchange Road corner Meralco AvenueOrtigas Center, Pasig City, 1605 PhilippinesTel. No. (632) 631-8024Fax No. (632) 631-4089Website: www.fphc.comEmail: [email protected]

ScheduleofAnnualStockholders’Meeting-EveryLastMondayofMay

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Concept + Design by k2 Interactive (Asia) Inc. Cover Photography Compliments of Mr. Art Valdez, Sato Raypon and the Balangay Team Portraitures by Erik Liongoren Operational photos courtesy of First Gen, EDC, Meralco, First Philec, Rockwell Land, First Philippine Industrial Park, First Balfour, STSI, and Asian Eye

The Lopez Credo We, as employees of the Lopez Group of companies, believe that our primary reason for being is to serve the Filipino people.

Thus, we shall always conduct ourselves in a manner that is mindful of the long-term mutual benefit of the Lopez Group, and the various publics we serve.

We will be responsible stewards of all our resources, and conscious of our obligation to present and future generations.

Since 1928, and in the years and generations to follow, our commitment to the distinctive Lopez values will not change as we remain committed to serve our stakeholders.

the Lopez ValuesIn our service to the Filipino people, we will be guided by the following distinct Lopez values: - A pioneering entrepreneurial spirit- Business Excellence- Unity- Nationalism- Social Justice- Integrity - Concern for employee welfare and wellness

We know from generations of experience that it is by living according to these values that a company can be built to last.

Financial Highlights 1 · STSI is the Lopez group’s stock transfer agent. MAJOR COMPANIES 1....

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