PNCC Exit Conference MinutesDate: 04/28/2015

1. AOM No. 15-001(2014) A parcel of land owned by the Corporation located in North Expressway Bocaue, Bulacan with a total area of 847 sq. m. was not titled nor registered under its name casting doubt as to the existence and ownership.

The Realty Management is still working on the research work for the transfer of title due to lack of documents. Since 1970, no deed of sale nor transfer certificate of title was in the hands of PNCC, so there was no proof of ownership. The only document that the Realty Management has was a photocopy of the tax declaration in the name of Victorino N. Roxas.

According to LFS, the property is surrounded by rice fields, and he does not believe on the valuation indicated in CALFILs appraisal. If not contrary to COA Rules and Regulation, LFS plans to put the questioned property for sale together with the adjacent titled properties in the same location with disclosure to the buyer about the untitled portion.

2. AOM No. 15-005(2014) Results of confirmation of Receivable account disclosed an unreconciled difference of P129.288 million. (Updated amount P207.135 million)

Accounting already reconciled the 129.288 million discrepancies. The remaining 77 million pertains to the receivables from PMMA. This amount is still uncollected due to the funding problem by PMMA. There is already a court decision in favor of PNCC. Atty. Henry Salazar asked the assistance of OGCC to file a petition for money claims to COA to require PMMA to pay the amount due to PNCC.

PNCC will ask OGCC for the update on the said letter of petition for money claim. Once the letter is available, COA will be given a copy of it.

3. AOM No. 15-006(2014) Long outstanding Accounts Receivable amounting to 46.728 million are not provided with allowance for doubtful accounts.

These receivables pertain to the royalties for operating gasoline stations which are under garnishment in favor of ASIA VEST. These are valid receivables and collectible but remain uncollected due to the case. PNCC cannot provide for a provision for doubtful accounts since ASIAVEST will collect these amounts once the latter won this 200 million-case.

The 200 million was previously disclosed under contingent liability in the financial statements but when the time came PNCC won the case, the contingent liability was removed. The audit team advised that Management disclose the 200 million in the notes to financial statements since the decision is not yet final and executory, and that there is a probable loss on the part of PNCC.

Shell Corporation deposited the royalties payable to PNCC in an escrow account, release dependent on the result of the case. The audit team recommended that Management disclose this to the notes to financial statements. According also to Atty. Henry, Chevron has already settled its obligation to PNCC. LFS committed to submit the documents regarding these matters to the audit team.

It was agreed that there will be no more receivables under the Non-current Assets, instead will be reclassified as Other Assets under Non-current assets using the same account title.

4. Unnecessary expenses amounting to P328,748 were incurred due to the 12% mark-up in the procurement of Janitorial and Messengerial Services for the period January to December 2014.

The management pointed out that hiring the workers directly under contract of service for a long period of time will result to their regularization, which will entitle them of mandatory benefits, resulting to increase in expenses. Hence, hiring them through DISC is more beneficial to PNCC. The management affirmed that no employer-employee relationship exists between the contractual workers and DISC.

5. Liabilities of the PNCC to various creditors assumed by the National Government in the amount of 5.552 billion, excluding interests and penalties amounting to P52.066 billion recorded as part of equity, misstated various account balances.

Just recently, LFS was able to obtain documents that relates on the matter. The documents were written by a former PMO Head, Guillermo Hernandez. The position of Hernandez, that the matter must therefore be subjected to conversion in equity, was backed up by the OGCC opinion. COA will be provided with these documents together with the copy of the Childrens Case, which shows that LOI 1295 still exists, valid, and can be implemented. LFS believes that although there is a DOJ Opinion, it is merely an opinion and the same can still be elevated with the Office of the President and the Supreme Court. He does not agree that these should be recognized as a debt, including its interest and penalty, because of the DOJ Opinion. When the DOJ resolves PNCCs motion for reconsideration and if the same is unfavorable, LFS intends to appeal it with the Office of the President up to the Supreme Court.

Majority of the Board signed the PAN with GCG, which shows the agreement among the board to pay the 5.55 billion to PMO, not the 52 billion. The audit committee advised to reverse the equity adjustment account which according to them, was a creature created upon recommendation of the previous COA audit team, pending PNCCs application for increase in capitalization.

According to Dir. Velasco, this issue will be a very long discussion and asked for the cooperation of everyone to study this matter.

6. AOM No. 14-019(2014) Neither deductions from salary nor sanctions were imposed on several employees for habitual tardiness and under times incurred which is not in accordance with Section 1A (6) of the PNCC Code of Conduct and Employee Discipline (PCCED) dated October 29, 2001 and Memorandum of the PNCC President and CEO dated October 6, 2011 relative to the Compressed Workweek adopted by the Company.

LFS adheres to a policy of appraising the performance of a individual not on an hourly basis but on completion of the tasks performed. If a person is late but his task is completed, LFS is happy with that. As of now, he doesnt encounter any PNCC employees who have not completed their tasks.

But this matter will be taken up in the next board meeting and will come up with the policy regarding this issue.

7. AOM No. 15-002(201) The Corporation was not able to maximize the potential rental income for the year ended December 31, 2014 of approximately P4463.941 million from its property located at the Financial Center Area (FCA) in Pasay City.

A policy on lease contracts was already formulated by the board. The said policy was based on a survey conducted on the properties located in the FCA area. The properties that were not included in the are those vacant spaces such as those used for parking lots. The minimum rental will be at P140 per square meter and for lessees paying above P140, a corresponding 5% escalation fee will be provided.

PNCC will not enter into any contract beyond June 2013 because according to LFS it is hard to conduct public bidding for lease of properties since the term of the lease is for only a year or less.

8. AOM No. 14-018(2014) (a) Conflict of interest noted in the lease of 470 square meters at Financial Center Area (FCA) by a Corporation owned by five PNCC Officers and Employees is a violation of Republic Act No. 3019 Anti Graft and Corrupt Practices Act. Dated August 17, 1960, PNCC Amended By-Laws and company policies. (b) Revenue forgone in the minimum amount of P.696 million due to the absence of company policy/guideline in the rental of areas in FCA property.

The board came up with a resolution to cancel or not to extend the lease contract of AHEAD effective May 30, 2015.

During the exit conference, the issues regarding the letter of Mr. Jaime dela Cruz was discussed, that despite the confidentiality of the AOM, it still reached the hands of the involved PNCC employees including Mr. dela Cruz, and that his letter has reached several government agencies compelling the audit team to include the findings in the annual audit report.

In relation to the JAMVIC contract raised by Mr. dela Cruz, LFS mentioned that JAMVIC offered to lease 5 hectares of the FCA property to be used as a storage facility, due to port congestion. JAMVIC and PNCC entered into a P60 million contract and a contract with DISC for the construction of property, amounting to P40 million. The contract was not perfected because of the AOM which questions the non conduct of public bidding for the lease of the property, the board opted to inform JAMVIC that it was postponing the implementation of the contract until the issue is resolved in the next Board meeting, which is a month after. They decided to ask GOCC regarding this matter and before GOCC came up with a decision, JAMVIC already cancelled its contract with PNCC and DISC. The letter of Mr. dela Cruz asking other agencies who will answer for the 100 million loss of PNCC was deliberated in the February 16 board meeting, and according to Dir Velasco, the Chairman has no intention to reply on the letter of Mr. dela Cruz.