c o v e r s h e e t - nlex corporation · c o v e r s h e e t for ... the standard for toll road...

C O V E R S H E E T

for

SEC FORM 17-A

SEC Registration Number

A 1 9 9 7 0 1 4 5 1 C O M P A N Y N A M E

M A N I L A N O R T H T O L L W A Y S C O R P O R A T

I O N ( A S U B S I D I A R Y O F M E T R O P A C

I F I C T O L L W A Y S D E V E L O P M E N T C O R P

O R A T I O N ) A N D A S U B S I D I A R Y

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

N L E X C O M P O U N D , B A L I N T A W A K , C A L

O O C A N C I T Y

Form Type Department requiring the report Secondary License Type, If Applicable

1 7 - A

C O M P A N Y I N F O R M A T I O N

Company’s Email Address Company’s Telephone Number Mobile Number

[email protected] 479-3000 –

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

19 1st Thursday of May December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Ms. Maria Theresa O. Wells [email protected] 479-3000 –

CONTACT PERSON’s ADDRESS

NLEX Compound Balintawak, Caloocan City

NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty (30) calendar

days from the occurrence thereof with information and complete contact details of the new contact person designated.

2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with the Commission and/or non-receipt

of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies.

SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141

OF THE CORPORATION CODE OF THE PHILIPPINES 1. For the fiscal year ended: December 31, 2015

2. SEC Identification Number: A1997-01451 3. BIR Tax Identification No. : 004-984-946-000 4. Exact name of issuer as specified in its charter: Manila North Tollways Corporation 5. Metro Manila, Philippines 6. (SEC Use Only) Province, Country or other jurisdiction of

incorporation or organization

Industry Classification Code:

7. NLEX Compound, Balintawak, Caloocan City 1400 Address of principal office Postal Code 8. +632-479-3000 Issuer's telephone number, including area code 9. N/A Former name, former address, and former fiscal year, if changed since last report. 10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA Title of Each Class Number of Shares of Common Stock

Outstanding and Amount of Debt Outstanding Fixed Rate Bonds Due 2021 Php4,400,000,000.00 Fixed Rate Bonds Due 2024 Php2,600,000,000.00 11. Are any or all of these securities listed on a Stock Exchange. Yes [ ] No [] If yes, state the name of such stock exchange and the classes of securities listed therein: N/A 12. Check whether the issuer: (a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports);

Yes [] No [ ] (b) has been subject to such filing requirements for the past ninety (90) days. Yes [] No [ ] 13. State the aggregate market value of the voting stock held by non-affiliates of the registrant: N/A

TABLE OF CONTENTS

PART I - BUSINESS AND GENERAL INFORMATION ........................................................ 1

Item 1. Business ................................................................................................................ 1

Item 2. Properties .............................................................................................................. 4

Item 3. Legal Proceedings ................................................................................................. 6

Item 4. Submission of Matters to a Vote of Security Holders ............................................. 8

PART II - OPERATIONAL AND FINANCIAL INFORMATION .............................................. 9

Item 5. Market for Issuer's Common Equity and Related Stockholder Matters ................... 9

Item 6. Management's Discussion and Analysis or Plan of Operation .............................. 12

Item 7. Financial Statements ........................................................................................... 26

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure ....................................................................................................................... 26

PART III - CONTROL AND COMPENSATION INFORMATION ......................................... 27

Item 9. Directors and Executive Officers of the Issuer ..................................................... 27

Item 10. Executive Compensation ................................................................................... 36

Item 11. Security Ownership of Certain Beneficial Owners and Management .................. 38

Item 12. Certain Relationships and Related Transactions................................................ 40

PART IV – CORPORATE GOVERNANCE ......................................................................... 41

Item 13. Corporate Governance ...................................................................................... 41

PART V - EXHIBITS AND SCHEDULES ............................................................................ 51

Item 14. Exhibits and Reports on SEC Form 17-C ........................................................... 51

1

PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business

Company Overview Manila North Tollways Corporation (“MNTC” or the “Company”) was incorporated in the Philippines on February 4, 1997 as the joint venture company of Philippine National Construction Corporation (“PNCC”) and Metro Pacific Tollways Development Corporation (formerly known as First Philippine Infrastructure Development Corporation) ( “MPTDC”), for the primary purpose of undertaking and implementing the North Luzon Expressway Project (“NLEX Project”). MNTC is engaged in project development, design, construction, financing, operation and management of toll roads, and has grown to be one of the country’s leading toll road developers and operators. MPTDC is the parent company of MNTC. In April 1998, the Government of the Republic of the Philippines (the “Government”), acting through the Toll Regulatory Board (“TRB”), MNTC and PNCC executed the Supplemental Toll Operation Agreement (the “STOA”) for the NLEX Project. The STOA is the concession for the NLEX Project, the largest toll road in the Philippines. The STOA is an amendment of the original PNCC Toll Operations Agreement executed in 1977. Under the STOA, the Government recognizes the assignment of PNCC’s franchise with respect to the NLEX Project in favor of MNTC from the date the STOA came into effect until 31 December 2030 or 30 years after the issuance of the toll operating permit for the last completed phase, whichever is earlier, unless further extended pursuant to the STOA. The NLEX currently spans approximately 95 kilometers or 463 lane-kilometers and services an average of 200,000 vehicles per day. The NLEX is the main infrastructure backbone that connects Metro Manila to 15 million people in Central and Northern Luzon. MNTC has been in commercial operations since February 2005 and has since established the NLEX brand as the standard for toll road operations and management excellence in the Philippines. In October 2008, in view of the construction of the NLEX-Mindanao Avenue Link or Segment 8.1 of the NLEX Project, the TRB approved the extension of the service concession term to 31 December 2037. Upon expiration of the concession period, MNTC will hand-over the NLEX Project to the Government free of charge, without any liens and impediments and in good, operational condition. On June 5, 2010, the 2.7km Segment 8.1 was opened to commercial operations. On March 19, 2015, the 2.4 km. Segment 9 or the Karuhatan Interchange was opened to the public. Segment 9 connects NLEX from the Smart Connect Interchange to the MacArthur Highway in Valenzuela City. Subic-Clark-Tarlac Expressway (SCTEX) On February 26, 2015, MNTC and the Bases Conversion and Development Authority (BCDA) entered into the Business Agreement (BA) covering the assignment by BCDA to MNTC of its rights, interest and obligations under the TOA relating to the management, operation and maintenance of the SCTEX (which shall include the exclusive right to possess and use the SCTEX toll road and facilities and the right to collect toll). BCDA shall retain all rights, interests and obligations under the TOA relating to the design, construction and financing of the SCTEX. Nevertheless, MNTC and BCDA hereby acknowledge that BCDA has, as of date of the BA, designed, financed and constructed the SCTEX as an operable toll road in accordance with the TOA.

2

BCDA is a government instrumentality vested with corporate powers created by virtue of Republic Act (RA) No. 7227. Pursuant to Section 4 (b) of RA No. 7227, BCDA undertook the design, construction, operation and maintenance of the SCTEX, a major road project to serve as the backbone of a new economic growth corridor in Central Luzon, pursuant to a TOA entered into between BCDA and the ROP, acting through the TRB, on June 13, 2007. In 2008, TRB has issued in favor of BCDA a TOP authorizing the commercial operations of and the collection of tolls in SCTEX. The term of the BA shall be from effective date (October 27, 2015), until October 30, 2043, and may be extended subject to mutual agreement of MNTC and BCDA and the relevant laws, rules and regulations and required government approvals. The SCTEX STOA, which was a supplement to and revision to the TOA, was entered into, by and among the ROP, acting through the TRB, BCDA and MNTC on May 22, 2015, in order to fully allow MNTC to exercise its rights and interests under the BA. In consideration for the assignment by BCDA to MNTC of its rights to and interests in SCTEX, MNTC paid BCDA an upfront cash of Php3.5 billion (inclusive of value-added tax or VAT) upon effectivity of the BA (the Upfront Payment). In addition, MNTC pays BCDA monthly concession fees amounting to 50% of the Audited Gross Toll Revenues of SCTEX. MNTC undertakes at its own cost the maintenance works/special/major emergency works, other additional works, enhancements and/or improvement works contained in the Maintenance Plans submitted by MNTC to BCDA. On October 22, 2015, MNTC received the TOC from the TRB for the operation and maintenance of the SCTEX. MNTC officially took over the SCTEX toll facilities and officially commenced the management, operation and maintenance of SCTEX on October 27, 2015. Segment 10 On April 28, 2014, MNTC signed a target cost construction contract with Leighton Contractors (Asia) Ltd. (LCAL) for the construction of NLEX Segment 10. The target cost is approximately P=10.0 billion (inclusive of VAT), with a completion period of 24 months from start date. On May 8, 2014, MNTC issued the notice to proceed to LCAL, signalling the start of the pre-construction activities. Pursuant to the contract, MNTC placed a reserve amount of P=889.0 million in an escrow account on July 28, 2014, which is recognized under “Other non-current assets” account, to cover payment default leading to suspension of works. As at March 31, 2016, construction of Segment 10 is still underway.

3

NLEX-SLEX Connector Road Project In September 2013, MPTDC was requested by the Government to consider undertaking the Connector Road Project either through a new joint venture with PNCC, or under the existing joint venture between PNCC and MPTDC and pursuant to the existing STOA amongst PNCC, MNTC and the TRB dated April 30, 1998. Accordingly, the NEDA Board approved that the Connector Road Project proposed by MPTDC will be implemented: (i) through a joint venture between MPTDC and PNCC, or (ii) to the extent possible, through an amendment or extension of the existing joint venture of PNCC and MPTDC and/or STOA pursuant to PD No. 1894. In a letter dated November 7, 2013, DPWH informed MPTDC that it would defer further consideration and processing of the Connector Road Project as a BOT unsolicited proposal to allow TRB to pursue the implementation of the same project as an amendment or extension of the existing STOA. Consequently, MNTC as the existing joint venture company, was requested to consider undertaking the NLEX-SLEX Connector Road Project as an extension of Segment 10 of the NLEX under the existing STOA from C3 Road in Caloocan to PUP Sta. Mesa, Manila utilizing the same PNR right-of-way covered by the BOT unsolicited proposal. On November 20, 2013, MNTC submitted to TRB an Investment Proposal for the implementation of the Connector Road Project as the new Segment 10.2 of the NLEX through an amendment or extension of the STOA, particularly the existing Phase II Segment 10, pursuant to a Grantor-initiated request under Clause 8.2 of the STOA. On January 10, 2014, MNTC and MPTDC entered into a letter agreement with PNCC, as shareholder of MNTC, and joint venture partner of MPTDC for the NLEX Project, confirming the agreement to implement Segment 10.2 as an extension or linkage of Phase II Segment 10 of the NLEX Project pursuant to P.D. No. 1894, and as an integral portion of NLEX subject to prior approval of the TRB of the investment proposal submitted by MNTC on November 20, 2013. Conformably to the provisions of the JVA and the ARSA, and upon TRB approval of the implementation of Segment 10.2, PNCC will be entitled (a) to receive 6% of the gross toll revenue collected by MNTC from the operation and maintenance of Segment 10.2 upon its completion in addition to its share in the gross toll revenues collected by MNTC from the toll roads as provided in the ARSA, and (b) to all dividends accruing on its shares of stock in MNTC. However, on July 7, 2014, the Department of Justice (DOJ) issued an opinion which stated, among others, that the NEDA Board amended approval dated September 11, 2013 to implement Connector Road Project by way of an amendment or extension of the existing joint venture of PNCC under P.D. 1894 appears to have been issued beyond its powers and without justification. Hence, it should be interpreted as merely recommendatory. In addition, it stated that the DPWH, under the BOT Law, could proceed with the consideration of the Unsolicited Proposal for the Connector Road Project. Consequently, the TRB advised MNTC on August 8, 2014 that it will desist from processing Segment 10.2 Project under the joint venture mode and give DPWH a free hand as implementing agency of the Unsolicited Proposal. While MPTDC continued discussions with DPWH as the Original Proponent of the Unsolicited Proposal under the BOT Law, it was advised that the ROP intends to clarify the legal framework to implement the project under the joint venture mode. Considering that the Connector Road Project can be implemented faster and the benefits that the road users will derive from a considerable reduction in toll rates if the Connector Road Project will be implemented as Segment 10.2 of the NLEX, MPTDC and MNTC sent a letter to DOTC/TRB dated October 29, 2014, stating that they prefer the implementation of the

4

Connector Road Project as a Joint Venture (JV) through an amendment or extension of the NLEX STOA under P.D. 1894 following the NEDA Board approval via ad referendum. In February 2015, the NEDA Board has confirmed the re-approval of the Connect Road Project through an unsolicited mode subject to Swiss Challenge. During 2015, the DPWH, NEDA and MPTDC and its subsidiaries, as original proponent, continue to negotiate in preparation for the Swiss Challenge. On December 18, 2015, the NEDA Board confirmed and approved the revised terms negotiated by the DPWH and MPTDC and its subsidiaries in order to proceed with the Swiss Challenge. As at February 17, 2016, the preparations for the Swiss Challenge are still on-going. NLEX Ventures Corporation On September 23, 2015, NLEX Ventures Corporation (NVC), was formed as a wholly owned subsidiary of MNTC, primarily engaged to develop, fund, construct, operate and maintain any and all facilities and to provide services relating to the safety, comfort and convenience of its customers such as road users; and to undertake traffic management services. Competitive Strengths The Company believes that its principal strengths are the following:

MNTC has a proven track record in toll road development and management.

MNTC has a franchise over a high-growth service area.

The NLEX has a stable traffic base.

MNTC’s shareholders are industry leaders.

MNTC has an experienced management team. Business Strategy The following are the strategies that MNTC employs as it pursues its business:

MNTC shall strengthen its industry position as the country’s leading toll road developer and operator.

MNTC shall expand its current toll road portfolio.

MNTC shall maintain a robust financial position while enhancing shareholder returns.

Item 2. Properties

Description and Location of Principal Properties As of the date of this Disclosure, MNTC’s principal properties are the buildings and facilities along the NLEX that were constructed for purposes of performing the management, operations and maintenance obligations of MNTC under the concession agreement.

The corporate headquarters of MNTC is located at the NLEX Compound, Balintawak, Caloocan City where the Operations Management Center (“OMC”) is also located. The OMC is where the main hub of automated operations, namely: the central toll computer system (“CTCS”) and the traffic control room (“TCR”), are installed and where the O&M service provider, TMC has its corporate headquarters.

5

The main maintenance and traffic management center is the Sta. Rita District Building located at Sta. Rita, Guiguinto, Bulacan. MNTC also has a field office along Subic-Tipo Road for the management of Segment 7.

Other key facilities for operations are located around the toll plazas along the NLEX, namely: the toll supervision buildings located beside major toll plazas, the mini-buildings beside smaller toll plazas, customer service centers mainly for motorists’ assistance and Easytrip Tag reloading. Technical shelter buildings are stand-alone small structures along the stretch of the NLEX which contain electrical and telecommunications equipment.

Location MNTC Property

NLEX Compound, Balintawak, Caloocan City

Main Office Buildings:

1. MNTC Head Office Main Building 2. MNTC Head Office Annex Building 3. Operations Management Center (OMC) 4. OMC Wellness Hub Building

Sta. Rita, Guiguinto, Bulacan Sta. Rita District Building

Toll Plaza Locations

1. Balintawak (Barrier), Caloocan City 16 Entry Lanes, 1 Toll Supervision Building or Mini-Building, 1 Customer Service Center, 3 Technical Shelter Buildings

2. Mindanao Avenue 6 Entry Lanes, 1 Mini Building, 2 Technical Shelter Buildings

3. Valenzuela City 7 Entry Lanes, 1 Toll Supervision Building, 1 Point of Sale Building, 1 Mini Building, 2 Technical Shelter Buildings

4. Meycauayan, Bulacan 7 Entry Lanes, 1 Toll Supervision Building, 1 Point of Sale Building, 1 Technical Shelter Building

5. Marilao, Bulacan 4 Entry Lanes, 1 Mini Building, Point of Sale Building, 1 Technical Shelter Building

6. Bocaue, Bulacan 14 Entry Lanes, 2 Mini Buildings

7. Bocaue (Barrier), Bulacan 19 Entry Lanes, 1 Toll Supervision Building, 1 Technical Shelter Building

8. Balagtas, Bulacan 9 Entry Lanes, 1 Toll Supervision Building

9. Tabang, Bulacan 9 Entry Lanes, 1 Toll Supervision Building, 1 Technical Shelter Building

10. Santa Rita, Bulacan 12 Entry Lanes, 1 Toll Supervision Building, 1 Mini Building, 3 Technical Shelter Buildings

11. Pulilan, Bulacan 10 Entry Lanes, 1 Toll Supervision Building, 1 Mini Building, 1 Technical Shelter Building

12. San Simon, Pampanga 9 Entry Lanes, 1 Toll Supervision Building, 1 Mini Building, 1 Point of Sale Building, 1 Technical Shelter Building

13. San Fernando, Pampanga 17 Entry Lanes, 1 Toll Supervision Building, 1 Mini Building, 2 Technical Shelter Buildings

14. Sindalan/Mexico, Pampanga 4 Entry Lanes, 1 Mini Building, 1 Technical Shelter Building

15. Angeles City, Pampanga 7 Entry Lanes, 1 Mini Building, 1 Technical Shelter Building

6

Location MNTC Property

16. Dau, Pampanga 2 Entry Lanes

17. Dau (Barrier), Pampanga 12 Entry Lanes, 1 Toll Supervision Building, 2 Technical Shelter Buildings

18. Subic Freeport Expressway 2 Entry Lanes, 1 Standard Field Office

19. Karuhatan, Valenzuela City 6 Entry Lanes, 1 Mini Building, 1 Technical Shelter Building

Technical Shelter Buildings 22

MNTC also owns 22 units of transportation equipment, mainly service vehicles used for day-to-day operations. There are no mortgages, liens or encumbrance over the properties described above. These are all maintained in good working condition and will be handed over to the Government with no consideration at the end of the concession period. MNTC does not own the parcels of land over which the NLEX has been built as these are owned by the Government. The entire NLEX roadway, including interchanges, entry/exit ramps, service roads, bridges, pedestrian and vehicular overpasses, farm crossings and viaducts are properties of public dominion and are owned by the Government. The NLEX roadway is maintained in good working condition through periodic resurfacing of the pavement. The NLEX bridges, the biggest of which is the Candaba viaduct, are likewise regularly maintained and structurally sound. These will also be handed over to the Government at no consideration at the end of the concession period. Properties to be Acquired MNTC or NVC may acquire certain properties in line with its plan to engage in the development of a toll service facility along the NLEX. The mode of acquisition is still under study and the cost is not expected to be significant. The source of financing for the planned acquisition will either be internal cashflow or loans.

Item 3. Legal Proceedings

Some of the following legal proceedings involving the Company were the subject of news reports and therefore generated public interest, but Management is nevertheless of the opinion that should there be any adverse judgment based on these claims, this will not materially affect the Company’s financial position and results of operations. Petitions for Toll Rate Adjustment In June 2012, MNTC, as petitioner-applicant, filed a Petition for Approval of Periodic Toll Rate Adjustment with TRB praying for the adjustment of the ATR for the North Luzon Expressway by an average of 11% across-the-board toll fare increase, effective January 1, 2013 (“2012 Petition”). In addition, in September 2014, MNTC, as petitioner-applicant, filed a Petition for Approval of Periodic Toll Rate Adjustment with TRB praying for the adjustment of the ATR for the North Luzon Expressway by an average of 4% across-the-board toll fare increase effective, January 1, 2015 (“2014 Petition”). MNTC has yet to receive regulatory approval for both 2012 Petition and 2014 Petition.

7

In August 2015, MNTC wrote the Republic of the Philippines (Republic), acting by and through the Toll Regulatory Board (TRB), a Final Demand for Compensation based on Overdue 2013 and 2015 Toll Rate Adjustments (Final Demand). In the letter, MNTC stated that the Republic’s/TRB’s inexcusable refusal to act on the 2012 Petition and 2014 Petition is in total disregard and a culpable violation of applicable laws and contractual provisions on the matter, to the great prejudice of MNTC, which has continuously relied in good faith on such contractual provisions as well as on the timely and proper performance of the Republic’s/TRB’s legal and contractual duties. As of December 31, 2015, the value of the compensation due to MNTC amounts to Php3 Billion (exclusive of VAT) under the 2012 Petition and 2014 Petition. In view of the failure of the Republic/TRB to heed the Final Demand, MNTC sent a Notice of Dispute to the Republic/TRB dated September 11, 2015 invoking STOA Clause 19 (Settlement of Disputes). STOA Clause 19.1 states that the parties shall endeavor to amicably settle the dispute within sixty (60) calendar days. The TRB sent several letters to MNTC requesting the extension of the amicable settlement period. However, MNTC has not received any feasible settlement offer from the Republic/TRB. Accordingly, on April 4, 2016, MNTC was compelled to issue a Notice of Arbitration and Statement of Claim to the Republic, acting by and through the TRB, consistent with STOA Clause 19 in order to preserve its rights under the STOA. Garlitos, Jr. vs. Bases Conversion and Development Authority, Manila North Tollways Corporation and the Executive Secretary, Supreme Court (G.R. No. 217001) Atty. Onofre G. Garlitos, Jr. filed with the Supreme Court a Petition for Prohibition and Mandamus with Prayer for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction dated March 17, 2015 (Petition) against the Bases Conversion and Development Authority, MNTC, and the Executive Secretary. The Petition prays that (a) a writ of preliminary mandatory and prohibitory injunction be issued enjoining the BCDA, MNTC, and Executive Secretary from proceeding with the SCTEX project and compelling the BCDA to rebid the SCTEX O&M project, and (b) an order be issued (i) annulling the bidding procedure, direct negotiations, and the Price Challenge conducted by the BCDA, and the Concession Agreement, Business and Operating Agreement, and all subsequent amendments and modifications thereto and (ii) compelling the BCDA to rebid the O&M of the SCTEX. MNTC filed its Comment praying that the Petition be denied. The BCDA, through the Office of the Government Corporate Counsel, and the Executive Secretary, through the Office of the Solicitor General, also filed their respective Comment praying that the Petition be denied due course and dismissed for lack of merit. The case is pending. Real Property Tax Issues In July 2008 and April 2013, MNTC filed Petitions for Review under Section 226 of the Local Government Code with the Local Board of Assessment Appeals (“LBAA”) of the Province of Bulacan seeking to declare as null and void tax declarations issued by the Provincial Assessor of the Province of Bulacan. The said tax declarations were issued in the name of MNTC as owner/administrator/beneficial user of the NLEX and categorized the NLEX as a commercial property, subject to real property tax. The LBAA has yet to conduct an ocular inspection to determine whether the properties, subject of the tax declarations form part of the NLEX, which MNTC argues is property of the public dominion and exempt from real property tax.

8

In September 2013, MNTC received notices of realty tax delinquencies for the years 2006 to 2012 and 2013 issued by the Provincial Treasurer of Bulacan stating that if MNTC fails to pay or remit the alleged delinquent taxes, the remedies provided for under the law for the collection of delinquent taxes shall be applied to enforce collection.In September 27, 2013, the Bureau of Local Government Finance of the Department of Finance (“DOF-BLGF”) wrote a letter to the Province of Bulacan advising it to hold in abeyance any further course of action pertaining to the alleged real property tax delinquency. In October 2013, the Provincial Treasurer of Bulacan has respected the directive from the DOF-BLGF to hold the enforcement of any collection remedies in abeyance.

Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

9

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer's Common Equity and Related Stockholder Matters

Market Information The Company has an authorized capital stock of P4,000,000,000.00 comprised of 40,000,000 common shares with par value of P100.00 per common share. As of the date of this annual report, the Company has issued and outstanding 17,760,000 common shares. The common shares of the Company are not traded in any market, nor are they subject to outstanding warrants to purchase, or securities convertible into common shares of the Company. Holders As of March 31, 2016, the Company has 19 stockholders, 14 of whom are individuals with at least one share each. The following sets out the shareholdings of the aforementioned 19 stockholders and the approximate percentages of their respective shareholdings to MNTC’s total outstanding common stocks:

Name of Stockholder Class of

Securities Number of

Shares

% of Outstanding

Shares

Metro Pacific Tollways Development Corporation

Common

12,609,591

71.00%

BDO Unibank, Inc.

Common

2,197,800

12.38%

Egis Investment Partners Philippines Inc.,

Common

1,775,999

10.00%

Globalfund Holdings, Inc.

Common

732,598

4.12%

Republic of the Philippines

Common

443,998

2.50%

Manuel V. Pangilinan

Common

1

0.00%

Jose Ma. K. Lim

Common

1

0.00%

Christopher Daniel C. Lizo

Common

1

0.00%

Rodrigo E. Franco

Common

1

0.00%

J. Luigi L. Bautista

Common

1

0.00%

10

Name of Stockholder Class of

Securities Number of

Shares

% of Outstanding

Shares

Raul L. Ignacio

Common

1

0.00%

Roberto V. Bontia

Common

1

0.00%

Alex Erlito S. Fider

Common

1

0.00%

Jean-Claude Neumann

Common

1

0.00%

Jose T. Sio

Common

1

0.00%

Frederic C. Dybuncio

Common

1

0.00%

Roberto B. Tan

Common

1

0.00%

Arlyn Sicangco – Villanueva

Common

1

0.00%

Elpidio C. Jamora, Jr.

Common

1

0.00%

TOTAL 17,760,000 100%

Dividend Policy Under Philippine law, dividends may be declared out of a corporation’s unrestricted retained earnings which shall be payable in cash, in property, or in stock to all stockholders on the basis of outstanding stock held by them. The amount of retained earnings available for declaration as dividends may be determined pursuant to the regulations issued by the SEC and the Amended and Restated Shareholders Agreement dated 30 September 2004 (“ARSA”) entered into, and acceded to, by the shareholders of the Company. The approval of the board of directors is generally sufficient to approve the distribution of dividends, except in the case of stock dividends which requires the approval of the stockholders representing not less than two-thirds (2/3) of the outstanding capital stock at a regular or special meeting duly called for the purpose. Dividend Policy under the Amended and Restated Shareholders Agreement In addition to what is stated in the Company’s By-Laws and as provided under existing laws, the Company follows the dividend policy provided under the ARSA. Subject to the terms and conditions of credit providers of the Company, the shareholders shall ensure that for each financial year, the Company shall distribute by way of dividends not less than 100% of the income of the Company available for distribution, after appropriation of prudent and proper reserves including allowance for future capital expenditures, and working

11

capital provision for taxes. Unless otherwise agreed upon by the shareholders, no amounts shall be distributed by way of dividends until PNCC’s share in the Project revenue collection has been repaid in full. To the extent funds for distribution are available, dividend distributions shall be made no less than once a year, and no later than within the later to occur of (i) sixty (60) days after the end of the relevant financial year in question and (ii) thirty (30) days after the date the auditors of the Company report on the accounts for the relevant period. Historical Dividends The Company’s Board of Directors has approved the declaration and payment of the following dividends to the shareholders in the past three years, as follows: 2015

Date of Approval

Date of Record Type of Dividend

Amount (P)

Dividend per Share (P)

July 23, 2015 July 13, 2015 Cash Php1,000,000,000 Php56.31

December 17, 2015

December 28, 2015

Cash 1,422,576,000 80.10

2014

Date of Approval


Amount (P)


July 31, 2014 July 21, 2014 Cash Php976,800,000 Php55.00

December 17, 2014

December 7, 2014

Cash 1,193,472,000 67.20

2013

Date of Approval


Amount (P)


July 24, 2013 July 24, 2013 Cash Php816,960,000 Php46.00

December 18, 2013

December 18, 2013

Cash 1,243,200,000 70.00

12

Item 6. Management's Discussion and Analysis or Plan of Operation

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying audited financial statements. This discussion may contain forward-looking statements that reflect our current views with respect to future events and our future financial performance. These statements involve risks and uncertainties, and our actual results may differ materially from those anticipated in these forward-looking statements Financial Highlights and Key Performance Indicators: Statement of Income Data

For the year

2015 For the year

2014 Increase (Decrease)

In PhP, Millions

(Audited) (Audited) Amount %

Operating revenue Php8,453 Php7,517 Php936 12%

Cost of services (3,421) (3,147) (274) 9%

General and administrative expenses (709) (552) (157) 28%

Interest expense and other financing costs, net of interest income of Php73 million in 2015 and Php61 million in 2014

(549) (540) (9) 2%

Foreign exchange gain – net 8 4 4 100%

Other income 156 122 34 28%

Provision for income tax (945) (839) (106) 13%

Net income Php2,993 Php2,565 Php428 17%

Net income margin 35% 34%

Statement of Financial Position

For the year

2015 For the year

2014

Increase (Decrease)

In PhP, Millions


Balance Sheet Data:

Cash and cash equivalents Php2,669 Php2,954 (Php285) (10%)

Total assets 30,885 28,715 2,170 8%

Total liabilities 22,751 21,087 1,664 8%

Total equity 8,134 7,628 506 7%

13

Business Overview Manila North Tollways Corporation (MNTC) holds the concession to operate and maintain the North Luzon Expressway (NLEX), and the Subic-Clark-Tarlac Expressway (SCTEX). The Company generates revenues mainly from toll fees collected from motorists who use the NLEX and SCTEX in travelling from Metro Manila going to the Central and Northern Luzon regions and vice versa. The months of April, May, November and December are considered peak season while the period from July to September are considered off-peak months mainly due to the onset of the rainy season. As of December 31, 2015, NLEX traffic reached 201,722 vehicle entries per day, a 9% growth or 16,425 daily vehicle entries higher compared to the 185,297 average vehicle entries per day in 2014. SCTEX traffic for 2015 was at 35,510 vehicle entries per day, a 10.9% growth from 32,018 vehicle entries in 2014. The expanded road network, coupled by lower fuel prices and favorable economic conditions were positive factors that propelled the growth of traffic in both expressways for the year.

Result of Operation Consolidated net income for the year ended December 31, 2015 reached Php2.99 billion and registered a 17% growth compared to the Php2.57 billion recorded in 2014. This was mainly due to higher toll revenues which increased by 12% or Php936 million versus last year as a result of the traffic growth in NLEX and the inclusion of SCTEX toll revenues starting October 27, 2015. The table below summarizes the revenues, costs and expenses during the year ended December 31, 2015 and 2014. Statement of Income Data

For the year

2015 For the year

2014 Increase (Decrease)

In PhP, Millions


Operating revenue Php8,453 Php7,517 Php936 12%

Cost of services (3,421) (3,147) (274) 9%

General and administrative expenses (709) (552) (157) 28%

Interest expense and other financing costs, net of interest income of Php73 million in 2015 and Php61 million in 2014

(549) (540) (9) 2%

Foreign exchange gain – net 8 4 4 100%

Other income 156 122 34 28%

Provision for income tax (945) (839) (106) 13%

Net income Php2,993 Php2,565 Php428 17%

Net income margin 35% 34%

14

December 31, 2015 Compared to December 31, 2014 Revenues The Company’s operating revenues for the years ended December 31, 2015 and 2014 were derived mainly from toll fees from NLEX and SCTEX. The Company also generated other income from advertising materials and structures as well as toll service facilities along the NLEX. For the year 2015, toll revenues reached Php8.45 billion, up by 12% compared to last year due to higher traffic volume. The average daily traffic on the NLEX reached more than 201,000 vehicles compared to the 185,297 vehicles generated last year. This can be attributed to the expanded road network via the opening of the Karuhatan Interchange (Segment 9), robust growth in car sales and relatively lower fuel prices throughout the year. Traffic growth on the SCTEX also looks promising as it recorded more than 35,000 vehicles in 2015. The Company started to record toll revenues from SCTEX starting October 27, 2015. Cost of Services The Company has allocated substantial portion of its resources to cover the costs of toll operation and maintenance. Summarized in the table below are details of cost of services and toll road repairs and maintenance costs for the period ended December 31, 2015 and 2014:

For the year 2015 For the year 2014 Change

In PhP, Millions Amount % Amount % Amount %

Operator’s fee Php1,742 51% Php1,711 54% Php31 2%

PNCC fee 482 14% 443 14% 39 9%

Concession fee 132 4% - 0% 132 100%

Provision for heavy maintenance

151 4% 225 7% (74) (33%)

Repairs and maintenance

108 3% 108 3% 0 0%

Insurance 53 2% 49 2% 4 8%

Toll collection and medical services

18 0% 16 1% 2 13%

Outside services 64 2% 54 2% 10 19%

Amortization of service concession assets

575 17% 484 16% 91 19%

Depreciation 9 0% - 0% 9 100%

Salaries 53 2% 43 1% 10 23%

Others 34 1% 14 0% 20 143%

Total cost of services Php3,421 100% Php3,147 100% Php274 9%

PNCC fee increased by 9% to Php482 million from Php443 million last year due to higher revenues reported in 2015. The provision for heavy maintenance amounted to Php151 million, 33% or Php74 million lower than last year. Repairs and maintenance costs amounted to Php108 million, almost at par

15

compared to last year. Insurance expense increased by 9% or Php4 million compared to 2014. On the other hand, toll collection and medical services increased by 13% or Php2 million versus last year. The increase in costs were mainly attributed to the operations and maintenance of the SCTEX. Amortization of service concession assets increased by 19% to Php575 million from Php484 million last year, due to the opening of Segment 9 in March 2015, and the take-over of the management, operation and maintenance of the SCTEX last October 2015. The cost incurred on outside services amounted to Php64 million, 19% or Php10 million higher compared to the Php54 million incurred last year as the Company continued to engage the services of third party consultants to render professional services on several marketing and tourism programs to promote the Easytrip tag as the convenient alternative mode of payment along the expressway. Salaries amounting to Php53 million incurred in 2015 pertains to the compensation of personnel directly involved in the toll operations and maintenance of NLEX and SCTEX. General and Administrative Expenses General and administrative expenses amounted to Php709 million in 2015, Php157 million or 28% higher than the Php552 million incurred last year. This account comprises mainly of manpower costs, advertising expenses, management fees, utilities, professional fees, supplies, taxes and licenses, outside services and depreciation expense. Advertising and marketing expenses increased by Php126 million to Php220 million as the Company increased its efforts in promoting travel to the North of Luzon via NLEX and SCTEX. Professional fees increased by Php33 million to Php51 million due to increase in legal and marketing services to support the non-toll revenue initiatives.


In PhP, Millions Amount % Amount % Amount %

Advertising and marketing expenses Php220 31% Php94 17% Php126 134%

Salaries and employee benefits 184 26% 203 37% (19) (9%)

Management fees 61 9% 45 8% 16 36%

Taxes and licenses 57 8% 52 9% 5 10%

Professional fees 51 7% 18 3% 33 183%

Depreciation of property and equipment 29 4% 31 6% (2) (6%)

Representation and travel 28 4% 22 4% 6 27%

Outside services 23 3% 26 5% (3) (12%)

Others 56 8% 61 11% (5) (8%)

Total General & Administrative Expenses Php709 100% Php552 100% Php157 28%

16

Interest and Financing Costs

Net interest expense (net of interest income) for the year ended December 31, 2015 amounted to Php549 million, slightly up by 2% or Php9 million than last year due partly to the prepayment fee paid on the 2011 term loans from insurance companies that were prepaid in December 2015. The prepayment of the loans also resulted to the amortization of debt issue costs increasing by 21% or Php5 million at Php29 million from Php24 million last year. For the year 2015, interest income earned from bank deposits and other short-term investments amounted to Php73 million, 20% or Php12 million higher than last year mainly due better yield on investments as well as higher cash balance. Total borrowing costs for the year which are capitalized amounted to Php575.1 million, higher by 71% from Php335.9 million in 2014. The table below summarizes the details of interest expense and other finance costs for the period ended December 31, 2015 and 2014:

In PhP, Millions For the year 2015 For the year 2014 Change

Amount % Amount % Amount %

Interest and financing costs:

Interest expense Php558 90% Php575 96% (Php17) (3%)

Prepayment fee 30 5% 0 0% 30 100%

Amortization of debt issue costs 29 5% 24 4% 5 21%

Lenders’ fees and bank charges 5 0% 2 0% 3 150%

Total interest & financing costs 622 100% 601 100% 21 4%

Interest Income:

Cash and cash equivalents 19 26% 11 18% 8 73%

AFS financial assets and others 54 74% 50 82% 4 8%

Total interest income 73 100% 61 100% 12 20%

Total net interest income Php549 Php540 Php9 2%

Other Income and Expenses This account includes income generated from advertising collaterals and toll service facility fees. For the year 2015, other income amounted to Php156 million, a growth of 28% or Php34 million from 2014 figures. The table below shows the details of other income for the year 2015 and 2014:

In Php Millions



Income from advertising Php112 72% Php95 78% Php17 18%

Income from toll service facilities 33 21% 22 18% 11 50%

Income from utility facilities 5 3% 2 2% 3 150%

17

In Php Millions



Gain on sale of AFS financial assets Php2 1% Php1 1% Php1 100%

Others 4 3% 2 1% 2 100%

Total other income Php156 100% Php122 100% Php34 28%

Net Income Net income for the year ended December 31, 2015 reached Php2.99 billion and registered a 17% growth compared to the Php2.57 billion recorded in 2014. This was mainly due to higher toll revenues which increased by 12% or Php936 million versus last year as a result of the traffic growth in NLEX and additional inflows due to the opening of the Karuhatan Interchange (Segment 9) on March 19, 2015 and the completion of the SCTEX take-over on October 27, 2015. December 31, 2014 Compared to December 31, 2013 Revenues The Company’s operating revenues for the years ended December 31, 2014 and 2013 were derived mainly from toll fees. The Company also generated other income from advertising materials and structures as well as toll service facilities along the NLEX. For the year 2014, toll revenues reached Php7.52 billion, up by 6% compared to last year due to higher traffic volume generated by the Class 1 and 3 vehicles. The average daily traffic reached 185,297 vehicles compared to the 173,067 vehicles generated last year. This can be attributed to the robust growth in car sales coupled with relatively lower fuel prices towards the end of 2014. Cost of Services

The Company has allocated substantial portion of its resources to cover the costs of toll

operation and maintenance. Summarized in the table below are details of cost of services

and toll road repairs and maintenance costs for the period ended December 31, 2014 and

2013:

In PhP, Millions



Operator’s fee Php1,711 54% Php1,532 52% Php179 12%

PNCC fee 443 14% 418 14% 25 6%

Provision for heavy maintenance

225

7%

167

6%

58

35%

Repairs and maintenance 108 3% 109 4% (1) (1%)

Insurance 49 2% 44 1% 5 11%

Toll collection and medical services

16

1%

18

1%

(2)

(11%)

Outside services 54 2% 44 1% 10 23%

Amortization of service concession assets

484

16%

600

21%

(116)

(19%)

18

In PhP, Millions



Salaries Php43 1% Php- - Php43 100%

Taxes and licenses 10 0% - - 10 100%

Others 4 0% 6 0% (3) (50%)

Total cost of services Php3,147 100% Php2,938 100% Php208 7%

Operator’s fee increased by Php179 million or 12% compared to 2013 as various additional services specifically on the continuing program to further improve traffic management, security services and anti-overloading campaign were implemented in 2014. PNCC fee increased by 6% to Php443 million from Php418 million last year due to higher revenues reported in 2014. The provision for heavy maintenance amounted to Php225 million, 35% or Php58 million higher than last year. Repairs and maintenance costs amounted to Php108 million, almost at par compared last year. Insurance expense increased by 11% or Php5 million compared to 2013. On the other hand, toll collection and medical services declined by 17% or Php2 million as a result of process improvements on the toll collection pick-up and deposits implemented in several major collection areas of the NLEX. Amortization of service concession assets amounted to Php484 million is Php116 million or 19% lower than the Php600 million reported in 2013 as the Company shifted to the units of production method of amortization from the straight-line method. The cost incurred on outside services amounted to Php54 million, 23% or Php10 million higher compared to the Php44 million incurred last year as the Company continued to engage the services of third party consultants to render professional services on several marketing and tourism programs to promote the Easytrip tag as the convenient alternative mode of payment along the expressway. General and Administrative Expenses

General and administrative expenses amounted to Php552 million in 2014, Php15 million or

3% higher than the Php537 million incurred last year. This account comprises mainly of

manpower costs, advertising expenses, management fees, utilities, professional fees,

supplies, taxes and licenses, outside services and depreciation expense.

Interest Expense and Financing Costs

Net interest expense (net of interest income) for the year ended December 31, 2014 amounted to Php540 million, slightly up by 1% or Php4 million than same period last year. The amortization of debt issue costs also posted a minimal increase of 2% or Php0.4 million in 2014 to Php24 million from Php23 million in 2013. The lenders’ fees and bank charges declined by 11% or Php0.3 million during the period. For the year 2014, interest income earned from bank deposits and other short-term investments amounted to Php61 million, 26% or Php21 million lower than same period last year mainly due to the accounting treatment of interest income earned from funds intended for the construction of expansion projects. The interest income earned from these funds was deducted from the borrowing costs capitalized as part of the project costs. Total interest income charged to project cost amounted to Php57 million in 2014 and Php2 million in 2013.

19

The table below summarizes the details of interest expense and other finance costs for the

period ended December 31, 2014 and 2013:

In PhP, Millions



Interest and financing costs:

Interest expense, net of interest income of Php61 million in 2014 and Php83 million in 2013

Php514

95%

Php510

95%

Php4

1%

Amortization of debt issue costs 24 4% 23 4% 1 4%

Lenders’ fees and bank charges 2 1 3 1% (1) (33%)

Total interest & financing costs Php540 100% Php536 100% Php4 1%

Interest Income:

Cash and cash equivalents Php11 18% Php44 53% (Php33) (75%)

AFS financial assets and others 50 82 39 47 11 28%

Total interest income Php61 100% Php83 100% (Php22) (27%)

Other Income and Expenses

This account includes income generated from advertising collaterals and toll service facility fees. For the year 2014, other income amounted to Php122 million, a double digit growth of Php15 million or 14% compared to the Php107 million generated in 2013. The table below shows the details of other income for the year 2014 and 2013:

In Php Millions



Income from advertising Php95 78% Php65 61% Php30 46%

Income from toll service facilities 22 18% 21 20% 1 5%

Income from utility facilities 2 2% 2 2% - -%

Gain on sale of AFS financial assets

1 1% 12 11% (11) (92%)

Reversal of allowance for doubtful accounts

-

-

5

5%

(5)

(100%)

Others 2 2% 2 2% - -%

Total other income Php122 100% Php107 100% Php15 14%

Net Income

Net income for the year ended December 31, 2014 reached Php2.57 billion and registered an 8% growth compared to the Php2.38 billion recorded in 2013. This was mainly due to higher toll revenues which increased by 6% or Php415 million versus last year as a result of the impressive traffic contributed by Class 1 and Class 3 vehicles which posted year-on-year growth of 8% for both classes.

20

Balance Sheet December 31, 2015 Compared to December 31, 2014 Assets Cash and cash equivalents as of December 31, 2015 was at Php2.67 billion, down by 10% from Php2.95 billion from the previous year. The decrease was due to the upfront payment for the acquisition of the SCTEX, maturity of existing loans, prepayment of 2011 term loans, the on-going construction of Segment 10. This was offset by cash generated from operations and collections of receivables, as well as proceeds from the term loan drawn last December 2015. In addition short-term deposits was at Php1.23 billion, down by 156%, while current available-for-sale assets decreased by 21% to Php201 million from Php256 million last year was also due to the upfront payment for the acquisition of the SCTEX, maturity of existing loans, prepayment of 2011 term loans, the on-going construction of Segment 10. Receivables amounted to Php561 million, down by 18% from Php683 million as of end-2014 due to collection of trade receivables this year. Other accounts receivables pertains to the advances made to the DPWH intended solely for right-of-way acquisition of the Segment 9 project and receivables arising from advertising collaterals and utility facility fees. Input value-added tax increased to Php448 million, Php401 million higher than the Php47 million recorded in 2014. The growth is mainly due to the surge in input value added tax arising from purchases of goods and services during the period. Service Concession Assets increased by Php5.9 billion to Php22.8 billion, from Php16.9 billion in 2014 due to the acquisition of SCTEX, the opening of Segment 9, the on-going construction of Segment 10 and the acquisition of fixed operating equipment (FOE) for the Toll Collection System Migration Project. Liabilities and Stockholder’s Equity Current liabilities reached Php5.2 billion, up by Php546 million or 12% compared to the Php4.6 billion as of December 31, 2014. The increase was largely due to the dividends payable amounting to Php1.42 billion compared to the Php1.19 billion balance in 2014. Accounts payable and other current liabilities increased by Php267 million compared to last year mainly on purchases on account from regular suppliers as well as payable to the contractors from the on-going construction activities on Segment 10 and the NLEX – SCTEX integration project. Long-term debt including current portion stood at Php17.8 billion, up by 6% or Php1.07 billion compared to the Php16.7 billion last year mainly due to the Php3 billion loan obtained in December 2015 from the recently signed term loan agreement, offset by the loan maturities as well as the prepayment of the 2011 term loan facilities with insurance companies. Retained earnings grew by Php571 million to Php2.62 billion from Php2.05 billion as of December 31, 2014 due to the net income from operations. Stockholders’ equity reached Php8.1 billion, up by 7.0% or Php506 million compared to the Php7.6 billion last year.

21

Key Financial Indicators The following table shows the Company’s relevant financial ratios:

December 31,

2015 December 31,

2014

Current ratio Current assets

1.06 1.96 Current liabilities

Debt-to-equity (DE) ratio Interest bearing liabilities

2.19 2.20 Stockholders’ equity

Net profit margin Net income

35% 34% Revenues

Return on assets Net income

10.0% 10.4% Average total assets

Return on stockholders’ equity*

Net income 38% 35%

Average stockholders’ equity

Current ratio decreased to 1.06 times from 1.96 times last year due to the prepayment of 2011 term loan facilities with insurance companies and the acquisition of SCTEX, offset by proceeds from the recently signed term loan facility. The Debt-to-Equity Ratio for 2015 is at par with last year’s level. Net profit margin as of December 31, 2014 slightly improved to 35%, 1% higher than the 34% margin posted last year. Return on assets remained flat at 10.0% this year. As of December 31, 2015, the return on stockholders’ equity slightly improved to 38% from 35% posted last year brought by higher net income this year. Higher traffic, expanded road network coupled by favorable business climate in the region had driven the momentum of stable growth during the year. December 31, 2014 Compared to December 31, 2013 Assets Cash and cash equivalents as of December 31, 2014 reached Php2.95 billion, up by Php1.45 billion or 97% compared to the Php1.50 billion in the previous year. The increase was contributed partly by cash generated from operations and collections of receivables, as well as proceeds from the retail bond offering in March 2014.

Receivables amounted to Php683 million, up by 187% or Php446 million compared to the

Php238 million last year. Other accounts receivables pertains to the advances made to the

DPWH intended solely for right-of-way acquisition of the Segment 9 project and receivables

arising from advertising collaterals and utility facility fees.

22

The value of inventories amounting to Php48 million is slightly lower by 5% or Php2.48 million compared to 2013. This is due to the completion of the new toll collection system migration which required lesser requirements of spare parts. Other current assets increased to Php178 million, 31% or Php43 million higher than the Php135 million recorded in 2013. The growth is mainly due to the increase in the premiums of project insurance and the surge in input value added tax arising from purchases of goods and services during the period. Available for sale financial assets amounting to Php256 million represents the current portion of the Company’s investments in high-yielding marketable securities. The service concession assets of Php16.86 billion increased by 13% or Php1.94 billion compared to the Php14.93 billion recorded in 2013 as a result of the on-going construction of Segments 9 & 10 (HarborLink) projects of the NLEX. Liabilities and Stockholder’s Equity Current liabilities reached Php4.6 billion, up by Php1.5 billion or 46% compared to the Php3.16 billion as of December 31, 2013. The increase was largely due to the dividends payable amounting to Php1.19 billion compared to the Php409 million balance in 2013. Accounts payable and other current liabilities increased by Php765 million compared last year mainly on purchases on account from regular suppliers as well as payable to the contractors from the on-going construction activities on Segments 9 and 10 of the NLEX project. Long-term debt including current portion stood at Php16.7 billion, up by 56% or Php6 billion compared to the Php10.8 billion last year mainly due to the Php7 billion debt obtained in March 2014 through the retail bond offering. Total payments of principal loans amounted to Php955 million in 2014 and Php167 million in 2013. Retained earnings grew by 24% or Php395 million to Php2.1 billion from Php1.7 billion as of December 31, 2013 due to the net income from operations. Stockholders’ equity reached Php7.6 billion, up by 6.0% or Php429 million compared to the Php7.2 billion last year. Key Financial Indicators The following table shows the Company’s relevant financial ratios:

December 31,

2014 December 31,

2013

Current ratio Current assets

1.96 1.31 Current liabilities

Debt-to-equity (DE) ratio Interest bearing liabilities

2.20 1.49 Stockholders’ equity

Net profit margin Net income

34% 33% Revenues

Return on assets Net income

10.4% 12% Average total assets

23

December 31,

2014 December 31,

2013

Return on stockholders’ equity*

Net income 35% 34%

Average stockholders’ equity

Current ratio slightly increased to 1.96 times from 1.31 times in 2013 due to the improvements in cash portfolio coming from the cash proceeds from the retail bond offering in March 2014 and strong cash generated from operations. The Debt-to-Equity Ratio increased to 2.20 times in 2014 compared to the 1.49 times registered in 2013 mainly due to additional debt arising from the fixed rate bonds offering in March 2014. Net profit margin as of December 31, 2014 slightly improved to 34%, 1% higher than the 33% margin posted in 2013. Return on assets of 10.4% is lower than the 12% ROA registered in 2013 due to higher asset base resulting from the cash proceeds from the bond offering last March 2014 and substantial increase in concession assets arising from the construction of Segments 9 and 10 (portions of the Harbor Link) and the Toll Collection System (TCS) migration project. As of December 31, 2014, the return on stockholders’ equity slightly improved to 35% from 34% posted in 2013 brought by higher net income in 2014. Higher traffic coupled by favorable business climate in the region had driven the momentum of stable growth during the year.

Cash Flows

The table below summarizes the Company’s comparative cash flow as of December 31, 2015 and 2014:

Cash Flows (Php, millions)

December 31, 2015 December 31, 2014

Cash, beginning balance Php2,954 Php1,502

Net cash provided by operating activities 4,147 3,949

Net cash used in investing activities (2,726) (6,523)

Net cash used in financing activities (1,708) 4,027

Net increase (decrease) in cash (287) 1,453

Effect of exchange rate changes 2 (1)

Cash, ending balance Php2,669 Php2,954

24

Cash Flows from Operating Activities The net cash inflows from operations in 2015 amounted to Php4.15 billion arising from toll fees collected from the motorists and income generated from non-toll activities. Strong cash flows from operating activities were mainly due to higher revenues as a result of higher traffic mainly from Class 1 and Class 3 vehicles which posted year-on-year traffic growth of 11% and 6%, respectively. Cash Flows from Investing Activities Net cash outflows from investing activities amounted to Php2.7 billion due to the on-going construction of Segment 10, the opening of Segment 9 and the acquisition of SCTEX in October 2015. Additions to service concession assets amounted to Php6.55 billion, offset by the sale of available-for-sale investments amounting to Php8.95 billion and acquisition of available-for-sale investments of Php5.40 billion Cash Flows from Financing Activities Net cash flows used in financing activities amounted to Php1.71 billion. Outflows during the period includes dividend payment of Php2.19 billion, interest expense of Php560 million, principal loan payment of Php1.96 billion offset by proceeds from loan amounting to Php3.0 billion. Other Financial Information

(i) Any known trends, demands, commitments, events or uncertainties that will have a material impact on the issuer’s liquidity.

There are no known trends, demands, commitments, events or uncertainties

that will have a material impact on the issuer’s liquidity.

(ii) Any events that will trigger direct or contingent financial obligation that is material to the Company, including any default or acceleration of an obligation.

The registrant’s current concession agreement includes standard provisions

relating to events of default. Any breach of the loan covenants or material adverse change may result in an event of default.

(iii) All material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons created during the reporting period.

The Company has no material off-balance sheet transactions, arrangements,

obligations (including contingent obligations), and other relationships with unconsolidated entities or other persons created during the reporting period.

(iv) Any material commitments for capital expenditures, the general purpose of such commitments, and the expected sources of funds for such expenditures should be described.

25

The Company sourced financing for the construction of Segment 10. The newly-raised Php7 billion fixed rate bonds, along with internally generated cash and loans from insurance companies obtained during the last quarter of 2013, will be used to finance the construction of Segment 10. This segment is expected to cost around Php11.5 billion. Construction has started in June 2014 and is expected to be completed by 2017.

The Company has also started the Phase1 of the NLEX Widening Project

covering the areas from Sta. Rita, Guiguinto, Bulacan to San Fernando, Pampanga and Balem to Sta. Ines in Pampanga. Total cost of the project is at Php2.9 billion and is also expected to be completed in 2017.

(v) Any known trends, events or uncertainties that have had or that are reasonably expected to have a material impact on net sales or revenues or income from continuing operations.

a. Tariff Increase – the uncertainty in the approval of the tariff increase from regulatory authorities in the expressway can hamper the growth in net revenues of the Company moving forward.

b. Higher Fuel Prices – vehicle operating costs normally go higher with the increase in fuel prices, thereby decreasing the demand for travel. Uncertainties in the movement of crude prices in the world market would affect the expected traffic volume growth in NLEX. (vi) Any significant elements of income or loss that did not arise from the registrant’s continuing operations.

During the period, there are no significant elements of income or loss that arise

from transactions outside the registrant’s continuing operations.

26

Item 7. Financial Statements

The financial statements and schedules listed in the accompanying Index to Financial

Statements and Supplementary Schedules are filed as part of this Form 17-A.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure

SGV & Co., independent auditors, audited the financial statements of the Company as at December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013. SGV & Co. has no shareholdings in the Company, or any right, whether legally enforceable or not, to nominate or to subscribe to the securities of the Company, in accordance with the professional standards on independence set by the Board of Accountancy and Professional Regulation Commission.

The named independent auditor has not acted and will not act as promoter, underwriter, voting

trustee, officer or employee of the Company.

The aggregate fees billed by SGV & Co. are shown below (with comparative figures for 2014

and 2013):

2015 2014 2013

Audit and Audit Related Fees

P4.7 Million P4.4 Million P4.4 Million

The Company has no disagreements with its independent auditors on any matter of

accounting principles or practices, financial statement disclosure, or auditing scope or

procedure.

27

PART III - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer

Board of Directors The Board is principally responsible for the Company’s overall direction and governance. The Company’s Articles of Incorporation provide for thirteen (13) members of the Board, who shall be elected by the stockholders. Each director holds office for one (1) year and until their successors are elected and qualified in accordance with the By-Laws. As of March 31, 2016, the following are the current members of the Board of Directors of the Company:

Name Age Citizenship Year Position was Assumed

Manuel V. Pangilinan 69 Filipino 2008 Jose Ma. K. Lim 64 Filipino 2008 Rodrigo E. Franco 57 Filipino 2008 Christopher Daniel C. Lizo 43 Filipino 2008 Raul L. Ignacio 57 Filipino 2016 Jose Luigi L. Bautista 57 Filipino 2016 Robert V. Bontia* 49 Filipino 2016 Roberto B. Tan 62 Filipino 2015 Jean-Claude Neumann 63 French 2005 Jose T. Sio 76 Filipino 2010 Frederic C. DyBuncio 56 Filipino 2014 Alex Erlito S. Fider 63 Filipino 2010 Dr. Arlyn Sicangco-Villanueva 59 Filipino 2014

On February 17, 2016, Mr. Roberto V. Bontia was elected as director of the Company. His election remains subject to the approval of the stockholders of the Company. The following is a brief description of the business experiences of each of our directors for at least the past five years: Manuel V. Pangilinan Mr. Manuel V. Pangilinan, has served as Chairman of the Board of MNTC since 2008 and is the chairman of the Compensation and Remuneration Committee of MNTC. He serves as Chairman of Philippine Long Distance Telephone Company (“PLDT”), Manila Electric Company, Smart Communications, Inc. (“Smart”), Metro Pacific Investments Corporation (“MPIC”), Landco Pacific Corporation, Philex Mining Corporation, Associated Broadcasting Corp., Medical Doctors, Inc. (Makati Medical Center), Colinas Verdes, Inc. (Cardinal Santos Medical Center), Asian Hospital, Inc. (“Asian Hospital”), Riverside Medical Center, Davao Doctors, Inc. and Our Lady of Lourdes Hospital. He also serves as the Vice Chairman of Roxas Holdings, Inc. Mr. Pangilinan founded First Pacific Company Limited in 1981 and served as Managing Director until 1999. He was appointed as Executive Chairman until June 2003, when he was named Chief Executive Officer and Managing Director. He also holds the position of President Commissioner of P.T. Indofood Sukses Makmur Tbk, the largest food company in Indonesia.

28

Outside the First Pacific Group, Mr. Pangilinan is also Chairman of the Board of Trustees of San Beda College, PLDT-Smart Foundation, Inc., the Philippine Business for Social Progress, Philippine Disaster Recovery Foundation, Inc. and the Hong Kong Bayanihan Trust, a non-stock, non-profit foundation which provides vocational, social and cultural activities for Hong Kong’s foreign domestic helpers, the Vice Chairman of the Foundation for Crime Prevention, a private sector group organized to assist the government with crime prevention, and a member of the Board of Trustees of Caritas Manila and Radio Veritas-Global Broadcasting Systems, Inc. He is also Co-Chairman of the newly organized US-Philippine Business Society, a non-profit society which seeks to broaden the relationship between the United States and the Philippines in the areas of trade, investment, education, foreign and security policies and culture. He also served as a member of the Board of Overseers of the Wharton School, University of Pennyslvania. In February 2007, he was named the President of the Samahang Basketbol ng Pilipinas, a national sports association for basketball, and effective January 2009, he assumed the chairmanship of the Amateur Boxing Association of the Philippines, the governing body of amateur boxers in the country. In 2011, he was appointed a member of the ASEAN Business Advisory Council by the Office of the President of the Philippines. He was a former Commissioner of the Pasig River Rehabilitation Commission and a former Governor of the Philippine Stock Exchange. Mr. Pangilinan graduated cum laude from the Ateneo de Manila University, with a Bachelor of Arts degree in Economics. He received his Master’s degree in Business Administration from Wharton School of Finance and Commerce, University of Pennsylvania. Jose Ma. K. Lim Mr. Jose Ma. K. Lim has served as a Director since 2008 and is the chairman of the Executive and Nomination Committees of MNTC. He serves as the President and Chief Executive Officer of MPIC (since 2006) and as a Director in the following MPIC Subsidiary and affiliate companies: Beacon Electric Asset Holdings Inc.; Metro Pacific Tollways Corporation (“MPTC”), Tollways Management Corporation (“TMC”), Manila Electric Company, Maynilad Water Services, Inc. (“Maynilad”), Light Rail Manila Corporation; AF Payments Inc; Metropac Water Services Inc., Indra Philippines Inc., Medical Doctors, Inc. (Makati Medical Center), Cardinal Santos Medical Center and Our Lady of Lourdes Hospital. He also serves as Chairman of Asian Hospital, Davao Doctors, Inc., and Riverside Medical Center. Mr. Lim joined Fort Bonifacio Development Corporation (FBDC) in 1995 as Treasury Vice President and was eventually appointed as its Chief Finance Officer. With the divestment in FBDC, Mr. Lim assumed the position of Group Vice President and Chief Finance Officer of FBDC’s then-parent company, Metro Pacific Corporation, from 2001 to 2003. Mr. Lim is actively involved in the Management Association of the Philippines and has served as Vice-Chair of the Corporate Governance Committee since 2007. He was awarded by Corporate Governance Asia as the Best CEO for Investor Relations for 4 consecutive years (2012-2015). Mr. Lim graduated from the Ateneo de Manila University, with a Bachelor of Arts degree in Philosophy. He received his Master’s degree in Business Administration in 1978 from the Asian Institute of Management.

29

Rodrigo E. Franco Mr. Rodrigo E. Franco is the President and Chief Executive Officer (“CEO”) of Metro Pacific Tollways Corporation concurrent to his role as President and CEO of MNTC. He has served as Director of the Company since 2008 and is a member of the Executive Committee of MNTC. He was previously MNTC’s Executive Vice President (“EVP”), Chief Operating Officer (“COO”), and Chief Finance Officer (“CFO”) from 2003 until his appointment as top executive of the Company in January 2009. During his tenure as EVP/COO/CFO of MNTC, Mr. Franco was primarily responsible for managing MNTC’s project finance facilities from multilateral and commercial banking sources. He was also involved in identifying and mitigating risk exposure of the Company, managing relationships with the shareholders and other stakeholders, and developing solutions for finance-related issues. Before joining MNTC in April 2003, Mr. Franco spent 20 years with JPMorgan Chase Bank. He was Vice President for Investment Banking when he left the Manila branch of JPMorgan Chase by the end of 2002. He assisted several Philippine companies raise funds from international debt and capital markets, and was involved in originating and executing a number of mergers and acquisitions, equity capital markets and loan and bond restructuring transactions. Mr. Franco graduated with honors from the Ateneo de Manila University with a Bachelor of Science degree in Management Engineering. He obtained his Master’s degree in Business Administration from the Ateneo Graduate School of Business in Manila. Christopher Daniel C. Lizo Mr. Christopher Daniel C. Lizo is the Chief Operating Officer of MP CALA Holdings, Inc. and concurrently serves as Treasurer and Director of MNTC, Director of MPTC and TMC. He has served as Chief Finance Officer and Treasurer of MNTC from 2008-2016. He was also appointed as MNTC’s Compliance Officer in 2014. He has 16 years of vast experience in finance and accounting for having worked with the Metro Pacific Group. As Treasury manager in 2000, Mr. Lizo has successfully handled the retirement of its seven-year debt reduction program that geared the company into reorganization and recapitalization. After Metro Pacific Investments Corporation (MPIC) was established in 2006. Mr. Lizo was appointed as Controller and Vice President for Treasury of MPIC to oversee its strategic business and financial planning process. In addition, he also handled the administration, finance, credit and risk management, budget and accounting departments of the company. Mr. Lizo became a Director of MPIC in 2007. He sits on the Board of Directors of MPTC and TMC. Chris Lizo is a BSC Accounting graduate of De La Salle University, batch 1993 and a Certified Public Accountant. He recently finished the Executive Development Program in Wharton Business School of the University of Pennsylvania. Roberto B. Tan Mr. Roberto B. Tan, Filipino, has served as Director and First Vice Chairman of MNTC since February 2015. He was re-appointed Treasurer of the Philippines in January 2015 and concurrently serves as the Officer-in-Charge of the International Finance Group of the Department of Finance.

30

Mr. Tan was first appointed as Treasurer of the Philippines in July 2008 and became World Bank Executive Director in November 2012. Mr. Tan has an extensive experience in public finance having assumed several key positions in the Department of Finance, including Undersecretary from 2005 to 2008, Assistant Secretary from 1999 to 2005, and Director in the early 1990s for the International Finance Group. Mr. Tan also assumed the post of Advisor to the Executive Director of the Asian Development Bank Board. His professional background includes treasury management, international finance, consumer credit, and management consulting. Mr. Tan holds a Master’s degree in Economics from the Fordham University, New York, where he also pursued doctoral studies. He obtained his MBA from the Ateneo de Manila University where he likewise received his Bachelor’s degree in Economics. Jean-Claude Neumann Mr. Jean-Claude Neumann has served as Director and Second Vice Chairman of the Company since 2005. He also serves as a member of the Executive and Audit Committees of MNTC. He is currently the President and Managing Director of Egis Projects Philippines, Inc., the local subsidiary of Egis Projects S.A. Mr. Neumann has occupied various positions as Project Director of several motorway operating systems projects in Asia and Europe. He served more than ten years with the defense giant, Thomson-CSF, managing complex integrated defense systems projects, culminating with the position of Project Director for a defense missile project worth €400 million. Mr. Neumann is an Electronics Engineer from Ecole Supérieure d’Electricité, Paris and has a Master’s Degree in Business Administration from INSEAD. He also holds a Master’s Degree in Mathematics from the University of Lyon. Jose T. Sio Mr. Jose T. Sio has served as Director of the Company since 2010 and is a member of the Executive and Audit Committees of MNTC. He is presently affiliated with the following companies listed with the Philippine Stock Exchange (PSE): (i) SM Investments Corporation, as Director, Executive Vice President and Chief Finance Officer, and Member of the Executive Committee; (ii) China Bank, as Director and Member of Trust Investment Committee; (iii) Atlas Consolidated Mining and Development Corporation, as Director and Member of Executive Committee; (iv) Belle Corporation, as Director; (v) BDO Unibank, Inc., as Adviser to the Board of Directors; (vi) Premium Leisure Corporation, as Adviser to the Board of Directors; and (vii) SM Prime Holdings, Inc., as Adviser of Audit and Risk Management Committee. Mr. Sio also serves as Director in several companies not listed in the PSE: (i) OCLP (Ortigas) Holdings, Inc.; (ii) Carmen Copper Corporation; (iii) CityMall Commercial Centers Inc.; and (iv) First Asia Realty Development Corporation. He is the President of SM Foundation, Inc. and GlobalFund Holdings, Inc. Mr. Sio was a Senior Partner of SyCip Gorres Velayo & Co. (SGV). He was voted as CFO of the Year in 2009 by the Financial Executives of the Philippines (FINEX). He was also awarded as Best CFO (Philippines) in various years by Hong Kong-based business publications such as Alpha Southeast Asia, Corporate Governance Asia, Finance Asia and The Asset. Mr. Sio is a Certified Public Accountant and holds a Bachelor of Science degree in Commerce, major in Accounting, from the University of San Agustin. He obtained his Master's degree in Business Administration from New York University, U.S.A.

31

Frederic C. DyBuncio Mr. Frederic C. DyBuncio has served as Director of MNTC since February 2014. He serves as President, Chief Executive Officer and Director of Belle Corporation and its subsidiary Premium Leisure Corp. He is the Vice Chairman and Director of Atlas Consolidated Mining and Development Corporation. Concurrently, he is the Executive Vice President of SM Investments Corporation. Prior to holding the post, he was a career banker who spent over 20 years with JPMorgan Chase and its predecessor institutions. Mr. DyBuncio graduated from Ateneo de Manila University with a Bachelor of Science degree in Business Management and finished a Master’s degree in Business Administration program at Asian Institute of Management. Alex Erlito S. Fider Atty. Alex Erlito S. Fider has served as Director and Corporate Secretary of the Company since 2010 and 2008, respectively. He serves as Director and Corporate Secretary of MPTDC, MPTC, TMC, Smart, and Maynilad, and as Director of Roxas Holdings, Inc. Atty. Fider is a senior partner of Picazo Buyco Tan Fider Santos Law Offices. He was admitted to the Philippine Bar in 1985 and has been in the practice of law since 1985. His legal experience spans almost 29 years of involvement in corporate transactions and projects that involved legal counseling on Philippine law, including legal advice on the appropriate transaction structure, crafting of documents, legal diligence audit and managing corporate legal work in corporate acquisitions and investments, joint ventures, privatizations, corporate finance, divestments and restructuring. Atty. Fider is actively involved in the Financial Executives Institute of the Philippines (FINEX) and Institute of Corporate Directors, of which he is a Fellow. Atty. Fider obtained his Bachelor of Arts degree in Economics and Bachelor of Laws from the University of the Philippines. Mr. Raul L. Ignacio Mr. Raul L. Ignacio is the Chief Operating Officer of the Manila North Tollways Corporation and concurrently serves as Director of MNTC since February 2016. He was previously the Senior Vice President for Construction and Engineering of the Company. Mr. Ignacio has more than 30 years of experience in engineering, construction, and maintenance of roads and bridges. He joined MNTC in November 1988 as Head of Project Controls. His accomplishments over his 15 years with MNTC include the timely completion of the rehabilitation of the North Luzon Expressway and the high standards of the operations and maintenance of the NLEX. Over the years, his role has expanded to cover the operations and maintenance of the NLEX, including the implementation of the heavy maintenance of the NLEX, and the planning, design & construction of various projects of MNTC. Mr. Ignacio graduated from the University of the Philippines in 1981 with a Bachelor of Science Degree in Civil Engineering. J. Luigi L. Bautista

32

Mr. Bautista is the President of MP CALA Holdings, Inc. (MPCHI). He serves as Director of MNTC since February 2016 concurrent to his position of President of Cavitex Infrastructure Corporation (CIC) and Senior Vice President for Technical Operations of Metro Pacific Tollways Development Corporation (MPTDC). Prior to CIC and MPTDC, he held various positions in the Manila North Tollways Corporation (MNTC) as Senior Vice President for Program Management and First Philippine Infrastructure Development Corporation as Assistant Vice President for Contracts Administration and the Chief-of-Staff under the Office of the President/General Manager. He has close to twenty (20) years of involvement in the development, construction and modernization of the North Luzon Expressway Project since 1995. His areas of expertise are in developing and constructing Tollroad Infrastructure Projects, as well as in overseeing their Operation and Maintenance. Mr. Bautista is a licensed civil engineer, having passed the civil engineering licensure examination in May 1981 with a general average of 84.25%. He belonged to the top 20 successful examinees of the Professional Regulations Commission. He is a member of the Philippine Institute of Civil Engineers (PICE). Mr. Bautista has a certificate in strategic business economics having completed his post-graduate studies in Masters in Business Economics at the University of Asia and Pacific (formerly the Center for Research and Communication) in Pasig City. He has earned several units in Masters in Construction Management at the Polytechnic University of the Philippines and Masters in Business Administration at the Ateneo de Manila University. Dr. Arlyn Sicangco-Villanueva Dr. Villanueva has served as an Independent Director of MNTC since February 2014 and is the chairman of the Audit Committee of MNTC. She is also a member of the Compensation and Remuneration Committee of MNTC. She is a Certified Public Accountant and is currently a member of the Professional Regulation Commission’s Board of Accountancy and a partner of Sicangco Menor Villanueva & Co., CPAs. Dr. Villanueva is a fellow of the Institute of Corporate Directors since 2014. She obtained her Accounting degree from Holy Angel University in 1977. She obtained her Master’s Degree in Business Management from the Ateneo Graduate School of Business in 1982 and her Doctorate Degree in Business Administration from the De La Salle Graduate School of Business in 2003, graduating “With Distinction”. In 2011, she completed the Advance Management Program at the Harvard Business School (HBS AMP181); and in 2014, completed the one-year course on Challenges of Leadership at the INSEAD Business School at its Fontainebleau, France campus. Mr. Roberto V. Bontia Mr. Bontia is the President and CEO of Tollways Management Corporation (TMC) and concurrently serves as Director of MNTC since February 2016 He joined TMC in 2005, shortly after the start of NLEX’s commercial operation. He previously held the position of Senior Vice President and headed the Toll Operations Division and Corporate Communications of TMC. Prior to TMC, Mr. Bontia had 14 years of experience working for the Nestle Group on various positions in the technical division covering industrial performance, manufacturing operations, and supply chain management. . He had assignments in the Philippines, Switzerland, United States, Australia, and Mexico. Mr. Bontia also worked as a Technical Staff Consultant in the Change Management Services Division of SGV Consulting specializing in organization/human resource management studies and operations improvement program.

33

Mr. Bontia obtained his Bachelor of Science in Industrial Engineering Degree at the University of the Philippines in 1988. Independent Directors of the Board The Company’s Board of Directors shall have at least two independent directors or such number of independent directors that constitutes twenty percent (20%) of the members of the Board, whichever is lesser, but in no case less than two. The independent directors shall have at least one (1) share of the stock of the Company in their respective names, are college graduates and possess integrity, probity and assiduousness. They are persons who, apart from their fees as directors of the Company, are independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with their exercise of independent judgment in carrying out their responsibilities as directors of the Company. Specifically, the independent directors: (i) are not directors or officers or substantial stockholders of the Company or its related companies or any of its substantial shareholders (other than as independent directors of any of the foregoing); (ii) are not relatives of any director, officer or substantial shareholder of the Company, or any of its related companies or any of its substantial shareholders; (iii) are not acting as nominees or representatives of a substantial shareholder of the Company, or any of its related companies or any of its substantial shareholders; (iv) have not been employed in any executive capacity by the Company, or any of its related companies or by any of its substantial shareholders within the last two (2) years; (v) are not retained as professional advisers by the Company, any of its related companies or any of its substantial shareholders within the last two (2) years, either personally or through their firms; (vi) have not engaged and do not engage in any transaction with the Company or with any of its related companies or with any of its substantial shareholders, whether by themselves or with other persons or through a firm of which they are partners or companies of which they are directors or substantial shareholders, other than transactions which are conducted at arm’s length and are immaterial; and (vii) do not own more than two (2) percent of the shares of the Company and/or its related companies or any of its substantial shareholders. The independent directors do not possess any of the disqualifications enumerated under Section II (5) of the Code of Corporate Governance and Section II (D) of SEC Memorandum Circular No. 16, Series of 2002.

34

Executive / Corporate Officers As of March 31, 2016 the following are the executive officers and all other officers of MNTC:

Name Age Citizenship Position Year Position was Assumed

Manuel V. Pangilinan* 69 Filipino Chairman of the Board

2008

Roberto B. Tan* 62 Filipino 1st Vice Chairman of the Board

2015

Jean-Claude Neumann* 61 French 2nd Vice Chairman of the Board

2005

Rodrigo E. Franco* 57 Filipino President and CEO 2010 Christopher Daniel C. Lizo* 43 Filipino Treasurer, and

Compliance Officer 2008 2014

Corazon M. Raquedan 67 Filipino Chief Audit Executive 2014 Romulo S. Quimbo, Jr. 60 Filipino Senior Vice President

for Legal, Regulatory Affairs and

Government Relations

2013

Raul L. Ignacio* 57 Filipino Chief Operating Officer

2015

Ma. Theresa O. Wells 47 Filipino Chief Financial Officer 2016 Nemesio G. Castillo 56 Filipino Vice President for

Construction Management Services

2011

Baby Lea M. Wong 48 Filipino Senior Vice President for Human Resources

and Administration

2016

* Member of the Board

The following is a brief description of the business experiences of the foregoing officers

(except those who are directors of the Company) for at least the past five years:

Corazon M. Raquedan

Ms. Corazon M. Raquedan serves as the Chief Audit Executive of MNTC. She currently serves concurrently as Chief Audit Adviser of MPTDC. Her extensive work experience included External and Internal Audit functions as well as exposure in all facets of Project Finance, Operations Accounting, SOX Compliance in various industries i.e. Construction, Insurance, and, Telecommunications. She obtained her undergraduate degree of Bachelor of Science in Commerce Major in Accounting in Centro Escolar University and a Certified Public Accountant. Romulo S. Quimbo, Jr.

Atty. Quimbo is the Head of Legal and Regulatory Affairs of Metro Pacific Tollways Group and concurrent to his position as Senior Vice President for Legal, Regulatory and Government Relations of MNTC. He provides day-to-day advice on relevant issues pertaining to the Company’s concession, right-of-way documentation, and regulatory and national/local tax matters. Atty. Quimbo has been involved in private sector infrastructure projects in the Philippines in the power, tollroad, telecommunications, airport terminal and cement terminal sectors for more than 20 years. Prior to joining the Company in 2000, he spent nine years as

35

a member of the Project Machinery/Infrastructure team of a global Japanese trading house which implemented several project finance transactions. He also has substantial public sector experience having worked for government agencies in planning and implementing multilateral/Official Development Assistance infrastructure projects. Upon joining the Company, he organized an in-house legal team focusing on the management of legal documentation for the project financing agreements, the construction contracts, the right-of-way expropriation cases and regulatory approvals relevant to the operations of the Company. Ma. Theresa O. Wells Ms. Wells was appointed as the Chief Finance Officer of MNTC. Prior to her appointment this 2016, she has been the Vice President for Treasury & Comptrollership of the Company since December 2005. She has more than 15 years of experience in various fields of financial management, focusing on project finance, treasury management, loan administration and restructuring, and comptrollership. This includes more than ten years of experience in toll road project development, project financing, and financial management. Prior to joining MNTC, she was assistant to the Chief Finance Officer of a publicly-listed holding company where she was seconded to several project companies to handle various finance-related assignments ranging from project finance to investment portfolio management. Nemesio G. Castillo Mr. Castillo serves as the Vice President for Construction Management Services of the Company. Mr. Castillo has more than 30 years of experience in the field of construction, particularly on project management, claims and contracts, procurement, planning and scheduling, cost engineering and quality control. His projects involved development of industrial parks and construction of shopping malls, banks, townhouses, residential houses, offices, power plants, water treatment plants and fertilizer plants. He was also involved in the feasibility study of a wharf facility. He was responsible for the successful completion of Segment 8.1 of the North Luzon Expressway (the “NLEX”) in June 2010 and the management of the ongoing construction of Segments 9 & 10, and other expansion projects of the Company. Baby Lea M. Wong

Ms. Lea Wong serves as the Senior Vice President for Human Resources and Administration of MNTC. She has over 25 years of professional experience in human resource management gained from various industries. She has a strong human resource generalist background with knowledge of advanced human resource theory and practice and hands-on experience in all aspects of human resources such as organization effectiveness, compensation design and administration, staffing, employee relations and training and development. She is part of the pioneer group in TMC that recruited and trained around 800 people in less than eight months. This led to the successful take-over of the operations and maintenance of NLEX from PNCC in February 2005. Significant Employees While all employees are expected to make a significant contribution to the Company, there is no one particular employee, not an executive officer, expected to make a significant contribution to the business of the Company on his own. Family Relationships

36

None of the directors/independent directors and executive officers of the Company or persons nominated to such positions has any family relationships up to the fourth civil degree either by consanguinity or affinity. Involvement of Directors and Officers in Certain Legal Proceedings The Company is not aware, and none of the directors/independent directors and executive officers or persons nominated for election to such positions has informed the Company, of any of the following events that occurred during the past five years:

(a) any bankruptcy petition filed by or against any business of which a director/independent director or executive officer or person nominated to become a director/independent director or executive officer was a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time;

(b) any conviction by final judgment in a criminal proceeding, domestic or foreign,

or any criminal proceeding, domestic or foreign, pending against any director/independent director or executive officer or person nominated to become a director/independent director or executive officer;

(c) any order, judgment, or decree, not subsequently reversed, suspended or

vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement of any director/independent director or executive officer or person nominated to become a director/independent director or executive officer in any type of business, securities, commodities or banking activities; and

(d) any finding by a domestic or foreign court of competent jurisdiction (in a civil

action), the SEC or comparable foreign body, or a domestic or foreign exchange or electronic marketplace or self-regulatory organization, that any director/independent director or executive officer or person nominated to become a director/independent director or executive officer, has violated a securities or commodities law or regulation, and the judgment has not been reversed, suspended or vacated.

Item 10. Executive Compensation

Directors Article III Section 8 of the Company’s By-Laws provides that the remuneration of the Directors shall be determined by, and be subject to the approval of, the shareholders. The directors each receive per diems amounting to P10,000.00 for their attendance to board meetings and P5,000.00 for their attendance to committee meetings. There are no other arrangements for compensation either by way of payments for committee participation or consulting contracts. The directors do not have employment contracts. Compensation The following table below sets forth the total annual compensation (salary and other variable pay) paid in 2013 and 2014 to: (i) the President and CEO, Mr. Rodrigo E. Franco, and the four

37

(4) most highly compensated officers of MNTC as a group, and (ii) all other executive officers, and other officers, as a group.

Name Year Salary (Php

millions)

Bonus (Php

millions)**

(1) Chief Executive Officer and four highest-compensated executive officers*

2015 Php23.7 Php40.9

2014 40.5 26.4

(2) All other executive officers and managers as a group (excluding the President and CEO and four highest-compensated executive officers)

2015

41.9

70.7

2014 63.8 37.7

*The President and CEO receive compensation from Metro Pacific Tollways Corp., not from MNTC.

**Bonus includes LTIP, 13th month pay, mid-year bonus and performance bonus.

The executive officers are covered by standard employment contracts and employees’ retirement plan and can be terminated upon appropriate notice. There are no other special arrangements pursuant to which any director was compensated. There is no compensatory plan or arrangement for the termination, resignation, or retirement of a member of the Board.

38

Long-Term Incentive Plan

MNTC’s long-term incentive plan, or LTIP, is a cash plan that is intended to provide meaningful and contingent financial incentive compensation for eligible executives, officers and advisors of MPTC and its subsidiaries (the “MPTC Group”), who are consistent performers and contributors to the achievement of the long-term strategic plans and objectives, as well as the functional strategy and goals of the MPTC Group. The LTIP is administered by the Executive Compensation Committee (“ECC”) and the Board of Directors (“BOD”) which has the authority to determine: (a) eligibility and identity of participants; (b) the award attributable to each participant based on the participant’s annual base compensation and taking into account such participant’s seniority, responsibility level, performance potential, tenure with the MPTC Group, job difficulty and such other measures as the Committee deems appropriate; (c) the level of achievement of the performance objectives; and (d) the actual award payable to each participant based on the level of achievement of the performance objectives. The LTIP payable of the Company will be based on profit targets for the covered performance cycle, amounted to Php70.5 million and Php120.0 million as at December 31, 2015 and 2014, respectively.

Item 11. Security Ownership of Certain Beneficial Owners and Management Security Ownership of Certain Records and Beneficial Owners of More Than 5% as at March 31, 2016

Title of class

Name and Address of Record Owner and Relationship with

Issuer

Name of Beneficial Owner and

Relationship with Record

Owner

Citizenship No. of Shares Held

% of Out-

standing

Common

Metro Pacific Tollways Development Corporation 10th Floor, MGO Building Legazpi corner dela Rosa Streets Legazpi Village, Makati City

Same as record owner

Filipino

12,609,591

71.00%

Common

BDO Unibank, Inc. BDO Corporate Center, 7899 Makati Avenue, Makati City


Filipino

2,197,800

12.375%

Common

Egis Investment Partners Philippines Inc., Unit 703, Citistate Center, 709 Shaw Blvd., Pasig City


French

1,775,998

10.00%

39

Security Ownership of Directors and Management as at March 31, 2016

Title of

Class

Name of

Shareholder

Amount and

Nature of

Ownership

Citizenship

%

of

Outstanding

Common Manuel V.

Pangilinan

1 share

(of record)

Filipino 0.00%

Common Jose Ma K. Lim 1 share

(of record)

Filipino 0.00%

Common Rodrigo E.

Franco

1 share

(of record)

Filipino 0.00%

Common Christopher

Daniel C. Lizo

1 share

(of record)

Filipino 0.00%

Common Raul L. Ignacio 1 share

(of record)

Filipino 0.00%

Common Roberto V.

Bontia*

1 share

(of record

Filipino 0.00%

Common J. Luigi L.

Bautista

1 share

(of record

Filipino 0.00%

Common Roberto B. Tan 1 share

(of record)

Filipino 0.00%

Common Jean-Claude

Neumann

1 share

(of record)

French 0.00%

Common Jose T. Sio 1 share

(of record)

Filipino 0.00%

Common Frederic C.

DyBuncio

1 share

(of record)

Filipino 0.00%

Common Alex Erlito S.

Fider

1 share

(of record)

Filipino 0.00%

40

Title of

Class

Name of

Shareholder

Amount and

Nature of

Ownership

Citizenship

%

of

Outstanding

Common Dr. Arlyn

Sicangco-

Villanueva

1 (beneficial

and of record)

Filipino 0.00%

*Subject to shareholder approval None of the members of the MNTC’s Board of Directors and Management owns 2.0% or more of the outstanding capital stock of MNTC. Voting Trust Holders of 5% or More MNTC is not aware of any person holding more than 5% of common shares under a voting trust or similar agreement. Changes in Control No change in control in the Company has occurred since the beginning of its last fiscal year.

Item 12. Certain Relationships and Related Transactions

The Company, in the ordinary course of business, has entered into transactions with stockholders, affiliates and other related parties principally consisting of advances and reimbursement of expenses, construction contracts, and development, management, underwriting, marketing, leasing and administrative service agreements. Sale and purchase of goods and services to and from related parties are made on an arm’s length basis and at current market prices at the time of the transactions. Except for the transactions discussed in Note 14 (“Related Party Transactions”) to the accompanying financial statements, there were no other material related party transactions during the last three financial years, nor are there any material transactions currently proposed between MNTC and any: (i) director or executive officer, direct or indirect owner of 10% or more of the outstanding shares in MNTC; (ii) close family member of such director, executive officer or owner; (iii) associates of MNTC; (iv) enterprises controlling, controlled by or under common control with MNTC or (v) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any director, executive officer or owner of 10% or more of the outstanding shares in MNTC or any close family member of such director, executive officer or owner.

41

PART IV – CORPORATE GOVERNANCE

Item 13. Corporate Governance

MNTC recognizes the importance of corporate governance in building and sustaining its long-

term growth and profitability as well as enhancing stakeholders’ interests in the Company. The

Company believes that the practice of corporate governance beyond mere compliance with

rules and legislation, through a process of developing the proper competencies in order to

establish an ethical corporate culture of principled business within the framework of its core

values of accountability, integrity, fairness and transparency.

As strong advocates of accountability, transparency and integrity in all aspects of the business,

the Board of Directors, management, officers and employees of MNTC commit themselves to

the principles and best practices of governance in the attainment of its corporate goals.

Policies The basic mechanisms for corporate governance are principally contained in the Company’s Articles of Incorporation and By-Laws. These constitutive documents lay down, among others, the basic structure of governance, minimum qualifications of directors, and the principal duties of the Board and officers of the Company. The Company’s Corporate Manual Governance (“Governance Manual”) which was adopted and approved by the Board of Directors on February 3, 2014, supplements and complements the Articles of Incorporation and By-Laws by institutionalize the principles of good governance that the Board of Directors and management believe to be a necessary component of sound business management. It was adopted pursuant to the Code of Corporate Governance, or the Philippine SEC Governance Code, that was promulgated by the Philippine SEC, under SEC Memorandum Circular No. 2, Series of 2002, dated April 5, 2002 as amended by SEC Memorandum Circular No. 6, Series of 2009 dated June 22, 2009. In compliance with the Philippine SEC Governance Code and consistent with the relevant provisions of the Securities Regulation Code and Corporation Code of the Philippines, the Governance Manual covers the following key areas:

1. The qualifications and grounds for disqualification for directorship;

2. The requirement that at least two (2) or 20% of the members of the Board of Directors, whichever is lesser, must be independent directors and the standards/criteria for the determination of independent directors;

3. The duties and responsibilities of the Board of Directors and the individual directors;

4. The Board committees, specifically, the nomination committee, audit committee and compensation and remuneration committee, the composition and the principal duties and responsibilities of such committees and grounds for permanent and temporary disqualification;

5. The role of our chairman in ensuring compliance with the corporate governance principles;

6. The role of our president/chief executive officer in ensuring that our organizational and procedural controls are adequate and effective to ensure reliability and

42

integrity of financial and operational information, effectiveness and efficiency of operations, safeguarding of assets and compliance with laws, rules, regulations and contracts;

7. The duties and responsibilities of the corporate secretary/assistant corporate secretary in terms of the support services that they need to provide the Board in upholding sound corporate governance;

8. The duties and responsibilities of the head of the internal audit organization that would provide the board of directors, management and shareholders with reasonable assurance that the key organizational and procedural controls are appropriate, adequate, effective and reasonably complied with;

9. The functions of the independent auditors that would reasonably ensure an environment of sound corporate governance as reflected in the financial records and reports; the requirement that non-audit work of the independent auditors should not conflict with their function as independent auditors; the requirement to rotate, at least once every five years, the independent auditors or the lead partner assigned to handle the independent audit of the financial statements;

10. The commitment to respect and promote shareholders’ rights such as voting right, pre-emptive right, inspection right, dividend right, appraisal right, and right to receive information about the background, business experience, compensation and shareholdings of the directors and officers and their transactions with us;

11. The requirement to appoint a compliance officer and the duties and responsibilities of such compliance officer including the establishment of an evaluation system to determine and measure compliance with the provisions of the Governance Manual; and

12. The penalties for violations of the Governance Manual. The Company also has a Code of Conduct. The Code defines the behaviors that are acceptable or not acceptable within the organization. It details the offenses versus the company’s or the person’s property, the schedule of penalties for each offense according to its gravity, and the grievance process, and defines the roles of the different people involved in disciplinary action. The Code covers all directors, employees, consultants, product and service providers, and anyone who acts in the name of MNTC. Board of Directors Key Roles The Board of Directors is the highest authority in matters of governance. The Board establishes the vision, mission and strategic direction of the Company, monitors over-all corporate performance, and protects the long-term interests of the various stakeholders by ensuring transparency, accountability and fairness. The Board exercises an oversight role over the risk management function while ensuring the adequacy of internal control mechanisms, reliability of financial reporting and compliance with applicable laws and regulations. In addition, certain matters are reserved specifically for the Board’s disposition, including the approval of corporate operating and capital budgets, major acquisitions and disposals of assets, major investments and changes in authority and approval limits. Composition

43

The Board consists of 13 members. They bring together immense value in terms of experience in running and directing various businesses and organizations. This expertise is applied in good measure to the pursuit of MPTC’s continued growth and profitability. Such a commitment requires, as well, a keen observance of corporate governance principles and policies adopted to ensure the objective performance of its oversight functions over management. In compliance with the SEC’s requirement to have independent directors with no material relationship with the Company comprising at least 20% of the Board, two (2) independent directors (were elected during the last annual stockholders’ meeting July 23, 2015, namely Atty. Raul C. Pangalangan and Dr. Arlyn Sicangco-Villanueva. These directors are independent of management, and free from any relationship that may interfere with their judgment. On February 17, 2016, Atty. Raul C. Pangalangan resigned as independent director of the Corporation following his appointment as a judgment in the Internal Criminal Court of Justice. To further enhance board independence, MNTC maintains the practice of keeping the posts of chairman of the board and the president and CEO separate. Each position has been given distinct and separate duties and responsibilities pursuant to the provisions of MNTC’s By-Laws and Governance Manual. Selection of Directors The Board itself is responsible for screening its own members and in recommending them for election by the Nomination Committee. The Chairman and Chief Executive Officer have direct input in the screening process while the final approval for the nominees as directors is determined by the Nomination Committee. Directors are elected during the annual stockholders’ meeting; however, in case of vacancies (due to causes other than removal by the stockholders or by expiration of term) in the Board between annual stockholders’ meetings, the Board if still constituting quorum, may elect directors to serve until the next annual meeting. Mix of Directors There is a mix of executive, non-executive and independent directors on the Board. Senior management executives other than the Chairman and Chief Executive Officer and the Chief Operating Officer attend Board meetings on a regular basis even though they are not members of the Board. On matters of corporate governance, while the Board assumes decisions will be made by the independent directors, input in any policy formulation and discussion from directors who are employees is welcome and expected unless the issue involves an actual conflict of interest with such directors. Criteria for Independence for Independent Directors The Board assesses the independence of each director and of each individual nominated for election to the Board as an independent director. As part of this analysis, the Board must review and conclude whether each nominee for independent director satisfies the requirements of the rules of the SEC, the by-laws and the Manual of Corporate Governance. Independent directors (i) are not directors or officers or substantial stockholders of the Company or its related companies or any of its substantial shareholders (other than as independent directors of any of the foregoing); (ii) are not relatives of any director, officer or substantial shareholder of the Company, or any of its related companies or any of its substantial shareholders; (iii) are not acting as nominees or representatives of a substantial shareholder of the Company, or any of its related companies or any of its substantial shareholders; (iv) have not been employed in any executive capacity by the Company, or any of its related companies or by any of its substantial shareholders within the last 2 years; (v) are not retained as professional advisers by the Company, any of its related companies or any

44

of its substantial shareholders within the last 2 years, either personally or through their firms; (vi) have not engaged and do not engage in any transaction with the Company or with any of its related companies or with any of its substantial shareholders, whether by themselves or with other persons or through a firm of which they are partners or companies of which they are directors or substantial shareholders, other than transactions which are conducted at arm’s length and are immaterial and (vii) do not own more than 2% of the shares of the Company and/or its related companies or any of its substantial shareholders. Board Performance The Board regularly meets to review the performance of the Company and approve any pertinent plans, budgets, and financial statements, set guidelines for management and discuss any various matters requiring Board attention and approval. Any member of the Board may ask management to give special reports and analysis on certain issues. The regular meetings of the board are normally held at least six (6) times a year, as well as special meetings of the board, and the Annual General Meeting (“AGM”). The Board met six (6) times in 2015, including the AGM. The attendance of the individual directors at these meetings is duly recorded, as follows: Regular and Special

Meetings Annual General

Meeting of Stockholders

Present Absent Present Absent

Manuel V. Pangilinan

4 1 1 0

Jose Ma. K. Lim

5 0 1 0

Ramoncito S. Fernandez*

5 0 1 0

Christopher C. Lizo

4 1 1 0

Rodrigo E. Franco

5 0 1 0

Roberto Tan

1 3 0 1

Jean-Claude Neumann

5 0 1 0

Jose T. Sio

4 1 1 0

Frederic DyBuncio

4 1 0 1

Alex Erlito S. Fider

5 0 1 0

Raul C. Pangalangan**

3 2 1 0

45

Regular and Special Meetings

Annual General Meeting of

Stockholders Present Absent Present Absent Dr. Arlyn Sicangco-Villanueva

4 1 1 0

*Mr. Fernandez resigned as director of the Corporation effective 1 January 2016. *Atty. Pangalangan resigned as independent director of the Corporation effective 17 February 2016 The average attendance rate of members of the Board was at 87.0%. Prior to the Board meetings, all of the directors are provided with board papers which include reports on the Company’s strategic, operational and financial performance and other regulatory matters. The Board also has access to the Corporate Secretary who, among other functions, oversees the flow of information to the Board prior to the meetings and who serves as adviser to the directors on their responsibilities and obligations. The members of the Board also have access to management should they need to clarify matters concerning items submitted for their consideration. Compensation of Directors Members of the Board each receive per diems amounting to P10,000 for their attendance to Board meetings and P5,000 for committee meetings. There are no other arrangements for remuneration either by way of payments for committee participation or consulting contracts. Board Committees The Board of Directors is authorized under the Company’s By-laws to create committees, as it may deem necessary. There are currently three (3) Board committees, namely, the audit, nomination, and compensation and remuneration committees, the purpose of which is to assist the Board of Directors. Audit Committee MNTC’s Audit Committee is composed of four (4) voting members, all of whom are regular members of the Board of Directors who preferably have accounting and finance backgrounds, and one (1) of whom must be independent and another with audit experience. The Audit Committee is chaired by an independent director. The purpose of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibility for: (i) MNTC’s accounting and financial reporting principles and policies and internal audit controls and procedures; (ii) the integrity of MNTC’s financial statements and the independent audit thereof; (iii) MNTC’s compliance with legal and regulatory requirements and (iv) the performance of the internal audit organization and the external auditors. To carry its direct responsibility for the appointment, setting of compensation, retention and removal of the external auditors, the Audit Committee has the following duties and powers:

Assist the Board in the performance of its oversight responsibility for the financial reporting process, system of internal control, audit process, and monitoring of compliance with applicable laws, rules and regulations.

46

Check all financial reports against its compliance with both the internal financial management handbook and pertinent accounting standards, including regulatory requirements.

Perform oversight financial management functions specifically in the areas of managing credit, market, liquidity, operational, legal and other risks of the Company, and crisis management. This function shall include the regular receipt from Management of information on risk exposures and risk management activities.

Perform direct interface functions with the internal and external auditors. To ensure that the internal and external auditors act independently from each other, and that both auditors are given unrestricted access to all records, properties and personnel in the performance of their respective audit functions.

Review of the annual audit plan to ensure its conformity with the objectives of the Company. The plan includes the audit scope, resources and budget necessary to implement it.

Prior to the commencement of the audit, discuss with the external auditor the nature, scope and expenses of the audit, and ensure proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts.

Organize an internal audit department, and consider the appointment of an independent internal auditor and the terms and conditions of its engagement and removal.

Monitor and evaluate the adequacy and effectiveness of the Company's internal control system, including financial reporting control and information technology security.

Review the reports submitted by the internal and external auditors.

Review the quarterly, half-year and annual financial statements before its submission to the Board, with particular focus on the following matters: o Any change/s in accounting policies and practices o Major judgment areas o Significant adjustments resulting from the audit o Going concern assumptions o Compliance with accounting standards o Compliance with tax, legal and regulatory requirements

Coordinate, monitor and facilitate compliance with laws, rules and regulations.

Elevate to international standards the accounting and auditing processes, practices and methodologies, and develop the following in relation to this reform: o A definitive timetable within which the accounting system of the Company will be

100% Philippine Accounting Standard (PAS) compliant. o An accountability statement that will specifically identify officers and/or personnel

directly responsible for the accomplishment of such task.

Develop a transparent financial management system that will ensure the integrity of internal control activities throughout the Company through a step-by-step procedures and policies handbook that will be used by the entire Company.

47

Coordinate, monitor and facilitate compliance with laws, rules and regulations.

Evaluate and determine non-audit work, if any, of the external auditor, and review periodically the non-audit fees paid to the external auditor in relation to their significance to the total annual income of the external auditor and to the Company's overall consultancy expenses. To disallow any non-audit work that will conflict with external auditor's duties and poses a threat to his independence. Non-audit works, if allowed, are disclosed in the Company's annual report.

Establish and identify reporting line of the Chief Audit Executive to properly enable him to fulfil his duties and responsibilities. The Chief Audit Executive shall functionally report directly to the Audit Committee.

To ensure that the performance of the work of Chief Audit Executive is free from interference by outside parties.

The Audit Committee also has the authority to retain or obtain advice from special counsel or other experts or consultants in the discharge of their responsibilities without the need for Board approval. Audit Committee Report The Audit Committee meets at least once every year and invites non-members, including the President and CEO, Chief Finance Officer, independent and internal auditors, and other key persons involved in company governance, to attend meetings where necessary. During these meetings:

The Committee reviews the financial statements and all related disclosures and reports certified by the Chief Finance Officer, and released to the public and/or submitted to the Philippine SEC for compliance with both the internal financial management handbook and pertinent accounting standards, including regulatory requirements. The Committee, after its review of the annual audited financial statements of MNTC endorses these to the Board for approval.

The Committee meets with the internal and independent auditors, and discusses the results of their audits, ensuring that management is taking appropriate corrective actions in a timely manner, including addressing internal controls and compliance issues.

The Committee reviews the performance and recommends the appointment, retention or discharge of the independent auditors, including the fixing of their remuneration, to the full Board. On an annual basis, the Committee also assesses the independent auditor’s qualifications, skills, resources, effectiveness and independence. The Committee also reviews and approves the proportion of audit and non-audit work both in relation to their significance to the auditor and in relation to the Company’s total expenditure on consultancy, to ensure that non-audit work will not be in conflict with the audit functions of the independent auditor.

The Committee reviews the plans, activities, staffing and organizational structure and assesses the effectiveness of the internal audit function, including conformance with international standards.

48

The Committee provides oversight of the financial reporting and operational risks, specifically on financial statements, internal controls, legal or regulatory compliance, corporate governance, risk management and fraud risks. The Committee also reviews the results of management’s annual risk assessment exercise.

To ensure compliance with regulatory requirements and assess the appropriateness of the existing charter for enabling good corporate governance, the Committee also reviews and assesses the adequacy of its charter annually, seeking Board approval for any amendments. Nomination Committee The Nomination Committee is composed of three (3) voting members, all of whom are regular members of the Board of Directors and one (1) of whom must be independent, and one (1) non-voting member in the person of the HR Director/Manager. The principal functions and responsibilities of the Nomination Committee are:

to review and evaluate the qualifications of all persons nominated to the Board and other appointments that require Board approval;

to assess the effectiveness of the Board’s processes and procedures in the election or replacement of directors; and

to pre-screen and shortlist all candidates nominated to become a member of the Board of Directors in accordance with the qualifications and disqualifications set forth in the Company’s Manual on Corporate Governance.

Compensation and Remuneration Committee The Compensation and Remuneration Committee is composed of three (3) voting members, all of whom are regular members of the Board of Directors and one (1) of whom must be independent. The principal functions and responsibilities of the Compensation and Remuneration Committee are:

to establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of Directors, and provide oversight over remuneration of senior management and other key personnel ensuring that compensation is consistent with the Company's culture, strategy and control environment;

to designate amount of remuneration, which shall be in a sufficient level to attract and retain directors and officers who are needed to run the Company successfully;

to establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of individual directors, if any, and officers;

to develop a form on Full Business Interest Disclosure as part of the pre-employment requirements for all incoming officers, which among others compel all officers to declare under the penalty of perjury all their existing business interests or shareholdings that may directly or indirectly conflict in their performance of duties once hired;

49

to disallow any director to decide his or her own remuneration;

to provide in the Company's annual reports, information and proxy statements a clear, concise and understandable disclosure of all fixed and variable compensation paid, directly or indirectly, to its executive officers, directors and management officers for the previous fiscal year and the ensuing year; and

to review the existing Human Resources Development Handbook, to strengthen provisions on conflict of interest, salaries and benefits policies, promotion and career advancement directives and compliance of personnel concerned with all statutory requirements that must be periodically met in their respective posts.

The members of each Board committee are set forth below:

Audit Committee Nomination Committee Compensation and

Remuneration Committee

Dr. Arlyn Sicangco-Villanueva (Chairman)

Jean-Claude Neumann Jose T. Sio (Members)

There is one vacancy in the

committee.

Jose Ma. K. Lim (Chairman)

Rodrigo E. Franco (Members)

Baby Lea M. Wong (Non-voting Member)

Manuel V. Pangilinan (Chairman)

Rodrigo E. Franco Dr. Arlyn Sicangco-

Villanueva (Members)

Compliance Officer The Company has appointed a Compliance Officer who is tasked to ensure the Company’s observance of corporate governance best practices and provide recommendations to the Board for continuous improvement towards full compliance and adoption of global best practices. Risk Management The Company’s risk management, control and governance processes are adequate and functioning to ensure that:

1. Risks are appropriately identified and managed; 2. Significant financial, managerial, and operating information are accurate, reliable and

timely; 3. Employees’ actions are in compliance with policies, standards, procedures, and

applicable laws and regulations; 4. Resources are acquired economically, used efficiently and adequately protected; 5. Programs, plans and objectives are achieved; 6. Quality and continuous improvement are fostered in our control process; 7. Significant legislative or regulatory issues impacting us are recognized and addressed

appropriately; and 8. Interaction with various governance groups occurs as needed.

50

To ensure independence, the Chief Audit Executive, head of the internal audit organization, reports functionally to our audit committee and administratively to our president and chief executive officer. He is accountable to management and our audit committee in the discharge of his duties and is required to:

1. Provide annually an assessment on the adequacy and effectiveness of our processes for controlling our activities and managing our risks;

2. Report significant issues related to the processes of controlling our activities, including potential improvements to those processes, and provide information concerning such issues;

3. Periodically provide information on the status and results of the annual audit plan and the sufficiency of our internal audit organization’s resources; and

4. Coordinate with and provide oversight of other control and monitoring functions (risk management, compliance, security, legal, ethics, environmental, and external audit).

The internal audit organization has a charter that has been approved by the audit committee. It seeks to comply with the Standards for the Professional Practice of Internal Auditing of The Institute of Internal Auditors in the discharge of its scope of work and responsibilities.

51

PART V - EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C

Reports on SEC Form 17-C

The following are the filed SEC 17-C for the past twelve months:

Disclosure Date

1. SEC 17-C (Disclosure on SCTEX Price Challenge) 2/2/2015

2. SEC 17-C (Press Release - SCTEX Integration) 2/6/2015

3. SEC 17-C (Resignation of Director) 2/9/2015

4. SEC 17-C (Notice of Award from BCDA) 2/10/2015

5. SEC 17-C (Appointment of Director) 2/13/2015

6. SEC 17-C (Press Release –Integration Construction) 2/13/2015

7. SEC 17-C (Acceptance of Notice of Award from BCDA) 2/13/2015

8. SEC 17-C (Press Release – SCTEX Business Agreement) 2/27/2015

9. SEC 17-C (Press Release – Opening of Segment 9) 3/11/2015

10. SEC 17-C (Issuance of Toll Operations Permit) 3/19/2015

11. SEC 17-C (FY2014 Results) 4/16/2015

12. SEC 17-C (Results of Board Meeting) 5/7/2015

13. SEC 17-C (1Q2015 Results) 5/15/2015

14. SEC 17-C (Retirement of Officers) 5/27/2015

15. SEC 17-C (Results of ASM) 7/28/2015


17. SEC 17-C (Incorporation of NLEX Ventures) 9/29/2015

18. SEC 17-C (Receipt of TOC for Operation & Maintenance of SCTEX) 10/27/2015

19. SEC 17-C (Appointment of Officers in Subsidiaries) 12/4/2015

20. SEC 17-C (Signing of Term Loan Agreement with PNB) 12/8/2015


*SGVFS015652*

C O V E R S H E E Tfor

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

A 1 9 9 7 0 1 4 5 1

C O M P A N Y N A M E

M A N I L A N O R T H T O L L W A Y S C O R P O R A T

I O N ( A S u b s i d i a r y o f M e t r o P a c

i f i c T o l l w a y s D e v e l o p m e n t C o r p

o r a t i o n ) A N D A S U B S I D I A R Y

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

N L E X C o m p o u n d , B a l i n t a w a k , C a l

o o c a n C i t y

Form Type Department requiring the report Secondary License Type, If Applicable

A C F S

C O M P A N Y I N F O R M A T I O N

Company’s Email Address Company’s Telephone Number Mobile Number

[email protected] 479-3000 –

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

18 1st Thursday of May December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Ms. Ma. Theresa O. Wells [email protected] 479-3000 –

CONTACT PERSON’s ADDRESS

NLEX Compound Balintawak, Caloocan City

NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to theCommission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact persondesignated.

2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records withthe Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation fromliability for its deficiencies.

*SGVFS015652*

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsManila North Tollways CorporationNLEX CompoundBalintawak, Caloocan City

We have audited the accompanying consolidated financial statements of Manila North TollwaysCorporation (a subsidiary of Metro Pacific Tollways Development Corporation) and its subsidiary,which comprise the consolidated balance sheets as at December 31, 2015 and 2014, and theconsolidated statements of income, statements of comprehensive income, statements of changes inequity and statements of cash flows for each of the three years in the period ended December 31, 2015,and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with Philippine Financial Reporting Standards, and for such internal controlas management determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits. We conducted our audits in accordance with Philippine Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018

A member firm of Ernst & Young Global Limited

*SGVFS015652*

- 2 -

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of Manila North Tollways Corporation and its subsidiary as at December 31, 2015and 2014, and their financial performance and their cash flows for each of the three years in the periodended December 31, 2015 in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Belinda T. Beng HuiPartnerCPA Certificate No. 88823SEC Accreditation No. 0923-AR-1 (Group A), March 25, 2013, valid until March 24, 2016Tax Identification No. 153-978-243BIR Accreditation No. 08-001998-78-2015, June 26, 2015, valid until June 25, 2018PTR No. 5321613, January 4, 2016, Makati City

February 17, 2016


*SGVFS015652*

MANILA NORTH TOLLWAYS CORPORATION(A Subsidiary of Metro Pacific Tollways Development Corporation)AND A SUBSIDIARYCONSOLIDATED BALANCE SHEETS

December 312015 2014

ASSETS

Current AssetsCash and cash equivalents (Note 6) P=2,669,324,105 P=2,953,881,594Short-term deposits (Notes 11 and 27) 1,225,420,748 4,789,522,429Receivables (Notes 7 and 14) 561,309,036 683,237,587Inventories - at cost 71,393,140 47,804,484Advances to contractors and consultants (Notes 14 and 25) 101,181,578 123,022,645Due from related parties (Note 14) 2,807,542 12,494,187Available-for-sale financial assets (Notes 11 and 27) 200,645,000 255,591,000Input value-added tax 447,522,931 46,907,017Other current assets 199,885,590 130,947,246

Total Current Assets 5,479,489,670 9,043,408,189

Noncurrent AssetsService concession assets (Note 8) 22,798,406,210 16,867,583,654Property and equipment (Note 9) 121,077,788 129,502,464Other intangible assets (Note 10) 16,681,278 22,169,763Available-for-sale financial assets (Notes 11 and 27) 1,514,483,246 1,682,521,728Pension asset (Note 19) 12,055,764 2,573,985Other noncurrent assets (Note 25) 942,806,342 967,275,471

Total Noncurrent Assets 25,405,510,628 19,671,627,065

P=30,885,000,298 P=28,715,035,254

LIABILITIES AND EQUITY

Current LiabilitiesAccounts payable and other current liabilities (Notes 12 and 14) P=2,322,521,034 P=2,055,790,449Long-term incentive plan payable (Note 19) – 120,000,012Unearned toll revenue 1,646,827 149,003Income tax payable 258,655,448 171,342,675Dividends payable (Note 16) 1,422,576,000 1,193,472,000Provisions (Note 13) 167,361,768 145,806,420Current portion of long-term debt (Notes 15 and 27) 992,503,413 932,509,947

Total Current Liabilities 5,165,264,490 4,619,070,506

Noncurrent LiabilitiesLong-term debt - net of current portion (Notes 15 and 27) 16,822,078,532 15,813,559,542Long-term incentive plan payable (Note 19) 70,478,307 –Provisions (Note 13) 172,092,670 112,169,833Deferred tax liabilities - net (Note 24) 521,447,771 542,379,105

Total Noncurrent Liabilities 17,586,097,280 16,468,108,480Total Liabilities 22,751,361,770 21,087,178,986

(Forward)

*SGVFS015652*

- 2 -

December 312015 2014

Equity (Note 16)Capital stock P=1,776,000,000 P=1,776,000,000Additional paid-in capital 3,749,711,168 3,749,711,168Retained earnings 2,622,707,396 2,052,153,253Other comprehensive income (loss) reserve (26,569,475) 39,447,251Other reserve (Note 20) 11,789,439 10,544,596

Total Equity 8,133,638,528 7,627,856,268

P=30,885,000,298 P=28,715,035,254

See accompanying Notes to Consolidated Financial Statements.

*SGVFS015652*

MANILA NORTH TOLLWAYS CORPORATION(A Subsidiary of Metro Pacific Tollways Development Corporation)AND A SUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME

Years Ended December 312015 2014 2013

OPERATING REVENUESToll fees (net of discounts amounting to

P=111,967,528 in 2015, P=79,048,588 in 2014,and P=59,283,405 in 2013) P=8,453,380,333 P=7,516,586,901 P=7,101,436,578

Sales of magnetic cards 13,482 5,357 3,5278,453,393,815 7,516,592,258 7,101,440,105

COST OF SERVICES (Note 17) (3,420,625,851) (3,146,485,760) (2,938,375,736)

GROSS PROFIT 5,032,767,964 4,370,106,498 4,163,064,369

CONSTRUCTION REVENUE (Note 8) 3,328,364,819 2,425,272,471 341,646,216

CONSTRUCTION COSTS (Note 8) (3,328,364,819) (2,425,272,471) (341,646,216)

GENERAL AND ADMINISTRATIVEEXPENSES (Note 18) (708,962,366) (552,082,087) (536,636,463)

INTEREST EXPENSE AND OTHERFINANCE COSTS (Note 22) (622,295,149) (601,214,207) (618,382,272)

INTEREST INCOME (Note 21) 72,896,989 61,266,122 82,563,116

FOREIGN EXCHANGE GAIN – net 7,840,647 4,260,215 8,015,606

OTHER INCOME (Note 23) 156,021,188 121,786,577 106,597,850

INCOME BEFORE INCOME TAX 3,938,269,273 3,404,123,118 3,205,222,206

PROVISION FOR (BENEFIT FROM)INCOME TAX (Note 24)

Current 963,726,925 752,767,850 741,163,380Deferred (18,587,795) 85,914,211 86,149,926

945,139,130 838,682,061 827,313,306

NET INCOME P=2,993,130,143 P=2,565,441,057 P=2,377,908,900


*SGVFS015652*

MANILA NORTH TOLLWAYS CORPORATION(A Subsidiary of Metro Pacific Tollways Development Corporation)AND A SUBSIDIARYCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


NET INCOME P=2,993,130,143 P=2,565,441,057 P=2,377,908,900

OTHER COMPREHENSIVE INCOME(LOSS)

Other comprehensive income (loss) to bereclassified to profit or loss in subsequentperiods:Net gain on cash flow hedges (Note 27) 3,775,752 8,935,147 10,508,616Income tax effect (Note 24) (1,132,726) (2,680,544) (3,152,584)

2,643,026 6,254,603 7,356,032Gain (loss) on available-for-sale financial

assets (Note 11) (78,828,116) 21,117,971 (19,537,962)Income tax effect (Note 24) 5,483,894 6,088,359 2,999,700

(73,344,222) 27,206,330 (16,538,262)

(70,701,196) 33,460,933 (9,182,230)Other comprehensive income (loss) not to be

reclassified to profit or loss in subsequentperiods:Remeasurement gains (losses) on defined

benefit retirement plan (Note 19) 6,692,099 (3,054,067) (3,619,777)Income tax effect (Note 24) (2,007,629) 916,220 1,085,933

4,684,470 (2,137,847) (2,533,844)

OTHER COMPREHENSIVE INCOME(LOSS) FOR THE YEAR, NET OF TAX (66,016,726) 31,323,086 (11,716,074)

TOTAL COMPREHENSIVE INCOME P=2,927,113,417 P=2,596,764,143 P=2,366,192,826


*SGVFS015652*

MANILA NORTH TOLLWAYS CORPORATION(A Subsidiary of Metro Pacific Tollways Development Corporation)AND A SUBSIDIARYCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Capital StockAdditional

Paid-in CapitalRetainedEarnings

OtherComprehensive

Income (Loss)Reserve

OtherReserve Total Equity

At January 1, 2015 P=1,776,000,000 P=3,749,711,168 P=2,052,153,253 P=39,447,251 P=10,544,596 P=7,627,856,268Cash dividends (Note 16) – – (2,422,576,000) – – (2,422,576,000)Equity contribution - executive stock option plan (Note 20) – – – – 1,244,843 1,244,843Net income – – 2,993,130,143 – – 2,993,130,143Other comprehensive loss (Note 16) – – – (66,016,726) – (66,016,726)Total comprehensive income for the year – – 2,993,130,143 (66,016,726) – 2,927,113,417At December 31, 2015 P=1,776,000,000 P=3,749,711,168 P=2,622,707,396 (P=26,569,475) P=11,789,439 P=8,133,638,528

At January 1, 2014 P=1,776,000,000 P=3,749,711,168 P=1,656,984,196 P=8,124,165 P=8,199,559 P=7,199,019,088Cash dividends (Note 16) – – (2,170,272,000) – – (2,170,272,000)Equity contribution - executive stock option plan (Note 20) – – – – 2,345,037 2,345,037Net income – – 2,565,441,057 – – 2,565,441,057Other comprehensive income (Note 16) – – – 31,323,086 – 31,323,086Total comprehensive income for the year – – 2,565,441,057 31,323,086 – 2,596,764,143At December 31, 2014 P=1,776,000,000 P=3,749,711,168 P=2,052,153,253 P=39,447,251 P=10,544,596 P=7,627,856,268

At January 1, 2013 P=1,776,000,000 P=3,749,711,168 P=1,339,235,296 P=19,840,239 P=7,577,137 P=6,892,363,840Cash dividends (Note 16) – – (2,060,160,000) – – (2,060,160,000)Equity contribution - executive stock option plan (Note 20) – – – – 622,422 622,422Net income – – 2,377,908,900 – – 2,377,908,900Other comprehensive loss (Note 16) – – – (11,716,074) – (11,716,074)Total comprehensive income for the year – – 2,377,908,900 (11,716,074) – 2,366,192,826At December 31, 2013 P=1,776,000,000 P=3,749,711,168 P=1,656,984,196 P=8,124,165 P=8,199,559 P=7,199,019,088


*SGVFS015652*

MANILA NORTH TOLLWAYS CORPORATION AND A SUBSIDIARY(A Subsidiary of Metro Pacific Tollways Development Corporation)CONSOLIDATED STATEMENTS OF CASH FLOWS


OPERATING ACTIVITIESIncome before income tax P=3,938,269,273 P=3,404,123,118 P=3,205,222,206Adjustments to reconcile income before income

tax to net cash flows:Interest expense and other finance costs

(Note 22) 622,295,149 601,214,207 618,382,272Amortization of service concession assets

(Notes 8 and 17) 575,097,888 483,626,911 599,931,592Interest income (Note 21) (72,896,989) (61,266,122) (82,563,116)Movements in:

Provisions 69,538,725 (58,490,828) (204,749,158)Pension asset (2,789,680) (3,790,206) 11,429,405

Long-term incentive plan expense (Note 19) 48,735,905 55,171,612 32,414,200Depreciation of property and equipment

(Notes 9, 17 and 18) 38,025,416 30,963,982 28,881,703Gain on disposal of available-for-sale

financial assets (Note 11) (2,032,346) (1,169,267) (11,780,746)Amortization of other intangible assets

(Notes 10 and 18) 10,954,056 6,056,952 8,108,060Executive stock option plan expense

(Notes 19 and 20) 1,244,843 2,345,037 622,422Unrealized foreign exchange loss (gain) – net (2,477,153) 1,006,086 (1,393,248)Gain on disposals of property and equipment

(Notes 9) (506,685) (355,322) (907,581)Deferred toll revenue realized (149,003) (335,345) –Reversal of allowance for doubtful accounts

(Note 23) – – (5,259,500)Working capital changes:

Decrease (increase) in:Receivables 124,358,991 (436,253,453) (71,067,777)Inventories (23,588,656) 2,484,978 (5,029,929)Advances to contractors and consultants 21,841,067 103,239,624 (209,141,384)Due from related parties 9,686,645 (7,657,605) 619,293Input value-added tax (400,615,914) (9,722,463) (4,824,475)Other current assets (68,938,344) (32,670,444) (17,040,465)

Increase (decrease) in:Accounts payable and other current

liabilities 233,572,875 644,634,166 239,391,055Due to related parties – (97,549) 97,549Long-term incentive plan payable (98,257,610) – –

Unearned toll revenue 1,646,827 149,003 335,345Income tax paid (876,414,152) (774,118,329) (700,035,575)Net cash flows from operating activities 4,146,601,128 3,949,088,743 3,431,642,148

(Forward)

*SGVFS015652*

- 2 -


INVESTING ACTIVITIESInterest received P=70,466,549 P=51,952,183 P=84,911,113Acquisition of available-for-sale financial assets

(Note 11) (5,407,332,256) (4,049,816,145) (4,011,901,065)Increase in other noncurrent assets (9,895,766) (907,879,073) (7,284,874)Additions to:

Service concession assets (Note 8) (6,550,150,015) (2,423,808,366) (341,507,662)Property and equipment (Note 9) (31,071,973) (43,881,614) (42,433,181)Other intangible assets (Note 10) (5,465,571) (18,237,565) (4,178,582)

Proceeds from:Sale of available-for-sale financial assets

(Note 11) 8,955,539,952 866,641,317 1,077,158,808Maturity of investments in bonds (Note 11) 250,000,000 – 50,600,000Sale of property and equipment (Note 9) 1,977,918 1,640,888 2,559,387

Net cash flows used in investing activities (2,725,931,162) (6,523,388,375) (3,192,076,056)

FINANCING ACTIVITIESProceeds from loans (Note 15) 3,000,000,000 7,000,000,000 2,000,000,000Payments of:

Dividends (Note 16) (2,193,472,000) (1,385,812,800) (2,485,867,200)Loans (1,954,602,309) (954,602,309) (167,102,308)Interest expense and other finance costs (559,630,299) (556,418,582) (572,622,868)Debt issue costs (Note 15) – (76,029,099) (16,315,791)Swap termination costs – – (175,000,000)

Net cash flows from (used in) financing activities (1,707,704,608) 4,027,137,210 (1,416,908,167)

NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS (287,034,642) 1,452,837,578 (1,177,342,075)

EFFECT OF EXCHANGE RATE CHANGESON CASH AND CASH EQUIVALENTS 2,477,153 (1,006,086) 1,393,248

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR (Note 6) 2,953,881,594 1,502,050,102 2,677,998,929

CASH AND CASH EQUIVALENTSAT END OF YEAR (Note 6) P=2,669,324,105 P=2,953,881,594 P=1,502,050,102


*SGVFS015652*

MANILA NORTH TOLLWAYS CORPORATION(A Subsidiary of Metro Pacific Tollways Development Corporation)AND A SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Manila North Tollways Corporation (MNTC or the Parent Company) and its subsidiary(collectively referred to as “the Company”) were incorporated in the Philippines and registered inthe Philippine Securities and Exchange Commission (SEC) on February 4, 1997 andSeptember 23, 2015, respectively. MNTC’s primary purpose is to engage in, and carry on, aconstruction and contracting business, involving tollways, its facilities, interchanges and relatedworks, including the operation and maintenance thereof, or otherwise engage in any work uponroads, bridges, buildings, and structures of all kinds.

NLEX Ventures Corporation (NVC), a wholly owned subsidiary of MNTC, is primarily engagedto develop, fund, construct, operate and maintain any and all facilities and to provide servicesrelating to the safety, comfort and convenience of its customers such as road users; and toundertake traffic management services.

MNTC was established for the purpose of implementing the provisions of the Joint VentureAgreement (JVA) between Metro Pacific Tollways Development Corporation (MPTDC), thenFirst Philippine Infrastructure Development Corporation (FPIDC), and the Philippine NationalConstruction Corporation (PNCC) for the rehabilitation of the North Luzon Expressway (NLEX)and the installation of the appropriate collection system therein referred to as the “Manila-NorthExpressway Project” or the “MNEP.”

The MNEP consists of three phases as follows:

Phase I Rehabilitation and expansion of approximately 84 kilometers (km) of theexisting NLEX and an 8.5-km stretch of a Greenfield expresswaythat connects Tipo in Hermosa, Bataan to Subic

Phase II Construction of the northern parts of the 17-km circumferential road C-5which connects the current C-5 expressway to the NLEX and the5.85-km road from McArthur to Letre

Phase III Construction of the 57-km Subic arm of the NLEX to Subic Expressway

The construction of Phase I was substantially completed in January 2005. On January 27, 2005,the Toll Regulatory Board (TRB) issued the Toll Operation Permit (TOP) for the operation andmaintenance of Phase I consisting of Segments 1, 2, 3 and including Segment 7 in favor ofMNTC. Thereafter, MNTC took over the NLEX from PNCC and commenced its tollwayoperations on February 10, 2005.

Segment 8.1, a portion of Phase II, which is a 2.7 km-road designed to link Mindanao Avenue tothe NLEX, had officially commenced tollway operation on June 5, 2010. Segment 9, a portion ofPhase II, which is a 2.4 km-road connecting NLEX to the McArthur Highway, had officiallycommenced tollway operation on March 19, 2015. In May 2014, Segment 10, a portion of PhaseII, which is a 5.76 km four-lane, elevated expressway that will start from the terminal ofSegment 9 in Valenzuela City going to C-3 Road in Caloocan City above the alignment ofPhilippine National Railway tracks, had commenced construction and is expected to be completed

- 2 -

*SGVFS015652*

in the second quarter of 2017. The estimated cost of construction of Segment 10 is P=10.5 billion.The remaining portion of Phase II is under pre-construction works while Phase III of the MNEPhas not yet been started as at February 17, 2016.

As discussed in Note 2, pursuant to the Toll Operation Certificate (TOC) received from the TRBand agreements covering the Subic-Clark-Tarlac Expressway (SCTEX), MNTC has commencedthe management, operation and maintenance of the SCTEX on October 27, 2015. The SCTEX isa 93.77-km four (4)-lane divided highway, traversing the provinces of Bataan, Pampanga andTarlac.

MPTDC, the parent company, is a wholly owned subsidiary of Metro Pacific TollwaysCorporation (MPTC). MPTC is 99.9% owned by Metro Pacific Investments Corporation (MPIC).MPIC is a publicly listed Philippine corporation and is 52.1% and 55.8% owned by Metro PacificHoldings, Inc. (MPHI) as at December 31, 2015 and 2014, respectively. MPHI is a Philippinecorporation whose stockholders are Enterprise Investment Holdings, Inc. (EIH) (60.0%),Intalink B.V. (26.7%) and First Pacific International Limited (FPIL) (13.3%). First PacificCompany Limited (FPC), a company incorporated in Bermuda and listed in Hong Kong, throughits subsidiaries, Intalink B.V. and FPIL, holds 40.0% equity interest in EIH and an investmentfinancing which under Hong Kong Generally Accepted Accounting Principles, require FPC toaccount for the results and assets and liabilities of EIH and its subsidiaries as part of FPC group ofcompanies in Hong Kong.

The registered office address of the Parent Company is NLEX Compound, Balintawak, CaloocanCity.

The consolidated financial statements as at December 31, 2015 and 2014 and for each of the threeyears in the period ended December 31, 2015 were authorized for issuance by the ParentCompany’s Board of Directors (BOD) on February 17, 2016, as reviewed and recommended forapproval by the Parent Company’s Audit Committee.

2. Service Concession Arrangements

Supplemental Toll Operation Agreement (STOA) for the Manila-North ExpresswayBy virtue of Presidential Decree (PD) No. 1113 issued on March 31, 1977 as amended byPD No. 1894 issued on December 22, 1983, PNCC was granted the franchise for the construction,operation and maintenance of toll facilities in the NLEX, South Luzon Expressway (SLEX) andMetro Manila Expressway. PNCC executed a Toll Operation Agreement (TOA) with theGovernment of the Republic of the Philippines (ROP), by and through the TRB.

Pursuant to the JVA entered into by PNCC and MPTDC (then FPIDC) on August 29, 1995, PNCCassigned its rights, interests and privileges under its franchise to construct, operate and maintaintoll facilities in the NLEX in favor of MNTC, including the design, funding and rehabilitation ofthe NLEX, and installation of the appropriate collection system therein. MPTDC (then FPIDC) inturn assigned all its rights, interests and privileges to Segment 7, as defined in the Memorandum ofAgreement dated March 6, 1995, to MNTC, which assumed all the rights and obligations as anecessary and integral part of the MNEP. The assignment of PNCC’s usufructuary rights,interests and privileges under its franchise, to the extent of the portion pertaining to the NLEX,was approved by the then President of the ROP. On October 10, 1995, the Department of Justiceissued Opinion No. 102, Series of 1995, noting the authority of the TRB to grant authority tooperate a toll facility and to issue the necessary TOC. On November 24, 1995, in a letter by thethen Secretary of Justice to the then Secretary of Public Works and Highways, the Secretary of

- 3 -

*SGVFS015652*

Justice reiterated and affirmed the authority of the TRB to grant authority to operate a toll facilityand to issue the necessary TOC in favor of PNCC and its joint venture partner for the proper andorderly construction, operation and maintenance of the NLEX as a toll road during the concessionperiod.

In April 1998, the ROP (Grantor), acting by and through the TRB, PNCC (Franchisee) and MNTC(Concessionaire) executed the STOA for the Manila-North Expressway, whereby the ROP grantedMNTC the rights, obligations and privileges including the authority to finance, design, construct,operate and maintain the project roads as toll roads (the “Concession”) commencing upon the datethe STOA comes into effect until December 31, 2030 or 30 years after the issuance of the TOP forthe last completed phase, whichever is earlier, unless further extended pursuant to the STOA.

The PNCC franchise expired on May 1, 2007. Pursuant to the STOA, the TRB issued thenecessary TOC for the NLEX in order to allow the continuation of the Concession. As furtherdiscussed in Note 25, MNTC pays a certain amount to PNCC.

Also, under the STOA, MNTC shall pay for the Grantor’s project overhead expenses based oncertain percentages of total construction costs or of periodic maintenance works on the projectroads.

Upon expiry of the concession period, MNTC shall hand-over the project roads to the Grantorwithout cost, free from any and all liens and encumbrances and fully operational and in goodworking condition, including any and all existing land required, works, toll road facilities andequipment found therein directly related to and in connection with the operation of the toll roadfacilities.

In October 2008, in consideration of the construction of Segment 8.1, TRB approved MNTC’sproposal to extend the concession period for Phase I and Segment 8.1 of the MNEP untilDecember 31, 2037, subject to certain conditions.

From 2007 to 2010, MNTC obtained TRB’s approval for certain amendments to the STOA for theMNEP which includes (a) the integration of Segment 10 into Phase II - July 2007; (b) amendmentof adjustment formula for the Authorized Toll Rate (ATR) by removing the foreign exchangefactor - June 2008; (c) adoption of an integrated operations period for Phase I and Segment 8.1and extension of the concession period until December 31, 2037 - October 2008; and(d) modification of alignments of Phase II Segments 9 and 10 - February 2010.

Agreements covering the SCTEXOn February 26, 2015, MNTC and the Bases Conversion and Development Authority (BCDA)entered into the Business Agreement (BA) covering the assignment by BCDA to MNTC of itsrights, interest and obligations under the TOA relating to the management, operation andmaintenance of the SCTEX (which shall include the exclusive right to possess and use the SCTEXtoll road and facilities and the right to collect toll). BCDA shall retain all rights, interests andobligations under the TOA relating to the design, construction and financing of the SCTEX.Nevertheless, MNTC and BCDA hereby acknowledge that BCDA has, as of date of the BA,designed, financed and constructed the SCTEX as an operable toll road in accordance with theTOA.

BCDA is a government instrumentality vested with corporate powers created by virtue ofRepublic Act (RA) No. 7227. Pursuant to Section 4 (b) of RA No. 7227, BCDA undertook thedesign, construction, operation and maintenance of the SCTEX, a major road project to serve asthe backbone of a new economic growth corridor in Central Luzon, pursuant to a TOA enteredinto between BCDA and the ROP, acting through the TRB, on June 13, 2007. In 2008, TRB has

- 4 -

*SGVFS015652*

issued in favor of BCDA a TOP authorizing the commercial operations of and the collection oftolls in SCTEX.

The term of the BA shall be from effective date (October 27, 2015), until October 30, 2043, andmay be extended subject to mutual agreement of MNTC and BCDA and the relevant laws, rulesand regulations and required government approvals. At the end of the contract term or upontermination of the BA, the SCTEX, as well as the as-built plans, specifications andoperation/repair/ maintenance manuals relating to the same shall be turned over to BCDA or itssuccessor-in-interest conformably with law, and in all cases in accordance with and subject to theterms and conditions of the STOA. The STOA, which was a supplement to and revision to theTOA, was entered into, by and among the ROP, acting through the TRB, BCDA and MNTC onMay 22, 2015, in order to fully allow MNTC to exercise its rights and interests under the BA.

In consideration for the assignment by BCDA to MNTC of its rights to and interests in SCTEX,MNTC paid BCDA an upfront cash of P=3.5 billion (inclusive of value-added tax or VAT) uponeffectivity of the BA (the Upfront Payment). MNTC shall also pay BCDA monthly concessionfees amounting to 50% of the Audited Gross Toll Revenues of SCTEX for the relevant monthfrom Effective Date to October 30, 2043. MNTC shall gross up the concession fees by the 12%value-added tax (VAT). In 2015, the Company recorded concession fees of P=132.1 millionincluded under “Cost of services” account in the consolidated statement of income (see Note 17).

MNTC also commits to undertake at its own cost the maintenance works/special/ majoremergency works, other additional works, enhancements and/or improvement works contained inthe Maintenance Plans submitted by MNTC to BCDA from time to time.

On October 22, 2015, MNTC received the TOC from the TRB for the operation and maintenanceof the SCTEX. MNTC officially took over the SCTEX toll facilities and officially commencedthe management, operation and maintenance of SCTEX on October 27, 2015.

3. Basis of Preparation and Summary of Significant Accounting Policies

Basis of PreparationThe consolidated financial statements have been prepared on a historical cost basis, except foravailable-for-sale (AFS) financial assets which are measured at fair value. The consolidatedfinancial statements are presented in Philippine peso, which is the Company’s functional andpresentation currency.

Statement of ComplianceThe consolidated financial statements have been prepared in compliance with Philippine FinancialReporting Standards (PFRS) as issued by the Financial Reporting Standards Council (FRSC).

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Parent Companyand its subsidiary as at December 31, 2015 and 2014 and for each of the three years in the periodended December 31, 2015.

- 5 -

*SGVFS015652*

Control is achieved when the Company is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power over theinvestee. Specifically, the Company controls an investee if and only if the Company has:

§ Power over the investee (i.e., existing rights that give it the current ability to direct therelevant activities of the investee),

§ Exposure, or rights, to variable returns from its involvement with the investee, and§ The ability to use its power over the investee to affect its returns.

The Company re-assesses whether or not it controls an investee if facts and circumstances indicatethat there are changes to one or more of the three elements of control.

The subsidiary is fully consolidated from the date of acquisition, being the date on which theCompany obtains control and continue to be consolidated until the date when such control ceases.The financial statements of the subsidiary are prepared for the same reporting year as theCompany, using consistent accounting policies. All intra-group balances, transactions, incomeand expenses, unrealized gains and losses and dividends resulting from intra-group transactionsare eliminated in full.

Changes in Accounting Policies and DisclosuresThe accounting policies adopted are consistent with those of the previous financial year, except forthe adoption of new and amended PFRS which were adopted as at January 1, 2015. The adoptionof the new and amended PFRS did not have significant impact on the consolidated financialstatements.

§ Amendments to Philippine Accounting Standards (PAS) 19, Employee Benefits – DefinedBenefit Plans: Employee Contributions

§ Annual Improvements to PFRS (2010-2012 cycle)§ PFRS 2, Share-based Payment – Definition of Vesting Condition§ PFRS 3, Business Combinations – Accounting for Contingent Consideration in a Business

Combination§ PFRS 8, Operating Segments – Aggregation of Operating Segments and Reconciliation of

the Total of the Reportable Segments’ Assets to the Entity's Assets§ PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets – Revaluation

Method – Proportionate Restatement of Accumulated Depreciation and Amortization§ PAS 24, Related Party Disclosures – Key Management Personnel

§ Annual Improvements to PFRS (2011-2013 cycle)§ PFRS 3, Business Combinations – Scope Exceptions for Joint Arrangements§ PFRS 13, Fair Value Measurement – Portfolio Exception§ PAS 40, Investment Property

Current versus Noncurrent Classification of Assets and LiabilitiesThe Company presents assets and liabilities in the consolidated balance sheet based oncurrent/noncurrent classification. An asset is current when it is:§ Expected to be realized or intended to be sold or consumed in normal operating cycle;§ Held primarily for the purpose of trading;§ Expected to be realized within twelve months after the reporting period; or§ Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for

at least twelve months after the reporting period.

- 6 -

*SGVFS015652*

All other assets are classified as noncurrent.

A liability is current when:§ It is expected to be settled in normal operating cycle;§ It is held primarily for the purpose of trading;§ It is due to be settled within twelve months after the reporting period; or§ There is no unconditional right to defer the settlement of the liability for at least twelve

months after the reporting period.

The Company classifies all other liabilities as noncurrent.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.

Cash and Cash EquivalentsCash and cash equivalents include cash on hand and in banks and short-term deposits with originalmaturities of three months or less from date of acquisition and are subject to an insignificant riskof changes in value.

Financial Assets and Liabilities

Initial Recognition and Measurement. The Company recognizes a financial asset or a financialliability when it becomes a party to the contractual provisions of the instrument. Financial assetsare classified as financial assets at fair value through profit or loss (FVPL), loans and receivables,held-to-maturity (HTM) investments, AFS financial assets, or as derivatives designated as hedginginstruments in an effective hedge, as appropriate. The Company determines the classification ofits financial assets at initial recognition and, where allowed and appropriate, re-evaluates thisdesignation at each financial year-end.

All financial assets are recognized initially at fair value plus transaction costs, except in the case offinancial assets recorded at FVPL.

All regular way purchases and sales of financial assets and liabilities are recognized on the tradedate, which is the date that the Company commits to purchase the asset. Regular way purchases orsales are purchases or sales of financial assets that require delivery of assets within the periodgenerally established by regulation or convention in the marketplace.

Financial liabilities are classified as financial liabilities at FVPL, loans and borrowings, or asderivatives designated as hedging instruments in an effective hedge, as appropriate. Financialliabilities are recognized initially at fair value and in the case of loans and borrowings, inclusive ofdirectly attributable transaction costs. The Company determines the classification of its financialliabilities at initial recognition.

The Company has no financial assets and liabilities at FVPL and HTM investments as atDecember 31, 2015 and 2014.

Subsequent Measurement. The subsequent measurement of financial assets and liabilities dependson their classification as described below:

a. Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market. After initial measurement, loans and receivables are

- 7 -

*SGVFS015652*

subsequently carried at amortized cost using the effective interest method less any allowanceon impairment. Amortized cost is calculated by taking into account any discount or premiumon acquisition and includes fees that are integral part of the effective interest rate andtransaction costs. Gains and losses are recognized in the consolidated statement of incomewhen the loans and receivables are derecognized or impaired, as well as through theamortization process.

Loans and receivables include cash and cash equivalents, receivables (excluding advances toofficers and employees), due from related parties, and restricted cash and refundable deposits(included in “Other noncurrent assets” account in the consolidated balance sheet)(see Notes 6, 7, 14 and 27).

b. AFS Financial Assets

AFS financial assets are non-derivative financial assets that are designated as AFS or are notclassified in any of the three preceding categories. AFS financial assets include equity anddebt instruments. Equity investments classified as AFS are those, which are neither classifiedas held for trading nor designated at FVPL. Debt instruments in this category are those whichare intended to be held for an indefinite period of time and which may be sold in response toneeds for liquidity or in response to changes in the market conditions.

After initial recognition, AFS financial assets are measured at fair value with unrealized gainsor losses being recognized as other comprehensive income (OCI) in “Other comprehensiveincome (loss) reserve” account, net of related deferred tax until the investment is derecognizedor until the investment is determined to be impaired at which time the cumulative gain or losspreviously reported in equity is included in the consolidated statement of income. Interestearned on the investments is reported as interest income using the effective interest method.

As at December 31, 2015 and 2014, the Company’s AFS financial assets consist ofinvestments in fixed rate retail treasury bonds and notes of the ROP; fixed rate corporatebonds of Manila Electric Company (Meralco), Philippine Long Distance Telephone Company(PLDT) and First Metro Investment Corporation (FMIC); unit investment trust funds (UITFs)and long-term negotiable certificate of deposits (LTNCDs) (see Note 11).

c. Loans and Borrowings

All loans and borrowings are initially recognized at fair value of the consideration receivedless directly attributable transaction costs (referred to herein as “debt issue costs”). Afterinitial recognition, interest bearing loans and borrowings are subsequently measured atamortized cost using the effective interest method.

Debt issue costs are amortized over the life of the debt instrument using the effective interestmethod. Debt issue costs are netted against the related loans and borrowings allocatedcorrespondingly between the current and noncurrent portion.

Gains and losses are recognized in the consolidated statement of income when the liabilitiesare derecognized, as well as through the amortization process.

This category includes accounts payable and other current liabilities, due to related parties,dividends payable and long-term debt (see Notes 12, 14, 15 and 27).

- 8 -

*SGVFS015652*

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in theconsolidated balance sheet, if and only if, there is a currently enforceable legal right to offset therecognized amounts and there is an intention to settle on a net basis, or to realize the asset andsettle the liability simultaneously. The Company assesses that it has a currently enforceable rightof offset if the right is not contingent on a future event, and is legally enforceable in the normalcourse of business, event of default, and event of insolvency or bankruptcy of the Company andall of the counterparties.

‘Day 1’ Profit or LossWhere the transaction price in a non-active market is different from the fair value of otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Company recognizes the differencebetween the transaction price and fair value (a ‘Day 1’ profit or loss) in the consolidated statementof income unless it qualifies for recognition as some other type of asset. In cases where data usedis not observable, the difference between the transaction price and model value is only recognizedin the consolidated statement of income when the inputs become observable or when theinstrument is derecognized. For each transaction, the Company determines the appropriatemethod of recognizing the ‘Day 1’ profit or loss amount.

Impairment of Financial AssetsThe Company assesses at each balance sheet date whether there is objective evidence that afinancial asset or group of financial assets is impaired. An impairment exists if one or moreevents that has occurred since the initial recognition of the asset (an incurred “loss event”) has animpact on the estimated future cash flows of the financial asset or the group of financial assets thatcan be reliably estimated. Evidence of impairment may include indications that the debtors or agroup of debtors is experiencing significant financial difficulty, default or delinquency in interestor principal payments, the probability that they will enter bankruptcy or other financialreorganization and where observable data indicate that there is a measurable decrease in theestimated future cash flows, such as changes in arrears or economic conditions that correlate withdefaults.

a. Financial Assets Carried at Amortized Cost

The Company first assesses whether objective evidence of impairment exists individually forfinancial assets that are individually significant, and individually or collectively for financialassets that are not individually significant. If it is determined that no objective evidence ofimpairment exists for an individually assessed financial asset, whether significant or not, theasset is included in a group of financial assets with similar credit risk characteristics and thatgroup of financial assets is collectively assessed for impairment. Assets that are individuallyassessed for impairment and for which an impairment loss is or continues to be recognized arenot included in a collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between theasset’s carrying amount and the present value of estimated future cash flows (excluding futurecredit losses that have not been incurred). The present value of the estimated future cash flowsis discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and theamount of the loss is recognized in the consolidated statement of income. Interest incomecontinues to be accrued using the rate of interest used to discount the future cash flows for thepurpose of measuring the impairment loss. The interest income is recorded as part of financeincome in the consolidated statement of income. The assets together with the associated

- 9 -

*SGVFS015652*

allowance are written off when there is no realistic prospect of future recovery and allcollateral has been realized or has been transferred to the Company. If a write-off is laterrecovered, any amount formerly charged is credited to the consolidated statement of income.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease canbe related objectively to an event occurring after the impairment was recognized, thepreviously recognized impairment loss is reversed. Any subsequent reversal of an impairmentloss is recognized in the consolidated statement of income, to the extent that the carrying valueof the asset does not exceed what its amortized cost would have been had the impairment notbeen recognized at the date the impairment is reversed.

b. AFS Financial Assets

In the case of equity investments classified as AFS financial assets, objective evidence wouldinclude a significant or prolonged decline in the fair value of the investment below its cost.Where there is evidence of impairment, the cumulative loss (measured as the differencebetween the acquisition cost and the current fair value, less any impairment loss on thatinvestment previously recognized in the consolidated statement of income) is removed fromOCI and recognized in the consolidated statement of income. Impairment losses on equityinvestments are not reversed through the consolidated statement of income; increases in theirfair value after impairment are recognized directly in OCI.

In the case of debt instruments classified as AFS financial assets, impairment is assessedbased on the same criteria as financial assets carried at amortized cost. However, the amountrecorded for impairment is the cumulative loss measured as the difference between theamortized cost and the current fair value, less any impairment loss on that investmentpreviously recognized in the consolidated statement of income.

Future interest income continues to be accrued based on the reduced carrying amount of theasset, using the rate of interest used to discount future cash flows for the purpose of measuringimpairment loss. Such accrual is recorded as part of “Interest income” in the consolidatedstatement of income. If, in subsequent year, the fair value of a debt instrument increases andthe increase can be objectively related to an event occurring after the impairment loss wasrecognized in the consolidated statement of income, the impairment loss is reversed throughthe consolidated statement of income.

Derecognition of Financial Assets and LiabilitiesA financial asset (or, where applicable a part of a financial asset or part of a group of similarfinancial assets) is derecognized when:

§ the rights to receive cash flows from the asset have expired; or

§ the Company has transferred its rights to receive cash flows from the asset or has assumed anobligation to pay the received cash flows in full without material delay to a third party under a‘pass through’ arrangement; and either (a) the Company has transferred substantially all therisks and rewards of the asset, or (b) the Company has neither transferred nor retainedsubstantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has enteredinto a pass-through arrangement, it evaluates if and to what extent it has retained the risks andrewards of ownership. When it has neither transferred nor retained substantially all of the risksand rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of

- 10 -

*SGVFS015652*

the Company’s continuing involvement in the asset. In that case, the Company also recognizes anassociated liability. The transferred asset and the associated liability are measured on a basis thatreflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measuredat the lower of original carrying amount of the asset and the maximum amount of considerationthat the Company could be required to repay.

A financial liability is derecognized when the obligation under the liability is discharged orcancelled or has expired.

When an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a newliability, and the difference in the respective carrying amounts of a financial liability (or part of afinancial liability) extinguished or transferred to another party and the consideration paid,including any non-cash assets transferred or liabilities assumed, shall be recognized in theconsolidated statement of income.

Derivatives and Hedge Accounting

Freestanding Derivatives. The Company uses derivative financial instruments, such as interestrate swaps, to hedge its interest rate risks. Such derivative financial instruments are initiallyrecognized at fair value on the date on which a derivative contract is entered into and aresubsequently remeasured at fair value. Derivatives are carried as financial assets when the fairvalue is positive and as financial liabilities when the fair value is negative.

For the purpose of hedge accounting, hedges are classified primarily either as (a) a hedge of thefair value of an asset, liability or a firm commitment (fair value hedge); or (b) a hedge of theexposure to variability in cash flows attributable to an asset or liability or a forecasted transaction(cash flow hedge); or (c) hedge of a net investment in a foreign operation. The Companydesignated and accounted for certain derivatives under cash flow hedges. The Company did notdesignate any of its derivatives as fair value hedges or hedges of a net investment in a foreignoperation.

At the inception of a hedge relationship, the Company formally designates and documents thehedge relationship to which the Company wishes to apply hedge accounting and the riskmanagement objective and strategy for undertaking the hedge. The documentation includesidentification of the hedging instrument, the hedged item or transaction, the nature of the riskbeing hedged and how the entity will assess the hedging instrument’s effectiveness in offsettingthe exposure to changes in the hedged item’s fair value or cash flows attributable to the hedgedrisk. Such hedges are assessed on an ongoing basis to determine that they actually have beenhighly effective throughout the financial reporting periods for which they were designated.

In cash flow hedges, changes in the fair value of a hedging instrument that qualifies as highlyeffective cash flow hedge are included in equity under “Other comprehensive income (loss)reserve” account, net of related deferred tax. The ineffective portion is immediately recognized inthe consolidated statement of income.

If the hedged cash flow results in the recognition of an asset or a liability, gains and losses initiallyrecognized in equity are transferred from equity to consolidated statement of income in the sameperiod or periods during which the hedged forecasted transaction or recognized asset or liabilityaffect the consolidated statement of income.

- 11 -

*SGVFS015652*

When the hedge ceases to be highly effective, hedge accounting is discontinued prospectively. Inthis case, the cumulative gain or loss on the hedging instrument that has been reported directly inequity is retained in equity until the forecasted transaction occurs. When the forecastedtransaction is no longer expected to occur, any net cumulative gain or loss previously reported inequity is charged against the consolidated statement of income.

For derivatives that are not designated as effective accounting hedges, any gains or losses arisingfrom changes in fair value of derivatives are recognized directly in the consolidated statement ofincome.

Fair Value MeasurementThe Company measures financial instruments such as AFS financial assets at fair value at eachbalance sheet date. Also, fair values of financial instruments measured at amortized cost aredisclosed in Note 27.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:

§ In the principal market for the asset or liability, or§ In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest. A fair value measurement of a non-financial asset takes into account amarket participant's ability to generate economic benefits by using the asset in its highest and bestuse or by selling it to another market participant that would use the asset in its highest and bestuse.

The Company uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs. All assets and liabilities for which fairvalue is measured or disclosed in the consolidated financial statements are categorized within thefair value hierarchy, described, as follows, based on the lowest-level input that is significant to thefair value measurement as a whole:

§ Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities

§ Level 2 – Valuation techniques for which the lowest-level input that is significant to the fairvalue measurement is directly or indirectly observable

§ Level 3 – Valuation techniques for which the lowest-level input that is significant to the fairvalue measurement is unobservable

For assets and liabilities that are recognized in the consolidated financial statements on a recurringbasis, the Company determines whether transfers have occurred between levels in the hierarchy byreassessing categorization (based on the lowest-level input that is significant to the fair valuemeasurement as a whole) at balance sheet date.

- 12 -

*SGVFS015652*

For the purpose of fair value disclosures, the Company has determined classes of assets andliabilities based on the nature, characteristics and risks of the asset or liability and the level of thefair value hierarchy as explained above.

InventoriesInventories, which consist of magnetic cards and spare parts, are valued at the lower of cost andnet realizable value (NRV). Cost includes purchase cost and import duties and is determinedprimarily on a weighted average method. For magnetic cards, NRV is the estimated selling pricein the ordinary course of business, less estimated costs necessary to make the sale. NRV for spareparts is the current replacement cost.

Advances to Contractors and ConsultantsAdvances to contractors and consultants represent the advance payments for mobilization of thecontractors and consultants. These are stated at costs less any impairment in value. These areprogressively reduced upon receipt of the equivalent amount of services rendered by thecontractors and consultants.

Service Concession ArrangementsThe Company accounts for its concession arrangements under the intangible asset model as itreceives the right (license) to charge users of public service.

Revenue and Cost Recognition. The Company recognizes and measures construction revenue inaccordance with PAS 11, Construction Contracts, and PAS 18, Revenue, for the services itperforms. When the Company provides construction or upgrade services, the considerationreceived or receivable by the Company is recognized at its fair value. The revenue and cost fromthese services are recognized based on the percentage of completion measured principally on thebasis of estimated completion of a physical proportion of the contract works, and by reference tothe actual costs incurred to date over the estimated total cost of the project.

Contractual Obligations. The Company recognizes its contractual obligations, (i) to maintain thetoll roads to a specified level of serviceability or (ii) to restore the toll roads to a specifiedcondition before it is handed over to the grantor at end of the concession term, in accordance withPAS 37, Provisions, Contingent Liabilities and Contingent Assets, as the obligations arise which isas a consequence of the use of the toll roads and therefore it is proportional to the number ofvehicles using the toll roads and increasing in measurable annual increments.

Service Concession Assets. The service concession assets (or the rights to charge users of thepublic service) are recognized initially at cost. The cost of the service concession assets consistsof the construction or upgrade costs, including related borrowing costs, and upfront fees paymentson the concession agreements. Following initial recognition, the service concession assets arecarried at cost less accumulated amortization and any impairment losses.

Subsequent costs and expenditures related to the toll road infrastructure arising from theCompany’s commitments to the concession agreements, or that increase future revenues arerecognized as additions to the service concession assets and are stated at cost. Repairs andmaintenance and other expenses that are routinary in nature are expensed and recognized to theconsolidated statement of income as incurred.

The service concession assets are amortized using the unit-of-production method. The annualamortization of the service concession assets are calculated by applying the ratio of actual trafficvolume of the underlying toll expressways compared to the total expected traffic volume of theunderlying toll expressways over the respective remaining concession periods to the net carrying

- 13 -

*SGVFS015652*

value of the assets. The expected traffic volume is estimated by management with reference to thetraffic projection reports.

The amortization expense is recognized under the “Cost of services” account in the consolidatedstatement of income.

The concession fees paid in consideration for the concession which vary in relation to futureactivity (i.e., based on toll revenues) are treated as executory and are expensed as incurred.

The service concession assets will be derecognized upon turnover to the Grantor. There will be nogain or loss upon derecognition as the service concession assets which are expected to be fullyamortized by then, will be handed over to the Grantor with no consideration.

Deferred Project Costs. Costs directly attributable to the acquisition of service concession assetsare recorded as deferred project costs (under “Other noncurrent assets”) until commencement ofthe concession term, whereupon the costs are transferred to the “Service concession assets”account.

Property and EquipmentProperty and equipment is stated at cost less accumulated depreciation and any impairment invalue. The cost of property and equipment consists of its purchase price and any costs directlyattributable to bringing the asset to the location and condition necessary for it to be capable ofoperating in the manner intended by management. Cost also includes the cost of replacing the partof such property and equipment when the recognition criteria are met.

Expenditures incurred after the property and equipment have been put into operation, such asrepairs and maintenance, are normally recognized as expense in the period such costs are incurred.In situations where it can be clearly demonstrated that the expenditures have resulted in anincrease in the future economic benefits expected to be obtained from the use of an item ofproperty and equipment beyond its originally assessed standard of performance, the expendituresare capitalized as additional cost of the property and equipment.

An item of property and equipment is derecognized upon disposal or when no future economicbenefits are expected from its use or disposal. Any gain or loss arising on derecognition of theasset (calculated as the difference between the net disposal proceeds and the carrying amount ofthe item) is included in the consolidated statement of income in the year the item is derecognized.

Depreciation commences once the property and equipment are available for use and is calculatedon a straight-line basis over the estimated useful life of the asset as follows:

Building and building improvements 5–25 yearsLeasehold improvements 5 years or lease term whichever is shorterTransportation equipment 5 yearsOffice equipment and others 3–5 years

Fully depreciated property and equipment are retained in the accounts until they are no longer inuse and no further depreciation is charged to the consolidated statement of income.

The assets’ residual values, useful lives and method of depreciation are reviewed at each financialyear-end, and adjusted prospectively, if appropriate.

- 14 -

*SGVFS015652*

Other Intangible Assets (Software Cost)The Company’s other intangible assets pertain to various computer software used inadministration and operations. Intangible assets acquired separately are measured on initialrecognition at cost. Following initial recognition, intangible assets are carried at cost less anyaccumulated amortization and accumulated impairment losses. Internally generated intangibleassets, excluding capitalized development costs, are not capitalized and expenditure is reflected inprofit and loss in the period in which the expenditure is incurred.

Intangible assets with finite lives are amortized over the useful economic life and assessed forimpairment whenever there is an indication that the intangible asset may be impaired. Theamortization period and the amortization method for an intangible asset with a finite useful life arereviewed at least at the end of each balance sheet date. Changes in the expected useful life or theexpected pattern of consumption of future economic benefits embodied in the asset are consideredto modify the amortization period or method, as appropriate, and are treated as changes inaccounting estimates. The amortization expense on intangible assets with finite lives is recognizedin the consolidated statement of income in the expense category that is consistent with the functionof the intangible assets.

Gains or losses arising from derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset and are recognized in theconsolidated statement of income when the asset is derecognized.

Impairment of Nonfinancial AssetsThe Company assesses at each balance sheet date whether there is an indication that an asset maybe impaired. If any such indication exists, or when annual impairment testing for an asset isrequired, the Company makes an estimate of the asset’s recoverable amount. An asset’srecoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to selland its value in use and is determined for an individual asset, unless the asset does not generatecash inflows that are largely independent of those from other assets or groups of assets. When thecarrying amount of an asset exceeds its recoverable amount, the asset is considered impaired andis written down to its recoverable amount. In assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. In determining fairvalue less costs to sell, recent market transactions are taken into account, if available. If no suchtransactions can be identified, an appropriate valuation model is used. These calculations arecorroborated by valuation multiples or other available fair value indicators. Impairment losses arerecognized in the consolidated statement of income in those expense categories consistent with thefunction of the impaired asset.

An assessment is made at each balance sheet date as to whether there is any indication thatpreviously recognized impairment losses may no longer exist or may have decreased. If suchindication exists, the recoverable amount is estimated. A previously recognized impairment loss isreversed only if there has been a change in the estimates used to determine the asset’s recoverableamount since the last impairment loss was recognized. If that is the case, the carrying amount ofthe asset is increased to its recoverable amount. That increased amount cannot exceed thecarrying amount that would have been determined, net of depreciation or amortization, had noimpairment loss been recognized for the asset in prior years. Such reversal is recognized in theconsolidated statement of income. After such a reversal, the depreciation and amortizationcharges are adjusted in future periods to allocate the asset’s revised carrying amount, less anyresidual value, on a systematic basis over its remaining useful life.

- 15 -

*SGVFS015652*

ProvisionsProvisions are recognized when the Company has a present obligation (legal or constructive) as aresult of a past event, it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate can be made of the amount of theobligation. Where the Company expects some or all of a provision to be reimbursed, thereimbursement is recognized as a separate asset but only when the reimbursement is virtuallycertain. The expense relating to any provision is presented in the consolidated statement ofincome, net of any reimbursement. If the effect of the time value of money is material, provisionsare discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to theliability. Where discounting is used, the increase in the provision due to the passage of time isrecognized as interest expense.

EquityCapital stock is measured at par value for all shares issued. Incremental costs incurred directlyattributable to the issuance of new shares are shown in equity as deduction from proceeds, net oftax. Proceeds and/or fair value of considerations received in excess of par value, if any, arerecognized as additional paid-in capital.

Retained earnings represent the accumulated earnings net of dividends declared, adjusted for theeffects of changes in accounting policies as may be required by PFRS’ transitional provisions.

Other comprehensive income (loss) reserve comprise items of income and expense, includingrecycling to profit and loss, that are not recognized in the consolidated statement of income asrequired or permitted by other PFRS.

Other reserve comprise the contribution from MPIC in relation to its executive stock option plangranted to MNTC employees accounted for as equity-settled share-based payment transactions.

Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theCompany and the amount of the revenue can be measured reliably, regardless of when thepayment is made. Revenue is measured at fair value of the consideration received or receivable,taking into account contractually defined terms of payment, excluding VAT, discounts andrebates. The Company has concluded that it is acting as principal in all of its revenuearrangements since it is the primary obligor in all the revenue arrangements, has pricing latitudeand is also exposed to inventory and credit risks.

The following specific criteria must also be met before revenue is recognized:

§ Revenue from toll fees is recognized upon the sale of toll tickets. Toll fees received inadvance, through transponders or magnetic cards, are recognized as income upon the holders’availment of the toll road services, net of discounts or rebates. The unused portion of toll feesreceived in advance is reflected as “Unearned toll revenue” in the consolidated balance sheet.

§ Revenue from sale of magnetic cards is recognized when the significant risks and rewards ofownership of the goods have passed to the buyer, normally upon delivery.

§ Construction revenue and costs are recognized by reference to the stage of completion of thecontract activity at the balance sheet date. When it is probable that total contract costs willexceed total contract revenue, the expected loss is recognized as an expense immediately.

- 16 -

*SGVFS015652*

§ Income from utility facility contracts, toll service facilities (TSF) and advertising, included in“Other income” account in the consolidated statement of income, are recognized inaccordance with the terms of the agreement.

§ Interest income is recognized as the interest accrues using the effective interest method.

§ Other income is recognized when there is an incidental economic benefit, other than the usualbusiness operations, that will flow to the Company through an increase in asset or reduction inliability that can be measured reliably. This includes reversal of allowance for doubtfulaccounts.

Cost and Expenses RecognitionCost and expenses are decreases in economic benefits during the accounting period in the form ofoutflows or decrease of assets or incurrence of liabilities that result in decrease in equity, otherthan those relating to distributions to equity participants. Cost of services, general andadministrative expenses and interest expense and other finance costs are recognized in theconsolidated statement of income in the period these are incurred.

Operating LeaseThe determination of whether an arrangement is, or contains a lease, is based on the substance ofthe arrangement at inception date of whether the fulfillment of the arrangement is dependent onthe use of a specific asset or assets or the arrangement conveys a right to use the asset.

A reassessment is made after inception of the lease only if one of the following applies:

a. there is a change in contractual terms, other than a renewal or extension of the arrangement;b. a renewal option is exercised or extension granted, unless the term of the renewal or extension

was initially included in the lease term;c. there is a change in the determination of whether fulfillment is dependent on a specified asset;

ord. there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) and at the date ofrenewal or extension period for scenario (b).

Company as Lessee. Leases where the lessor retains substantially all the risks and benefits ofownership of the assets are classified as operating leases. Operating lease payments arerecognized as an expense in the consolidated statement of income on a straight-line basis over theterm of the lease.

Foreign Currency-denominated Transactions and TranslationsThe Company determines its own functional currency and items included in the consolidatedfinancial statements are measured using that functional currency. The Company has determinedits functional currency to be the Philippine peso. Transactions in foreign currencies are initiallyrecorded in the functional currency rate ruling at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies are translated at the functional currency closingexchange rate at balance sheet date. All differences are taken to the consolidated statement ofincome with the exception of differences on foreign currency borrowings that are regarded asadjustments to interest cost, and are capitalized as part of the cost of the service concession assetsduring the construction period.

- 17 -

*SGVFS015652*

Borrowing CostsBorrowing costs are capitalized as part of service concession assets if they are directly attributableto the acquisition and construction of the assets. Capitalization of borrowing costs commenceswhen the activities to prepare for the construction of the assets are in progress and expendituresand borrowing costs are being incurred, until the assets are ready for their intended use. If theresulting carrying amount of the asset exceeds its recoverable amount, an impairment loss isrecorded.

Borrowing costs include interest charges, amortization of debt issue costs and other costs incurredin connection with the borrowing of funds, including exchange differences arising from foreigncurrency borrowings used to finance the assets, to the extent that they are regarded as adjustmentsto interest cost.

All other borrowing costs are expensed in the period they are incurred.

Defined Benefit PlanThe net defined benefit liability or asset is the aggregate of the present value of the defined benefitobligation at the end of the reporting period reduced by the fair value of plan assets, adjusted forany effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is thepresent value of any economic benefits available in the form of refunds from the plan orreductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

Defined benefit costs comprise the following:

§ Service cost§ Net interest on the net defined benefit liability or asset§ Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognizedwhen plan amendment or curtailment occurs. These amounts are calculated periodically byindependent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined byapplying the discount rate based on government bonds to the net defined benefit liability or asset.Net interest on the net defined benefit liability or asset is recognized as expense or income inprofit or loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change inthe effect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in OCI in the period in which they arise. Remeasurements are not reclassified toprofit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Company, nor can they be paiddirectly to the Company. Fair value of plan assets is based on market price information. When nomarket price is available, the fair value of plan assets is estimated by discounting expected futurecash flows using a discount rate that reflects both the risk associated with the plan assets and the

- 18 -

*SGVFS015652*

maturity or expected disposal date of those assets (or, if they have no maturity, the expectedperiod until the settlement of the related obligations). If the fair value of the plan assets is higherthan the present value of the defined benefit obligation, the measurement of the resulting definedbenefit asset is limited to the present value of economic benefits available in the form of refundsfrom the plan or reductions in future contributions to the plan.

The Company’s right to be reimbursed of some or all of the expenditure required to settle adefined benefit obligation is recognized as a separate asset at fair value when and only whenreimbursement is virtually certain.

Employee Leave EntitlementEmployee entitlements to annual leave are recognized as a liability when they are accrued to theemployees. The undiscounted liability for leave expected to be settled wholly before twelvemonths after the end of the annual reporting period is recognized for services rendered byemployees up to the end of the reporting period.

Share-based PaymentMPIC has an Executive Stock Option Plan (ESOP) for eligible executives to receive remunerationin the form of share-based payment transactions, whereby executives render services in exchangefor the share option.

Executives of the Company are granted rights to equity instruments of MPIC as consideration forthe services provided to the Company.

The Company shall measure the services received from its employees in accordance with therequirements applicable to equity-settled share-based payment transactions, with a correspondingincrease recognized in equity as a contribution from MPIC, provided that the share-basedarrangement is accounted for as equity-settled in the consolidated financial statements of MPIC.

A parent grants rights to its equity instruments to the employees of its subsidiaries, conditionalupon the completion of continuing service with the group for a specified period. An employee ofone subsidiary may transfer employment to another subsidiary during the specified vesting periodwithout the employee’s rights to equity instruments of the parent under the original share-basedpayment arrangement being affected. Each subsidiary shall measure the services received fromthe employee by reference to the fair value of the equity instruments at the date those rights toequity instruments were originally granted by the parent, and the proportion of the vesting periodserved by the employee with each subsidiary.

Such an employee may fail to satisfy a vesting condition other than a market condition aftertransferring between group entities. In this case, each subsidiary shall adjust the amountpreviously recognized in respect of the services received from the employee. Hence, no amount isrecognized on a cumulative basis for the services received from that employee in the consolidatedfinancial statements of any subsidiary if the rights to the equity instruments granted by the parentdo not vest because of an employee’s failure to meet a vesting condition other than a marketcondition.

- 19 -

*SGVFS015652*

Where the terms of an equity-settled transaction award are modified, the minimum expenserecognized is the expense as if the terms had not been modified, if the original terms of the awardare met. An additional expense is recognized for any modification that increases the total fairvalue of the share-based payment transaction, or is otherwise beneficial to the employee asmeasured at the date of modification.

Long-term Employee BenefitsMPTC has long-term incentive plan (LTIP) which grants cash incentives to eligible key executivesof MPTC and its subsidiaries, including the Company. Liability under the LTIP is determinedusing the projected unit credit method. Employee benefit costs include current service costs,interest cost, actuarial gains and loss and past service costs. Past service costs and actuarial gainsand losses are recognized immediately.

The liability under LTIP comprise the present value of the defined benefit obligation (usingdiscount rate based on government bonds) vested at the balance sheet date.

Taxes

Current Tax. Current tax assets and liabilities are measured at the amount expected to berecovered from or paid to the taxation authority. The tax rates and tax laws used to compute theamount are those that are enacted or substantively enacted at the balance sheet date.

Current tax relating to items recognized directly in equity is recognized in equity and not in theconsolidated statement of income.

Deferred Tax. Deferred tax is provided using the liability method, on temporary differencesbetween the tax bases of assets and liabilities and their carrying amounts for financial reportingpurposes at balance sheet date.

Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assetsare recognized for all deductible temporary differences, carryforward benefits of unused taxcredits and unused tax losses, to the extent that it is probable that taxable income will be availableagainst which the deductible temporary differences, and the carryforward of unused tax creditsand unused tax losses can be utilized. Deferred tax liability or asset, however, is not recognizedwhen it arises from the initial recognition of an asset or liability in a transaction that is not abusiness combination and, at the time of the transaction, affects neither the accounting profit nortaxable income or loss.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced tothe extent that it is no longer probable that sufficient taxable income will be available to allow allor part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed ateach balance sheet date and are recognized to the extent that it has become probable that futuretaxable income will allow the deferred tax assets to be recovered.

Deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected toapply to the year when the asset is realized or the liability is settled, based on tax rate and tax lawsthat have been enacted or substantively enacted at the balance sheet date.

Deferred tax relating to items recognized outside consolidated statement of income is recognizedoutside consolidated statement of income. Deferred tax items are recognized in correlation to theunderlying transaction either in OCI or directly in equity.

- 20 -

*SGVFS015652*

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to setoff current tax assets against current tax liabilities and the deferred tax relate to the same taxableentity and the same taxation authority.

Value-added Tax. Revenues, expenses and assets are recognized net of the amount of VATexcept:

a. When the VAT incurred on a purchase of assets or services is not recoverable from thetaxation authority, in which case the VAT is recognized as part of the cost of acquisition of theasset or as part of the expense item as applicable.

b. When receivables and payables are stated with the amount of VAT included.

The net amount of VAT recoverable from, or payable to, the taxation authority is included as partof other current assets or as part of payables in the consolidated balance sheet.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements but are disclosedunless the possibility of an outflow of resources embodying economic benefits is remote.Contingent assets are not recognized in the consolidated financial statements but disclosed whenan inflow of economic benefits is probable.

Events After the Balance Sheet DatePost year-end events that provide additional information about the Company’s financial position atthe balance sheet date (adjusting events), if any, are reflected in the consolidated financialstatements. Post year-end events that are not adjusting events are disclosed in the notes toconsolidated financial statements when material.

4. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements in compliance with PFRS requiresmanagement to make judgments, estimates and assumptions that affect certain reported amounts anddisclosures. In preparing the consolidated financial statements, management has made its bestjudgment and estimates of certain amounts, giving due consideration to materiality. The judgmentsand estimates used in the consolidated financial statements are based upon management’s evaluationof relevant facts and circumstances as at the date of the consolidated financial statements. Actualresults could differ from those estimates, and such estimates will be adjusted accordingly.

The Company believes that the following represent a summary of these significant judgments andestimates and the related impact and associated risks in the consolidated financial statements.

JudgmentsIn the process of applying the Company’s accounting policies, management has made certainjudgments, apart from those involving estimations, which have the most significant effect on theamounts recognized in the consolidated financial statements.

Service Concession Arrangements. Philippine Interpretation IFRIC 12, Service ConcessionArrangements, outlines an approach to account for contractual arrangements arising from entitiesproviding public services. Arrangements within the scope of Philippine Interpretation IFRIC 12are those public-to-private service concession arrangements in which: (a) the grantor controls orregulates the services that the operator must provide using the infrastructure, to whom it must

- 21 -

*SGVFS015652*

provide them, and at what price; and (b) the grantor controls any significant residual interest in theproperty at the end of the concession term through ownership, beneficial entitlement or otherwise.Infrastructure assets within scope are those constructed or acquired for the purpose of the serviceconcession arrangement or existing infrastructure to which the operator is given access by thegrantor for the purpose of the service concession arrangement.

Philippine Interpretation IFRIC 12 also provides that the operator should not account for theinfrastructure as property, plant and equipment, but recognize a financial asset and/or an intangibleasset.

The Company has made a judgment that the STOA for the Manila-North Expressway and theagreements covering the SCTEX are within the scope of Philippine Interpretation IFRIC 12 andqualify under the intangible asset model, wherein the service concession assets are recognized asintangible asset in accordance with PAS 38, Intangible Assets.

The Company also recognizes construction revenues and costs in accordance with PAS 11,Construction Contracts. It measures contract revenue at the fair value of the considerationreceived or receivable. Given that MNTC has subcontracted the construction to outsidecontractors, the construction revenue recognized is equal to the construction costs. Constructionrevenue and costs recognized in consolidated statements of income amounted to P=3,328.4 million,P=2,425.3 million and P=341.6 million for the years ended December 31, 2015, 2014 and 2013,respectively.

The Company also recognizes its contractual obligations to restore the toll roads to a specifiedlevel of serviceability. The Company recognizes a provision following PAS 37, as the obligationarises which is a consequence of the use of the toll roads and therefore it is proportional to thenumber of vehicles using the toll roads and increasing in measurable annual increments. Provisionfor heavy maintenance amounted to P=263.3 million and P=167.9 million as at December 31, 2015and 2014, respectively (see Note 13).

Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at thebalance sheet date that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below. The Companybased its assumptions and estimates on parameters available when the consolidated financialstatements were prepared. Existing circumstances and assumptions about future developments,however, may change due to market changes or circumstances arising that are beyond the controlof the Company. Such changes are reflected in the assumptions when they occur.

Allowance for Doubtful Accounts. Allowance for doubtful accounts is maintained at a levelconsidered adequate to provide for potentially uncollectible receivables. The level of allowance isbased on past collection experience and other factors that may affect collectability. An evaluation ofthe receivables using specific method, designed to identify potential charges to the allowance, isperformed on a continuous basis throughout the year. There were no provisions under collectiveassessment in 2015, 2014 and 2013.

Receivables (excluding advances to officers and employees) amounted to P=553.9 million andP=674.4 million as at December 31, 2015 and 2014, respectively. Allowance for doubtful accountsamounted to P=14.2 million and P=9.9 million as at December 31, 2015 and 2014, respectively(see Note 7).

- 22 -

*SGVFS015652*

Due from related parties amounted to P=2.8 million and P=12.5 million as at December 31, 2015 and2014, respectively (see Note 14).

Impairment of AFS Financial Assets. For debt instruments classified as AFS financial assets, theCompany considers loss events that has an impact on the estimated future cash flows of the financialasset, among others, the issuer is experiencing significant financial difficulty, default or delinquencyin interest or principal payments, the probability that they will enter bankruptcy or other financialreorganization. Other observable data may indicate that there is a measurable decrease in theestimated future cash flows, such as changes in arrears or economic conditions that correlate withdefaults.

No impairment loss was recognized in 2015, 2014 and 2013. The carrying values of AFS financialassets, including short-term deposits, amounted to P=2,940.5 million and P=6,727.6 million as atDecember 31, 2015 and 2014, respectively (see Note 11).

NRV of Inventories. Inventories are presented at the lower of cost and NRV. Estimates of NRV arebased on the most reliable evidence available at the time the estimates are made of the amount theinventories are expected to be realized. A review of the items of inventories is performed at eachbalance sheet date to reflect the accurate valuation of inventories in the consolidated financialstatements.

There was no write-down of inventories recognized in the consolidated statements of income in 2015,2014 and 2013. Inventories amounted to P=71.4 million and P=47.8 million as at December 31, 2015and 2014, respectively.

Amortization of Service Concession Assets. Prior to 2014, the service concession assets are amortizedusing the straight-line method over the service concession term. Effective January 1, 2014, theservice concession assets are amortized using unit-of-production (UOP) method, where theamortization is calculated based on the ratio of actual traffic volume of the underlying tollexpressways compared to the total expected traffic volume of the underlying toll expressways overthe remaining concession periods of the concession agreements. Adjustments may need to be madeto the carrying amounts of service concession assets should there be a material difference between thetotal expected traffic volume and the actual results.

As at December 31, 2015 and 2014, the Company’s management has reviewed the total expectedtraffic volume and made appropriate adjustments to the assumptions of the expected traffic volumewith reference to the latest traffic studies. In 2015 and 2014, the Company reported amortization ofservice concession assets amounting to P=575.1 million and P=483.6 million, respectively (see Note 17).The management of the Company considers that these are calculated by reference to the bestestimates of the total expected traffic volumes of the underlying toll expressways. In 2013, theamortization of service concession assets under straight-line method amounted to P=599.9 million.

The carrying values of the service concession assets as at December 31, 2015 and 2014 areP=22,798.4 million and P=16,867.6 million, respectively (see Note 8).

Estimated Useful Lives. The useful life of each of the Company’s item of property and equipmentand other intangible assets is estimated based on the period over which the assets are expected to beavailable for use by the Company. Such estimation is based on a collective assessment of similarbusinesses, internal technical evaluation and experience with similar assets. The estimated useful lifeof each asset is reviewed periodically and updated if expectations differ from previous estimates dueto physical wear and tear, technical or commercial obsolescence and legal or other limits on the use ofthe asset. It is possible, however, that future results of operations could be materially affected by

- 23 -

*SGVFS015652*

changes in the amounts and timing of recorded expenses brought about by changes in the factorsmentioned above. An increase in the estimated useful life of any item of property and equipment andother intangible assets would decrease the recorded depreciation and amortization expense.

There were no changes in the estimated useful lives of property and equipment and other intangibleassets in 2015 and 2014. The carrying values of property and equipment and other intangible assetsas at December 31, 2015 and 2014 are as follows:

2015 2014Property and equipment (see Note 9) P=121,077,788 P=129,502,464Other intangible assets (see Note 10) 16,681,278 22,169,763

Impairment of Nonfinancial Assets. Impairment review of service concession assets, property andequipment and other intangible assets is performed when certain impairment indicators are present.Determining the fair value of assets requires the estimation of cash flows, expected to be generatedfrom the continued and ultimate disposition of such assets.

There was no impairment loss recognized in the consolidated statements of income in the years 2015,2014 and 2013. There was no impairment testing performed in the years 2015, 2014 and 2013 asthere were no indicators of impairment.

The carrying values of the Company’s nonfinancial assets as at December 31, 2015 and 2014 are asfollows:

2015 2014Service concession assets (see Note 8) P=22,798,406,210 P=16,867,583,654Property and equipment (see Note 9) 121,077,788 129,502,464Other intangible assets (see Note 10) 16,681,278 22,169,763

Recognition of Deferred Tax Assets. The carrying amount of deferred tax assets is reviewed ateach balance sheet date and reduced to the extent that it is no longer probable that sufficienttaxable income will be available to allow or part of the deferred tax assets to be utilized. TheCompany’s assessment on the recognition of deferred tax assets on deductible temporarydifferences is based on the expected future results of operations.

Deferred tax assets amounted to P=134.7 million and P=107.5 million as at December 31, 2015 and2014, respectively. The deferred tax asset on net operating loss carry over (NOLCO) of NVC ofP=83,307 was not recognized since management believes that it is more likely than not that thesewill not be realized in the future (see Note 24).

Retirement Costs. The cost of defined benefit retirement plan and the present value of the definedbenefit obligation are determined using actuarial valuations. The actuarial valuations involvemaking various assumptions about discount rates, future salary increases, mortality rates andfuture pension increases. Due to the complexity of the valuation, underlying assumptions and itslong-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions.All assumptions are reviewed at each balance sheet date. Further details about the assumptionsused are given in Note 19.

Pension asset amounted to P=12.1 million and P=2.6 million as at December 31, 2015 and 2014,respectively (see Note 19).

- 24 -

*SGVFS015652*

Long-Term Incentives Benefits. The LTIP for key executives of the Company is based on profittargets for the covered performance cycle. The cost of LTIP is determined using the projected unitcredit method based on prevailing discount rates and profit targets. While management’sassumptions are believed to be reasonable and appropriate, significant differences in actual resultsor changes in assumptions may materially affect the Company’s long-term incentives benefits.

LTIP payable amounted to P=70.5 million and P=120.0 million as at December 31, 2015 and 2014,respectively (see Note 19).

Share-based Payments. The Company measures the cost of equity-settled transactions withemployees by reference to the fair value of the equity instruments at the date at which they aregranted. Estimating fair value for share-based payments requires determining the mostappropriate valuation model for a grant of equity instruments, which is dependent on the terms andconditions of the grant. This estimate also requires determining the most appropriate inputs to thevaluation model including the expected life of the option, volatility and dividend yield and makingassumptions about them. The assumptions and models used for estimating fair value for share-based payments are disclosed in Note 20.

Total cost arising from share-based payments recognized by the Company, included in salariesand employee benefits under “General and administrative expenses” account in the consolidatedstatements of income, amounted to P=1.2 million, P=2.3 million and P=0.6 million for the years endedDecember 31, 2015, 2014 and 2013, respectively (see Notes 18, 19 and 20).

Provisions. The Company recognizes provisions based on estimates of whether it is probable thatan outflow of resources will be required to settle an obligation. Where the final outcome of thesematters is different from the amounts that were initially recognized, such differences will impactthe financial performance in the current period in which such determination is made.

The provision for the heavy maintenance requires an estimation of the periodic cost, generallyestimated to be every seven to nine years or the expected heavy maintenance dates, to restore theassets to a level of serviceability during the service concession term and in good condition before theturnover to the Grantor. This is based on the best estimate of management to be the amount expectedto be incurred to settle the obligation at every heavy maintenance date discounted using a pre-tax ratethat reflects the current market assessment of the time value of money and the risk specific to theliability.

Provisions (current and noncurrent) amounted to P=339.5 million and P=258.0 million as atDecember 31, 2015 and 2014, respectively (see Note 13).

Contingencies. The Company is a party to certain lawsuits or claims arising from the ordinarycourse of business. However, the Company’s management and legal counsel believe that theeventual liabilities under these lawsuits or claims, if any, will not have a material effect on theCompany’s consolidated financial statements (see Note 28).

5. Operating Segment Information

The Company has only one operating segment which is the tollways business. The Company’sresults of operations are reviewed by the chief operating decision maker to make decisions and toassess Company performance, and for which discrete financial information is available.

- 25 -

*SGVFS015652*

The Company’s performance is evaluated based on net income for the year; earnings beforeinterest, taxes and depreciation and amortization (EBITDA); EBITDA margin; core income; andcore income margin. Net income for the year is measured consistent with the net income in theconsolidated statements of income.

EBITDA is measured as net income excluding amortization of service concession assets and otherintangible assets, depreciation of property and equipment, provision for heavy maintenance andother provisions, asset impairment on noncurrent assets, interest expense and other finance costs,interest income, net foreign exchange gain (loss), gain (loss) on derivative financial instruments,provision for (benefit from) income tax and other nonrecurring income and expenses.Nonrecurring items represent income and expenses that, through occurrence or size, are notconsidered usual operating items. EBITDA margin pertains to EBITDA divided by net tollrevenues.

Core income for the year is measured as net income, excluding adjustments on net foreignexchange gain (loss), gain (loss) on derivative financial instruments, gain (loss) on prepayment orextinguishment of debt, asset impairment on noncurrent assets, net of tax effects ofaforementioned adjustments and other nonrecurring income and expenses, as defined under theCompany’s policy.

Core income margin pertains to core income divided by net toll revenues. Net income marginpertains to net income divided by net toll revenues.

The revenues, net income, assets, liabilities, and other information of the Company’s operations asat and for the years ended December 31, 2015, 2014 and 2013 are as follows:

2015 2014 2013Net toll revenues P=8,453,380,333 P=7,516,586,901 P=7,101,436,578Other income 154,002,324 120,227,103 89,374,089Total revenues 8,607,382,657 7,636,814,004 7,190,810,667Operating and maintenance costs (2,694,832,558) (2,438,204,973) (2,170,962,574)Operating expenses (613,837,616) (501,220,971) (468,541,570)EBITDA 5,298,712,483 4,697,388,060 4,551,306,523Financing costs (480,832,163) (504,337,927) (498,549,148)Core income before depreciation,

amortization and provisions 4,817,880,320 4,193,050,133 4,052,757,375Depreciation, amortization and

provisions* (1,737,541,182) (1,609,093,962) (1,646,328,751)Core income 3,080,339,138 2,583,956,171 2,406,428,624Nonrecurring items (87,208,995) (18,515,114) (28,519,724)Net income P=2,993,130,143 P=2,565,441,057 P=2,377,908,900

EBITDA margin for the year 63% 62% 64%Core income margin for the year 36% 34% 34%Net income margin for the year 35% 34% 33%

Total assets P=30,885,000,298 P=28,715,035,254 P=20,788,302,893Total liabilities 22,751,361,770 21,087,178,986 13,589,283,805Total equity 8,133,638,528 7,627,856,268 7,199,019,088

Other disclosures:Capital expenditure (consists of

additions to service concessionassets, property and equipmentand other intangible assets) P=6,586,687,559 P=2,485,927,545 P=388,119,425

* Includes provision for current and deferred taxes.

- 26 -

*SGVFS015652*

The following table shows the reconciliation of EBITDA to consolidated net income for the yearsended December 31, 2015, 2014 and 2013.

2015 2014 2013EBITDA P=5,298,712,483 P=4,697,388,060 P=4,551,306,523Interest expense and other finance

costs (see Note 22) (622,295,149) (601,214,207) (618,382,272)Amortization of service concession

assets (see Note 17) (575,097,888) (483,626,911) (599,931,592)Interest income (see Note 21) 72,896,989 61,266,122 82,563,116Provision for heavy maintenance

(see Note 17) (150,819,004) (224,653,876) (167,481,570)Depreciation of property and

equipment (see Notes 17 and 18) (38,025,416) (30,963,982) (28,881,703)Amortization of other intangible

assets (see Note 18) (10,954,056) (6,056,952) (8,108,060)Nonrecurring items:

Provisions (see Note 18) (5,101,457) (13,840,182) (13,256,981)Foreign exchange gain - net 7,840,647 4,260,215 8,015,606Other nonrecurring items (38,887,876) 1,564,831 (620,861)

Income before income tax 3,938,269,273 3,404,123,118 3,205,222,206Provision for (benefit from) income

tax (see Note 24):Current 963,726,925 752,767,850 741,163,380Deferred (18,587,795) 85,914,211 86,149,926

945,139,130 838,682,061 827,313,306Net income P=2,993,130,143 P=2,565,441,057 P=2,377,908,900

The following table shows the reconciliation of the consolidated core income to the net income forthe years ended December 31, 2015, 2014 and 2013.

2015 2014 2013Core income for the year P=3,080,339,138 P=2,583,956,171 P=2,406,428,624Provisions (see Note 18) (5,101,457) (13,840,182) (13,256,981)Foreign exchange gain - net 7,840,647 4,260,215 8,015,606Other nonrecurring items (89,948,185) (8,935,147) (23,278,349)Net income P=2,993,130,143 P=2,565,441,057 P=2,377,908,900

6. Cash and Cash Equivalents

This account consists of:

2015 2014Cash on hand and in banks P=378,985,821 P=905,227,627Short-term deposits as cash equivalents 2,290,338,284 2,048,653,967

P=2,669,324,105 P=2,953,881,594

- 27 -

*SGVFS015652*

Cash in banks earn interest at the prevailing bank deposit rates. Short-term deposits as cashequivalents are made for varying periods of up to three months depending on the immediate cashrequirements of the Company and earn interest at the respective short-term deposit rates.

Interest earned from cash and cash equivalents amounted to P=19.1 million, P=11.1 million andP=43.6 million for the years ended December 31, 2015, 2014 and 2013, respectively (see Note 21).

As at December 31, 2015, the Company has available P=2.0 billion undrawn committed term loanfacility from Philippine National Bank (PNB).

7. Receivables


2015 2014Trade receivables (see Note 14) P=313,928,378 P=464,262,735Advances to Department of Public Works and

Highways (DPWH) 202,883,464 173,678,456Advances to officers and employees (see Note 14) 7,373,156 8,883,113Interest receivables 15,943,301 13,512,861Other receivables 35,342,796 32,783,619

575,471,095 693,120,784Less allowance for doubtful accounts 14,162,059 9,883,197

P=561,309,036 P=683,237,587

Trade receivables are noninterest-bearing and are generally on terms of 30 to 45 days.

Advances made to DPWH is pursuant to the Reimbursement Agreement entered into by MNTCwith DPWH in 2013 where DPWH requested these advances in order to fast track the acquisitionof right-of-way for the construction of Phase II Segment 9. The balance also includes directadvances to certain Segment 9 landowners as consideration for the grant of immediate right-of-way possession to MNTC ahead of the expropriation proceedings. Under a Deed of Assignmentwith Special Power of Attorney agreement, these landowners agreed to assign their receivablesfrom DPWH to MNTC in consideration for the direct advances received from MNTC. Theseadvances to DPWH are noninterest-bearing and are collectible within a year.

Advances to officers and employees are normally liquidated within a month.

Interest receivables are collectible within three months.

Other receivables are noninterest-bearing and are collectible within a year. As atDecember 31, 2015 and 2014, other receivables include those receivables from motorists whocaused accidental damage to NLEX property from day-to-day operations amounting toP=33.2 million and P=30.2 million, respectively.

- 28 -

*SGVFS015652*

Movements in the allowance for individually assessed impaired receivables in 2015 and 2014 areas follows:

2015Trade

ReceivablesOther

Receivables TotalBalance at beginning of year P=2,238,191 P=7,645,006 P=9,883,197Provision for doubtful accounts

(see Note 18) 151,641 4,127,221 4,278,862Balance at end of year P=2,389,832 P=11,772,227 P=14,162,059

2014Trade

ReceivablesOther

Receivables TotalBalance at beginning of year P=– P=5,544,087 P=5,544,087Provision for doubtful accounts

(see Note 18) 2,238,191 2,100,919 4,339,110Balance at end of year P=2,238,191 P=7,645,006 P=9,883,197

8. Service Concession Assets

The movements in this account follow:

MNEP SCTEX TotalCost:

At January 1, 2014 P=20,380,318,478 P=− P=20,380,318,478Additions 2,425,272,471 − 2,425,272,471At December 31, 2014 22,805,590,949 − 22,805,590,949Additions 3,328,364,819 3,177,555,625 6,505,920,444At December 31, 2015 P=26,133,955,768 P=3,177,555,625 P=29,311,511,393

Accumulated amortization:At January 1, 2014 P=5,454,380,384 P=− P=5,454,380,384Amortization (see Note 17) 483,626,911 − 483,626,911At December 31, 2014 5,938,007,295 − 5,938,007,295Amortization (see Note 17) 563,733,763 11,364,125 575,097,888At December 31, 2015 P=6,501,741,058 P=11,364,125 P=6,513,105,183

Net book value:At December 31, 2015 P=19,632,214,710 P=3,166,191,500 P=22,798,406,210At December 31, 2014 16,867,583,654 − 16,867,583,654

MNEPAdditions during 2015 and 2014 pertain mainly to civil works construction on Segments 9 and 10 andfixed operating equipment (FOE) design, supply and installation for the toll collection system (TCS)migration on Segment 8.1 and Phase I of the MNEP. Additions also include the pre-constructioncosts of Segment 8.2 of the Phase II of the MNEP.

Borrowing costs capitalized amounted to P=383.0 million and P=335.9 million for the years endedDecember 31, 2015 and 2014, respectively. The interest rates used to determine the amount ofborrowing costs eligible for capitalization ranges from 5.0% to 5.8% in 2015 and 2014.

- 29 -

*SGVFS015652*

The concession term for fully operational Phase I and Segments 8.1 and 9 of Phase II of theMNEP is until December 31, 2037. As at December 31, 2015 and 2014, the remaining concessionterm is 22 years and 23 years, respectively.

SCTEXAs discussed in Note 2, MNTC took over from BCDA the management, operation andmaintenance of the SCTEX on October 27, 2015. Additions during 2015 pertain to an upfront feepayment amounting to P=3.1 billion and other directly attributable costs of the project.

The concession term for SCTEX is until October 30, 2043. As at December 31, 2015, the remainingconcession term is 28 years.

9. Property and Equipment


Building,Building

Improvementsand LeaseholdImprovements

TransportationEquipment

OfficeEquipmentand Others Total

Cost: At January 1, 2014 P=93,089,431 P=64,354,325 P=112,198,591 P=269,642,347 Additions 330,400 16,986,321 26,564,893 43,881,614 Disposals (498,288) (10,151,786) (753,501) (11,403,575) At December 31, 2014 92,921,543 71,188,860 138,009,983 302,120,386 Additions 1,279,911 10,720,714 19,071,348 31,071,973 Disposals − (7,304,642) (724,111) (8,028,753) At December 31, 2015 P=94,201,454 P=74,604,932 P=156,357,220 P=325,163,606

Accumulated depreciation: At January 1, 2014 P=27,843,443 P=39,117,071 P=84,811,435 P=151,771,949 Depreciation (see Note 18) 4,296,499 9,908,799 16,758,684 30,963,982 Disposals (498,288) (8,866,220) (753,501) (10,118,009) At December 31, 2014 31,641,654 40,159,650 100,816,618 172,617,922 Depreciation (see Notes 17 and 18) 4,873,240 12,979,609 20,172,567 38,025,416 Disposals − (5,995,409) (562,111) (6,557,520) At December 31, 2015 P=36,514,894 P=47,143,850 P=120,427,074 P=204,085,818

Net book value: At December 31, 2015 P=57,686,560 P=27,461,082 P=35,930,146 P=121,077,788 At December 31, 2014 61,279,889 31,029,210 37,193,365 129,502,464

Proceeds from the sale of property and equipment amounted to P=2.0 million, P=1.6 million,P=2.6 million and in 2015, 2014 and 2013, respectively. Gain on disposal of property andequipment amounted to P=0.5 million, P=0.4 million and P=0.9 million for the years endedDecember 31, 2015, 2014 and 2013, respectively. The gross carrying amounts of fully depreciatedproperty and equipment that are still in use amounted to P=115.0 million and P=99.6 million as atDecember 31, 2015 and 2014, respectively.

- 30 -

*SGVFS015652*

10. Other Intangible Assets

Other intangible assets pertain to computer software relating to the Company’s accounting,reporting and asset management systems with estimated useful life of 5 years. The movements inthis account follow:

2015 2014Cost:

Balance at beginning of year P=93,567,919 P=75,330,354Additions 5,465,571 18,237,565Balance at end of year 99,033,490 93,567,919

Accumulated amortization:Balance at beginning of year 71,398,156 65,341,204Amortization (see Note 18) 10,954,056 6,056,952Balance at end of year 82,352,212 71,398,156

Net book value P=16,681,278 P=22,169,763

11. Available-for-sale Financial Assets

Details of AFS financial assets are shown below:

Maturity DateInterest

Rate

2015 2014

Fair ValuePrincipalAmount Fair Value

PrincipalAmount

UITF*Short-term P=1,225,420,748 P=1,220,988,850 P=4,789,522,429 P=4,730,364,789ROP Retail Treasury BondsMarch 12, 2015 5.00% – – 50,767,000 50,000,000August 19, 2015 5.88% – – 204,824,000 200,000,000March 3, 2016 6.00% 150,870,000 150,000,000 156,741,000 150,000,000August 15, 2023 3.25% 525,712,530 565,100,000 544,095,233 565,100,000

676,582,530 715,100,000 956,427,233 965,100,000Fixed Rate Treasury NotesApril 25, 2016 1.63% 49,775,000 50,000,000 49,584,500 50,000,000May 23, 2018 2.13% 434,254,716 449,260,000 390,360,495 399,260,000

484,029,716 499,260,000 439,944,995 449,260,000LTNCDPNB - June 12, 2020 4.13% 49,460,000 50,000,000 50,000,000 50,000,000Metrobank - November 21, 2021 4.25% 48,135,000 50,000,000 50,000,000 50,000,000

97,595,000 100,000,000 100,000,000 100,000,000Corporate BondsFMIC - August 10, 2019 5.75% 52,745,000 50,000,000 51,114,500 50,000,000Meralco - December 12, 2020 4.38% 202,142,000 200,000,000 192,254,000 200,000,000PLDT - February 6, 2021 5.23% 202,034,000 200,000,000 198,372,000 200,000,000

456,921,000 450,000,000 441,740,500 450,000,000 P=2,940,548,994 P=2,985,348,850 P=6,727,635,157 P=6,694,724,789

* Presented as “Short-term deposits” in the consolidated balance sheets.

UITFs are ready-made investments that allow the pooling of funds from different investors withsimilar investment objectives. These UITFs are managed by professional fund managers and areinvested in various financial instruments such as money market securities, bonds and equities,which are normally available to bigger investors only. A UITF uses the mark-to-market method invaluing the fund’s securities. It is a valuation method which calculates the Net Asset Value

- 31 -

*SGVFS015652*

(NAV) based on the estimated fair market value of the assets of the fund based on prices suppliedby independent sources.


2015 2014Balance at beginning of year P=6,727,635,157 P=3,516,701,041Additions 5,407,332,256 4,049,816,145Maturity (250,000,000) –Sale of AFS financial assets (8,865,590,303) (860,000,000)Gain (loss) on AFS financial assets during the year

(see Note 16) (78,828,116) 21,117,971Balance at end of year P=2,940,548,994 P=6,727,635,157

Current P=1,426,065,748 P=5,045,113,429Noncurrent 1,514,483,246 1,682,521,728

P=2,940,548,994 P=6,727,635,157

The fair value is based on the quoted market price of the financial instruments as atDecember 31, 2015 and 2014. The movements in the net unrealized gain on fair value change inAFS financial assets under “Other comprehensive income (loss) reserve” account for the yearsended December 31, 2015, 2014 and 2013 follow:

2015 2014 2013Balance at beginning of year P=41,296,009 P=20,178,038 P=39,716,000Changes in fair value during the year 11,121,533 27,759,214 (5,427,561)Reclassification to profit or loss* (89,949,649) (6,641,243) (14,110,401)Balance at end of year (37,532,107) 41,296,009 20,178,038Tax effects of items taken directly in

equity (see Note 24) 2,657,153 (2,826,741) (8,915,100)(P=34,874,954) P=38,469,268 P=11,262,938

* Includes gain on sale of UITF amounting to P=87,917,303 and P=5,471,976 in 2015 and 2014, respectively, thatwas deducted from borrowing costs capitalized to service concession assets.

12. Accounts Payable and Other Current Liabilities


2015 2014Trade payables (see Note 14) P=978,330,080 P=735,625,201Accrued expenses (see Note 14) 930,307,385 946,662,930Retention payable 139,949,877 141,287,463Output value-added tax 124,354,201 108,610,052Withholding taxes payable 95,145,493 87,599,960Interest payable 41,996,378 23,838,668Others 12,437,620 12,166,175

P=2,322,521,034 P=2,055,790,449

Trade payables and accrued expenses are noninterest-bearing and are normally settled within 30 to45 days.

- 32 -

*SGVFS015652*

Accrued expenses consist of:

2015 2014Operator’s fee (see Note 14) P=329,024,746 P=419,551,367Construction costs 239,316,532 302,730,298Concession fees (see Note 2) 78,025,151 –Operating and maintenance cost 64,700,365 47,818,012PNCC fee 47,895,086 47,899,188Salaries and employee benefits 41,368,543 43,203,819Advertising and marketing expenses 32,522,105 36,960,176Management fees (see Note 14) 29,890,097 –Outside services 17,665,604 24,292,771Repairs and maintenance 7,405,068 7,405,068Professional fees 8,732,323 6,544,196Toll collection and medical services 3,339,113 1,334,270Project insurance 10,670,039 –Others 19,752,613 8,923,765

P=930,307,385 P=946,662,930

Retention payable is a percentage of the amount certified as due to the contractor on an interimcertificate, that is deducted from the amount due and retained by the Company. Retention payableis usually released upon completion of the relevant project.

Interest payable is settled within six months.

13. Provisions


HeavyMaintenance Others Total

At January 1, 2014 P=205,876,862 P=98,611,379 P=304,488,241Additions (see Notes 17 and 18) 251,612,341 13,840,182 265,452,523Accretion (see Note 22) 11,978,840 – 11,978,840Payments (301,616,361) (22,326,990) (323,943,351)At December 31, 2014 167,851,682 90,124,571 257,976,253Additions (see Notes 17 and 18) 168,917,287 5,101,457 174,018,744Accretion (see Note 22) 11,939,460 – 11,939,460Payments (85,455,941) (19,024,078) (104,480,019)At December 31, 2015 P=263,252,488 P=76,201,950 P=339,454,438

At December 31, 2015: Current P=105,000,000 P=62,361,768 P=167,361,768 Noncurrent 158,252,488 13,840,182 172,092,670

P=263,252,488 P=76,201,950 P=339,454,438

At December 31, 2014: Current P=69,522,031 P=76,284,389 P=145,806,420 Noncurrent 98,329,651 13,840,182 112,169,833

P=167,851,682 P=90,124,571 P=257,976,253

- 33 -

*SGVFS015652*

As discussed in Note 4, provision for heavy maintenance pertains to the present value of theestimated contractual obligations of the Company to maintain the service concession assets to aspecified level of serviceability during the service concession term and to restore the same assetsin good condition prior to turnover of the assets to the Grantor. The amount of provision isreduced by the actual obligations paid for heavy maintenance of the service concession assets.

Other provisions include estimated liabilities for losses on claims by a third party. Theinformation usually required by PAS 37 is not disclosed as it may prejudice the Company’snegotiation with the third party.

14. Related Party Disclosures

Enterprises and individuals that directly, or indirectly through one or more intermediaries, control,or are controlled by, or under common control with the Company, including holding companies,subsidiaries and fellow subsidiaries are related parties of the Company. Associates andindividuals owning, directly or indirectly, an interest in the voting power of the Company thatgives them significant influence over the enterprise, key management personnel, includingdirectors and officers of the Company and close members of the family of these individuals andcompanies associated with these individuals also constitute related parties.

- 34 -

*SGVFS015652*

The following table provides the total amount of significant transactions with related parties for the relevant year:

Related Party

ManagementFees

(see Note 18)

Operator’sFee

(see Note 17)

OutsideServices

(see Notes 17)

Repairs andMaintenance(see Note 17)

Income fromAdvertising

(see Note 23)

Income fromUtility Facilities

(see Note 23)MPTC Intermediate Parent

Company2015 P=60,702,628 P=– P=– P=– P=– P=–2014 44,832,143 – – – – –2013 44,832,143 – – – – –

Tollways Management Corporation (TMC) Associate of MPTDC 2015 – 1,741,674,430 – 5,524,377 – –2014 – 1,710,956,357 – 3,230,823 – –2013 – 1,532,066,430 – 1,405,511 – –

Easytrip Services Corp. (ESC) Joint Venture ofMPTDC

2015 – – 61,167,420 – 60,000 –2014 – – 54,442,444 – 620,000 –2013 – – 44,393,941 – 1,311,900 –

Smart Communications Inc. (Smart) Associate of FPC 2015 – – – – 72,850,000 342,3502014 – – – – 58,492,000 327,6082013 – – – – 44,710,209 313,500

PLDT Associate of FPC 2015 – – – – – 2,423,0992014 – – – – – 1,889,4812013 – – – – – 1,760,749

Digitel Mobile Philippines, Inc. (Digitel) Associate of FPC 2015 – – – – 7,579,000 –2014 – – – – 10,880,000 –2013 – – – – 8,021,531 –

Total 2015 P=60,702,628 P=1,741,674,430 P=61,167,420 P=5,524,377 P=80,489,000 P=2,765,4492014 44,832,143 1,710,956,357 54,442,444 3,230,823 69,992,000 2,217,0892013 44,832,143 1,532,066,430 44,393,941 1,405,511 54,043,640 2,074,249

- 35 -

*SGVFS015652*

Outstanding balances of receivables from/payables to related parties are carried in the consolidated balance sheets under the following accounts:

Name Relationship

Advances toContractors

andConsultants

Receivables(2)

(see Note 7)

Due fromRelatedParties(1)

AccountsPayable and

Other CurrentLiabilities(2)

(see Note 12) Terms ConditionsMPTC Intermediate Parent

Company2015 P=– P=647,529 P=2,201,450 P=65,192,328 (1) On demand; noninterest-bearing

(2) 30-45 days; noninterest-bearingUnsecured; no

impairment2014 – – 2,696,473 36,960,176MPTDC Parent Company 2015 – – – 8,624,846 (1) On demand; noninterest-bearing

(2) 30-45 days; noninterest-bearingUnsecured; no

impairment2014 – – 8,274 5,825,468MPCALA Holdings,

Inc. (MHI)Subsidiary of

MPTDC2015 – – 55,408 – On demand; noninterest-bearing Unsecured; no

impairment2014 – – – –

TMC Associate ofMPTDC

2015 58,000 25,455 109,177 479,494,299 (1) On demand; noninterest-bearing(2) 30-45 days; noninterest-bearing

Unsecured; noimpairment2014 15,000 – 9,354,793 436,291,284

Cavitex InfrastructureCorp. (CIC)

Subsidiary of MPTC 2015 – – 342,507 – On demand; noninterest-bearing Unsecured; noimpairment2014 – – 335,647 –

ESC Joint Venture ofMPTDC

2015 – 228,352,174 99,000 59,366,617 (1) On demand; noninterest-bearing(2) 7 days; noninterest-bearing

Unsecured; noimpairment2014 – 404,242,172 99,000 44,151,770

Indra Philippines, Inc.(Indra)

Associate of MPIC 2015 425,045 – – 18,010,626 Within one year; noninterest-bearing Unsecured, noimpairment2014 – – – 18,010,626

Smart Associate of FPC 2015 – 24,727,200 – 125,761 30-45 days; noninterest-bearing Unsecured; noimpairment2014 – 42,732,473 – 245,574

PLDT Associate of FPC 2015 – 892,697 – 92,849 30-45 days; noninterest-bearing Unsecured; noimpairment2014 – 478,297 – 358,644

Digitel Associate of FPC 2015 – 8,286,880 – – 30-45 days; noninterest-bearing Unsecured; noimpairment2014 – 4,297,440 – 3,532

2015 P=483,045 P=262,931,935 P=2,807,542 P=630,907,3262014 15,000 451,750,382 12,494,187 541,847,074

- 36 -

*SGVFS015652*

Settlement of outstanding balances at year-end occurs in cash for the outstanding receivablesfrom/payables to related parties, while advances to contractors and consultants will be applied tofuture services rendered.

Transactions with Parent Companies

MPTC

§ MPTC performs managerial and financial advisory services for MNTC in 2015, 2014, and2013. On January 1, 2014, MNTC and MPTC renewed their Management ServicesAgreement where MNTC shall pay MPTC a fixed monthly fee of P=3.7 million (exclusive ofVAT) for the services rendered by MPTC. The agreement is effective January 1, 2014, andshall remain in effect for twelve (12) months. As at February 17, 2016, MNTC and MPTC arein the process of renewing the Management Services Agreement for year 2015 with anincrease in the monthly fee to P=5.1 million.

MPTDC§ In 2015 and 2014, MPTDC billed MNTC for various expenses paid in behalf of MNTC as

well as the latter’s share in common expenses.

Transactions with Other Related Parties

TMC

NLEX§ TMC, an associate of MPTDC, provides services to MNTC as operator to the existing NLEX,

and Segment 7 under the Operations and Management Agreement (O&M) entered into byMNTC and TMC on July 6, 2001. The O&M contains the terms and conditions for theoperation and maintenance by TMC of the existing NLEX and subsequently, of Segment 7,and sets forth the scope of its services. Under the O&M, MNTC pays TMC a minimum fixedannual amount of P=605.4 million for the existing NLEX and P=38.8 million for Segment 7, tobe escalated on a quarterly basis plus a variable component, which took effect upon start ofcommercial operations. The O&M, which also provides for certain bonuses and penalties asdescribed in the O&M, shall be effective for the entire concession term.

§ On May 27, 2010, pursuant to the O&M and the TRB’s approval to integrate the operationsperiod of Phase I and Segment 8.1, portion of Phase II of the MNEP, and to extend theconcession term, MNTC and TMC agreed to extend the O&M to cover Segment 8.1 fromJune 1, 2010 until December 31, 2037. Consequently, MNTC agreed to pay TMC an annualbase fee for the operations and maintenance of Segment 8.1 in the amount of P=33.6 millioneffective in June 2010.

§ On December 10, 2012, pursuant to the O&M and the TRB’s approval to open and operate theBalagtas Interchange as an integral part of Phase I of the MNEP, MNTC and TMC agreed thatthe scope of the O&M shall correspondingly cover the Balagtas Interchange fromJune 25, 2012 until December 31, 2037. Consequently, MNTC agreed to pay TMC an annualbase fee for the operations and maintenance of the Balagtas Interchange in the amount ofP=15.6 million effective in 2012. On July 6, 2015, MNTC and TMC agreed to reduce the basefee for Balagtas Interchange from P=15.6 million to P=13.7 million to take into account thereduction in operational and maintenance costs of the Sta. Rita Interchange. The BalagtasInterchange is a 1.5-km stretch connecting Plaridel to NLEX.

- 37 -

*SGVFS015652*

§ In 2012, MNTC also added the new Bocaue Interchange Northbound Exit to the scope ofTMC’s operations and maintenance contract at the proposed annual fee of P=7.7 million.On June 22, 2015, pursuant to the O&M, MNTC gave a formal notice to TMC that the scopeof O&M shall correspondingly cover the Bocaue Interchange Northbound Exit fromJuly 29, 2012 until December 31, 2037. Consequently, MNTC agreed to pay TMC an annualbase fee of P=7.7 million. It has been further agreed that the base fee may be escalated after thelapse of one (1) year from July 2012.

§ In 2014, in view of the latest publication of the National Statistics Office (NSO) for consumerprice index (CPI) values issued in July 2011, with different commodity grouping comparedwith those stipulated in the O&M, MNTC and TMC agreed to amend the base fee, effectiveJanuary 9, 2012 as follows:§ P=1,312.6 million for the existing NLEX;§ P=84.2 million for Segment 7;§ P=6.9 million for Dau Interchange; and§ P=32.9 million for Segment 8.1.

All compensations payable to TMC shall be escalated in accordance with the O&MAgreement with a new Base Date of January 1, 2012. MNTC and TMC further agree that inorder to reflect the new commodity grouping for the indices published by the NSO inJuly 2011, the definition of CPI in the O&M was likewise amended.

§ On March 15, 2015, MNTC engaged TMC to operate and maintain Segment 9, portion ofPhase II of MNEP, for a proposed annual fee of P=32.6 million until December 31, 2037. Theterms for the operation and maintenance of Segment 9 is still being finalized as atFebruary 17, 2016.

SCTEX§ On May 27, 2015, in view of the forthcoming turn-over of the management, operation and

maintenance of the SCTEX to MNTC by the BCDA (see Note 2), MNTC and TMC enteredinto a letter-agreement where TMC was designated to operate and maintain the SCTEX underthe existing O&M dated July 6, 2001 for a compensation computed based on a cost plusmargin, which compensation shall not exceed P=26.3 million per month (inclusive of VAT).TMC commenced the operation and maintenance of the SCTEX on October 27, 2015.

ESC

§ On December 5, 2007, MNTC engaged the services of ESC, a joint venture of MPTDC, toassist MNTC in increasing the usage of the electronic toll collection (ETC) facility along theNLEX which ended on April 30, 2010. On November 24, 2010, MNTC and ESC signed theSupplemental Agreement to the Service Agreement extending the services of ESC as ETCservice provider for another eight years effective on May 1, 2010 with a five year extension.In accordance with the Supplemental Agreement, MNTC will pay ESC an annual fixed fee ofP=14.0 million for Class 1 vehicles and annual fixed fee of P=5.0 million for Class 2 and Class 3vehicles, which are to be maintained and escalated every year for labor index and consumerprice index (CPI). MNTC shall also pay for variable fees of P=0.75 or P=2.5 per transaction forClass 1 vehicles depending on the number of transactions achieved during the year comparedwith prior year; and P=3.0 and P=4.0 per transactions for Class 2 and Class 3, respectively,which are also to be maintained and escalated every year for labor index and CPI.

- 38 -

*SGVFS015652*

Pursuant to the Service Agreement, amounts due to MNTC arising from the use of Easytriptags in the NLEX shall be remitted by ESC to the designated MNTC bank accounts withinseven (7) days immediately following the date when any vehicle using the Easytrip tags passthrough the electronic payment lane of the NLEX. Any amount due to ESC arising from thereloading of the Easytrip tags in the NLEX shall be remitted by MNTC to the designated ESCbank accounts within seven (7) days immediately following the date of reloading.

Indra

§ On December 27, 2012, MNTC entered into a Contract Agreement with EPPI and Indra(associate of MPIC) Consortium for the FOE Design, Supply and Installation for the TCSMigration Project of Phase I and Segment 8.1. The total contract price of €6.2 million(P=365.3 million) shall be fixed lump sum, inclusive of VAT. The migration was completed inAugust 2014.

§ On June 14, 2013, MNTC entered into a Contract Agreement with EPPI and Indra Consortiumfor the design, supply, installation, testing and commissioning of the FOE for Segment 9 ofPhase II. The total contract price of €1.3 million (P=77.5 million) shall be fixed lump sum,inclusive of VAT. Segment 9 has been substantially completed and has started tollwayoperation on March 19, 2015.

§ On May 8, 2015, MNTC entered into a Contract Agreement with EPPI and Indra Consortiumfor the design, supply, installation, testing and commissioning of the FOE for Segment 10,part of Phase II of the MNEP. The total contract amount is €1.8 million (P=92.7 million),inclusive of VAT. The target completion of the works shall be within 2 years from contractdate.

§ On August 7, 2015, MNTC issued a letter of acceptance to EPPI and Indra Consortiumrelating to the revised proposal dated August 3, 2015 for the design, supply, installation,testing and commissioning of the Fixed Operating Equipment (FOE) for the NLEX-SCTEXintegration project. The revised contract price amounted to €10.2 million (P=507.2 million).The target completion of the works shall be within second quarter of 2016.

PLDT, Smart and Digitel

§ On March 17, 2010, MNTC and PLDT entered into an agreement with respect to thecommercial aspect of the Utility Facilities Contract for the Fiber Optic Overlay along Phase Iof the NLEX, the contract of which was signed on February 18, 2013. Pursuant to theagreement, PLDT shall pay MNTC an annual fee of P=1.3 million starting in the year 2010which shall then be escalated annually by 9% on the succeeding years. The contract shall beeffective for a period of 20 years from April 15, 2010 and may be renewed or extended uponmutual agreement by MNTC and PLDT.

§ On January 5, 2011, MNTC and Smart (a subsidiary of PLDT) signed a Utility FacilitiesContract where MNTC provides Smart an access for the construction, operation andmaintenance of a cell site inside the NLEX right of way for an annual fee of P=0.3 millionwhich shall then be escalated annually to 4.5% starting on the fourth year of the contract andevery year thereafter. The contract is effective from April 26, 2010 for a period of five (5)years which may be renewed or extended upon mutual agreement by MNTC and Smart. As atFebruary 17, 2016, MNTC and Smart are in the process of renewing the contract.

- 39 -

*SGVFS015652*

§ On March 26, 2012, MNTC and Smart agreed on the terms of the grant to Smart of exclusiverights to name the NLEX-Mindanao Avenue Cloverleaf as a Smart Connect Interchange andput up outdoor advertising structures near the interchange. The annual package is based on apredetermined timetable of when the official road signs are progressively built. The base priceis from P=175.0 million to P=228.2 million and may increase depending on the final features andcharacteristics of the cloverleaf. This agreement shall take effect from April 1, 2012 untilApril 30, 2017, unless pre-terminated or renewed by mutual written agreement of the parties.

§ In 2015, 2014 and 2013, MNTC entered into advertising arrangements with Smart and Digitel(a subsidiary of PLDT) related to various advertising mediums, which include rental, materialproduction, installation and maintenance at several locations along NLEX.

Other Transactions

§ Compensation of key management personnel of the Company are as follows:

2015 2014 2013Short-term employee benefits P=90,576,679 P=96,765,803 P=97,828,770Retirement costs (see Note 19) 10,924,834 9,726,985 8,848,409Executive stock option expense

(see Notes 19 and 20) 1,244,843 2,345,037 622,422Long-term incentive plan expense

(see Note 19) 48,735,905 55,171,612 32,414,200P=151,482,261 P=164,009,437 P=139,713,801

§ MNTC acts as a surety or co-obligor with certain MNTC officers for the payment of validcorporate expenses through the use of corporate credit cards at specified approved amountsranging from P=0.04 million to P=0.4 million.

§ The Company paid directors fees amounting to P=0.5 million, P=0.7 million and P=0.6 million in2015, 2014 and 2013, respectively, recorded under “General and administrative expenses”account in the consolidated statements of income (see Note 18).

§ Advances to officers and employees has an outstanding balance of P=7.4 million andP=8.9 million as at December 31, 2015 and 2014, respectively (see Note 7).

15. Long-term Debt


2015 2014Peso-denominated Notes, Loans and Bonds:

Series A Notes P=5,961,821,616 P=6,023,923,925Term Loan Facilities 5,000,000,000 3,000,000,000Philippine National Bank (PNB) Loan – 892,500,000Fixed-rate Bonds 7,000,000,000 7,000,000,000

17,961,821,616 16,916,423,925Less unamortized debt issue costs 147,239,671 170,354,436

17,814,581,945 16,746,069,489Less current portion of long-term debt - net of

unamortized debt issue costs of P=19,598,895in 2015 and P=22,092,362 in 2014 992,503,413 932,509,947

P=16,822,078,532 P=15,813,559,542

- 40 -

*SGVFS015652*

The unamortized debt issue costs incurred in connection with the availment of long-term debtamounting to P=147.2 million and P=170.4 as at December 31, 2015 and 2014, respectively, werededucted against the long-term debt. The movements in debt issue costs are as follows:

2015 2014Balance at beginning of year P=170,354,436 P=125,004,006Amortization during the year* (see Note 22) (38,114,765) (30,678,669)Debt issue costs incurred during the year 15,000,000 76,029,099Balance at end of year P=147,239,671 P=170,354,436* Includes amortization of debt issue costs capitalized to service concession assets amounting to P=9,322,837 and

P=6,936,155 in 2015 and 2014, respectively.

Series A NotesOn April 15, 2011, MNTC entered into a Corporate Notes Facility Agreement with various localfinancial institutions for fixed-rate unsecured notes amounting to P=6.2 billion, with tenors rangingfrom 5 years, 7 years and 10 years (“Series A Notes”). Weighted average fixed interest rate on theSeries A Notes is 7.22% per annum. Debt issue costs incurred in the availment of the Series ANotes amounted to P=141.9 million in 2011.

PNB LoanOn March 16, 2009, MNTC entered into a seven-year term loan agreement for a facility amount ofP=2.1 billion with PNB to finance the project cost of Segment 8.1. Interest rate on the PNB Loan isinitially fixed at 9.61% per annum. On November 22, 2010, the interest rate of the PNB Loan wasamended from fixed to floating rate based on the six-month Philippine Dealing System TreasuryFixing (PDST-F) rate plus a spread of 0.50%.

On March 11, 2011, MNTC entered into an interest rate swap transaction with PNB to convert thefloating-rate PNB loan to fixed rate effective March 14, 2011. The interest rate swap effectivelyfixed the floating rate of the said loan over the remaining tenor at 5.9% per annum.

On April 15, 2011, MNTC entered into an Amended and Restated Loan Agreement with PNB toamend certain commercial terms of the 2009 PNB Loan, incorporate the interest rate conversionfrom fixed to floating rate, release the security and align the loan covenants with that of the SeriesA Notes.

On December 28, 2012, MNTC issued a notice for early termination of the interest rate swaptransaction with PNB effective December 15, 2012 (see Note 27).

As at December 31, 2015, the loan facility has already matured.

Term Loan Facilities

The Insular Life Assurance Company, Ltd. (Insular) and the Philippine American Life andGeneral Insurance Company (Philam). On December 12, 2011, MNTC entered into a Term LoanFacility Agreement for a P=1.0 billion fixed-rate term loan facility from Insular and Philam. Theloan facility has a final maturity date of 15 years, with two bullet repayment tranches ofP=500.0 million each after 10 and 15 years from availment date. Average fixed interest rate on theloan facility is 7.10% per annum. Debt issue cost incurred in the availment of the fixed-rate termloans amounted to P=8.1 million.

- 41 -

*SGVFS015652*

On November 20, 2015, MNTC issued a notice of prepayment effective on December 15, 2015 forthe loans availed from Insular and Philam, amounting to P=500.0 million each. The prepaymentpenalty amounting to P=30.0 million was recognized as part “Interest expense and other financecosts” (see Note 22).

Sun Life of Canada (Philippines) Inc. (Sun Life). On October 8, 2013, MNTC entered into a TermLoan Facility Agreement with Sun Life for a fixed-rate loan amounting to P=800.0 million payablein lump sum after 10 years. The fixed interest rate on the loan is 5.30% per annum. Debt issuecosts incurred in the availment of the loan amounted to P=6.5 million.

Insular. On November 26, 2013, MNTC entered into Term Loan Facility Agreement with Insularfor a P=200.0 million fixed-rate loan payable in lump sum after 10 years. The fixed interest rate onthe loan is 5.03% per annum. Debt issue cos ts incurred in the availment of the loan amounted toP=1.6 million.

Philam. On December 5, 2013, MNTC entered into a Term Loan Facility Agreement with Philamfor a P=1.0 billion fixed-rate loan payable in lump sum after 15 years. The fixed interest rate on theloan is 5.80% per annum. Debt issue costs incurred in the availment of the loan amounted toP=8.2 million.

The loans availed from Sun Life, Insular and Philam in 2013 are intended to partially finance thePhase II expansion projects of MNTC.

PNB. On December 4, 2015, MNTC entered into a new ten-year term loan facility agreement withPNB for a facility amount of P=5.0 billion to finance capital expenditures such as the NLEX LaneWidening Project, NLEX-SCTEX Integration Project and the upgrade of the SCTEX. OnDecember 10, 2015, MNTC made its initial drawdown amounting to P=3.0 billion. The undrawnamount can be availed on December 1, 2016 and March 1, 2017 at P=1.0 billion each. The maturitydate of the loan is on December 10, 2025. Debt issue costs incurred on the initial drawdownamounted to P=15.0 million.

The applicable interest rate for each drawdown made until repricing date (which isDecember 15, 2020) shall be the higher of (i) 5-year PDST-R2 rate on the drawdown date plus a1.0% per annum; and (ii) 5.0% per annum, which will be repriced after 5 years from drawdowndate. On date immediately after the repricing date and until termination, the applicable interestrate shall be the higher of (i) 5-year PDST-R2 rate plus a 1.0% per annum; and (ii) weightedaverage of the applicable interest rate for each drawdown. The interest shall be payable semi-annually.

Fixed-rate BondsOn March 31, 2014, MNTC issued P=4.4 billion principal amount of fixed-rate bonds with terms ofseven years at 5.07% per annum and P=2.6 billion principal amount of bonds with terms of tenyears at 5.50% per annum, for public distribution and sale in the Philippines. Interest paymentsare payable quarterly in arrears on March 31, June 30, September 30 and December 31 starting onJune 30, 2014. Total debt issue costs incurred in the availment of the loan amounted toP=76.0 million.

The bonds will be payable with bullet payment at the end of 7-year/10-year maturity periods. Theproceeds will be used by MNTC to partially fund the construction cost of Segment 10, portion ofPhase II of MNEP, which will connect the MacArthur Highway in Valenzuela City to C-3 Road inCaloocan City.

- 42 -

*SGVFS015652*

Compliance with Loan CovenantsAs at December 31, 2015 and 2014, MNTC is in compliance with the required financial ratios andother loan covenants. MNTC’s long-term debts are unsecured as at December 31, 2015 and 2014.

16. Equity

Capital StockDetails of common shares of the Parent Company as at December 31, 2015 and 2014 follow:

Number of SharesAuthorized - P=100 par value 40,000,000Issued and outstanding 17,760,000

Cash DividendsThe Parent Company’s BOD declared the following cash dividends in 2015 and 2014:

Declaration Date Record Date Payment DateCash Dividend

per Share TotalJuly 23, 2015 July 13, 2015 August 12, 2015 P=56.31 P=1,000,000,000

December 17, 2015 December 28, 2015 January 27, 2016 80.10 1,422,576,000July 31, 2014 July 21, 2014 August 20, 2014 55.0 976,800,000

December 17, 2014 December 7, 2014 January 6, 2015 67.2 1,193,472,000

Unpaid dividends amounted to P=1,422.6 million and P=1,193.5 million as at December 31, 2015and 2014, respectively.

Other Comprehensive Income (Loss) Reserve

Cash FlowHedge

Income TaxRelated toCash Flow

HedgeAFS Financial

Assets

Income TaxRelated to

AFS FinancialAssets

Re-measurement

of DefinedBenefit Plan

Income TaxRelated to

DefinedBenefit Plan Total

Balance at January 1, 2015 (P=3,775,752) P=1,132,726 P=41,296,009 (P=2,826,741) P=5,172,871 (P=1,551,862) P=39,447,251Net movement in cash flow

hedge (see Note 27) 3,775,752 (1,132,726) – – – – 2,643,026Change in fair value of AFS

(see Note 11) – – (78,828,116) 5,483,894 – – (73,344,222)Remeasurement gain

(see Note 19) – – – – 6,692,099 (2,007,629) 4,684,470Balance at December 31,

2015 P=– P=– (P=37,532,107) P=2,657,153 P=11,864,970 (P=3,559,491) (P=26,569,475)



(see Note 11) – – 21,117,971 6,088,359 – – 27,206,330Remeasurement loss

(see Note 19) – – – – (3,054,067) 916,220 (2,137,847)Balance at December 31,

2014 (P=3,775,752) P=1,132,726 P=41,296,009 (P=2,826,741) P=5,172,871 (P=1,551,862) P=39,447,251



(see Note 11) – – (19,537,962) 2,999,700 – – (16,538,262)Remeasurement loss

(see Note 19) – – – – (3,619,777) 1,085,933 (2,533,844)Balance at December 31,

2013 (P=12,710,899) P=3,813,270 P=20,178,038 (P=8,915,100) P=8,226,938 (P=2,468,082) P=8,124,165

- 43 -

*SGVFS015652*

17. Cost of Services


2015 2014 2013Operator’s fee (see Note 14) P=1,741,674,430 P=1,710,956,357 P=1,532,066,430Amortization of service concession

assets (see Note 8) 575,097,888 483,626,911 599,931,592PNCC fee (see Note 25) 482,149,955 442,714,079 418,087,772Provision for heavy maintenance

(see Note 13) 150,819,004 224,653,876 167,481,570Concession fees (see Note 2) 132,146,972 – –Repairs and maintenance

(see Note 14) 108,201,070 108,050,774 108,859,648Outside services (see Note 14) 64,279,224 54,442,444 44,393,941Salaries and employee benefits

(see Note 19) 53,303,999 43,603,408 –Insurance 52,976,575 48,781,314 43,673,719Toll collection and medical services 17,636,666 15,612,000 17,988,000Depreciation of property and

equipment (see Note 9) 8,956,180 – –Others 33,383,888 14,044,597 5,893,064

P=3,420,625,851 P=3,146,485,760 P=2,938,375,736

18. General and Administrative Expenses


2015 2014 2013Advertising and marketing expenses P=220,221,143 P=93,756,686 P=48,945,056Salaries and employee benefits

(see Notes 14, 19 and 20) 184,339,652 203,587,291 207,912,356Management fees (see Note 14) 60,702,628 44,832,143 44,832,143Taxes and licenses 57,258,388 51,740,610 56,820,919Professional fees 50,619,790 17,718,074 52,144,556Depreciation of property and

equipment (see Note 9) 29,069,236 30,963,982 28,881,703Representation and travel 27,495,494 22,064,000 20,673,614Outside services 23,201,107 26,072,527 16,331,803Amortization of other intangible

assets (see Note 10) 10,954,056 6,056,952 8,108,060Communication, light and water 10,251,450 10,472,969 8,484,186Repairs and maintenance 6,837,414 6,430,205 8,974,739Training and development costs 5,416,536 3,997,548 3,299,894Provisions (see Note 13) 5,101,457 13,840,182 13,256,981Provision for doubtful accounts

(see Note 7) 4,278,862 4,339,110 5,544,087Office supplies 2,365,137 5,807,068 3,811,919Rentals 1,168,873 – 75,224Directors’ fees (see Note 14) 530,000 680,000 590,000Miscellaneous 9,151,143 9,722,740 7,949,223

P=708,962,366 P=552,082,087 P=536,636,463

- 44 -

*SGVFS015652*

19. Personnel Cost and Employee Benefits


2015 2014 2013Salaries expense P=169,520,573 P=171,404,655 P=159,703,765Long-term incentive plan (LTIP)

expense 48,735,905 55,171,612 32,414,200Retirement expense 13,256,495 12,811,988 11,429,405Employee stock option plan expense

(see Note 20) 1,244,843 2,345,037 622,422Other employee benefits 4,885,835 5,457,407 3,742,564

P=237,643,651 P=247,190,699 P=207,912,356

Cost of services (see Note 17) P=53,303,999 P=43,603,408 P=–General and administrative expenses

(see Note 18) 184,339,652 203,587,291 207,912,356P=237,643,651 P=247,190,699 P=207,912,356

LTIPOn April 27, 2012, MPTC’s BOD approved the implementation of 2012 to 2014 LTIP of MPTCand its subsidiaries (MPTC Group) which will be effective on January 1, 2012. In 2015, pendingapproval from MPTC’s BOD, MPTC’s management implemented the 2015-2017 LTIP of MPTCGroup effective January 1, 2015. MPTC’s LTIP is aimed at providing a competitive level offinancial incentives for eligible employees to encourage them to achieve performance targetsconsistent with the MPTC Group’s long-term business plans; recognizing and rewarding thecontribution of eligible employees to the overall profitability and performance of the MPTCGroup; and attracting and retaining talented employees to ensure the sustained growth and successof the MPTC Group. The payment under the LTIP was intended to be made at the end of thePerformance Cycle (without interim payments) and contingent on the achievement of the MPTCGroup’s cumulative consolidated core income target for the relevant Performance Cycle.

Total amount of LTIP under this Plan is fixed upon achievement of the target Core Income and isnot affected by changes in future salaries of the employees covered. The long term employeebenefit liability comprises the present value of the defined benefit obligation (using discount ratebased on government bonds) at the end of the reporting period.

The total cost of the LTIP recognized by the Company in 2015, 2014 and 2013 included in“Salaries and employee benefits” account under “General and administrative expenses” in theconsolidated statements of income amounted to P=48.7 million, P=55.2 million and P=32.4 million,respectively (see Note 18). Total long-term incentive plan payable amounted toP=70.5 million and P=120.0 million as at December 31, 2015 and 2014, respectively.

Retirement CostsMNTC has a funded noncontributory defined benefit retirement plan covering all of its regular andfull time employees. The plan provides for a lump sum benefit payment upon retirement.Contributions and costs are determined in accordance with the actuarial study made for the planwhich is normally obtained every two years. The most recent actuarial valuation of plan assetsand the present value of the defined benefit obligation was carried out as at December 31, 2015 bya certified actuary.

- 45 -

*SGVFS015652*

The funds are administered by a trustee bank. Subject to the specific instructions provided byCompany in writing, MNTC directs the trustee bank to hold, invest, and reinvest the funds andkeep the same invested, in its sole discretion, without distinction between principal and income in,but not limited to, certain government securities and bonds, term loans, short-term fixed incomesecurities and other loans and investments.

Under the existing regulatory framework, Republic Act 7641 requires a provision for retirementpay to qualified private sector employees in the absence of any retirement plan in the entity,provided however that the employee’s retirement benefits under any collective bargaining andother agreements shall not be less than those provided under the law. The law does not requireminimum funding of the plan.

Changes in pension asset in 2015 are as follows:

Present Valueof Defined

BenefitObligation

Fair Valueof Plan Assets

PensionAsset

At January 1, 2015 (P=126,819,299) P=129,393,284 P=2,573,985Net benefit income (cost) in statement of

consolidated statement of income:Current service cost (13,361,771) – (13,361,771)Net interest (5,186,909) 5,292,185 105,276

(18,548,680) 5,292,185 (13,256,495)Benefits paid 26,416,340 (26,416,340) –Remeasurement gain (loss) in other

comprehensive income:Return on plan assets (excluding amount included in net interest) – (1,320,394) (1,320,394)Actuarial changes arising from changes in financial assumptions 4,496,060 – 4,496,060Actuarial changes arising from changes in demographic assumptions (525,026) – (525,026)Actuarial changes due to experience adjustment 4,041,459 – 4,041,459

8,012,493 (1,320,394) 6,692,099Contributions – 16,046,175 16,046,175At December 31, 2015 (P=110,939,146) P=122,994,910 P=12,055,764


Present valueof Defined

BenefitObligation


PensionAsset

At January 1, 2014 (P=113,327,192) P=115,165,038 P=1,837,846Net benefit income (cost) in consolidated

statement of income:Current service cost (12,881,458) – (12,881,458)Net interest (4,283,768) 4,353,238 69,470

(17,165,226) 4,353,238 (12,811,988)Benefits paid 4,257,778 (4,257,778) –

(Forward)

- 46 -

*SGVFS015652*


BenefitObligation


PensionAsset

Remeasurement gain (loss) in othercomprehensive income:Return on plan assets (excluding amount

included in net interest) P=– (P=2,469,408) (P=2,469,408)Actuarial changes arising from changes

in financial assumptions 2,769,968 – 2,769,968Actuarial changes due to experience

adjustment (3,354,627) – (3,354,627)(584,659) (2,469,408) (3,054,067)

Contributions – 16,602,194 16,602,194At December 31, 2014 (P=126,819,299) P=129,393,284 P=2,573,985



BenefitObligation


PensionAsset

At January 1, 2013 (P=104,780,939) P=121,667,967 P=16,887,028Net benefit income (cost) in consolidated

statement of income:Current service cost (12,202,831) – (12,202,831)Net interest (4,798,967) 5,572,393 773,426

(17,001,798) 5,572,393 (11,429,405)Benefits paid 15,088,771 (15,088,771) –Remeasurement gain (loss) in other

comprehensive income:Return on plan assets (excluding amount

included in net interest) – 3,013,449 3,013,449Actuarial changes arising from changes

in financial assumptions (6,196,967) – (6,196,967)Actuarial changes due to experience

adjustment (436,259) – (436,259)(6,633,226) 3,013,449 (3,619,777)

At December 31, 2013 (P=113,327,192) P=115,165,038 P=1,837,846

The maximum economic benefit available is a combination of expected refunds from the plan andreductions in future contributions.

The actual return on plan assets amounted to P=4.0 million, P=1.9 million and P=8.6 million in 2015,2014 and 2013, respectively.

MNTC expects to contribute P=10.3 million in 2016.

- 47 -

*SGVFS015652*

The major categories of plan assets as a percentage of the fair value of total plan assets follow:

2015 2014 2013Amount Percentage Amount Percentage Amount Percentage

Investments in:Government securities P=76,878,679 62.51% P=77,778,679 60.11% P=82,194,575 71.37%Debt securities 39,818,321 32.37% 31,283,347 24.18% 28,628,225 24.85%

Cash and cash equivalents 2,544,126 2.07% 14,546,546 11.24% 310,498 0.27%Loans/notes receivable 2,600,000 2.11% 2,600,000 2.01% 2,574,000 2.24%Receivables and others 1,153,784 0.94% 3,184,712 2.46% 1,457,740 1.27%

P=122,994,910 100.00% P=129,393,284 100.00% P=115,165,038 100.00%

The plan asset’s carrying amount approximates its fair value since these are short-term in nature ormarked-to-market.

The plan assets consist of the following:

§ Investments in government securities consist primarily of fixed-rate treasury notes and retailtreasury bonds that bear interest ranging from 2.13% to 9.41% per annum in 2015, 2.30% to9.42% per annum in 2014 and 3.58% to 9.42% per annum in 2013 and have maturities from2015 to 2037.

§ Investments in debt instruments consist of quoted, unsecured, long-term corporate bonds andsubordinated notes, which bear interest ranging from 4.63% to 6.27% per annum in 2015,2014 and 2013 and have maturities from 2017 to 2024.

§ Cash and cash equivalents include regular savings and time deposits, which bear interest of2.5% per annum in 2015 and 2014 and ranging from 1.25% to 4.10% per annum in 2013.

§ As at December 31, 2015, 2014 and 2013, loans and notes receivables consist of unsecuredsubordinated note of an unaffiliated company amounting to P=2.6 million, which bears interestof 6.73% per annum.

§ Other financial assets held by the plan are primarily accrued interest income from cash andcash equivalents, UITFs, and investments in debt securities.

The principal assumptions used to determine accrued retirement costs as at December 31, 2015and 2014 are as follows:

2015 2014 2013Discount rate 4.59% 4.09% 3.78%Salary increase rate 7.00% 7.00% 7.00%

The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation as at December 31, 2015 and 2014,assuming if all other assumptions were held constant:

AmountDiscount rate

2015 (Actual + 1.00%) 5.59% P=102,803,333(Actual - 1.00%) 3.59% 120,324,656

2014 (Actual + 1.00%) 5.09% 118,660,522(Actual - 1.00%) 3.09% 136,216,002

- 48 -

*SGVFS015652*

AmountSalary increase rate

2015 (Actual + 1.00%) 8.00% P=119,614,630(Actual - 1.00%) 6.00% 103,213,151

2014 (Actual + 1.00%) 8.00% 135,562,239(Actual - 1.00%) 6.00% 119,016,823

The management performed an Asset-Liability Matching Study (ALM) annually. The overallinvestment policy and strategy of MNTC’s defined benefit plan is guided by the objective ofachieving an investment return which, together with contributions, ensures that there will besufficient assets to pay pension benefits as they fall due while also mitigating the various risk ofthe plans. MNTC’s current strategic investment strategy consists of 99.59% of debt instrumentsand 0.41% cash.

The average duration of the defined benefit obligation as at December 31, 2015 and 2014 is14 years.

Shown below is the maturity analysis of the undiscounted benefit payments:

2015 2014Less than 1 year P=30,476.517 P=57,111,370More than 1 year to 5 years 24,525,496 24,588,490More than 5 years to 10 years 91,278,048 71,777,735More than 10 years to 15 years 68,161,913 72,095,603More than 15 years to 20 years 98,944,707 91,287,113More than 20 years 178,590,037 177,153,803

20. Share-based Payment Plan

On June 24, 2007, the stockholders of MPIC approved a share option scheme (the Plan) underwhich MPIC’s directors may, at their discretion, invite executives of MPIC upon theregularization of employment of eligible executives, to take up share option of MPIC to obtain anownership interest in MPIC and for the purpose of long-term employment motivation. Thescheme became effective on June 14, 2007 and is valid for ten (10) years. An amended plan wasapproved by the stockholders of MPIC on February 20, 2009.

As amended, the overall limit on the number of shares which may be issued upon exercise of alloptions to be granted and yet to be exercised under the Plan must not exceed 5% of the shares inissue from time to time. The maximum number of shares in respect of which options may begranted under the Plan shall not exceed 5% of the issued shares of MPIC on June 14, 2007 or thedate when an event of any change in the corporate structure or capitalization affecting MPIC’sshares occurred, as the case may be.

The exercise price in relation to each option shall be determined by MPIC’s CompensationCommittee, but shall not be lower than the highest of: (i) the closing price of the shares for one ormore board lots of such shares on the PSE on the option offer date; (ii) the average closing price ofthe shares for one or more board lots of such shares on the PSE for the five (5) business days onwhich dealings in the shares are made immediately preceding the option offer date; and (iii) thepar value of the shares.

- 49 -

*SGVFS015652*

On July 2, 2010, MPIC has granted options in respect of 94,300,000 common shares of MPIC tonew directors and senior management officers of MPIC and to selected management committeemembers of MPIC subsidiaries (includes the Company). The stock options expired onJuly 2, 2015. With respect to the stock options granted to MPIC subsidiaries, said stock optionsvested as follows: 30% on July 2, 2011; 35% on July 2, 2012; and 35% on July 2, 2013.

On October 14, 2013, MPIC has granted options in respect of 120,000,000 common shares ofMPIC to its directors and senior management officers of MPIC and to selected managementcommittee members of MPTC and subsidiaries (includes the Company). Of the total sharesgranted, 14,000,000 common shares were allocated to MPTC and subsidiaries. The stock optionswill expire on October 15, 2018. With respect to the stock options granted to MPIC subsidiaries,said stock options will vest as follows: 50% on October 14, 2014 and 50% on October 14, 2015.

A summary of the Company’s stock option activity received from MPIC and related informationfor the years ended December 31, 2015, 2014 and 2013 follows:

2010 Grant 2013 GrantNumber

of SharesExercise

PriceNumber

of SharesExercise

PriceOutstanding at January 31, 2013 4,830,000 P=2.73 – P=–Granted during the year – – 4,000,000 4.60Exercised during the year (4,345,000) 2.73 – –Outstanding at December 31, 2013 485,000 2.73 4,000,000 4.60Exercised during the year (485,000) 2.73 – –Outstanding at December 31, 2015

and 2014 – P=– 4,000,000 P=4.60

Exercisable at:December 31, 2015 – P=– 4,000,000 P=4.60December 31, 2014 – – 2,000,000 4.60December 31, 2013 485,000 2.73 – –

The weighted average remaining contractual life for the 2010 share options outstanding as atDecember 31, 2015 and 2014 is nil and 0.5 year, respectively. The weighted average remainingcontractual life for the 2013 share options outstanding as at December 31, 2015 and 2014 is2.8 years and 3.8 years, respectively.

The fair value of the options granted is estimated at the date of grant using Black-Scholes-Mertonformula, taking into account the terms and conditions upon which the options were granted.

The following tables list the inputs to the model used for the ESOP in 2013:

50% Vesting onOctober 14, 2014

50% Vesting onOctober 14, 2015

Grant date October 14, 2013Spot price P=4.59 P=4.59Exercise price P=4.60 P=4.60Risk-free rate 0.66% 2.40%Expected volatility* 35.23% 33.07%Term to vesting (in days) 365 730Call price P=0.63 P=0.89* The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the

options is indicative of future trends, which may also not necessarily be the actual outcome.

- 50 -

*SGVFS015652*

The following tables list the inputs to the model used for the ESOP in 2010:

30% Vesting onJuly 2, 2011



Grant date July 2, 2010Spot price P=2.65 P=2.65 P=2.65Exercise price P=2.73 P=2.73 P=2.73Risk-free rate 4.61% 5.21% 5.67%Expected volatility* 69.27% 67.52% 76.60%Term to vesting (in days) 365 731 1,096Call price P=0.73 P=1.03 P=1.39* The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the

options is indicative of future trends, which may also not necessarily be the actual outcome.

Executive stock options expense, recognized by the Company in “Salaries and employee benefits”account under “General and administrative expenses” in the consolidated statements of incomeamounted to P=1.2 million, P=2.3 million and P=0.6 million in 2015, 2014 and 2013, respectively(see Notes 18 and 19).

Carrying value of the ESOP, recognized under “Other reserve” in the consolidated statement ofchanges in equity, amounted to P=11.8 million, P=10.5 million and P=8.2 million as atDecember 31, 2015, 2014 and 2013, respectively.

21. Interest Income

Sources of interest income follow:

2015 2014 2013Cash and cash equivalents

(see Note 6) P=19,108,129 P=11,129,626 P=43,609,422AFS financial assets (see Note 11) 53,776,152 50,136,496 38,587,263Others 12,708 – 366,431

P=72,896,989 P=61,266,122 P=82,563,116

22. Interest Expense and Other Finance Costs

Sources of interest expense and other finance costs follow:

2015 2014 2013Interest expense on:

Loans (see Notes 15 and 27) P=546,748,317 P=563,162,098 P=584,348,880Provision for heavy maintenance (see Note 13) 11,939,460 11,978,840 8,094,216

Finance costs:Loan prepayment fees 30,000,000 – –Amortization of debt issue costs (see Note 15) 28,791,928 23,742,514 23,333,449Lenders’ fees 3,998,564 1,793,373 1,500,062Bank charges 816,880 537,382 1,105,665

P=622,295,149 P=601,214,207 P=618,382,272

- 51 -

*SGVFS015652*

23. Other Income

Details of other income follow:

2015 2014 2013Income from advertising

(see Note 14) P=112,313,888 P=95,112,651 P=64,226,382Income from TSF 32,661,844 21,540,542 21,126,460Income from utility facilities

(see Note 14) 5,088,001 2,354,089 2,074,249Gain on sale of AFS financial assets

(see Note 11) 2,032,346 1,169,267 11,780,746Reversal of allowance for doubtful

accounts − – 5,259,500Others 3,925,109 1,610,028 2,130,513

P=156,021,188 P=121,786,577 P=106,597,850

24. Income Taxes

The provisions for current income tax for the years ended December 31, 2015, 2014 and 2013 areas follows:

2015 2014 2013Regular corporate income tax (RCIT) P=949,581,001 P=742,156,676 P=724,348,235Final tax on interest income

from banks 14,145,924 10,611,174 16,815,145P=963,726,925 P=752,767,850 P=741,163,380

The components of the Company’s deferred tax assets and liabilities follow:

2015 2014Deferred tax assets:

Provision for heavy maintenance P=72,072,409 P=46,134,929Long-term incentive plan payable 21,143,492 36,000,004Accrued expenses and provisions 25,849,075 12,961,146Unamortized past service cost 8,710,551 9,630,966Allowance for doubtful accounts 4,248,618 1,301,733Fair value changes on derivatives deferred in

equity – 1,132,725Fair value changes on AFS financial assets 2,657,153 –Unrealized foreign exchange loss – 301,826

134,681,298 107,463,329Deferred tax liabilities:

Difference in amortization of service concessionassets (632,176,295) (625,760,012)

Unamortized realized foreign exchange lossescapitalized (19,592,899) (20,483,486)

Fair value changes on AFS financial assets – (2,826,741)Pension asset (3,616,729) (772,195)Unrealized foreign exchange gain (743,146) –

(656,129,069) (649,842,434)Deferred tax liabilities – net (P=521,447,771) (P=542,379,105)

- 52 -

*SGVFS015652*

For tax purposes, the Company used the UOP method of amortization for the civil workcomponent of the service concession assets as approved by the BIR.

As at December 31, 2015, NVC has NOLCO of P=277,690 that can be claimed as deduction forfuture taxable income and will expire in year 2018. The deferred tax asset on NOLCO ofP=83,307 was not recognized since management believes that it is more likely than not that thesewill not be realized in the future.

The reconciliation of provision for income tax computed at the statutory income tax rate toprovision for income tax as shown in the consolidated statements of income is summarized asfollows:

2015 2014 2013Income before income tax P=3,938,269,273 P=3,404,123,118 P=3,205,222,206Income tax computed at statutory

tax rate of 30% 1,181,480,782 1,021,236,935 961,566,662Add (deduct) the tax effects of:

Effect of optional standarddeduction (228,320,466) (175,204,186) (126,299,566)

Interest income already subjectedto final tax (21,865,284) (18,379,836) (24,768,935)

Nondeductible expenses andothers (301,826) 417,974 –

Final tax on interest income 14,145,924 10,611,174 16,815,145Provision for income tax P=945,139,130 P=838,682,061 P=827,313,306

On December 18, 2008, the Bureau of Internal Revenue (BIR) issued Revenue Regulation (RR)No. 16-2008, which implemented the provisions of R.A. 9504 on Optional Standard Deduction(OSD), which allowed both individual and corporate tax payers to use OSD in computing theirtaxable income. For corporations, they may elect a standard deduction in an amount equivalent to40% of gross income, as provided by law, in lieu of the itemized allowed deductions.

The Company opted to avail of the OSD for the taxable years 2015 and 2014.

The reconciliation of net deferred tax liability is summarized as follows:

2015 2014 2013Balance at beginning of year P=542,379,105 P=460,788,929 P=375,572,052Provision for (benefit from) income

tax during the year recognized inthe consolidated statements ofincome (18,587,795) 85,914,211 86,149,926

Income tax effect during the yearrecognized in the consolidatedstatements of comprehensiveincome (2,343,539) (4,324,035) (933,049)

Balance at end of year P=521,447,771 P=542,379,105 P=460,788,929

- 53 -

*SGVFS015652*

25. Significant Contracts and Commitments

PNCC FeeIn consideration of the assignment by PNCC of its usufructuary rights, interests and privilegesunder its franchise, PNCC is entitled to receive payment equivalent to 6% and 2% of the tollrevenues from the NLEX and Segment 7, respectively. Any unpaid balance carried forward willaccrue interest at the rate of the latest Philippine 91-day Treasury bill rate plus 1% per annum.This entitlement, as affirmed in the Amended and Restated Shareholders’ Agreement (ARSA)dated September 30, 2004, shall be subordinated to operating expenses and the requirements of thefinancing agreements and shall be paid out subject to availability of funds. In December 2006,MNTC entered into a letter agreement with PNCC to set out the detailed procedure for payment.

The PNCC franchise expired in May 2007. However, since the payment is a continuing obligationunder the ARSA, MNTC continues to accrue and pay the PNCC entitlement.

On December 2, 2010, MNTC received a letter from the TRB dated November 30, 2010, citing adecision of the Supreme Court (SC) dated October 19, 2010 directing MNTC to remit forthwith tothe National Treasury, through TRB, all payments representing PNCC’s percentage share of thetoll revenues and dividends, if any, arising out of PNCC’s participation in the MNEP. In the saiddecision, the SC ruled, among others, that after the expiration of the franchise of PNCC, itsshare/participation in the JVAs and STOAs, inclusive of its percentage share in toll fees collectedby joint venture companies currently operating the expressways, shall accrue to the PhilippineGovernment.

On April 12, 2011, the SC issued a resolution directing MNTC to remit PNCC’s share in the netincome from toll revenues to the National Treasury and the TRB, with the assistance of theCommission on Audit (COA), was directed to prepare and finalize the implementing rules andguidelines relative to the determination of the net income remittable by PNCC to the NationalTreasury.

In accordance with the TRB directive, 90% of the PNCC fee and dividends payable are to beremitted to the TRB, while the balance of 10% to PNCC.

The Company recorded PNCC fee amounting to P=482.1 million, P=442.7 million andP=418.1 million in 2015, 2014 and 2013, respectively (see Note 17).

NLEX-SLEX Connector Road ProjectIn September 2013, MPTDC was requested by the ROP to consider undertaking the ConnectorRoad Project either through a new joint venture with PNCC, or under the existing joint venturebetween PNCC and MPTDC and pursuant to the existing STOA amongst PNCC, MNTC and theTRB dated April 30, 1998. Accordingly, the National Economic and Development Authority(NEDA) Board approved that the Connector Road Project proposed by MPTDC will beimplemented: (i) through a joint venture between MPTDC and PNCC, or (ii) to the extentpossible, through an amendment or extension of the existing joint venture of PNCC and MPTDCand/or STOA pursuant to PD No. 1894. The Connector Road Project is approximately 8-kmelevated 2x2 toll road extending the NLEX southward from the end of Segment 10 in C3 RoadCaloocan City to PUP Sta. Mesa and connect to the Common Alignment of Skyway Stage 3, andtraversing mostly along the Philippine National Railways rail track.

In a letter dated November 7, 2013, DPWH informed MPTDC that it would defer furtherconsideration and processing of the Connector Road Project as a Build-Operate-Transfer (BOT)unsolicited proposal to allow TRB to pursue the implementation of the same project as an

- 54 -

*SGVFS015652*

amendment or extension of the existing STOA. Consequently, MNTC as the existing jointventure company, was requested to consider undertaking the NLEX-SLEX Connector RoadProject as an extension of Segment 10 of the NLEX under the existing STOA from C3 Road inCaloocan to PUP Sta. Mesa, Manila utilizing the same PNR right-of-way covered by the BOTunsolicited proposal .

On November 20, 2013, MNTC submitted to TRB an Investment Proposal for the implementationof the Connector Road Project as the new Segment 10.2 of the NLEX through an amendment orextension of the STOA, particularly the existing Phase II Segment 10, pursuant to a Grantor-initiated request under Clause 8.2 of the STOA.

On January 10, 2014, MNTC and MPTDC entered into a letter agreement with PNCC, asshareholder of MNTC, and joint venture partner of MPTDC for the NLEX Project, confirming theagreement to implement Segment 10.2 as an extension or linkage of Phase II Segment 10 of theNLEX Project pursuant to PD No. 1894, and as an integral portion of NLEX subject to priorapproval of the TRB of the investment proposal submitted by MNTC on November 20, 2013.Conformably to the provisions of the JVA and the ARSA, and upon TRB approval of theimplementation of Segment 10.2, PNCC will be entitled (a) to receive 6% of the gross toll revenuecollected by MNTC from the operation and maintenance of Segment 10.2 upon its completion inaddition to its share in the gross toll revenues collected by MNTC from the toll roads as providedin the ARSA, and (b) to all dividends accruing on its shares of stock in MNTC.

However, on July 7, 2014, the Department of Justice (DOJ) issued an opinion which stated, amongothers, that the NEDA Board approval dated September 11, 2013 to implement Connector RoadProject by way of an amendment or extension of the existing joint venture of PNCC underPD 1894 appears to have been issued beyond its powers and without justification. Hence, itshould be interpreted as merely recommendatory. In addition, it stated that the DPWH, under theBOT Law, could proceed with the consideration of the Unsolicited Proposal for the ConnectorRoad Project.

Consequently, the TRB advised MNTC on August 8, 2014 that it will desist from processingSegment 10.2 Project under the joint venture mode and give DPWH a free hand as implementingagency of the Unsolicited Proposal. While MPTDC continued discussions with DPWH as theOriginal Proponent of the Unsolicited Proposal under the BOT Law, it was advised that the ROPintends to clarify the legal framework to implement the project under the joint venture mode.

Considering that the Connector Road Project can be implemented faster and the benefits that theroad users will derive from a considerable reduction in toll rates if the Connector Road Project willbe implemented as Segment 10.2 of the NLEX, MPTDC and MNTC sent a letter to DOTC/TRBdated October 29, 2014, stating that they prefer the implementation of the Connector Road Projectas a Joint Venture (JV) through an amendment or extension of the NLEX STOA under PD 1894following the NEDA Board approval via ad referendum.

In February 2015, the NEDA Board has confirmed the re-approval of the Connect Road Projectthrough an unsolicited mode subject to Swiss Challenge. During 2015, the DPWH, NEDA andMPTDC and its subsidiaries, as original proponent, continue to negotiate in preparation for theSwiss Challenge. On December 18, 2015, the NEDA Board confirmed and approved the revisedterms negotiated by the DPWH and MPTDC and its subsidiaries in order to proceed with theSwiss Challenge.

As at February 17, 2016, the preparations for the Swiss Challenge are still on-going.

- 55 -

*SGVFS015652*

Construction of Segment 9 of Phase II of the ProjectOn May 3, 2013, MNTC, under a competitive bidding, has awarded the Civil Works contract toEEI Corporation. The Civil Works Construction Agreement was executed by MNTC and EEICorporation in relation to the construction of the 2.4 km Segment 9 (part of Phase II of Project), afour-lane expressway that links the SMART Connect Interchange to McArthur Highway. Totalcivil works construction contract was set at P=1,145.4 million, as may be adjusted from time to timepursuant to the terms of the agreement.

The Construction Notice to Proceed was issued by MNTC to EEI Corporation in May 2013 andmobilization works commenced in May 2013. The construction works for Segment 9 weresubstantially completed in March 2015.

Unapplied mobilization advances to EEI Corporation, included as part of “Advances tocontractors and consultants” in the consolidated balance sheets, amounting to P=71.0 million as atDecember 31, 2014 was already applied against payments in 2015.

Construction of Segment 10, part of Phase II of the ProjectOn April 28, 2014, MNTC signed a target cost construction contract with Leighton Contractors(Asia) Ltd. (LCAL) for the construction of NLEX Segment 10. The target cost is approximately P=10.0 billion (inclusive of VAT), with a completion period of 24 months from start date. Thecontract structure is collaborative in nature and provides a pain-sharing or gain-sharing mechanismif the actual construction cost exceeds or falls below the agreed target. LCAL’s performanceobligation under the contract are backed up by: (i) a bank-issued irrevocable stand-by letter ofcredit, (ii) cash retention, and (iii) a parent company guarantee issued by Leighton Asia Limited.

On May 8, 2014, MNTC issued the notice to proceed to LCAL, signaling the start of the pre-construction activities. Pursuant to the contract, MNTC placed a reserve amount ofP=889.0 million in an escrow account on July 28, 2014, which is recognized under“Other noncurrent assets” account, to cover payment default leading to suspension of works.

NLEX-SCTEX Integration AgreementOn February 5, 2015, MNTC and BCDA executed the Integration Agreement relating to the TCSintegration of the NLEX-SCTEX that will involve the adoption of an advanced common transitticket system which will make operations more efficient and enhance motorists’ convenience. Theproject cost is estimated at P=650.0 million and expected to be completed within the second quarterof 2016.

26. Financial Risk Management Objectives and Policies

The Company’s principal financial instruments comprise long-term debt, proceeds of which wereused to finance the construction of the service concession assets. The Company has various otherfinancial instruments such as cash and cash equivalents, receivables from trade debtors andpayables to trade creditors, which arise directly from its operations. The Company also holds AFSfinancial assets.

The Company also enters into derivative transactions, particularly interest rate swaps and crosscurrency swaps, to manage the interest rate and foreign currency risks arising from its operationsand sources of finances.

- 56 -

*SGVFS015652*

The main risks arising from the Company’s financial instruments are interest rate, credit, foreigncurrency and liquidity risks which are discussed in detail below. The BOD reviews and approvespolicies of managing each of these risks and they are enumerated below:

Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market interest rates. The Company’s exposure to interest rate riskrelates primarily to the Company’s long-term debt with floating interest rates. In accordance withits interest rate management policy, the Company converted its outstanding loans into fixed-ratedebt, effectively locking in the interest rate on its loan obligations and reducing exposure tointerest rate fluctuations.

To further reduce its cash flow interest rate risk exposure, the Company entered into a series ofderivative transactions, in particular, interest rate swaps. The Company also constantly monitorsfluctuation of interest rates in order to manage interest rate risks.

The following tables set out the principal amount, by maturity, of the Company’s interest-bearingfinancial assets and liabilities:

December 31, 2015

Interest RateWithin the

Year (’000)2–3 Years

(’000)4–5 Years

(’000)

More than5 Years

(’000)Total(’000)

Cash and cash equivalents(a) 0.25%–2.50% P=2,607,948 P=– P=– P=– P=2,607,948AFS financial assets 1.63%–6.00% 200,000 449,260 300,000 815,100 1,764,360Restricted cash(b) 1.00% – 889,000 – – 889,000

P=2,807,948 P=1,338,260 P=300,000 P=815,100 P=5,261,308

Fixed-rate loans: Series A-5 6.54% P=960,000 P=− P=− P=− P=960,000 Series A-7 7.27% 42,102 3,999,719 − − 4,041,821 Series A-10 7.70% 10,000 20,000 20,000 910,000 960,000 Term-loan facility 5.00%−5.80% − 300,000 300,000 4,400,000 5,000,000

Fixed-rate bonds 5.07%−5.50% − − − 7,000,000 7,000,000P=1,012,102 P=4,319,719 P=320,000 P=12,310,000 P=17,961,821

(a) Excluding cash on hand(b) Included under “Other noncurrent assets” account in the consolidated balance sheets.

December 31, 2014

Interest RateWithin the

Year (’000)2–3 Years

(’000)4–5 Years

(’000)

More than5 Years

(’000)Total

(’000)Cash and cash equivalents(a) 0.25%–2.50% P=2,916,206 P=– P=– P=– P=2,916,206AFS financial assets 1.63%–6.00% 250,000 200,000 449,260 1,065,100 1,964,360Short-term investments(b) 2.00% 17,847 – – – 17,847Restricted cash(c) 1.00% – 889,000 – – 889,000

P=3,184,053 P=1,089,000 P=449,260 P=1,065,100 P=5,787,413

Fixed-rate loans: Series A-5 6.54% P=10,000 P=960,000 P=– P=– P=970,000 Series A-7 7.27% 42,102 84,205 3,957,617 – 4,083,924 Series A-10 7.70% 10,000 20,000 20,000 920,000 970,000 Term-loan facility 5.03%−7.50% – – – 3,000,000 3,000,000

Fixed-rate bonds 5.07%−5.50% – – – 7,000,000 7,000,00062,102 1,064,205 3,977,617 10,920,000 16,023,924

Floating-rate loan - PNB Loan PDST-F +

0.50% Margin 892,500 – – – 892,500P=954,602 P=1,064,205 P=3,977,617 P=10,920,000 P=16,916,424

(a) Excluding cash on hand(b) Included under “Other current assets” account in the consolidated balance sheets.(c) Included under “Other noncurrent assets” account in the consolidated balance sheets.

- 57 -

*SGVFS015652*

Interest on financial instruments classified as floating rate is repriced semi-annually on eachinterest payment date. Interest on financial instruments classified as fixed rate is fixed until thematurity of the instrument. The other financial instruments of the Company that are not includedin the above table are noninterest-bearing and are therefore not subject to cash flow interest raterisk.

The following table demonstrates the sensitivity of income to changes in interest rates with allother variables held constant. The management expects that interest rates will move by ±50 basispoints within the next reporting period. There is no other impact on the Company’s equity otherthan those already affecting the consolidated statement of income:

Increase/Decrease in Basis PointsEffect on Income

Before Income Tax2014 +50 (4,462,500)

-50 4,462,500

As at December 31, 2015, there were no floating rate loans.

Credit RiskCredit risk is the risk that the Company will incur a loss arising from customers, clients orcounterparties that fail to discharge their contracted obligations. Exposure to credit risk ismanaged through a credit review where an analysis of the obligors to meet their obligations isconsidered.

Receivables arose mainly from ESC when Easytrip tag-motorists ply in NLEX and those non-tollrevenues in the form of advertising services particularly from Smart. ESC, Smart and TMC areconsidered as low-risk counterparties as these are well-established companies. Moreover, theCompany has payment obligations to TMC which far exceed the aggregate amount of receivables.Receivables also arose from motorists who cause accidental damage to NLEX property from day-to-day operations. Property damage claims are initially processed by TMC and are eventuallyturned over to MNTC. The Company also has advances to DPWH, a Philippine governmententity, which is covered by a Reimbursement Agreement.

The Company also generates non-toll revenues in the form of service fees collected from businesslocators, generally called TSF, along the stretch of the NLEX. The collection of such fees isprovided in the STOA and is based on the principle that these TSF derive benefit from offeringgoods and services to NLEX motorists. The fees range from one-time access fees to recurring feescalculated as a percentage of sales. The arrangements are backed by a service facility contractbetween the Company and the various locators. The credit risk on these arrangements is minimalbecause the fees are collected on a monthly basis mostly from well-established companies. Theexposure is also limited given that the recurring amounts are not significant and there are adequatesafeguards in the contract against payment delinquency. Nevertheless, the Company closelymonitors receivables from the TSF.

The Company’s exposure to credit risk arises from default of the counterparty, with a maximumexposure equal to carrying amount of these financial assets. The Company does not requirecollateral for its financial assets.

The Company’s credit risk is concentrated on AFS financial assets (including short-term deposits)covering at least 67% and 81% of the Company’s financial assets, except cash and cashequivalents, as at December 31, 2015 and 2014, respectively. The table below shows the

- 58 -

*SGVFS015652*

maximum exposure to credit risk for the Company’s financial assets, without taking account ofany collateral, credit enhancements and other credit risk mitigation techniques.

December 31,2015

December 31,2014

Cash and cash equivalents(a) P=2,607,948,946 P=2,916,206,125Short-term deposits 1,225,420,748 4,789,522,429Receivables(b) 553,935,880 674,354,474Due from related parties 2,807,542 12,494,187Short-term investments(c) – 17,846,800AFS financial assets 1,715,128,246 1,938,112,728Refundable deposits(d) 3,694,561 3,694,561Restricted cash(d) 889,000,000 889,000,000Total credit risk exposure P=6,997,935,923 P=11,241,231,304(a) Excluding cash on hand.(b) Excluding advances to officers and employees.(c) Included in “Other current assets” account in the consolidated balance sheets.(d) Included in “Other noncurrent assets” account in the consolidated balance sheets.

Cash and cash equivalents and AFS financial assets (including short-term deposits) are placedwith reputable local and international banks and companies and Philippine Government whichmeet the standards of the Company’s BOD.

As at December 31, 2015 and 2014, the aging analysis of past due but not impaired tradereceivables follows. All other financial assets of the Company are neither past due nor impairedas at December 31, 2015 and 2014.

Year

Neither PastDue nor

Impaired

Past Due but not Impaired

<31 Days 31–60 Days 61–90 Days 91–180 DaysOver 180

Days Total Total2015 P=248,866,172 P=54,219,711 P=1,069,731 P=975,781 P=746,254 P=5,660,897 P=62,672,374 P=311,538,5462014 423,907,069 756,560 22,550,213 3,438,431 844,454 10,527,817 38,117,475 462,024,544

The tables below show the credit quality of the Company’s financial assets based on theirhistorical experience with the corresponding third parties:

December 31, 2015Neither Past

Due norImpaired - Past Due but

High-grade not Impaired Impaired TotalCash and cash equivalents(a) P=2,607,948,946 P=– P=– P=2,607,948,946Short-term deposits 1,225,420,748 – – 1,225,420,748Receivables:

Trade receivables 248,866,172 62,672,374 2,389,832 313,928,378Interest receivables 15,943,301 – – 15,943,301Advances to DPWH 202,883,464 – – 202,883,464Other receivables 23,570,569 – 11,772,227 35,342,796

Due from related parties 2,807,542 – – 2,807,542AFS financial assets 1,715,128,246 – – 1,715,128,246Refundable deposits(b) 3,694,561 – – 3,694,561Restricted cash(b) 889,000,000 – – 889,000,000

P=6,935,263,549 P=62,672,374 P=14,162,059 P=7,012,097,982(a) Excluding cash on hand.(b) Included in “Other noncurrent assets” account in the consolidated balance sheets.

- 59 -

*SGVFS015652*

December 31, 2014Neither Past

Due norImpaired - Past Due but

High-grade not Impaired Impaired TotalCash and cash equivalents(a) P=2,916,206,125 P=– P=– P=2,916,206,125Short-term deposits 4,789,522,429 – – 4,789,522,429Receivables:

Trade receivables 423,907,069 38,117,475 2,238,191 464,262,735Interest receivables 13,512,861 – – 13,512,861Advances to DPWH 173,678,456 – – 173,678,456Other receivables 25,138,613 – 7,645,006 32,783,619

Due from related parties 12,494,187 – – 12,494,187Short-term investments(b) 17,846,800 – – 17,846,800AFS financial assets 1,938,112,728 – – 1,938,112,728Refundable deposits(c) 3,694,561 – – 3,694,561Restricted cash(c) 889,000,000 889,000,000

P=11,203,113,829 P=38,117,475 P=9,883,197 P=11,251,114,501(a) Excluding cash on hand.(b) Included in “Other current assets” account in the consolidated balance sheets.(c) Included in “Other noncurrent assets” account in the consolidated balance sheets.

With the exception of the impaired portion and past due accounts, all of the Company’s financialassets are considered high-grade receivables since these are receivables from counterparties whoare not expected to default in settling their obligations. These counterparties include reputablelocal and international banks and companies and the Philippine government. Other counterpartiesalso have corresponding collectibles from the Company for certain contracted services. The firstlayer of security comes from the Company’s ability to offset amounts receivable from thesecounterparties against payments due to them.

Foreign Currency RiskForeign currency risk is the risk that the fair value or future cash flows of a financial instrumentwill fluctuate because of changes in foreign exchange rates. As at December 31, 2015 and 2014,the Company is not significantly exposed to foreign currency risk. The minimal exposure toforeign currency risk relates to the Company’s foreign currency denominated cash and cashequivalents, short-term investments (included in “Other current assets” account in the consolidatedbalance sheet) and accounts payables as at December 31, 2015 and 2014.

Liquidity RiskLiquidity risk is the risk that the Company will encounter difficulty in meeting obligationsassociated with financial liabilities. The Company is not exposed to significant liquidity riskbecause of the nature of its operations which provides daily inflows of cash from toll collections.The Company is able to build up sufficient cash from operating revenues prior to the maturity ofits payment obligations. The Company arranged additional short-term lines to boost its ability tomeet short-term liquidity needs. The Company has short-term credit lines amounting toP=2,450.0 million and P=2,825.0 million as at December 31, 2015 and 2014, respectively, and cashand cash equivalents amounting to P=2,669.3 million and P=2,953.9 million as at December 31, 2015and 2014, respectively, that are allocated to meet the Company’s short-term liquidity needs.

- 60 -

*SGVFS015652*

The tables below summarize the maturity profile of the Company’s financial assets and financialliabilities as at December 31, 2015 and 2014 based on undiscounted payments:

December 31, 2015

Within the Year 2–3 Years 4–5 YearsMore than

5 Years TotalFinancial AssetsCash and cash equivalents P=2,669,324,105 P=– P=– P=– P=2,669,324,105Short-term deposits 1,225,420,748 – – – 1,225,420,748Receivables (a) 553,935,880 – – – 553,935,880Due from related parties 2,807,542 – – – 2,807,542AFS financial assets (b) 256,791,692 552,234,537 376,223,604 869,099,663 2,054,349,496Refundable deposits – – – 3,694,561 3,694,561Restricted cash – 889,000,000 – – 889,000,000

P=4,708,279,967 P=1,441,234,537 P=376,223,604 P=872,794,224 P=7,398,532,332

Financial LiabilitiesAccounts payable and other

current liabilities (c) P=2,103,021,340 P=– P=– P=– P=2,103,021,340Dividends payable 1,422,576,000 – – – 1,422,576,000Long-term debt (d) 2,042,011,488 6,121,358,466 1,697,568,817 13,977,224,180 23,838,162,951

P=5,567,608,828 P=6,121,358,466 P=1,697,568,817 P=13,977,224,180 P=27,363,760,291(a) Excluding advances to officers and employees.(b) Including interest to be received.(c) Excluding statutory liabilities(d) Including interest to be paid.

December 31, 2014

Within the Year 2–3 Years 4–5 YearsMore than

5 Years TotalFinancial Assets –Cash and cash equivalents P=2,953,881,594 P=– P=– P=– P=2,953,881,594Short-term deposits 4,789,522,429 – – – 4,789,522,429Receivables (a) 674,354,474 – – – 674,354,474Due from related parties 12,494,187 – – – 12,494,187Short-term investments 17,846,800 – – – 17,846,800AFS financial assets (b) 323,135,616 309,742,588 541,944,099 1,161,449,790 2,336,272,093Refundable deposits – – – 3,694,561 3,694,561Restricted cash – 889,000,000 – – 889,000,000

P=8,771,235,100 P=1,198,742,588 P=541,944,099 P=1,165,144,351 P=11,677,066,138

Financial LiabilitiesAccounts payable and other

current liabilities (c) P=1,859,580,437 P=– P=– P=– P=1,859,580,437Dividends payable 1,193,472,000 – – – 1,193,472,000Long-term debt (d) 1,965,071,070 2,935,102,716 5,332,703,887 12,982,003,289 23,214,880,962

P=5,018,123,507 P=2,935,102,716 P=5,332,703,887 P=12,982,003,289 P=26,267,933,399(a) Excluding advances to officers and employees.(b) Including interest to be received.(c) Excluding statutory liabilities(d) Including interest to be paid.

Capital ManagementThe primary objective of the Company’s capital management is to ensure that it maintains healthycapital ratios in order to support its business and maximize shareholder value while complyingwith the financial covenants required by the lenders. These loan covenants were overhauled inApril 2011 and were amended in 2015. Under the loan agreements, MNTC is required aMaintenance Debt Service Coverage Ratio (DSCR) of not less than 1.15 times and maintain aDebt to Equity Ratio not exceeding 3.0 times until the loan maturity. For the Fixed Rate Bonds,the Company is required to maintain a Debt to Equity Ratio of not exceeding 3.0 times for the firstthree years after the date of the loan agreement and not exceeding 2.5 times after such period. The

- 61 -

*SGVFS015652*

loan agreement provides that MNTC may incur new loans or declare dividends as long as the Pro-forma DSCR for the relevant year is not less than 1.3 times.

MNTC also ensures that its debt to equity ratio is in line with the requirements of the Board ofInvestments (BOI). BOI requires MNTC not to exceed 75:25 debt to equity ratio as proof ofcapital build-up. The Company’s long-term debt to equity ratio stood at both 69:31 for 2015 and2014 indicating that the Company has the capacity to incur additional long-term debt to build upits capital.

2015 2014Long-term debt P=17,814,581,945 P=16,746,069,489Total equity 8,133,638,528 7,627,856,268Total capital P=25,948,220,473 P=24,373,925,757

Debt to equity ratio 69:31 69:31

The Company continuously evaluates whether its capital structure can support its businessstrategy.

27. Financial Assets and Financial Liabilities

Fair ValuesA comparison of carrying and fair values of all of the Company’s financial instruments other thanthose with carrying amounts that are reasonable approximate of fair values, by category as atDecember 31, 2015 and 2014 follows:

2015 2014Carrying Value Fair Value Carrying Value Fair Value

Financial AssetsAFS financial assets: UITF* P=1,225,420,748 P=1,225,420,748 P=4,789,522,429 P=4,789,522,429 Investment in treasury bonds

and notes 1,160,612,246 1,160,612,246 1,396,372,228 1,396,372,228Investment in corporate bonds 456,921,000 456,921,000 441,740,500 441,740,500Investment in LTNCD 97,595,000 97,595,000 100,000,000 100,000,000

P=2,940,548,994 P=2,940,548,994 P=6,727,635,157 P=6,727,635,157

Financial LiabilitiesOther financial liabilities: Long-term debt P=17,814,581,945 P=18,328,964,217 P=16,746,069,489 P=17,466,778,765* Presented as “Short-term deposits” in the consolidated balance sheets.

The management assessed that fair values of cash and cash equivalents, receivables, due fromrelated parties, short-term investments, restricted cash, accounts payable and other currentliabilities, and dividends payable approximate their carrying amounts largely due to the short-termmaturities of these instruments.

- 62 -

*SGVFS015652*

The following methods and assumptions were used to estimate the fair value of each class offinancial instrument for which it is practicable to estimate such value:

AFS Financial AssetsThe fair value of investment in treasury bonds and notes, corporate bonds and LTNCD is based onthe quoted market price of the financial instruments as at December 31, 2015 and 2014. The fairvalue of the UITF is based on the estimated fair market value of the assets of the fund based onprices supplied by independent sources as at December 31, 2015 and 2014.

Long-term DebtFor both fixed rate and floating rate (repriceable every six months) peso-denominated notes andloans, except the fixed-rate bonds where the fair value is based on its quoted market price as atDecember 31, 2015 and 2014, estimated fair value is based on the discounted value of future cashflows using the prevailing peso interest rates. In 2015 and 2014, the prevailing peso interest ratesranged from 3.2% to 6.1% and 3.1% to 6.2%, respectively.

Fair Value HierarchyAs at December 31, 2015 and 2014, the Company held the following financial instrumentsmeasured at fair value:

2015 Level 1 Level 2 Level 3Assets measured at fair valueAFS financial assets:

UITF* P=1,225,420,748 P=– P=1,225,420,748 P=–Investment in treasury bonds and

notes 1,160,612,246 959,967,246 200,645,000 –Investment in corporate bonds 456,921,000 456,921,000 – –Investment in LTNCD 97,595,000 97,595,000 – –

P=2,940,548,994 P=1,514,483,246 P=1,426,065,748 P=–

Liabilities for which fair values aredisclosed

Other financial liabilities-Long-term debt P=18,328,964,217 P=7,064,938,000 P=11,264,026,217 P=–


2014 Level 1 Level 2 Level 3Assets measured at fair valueAFS financial assets:

UITF* P=4,789,522,429 P=– P=4,789,522,429 P=–Investment in treasury bonds and

notes 1,396,372,228 1,396,372,228 – –Investment in corporate bonds 441,740,500 441,740,500 – –Investment in LTNCD 100,000,000 100,000,000 – –

P=6,727,635,157 P=1,938,112,728 P=4,789,522,429 P=–

Liabilities for which fair values aredisclosed

Other financial liabilities:Long-term debt P=17,466,778,765 P=6,895,610,200 P=10,571,168,565 P=–


- 63 -

*SGVFS015652*

During the year ended December 31, 2015, a portion of the investment in treasury bonds and notesamounting to P=200.6 million was transferred from Level 1 to Level 2. These investments wereproven to be inactively traded due to the lower average daily trading volume in December 2015, aswell as no availability of bid-offer on value date. For the year ended December 31, 2014, therewere no transfers between Level 1 and Level 2 fair value measurements and no transfers into andout of Level 3 fair value measurements.

Derivative Instruments

PNB Term LoanOn March 11, 2011, MNTC entered into a pay-fixed, receive-floating interest rate swap contract tohedge the variability of cash flows pertaining to the floating rate PNB Term Loan effectiveMarch 14, 2011. Under the swap, MNTC will receive semi-annual interest equal to six-monthsPDST-F plus 0.50% per annum spread and pay semi-annual fixed interest of 5.9% per annum,based on the amortizing principal balance of the PNB Term Loan, starting from June 15, 2011until December 15, 2015. The interest rate swap effectively fixed the floating rate of the said loanover the duration of the agreement at 5.9% per annum.

The swap was designated as cash flow hedge at trade date. As at June 30, 2011, the effectivenessratio was only 58.05% and the hedging relationship failed to meet the 80% to 125% hedgeeffectiveness criterion of PAS 39. As a result, the hedge was de-designated by the Company. TheP=39.0 million (gross of P=10.7 million tax) deferred in equity representing the negative fair valuechange of the swap up to March 31, 2011 (the last testing date when the hedge was still effective)is being amortized over the term of the hedged loan and recognized under “Interest expense andother finance costs” account. As at December 31, 2015 and 2014, the unamortized amountdeferred in equity amounted to nil (after amortization of P=3.8 million) and P=3.8 million (gross ofP=1.1 million tax) after amortization of P=8.9 million, respectively.

Under cash flow hedge accounting, the effective portion of the change in fair values of thedesignated hedges are recognized directly in equity and recycled in earnings in the same periodsduring which the hedged transaction affects earnings.

As discussed in Note 15, this swap was pre-terminated on December 28, 2012.

Hedge Effectiveness of Cash Flow Hedges. Movements of the Company’s cumulative translationadjustments on cash flow hedges under “Other comprehensive income (loss) reserve” account forthe years ended December 31, 2015, 2014 and 2013 follow:

2015 2014 2013Balance at beginning of year (P=3,775,752) (P=12,710,899) (P=23,219,515)Transferred to consolidated statement

of income:Interest expense* 3,775,752 8,935,147 10,508,616

Balance at end of year − (3,775,752) (12,710,899)Tax effects of items taken directly

to equity − 1,132,726 3,813,270P=− (P=2,643,026) (P=8,897,629)

* Included in “Interest expense on loans” under “Interest expense and other finance costs” account(see Note 22).

- 64 -

*SGVFS015652*

28. Contingencies and Others

a. Value-Added Tax

When RA No. 9337 took effect, the BIR issued RR No. 16-2005 on September 1, 2005, which,for the first time, expressly subjected gross receipts from toll road operations to VAT. Thisnotwithstanding the BIR issued VAT Ruling No. 078-99 on August 9, 1999 where it categoricallyruled that MNTC, as assignee of the PNCC franchise, is entitled to the tax exemption privilegesof PNCC and is therefore exempt from VAT on its gross receipts from the operation of theNLEX.

MNTC, together with other tollway operators, continued to discuss the issue of VAT with theconcerned government agencies from 2005 to 2011. The BIR continuously upheld its positionthat the tollway operators are subject to VAT and issued several Revenue MemorandumCirculars (RMCs) for the imposition of the VAT. The BIR also continuously issued VATassessments to MNTC. On the other hand, the TRB continued to direct the tollway companies(including MNTC) to defer the imposition of the VAT. To fully implement the imposition ofthe VAT on toll fees, the BIR issued RMC No. 63-2010 dated July 19, 2010, stating amongothers, that VAT shall be imposed on the gross receipts of tollway operators from all types ofvehicles starting August 16, 2010 and that the accumulated input VAT account of the tollcompanies shall have a zero balance on August 16, 2010. Any input VAT that willthenceforth be reflected in the books of accounts and other accounting records of tollwayoperators should be for purchases of goods and services delivered/rendered andinvoiced/receipted on or after August 16, 2010. More importantly, RMC No. 63-2010allowed tollway operators with prior VAT assessments to apply for abatement of tax liability,surcharge, interest and penalties under Section 204 of the National Internal Revenue Code(NIRC).

Thus, on August 4, 2010, notwithstanding legal basis on its claim for VAT exemption,MNTC, in accordance with RMC No. 63-2010, applied for abatement of alleged VATliabilities for taxable years 2006 and 2007.

The BIR was not able to immediately resolve the application for abatement of MNTC becauseof a temporary restraining order issued by the Supreme Court on August 13, 2010 on theimposition VAT on tollway operators. On July 19, 2011, however, the matter was resolvedwhen the SC upheld the legality of RMC No. 63-2010 issued by the BIR on July 19, 2010, inrelation to Section 108 of the NIRC that imposes VAT on all services for a fee.

Following the SC decision, the BIR issued RMC No. 39-2011 dated August 31, 2011 fullyimplementing VAT on the gross receipts of tollway operators from all types of vehiclesbeginning October 1, 2011. The notable provisions of RMC No. 39-2011 are as follows:

i. Tollway operators who have been assessed VAT liabilities on gross receipts from toll feesprior to October 1, 2011 can apply for Abatement of the assessed tax liability, surchargeand interest under Section 204 of the NIRC and RR No. 13-2001.

ii. The accumulated input VAT account of the toll companies shall have a zero balance onOctober 1, 2011. Any input VAT that will henceforth be reflected in the books ofaccounts and other accounting records of tollway operators will have to be for purchasesof goods delivered and invoiced on or after October 1, 2011. Whereas, for services, itshould be for purchases of services which will be rendered and receipted on or afterOctober 1, 2011.

- 65 -

*SGVFS015652*

iii. No future claims for tax credit or refunds shall be allowed for any VAT passed-on to thetollways operators on any of their purchases made prior to October 1, 2011.

iv. All tollway operators are required to comply with the invoice/receipt format prescribedunder RMC No. 40-2005.

In view of RMC No. 39-2011, MNTC started imposing VAT on toll fees from motorists andcorrespondingly started recognizing VAT liability on October 1, 2011. MNTC also reducedits accumulated input VAT to zero as at September 30, 2011.

Through all the years that the issues of VAT are being discussed, MNTC received the followingVAT assessments:

§ The BIR issued a Formal Letter of Demand on March 16, 2009 requesting MNTC to paydeficiency VAT plus penalties amounting to P=1,010.5 million for taxable year 2006.MNTC filed a protest letter with the BIR in May 2009. In July of 2009, MNTC filed asupplement to the protest letter stating that its May 2009 submission should be consideredits complete submission of documents for the purpose of counting the BIR’s 180-dayperiod to decide the protest pursuant to NIRC. However, the BIR did not act upon theprotest letter. In March 2012, MNTC filed a position paper with the BIR regarding thetreatment of deferred input VAT from the purchase of capital goods and services inrelation to its above application for abatement. The BIR has yet to resolve the applicationfor abatement of MNTC.

§ A Final Assessment Notice was received from the BIR dated November 15, 2009assessing MNTC deficiency VAT plus penalties amounting to P=557.6 million for taxableyear 2007. MNTC filed a protest letter with the BIR in December 2009. In February2010, MNTC filed a supplement to the protest letter stating that its December 2009submission should be considered as its complete submission of documents for the purposeof counting the BIR’s 180-day period to decide the protest pursuant to the Tax Code. InMarch 2010, MNTC received the decision of the BIR denying the protest (the “DisputedDecision”). Within 30 days from the receipt of the Disputed Decision or in April 2010,MNTC filed a petition for review with the Court of Tax Appeals (CTA) to appeal thedenial by the BIR of its protest. MNTC filed its memorandum in July 2013 and asupplemental memorandum in August 2013. The case is now considered submitted fordecision.

§ The BIR issued a Notice of Informal Conference dated October 5, 2009 assessing MNTCfor deficiency VAT plus penalties amounting to P=470.9 million for taxable year 2008. OnMay 21, 2010, the BIR issued another notice increasing the deficiency VAT for taxableyear 2008 to P=1,209.2 million (including penalties). On June 11, 2010, MNTC filed itsPosition Paper with the BIR reiterating its claim that it is not subject to VAT on toll fees.

§ The BIR issued a Notice of Informal Conference on May 21, 2010 assessing MNTCdeficiency VAT plus penalties amounting to P=1,026.6 million for taxable year 2009. OnJune 11, 2010, MNTC filed its Position Paper with the BIR reiterating its claim that it isnot subject to VAT on toll fees.

On April 3, 2014, the BIR accepted and approved MNTC’s application for abatement andissued a Certificate of Approval for the cancellation of the basic output tax, interest andcompromise penalty amounting to P=1,010.5 million and P=584.6 million for taxable years 2006and 2007, respectively.

- 66 -

*SGVFS015652*

Notwithstanding the foregoing, management believes, in consultation with its legal counsel,that in any event, the STOA amongst MNTC, ROP, acting by and through the TRB, andPNCC, provides MNTC with legal recourse in order to protect its lawful interests in case thereis a change in existing laws which makes the performance by MNTC of its obligationsmaterially more expensive.

b. MNTC is also a party to certain claims and assessments relating to real property taxes asfollows:

On July 15, 2008, MNTC filed a petition for review under Section 226 of the LocalGovernment Code (“LGC”) with the Local Boards of Assessment Appeals (LBAA) to annuland set aside the action of the provincial assessor of the province of Bulacan, in motu proprioissuing five (5) assailed tax declarations under the name of MNTC as administrator/ beneficialuser and classifying and categorizing the NLEX as a commercial property subject to RPT. InAugust 2008, the respondent provincial assessor filed its answer with motion to dismiss. InSeptember 2008, MNTC filed the corresponding reply with opposition. The LBAA scheduledan ocular inspection of the subject real properties on May 7, 2009 to determine whether saidproperties in fact covers portions of the NLEX, which MNTC argues are part of public landexempt from RPT. The ocular inspection however was reset due to the unavailability of someof the members of the LBAA. The LBAA has yet to re-schedule the ocular inspection as atFebruary 17, 2016. The case is still pending before the LBAA of the Province of Bulacan.

In April 2013, MNTC filed a petition for review under Section 226 of the LGC with theLBAA to declare as null and void the assailed assessment and the assailed thirty-four (34) taxdeclarations motu proprio issued by the provincial assessor of the province of Bulacan in thename of MNTC as owner of the NLEX and categorizing the NLEX as a commercial property,subject to RPT, and the corresponding notice of assessment dated January 10, 2013 for RPTagainst MNTC over the said properties pursuant to Section 204 of the LGC. In June 2013, theLBAA issued an order denying due course to the petition. In July 2013, MNTC filed a motionfor reconsideration praying that the order be reconsidered and that MNTC’s petition be givendue course. In September 2013, MNTC received an order from the LBAA setting the date forthe hearing on MNTC’s motion for reconsideration on September 25, 2013. In September2013, MNTC received the province of Bulacan’s comment to MNTC’s motion forreconsideration. Since MNTC learned of the September 25, 2013 hearing only after itreceived the order on September 26, 2013, MNTC filed a manifestation and motion prayingthat (i) MNTC be given until October 16, 2013 within which to file its reply to the comment,and (ii) the hearing on the motion for reconsideration be reset to October 22, 2013. During thehearing on November 20, 2013, the province requested for time to file its rejoinder. TheLBAA also ordered the Respondents to submit samples of the tax declarations in question.The LBAA then set another hearing on December 11, 2013. The LBAA submitted the Motionfor Reconsideration for resolution during the December 11, 2013 hearing. As atFebruary 17, 2016, the LBAA has not yet resolved the motion.

On September 18, 2013, MNTC received Notices of Realty Tax Delinquencies for the years2006 to 2013 issued by the Provincial Treasurer of Bulacan, which state that, if after fifteen(15) days from MNTC’s receipt of the Notices, MNTC fails to pay or remit the allegeddelinquent RPT due in the amount of P=304.9 million, the remedies provided for under the lawfor the collection of delinquent taxes shall be applied to enforce collection. On September 27,2013, the BLGF wrote a letter to the LGU advising it to hold in abeyance any further course ofaction pertaining to the RPT delinquency covering the subject 34 tax declarations. OnOctober 3, 2013, MNTC received another notice dated October 1, 2013 from the ProvincialTreasurer, alleging that since the period given in the Notices has already elapsed, the Province

- 67 -

*SGVFS015652*

may apply “the remedies under the law for the collection of delinquent taxes.” On October 4,2013, the Provincial Treasurer withdrew the October 3, 2013 notice to respect the directivefrom the DOF-BLGF to hold the enforcement of any collection remedies in abeyance.

The outcome of the claims on RPT cannot be presently determined. Management believes thatthese claims will not have a significant impact on MNTC’s consolidated financial statements.Management and its legal counsel also believes that the STOA also provides MNTC with legalrecourse in order to protect its lawful interests in case there is a change in existing laws whichmakes the performance by MNTC of its obligations materially more expensive.

c. Toll Rate Adjustments

On August 26, 2015, MNTC wrote the ROP, acting by and through the TRB, a Final Demand forCompensation based on Overdue 2013 and 2015 Toll Rate Adjustments (Final Demand).

In the letter, MNTC stated that, the ROP’s/TRB’s inexcusable refusal to act on the Petitions forApproval of Periodic Toll Rate Adjustment effective January 1, 2013 (2012 Petition) andJanuary 1, 2015 (2014 Petition) is in total disregard and a culpable violation of applicable lawsand contractual provisions to the great prejudice of MNTC, which has continuously relied in goodfaith on such contractual provisions as well as on the timely and proper performance of theROP’s/TRB’s legal and contractual duties.

Thus, as of July 31, 2015, the value of the compensation due to MNTC amounts to P=2.3 billion(exclusive of VAT) and P=0.2 billion (exclusive of VAT) under the 2012 and 2014 Petitions,respectively.

In view of the failure of the ROP/TRB to heed the Final Demand, MNTC sent a Notice ofDispute to the ROP/TRB dated September 11, 2015 invoking STOA Clause 19 (Settlement ofDisputes) that require the parties to reach an amicable settlement within 60 calendar days. TheTRB sent several letters to MNTC requesting the extension of the amicable settlement period, thelatest letter of which, requests that the amicable settlement period be further extended toApril 12, 2016.

d. MNTC is also a party to other cases and claims arising from the ordinary course of businessfiled by third parties which are either pending decisions by the courts or are subject tosettlement agreements. The outcome of these claims cannot be presently determined. In theopinion of management and the Company’s legal counsel, the eventual liability from theselawsuits or claims, if any, will not have a material adverse effect on the Company’s financialposition and financial performance.

29. Standards Issued but Not Yet Effective

The standards and interpretations that are issued, but not yet effective, up to the date of issuance ofthe Company’s financial statements are disclosed below. The Company intends to adopt thesestandards, if applicable, when they become effective. Adoption of these standards andinterpretations are not expected to have any significant impact on the financial statements of theCompany, except for the adoption of PFRS 9, Financial Instruments, International FinancialReporting Standards (IFRS) 15, Revenue from Contracts with Customers and IFRS 16, Leases.The nature of the impending changes in accounting policy on adoption of PFRS 9, IFRS 15 andIFRS 16 are described below.

- 68 -

*SGVFS015652*

No definite adoption date prescribed by the SEC and FRSC§ Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate

Effective January 1, 2016§ PAS 1, Presentation of Financial Statements – Disclosure Initiatives (Amendments)§ PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets – Clarification of

Acceptable Methods of Depreciation and Amortization (Amendments)§ PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture – Bearer Plants

(Amendments)§ PAS 27, Separate Financial Statements – Equity Method in Separate Financial Statements

(Amendments)§ PFRS 10, Consolidated Financial Statements, and PAS 28, Investments in Associates and

Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or JointVenture

§ PFRS 10, Consolidated Financial Statements, PFRS 12, Disclosure of Interests in OtherEntities, and PAS 28, Investments in Associates and Joint Ventures – Investment Entities:Applying the Consolidation Exception (Amendments)

§ PFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations(Amendments)

§ PFRS 14, Regulatory Deferral Accounts§ Annual Improvements to PFRSs (2012-2014 cycle)§ PFRS 5, Non-current Assets Held for Sale and Discontinued Operations – Changes in

Methods of Disposal§ PFRS 7, Financial Instruments: Disclosures – Servicing Contracts§ PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed Interim Financial

Statements§ PAS 19, Employee Benefits – Regional Market Issue regarding Discount Rate§ PAS 34, Interim Financial Reporting – Disclosure of Information ‘Elsewhere in the

Interim Financial Report’

Effective January 1, 2018

§ PFRS 9, Financial Instruments (2014 or final version). In July 2014, the final version ofPFRS 9, was issued. PFRS 9 reflects all phases of the financial instruments project andreplaces PAS 39, and all previous versions of PFRS 9. The standard introduces newrequirements for classification and measurement, impairment, and hedge accounting. PFRS 9is effective for annual periods beginning on or after January 1, 2018, with early applicationpermitted. Retrospective application is required, but comparative information is notcompulsory. For hedge accounting, the requirements are generally applied prospectively, withsome limited exceptions. Early application of previous versions of PFRS 9 (2009, 2010 and2013) is permitted if the date of initial application is before February 1, 2015. The Companydid not early adopt PFRS 9.

The adoption of PFRS 9 will have an effect on the classification and measurement of theCompany’s financial assets and impairment methodology for financial assets, but will have noimpact on the classification and measurement of the Company’s financial liabilities. Theadoption will also have an effect on the Company’s application of hedge accounting. TheCompany is currently assessing the impact of adopting this standard.

- 69 -

*SGVFS015652*

Standards issued by the International Accounting Standards Board (IASB) but not yet adoptedlocally by the SEC and FRSC

§ International Financial Reporting Standards (IFRS) 15, Revenue from Contracts withCustomers. IFRS 15 was issued in May 2014 by the IASB and establishes a new five-stepmodel that will apply to revenue arising from contracts with customers. Under IFRS 15,revenue is recognized at an amount that reflects the consideration to which an entity expects tobe entitled in exchange for transferring goods or services to a customer. The principles inIFRS 15 provide a more structured approach to measuring and recognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenuerecognition requirements under IFRS. Either a full or modified retrospective application isrequired for annual periods beginning on or after January 1, 2018 with early adoptionpermitted. IFRS 15 was not yet adopted by FRSC. The Company is currently assessing theimpact of IFRS 15 and plans to adopt the new standard on the required effective date onceadopted locally.

§ IFRS 16, Leases. On January 13, 2016, the IASB issued its new standards, IFRS 16, Leases,which replaces International Accounting Standard (IAS) 17, the current leases standard, andthe related Interpretations.

Under the new standard, lessees will no longer classify their leases as either operating orfinance leases in accordance with IAS 17. Rather, lessees will apply the single-asset model.Under this model, lessees will recognize the assets and related liabilities for most leases ontheir balance sheets, and subsequently, will depreciate the lease assets and recognize intereston the lease liabilities in their profit or less. Lease with a term of 12 months or less or forwhich the underlying asset if of low value are exempted from these requirements.

The accounting by lessors is substantially unchanged as the new standard carried forward theprinciples of lessor accounting under IAS 17. Lessors, however, will be required to disclosemore information in their financial statements, particularly on the risk exposure to residualvalue.

The new standard is effective for annual periods beginning on or after January 1, 2019.Entities may early adopt IFRS 16 but only if they have also adopted IFRS 15, Revenue fromContracts with Customers. When adopting IFRS 16, an entity is permitted to use either a fullretrospective or a modified retrospective approach, with options to use certain transitionreliefs. The Company is currently assessing the impact of IFRS 16 and plans to adopt the newstandard on the required effective date once adopted locally.

30. Events After the Reporting Period

On January 29, 2016, MNTC entered into a new ten-year term loan facility agreement withUnionbank of the Philippines for a facility amount of P=5.0 billion to finance capital expendituresuch as Segment 10 and NLEX-SLEX Connector Road. On February 3, 2016, MNTC made itsinitial drawdown amounting to P=1.0 billion. The undrawn amount will be available for drawing inone (1) or more availments on any banking day within one (1) year from July 24, 2015, or suchlonger period as the parties may agree upon in writing.

- 70 -

*SGVFS015652*

The applicable interest rate for the loan shall be 130 basis points plus the prevailing 10 yearPDST-R2, provided that the applicable interest rate shall not be lower than 5% per annum.Interest payment shall be made quarterly until maturity date of February 3, 2026.

*SGVFS015652*

INDEPENDENT AUDITORS’ REPORT


We have audited the consolidated financial statements of Manila North Tollways Corporation(a subsidiary of Metro Pacific Tollways Development Corporation) and a Subsidiary as at and for theyear ended December 31, 2015, on which we have rendered the attached report datedFebruary 17, 2016.

In compliance with Securities Regulation Code Rule 68, As Amended (2011), we are stating that theabove Company has five (5) stockholders owning more than one hundred (100) shares each.



February 17, 2016


Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph



*SGVFS015652*

INDEPENDENT AUDITORS’ REPORTON SUPPLEMENTARY SCHEDULES


We have audited in accordance with Philippine Standards on Auditing, the consolidated financialstatements of Manila North Tollways Corporation (a subsidiary of Metro Pacific TollwaysDevelopment Corporation) and its subsidiary as at December 31, 2015 and 2014 and for each of thethree years in the period ended December 31, 2015, included in this form 17-A, and have issued ourreport thereon dated February 17, 2016. Our audits were made for the purpose of forming an opinionon the basic financial statements taken as a whole. The schedules listed in the Index to theConsolidated Financial Statements and Supplementary Schedules are the responsibility of theCompany’s management. These schedules are presented for purposes of complying with SecuritiesRegulation Code Rule 68, As Amended (2011) and are not part of the basic financial statements.These schedules have been subjected to the auditing procedures applied in the audit of the basicfinancial statements and, in our opinion, fairly state, in all material respects, the information requiredto be set forth therein in relation to the basic financial statements taken as a whole.



February 17, 2016


Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph



MANILA NORTH TOLLWAYS CORPORATION AND A SUBSIDIARY

INDEX TO THE FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES

UNDER SRC RULE 68, AS AMENDED (2011)

DECEMBER 31, 2015

Schedule Title Page

Consolidated Financial Statements

I List of Philippine Financial Reporting

Standards (PFRS) and Interpretations

Effective as at December 31, 2015

S-1

II Financial Soundness Indicators S-8

III Reconciliation of Retained Earnings Available for Dividend Declaration

S-9

IV Supplementary Schedules Required by Paragraph 6D, Part II

A Financial Assets S-10

B Amounts Receivable from Directors, Officers,

Employees, Related Parties and Principal Stockholders (Other than Related Parties)

Not Applicable

C Amounts Receivable from Related Parties

which are eliminated during the consolidation

of financial statements

S-11

D Intangible Assets - Other Assets S-12

E Long Term Debt S-13

F Indebtedness to Related Parties (Long-Term

Loans from Related Companies) Not Applicable

G Guarantee Securities of Other Issuers Not Applicable

H Capital Stock S-16

V Organization Structure S-17

S-1


SUPPLEMENTARY SCHEDULE REQUIRED

UNDER SRC RULE 68, AS AMENDED (2011)

List of Philippine Financial Reporting Standards (PFRS) and

Interpretations Effective as at December 31, 2015

PHILIPPINE FINANCIAL REPORTING STANDARDS AND

INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

Framework for the Preparation and Presentation of Financial

Statements

Conceptual Framework Phase A: Objectives and Qualitative

Characteristics

PFRS Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1

(Revised)

First-time Adoption of Philippine Financial Reporting

Standards

Amendments to PFRS 1 and PAS 27: Cost of an

Investment in a Subsidiary, Jointly Controlled Entity or

Associate

Amendments to PFRS 1: Additional Exemptions for

First-time Adopters

Amendment to PFRS 1: Limited Exemption from

Comparative PFRS 7 Disclosures for First-time

Adopters

Amendments to PFRS 1: Severe Hyperinflation and

Removal of Fixed Date for First-time Adopters

Amendments to PFRS 1: Government Loans

Amendments to PFRS 1: Borrowing Costs

Amendment to PFRS 1: Meaning of Effective PFRS

PFRS 2 Share-based Payment

Amendments to PFRS 2: Vesting Conditions and

Cancellations

Amendments to PFRS 2: Group Cash-settled Share-

based Payment Transactions

Amendment to PFRS 2: Definition of Vesting

Condition

PFRS 3

(Revised)

Business Combinations

Amendment to PFRS 3: Accounting for Contingent

Consideration in a Business Combination

Amendment to PFRS 3: Scope Exceptions for Joint

Arrangements

PFRS 4 Insurance Contracts

SCHEDULE I

Page 1 of 7

S-2


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

Amendments to PAS 39 and PFRS 4: Financial

Guarantee Contracts

PFRS 5 Non-current Assets Held for Sale and Discontinued

Operations

Amendment to PFRS 5: Changes in Methods of

Disposals* Not Early Adopted

PFRS 6 Exploration for and Evaluation of Mineral Resources

PFRS 7 Financial Instruments: Disclosures

Amendments to PAS 39 and PFRS 7: Reclassification

of Financial Assets


of Financial Assets - Effective Date and Transition

Amendments to PFRS 7: Improving Disclosures about

Financial Instruments

Amendments to PFRS 7: Disclosures - Transfers of

Financial Assets

Amendments to PFRS 7: Disclosures – Offsetting

Financial Assets and Financial Liabilities

Amendments to PFRS 7: Mandatory Effective Date of

PFRS 9 and Transition Disclosures

Amendment to PFRS 7: Disclosures – Servicing

Contracts* Not Early Adopted

Amendment to PFRS 7: Applicability of the

Amendments to PFRS 7 to Condensed Interim

Financial Statements*

Not Early Adopted

PFRS 8 Operating Segments

Amendments to PFRS 8: Aggregation of Operating

Segments and Reconciliation of the Total of the

Reportable Segments’ Assets to the Entity’s Assets

PFRS 9 Financial Instruments (2010 version)* Not Early Adopted

Amendments to PFRS 9: Mandatory Effective Date of

PFRS 9 and Transition Disclosures* Not Early Adopted

Amendments to PFRS 9: Hedge accounting and

amendments to PFRS 9 and PAS 39 (2013 version)* Not Early Adopted

Amendments to PFRS 9 (2014 version)* Not Early Adopted

PFRS 10 Consolidated Financial Statements

Amendments to PFRS 10, PFRS 12 and PAS 27:

Investment Entities

Amendments to PFRS 10 and PAS 28: Sale or

Contribution of Assets between an Investor and its

Associate or Joint Venture*

Not Early Adopted

SCHEDULE I

Page 2 of 7

S-3


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

Amendment to PFRS 10, PFRS 12, and PAS 28:

Investment Entities: Applying the Consolidation

Exception*

Not Early Adopted

PFRS 11 Joint Arrangements

Amendments to PFRS 11: Accounting for Acquisitions

of Interests in Joint Operations*

Not Early Adopted

PFRS 12 Disclosure of Interests in Other Entities


Investment Entities

Amendment to PFRS 10, PFRS 12 and PAS 28:


Exception*

Not Early Adopted

PFRS 13 Fair Value Measurement

Amendment to PFRS 13: Short-term Receivables and

Payables

Amendment to PFRS 13: Portfolio Exception

PFRS 14 Regulatory Deferral Accounts* Not Early Adopted

Philippine Accounting Standards

PAS 1

(Revised)

Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures

Amendments to PAS 32 and PAS 1: Puttable Financial

Instruments and Obligations Arising on Liquidation

Amendments to PAS 1: Presentation of Items of Other

Comprehensive Income

Amendments to PAS 1: Clarification of the

Requirements for Comparative Information

Amendments to PAS 1: Disclosure Initiative* Not Early Adopted

PAS 2 Inventories

PAS 7 Statement of Cash Flows

PAS 8 Accounting Policies, Changes in Accounting Estimates

and Errors

PAS 10 Events after the Reporting Period

PAS 11 Construction Contracts

PAS 12 Income Taxes

Amendments to PAS 12 - Deferred Tax: Recovery of

Underlying Assets

SCHEDULE I

Page 3 of 7

S-4


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

PAS 16

Property, Plant and Equipment

Amendments to PAS 16: Classification of Servicing

Equipment

Amendment to PAS 16 and PAS 38: Revaluation

Method – Proportionate Restatement of Accumulated

Depreciation/Amortization

Amendments to PAS 16 and PAS 38: Clarification of

Acceptable Methods of Depreciation and Amortization* Not Early Adopted

Amendments to PAS 16 and PAS 41: Bearer Plants* Not Early Adopted

PAS 17 Leases

PAS 18 Revenue

PAS 19 Employee Benefits

Amendments to PAS 19: Actuarial Gains and Losses,

Group Plans and Disclosures

PAS 19

(Amended)

Employee Benefits

Amendments to PAS 19: Defined Benefit Plans:

Employee Contributions

Amendment to PAS 19: Regional Market Issue

Regarding Discount Rate* Not Early Adopted

PAS 20 Accounting for Government Grants and Disclosure of

Government Assistance

PAS 21 The Effects of Changes in Foreign Exchange Rates

Amendment: Net Investment in a Foreign Operation

PAS 23

(Revised)

Borrowing Costs

PAS 24

(Revised)

Related Party Disclosures

Amendments to PAS 24: Key Management Personnel

PAS 26 Accounting and Reporting by Retirement Benefit Plans

PAS 27 Consolidated and Separate Financial Statements

PAS 27

(Amended)

Separate Financial Statements


Investment Entities

Amendments to PAS 27: Equity Method in Separate

Financial Statements* Not Early Adopted

PAS 28 Investments in Associates

PAS 28 Investments in Associates and Joint Ventures

SCHEDULE I

Page 4 of 7

S-5


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

(Amended) Amendments to PFRS 10 and PAS 28: Sale or

Contribution of Assets between an Investor and its

Associate or Joint Venture*

Not Early Adopted

Amendment to PFRS 10, PFRS 12 and PAS 28:


Exception*

Not Early Adopted

PAS 29 Financial Reporting in Hyperinflationary Economies

PAS 31 Interests in Joint Ventures

PAS 32 Financial Instruments: Presentation

Amendments to PAS 32 and PAS 1: Puttable Financial

Instruments and Obligations Arising on Liquidation

Amendment to PAS 32: Classification of Rights Issues

Amendments to PAS 32: Offsetting Financial Assets

and Financial Liabilities

Amendments to PAS 32: Tax Effect of Distribution to

Holders of Equity Instruments

Amendments to PAS 32: Offsetting Financial Assets

and Financial Liabilities

PAS 33 Earnings per Share

PAS 34 Interim Financial Reporting

Amendments to PAS 34: Interim Financial Reporting

and Segment Information for Total Assets and

Liabilities

Amendment to PAS 34: Disclosure of Information

‘Elsewhere in the Interim Financial Report’* Not Early Adopted

PAS 36 Impairment of Assets

Amendments to PAS 36: Recoverable Amount

Disclosures for Non-Financial Assets

PAS 37 Provisions, Contingent Liabilities and Contingent

Assets

PAS 38 Intangible Assets

Amendment to PAS 16 and PAS 38: Revaluation

Method – Proportionate Restatement of Accumulated

Depreciation/Amortization

Amendment to PAS 16 and PAS 38: Clarification of

Acceptable Methods of Depreciation and Amortization* Not Early Adopted

PAS 39

Financial Instruments: Recognition and Measurement

Amendments to PAS 39: Transition and Initial

Recognition of Financial Assets and Financial

Liabilities

SCHEDULE I

Page 5 of 7

S-6


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

Amendments to PAS 39: Cash Flow Hedge Accounting

of Forecast Intragroup Transactions

Amendments to PAS 39: The Fair Value Option

Amendments to PAS 39 and PFRS 4: Financial

Guarantee Contracts


of Financial Assets


of Financial Assets – Effective Date and Transition

Amendments to Philippine Interpretation IFRIC–9 and

PAS 39: Embedded Derivatives

Amendment to PAS 39: Eligible Hedged Items

Amendments to PAS 39: Novation of Derivatives and

Continuation of Hedge Accounting

PAS 40 Investment Property

Amendment to PAS 40: Clarifying the Interrelationship

between PFRS 3 and PAS 40 when Classifying

Property as Investment Property or Owner-Occupied

Property

PAS 41 Agriculture

Amendments to PAS 16 and PAS 41: Bearer Plants* Not Early Adopted

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration and

Similar Liabilities

IFRIC 2 Members’ Share in Co-operative Entities and Similar

Instruments

IFRIC 4 Determining Whether an Arrangement Contains a Lease

IFRIC 5 Rights to Interests arising from Decommissioning,

Restoration and Environmental Rehabilitation Funds

IFRIC 6 Liabilities arising from Participating in a Specific

Market - Waste Electrical and Electronic Equipment

IFRIC 7 Applying the Restatement Approach under PAS 29

Financial Reporting in Hyperinflationary Economies

IFRIC 8 Scope of PFRS 2

IFRIC 9 Reassessment of Embedded Derivatives

Amendments to Philippine Interpretation IFRIC–9 and

PAS 39: Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 11 PFRS 2- Group and Treasury Share Transactions

SCHEDULE I

Page 6 of 7

S-7


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

IFRIC 12 Service Concession Arrangements

IFRIC 13 Customer Loyalty Programmes

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum

Funding Requirements and their Interaction

Amendments to Philippine Interpretations IFRIC- 14,

Prepayments of a Minimum Funding Requirement

IFRIC 15 Agreements for the Construction of Real Estate* Not Early Adopted

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

IFRIC 17 Distributions of Non-cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments

IFRIC 20 Stripping Costs in the Production Phase of a Surface

Mine

IFRIC 21 Levies

SIC-7 Introduction of the Euro

SIC-10 Government Assistance - No Specific Relation to

Operating Activities

SIC-12 Consolidation - Special Purpose Entities

Amendment to SIC - 12: Scope of SIC 12

SIC-13 Jointly Controlled Entities - Non-Monetary

Contributions by Venturers

SIC-15 Operating Leases – Incentives

SIC-25 Income Taxes - Changes in the Tax Status of an Entity

or its Shareholders

SIC-27 Evaluating the Substance of Transactions Involving the

Legal Form of a Lease

SIC-29 Service Concession Arrangements: Disclosures

SIC-31 Revenue - Barter Transactions Involving Advertising

Services

SIC-32 Intangible Assets - Web Site Costs

* Standards and interpretations which will become effective subsequent to December 31, 2015.

Note: Standards and interpretations tagged as “Not Applicable” are those standards and interpretations which were

adopted but the entity has no significant transaction as at and for the year ended December 31, 2015.

SCHEDULE I

Page 7 of 7

S-8


Supplementary Schedules Required by Paragraph 4D, Part I

Under SRC Rule 68, As Amended (2011)

Financial Soundness Indicators

Financial Ratios Formula December 31,

2015

December 31,

2014

a) Current Ratio Total Current Assets 1.06 1.96

Total Current Liabilities

b) Solvency Ratio Net Profit after Tax (or NPAT) +

Depreciation and amortization 0.16 0.15

Total Liabilities

c) Debt-to-Equity

Ratio Total Long-term Debt

2.19 2.20

Total Stockholders’ Equity

d) Asset to Equity

Ratio Total Assets

3.80 3.76

Total Stockholders’ Equity

e) Interest Rate

Coverage Ratio Earnings before Interests and Taxes

9.31 7.78

Net Interest Expense

f) Net Profit margin NPAT 35.41% 34.13%

Net Operating Revenues

g) Return on asset NPAT 10.04% 10.36%

Average Total Assets

h) Return on Equity NPAT 37.98% 34.61%

Average Total Stockholders’ Equity

SCHEDULE II

Page 1 of 1

S-9

RECONCILIATION OF RETAINED EARNINGS

AVAILABLE FOR DIVIDEND DECLARATION

As at December 31, 2015

Manila North Tollways Corporation

NLEX Compound, Balintawak

Caloocan City

Items Amount

Unapproriated Retained Earnings, beginning P=2,052,153,253

Adjustment:

Amount of recognized deferred tax assets (107,002,905)

Unappropriated Retained Earnings, as adjusted to

available for dividend distribution, beginning 1,945,150,348

Net income based on the face of audited financial

statements 2,993,412,107

Less: Non-actual losses

Deferred tax assets realized during the period (24,560,816)

Net income actually earned during the period 2,968,851,291

Less:

Dividend declarations during the period (2,422,576,000)

TOTAL RETAINED EARNINGS AVAILABLE FOR

DIVIDEND, END P=2,490,292,915

SCHEDULE III

Page 1 of 1

S-10


Supplementary Schedules Required by Paragraph 6D, Part II



SCHEDULE A – Financial Assets

Name of issuing entity and

association of each issue

Number of

shares or

principal

amount of

bonds and notes

Amount shown

in the balance

sheet

Valued based on

market

quotation at end

of reporting

period

Income received

and accrued

Available-for-sale financial

assets:

Investment in Retail Treasury

Bonds and Notes of the

Philippines P=1,214,360,000 P=1,160,612,246 P=1,160,612,246 P=46,754,674(a)

Investment in Unit Investment

Trust Fund (UITF)(d) 1,220,988,850 1,225,420,748 1,225,420,748 89,949,649(b)

Investment in Long-Term

Negotiable Certificate of

Deposits 100,000,000 97,595,000 97,595,000 4,187,500

Investment in FMIC Corporate

Bonds 50,000,000 52,745,000 52,745,000 2,647,940

Investment in Meralco

Corporate Bonds 200,000,000 202,142,000 202,142,000 8,750,000(c)

Investment in PLDT Corporate

Bonds 200,000,000 202,034,000 202,034,000 10,450,000

P=2,985,348,850 P=2,940,548,994 P=2,940,548,994 P=162,739,763

Receivables(e)

Easytrip Services Corporation P=– P=228,352,174 P=– P=–

Department of Public Works

and Highways – 202,883,464 – –

Smart Communications Inc. – 24,727,200 – –

Various motorists – 21,449,250 – –

Interest receivable from various

banks – 15,943,301 – –

Digitel Mobile Philippines, Inc. – 8,286,880 – –

Philippine Long Distance

Telephone Company – 892,697 – –

Others – 51,400,914 – –

P=– P=553,935,880 P=– P=– (a) Includes interest income amounting to P=10,263,962, which were deducted from borrowing costs capitalized as part of

service concession assets. (b) Includes gain on sale of UITF amounting to P=87,917,303, which were deducted from borrowing cost capitalized as part of

service concession assets while the remaining amount of P=2,032,346 was recognized as “Other income” in the

consolidated statement of comprehensive income.

(c) These were deducted from borrowing costs capitalized as part of service concession assets. (d) Presented as “Short-term deposits” in the consolidated balance sheet. (e) Excluding advances to officers and employees amounting to P=7,373,156 as at December 31, 2015.

SCHEDULE IV

Page 1 of 7

S-11

MANILA NORTH TOLLWAYS CORPORATION AND A SUBSIDIARY Supplementary Schedules Required by Paragraph 6D, Part II



SCHEDULE C – Amounts Receivable from Related Parties which are eliminated during the consolidation of

financial statements

Deductions

Name and

Designation of debtor

Balance at

beginning of

beginning of period

Additions Amounts

collected

Amounts

written-off

Current Not

Current

Balance at

end of period

NLEX Ventures

Corporation P=– P=1,265,303 P=– P=– P=1,265,303 P=– P=1,265,303

SCHEDULE IV

Page 2 of 7

S-12




SCHEDULE D – Intangible Assets – Other Assets

Description Beginning balance

Additions at cost

Charged to cost and expenses

Charged to other accounts

Other changes additions

(deductions)

Ending balance

Service Concession Assets:

Cost P=22,805,590,949 P=6,505,920,444 P=– P=– P=– P=29,311,511,393

Accumulated

Amortization 5,938,007,295 – 575,097,888 – – 6,513,105,183

Carrying Value 16,867,583,654 6,505,920,444 575,097,888 – – 22,798,406,210

Computer Software*:

Cost 93,567,919 5,465,571 – – – 99,033,490

Accumulated

Amortization 71,398,156 – 10,954,056 – – 82,352,212

Carrying Value 22,169,763 5,465,571 10,954,056 – – 16,681,278

TOTAL P=16,889,753,417 P=6,511,386,015 P=586,051,944 P=– P=– P=22,815,087,488

** Computer software, presented as “Other intangible assets” account in the consolidated balance sheet pertains to the

Company’s accounting, reporting and asset management systems with estimated useful life of 5 years.

SCHEDULE IV

Page 3 of 7

S-13




SCHEDULE E – Long Term Debt

Title of Issue and type of

obligation

Amount

authorized by indenture

Amount shown

under caption “Current portion

of long-term

debt” in related balance sheet

Amount shown

under caption “Long-term

Debt” in related

balance sheet

Interest rates, amounts or number of

periodic installments, and maturity dates

SERIES-A NOTES

Series A-5 Notes

BDO Leasing and

Finance, Inc.

Bank of the Philippine Islands

P=1,000,000,000

P=959,215,330

P=−

Interest rate: 6.5346% fixed interest per

annum

Payment terms: 5 years bullet-like

repayment, minimal annual amortizations aggregating 4% between March 15, 2012 to

March 15, 2015 and 96% on April 19, 2016

Maturity date: April 19, 2016

Series A-7 Notes

Robinsons Bank

Corp. BDO Capital &

Investment Corp.

Philippine National Bank

The Insular Life

Assurance Company, Ltd.

Security Bank

Corporation Bank of the

Philippine Islands

4,210,230,849

25,850,306

3,976,219,984

Interest rate: 7.2704% fixed interest per annum

Payment terms: 7 years bullet-like repayment, minimal annual amortizations

aggregating 6% between March 15, 2012 to



Series A-10 Notes

BDO Capital &

Investment Corp.

The Insular Life Assurance Company,

Ltd.

Security Bank

Corporation

1,000,000,000

7,437,777

936,805,890


annum

Payment terms: 10 years bullet-like

repayment, minimal annual amortizations aggregating 9% between March 15, 2012 to



TERM LOAN FACILITIES

The Insular Life

Assurance Company, Ltd.

200,000,000

−

198,642,938


annum

Payment terms: 10-years final maturity,

bullet repayment of P=200 million on

November 29, 2023

Maturity date: November 29, 2023

SCHEDULE IV

Page 4 of 7

S-14


obligation

Amount

authorized by

indenture

Amount shown

under caption

“Current portion of long-term

debt” in related

balance sheet

Amount shown

under caption

“Long-term Debt” in related

balance sheet



The Philippine American Life and

General Insurance

Assurance

P=1,000,000,000

P=−

P=992,578,372


annum


bullet repayment of P=1.0 billion on December 12, 2028

Maturity date: December 12, 2028

Sun Life of Canada (Philippines), Inc.

800,000,000

−

794,632,999


Payment terms: 10-years final maturity, bullet repayment of P=800 million on

October 11, 2023

Maturity date: October 11, 2023

PNB

5,000,000,000

−

2,985,000,000

Interest rate: (a) First drawdown is subject

to 5.0000% fixed interest per annum until

December 15, 2020

(b) For the remaining drawdown

made until repricing date (which is December 15, 2020) shall be the higher of

(i) 5-year PDST-R2 rate on the drawdown

date plus a 1.0% per annum; and (ii) 5.0%

per annum, which will be repriced after 5

years from drawdown date.

(c) On date immediately after the repricing

date and until termination, the applicable

interest rate shall be the higher of (i) 5-year PDST-R2 rate plus a 1.0% per annum; and

(ii) weighted average of the applicable

interest rate for each drawdown.

Payment terms: 10-years annual

repayment of 5% of principal amount from December 15, 2017 to December 15, 2023;

65% payable on the last 2 annual periods

(December 15, 2024 to December 10, 2025)

Maturity date: December 10, 2025

FIXED-RATE BONDS

BDO Capital & Investment

Corporation

4,400,000,000

−

4,362,459,353


annum


bullet repayment of P=4,400 million on

March 31, 2021

Maturity date: March 31, 2021

SCHEDULE IV

Page 5 of 7

S-15


obligation

Amount

authorized by

indenture

Amount shown

under caption

“Current portion of long-term

debt” in related

balance sheet

Amount shown

under caption

“Long-term Debt” in related

balance sheet



BDO Capital & Investment

Corporation

P=2,600,000,000

P=−

P=2,575,738,996


Payment terms: 10-years final maturity, bullet repayment of P=2,600 million on

March 31, 2024

Maturity date: March 31, 2024

TOTAL

P=19,210,230,849

P=992,503,413

P=16,822,078,532

SCHEDULE IV

Page 6 of 7

S-16




SCHEDULE H – Capital Stock

Title of

Issue

Number of

Shares

authorized

Number of

shares issued

and

outstanding

as shown

under related

balance sheet

caption

Number of

shares

reserved for

options,

warrants,

conversion

and other

rights

Number of

shares held by

related parties

Directors,

officers and

employees

Others

Common

40,000,000

17,760,000

None

17,759,987

13

None

SCHEDULE IV

Page 7 of 7

Filed to SEC Non-Operation

NOTES:

1 First Pacific Company Limited holds 40% equity interest in EIH

2 By virtue of the Management Letter-Agreement, MPTC acquired control over CIC effective Jan 2, 2013

3 4.6% is owned through 46% ownership in Egis Investment Partners Philippines Inc.

4 ESC is a Joint venture between MPTDC and EGIS. Equity interest of 50% plus one share.

5 Effective interest of 95.55% in MSIHI through 57% owned by MPTC and 40% owned by NOHI

6 Effective interest of 100% in AIF Toll Roads through intermediate wholly owned BVI companies

7 Controlling interest in LRMHI and LRMH2. Equity interest of 50% plus one share.

8

9 End of corporate life (under liquidation)

MPIC's Operating Segments are as follows:

Water Utilities Power Distributions Rail

Toll Operations Healthcare Others

Davao Doctors

Oncology Center Inc.

30.0%

15.0%

100.0%

50.0% Easytrip Services

Corporation (4)

Riverside College Inc.100.0%

Riverside Medical

Center Inc.

Davao Doctors

College, Inc.

100.0%

Davao Doctors Hospital

(Clinica Hilario) Inc.

Operator of Makati Medical

Center

Luzon Tollways

Corporation

24.5%

100.0%

operator of Our Lady of Lourdes

Hospital

51.0% De Los Santos

Medical Center, Inc.

51.0%MPCALA Holdings, Inc

100.0%MPIC Infrastructure

Holdings Limited

100.0%

100.0%

Philippine Hydro, Inc.

Amayi Water

Solutions Inc.

Collared Wren Holdings,

Inc.

24.5%

75.6%

Tollways Management

Corp

Manila North Tollways

Corp (3)

39.0% Manila Water

Consortium Inc.

100.0%

100.0%

FPM Infrastructure

Holdings Limited (6)

Colinas Verdes Hospital

Managers Corp.

45.0% CII Bridges and Roads

Investment Joint Stock Co.

50.0%Porrovia Corporation

Operator of Cardinal Santos

Medical Center

100.0% MetroPac Cagayan

De Oro, Inc.

20.0%

100.0%

100.0%

57.0%

46.0%

Watergy Business

Solutions, Inc.

49.0%

30.0%Equipacific Holdco Inc.

MetroPac Logistic

Company, Inc.

25.0%Indra Philippines, Inc.

Larkwing Holdings, Inc. AF Payments, Inc.

100.0%

100.0% Allied Professional

Development Corp.

35.2%

78.0%

33.2%

East Manila Hospital

Managers Corp.

The Megaclinic, Inc.

Central Luzon

Doctors' Hospital

60.0% Computerized Imaging

Institute, Inc.

100.0% Metro Pacific Zamboanga

Hospital Corporation

Medical Doctors, Inc.

51.0%

51.0%

20.0% Manila Medical Services,

Inc.Operator of Manila Doctors Hospital

100.0% First Call 24/7

Corporation

100.0%

GIC also holds an Exchangeable Bond issued by MPIC which can be exchanged into a 25.5% stake in NSHI in the future, subject to

certain conditions.

5.2%

51.3%

58.1%Asian Hospital Inc.

50.0%

50.0%

20.0%

100.0% Metro Pacific Light

Rail Corporation

100.0%

92.9%

70.0%

Light Rail Manila Corporation

Light Rail Manila Holdings

Inc. (7)

100.0%

Metro Pacific Tollways

Development Corp.

MetroPac Water

Investments Corp.

NLEX Ventures

Corporation

100.0%

50.0% Light Rail Manila Holdings

2 Inc. (7)

100.0%

Maynilad Water

Services, Inc.

Manila Electric Co

27.5%

Metro Strategic Infra Holdings

Inc. (5)

GROUP STRUCTURE AS OF DECEMBER 31, 2015

52.1%

60.0%

Beacon Electric Asset

Holdings Inc

100.0%

Colinas Healthcare,

Inc.

Enterprise Investments

Holding, Inc. (1)

First Pacific International

LimitedIntalink B.V.

Metro Pacific Holdings,

Inc.

60.0% 26.7%

13.3%

35.0%

METRO PACIFIC INVESTMENTS CORPORATION

99.9%

Metro Pacific Tollways

Corporation

Cavitex Infrastructure

Corporation (2)

Metro Pacific

Infrastructure Corporation

100.0%

Maynilad Water

Holding Company,

Inc.

50.0%

Bumrungrad

International Phils.

85.6%50.0%

Two Rivers Holdings Corp.

60.0%

Metro Pacific Resource,

Inc.

100.0% Fragrant Cedar

Holdings Inc

33.3% First Gen Northern

Energy Corp

Metro Pacific Hospital

Holdings, Inc. (8)

58.8% MPIC-JGS Airport

Holdings, Inc.

Neo Oracle Holdings,

Inc. (9)

Costa de Madera

Corporation

96.6%

100% First Pacific Bancshares

Philippines, Inc.

100% Metro Pacific Management

Services, Inc.

50.0% First Pacific Realty Partners

Corporation

MetroPac Movers Inc.60.0%

AIF Toll Roads Holdings

(Thailand) Limited

29.5% Don Muang Tollway Public

Company Ltd (Thailand)

100.0% 60.0% Metro Asia Link Holdings,

Inc.

70.0% Metro Global Green

Waste, Inc.

49.0% Metro Pacific Land

Holdings, Inc.

40.0% Metro Strategic Infra

Holdings Inc. (5)

100% Pacific Plaza Towers

Management Services, Inc.

100% Philippine International

Paper Corporation

100% Pollux Realty

Development Corporation

100.0% Metro Tagaytay Land Co.,

Inc

62.0%

.

.

.

Mary.C.Pasion

Text Box

SCHEDULE V Page 1 of 1

Mary.C.Pasion

Text Box

S-17

c o v e r s h e e t - nlex corporation · c o v e r s h e e t for ... the standard for toll road...

Documents