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Panasonic Manufacturing Philippines Corporation Ortigas Avenue Extension, Taytay, Rizal, 1920 Philippines

PMPC ANNUAL STOCKHOLDERS' MEETING JUNE 15, 2012

I. NOTICE OF STOCKHOLDERS’ MEETING

II. INFORMATION STATEMENT (SEC FORM 20-IS)

III. MANAGEMENT REPORT (ANNEX “A”)

OPERATIONAL AND FINANCIAL REPORT

MANAGEMENT ANALYSIS OR PLANS OF OPERATION

CORPORATE GOVERNANCE

CHAIRMAN & PRESIDENT’S REPORT

IV. CERTIFICATION OF INDEPENDENT DIRECTORS

(ANNEX “B”)

V. AUDITED FINANCIAL STATEMENTS (ANNEX “C”)

FOR FISCAL YEARS 2011, 2010 AND 2009

VI. UNAUDITED QUARTERLY REPORT (ANNEX “D”)

AS OF DECEMBER 31, 2011

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2 3 0 2 2 SEC Registration Number

P A N A S O N I C M A N U F A C T U R I N G P H I L I P P I N

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

(Company’s Full Name)

O r t i G a s A v e n u E E x t e n s i o n , T a y t a Y ,

A R i z a l

(Business Address: No. Street City/Town/Province)

Marlon M. Molano (632) 635-22-60 to 65 (Contact Person) (Company Telephone Number)

0 3 3 1 2 0 - I S D E F I N I T I V E 0 6 1 5

Month Day (Form Type) Month Day (Quarter ending) (Annual Meeting)

(Secondary License Type, If Applicable)

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

471 Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S

Remarks: Please use BLACK ink for scanning purposes.

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SECURITIES AND EXCHANGE COMMISSION

SEC FORM 20-IS

Information Statement Pursuant to Section 20 of the Securities Regulation Code

1. Check the appropriate box: ______ Preliminary Information Sheet

Definitive Information Sheet 2. Name of Registrant as specified in this Charter:

PANASONIC MANUFACTURING PHILIPPINES CORPORATION 3. Province, country and other jurisdiction or incorporation or organization:

PASAY CITY, METRO MANILA, PHILIPPINES

4. SEC Identification Number: 23022 5. BIR Tax Identification Code: 000-099-692-000 6. Address of Principal Office: Ortigas Avenue Extension Taytay, Rizal 1901 7. Registrant’s telephone number, including area code: (632) 635-22-60 to 65 8. Date, time and place of meeting of security holders: Date : June 15, 2012 (Friday) Time : 5:00 P.M. Place : Auditorium Building PMPC Taytay, Rizal 9. Approximate date of which the Information Statement is first to be sent or

given to security holders: May 24, 2012

10. In case of Proxy solicitations: Name of Persons Filing the Statement/Solicitor: NOT APPLICABLE Address and Telephone No:

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11. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec 4 and 8 of the RSA

a. Authorized Capital Stock P 847,000,000 (P1.00 par value) Common Class A shares (Listed) 169,400,000 Class “B” shares 677,600,000

Only Class “A” shares are listed

b. Number of Shares Outstanding as of March 31, 2012

Common Shares @ P1.00/share

Class “A” P 84,723,432 Class “B” 337,994,588

Total P422,718,020

c. Amount of Debt Outstanding as of March 31, 2012 - NONE 12. Are any of the registrant’s securities listed on a Stock Exchange?

yes ______no If yes, disclose the name of such Stock Exchange and the class of securities listed

therein: As of April 30, 2012, a total of 104,988,723 Class “A” shares are listed in

Philippine Stock Exchange.

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INFORMATION STATEMENT

A. GENERAL INFORMATION 1. Date, time and place of meeting of security holders. Date: June 15, 2012 (Friday) Time: 5:00 P.M. Place: PMPC Auditorium Building Ortigas Avenue Extension Taytay, Rizal Complete mailing address of principal office: Panasonic Manufacturing Philippines Corporation Ortigas Avenue Extension

Taytay, Rizal 1901 The Information Statement and the proxy form are first to be sent to security holders on or before May 24, 2012.

2. Dissenters’ Right of Appraisal

There are no matters or proposed corporate actions included in the Agenda of the Meeting which may give rise to a possible exercise by security holders of their appraisal rights as provided under Title X of the Corporation Code.

However, in the instances where the appraisal right may be exercised, any stockholder voting against the proposed corporate action should make a written demand for payment of the fair value of his shares within thirty (30) days after the date of meeting on which the vote was taken. Failure to make the demand within such a period shall be deemed a waiver of the appraisal right.

3. Interest of Certain Persons in or Opposition to Matters to be Acted Upon

a) The directors and executive officers do not have any substantial interest, direct or indirect, in any matter to be acted upon, other than election to office.

b) The registrant has not received any written information from anyone that intends to oppose any action to be taken by the registrant at the meeting.

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B. CONTROL AND COMPENSATION INFORMATION

4. Voting Securities and Principal Holders Thereof

a. As of April 30, 2012, the Company’s outstanding numbers of shares are as follows:

Common shares: No. of Shares No. of Votes to Outstanding which entitled Class “A” 84,723,432 84,723,432 Class “B” 337,994,588 337,994,588 Total 422,718,020 422,718,020

b. Record date for which are entitled to vote

All stockholders of record as of May 28, 2012 shall be entitled to vote at the Annual Stockholders’ Meeting. Notice to stockholders shall be sent out thru courier on or before May 31, 2012.

c. Election of Directors

All stockholders as of record date are entitled to cumulative voting right with respect to the election of directors.

Each stockholder is entitled to one vote for each share of stock standing in his name on the books of the corporation; provided, however, that in the election of Directors, each stockholder is entitled to cumulate his votes in the manner provided by law. Each stockholder is entitled to vote by proxy at the stockholders’ meeting provided the proxy has been appointed in writing by the stockholder himself or by his duly authorized attorney. The instrument appointing the proxy shall be exhibited to and lodged with the Secretary at the time of the meeting.

d. Security Ownership of Certain Record and Beneficial Owners of more than 5%

Owners of record of more than 5% of the voting securities as of April 30, 2012:

Title of Class

Name and Address of Record Owner and

Relationship with Issuer

Name of Beneficial Ownership and

Relationship with Record Owner

Citizenship No. of Shares

Percentage

Common “B”

o Panasonic Corporation o 1006 Oaza Kadoma,

Kadoma, Osaka 571-8501, Japan

o Parent Company

Various Stockholders

Non-Filipino

337,994,588

79.96%

Panasonic Corporation (PC) has the power to decide how the PC shares in Panasonic Manufacturing Philippines are to be voted and has authorized Mr. Masao Okawa – Chairman of the Board to vote on the shares.

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e. Security Ownership of Management and Directors

The following are the number of shares of which Company’s stock owned of record by the Chairman, Directors and Officers, and nominees for election as director, as of April 30, 2012.

Title of Class

Name of Beneficial Owner Amount of Beneficial

Ownership (Php)

Nature of Beneficial

Ownership

Citizenship

Percent

Common “B”

Naoya Nishiwaki

1

Direct

Japanese

NIL

Common “A” Miguel Castro 185 Direct Filipino NIL

Common “B” Hiroyoshi Fukutomi 1 Direct Japanese NIL

Common “B” Masaru Maruo 1 Direct Japanese NIL

Common “B” Masao Okawa 1 Direct Japanese NIL

Common “B” Waichi Tamiya 1 Direct Japanese NIL.

Common “B” Shigeyoshi Terawaki 1 Direct Japanese NIL

Common “A” Emiliano Volante 9,879 Direct Filipino NIL

Common “A” Evangelista Cuenco 10,193 Direct Filipino .0024

Common “A” Atty. Mamerto Mondragon 85,360 Direct Filipino .0202

The aggregate number of shares owned of record by all or key officers and directors as a group as of April 30, 2012 is 105,623 shares or approximately 0.02% of the Company’s outstanding capital stock. f. Voting Trust Holders of 5% or More There are no voting trust holders / arrangements holding 5% or more of the Company’s outstanding shares. g. Change in Control of the Registrant since beginning of last Fiscal Year

There are no change in control or arrangement that may result in change in control of the Company since the beginning of its last fiscal year.

5. Directors and Executive Officers a. Final list of Nominees for Election

Name

Office/Position

Citizenship

Age

Masao Okawa Naoya Nishiwaki Waichi Tamiya

Chairman of the Board President / CEO Vice-President

Japanese Japanese Japanese

53 53 57

Hiroyoshi Fukutomi Executive Director / Treasurer Japanese 54 Atsushi Miwa Director Japanese 50 Shigeyoshi Terawaki Director / VP – PPH Japanese 58 Miguel P. Castro Director Filipino 55 Evangelista C. Cuenco Independent Director Filipino 81 Emiliano S. Volante Independent Director Filipino 68 Mamerto Z. Mondragon Corporate Secretary Filipino 68

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Directors and Executive Officers / (Nominees)

Masao Okawa, Japanese, is a graduate of Bachelor of Laws and Economics with major in Economics,

Faculty of Humanities and Social Sciences in Shizuoka University. He has been the Chairman of the Board since December 1, 2011 and elected as Director since July 22, 2008. He is also the Director, Member of the Board of Panasonic Asia Pacific Pte., Ltd., Singapore since April 2008. He is a former Director – Finance and Administration of Panasonic France S.A. (PFS), PC French Subsidiary from May 2000 to March 2008.

Naoya Nishiwaki, Japanese, is a graduate of Faculty of Engineering with a Bachelor’s degree from

Osaka Perfectural University, Japan. He has been the President and Director of the Company since March 31, 2010. He is a former Managing Director of Panasonic Corporation’s Malaysian subsidiary, Panasonic Manufacturing Malaysia Bhd. (PMMA) from May 2007 to March 2010. He was the President and COO of Panasonic Home Appliances Company of America (PHHA) from April 2005 to 2007. He is also a former President of Panasonic Home Appliances de Mexico (PHAM) from May 2004 to March 2005.

Waichi Tamiya, Japanese, is a graduate of Electric & Communications Course from Seisei Technical

High School in Shizuoka Prefecture, Japan. He has been elected as PMPC – Vice President since October 04, 2007. He is a former Councilor for Home Appliances Business Group, Matsushita Home Appliances Company (MHAC), Matsushita Electric Industrial Co., Ltd. (MEI) from June 2006 to September 2007. He is also a former President of Matsushita Washing Machine India Pvt. Ltd. (MWI) from January 2003 to June 2006.

Hiroyoshi Fukutomi, Japanese, graduated from Kobe University of Commerce with a Bachelor’s

degree. He has been the Executive Director of the Company since May 1, 2010. He also holds the following positions: Treasurer, Chairman of the Compensation/Remuneration Committee and member of the Audit Committee. He is a former Councilor to Business Operation Team, Corporate Accounting of Panasonic Corporation (PC) from April 2008 to March 2010. From April 2006 to March 2008, he was assigned to Accounting Group of PC Home Appliances Company as the Group Manager. April 2005 to March 2006, Councilor for PC – Accounting, H.Q. of PC Home Appliances Company and from April 2004 to March 2005 Councilor for PC Home PC – Accounting Group, Kitchen Appliance Division.

Shigeyoshi Terawaki, Japanese, is a graduate of Bachelor of Economics from Osaka University

(School of Economics), Japan. He has been a Director since June 2009. He is also the Managing Director for Panasonic Philippines (PPH – Sales Division). He is a former Manager of Vietnam Sales Team, Asia and Oceania Sales Group, Corporate Management Division for Asia & Ocenia, Panasonic Corporation from July 2007 to March 2009. From March 2003 to July 2007, he was assigned to Planning Group, Corporate Management Division for Asia & Oceania, MEI, as a Councilor. He was a former Director of PT. National Panasonic Gobel, MEI’s Indonesian subsidiary in 2002. From March 1997 to December 2001, he is a former Director of National Panasonic Sales Philippines (NPP).

Atsushi Miwa, Japanese, graduated from Doshisha University – Department of Political Science,

Faculty Law in March 1986 with a Bachelor’s degree. He has been a Director since December 1, 2011. He is also the Asia Pacific Pte., Ltd., - Singapore Group Head and Member of the Board since August 2008. He is a former Manager – Legal and Risk Management Group Panasonic from July 2008 to November 2008. And he was the former Manager of Legal Affairs Group, Panasonic Battery Industrial Co., Ltd., a subsidiary of Panasonic Corporation from April 2004 to July 2008.

Miguel Castro, Filipino, is a graduate of B.S. Mechanical Engineering from FEATI University. He has

been a Director since August 01, 2007. He is a former General Manager of PMPC – Refrigerator Division from September 2004 to July 2007 and PMPC – Audio Video and Electric Fan Departments from April 2002 to August 2004.

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Independent Directors / (Nominees) Evangelista Cuenco, Filipino, is a graduate of B. S. in Commerce from Far Eastern University and is a Certified Public Accountant. He was previously the President of Consumer Electronic Products Manufacturers Association and Chairman of Philippine Electrical, Electronics and Allied Industries Federation. He used to be the Vice President and General Manager of Wodel, Inc. He was elected as PMPC’s Independent Director since January 6, 2003. Currently he is the Chairman of the Audit Committee of the Company and Member of Nomination Committee. Emiliano S. Volante, Filipino, is a graduate of B. S. in Commerce from Far Eastern University. He was elected as Independent Director since October 2010. He is also a member of the Audit Committee and Compensation/Remuneration Committee. He was a former Financial Consultant for Expresslane Brokerage Corporation from 2003 – 2010. He was also a former Internal Audit Manager of PMPC from 2000-2002. Corporate Secretary Atty. Mamerto Z. Mondragon has been a corporate secretary of the Company since 1975. He is also the Corporate Secretary of Panasonic Precision Devices Philippines Corporation (PSNP) and Precision Electronics Realty Corporation (PERC). The members of the Board of Directors are elected at the annual stockholders’ meeting to hold office until the next annual meeting and until their respective successors have been elected and qualified. The Company’s Corporate Governance Committee evaluated and reviewed each nominee-director’s qualifications based on the guidelines spelled out in SRC Implementing Rule 38 (as amended) and unanimously resolved that said nominees are qualified for election/re-election.

b. Independent Directors The independent directors of the Company are as follows:

1) Mr. Evangelista Cuenco 2) Mr. Emiliano Volante

The Company’s Corporate Governance Committee evaluated and reviewed each nominee-director’s qualifications based on the guidelines spelled out in the SRC Rule 38.1 (as amended) and BSP Circular No. 456 and unanimously resolved that said nominees are qualified for election/re-election. Mr. Emiliano Volante was nominated by Mr. Marlon M. Molano. Messrs. Volante and Molano are not related to each other. Mr. Evangelista Cuenco was nominated by Mr. Miguel Castro. Messrs. Cuenco and Castro are not related to each other.

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Executive Officers POSITION NAME AGE CITIZENSHIP

Chairman of the Board Masao Okawa 53 Japanese President Naoya Nishiwaki 53 Japanese Vice-President Waichi Tamiya 57 Japanese Executive Director Hiroyoshi Fukutomi 54 Japanese Vice-President - PPH Shigeyoshi Terawaki 58 Japanese Director Miguel Castro 55 Filipino Corporate Secretary Mamerto Mondragon 68 Filipino

Nomination Committee

Chairman Miguel Castro Director Member Hiroyoshi Fukutomi Treasurer & Executive Director Member Evangelista Cuenco Independent Director

Compensation/Remuneration Committee

Chairman Hiroyoshi Fukutomi Treasurer & Executive Director Member Miguel Castro Director Member Emiliano Volante Independent Director

Audit Committee

Chairman Evangelista Cuenco Independent Director Member Hiroyoshi Fukutomi Treasurer & Executive Director Member Emiliano Volante Independent Director Term of Office

Executive Officers are appointed/elected annually during the annual stockholders meeting, each to hold office for a period of one (1) year until the next succeeding annual meeting and until their respective successors have been elected and qualified. d. Significant Employee

The Company has no employee who is not an executive officer but who is expected to make a significant contribution to the business. e. Family relationship There are no family relationships up to the fourth civil degree either by consanguinity or affinity among the Company’s directors, executive officers or persons nominated or chosen by the Company to become its directors or executive officers.

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f. Certain Relationship and Related Transactions

There were no transactions with directors, executive officers or any principal stockholders that are not in the Company’s ordinary course of business for the past two (2) years. g. Involvement in Certain Legal Proceedings The above-named executive officers and directors have not been involved in any material legal proceeding during the past five years that will affect their ability as directors and officers of the Company.

6. Compensation of Directors and Executive Officers The aggregate annual compensation of the Company’s Directors and Officers for the last two fiscal years and for the ensuing year are as follows: FY 2011 (In Millions)

NAME POSITION SALARY BONUS OTHERS TOTAL President and The Four Highest Compensated Officers

Naoya Nishiwaki President

Waichi Tamiya Vice-President

Hiroyoshi Fukutomi Treasurer & Exec. Director

Shigeyoshi Terawaki Vice-President Sales & Marketing

Miguel Castro Director

Total 39.2 12.8 0.4 52.4

All Officers & Directors As a Group

39.2

12.8 0.4 52.4

FY 2010 (In Millions)

NAME POSITION SALARY BONUS OTHERS TOTAL

President and The Four Highest Compensated Officers






Total 38.8 7.5 0.4 46.7


38.8

7.5 0.4 46.7

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For the ensuing FY 2012 (In Millions)

NAME POSITION SALARY BONUS OTHERS TOTAL

President and The Four Highest Compensated Officers






Total 40.3 13.0 0.4 53.7


40.3

13.0 0.4 53.7

For ensuing year 2012, no significant change is anticipated in the compensation of

Directors and Officers.

The Company has no standard arrangement regarding the remuneration of its existing directors and officers aside from the compensation herein stated. The directors and executive officers receive salaries, bonuses and other usual benefits that are also already included in the amounts stated above. Aside from the said amounts, they have no other compensation plan or arrangement with the registrant.

The Company has not granted any warrant or options to any of its Directors or Executive Officers.

7. Independent Public Accountants

The Company, upon the recommendation of the Audit Committee of the Board of Directors composed of Evangelist Cuenco as Chairman and Hiroyoshi Fukutomi and Emiliano Volante as members, has approved the engagement Sycip, Gorres, Velayo & Co. (SGV) as external auditors of the Company for fiscal year 2011 ended March 31, 2012 and will submit such engagement to its stockholders for ratification. SGV was also the external auditor of the Company for fiscal years 2010, 2009 and 2008. The audit partner-in-charge, Ms. Janet A. Paraiso was appointed in 2009. The SGV partner-in-charge who audited the Company in 2008 was Mr. Medel T. Nera. In accordance with SRC Rule 68, par. 3 (b) (IV), there is no need to change the audit partner of the Company and its domestic subsidiary.

The representatives of the SGV & Co. are expected to be present at the stockholders’ meeting and to be available to respond to appropriate questions. They will have the opportunity to make a statement if they so desire to do so.

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It is expected that Management will make the recommendation for the appointment of the external auditor for fiscal year 2012 in compliance with the SEC Rules on the Rotation of the External Auditors.

Changes and Disagreements with Accountants on Accounting and Financial Disclosures

There were no changes or disagreements with accountants on accounting and financial disclosures. Audit-Related Fees I. Audit Fees and Other-related Fees The Company engaged SGV & Co. to audit its annual financial statements and perform related reviews. The following fees, exclusive of VAT were incurred: (Amounts in Php millons) 2011 2010 2009 Annual Audit P 1.5 P 1.6 1.6 Audit – Related - - - Total P 1.5 P 1.6 P 1.6 II. Tax Fees There were no tax fees paid to external auditors other than for annual audit services. Management presents proposals on possible external auditors to be engaged together with their respective proposed audit fees to the Audit Committee for proper consideration. The Audit Committee evaluates and thereafter, upon its recommendation, the appointment of the external auditor is presented to the Board of Directors and/or stockholders for confirmation. However, financial statements duly approved by the Audit Committee are still subject to confirmation of the Board of Directors prior to submission to the respective government regulatory agencies. 8. Compensation Plans There are no actions to be taken up in the meeting with respect to any compensation plan 9. Authorization or issuance of Securities other than for Exchange There are no matters or actions to be acted upon in the meeting with respect to the authorization or issuance of securities other than for exchange. 10. Modification or Exchange of Securities There are no matters or actions to be acted upon in the meeting with respect to the modification or exchange of securities.

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11. Financial and Other Information The audited financial statements of the Company as of March 31, 2012, FY 2011 interim report (SEC Form 17-Q) as of December 31, 2011 and other data related financial information are attached hereto as Annex “B” and “C” respectively. 12. Mergers, Consolidations, Acquisitions and Similar Matters There are no matters or actions to be taken up in the meeting with respect to merger, consolidation, acquisition and similar matters. 13. Acquisition or Disposition of Property There are no matters or actions to be taken up in the meeting with respect to acquisition or disposition of any property. See Notes 3 and 9 in the attached Annual Audited Financial Statements 14. Restatement of Accounts There are no matters or actions to be taken up in the meeting relating to restatement of accounts. D. OTHER MATTERS 15. Action with Respect to Reports Financial Statements and Management Report – Management shall report on the significant business transactions undertaken by Management and the financial targets and achievements for the fiscal year 2011. Attached as Annexes “A” and “B” are the Management Report and the Audited Annual Financial Statements for the period ending March 31, 2012 of the Company are reflected in the accompanying Annual Report to Stockholders. 16. Matters Not required to be Submitted There are no actions to be taken with respect to any matter which is not required to be submitted to a vote of the security holders.

17. Amendment of Charter, Bylaws or other Documents

The resolution adapted by the Board of Directors on May 17, 2012 amending its Articles of Incorporation to extend its corporate life shall be submitted for the approval of the stockholders.

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18. Other Proposed Actions a) Approval of the Minutes of the Previous Annual Stockholders’ Meeting – Minutes of the Annual Stockholders’ Meeting dated June 17, 2011 will be submitted for the approval of the shareholders. Among the matters included in the Minutes of the June 15, 2012 meeting are the following:

1. Approval of the Minutes of the Previous Annual Stockholders’ Meeting 2. Approval of the fiscal year 2011 Management Annual Report 3. Election of the Board of Directors, including the two (2) Independent Directors 4. Appointment of External Auditor

Copies of the same will be made available at the annual stockholders’ meeting on June 15, 2012 for any stockholder desiring to review the same. The Board of Directors recommends that the stockholders APPROVE the minutes of the last annual stockholders’ meeting held on June 17, 2011. b) Ratification of All Acts of Management in 2011 – For transparency and good corporate practice, the acts of Management are presented for approval of the stockholders, to wit:

Date Filed

Item Reported

05/06/2011 05/12/2011 05/31/2011 06/17/2011

Authority to issue FY 2010 ending March 31, 2011 Audited Financial Statements Authorization of Mr. Hiroyoshi Fukutomi (Treasurer) to sign deed of sale on sale of company car Authorization of Mr. Eduardo Gumanoy (General Manager) to file, sign and execute transactions with National Labor Relations Commission Ratification of the Minutes of 2010 Annual Stockholders Meeting Election of Directors: 1. Masaru Maruo – Chairman 2. Naoya Nishiwaki 3. Waichi Tamiya 4. Hiroyoshi Fukutomi 5. Shigeyoshi Terawaki 6. Miguel Castro 7. Masao Okawa Independent Directors:

1. Evangelista Cuenco 2. Emiliano Volante

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07/07/2011 07/08/2011 07/13/2011 07/15/2011 08/04/2011 08/24/2011 08/25/2011 10/12/2011 11/02/2011

Authorization of Ms. Gerlie Rio to execute promissory note in favor of Social Security Election of Corporate Officers and members of committees for 2011 – 2012: Corporate Officers: Chairman Mr. Masaru Maruo President / CEO Mr. Naoya Nishiwaki Vice-President Mr. Waichi Tamiya Treasurer & Exec. Director Mr. Hiroyoshi Fukutomi VP – Sales & Marketing Mr. Shigeyoshi Terawaki Corporate Secretary Atty. Mamerto Mondragon Audit Committee: Chairman Mr. Evangelista Cuenco Member Mr. Emiliano Volante Member Mr. Hiroyoshi Fukutomi Nomination Committee: Chairman Mr. Miguel Castro Member Mr. Evangelista Cuenco Member Mr. Hiroyoshi Fukutomi Compensation/Remuneration Committee: Chairman Mr. Hiroyoshi Fukutomi Member Mr. Miguel Castro Member Mr. Emiliano Volante Authorization of Mr. Bonifacio Bautista, Manager of System Sales Dept. to sign and execute Affidavit with waiver of liability Amendment of Banco de Oro new set of auhorized signatories: Mr. Naoya Nishiwaki Mr. Waichi Tamiya Mr. Hiroyoshi Fukutomi Authorization of Mr. Naoya Nishiwaki to sign distributorship agreement with JECO Distributor Co., Inc. Authorized signatories with Welth Bank – Cebu Branch: Mr. Francis Valencia (Finance Area Manager) Ms. Jennifer Alforque (Area Sales Manager) Code of Corporate Governance for newly elected directors Authorization of Mr. Naoya Nishiwaki to sign deed of sale Authorization of Mr. Jose Manzanares (Product Manager) to process Import Commodity Clearance (ICC) application

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11/09/2011 11/24/2011 11/29/2011 12/15/2011 12/16/2011

Authorization of Mr. Naoya Nishiwaki to sign deed of sale Resignation of Mr. Masaru Maruo as Director and Chairman of the Board effective December 1, 2011 Election of Mr. Masao Okawa as the new Chairman of the Board and Mr. Atsushi Miwa as new Director effective December 1, 2011 Authorization of Mr. Naoya Nishiwaki to sign any and all contracts/agreements of PMPC Approval and adoption of Related Party transactions and Insiders Trading policy Authorization of Mr. Marlon Molano (Assistant Director) to claim refunds from Meralco for or on behalf of the Company

01/19/2012 01/23/2012 02/23/2012 03/15/2012

Designation and authorization of Corporate signatories: BIR, BOC, DTI, PSE, SEC, PEZA, BOI, Insurance, External Auditors, Local Government, Meralco, Actuary and related offices: Mr. Hiroyoshi Fukutomi Mr. Marlon Molano PAIA, DTI for Standards Mr. Waichi Tamiya Mr. Miguel Castro Labor, Legal & External Affairs Mr. Hiroyoshi Fukutomi Mr. Eduardo Gumanoy Mr. Elmer Sangalang (Legal Manager) Authorization of Mr. Naoya Nishiwaki to sign deed of sale Designation of Mr. Elmer Sangalang to represent the Company with National Labor Relations Commission (NLRC) Authorization of Mr. Naoya Nishiwaki to sign deed of sale Nomination of Corporate Officers and Member of the Board for 2012 - 2013 Corporate Officers: Mr. Masao Okawa Mr. Naoya Nishiwaki Mr. Waichi Tamiya Mr. Hiroyoshi Fukutomi Mr. Shigeyoshi Terawaki Atty. Mamerto Mondragon

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03/31/2012 04/19/2012

Members of the Board: Mr. Masao Okawa Mr. Naoya Nishiwaki Mr. Waichi Tamiya Mr. Hiroyoshi Fukutomi Mr. Shigeyoshi Terawaki Mr. Atsushi Miwa Mr. Miguel Castro Mr. Evangelista Cuenco Mr. Emiliano Volante Appropriation of Php100 million for business plant expansion, modernization and upgrade of factory facilities and equipment Declaration of 10% cash dividend as of May 4, 2012 record date and payable on May 30, 2012.

c) Election of Directors – The Regular and Independent members of the Board of Directors are elected at the Annual Stockholders’ Meeting to hold office until the next stockholders’ meeting and until their respective successors have been elected and qualified. 19. Voting Procedures In the election of directors, the nine (9) nominees with the greatest number of votes will be elected directors. Except in cases where a higher vote is required under the Corporation Code, the approval of any corporate action shall require the majority vote of all stockholders present and proxy in the meeting, if constituting a quorum. Except in cases where voting by ballot is applicable, voting and counting shall be by viva voce. If by ballot, the counting shall be supervised by the Corporate Secretary and independent auditors of the Company.

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ANNEX “A”

MANAGEMENT REPORT

1. Operational and Financial

Information

2. Management Discussions and

Analysis or Plan of Operation

3. Corporate Governance

4. Chairman & President’s Report

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OPERATIONAL AND FINANCIAL INFORMATION

Market for Issuer’s Common Equity and Related Stockholder Matters MARKET INFORMATION

Common shares outstanding as of April 30, 2012 were:

Class “A” 84,723,432 Class “B” 337,994,588

422,718,020

The Parent Company’s common equity is traded in the Philippine Stock Exchange. The following table shows the market prices in Philippine pesos of the Parent Company’s Class A shares listed in the Philippine Stock Exchange for fiscal years 2011 and 2010 and the first quarter of fiscal year 2012:

2011

2010

High Low High Low Jan – Mar

6.00

6.00

6.50

6.50

Apr – Jun 6.00 4.50 7.00 6.30 Jul – Sept 5.90 5.50 7.00 6.50 Oct – Dec 6.50 6.48 6.50 6.50

2012

Jan – Mar Last trading date Apr. 26, 2012

6.75

5.40

5.40

5.40

DIVIDENDS The payment of dividend, either in the form of cash or stock, will depend upon the Company’s earnings, cash flow and financial condition, among other factors. The Company may declare dividends only out of its unrestricted retained earnings. These represent the net accumulated earnings of the Company, with its capital unimpaired, that are not appropriated for any other purpose.

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Dividends paid are subject to the approval by the Board of Directors. The Company’s Board of Director declared cash dividends as follows: Declaration Date Cash Dividend Record Date Payment Date Fiscal year 2012

April 30, 2012 10% May 4, 2012 May 30, 2012 2011

April 13, 2011 5% April 29, 2011 May 20, 2011 2010

January 12, 2011 5% January 26, 2011 February 4, 2011 April 7, 2010 5% April 26, 2010 May 20, 2010 2009 December 16, 2009 5% January 7, 2010 January 21, 2010 May 29, 2009 5% June 19, 2009 June 30, 2009

HOLDERS As of April 30, 2012, there were 471 holders of the Company’s common shares. The following table sets forth the top 20 shareholders as of April 30, 2012.

Rank / Name of Holder

Number of Shares

Percentage of Ownership

1. Panasonic Corporation (Japanese) 337,994,588 79.96 % 2. PCD Nominee Corporation (Filipino) 24,774,694 5.86 % 3. PMPC Employees Retirement Plan 17,992,130 4.26 % 4. Great Pacific Life Assurance Corporation 8,397,572 1.99 % 5. Pan Malayan Management & Investment 4,606,076 1.09% 6. Jesus V. Del Rosario Foundation, Inc. 3,870,926 0.92% 7. Vergon Realty Investment Corporation 3,389,453 0.80 % 8. Tan Suy Tin 1,971,568 0.47 % 9. J.B. Realty and Development Corporation 1,778,915 0.42 % 10. Automatic Appliance, Inc. 1,373,563 0.32 % 11. Antonio R. Punzalan 1,097,291 0.26 % 12. So Sa Gee 855,716 0.20 % 13. Joselito P. de Joya 808,765 0.19 % 14. David S. Lim 656,393 0.16 % 15. Efren M. Sangalang 603,156 0.14 % 16. Wellington Lim 595,905 0.14 % 17. Edward Lim 587,141 0.14 % 18. Vicente L. Co 577,245 0.14 % 19. Jenny Lim 518,179 0.12% 20. Jason S. Lim 500,000 0.12% Jonathan Joseph Lim 500,000 0.12% Vicente S. Lim 500,000 0.12 %

RECENT SALE OF UNREGISTERED SECURITIES The Company has neither sold any securities nor reacquired or issued new securities in exchange of properties within the past three (3) years.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Management’s Discussion and Analysis of Financial Condition and Results of Operations

Top 5 Key Performance Indicators of the Company

Name of Index

Calculation

FY 2011

FY 2010 (Restated)

FY 2009 (Restated)

1. Rate of Sales Increase

CY Sales – LY Sales

–12.0%

10.1%

7.4%

--------------------------- X 100%

LY Sales

2. Rate of Profit Increase CY Profit After Tax – LY Profit After Tax

25.4%

780.0%

– 71.0%

-------------------------- x 100%

LY Profit After Tax

3. Rate of Profit on Sales

Profit After Tax

1.0%

0.7%

0.08%

-------------------- x 100%

Total Sales

4. Current Ratio

Current Assets

3.6

3.4

4.1

----------------------

Current Liabilities

5. Dividend Ratio to

Capital

Dividend

10%

10%

10%

-------------------- x 100%

Average Capital

(a) Rate of Sales Increase - This measures the sales growth versus the same period last year.

Sales decreased from a year ago by 12.0% as result of various unfavorable events which resulted to high cost of major commodities and low purchasing power of the consumers.

(b) Rate of Profit Increase - This measures the increase in profit after tax versus the same

period last year. Rate of profit for the year increased by 25.4% due mainly to decrease in total direct selling expenses and general administrative expenses%.

(c) Rate of Profit on Sales - This measures the percentage of profit after tax versus net sales for

the period. Rate of profit increased to 1.0%vs. 0.7% last year due mainly to decrease in total direct selling expenses and general administrative. On the other hand, other income increased due mainly to foreign currency exchange gain, interest income from time deposit and income from scrap sales.

(d) Current Ratio - This measures the liquidity of the Company and its ability to pay off

current liabilities. Current ratio increased to 3.6.1 as of March 31, 2012 from 3.4.1 as of March 31, 2011.

(e) Dividend Ratio to Capital - This measures the dividend payout ratio versus capital for the

period. The Group declared a 10% cash dividend for the fiscal year 2011 and 2010.

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INTRODUCTION

The following are discussions on the Consolidated Financial Conditions and Results of the Company and its Subsidiary (The Group) based on the Audited Financial Statements as of and for the years ended March 31, 2012, 2011 and 2010. This discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of the Group for the fiscal year 2011 ended March 31, 2012. The following discussion should be read in conjunction with the attached audited consolidated financial statements of the Company as of and for the year ended March 31, 2012 (Annex “B”) and management plans and reviews (Annex “A’). Fiscal Year 2011 vs. 2010 Statement of Financial Conditions

The Group continues to maintain its strong financial position with total assets amounting to P=4.854 billion and P=4.857 billion as of March 31, 2012 & 2011, respectively while total equity amounted to P=3.710 billion and P=3.674 billion as of the same period.

Current ratio improved to 3.6:1 as of March 31, 2012 compared to 3.4: 1 as of March 31, 2011.

Total current assets increased by P=60.5 million (1.5%) due mainly to increase in cash and cash equivalents by P=223.0 million (8.8%) due to increase in sales collection and interest income received from bank deposits amounting to P=55.5 million. On the other hand, inventories decreased by P=159.7 million (25.4%) due mainly to adherence to sales and operation planning and strict monitoring of inventory. Other current assets decreased by P=16.4 million (14.7%) mainly due to application of prepaid taxes amounting to P=18.0 million. Total non-current assets decreased by P=62.8 million (7.8%) due mainly to decrease in net property, plant and equipment by P=53.8 due to current year’s depreciation of P=120 million and the net acquisition/disposal of P=66 million. Other asset also decreased by P=5.2 million (14.8%) due mainly to depreciation of intangible assets amounting to P=4.2 million and consumption of deposits paid on rental by P=1.0 million.

Total current liabilities decreased by P=38.6 million (3.3%) due mainly to provision for estimated liabilities by P=16.4 million, accounts payable and accrued expenses by P=13.2 million. Technical assistance payable decreased by P=8.7 million and income tax payable by P=1.0 million due to decrease in sale by 12.0%. Capital expenditures amounted to P=70.9 million during the year as the Group continues to upgrade its factory facilities, machinery and equipment to improve productivity and profitability of the Company. Appropriated retained earnings for plant expansion increased by P=100.0 million.

- 25 -

Results of Operation

Consolidated sales of the Group for the FY 2011 amounted to P5.943 billion, decreased by 12.0% from P6.753 billion posted in fiscal year 2010 due mainly to the effects of the unfavorable events with the phenomenal calamity of the earthquake and tsunami in Japan, the global recession particularly in Europe and the United States and the political unrest in the middle east. These events have brought high cost of raw materials for the operation. Likewise the condition resulted to the low purchasing power of the consumers aggravated by the employment displacements of most OFWs.

Selling expenses decreased by P246.8 million (21.6%) due mainly to decrease in sales promotion by P225.3 million and advertising expense by P53.8 million.

General and administrative expenses decreased by P22.5 million (4.1%) due mainly to

salaries and compensation decreased by P15.8 million due mainly to reduction of overtime

and lower production, royalty by P8.5 million, brand license fee P1.7 million. Reduction on royalty and brand license fee amount was mainly due to decrease on sales by 12.0%.

Non-operating income increased by P14.0 million (18.1%) due mainly to interest income

from time deposit with banks by P3.8 million, foreign currency exchange gain by P5.8

million and income from scrap sales by P3.1 million.

Provision for income tax increased by P11.0 million (62.6%) due mainly to the application and recognition of deferred tax assets last year arising from MCIT of fiscal year 2008

amounting to P33.3 million. The Group’s net income after tax for the fiscal year 2011 amounted to P=57.0 million, increased by P=11.5 million (25.4%) posted in fiscal year 2010, due mainly to decrease in selling expenses and general administrative expenses and increase in other income. Known Trends

There are no known events, trends, and demands, commitments or uncertainties that might affect the Company’s liquidity or cash flows within the next twelve (12) months. There are no trends, events or uncertainties know to management that are reasonably expected to have material favorable or unfavorable impact on the net income or revenues from continuing operations of the Company.

Events that will trigger direct or contingent financial obligation

In the normal course of business, the Group has various commitments and contingent liabilities that are not presented in the accompanying financial statements. The management believes that these actions are without merit or that the ultimate liability, if any, resulting from these cases will not adversely affect the financial position or results of operation of the Parent Company. The Group does not anticipate material losses as a result of these commitments and contingent liabilities.

- 26 -

Material off-balance transactions, arrangements or obligations

There were no material off-balance transactions, arrangement or obligations that had a material effect on the Company’s financial conditions or result of operations.

Capital expenditures

The Parent Company has commitments for capital expenditures. Among these are investments on IT-related projects, relocation and renovation of branch premises, acquisition and repairs of furniture, fixtures and equipment needed to bring the Company at par with competitors.

Significant Elements of Income or Loss

Significant elements of income or loss will come from continuing operations.

Seasonal Aspects

There was no seasonal aspect that had a material effect on the Company’s financial conditions or result or operations.

Fiscal Year 2010 vs. 2009 Statement of Financial Conditions

The Group continues to maintain its strong financial position with total assets amounting to P=4.857 billion and P=4.616 billion as of March 31, 2011 & 2010, respectively while total equity amounted to P=3.7 billion as of the same period.

Current ratio is 3.4:1 as of March 31, 2011 compared to 4.1: 1 as of March 31, 2010.

Total current assets increased by P=199.7 million (5.2%) due mainly to increase in cash and cash equivalents by P=237.4 million brought by the increase in collection and interest income received from bank deposits amounting to P=50.0 million. Accounts receivable increased by P=153.4 million due to increase in sales achievement by 10.0%. On the other hand, inventories decreased by P=182.9 million due mainly to strict monitoring of inventory. Other current assets decreased by P=8.3 million mainly due to consumption of tax credit certificate amounting to P=6.7 million.

Total non-current assets increased by P=41.5 million (5.5%) due mainly to increase in property, plant and equipment net of depreciation by P=42.8 to upgrade machineries and equipment. Other asset also increased by P=15.2 million due mainly to purchased of software for Sales Division new sales system while investment properties decreased by P=16.2 million due mainly to depreciation of properties.

- 27 -

Accounts payable and accrued expenses increased by P=203.1 million (27.0%). Trade accounts payable increased by P=20.3 million (5.6%) for the purchase of local raw materials. Accrued expenses increased by P=182.8 million (47.3%) which includes increase in provision for product promotion by P=102.9 million (82.5%); and other accrued expenses for withholding and output taxes, advertising, utilities, freight and releasing charges. Technical Assistance payable increased by P=8.3 million (20.5%). Capital expenditures amounted to P=184.7 million during the year as the Group continues to upgrade its factory facilities, machinery and equipment to improve productivity and profitability of the Company. Appropriated retained earnings for plant expansion decreased by P=75.0 million. Results of Operation (Restated)

Consolidated sales of the Group for the FY 2010 amounted to P6.753 billion, increased by 10.1% from P6.135 billion posted in fiscal year 2009 despite severe business conditions.

Selling expenses increased by P161.3 million (16.4%) due mainly to increase in sales promotion by P113.3 million and advertising expense by P53.1 million.

General and administrative expenses increased by P15.2 million (2.8%) due mainly to

salaries and compensation increased for the year by P18.2 million.

Non-operating income decreased by P4.0 million (4.9%) due mainly to interest income from

time deposit with banks by P2.2 million and foreign currency exchange gain by P6.1 million.

Provision for income tax decreased by P85.7 million (83.0%) due mainly to reductions in

deferred income taxes assets resulting from expired MCIT P34.6 million and expired

NOLCO P15.2 million in fiscal year 2009. The Group also recognized deferred tax assets

arising from MCIT of fiscal year 2008 amounting to P33.3 million. The Group’s net income after tax for the fiscal year 2010 amounted to P=45.5 million, increased by P=40.3 million (780.5%) posted in fiscal year 2009, due mainly to increase in deferred income tax assets and increased in selling expenses. Known Trends

There are no known events, trends, and demands, commitments or uncertainties that might affect the Company’s liquidity or cash flows within the next twelve (12) months. There are no trends, events or uncertainties know to management that are reasonably expected to have material favorable or unfavorable impact on the net income or revenues from continuing operations of the Company.


In the normal course of business, the Group has various commitments and contingent liabilities that are not presented in the accompanying financial statements.

- 28 -

The management believes that these actions are without merit or that the ultimate liability, if any, resulting from these cases will not adversely affect the financial position or results of operation of the Parent Company. The Group does not anticipate material losses as a result of these commitments and contingent liabilities.




The Parent Company has commitments for capital expenditures. Among these are investments on IT-related projects, relocation and renovation of branch premises, acquisition and repairs of furniture, fixtures and equipment needed to bring the Company at par with competitors.



Seasonal Aspects


Fiscal Year 2009 vs 2008 Statement of Financial Conditions

The Group continues to maintain its strong financial position with total assets amounting to P=4.616 billion and P=4.573 billion as of March 31, 2010 & 2009, respectively while total equity amounted to P=3.7 billion as of the same period.

Current ratio improved to 4.1:1 as of March 31, 2010 compared to 4.5: 1 as of March 31, 2009.

Total current assets increased by P=212.3 million (5.8%) due mainly to increase in inventories by P=169.2 million (26.3%) due to non-achievement of sales forecasted for the year. On the other hand, accounts receivable decreased by P=47.9 million (6.6%) mainly due to strict monitoring of accounts. Total noncurrent assets decreased by P=169.8 million (18.3%) due mainly to decrease in property, plant and equipment by P=88.7 (14.3%) investment properties decreased by P=16.2 million (15.0%) due mainly to depreciation of properties. Deferred tax assets decreased by P=58.8 million (33.8%) due mainly to reductions in income taxes resulting from expired MCIT amounting to P=34.6 million and NOLCO amounting to P=15.2 million. Other assets decreased by P=6.1 million (23.3%) due mainly to the collection of Meralco refund amounted to P=3.3 million and utilization of house rental deposit by P=2.7 million.

- 29 -

Total current liabilities increased by about P=136.3 million (17.0%) due mainly to increase in trade accounts payable to consolidated companies for the importation of airconditioner amounting to P=66.7 million (44.3%). Accrued expenses increased by P=64.9 million (87.3%) due mainly to increase in product promotional expenses, releasing charges and freight cost. Finance lease liability increased by P=0.2 million (8.3%) due to additional leases on motor vehicles. Capital expenditures amounted to P=45.8 million during the year as the Group continues to upgrade its factory facilities, machinery and equipment. Results of Operation (Continuing Operations Only)

Consolidated sales of the Group for the FY 2009 amounted to P6.460 billion, increased by 7.4% from P6.017 billion posted in fiscal year 2008 despite severe business conditions.

Cost of goods sold ratio decreased by 3.3% from 74.3% of last year to 71.3% this fiscal year 2009 mainly due to the Group’s continuing cost reduction efforts including material costs and fixed costs.

Selling expenses increased by P345.3 million (35.8%) due mainly to increased on sales promotion by P352.9 million (52.3%) and provision of warranty expense by P16.9 million (56.1%). On the other hand, advertising expense decreased by P30.3 million (43.2%).

General and administrative expenses decreased by P67.9 million (11.2%) due mainly to salaries and employees benefit paid to early retirement of employees affected by the cessation of business operation of PMPC Battery Manufacturing Division and early retirement program.

Non-operating income decreased by P61.1 million (42.9%) due mainly to interest income

from time deposit with banks by P22.0 million (29.3%), dividend income received by P13.0

million and gain on sale of property and equipment from the discontinued operations

amounted to P11.7 million.

Provision for income tax increased by P67.5 million (188.8%) due mainly to reductions in

deferred income taxes assets resulting from expired MCIT P34.6 million and expired

NOLCO P15.2 million. The Group also did not recognize deferred tax assets arising from MCIT for this fiscal year 2009. The Group’s net income after tax for the fiscal year 2009 amounted to P=5.2 million, a decrease of 93.7% from P=81.7 million posted in fiscal year 2008, due mainly to decreased on deferred income tax assets, decrease in non-operating income and increased in selling expenses.

- 30 -

Known Trends There are no known events, trends, and demands, commitments or uncertainties that might affect the Company’s liquidity or cash flows within the next twelve (12) months. There are no trends, events or uncertainties know to management that are reasonably expected to have material favorable or unfavorable impact on the net income or revenues from continuing operations of the Company.


In the normal course of business, the Group has various commitments and contingent liabilities that are not presented in the accompanying financial statements. The management believes that these actions are without merit or that the ultimate liability, if any, resulting from these cases will not adversely affect the financial position or results of operation of the Parent Company. The Group does not anticipate material losses as a result of these commitments and contingent liabilities.




The Parent Company has commitments for capital expenditures. Among these are investments on relocation and renovation of branch premises, acquisition and repairs of machinery and equipments, furniture and fixtures, and IT-related projects needed to bring the Company at par with competitors.



Seasonal Aspects


- 31 -

CASHFLOWS A brief summary of cash flow movement is shown below

(In thousands) 2012 2011 2010

Net cash provided by operating activities 255,921 409,780 120,078 Net cash provided by (used in) investing activities (8,137) (124,858) 18,175 Net cash used in financing activities (24,883) (46,234) (45,350) Net cash flow from operations consists of income for the period less change in non-cash current assets, certain current liabilities and others, which include decrease in inventory level. Net cash provided by (used in) investing activities included the following:

In thousands 2012 2011 2010

Interest received from bank deposits 55,031 50,038 53,032 Proceeds from sale of PPE 5,009 25,052 2,099 Dividends received _ 1 17 Acquisitions of property, plant and equipment (69,217) (183,898) (41,884) Decrease in other assets 1,040 (16,051) 4,911

Total (8,137) (124,858) 18,175

Major components of net cash used in financing activities are as follows:

In thousands 2012 2011 2010

Cash dividends paid (21,136) (42,272) (42,272) Finance lease liabilities paid (3,747) (3,962) (3,078)

Total (24,883) (46,234) (45,350)

Despite the stagnant Philippines GDP, financial crisis and slow economic recovery affecting the Group’s operations in general, the Group can internally provide its own cash requirements for its operation for the next twelve months and in succeeding years. Various cash flow improvements such as aggressive operational cost reduction, cost negotiation, productivity and system enhancements are being implemented to maintain the Group’s loan-free operation. RETAINED EARNINGS

Retained Earnings in excess of 100% of paid-in capital will be declared as dividends and/or appropriated for plant expansion and modernization and upgrading of factory facilities and equipment in the future. The appropriated retained earnings pertain to the appropriation for plant expansion and modernization and upgrade of factory facilities and equipment of the Parent Company and for purchase of industrial land for future business expansion of PERC.

- 32 -

CORPORATE GOVERNANCE

PMPC’s Corporate Governance

Financial Reporting 2012 Fiscal Year (FY) 2011, ending March 31, 2012 marked a significant improvement in the Corporate Governance process of Panasonic Manufacturing Philippines Corp. (PMPC). All policies and committee charters in connection with Corporate Governance were finally approved by the Board and correspondingly implemented to strengthen the current practices in corporate governance of the company. Foremost of these are PMPC’s Enterprise Risk Management Policy and the formation of Risk Management and Corporate Governance Committees. As a result, the Board with the active and full participation of the Audit Committee conducts a monthly meeting to discuss and resolve issues relevant to corporate governance. PMPC’s internal governance framework embodies all the principles needed to ensure that the company’s businesses are managed and supervised in a manner consistent with good corporate governance, including the necessary checks and balances.

Measure to fully comply with Corporate Governance In 2011, PMPC substantially complied with the provisions of the Code of Corporate Governance of the Securities and Exchange Commission (SEC) and the Corporate Governance Guidelines Disclosure Template of the Philippine Stock Exchange (PSE). As a mechanism to comply with Corporate Governance, the company established the Corporate Governance Committee in 2011, which comprises the company’s President, Compliance Officer, Audit Committee, Internal Audit, Risk Management Committee among others. The key role of Internal Audit is to assist the Board and the Audit Committee in discharging its governance responsibilities and to conduct an objective evaluation and assessment of the company’s compliance with the Code of Corporate Governance. Accordingly, PMPC reported its Corporate Governance Certificate of Compliance to SEC and Corporate Governance disclosure practices to PSE on January 11, 2012 and January 27, 2012, respectively.

- 33 -

Evaluation System Board of Director, Board Committee and relevant senior management evaluations, in accordance with the Code of Corporate Governance self assessment, have been undertaken with respect to the FY 2011 reporting period, with one exception. It was believed that it is not necessary to carry out a performance review of the Chairman of the Board given the recent change of Chairmanship on December 1, 2011. The corporate governance self-assessment is annually conducted to measure expected performance and benchmark its compliance with the best Corporate Governance practices in the industry. The actions agreed upon by the Board in response to the performance review were documented and the completion of these items was monitored by the Board.

No Material Deviation The Company has established Internal Control procedures and mechanism to ensure compliance with the Code of Corporate Governance and to avert any possible deviation thereof. PMPC shall continue to adopt and evolve in conjunction with corporate governance developments. As such, there have been no material deviations noted by the compliance officer based on its Certificate of Corporate Governance Compliance report to SEC and Corporate Governance Disclosure Template report to PSE as of January 11, 2012 and January 27, 2012, respectively.

Plans to improve Corporate Governance The Corporate Governance Committee shall principally and periodically review the provisions and enforcement of the Company’s Manual on Corporate Governance, unless otherwise stated by the Board. The Company’s manual is subject to review and amendment to continuously improve the Company’s corporate governance practices by assessing their effectiveness and comparing them with evolving best practices, standards identified by leading governance authorities and the Company’s changing circumstances and needs.

- 34 -

CHAIRMAN & PRESIDENT’S

REPORT

- 35 -

- 36 -

- 37 -

- 38 -

ANNEX “B”

CERTIFICATION OF INDEPENDENT

DIRECTORS

- 39 -

- 40 -

- 41 -

- 42 -

ANNEX “C”

Panasonic Manufacturing Philippines Corporation and Subsidiary

Consolidated Financial Statements March 31, 2012, 2011 and 2010

- 43 -

- 44 -

Panasonic Manufacturing Philippines Corporation and Subsidiary

Consolidated Financial Statements March 31, 2012 and 2011 and Years Ended March 31, 2012, 2011 and 2010 and Independent Auditors’ Report SyCip Gorres Velayo & Co.

- 45 -

COVER SHEET





O r t i g a s A v e n u e E x t e n s i o n , T a y t a y ,

R i z a l


Mr. Marlon M. Molano 635-2260 to 65 (Contact Person) (Company Telephone Number)

0 3 3 1 A A F S

Month Day (Form Type) Month Day (Fiscal Year) (Annual Meeting)




Total No. of Stockholders Domestic Foreign


File Number LCU

Document ID Cashier

S T A M P S


- 46 -

INDEPENDENT AUDITORS’ REPORT The Stockholders and the Board of Directors Panasonic Manufacturing Philippines Corporation Ortigas Avenue Extension Taytay, Rizal We have audited the accompanying consolidated financial statements of Panasonic Manufacturing Philippines Corporation and its Subsidiary, which comprise the consolidated statements of financial position as at March 31, 2012 and 2011, and the consolidated statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the three years in the period ended March 31, 2012, 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 financial statements in accordance with Philippine Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that 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 our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in 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 control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

SyCip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City Philippines

Phone: (632) 891 0307 Fax: (632) 819 0872 www.sgv.com.ph BOA/PRC Reg. No. 0001, January 25, 2010, valid until December 31, 2012 SEC Accreditation No. 0012-FR-2 (Group A), February 4, 2010, valid until February 3, 2013

- 47 -

- 48 -

PANASONIC MANUFACTURING PHILIPPINES CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION March 31

2012 2011

ASSETS Current Assets Cash and cash equivalents (Notes 4 and 30) P=2,771,241,822 P=2,548,263,130 Receivables (Notes 3, 5, 23 and 30) 780,456,456 766,860,331 Inventories (Notes 3, 6 and 23) 470,040,513 629,708,809 Other current assets (Note 10) 94,902,009 111,265,219

Total Current Assets 4,116,640,800 4,056,097,489

Noncurrent Assets Available-for-sale investments (Notes 7 and 30) 2,341,458 2,340,861 Property, plant and equipment (Notes 3 and 8) 518,286,111 572,106,527 Investment properties (Notes 3 and 9) 66,960,754 75,986,175 Deferred tax assets - net (Notes 3 and 26) 120,243,953 115,003,568

Other assets (Notes 10 and 29) 30,000,711 35,223,005

Total Noncurrent Assets 737,832,987 800,660,136

P=4,854,473,787 P=4,856,757,625

LIABILITIES AND EQUITY

Current Liabilities Accounts payable and accrued expenses (Notes 11,

23 and 30) P=941,149,914 P=954,336,989 Provisions for estimated liabilities (Notes 3 and 12) 156,208,961 172,556,800 Technical assistance fees payable (Notes 17 and 23) 39,981,585 48,677,824 Income tax payable 830,175 1,833,004 Current portion of finance lease liability (Note 22) 2,441,045 1,780,825

Total Current Liabilities 1,140,611,680 1,179,185,442

Noncurrent Liability Finance lease liability (Note 22) 4,106,141 3,660,643

Total Liabilities 1,144,717,821 1,182,846,085

Equity Equity attributable to equity holders of the Parent Company Capital stock (Note 13) 422,718,020 422,718,020 Additional paid-in capital 4,779,762 4,779,762 Net unrealized gains on available-for-sale investments (Note 7) 1,380,968 1,380,371 Retained earnings (Note 14) Appropriated 2,867,400,000 2,767,400,000 Unappropriated 336,958,448 400,751,618

3,633,237,198 3,597,029,771 Non-controlling interest 76,518,768 76,881,769

Total Equity 3,709,755,966 3,673,911,540

P=4,854,473,787 P=4,856,757,625

See accompanying Notes to Consolidated Financial Statements.

A member firm of Ernst & Young Global Limited

A member firm of Ernst & Young Global Limited

- 49 -


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended March 31

2012 2011 2010

NET SALES (Notes 23, 29 and 33) P=5,942,727,046 P=6,752,751,590 P=6,134,756,925

COST OF GOODS SOLD (Notes 15, 23 and 29) 4,519,165,827 5,068,383,398 4,585,440,258

GROSS PROFIT 1,423,561,219 1,684,368,192 1,549,316,667

SELLING EXPENSES (Notes 16, 23, 29 and 33) (897,351,151) (1,144,192,318) (982,925,909)

GENERAL AND ADMINISTRATIVE EXPENSES (Notes 17, 23 and 29) (532,289,907) (554,521,388) (539,338,383)

OTHER INCOME - net (Notes 21 and 29) 91,591,889 77,337,434 81,360,553

INCOME BEFORE INCOME TAX 85,512,050 62,991,920 108,412,928

PROVISION FOR INCOME TAX (Notes 25 and 26) 28,532,320 17,545,158 103,251,511

NET INCOME 56,979,730 45,446,762 5,161,417

OTHER COMPREHENSIVE INCOME Net unrealized gains on available-for-sale

investments (Note 7) 597 3,731 3,731

TOTAL COMPREHENSIVE INCOME P=56,980,327 P=45,450,493 P=5,165,148

Net income (loss) attributable to: Equity holders of the Parent Company (Note 28) P=57,342,731 P=45,311,952 P=4,894,780 Non-controlling interest (363,001) 134,810 266,637

P=56,979,730 P=45,446,762 P=5,161,417

Total comprehensive income (loss) attributable to: Equity holders of the Parent Company P=57,343,328 P=45,315,683 P=4,898,511 Non-controlling interest (363,001) 134,810 266,637

P=56,980,327 P=45,450,493 P=5,165,148

Basic/Diluted Earnings Per Share (Note 28)

Income attributable to equity holders of the Parent Company P=0.14 P=0.11 P=0.01


50


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Equity Attributable to Equity Holders of the Parent Company

Capital Stock

(Note 13) Additional

Paid-in Capital

Net Unrealized Gains on AFS

Investments

Appropriated Retained Earnings (Note 14)

Unappropriated Retained Earnings (Note 14) Total

Non-controlling Interest Total

Balances as of April 1, 2011 P=422,718,020 P=4,779,762 P=1,380,371 P=2,767,400,000 P=400,751,618 P=3,597,029,771 P=76,881,769 P=3,673,911,540

Net income (loss) − − − − 57,342,731 57,342,731 (363,001) 56,979,730

Other comprehensive income − − 597 − − 597 − 597

Total comprehensive income (loss) − − 597 − 57,342,731 57,343,328 (363,001) 56,980,327

Cash dividends (Note 14) − − − − (21,135,901) (21,135,901) − (21,135,901)

Appropriation during the year (Note 14) − − − 100,000,000 (100,000,000) − − −

Balances as of March 31, 2012 P=422,718,020 P=4,779,762 P=1,380,968 P=2,867,400,000 P=336,958,448 P=3,633,237,198 P=76,518,768 P=3,709,755,966


Net income − − − − 45,311,952 45,311,952 134,810 45,446,762 Other comprehensive income − − 3,731 − − 3,731 − 3,731

Total comprehensive income − − 3,731 − 45,311,952 45,315,683 134,810 45,450,493


Reversal of appropriation (Note 14) − − − (75,000,000) 75,000,000 − − −



51

Equity Attributable to Equity Holders of the Parent Company

Capital Stock

(Note 13) Additional

Paid-in Capital

Net Unrealized Gains on AFS

Investments

Appropriated Retained Earnings

(Note 14)

Unappropriated Retained Earnings

(Note 14) Total Non-controlling

Interest Total


Net income − − − − 4,894,780 4,894,780 266,637 5,161,417 Other comprehensive income − − 3,731 − − 3,731 − 3,731

Total comprehensive income − − 3,731 − 4,894,780 4,898,511 266,637 5,165,148




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CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended March 31

2012 2011 2010

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=85,512,050 P=62,991,920 P=108,412,928 Adjustments for: Depreciation and amortization (Note 19) 137,271,519 135,635,790 149,799,913 Interest income (Notes 4 and 21) (55,538,652) (51,733,196) (53,930,787) Net movement for estimated liabilities (16,347,839) 32,153,500 (32,400,666) Provision for(reversal of) doubtful

accounts (Notes 5 and 17) 1,847,580 8,086,000 (987,025) Gain on sale of property, plant and

equipment (Note 21) (1,182,413) (1,360,000) − Unrealized foreign currency exchange loss (gain) (1,080,233) 827,951 2,521,101 Dividend income (Notes 7 and 21) (200) (670) (17,484) Impairment loss on available-for-sale

investments (Note 7) − 260,000 − Movement in pension balance − − (57,356,734) Impairment loss on PPE (Note 21) − − 3,482,820

Operating income before working capital changes 150,481,812 186,861,295 119,524,066 Changes in operating assets and liabilities: Decrease (increase) in: Inventories 159,668,296 182,845,119 (169,177,758) Receivables (13,328,747) (162,441,931) 50,759,988 Other current assets (14,742,525) 9,976,521 157,474 Increase (decrease) in: Accounts payable and accrued expenses (12,398,541) 204,082,922 165,257,989 Technical assistance fees payable (8,696,239) 8,297,374 (86,827)

Net cash generated from operations 260,984,056 429,621,300 166,434,932 Income taxes paid (3,669,799) (19,841,727) (42,873,998)

Net cash provided by operating activities 257,314,257 409,779,573 123,560,934

CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in other assets 1,039,979 (16,050,787) 4,911,393 Dividends received (Note 7) 200 670 17,484 Acquisitions of property, plant and equipment

(Notes 8 and 32) (69,216,872) (183,898,105) (45,367,242) Interest received from bank deposits 53,637,652 50,038,232 53,032,165 Proceeds from sale of property, plant and equipment 5,008,664 25,052,234 2,098,848

Net cash provided by (used in) investing activities (9,530,377) (124,857,756) 14,692,648

CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends paid (Note 14) (21,135,901) (42,271,802) (42,271,802) Finance lease liabilities paid (Note 22) (3,747,028) (3,961,987) (3,078,264)

Cash used in financing activities (24,882,929) (46,233,789) (45,350,066) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND

CASH EQUIVALENTS 77,741 (1,272,130) (2,643,374)

NET INCREASE IN CASH AND CASH EQUIVALENTS 222,978,692 237,415,898 90,260,142

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,548,263,130 2,310,847,232 2,220,587,090 CASH AND CASH EQUIVALENTS AT END

OF YEAR P=2,771,241,822 P=2,548,263,130 P=2,310,847,232


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Panasonic Manufacturing Philippines Corporation (the Parent Company) was incorporated in the Philippines on May 14, 1963 and is a subsidiary of Panasonic Corporation (the Ultimate Parent Company). The Parent Company holds 40.0% interest in Precision Electronics Realty Corporation (PERC or the Subsidiary), over which the Parent Company has the ability to govern the financial and operating policies and whose activities primarily benefits the Parent Company. The Parent Company’s ultimate parent company is Panasonic Corporation which is incorporated in Japan on December 15, 1935.

The Parent Company is a manufacturer, importer and distributor of electronic, electrical, mechanical, electro-mechanical appliances, other types of machinery, parts and components, battery and other related products bearing the “Panasonic” brand. The Subsidiary is in the business of realty brokerage and leases out the land in which the Parent Company’s manufacturing facilities are located (see Note 9).

The Parent Company’s registered address is Ortigas Avenue Extension, Taytay, Rizal.

The accompanying consolidated financial statements were approved and authorized for issue by the Parent Company’s Board of Directors (BOD) on May 4, 2012.

2. Summary of Significant Accounting Policies

Basis of Preparation The accompanying consolidated financial statements of the Parent Company and the Subsidiary (collectively referred to as the “Group”) have been prepared on a historical cost basis, except for available-for-sale (AFS) investments which are measured at fair value. The accompanying consolidated financial statements are presented in Philippine peso (P=), which is also the Parent Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. The functional currency of PERC is the Philippine peso.

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Statement of Compliance The accompanying consolidated financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

Basis of Consolidation The consolidated financial statements comprise the financial statements of the Parent Company and its Subsidiary over which the Parent Company has the ability to govern the financial and operating policies to obtain benefits from its activities. The financial statements of the Subsidiary are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All intercompany balances, income and expenses are eliminated in full. Non-controlling interest represents the portion of profit or loss and net assets not owned, directly or indirectly, by the Parent Company. Non-controlling interests are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from the equity. Any losses applicable to the non-controlling interests are allocated against the interests of the non-controlling interest even if this results in the non-controlling interest having a deficit balance. Acquisitions of non-controlling interests that do not result in a loss of control are accounted for as equity transaction, whereby the difference between the consideration and the fair value of the share of net assets acquired is recognized as an equity transaction and attributed to the owners of the Parent Company. Changes in Accounting Policies and Disclosures The accounting policies adopted are consistent with those of the previous year except for the following new and amended standards, interpretations and improvements to PFRS adopted as of April 1, 2011. These new and amended standards and improvements to PFRS did not have any impact on the accounting policies, financial position or performance of the Group.

New and Amended Standards and Interpretations

Philippine Accounting Standard (PAS) 24, Related Party Disclosures (Amendment)

PAS 32, Financial Instruments: Presentation (Amendment)

Philippine Interpretation of International Financial Reporting Interpretation Committee (IFRIC) 14, Prepayments of a Minimum Funding Requirement (Amendment)

Philippines Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments

Philippine Interpretation IFRIC 13, Customer Loyalty Programmes (determining the fair value of award credits)

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Improvements to PFRS in 2010

PFRS 3, Business Combinations

PFRS 7, Financial Instruments: Disclosures

PAS 1, Presentation of Financial Statements

PAS 27, Consolidated and Separate Financial Statements

PAS 34, Interim Financial Reporting New standards and interpretations that have been issued but are not yet effective Standards or interpretations issued but are not effective as of March 31, 2012 are listed below. The Group intends to adopt these standards and interpretations when they become effective. Except as otherwise stated, the Group does not expect the adoption of these new standards and interpretations to have a significant impact on its financial statements.

PAS 1, Financial Statement Presentation - Presentation of Items of Other Comprehensive Income (Amendment), effective for annual periods beginning on or after July 1, 2012. The amendments to PAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or “recycled”) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified.

PAS 12, Income Taxes - Recovery of Underlying Assets (Amendment), effective for annual periods beginning on or after January 1, 2012. It clarified the determination of deferred tax on investment property measured at fair value. The amendment introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in PAS 40, Investment Property, should be determined on the basis that its carrying amount will be recovered through sale. Furthermore, it introduces the requirement that deferred tax on non-depreciable assets that are measured using the revaluation model in PAS 16, Property, Plant and Equipment, always be measured on a sale basis of the asset.

PAS 19, Employee Benefits (Amendment), effective for annual periods beginning on or after January 1, 2013. Amendments to PAS 19 range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and rewording. The Group is currently assessing the impact of the amendment to PAS 19.

PAS 27, Separate Financial Statements (as revised in 2011), effective for annual periods beginning on or after January 1, 2013. As a consequence of the new PFRS 10, Consolidated Financial Statements, and PFRS 12, Disclosure of Interests in Other Entities, what remains of PAS 27 is limited to accounting for

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subsidiaries, jointly controlled entities, and associates in separate financial statements.

PAS 28, Investments in Associates and Joint Ventures (as revised in 2011), effective for annual periods beginning on or after January 1, 2012. As a consequence of the new PFRS 11, Joint Arrangements, and PFRS 12, PAS 28 has been renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates.

PFRS 7, Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements, effective for annual periods beginning on or after January 1, 2012. The amendment requires additional disclosure about financial assets that have been transferred but not derecognized to enable the user of the Group’s financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate the nature of, and risks associated with, the entity’s continuing involvement in those derecognized assets.

PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities. These amendments require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are set off in accordance with PAS 32. These disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or ‘similar agreement’, irrespective of whether they are set-off in accordance with PAS 32. The amendments require entities to disclose, in a tabular format unless another format is more appropriate, the following minimum quantitative information. This is presented separately for financial assets and financial liabilities recognized at the end of the reporting period: a. The gross amounts of those recognized financial assets and recognized

financial liabilities; b. The amounts that are set off in accordance with the criteria in PAS 32

when determining the net amounts presented in the statement of financial position;

c. The net amounts presented in the statement of financial position; d. The amounts subject to an enforceable master netting arrangement or

similar agreement that are not otherwise included in (b) above, including:

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i. Amounts related to recognized financial instruments that do not meet some or all of the offsetting criteria in PAS 32; and

ii. Amounts related to financial collateral (including cash collateral); and

e. The net amount after deducting the amounts in (d) from the amounts in (c) above.

The amendments to PFRS 7 are to be retrospectively applied for annual periods beginning on or after January 1, 2013.

PFRS 10, Consolidated Financial Statements, effective for annual periods beginning on or after January 1, 2013. PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements, that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12, Consolidation - Special Purpose Entities. PFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by PFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in PAS 27. The Group is currently assessing the impact of the amendment to PFRS 10.

PFRS 11, Joint Arrangements, effective for annual periods beginning on or after January 1, 2012. PFRS 11 replaces PAS 31, Interests in Joint Ventures, and SIC-13, Jointly-controlled Entities - Non-monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. This standard becomes effective for annual periods beginning on or after January 1, 2013.

PFRS 12, Disclosure of Interests in Other Entities, effective for annual periods beginning on or after January 1, 2013. PFRS 12ncludes all of the disclosures that were previously in PAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in PAS 31 and PAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required.

PFRS 13, Fair Value Measurement, effective for annual periods beginning on or after January 1, 2013. PFRS 13 establishes a single source of guidance under PFRS for all fair value measurements. PFRS 13 does not change when an entity is

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required to use fair value, but rather provides guidance on how to measure fair value under PFRS when fair value is required or permitted.

PFRS 9, Financial Instruments: Classification and Measurement, effective for annual periods beginning on or after January 1, 2015. PFRS 9, as issued in 2010, reflects the first phase of the work on the replacement of PAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in PAS 39. In subsequent phases, hedge accounting and impairment of financial assets will be addressed with the completion of this project expected on the first half of 2012.

PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities. These amendments to PAS 32 clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments to PAS 32 are to be retrospectively applied for annual periods beginning on or after January 1, 2014.

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate. This interpretation covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The interpretation requires that revenue on construction of real estate be recognized only upon completion, except when such contract qualifies as construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of completion. Contracts involving provision of services with the construction materials and where the risks and reward of ownership are transferred to the buyer on a continuous basis will also be accounted for based on stage of completion. The Securities and Exchange Commission (SEC) and the Financial Reporting Standards Council have deferred the effectivity of this interpretation until the final Revenue standard is issued by International Accounting and Standards Board and an evaluation of the requirements of the final revenue standard against the practices of the Philippine real estate industry is completed.

Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, effective for annual periods beginning on or after January 1, 2013. This interpretation applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (“production stripping costs”) and provides guidance on the recognition of production stripping costs as an asset and measurement of the stripping activity asset.

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Summary of Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents in the consolidated statement of financial position comprise cash on hand and in banks and time deposits with original maturities of three months or less and are subject to an insignificant risk of change in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and time deposits as defined above. Financial Instruments Date of recognition Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the settlement date, the date that an asset is delivered to or by the Group. Settlement date accounting refers to (a) the recognition of an asset on the day it is received by the Group, and (b) the derecognition of an asset and recognition of any gain or loss on disposal on the day that it is delivered by the Group. Initial recognition and classification of financial instruments All financial instruments are initially measured at fair value. Except for financial instruments carried at fair value through profit or loss (FVPL), the initial measurement of financial instruments includes transaction costs. The Group classifies its financial assets in the following categories: financial assets at FVPL, held-to-maturity (HTM) investments, AFS investments, and loans and receivables. Financial liabilities are classified into financial liabilities at FVPL and other financial liabilities carried at cost. The classification depends on the purpose for which the investments were acquired and whether they are quoted in an active market. Management determines the classification of its investments at initial recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date. The Group has no financial assets and liabilities at FVPL and HTM investments as of March 31, 2012 and 2011.

Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows:

AFS investments AFS investments are non-derivative financial assets that are designated as such or do not qualify to be classified or designated as FVPL, HTM or loans and receivables. They are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market conditions.

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After initial measurement, AFS investments are subsequently measured at fair value. The unrealized gains and losses arising from the fair valuation of AFS investments are recognized as other comprehensive income. For AFS investments not traded in the active market, the fair value is determined using valuation techniques (refer to ‘Determination of Fair Value’). However, when no reliable fair value can be derived, the Group subsequently carries its unquoted investments at cost, less any impairment loss.

When an AFS investment is disposed of, the cumulative gain or loss previously recognized under other comprehensive income is recognized in current operations. The losses arising from impairment of such investments are recognized as ‘Provision for impairment losses’ in profit or loss.

AFS investments are classified as current assets when it is expected to be sold or realized within twelve months after the reporting date or within the normal operating cycle, whichever is longer.

The Group’s AFS investments include investments in quoted equity shares (see Notes 7 and 30). Loans and receivables Loans and receivables include non-derivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market and for which the Group has no intention of trading. After initial recognition, loans and receivables are subsequently stated at their amortized cost, reduced by accumulated impairment loss, if any. Amortization is determined using the effective interest method.

Loans and receivables are included in current assets if maturity is within 12 months from the reporting date. Otherwise, these are classified as other assets included in noncurrent assets. Classified as loans and receivables are the Group’s cash in banks and cash equivalents and receivables. Other financial liabilities This category pertains to financial liabilities that are not held for trading or not designated as at FVPL upon the inception of the liability. These include liabilities arising from operations or borrowings. The financial liabilities are recognized initially at fair value and are subsequently carried at amortized cost, taking into account the impact of applying the effective interest method of amortization (or accretion) for any related premium, discount and any directly attributable transaction costs.

Other financial liabilities are classified as current liabilities when it is expected to be settled within twelve months from the reporting date or the Group does not

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have an unconditional right to defer settlement for at least twelve months from reporting date. Included in this category are the Group’s accounts payable and accrued expenses and technical assistance fees payable. Determination of Fair Value The fair value of financial instruments that are actively traded in organized financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. When current bid and ask prices are not available, the price of the most recent transaction is used since it provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction.

For all other financial instruments not listed in an active market, the fair value is determined by using appropriate valuation techniques, which includes discounted cash flow techniques and comparison to similar instruments for which observable market prices exist.

‘Day 1’ difference Where the transaction price in a non-active market is different from the fair value based on other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Group recognizes the difference between the transaction price and fair value (a Day 1 difference) in profit or loss unless it qualifies for recognition as some other type of asset. In cases where use is made of data which is not observable, the difference between the transaction price and model value is only recognized in profit or loss when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate method of recognizing the ‘Day 1’ difference amount. Impairment of Financial Assets The Group assesses at each reporting date whether a financial asset or group of financial assets is impaired. A financial asset or a group of financial asset is deemed to be impaired if, and only if, there is objective criteria of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Objective evidence includes observable data that comes to the attention of the Group about loss events such as, but not limited to, significant financial d ifficulty of the counterparty, a breach of contract, such as a default or delinquency in interest or principal payments, probability that the borrower will enter bankruptcy or other financial reorganization.

Loans and receivables

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The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant and individually or collectively for financial assets that are not individually significant. If there is an objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through the use of an allowance account. The amount of the loss shall be recognized in profit or loss.

If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of credit risk characteristics such as industry, past due status and term. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognized in the profit or loss. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral, if any, has been realized or has been transferred to the Group. If in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance for impairment losses account.

If a future write-off is later recovered, the recovery is recognized in profit or loss under “Other income” account. Any subsequent reversal of an impairment loss is recognized in profit or loss as reversal of allowance for doubtful accounts, to the extent that the carrying value of the asset does not exceed its amortized cost at reversal date.

AFS Investments In case of equity instruments classified as AFS, objective evidence would include a significant or prolonged decline in the fair value of the investments below its

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cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. When there is evidence of impairment, an amount comprising the difference between its cost and its current fair value, less any impairment loss previously recognized under profit or loss, is transferred from other comprehensive income to profit or loss. Impairment losses on equity investments are not reversed through current operations. Increases in fair value after impairment are recognized as other comprehensive income.

Offsetting of Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. Derecognition of Financial Assets and Financial Liabilities Financial asset A financial asset or, where applicable, a part of a financial asset or a part of a group of similar financial assets is derecognized when:

the right to receive cash flows from the asset have expired;

the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or

the Group has transferred its right to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Financial liability A financial liability is derecognized when the obligation under the liability is discharged, cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or

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modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss. Inventories Inventories are valued at the lower of cost and net realizable value (NRV). NRV is the selling price in the ordinary course of business, less costs of completion, marketing and distribution. Cost is determined primarily using the first-in, first-out method, except for spare parts and supplies, which are determined on a weighted average method. For manufactured inventories, cost includes the applicable allocation of fixed and variable overhead costs.

Creditable Withholding Tax This pertains to the tax withheld at source by the Group’s customers and is creditable against the income tax liability of the Group. Property, Plant and Equipment Property, plant and equipment are carried at cost less accumulated depreciation, amortization and any impairment in value except land which is carried at cost less any impairment in value. The initial cost of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Significant renewals and improvements are capitalized.

Expenditures incurred after the properties have been put into operation, such as repairs and maintenance and overhaul costs, are normally charged to income in the year the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property, plant and equipment.

Depreciation and amortization is computed using the straight-line method on land improvements and buildings and improvements over their estimated useful lives and the declining balance method on other property, plant and equipment.

The estimated useful lives of property, plant and equipment are as follows:

Years

Land improvements 10 Factory machinery, equipment and tools 2-7 Buildings and improvements 5-25 Office furniture, fixtures and equipment 2-5 Transportation equipment 4

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The useful life and depreciation and amortization methods are reviewed at each reporting date to ensure that the period and method of depreciation and amortization are consistent with the expected pattern of economic benefits from items of property, plant and equipment.

When assets are sold or retired, their cost and accumulated depreciation and amortization and any accumulated impairment losses are eliminated from the accounts and any gain or loss resulting from their disposal is included in profit or loss. Investment Properties Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, depreciable investment properties are carried at cost less accumulated depreciation and amortization and any impairment in value. Expenditures incurred after the investment properties have been put into operation, such as repairs and maintenance costs, are normally charged to operations in the period in which the costs are incurred.

Depreciation and amortization is calculated on a straight-line basis using the remaining useful lives from the time of acquisition of the investment properties but not to exceed:

Years

Building 25 Building improvements 5-10

Investment properties are derecognized when either they have been disposed of, or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in profit or loss in the year of retirement or disposal.

Transfers are made to investment properties when, and only when, there is a change in use evidenced by ending of owner-occupation or commencement of an operating lease to another party. Transfers are made from investment properties when, and only when, there is a change in use evidenced by commencement of owner-occupation or commencement of development with a view to sale.

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Software Software acquired separately is measured on initial recognition at cost. Following initial recognition, software is carried at cost less any accumulated amortization and any accumulated impairment losses.

Amortization of software is computed using the declining balance method over its estimated useful life of 2 to 5 years. The estimated useful life and amortization method for software are reviewed at least at each financial year end to ensure that the period and method of amortization are consistent with the expected pattern of economic benefits from these assets.

The amortization expense on software is recognized in profit or loss under general and administrative expenses. Software is assessed for impairment whenever there is an indication that this asset may be impaired.

Impairment of Nonfinancial Assets At each reporting date, the Group assesses whether there is any indication that its property, plant and equipment, investment properties and software may be impaired. Where there is an indication of impairment, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. A previously recognized impairment loss is reversed by a credit to current operations, unless the asset is carried at a revalued amount, in which case, the reversal of the impairment loss is credited to the revaluation increment of the same asset, to the extent that it does not restate the asset to a carrying amount in excess of what would have been determined (net of any accumulated depreciation and amortization) had no impairment loss been recognized for the asset in prior years. Leases The determination of whether an arrangement is, or contains a lease, is based on the substance of the arrangement at inception date whether the fulfillment of the arrangement is dependent on the use of a specific asset or the arrangement conveys a right to use the asset.

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A reassessment is made only after inception of the lease 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 that 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; or d) There is a substantial change to the asset.

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

The Group as a lessee Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in profit or loss on a straight-line basis over the lease term.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against profit or loss.

The Group as a lessor Leases where the Group retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as income in profit or loss on a straight-line basis over the lease term.

Business Combinations Business combinations from January 1, 2010 Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the noncontrolling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed in the statement of income.

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When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or liability, will be recognized in accordance with PAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in the statement of income. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGU) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the CGU retained. Business combinations prior to January 1, 2010 In comparison to the above-mentioned requirements, the following differences applied: Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority

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interest) was measured at the proportionate share of the acquiree’s identifiable net assets. Business combinations achieved in stages were accounted for as separate steps. Any additional acquired share of interest did not affect previously recognized goodwill. When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree were not reassessed on acquisition unless the business combination resulted in a change in the terms of the contract that significantly modified the cash flows that otherwise would have been required under the contract. Contingent consideration was recognized if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognized as part of goodwill. Equity Capital stock is measured at par value for all shares issued and outstanding. When the shares are sold at premium, the difference between the proceeds and the par value is credited to “Additional paid-in capital” account. Direct costs incurred related to equity issuance, such as underwriting, accounting and legal fees, printing costs and taxes are chargeable to “Additional paid-in capital” account. If additional paid-in capital is not sufficient, the excess is charged against the retained earnings.

When the Group issues more than one class of stock, a separate account is maintained for each class of stock and the number of shares issued. Retained earnings represent accumulated earnings of the Group less any dividends declared. The Parent Company’s retained earnings available for dividend declaration amounted to P=147.1 million and P=216.9 million as of March 31, 2012 and 2011, respectively. Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received net of discounts, sales taxes and duties. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as principal in all of its revenue arrangements.

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

Sale of goods Revenue from sale of goods is recognized when significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of goods.

Interest income Interest income is recognized as interest accrues, taking into account the effective yield on the assets.

Dividend income Dividend income is recognized when the Group’s right to receive the payment is established.

Rental income Rental income arising from operating leases on investment properties is accounted for on a straight line basis over the corresponding lease terms.

Sale of scrap Income from sale of scrap is recognized when the significant risk and rewards of ownership of the scrap have passed to the buyer and the amount of revenue can be measured reliably. Costs and Expenses Costs and expenses encompass losses as well as those expenses that arise in the course of the ordinary activities of the Group. The following specific recognition criteria must be met before costs and expenses are recognized:

Cost of goods sold Cost of goods sold includes all expenses associated with the specific sale of goods. Cost of goods sold include all materials and supplies used, direct labor, occupancy cost, depreciation of production equipment and other expenses related to production. Such costs are recognized when the related sales have been recognized. Selling expenses Selling expenses constitute costs which are directly related to selling, advertising and delivery of goods to customers. These include sales commissions and marketing expenses. Selling expenses are recognized when incurred. General and administrative expenses General and administrative expenses constitute costs of administering the business and are recognized when incurred.

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Dividends on Common Shares Dividends on common shares are recognized as a liability and deducted from equity when declared and approved by the BOD of the Parent Company. Dividends for the year that are declared and approved after the consolidated statement of financial position date, if any, are dealt with as an event after the financial reporting date and disclosed accordingly.

Earnings Per Share (EPS) Basic EPS is computed by dividing net income for the year attributable to ordinary equity holders of the parent by the weighted average number of common shares issued and outstanding during the year, after giving retroactive adjustment to any stock dividend declared or stock split made during the year. Diluted EPS is calculated by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding during the year adjusted for the effects of any dilutive convertible common shares.

As of March 31, 2012 and 2011, the Group has no dilutive convertible common shares. Thus, basic and diluted EPS are the same.

Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalized. All other borrowing costs are recognized as expense in the year which they are incurred.

Retirement Costs The Group’s retirement expense is actuarially determined using the projected unit credit method. Under this method, the current service cost is the present value of retirement benefits payable in the future with respect to services rendered in the current period. Actuarial gains and losses on the excess of the net cumulative unrecognized actuarial gains and losses of the plan at the end of the previous reporting year in excess of 10.0% of the higher of the defined benefit obligation and the fair value of plan assets at that date are recognized as income or expense. These actuarial gains and losses are recognized over the expected average remaining working life of the employees participating in the plan. The defined benefit liability is the aggregate of the present value of the defined benefit obligation and actuarial gains and losses not recognized reduced by past service cost not yet recognized and the fair value of plan assets out of which the obligations are to be settled directly. If such aggregate is negative, the asset is measured at the lower of such aggregate and the aggregate of cumulative unrecognized net actuarial losses and past service cost and the present value of

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any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan. Past service cost, if any, is recognized immediately in profit or loss, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service cost is amortized on a straight-line basis over the vesting period. Income Tax Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The rates and tax laws used to compute the amount are those that have been enacted or substantially enacted as of the reporting date. Deferred tax Deferred tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits from excess minimum corporate income tax (MCIT) over regular corporate income tax (RCIT) and unused net operating losses carryover (NOLCO), to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carryforward of unused tax credits from excess credits and unexpired NOLCO can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilized.

Deferred tax assets and liabilities are measured at the tax rate that is expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted as of the reporting date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to offset current income tax assets against current income tax liabilities, and the deferred taxes relate to the same taxable entity and the same taxation authority.

Foreign Currency-denominated Transactions and Translation Foreign currency-denominated transactions are recorded using the exchange rate at the date of transaction. Foreign currency-denominated monetary assets and liabilities are translated using the prevailing closing exchange rate at reporting

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date. Exchange gains or losses from foreign currency-denominated transactions and translation are credited or charged to profit or loss.

Operating Segment Operating segments for management reporting purposes are organized into three major segments according to the nature of the products. Common income and expenses are allocated among business segments based on sales or other appropriate bases. Segment assets include operating assets used by a segment and consist principally of operating cash, receivables, inventories and property, plant and equipment net of allowances, provisions and depreciation and amortization. Segment liabilities include all operating liabilities and consist principally of accounts payable and accrued liabilities. Information on business segments is presented in Note 29. Provisions Provisions are recognized when the following conditions are present: (a) the Group has a present obligation (legal or constructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation.

Provision for estimated liabilities

Provision for estimated liabilities consists of provision for warranty claims and other liabilities. Provision for warranty claims is recognized for expected warranty claims on products sold, based on percentage of sales which range from 0.1% to 2.0% on a monthly basis. Provision for other liabilities is recognized when all of the conditions mentioned above are present.

Contingencies Contingent liabilities are not recognized in the consolidated financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the consolidated financial statements but are disclosed when an inflow of economic benefits is probable. Events after the Reporting Period Post year-end events that provide additional information about the Group’s position at the reporting date (adjusting events) are reflected in the consolidated financial statements. Post year-end events that are not adjusting events are disclosed in the notes to the consolidated financial statements when material.

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3. Significant Accounting Judgments, Assumptions and Estimates

The preparation of the consolidated financial statements in compliance with PFRS requires the Group to make judgments, estimates and assumptions that affect reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and contingent liabilities. Future events may occur which can cause the assumptions used in arriving at those estimates to change. The effects of any changes in estimates will be reflected in the consolidated financial statements as they become reasonably determinable.

Judgments, assumptions and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Judgments

In the process of applying the Group’s accounting policies, management has made the following

judgments, apart from those involving estimations, which have the most significant effect on the

amounts recognized in the consolidated financial statements:

Going concern

The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied that the Group has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the consolidated financial statements continue to be prepared on a going concern basis.

Determination of functional currency The Group determines the functional currency based on the economic substance of underlying circumstances relevant to the Group. The functional currency has been determined to be the Philippine Peso since its revenues and expenses are substantially denominated in Philippine peso. Classification of leases Management exercises judgment in determining whether substantially all the significant risks and rewards of ownership of the leased assets are transferred to or by the Group. Lease contracts, which transfers substantially all the significant risks and rewards incidental to ownership of the leased items, are classified as finance leases. Otherwise, they are considered as operating leases.

Finance lease - the Group as lessee The Group has certain lease agreements covering certain vehicles where the lease terms approximate the estimated useful lives of the assets, and provide for an option to purchase the asset at a price that is expected to be sufficiently lower

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than the fair value at the date the option becomes exercisable. These leases are classified by the Group as finance leases (see Note 22). Operating lease - the Group as lessor The Group has entered into commercial property leases on its investment property. Based on the evaluation of the terms and conditions of the agreement, there will be no transfer of ownership of assets to the lessee at the end of the lease term. The Group has determined that it retains all the significant risks and rewards of the ownership of the asset and so account for the contract as operating leases (see Notes 22 and 23).

Impairment of Property, plant and equipment, Investment properties and Software

The Group assesses impairment on assets whenever events or changes in circumstances indicate

that the carrying amount of an asset may not be recoverable. The factors that the Group considers

important which could trigger an impairment review include the following:

Significant or prolonged decline in the fair value of the asset;

Increase in market interest rates or other market rates of return on investments during the

period, and those increases are likely to affect the discount rate used in calculating the asset’s

value in use and decrease the asset’s recoverable amount materially;

Significant underperformance relative to expected historical or projected future operating

results;

Significant changes in the manner of use of the acquired assets or the strategy for overall

business; and

Significant negative industry or economic trends.

There were no indicators of impairment in 2012, 2011 and 2010, thus, no impairment losses were

recognized.

Estimates The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

NRV of inventory The Group maintains an allowance for inventory obsolescence at a level considered adequate for the excess of cost of inventories over their NRV. NRV of inventories are assessed regularly based on the prevailing selling prices of inventories less the estimated costs necessary to sell and complete. Any increase in NRV will increase the carrying amount of inventories but only to the extent of their original acquisition costs. The carrying value of inventories as of March 31, 2012 and 2011 amounted to P=470.0 million and P=629.7 million, respectively (see Note 6).

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Useful lives of Property, plant and equipment, Investment properties and Software The Group’s management determines the estimated useful lives and related depreciation and amortization charges for its property, plant and equipment, investment properties and software. These estimates are based on the expected future economic benefit of the assets of the Group. Management will increase the depreciation and amortization charges where useful lives are less than previously estimated, or it will write off or write down technically obsolete assets that have been abandoned or removed from the statements of financial position. The carrying value of property, plant and equipment as of March 31, 2012 and 2011 amounted to P=518.3 million and P=572.1 million, respectively (see Note 8). The carrying value of investment properties as of March 31, 2012 and 2011 amounted to P=67.0 million and P=76.0 million, respectively (see Note 9). The carrying value of software as of March 31, 2012 and 2011 amounted to P=14.3 million and P=18.5 million, respectively (see Note 10). Impairment of receivables The Group reviews its receivable portfolio to assess impairment. In determining whether an impairment loss should be recorded in profit or loss, the Group makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of receivables before the decrease can be identified with an individual receivable in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the customer’s payment behavior and known market factors.

The main considerations for impairment assessment include whether any payments are overdue or if there are any known difficulties in the cash flows of the counterparties (e.g., debt restructuring and declaration of bankruptcy). The Group assesses impairment into two areas: individually assessed allowances and collectively assessed allowances.

The Group determines allowance for each significant receivable on an individual basis. Among the items that the Group considers in assessing impairment is the inability to collect from the counterparty based on the contractual terms of the receivables. Receivables included in the specific assessment are the accounts that have been endorsed to the legal department and nonmoving accounts receivable.

For collective assessment, allowances are assessed for receivables that are not individually significant and for individually significant receivables where there is no objective evidence yet of individual impairment. Impairment losses are estimated by taking into consideration the age of the receivables, past collection experience and other factors that may affect collectibility.

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The carrying value of receivables amounted to P=780.5 million and P=766.9 million as of March 31, 2012 and 2011, respectively (see Note 5). Retirement cost The determination of cost of pension and other employee benefits is dependent on the selection of certain assumptions used in calculating such amounts. Those assumptions include, among others, discount rate, expected return on plan assets and salary increase rate. In accordance with PFRS, actual results that differ from the Group’s assumptions, subject to the 10.0% corridor test are accumulated and amortized over future periods and therefore, generally affect the recognized expense.

The Group’s net pension liability amounted to nil as of March 31, 2012 and 2011, respectively (see Note 24).

While the Group believes that the assumptions are reasonable and appropriate, significant differences between actual experiences and assumptions may materially affect the Group’s pension asset and annual retirement cost.

Provisions for estimated liabilities Provision for warranty is recognized for expected warranty claims on products sold, based on percentages of sales which range from 0.1% to 2.0%. The Group calculates these percentages based on past experience of the level of repairs and returns. Other provisions for estimated liabilities include provisions for installment and institutional discounts, special and prompt payment discounts. Provisions for discounts and prompt payments are recognized based on a certain percentage of sales considering the Group’s experience. Provisions for estimated liabilities amounted to P=156.2 million and P=172.6 million as of March 31, 2012 and 2011, respectively (see Note 12).

Deferred tax assets The Group reviews the carrying amounts of deferred tax assets at each reporting date and reduces them to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax assets to be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, particularly the deferred tax assets on NOLCO and MCIT that have three years expiration from the date incurred, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.

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Net deferred tax assets amounted to P=120.2 million and P=115.0 as of March 31, 2012 and 2011, respectively (see Note 26).

4. Cash and Cash Equivalents

This account consists of:

2012 2011 2010

Cash on hand P=36,627,216 P=25,484,889 P=13,382,442 Cash in banks 181,914,606 230,908,241 201,322,790 Time deposits 2,552,700,000 2,291,870,000 2,096,142,000

P=2,771,241,822 P=2,548,263,130 P=2,310,847,232

Cash in banks earned annual interest ranging from 0.5% to 1.0% in 2012 and 2011. Time deposits are made for varying periods of up to three months depending on the immediate cash requirements of the Group, and earned interest ranging from 1.5% to 4.5% in 2012, 2011 and 2010. Interest income from cash in banks and time deposits amounted to P=55.5 million, P=51.7 million and P=53.9 million in 2012, 2011 and 2010, respectively (see Note 21).

5. Receivables This account consists of:

2012 2011

Trade Domestic P=579,436,373 P=562,202,019 Export (Note 23) 124,823,673 138,085,362 Non-trade Related parties (Note 23) 55,221,667 34,161,608 Employees 25,617,980 25,845,041 Insurance claims 3,840,761 4,009,931 Others 21,719,002 37,046,870

810,659,456 801,350,831 Less allowance for doubtful accounts 30,203,000 34,490,500

P=780,456,456 P=766,860,331

Trade receivables are non-interest-bearing and are generally on 30- to 60-day terms. Receivables classified as “domestic” are those claims against local customers. Receivables classified as export are those claims arising from export sales of airconditioner units to related parties. The Parent Company has outstanding interest-bearing loans receivable to its Subsidiary amounting to P=154.0 million as of March 31, 2012 and 2011. The 12% nominal interest is to be paid on an annual basis while the principal is payable on

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its maturity date, March 31, 2016. The present value equivalent of this receivable in the Parent Company and Subsidiary’s books amounted to P=129.5 million and P=125.5 million as of March 31, 2012 and 2011, respectively, which were eliminated during consolidation.

The changes in allowance for doubtful accounts in 2012 and 2011 follow:

2012

Domestic Other

receivables Total

Balances at beginning of year P=28,133,459 P=6,357,041 P=34,490,500 Provisions (Note 17) 1,847,580 − 1,847,580 Write-off (5,300,013) (835,067) (6,135,080)

Balances at end of year P=24,681,026 P=5,521,974 P=30,203,000

Specific P=15,652,090 P=− P=15,652,090 Collective 9,028,936 5,521,974 14,550,910

P=24,681,026 P=5,521,974 P=30,203,000

2011

Domestic Other

receivables Total

Balances at beginning of year P=20,011,900 P=6,392,600 P=26,404,500 Provisions (Note 17) 8,121,559 − 8,121,559 Reversals (Note 17) − (35,559) (35,559)


Specific P=19,264,869 P=835,067 P=20,099,936 Collective 8,868,590 5,521,974 14,390,564

P=28,133,459 P=6,357,041 P=34,490,500

As of March 31, 2012 and 2011, the aging analysis of trade receivables and other receivables follows:

2012

Neither Past

Due nor Past Due but not Impaired

Impaired 1-30 days Over 30 days Over 60 days Impaired Total

Trade

Domestic P=484,461,069 P=75,531,114 P=3,787,502 P=4,598 P=15,652,090 P=579,436,373

Export 124,616,071 207,602 − − − 124,823,673

Others 106,399,410 − − − − 106,399,410

Total P=715,476,550 P=75,738,716 P=3,787,502 P=4,598 P=15,652,090 P=810,659,456

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2011

Neither Past

Due nor Past Due but not Impaired

Impaired 1-30 days Over 30 days Over 60 days Impaired Total

Trade

Domestic P= 476,600,730 P= 44,228,660 P=2,442,072 P= 19,665,688 P=19,264,869 P=562,202,019 Export 134,545,992 3,534,038 5,332 − − 138,085,362

Others 84,102,292 16,126,091 − − 835,067 101,063,450

Total P=695,249,014 P=63,888,789 P=2,447,404 P=19,665,688 P=20,099,936 P=801,350,831

The gross amount of individually impaired receivables as of March 31, 2012 and 2011 amounted to P=15.7 million and P=20.1 million, respectively.

6. Inventories


2012 2011

At NRV: Finished goods and merchandise P=139,728,696 P=142,556,944 Raw materials 124,026,676 177,196,256 Spare parts and supplies 5,835,616 7,108,381 Goods in process 4,626,809 10,381,416 At cost: Finished goods and merchandise 99,073,160 161,464,600 Goods in transit 96,749,556 131,001,212

P=470,040,513 P=629,708,809

The related cost of inventories recorded at NRV amounted to P=358.9 million and P=403.4 million as of March 31, 2012 and 2011, respectively. The amount of write-down of inventories recognized as expense and included under cost of goods sold amounted to P=18.5 million, P=27.6 million and P=13.5 million in 2012, 2011 and 2010, respectively. The amount of inventories recognized in cost of goods sold during the period is P=4.5 billion, P=5.1 billion and P=4.6 billion in 2012, 2011 and 2010, respectively (see Note 15).

7. Available-for-Sale Investments

AFS investments include quoted equity shares. The carrying value of the AFS investments amounted to P=2.3 million as of March 31, 2012 and 2011. The changes in fair value recognized in other comprehensive income amounted to P=597 in 2012 and P=3,731 in both 2011 and 2010. In 2011, the Group recognized impairment loss on AFS investments amounted to P=0.3 million directly to profit or loss, included under Other income (expense).

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The movements in unrealized gain on AFS investments follow:

2012 2011

Balance at beginning of year P=1,380,371 P=1,376,640 Changes in fair value 597 3,731

Balance at end of year P=1,380,968 P=1,380,371

Dividend income earned from AFS investments amounted to P=200, P=670 and P=17,484 in 2012, 2011 and 2010, respectively.

8. Property, Plant and Equipment

The rollforward of this account follows:

2012

Land and Land

Improvements

Factory Machinery, Equipment

and Tools Buildings and Improvements

Office Furniture,

Fixtures and Equipment

Transportation Equipment Total

Cost Balances at beginning of

year P=236,029,163 P=1,372,587,888 P=556,833,778 P=219,194,407 P=75,063,881 P=2,459,709,117 Acquisitions − 41,703,443 13,034,362 8,425,913 7,714,187 70,877,905 Retirements/disposals − (115,883,704) (6,685,328) (15,882,309) (16,822,081) (155,273,422)

Balances at end of year 236,029,163 1,298,407,627 563,182,812 211,738,011 65,955,987 2,375,313,600

Accumulated depreciation and amortization

Balances at beginning of

year 2,281,040 1,278,526,090 344,586,566 201,980,354 60,228,540 1,887,602,590 Depreciation and

amortization (Note 19) 285,130 73,982,938 27,511,559 9,878,410 9,214,033 120,872,070 Retirements/disposals − (114,793,651) (6,525,517) (13,512,017) (16,615,986) (151,447,171)


Net book value P=233,462,993 P=60,692,250 P=197,610,204 P=13,391,264 P=13,129,400 P=518,286,111

2011

Land and Land

Improvements

Factory Machinery, Equipment

and Tools Buildings and

Improvements

Office Furniture,

Fixtures and Equipment

Transportation Equipment Total

Cost Balances at beginning of

year P=236,029,163 P=1,316,013,593 P=557,393,588 P=226,848,857 P=67,606,409 P=2,403,891,610 Acquisitions − 130,771,573 26,939,123 8,851,216 18,127,636 184,689,548 Retirements/disposals − (74,197,278) (27,498,933) (16,505,666) (10,670,164) (128,872,041)



Balances at beginning of year 1,995,910 1,270,089,936 333,668,944 206,249,725 62,565,710 1,874,570,225

Depreciation and amortization (Note 19) 285,130 75,413,104 26,254,417 11,349,641 4,909,880 118,212,172

Retirements/disposals − (66,976,950) (15,336,795) (15,619,012) (7,247,050) (105,179,807)


Net book value P=233,748,123 P=94,061,798 P=212,247,212 P=17,214,053 P=14,835,341 P=572,106,527

The land owned by PERC on which the manufacturing facilities are located is leased by the Parent Company under a twenty-five year lease agreement. Lease

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rentals were eliminated in the consolidated financial statements. Upon expiration of the lease, title to the land will not be transferred to the Parent Company. The Parent Company entered into a finance lease agreement with Build Operate and Transfer (BOT) Lease and Finance Philippines, Inc. for the vehicles of its executives. The carrying value of those leased vehicles, included under transportation equipment, amounted to P=5.1 million and P=5.0 million as of March 31, 2012 and 2011, respectively (see Note 22).

9. Investment Properties

The rollforward of this account follows:

2012

Building Building

Improvement Total

Cost Balances at beginning and

end of year P=115,251,594 P=115,622,923 P=230,874,517


Balances at beginning of year 43,680,776 111,207,566 154,888,342

Depreciation and amortization (Note 19) 4,610,064 4,415,357 9,025,421

Balances at end of year 48,290,840 115,622,923 163,913,763

Net book value P=66,960,754 − P=66,960,754

2011

Building Building

Improvement Total

Cost Balances at beginning and

end of year P=115,251,594 P=115,622,923 P=230,874,517


Balances at beginning of year 39,070,716 99,632,635 138,703,351


Balances at end of year 43,680,776 111,207,566 154,888,342

Net book value P=71,570,818 P=4,415,357 P=75,986,175

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The aggregate fair value of the investment properties amounted to P=91.7 million and P=114.0 million as of March 31, 2012 and 2011, respectively. The fair value of the investment properties has been determined by an independent appraiser using Market Data Approach. In this approach, the value of the investment properties is based on sales and listings of comparable property registered within the vicinity. The technique of this approach requires the establishing comparable property by reducing reasonable comparative sales and listings to a common denominator. This is done by adjusting the differences between the subject property and those actual sales and listings regarded as comparable.

Rent income recognized under other income - net amounted to P=27.6 million, P=28.8 million and P=30.7 million in 2012, 2011 and 2010, respectively (see Notes 21 and 23).

10. Other Current Assets and Other Assets

These accounts consist of the following:

2012 2011

Other current assets Creditable withholding taxes P=61,791,902 P=64,269,006 Prepaid expenses 24,479,643 20,250,697 Tax credit certificate 3,459,909 4,334,945 Other prepaid taxes 3,277,610 18,596,757 Advances to employees 627,489 730,812 Others 1,265,456 3,083,002

P=94,902,009 P=111,265,219

Other assets Deposits paid P=12,812,130 P=13,895,822 Software 14,272,492 18,454,807 Others 2,916,089 2,872,376

P=30,000,711 P=35,223,005

The composition and movements of software follow:

2012 2011

Cost Balances at beginning of year P=113,817,394 P=98,356,037 Additions 3,191,713 17,664,567 Retirement − (2,203,210)

Balances at end of year 117,009,107 113,817,394

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Accumulated amortization Balances at beginning of year 95,362,587 96,327,170

Amortization (Note 19) 7,374,028 1,238,627

Retirement − (2,203,210)

Balances at end of year 102,736,615 95,362,587

Net book value P=14,272,492 P=18,454,807

Software is included under “Other assets” account in the consolidated statements of financial position. Amortization of software cost is included in the “Depreciation and amortization” account under general and administrative expenses in profit or loss.

11. Accounts Payable and Accrued Expenses

This account consists of: 2012 2011

Trade accounts payable (Notes 23 and 30) P=348,252,305 P=384,758,471 Accrued advertising expenses 316,061,000 270,406,000 Payable to suppliers 113,576,882 129,918,090 Advances from customers 52,026,393 39,964,092 Accrued releasing expenses 31,477,674 21,658,758 Salaries and other employee benefits 29,131,172 28,077,368 Output VAT 17,188,866 19,219,665 Brand license fee payable (Note 23) 13,000,776 14,866,838 Other accrued expenses (Note 23) 20,434,846 45,467,707

P=941,149,914 P=954,336,989

Trade accounts payable are non-interest-bearing and are generally on 30- to 60- day terms. Other accrued expenses include withholding taxes and utilities.

12. Provisions for Estimated Liabilities

The rollforward of this account follows: 2012

Warranty

Claims

Provisions for Other

Estimated Liabilities Total

Balances at beginning of year P=39,046,000 P=133,510,800 P=172,556,800

Provisions (Note 16) 36,472,058 167,970,428 204,442,486

Usage (37,769,687) (183,020,638) (220,790,325)


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2011

Warranty

Claims

Provisions for Other Estimated

Liabilities Total

Balances at beginning of year P=38,948,000 P=101,455,300 P=140,403,300

Provisions (Note 16) 41,985,176 117,410,800 159,395,976

Usage (41,887,176) (85,355,300) (127,242,476)


Provisions for warranty claims are recognized for expected warranty claims on products sold, based on past experience of the level of repairs and returns.

Provision for other estimated liabilities consists of provisions for discounts and other liabilities.

The other information usually required by PAS 37, Provisions, Contingent Liabilities and Contingent Assets, is not disclosed on the grounds that it may negatively affect the operations of the Group and prejudice the outcome of the litigations and assessments.

13. Capital Stock

Details of capital stock follow:

Par

Value Shares

Authorized Amount Shares Issued and

Outstanding Amount

Class A P=1 169,400,000 P=169,400,000 84,723,432 P=84,723,432 Class B 1 677,600,000 677,600,000 337,994,588 337,994,588

847,000,000 P=847,000,000 422,718,020 P=422,718,020

a. The Class A shares of stock can be issued to Philippine nationals only, while the Class B shares of stock

can be issued to either Philippine or foreign nationals. The Group’s Class A shares of stock are listed in

the Philippine Stock Exchange.

b. Below is the summary of the Parent Company’s track record of registration of securities under the

Securities Regulation Code (SRC):

Date Number

of Shares Issue Price

January 21, 1983 44,100,000 P=1

July 14, 1986 74,042,783 1

January 16, 1992 104,988,723 1

As of March 31, 2012, the total number of shares registered under the SRC is 84,723,432 shares being held by 475 stockholders.

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14. Retained Earnings

a. On September 18, 1990, the Parent Company entered into a Merger Agreement with National Panasonic (Phils.) Inc. (NPPI), a related party and the exclusive distributor of the “National” brand of electronic products. The terms and conditions of the merger, as set forth in the Articles of Merger which was approved by the SEC on October 29, 1990, include, among others, the transfer by NPPI to the Parent Company, being the surviving corporation, of all its assets, liabilities and business on the same date. The transaction was accounted for using the pooling of interests method.

The retained earnings inherited from NPPI before the effectivity of the merger amounting to P=64.7 million are included in the statement of financial position under “unappropriated retained earnings”. Such is not available for distribution to stockholders in the form of cash or property dividends.

b. On March 31, 2012, the Parent Company’s BOD approved the additional appropriation of retained earnings amounting to P=100.0 million. As indicated in the Board Resolution dated March 31, 2012, the appropriated retained earnings amounting to P=2.87 billion pertain to the appropriation for plant expansion and modernization and upgrade of factory facilities and equipment of the Parent Company. On March 31, 2011, the Parent Company’s BOD approved the reversal of prior years’ appropriations in retained earnings amounting to P=75.0 million.

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c. The Parent Company’s BOD declared cash dividends as follows:

2012 2011 2010 April 13, 2011, 5.0% cash dividends to

stockholders of record as of April 29, 2011 payable on May 20, 2011 (P=0.05 per share) P=21,135,901 P=− P=−

January 12, 2011, 5.0% cash dividends to stockholders of record as of January 26, 2011 payable on February 4, 2011 (P=0.05 per share) − 21,135,901 −

April 2, 2010, 5.0% cash dividends to stockholders of record as of April 26, 2010 payable on May 20, 2010 (P=0.05 per share) − 21,135,901 −

December 16, 2009, 5.0% cash dividends to stockholders of record as of January 7, 2010 payable on January 21, 2010 (P=0.05 per share) − − 21,135,901

May 29, 2009, 5.0% cash dividends to stockholders of record as of June 19, 2009 payable on June 30, 2009 (P=0.05 per share) − − 21,135,901

P=21,135,901 P=42,271,802 P=42,271,802

d. The accumulated earnings of PERC, included in the consolidated

unappropriated retained earnings amounting to P=3.5 million, are available for dividend declaration when these are declared as dividends by the subsidiary as approved by the subsidiary’s board of directors.

15. Cost of Goods Sold This account consists of:

2012 2011 2010

Direct materials (Note 23) P=2,420,464,970 P=2,479,483,459 P=2,292,626,292

Direct labor (Note 18) 93,677,233 114,091,183 109,309,055

Manufacturing overhead: Indirect labor (Note 18) 150,159,643 145,837,793 121,076,050 Depreciation and amortization

(Note 19) 101,334,433 103,775,207 119,223,660 Electricity, gas and water 42,886,207 48,297,285 32,831,012 Repairs and maintenance 26,805,498 28,553,105 25,045,435 Indirect materials 21,129,593 21,345,705 15,936,649 Research and development 8,434,186 12,191,510 19,845,147 Travel 9,230,306 9,950,176 8,595,713 Taxes and dues 7,518,719 7,479,030 7,885,033 Insurance 7,187,292 9,093,197 8,917,320 Supplies 7,137,815 8,315,381 7,299,797 Provision for decline in value

of inventories 2,530,852 5,150,309 12,539,350 Others (Note 20) 6,816,480 4,686,403 4,646,431

Total manufacturing overhead 391,171,024 404,675,101 383,841,597

Total manufacturing costs 2,905,313,227 2,998,249,743 2,785,776,944 (Forward)

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2012 2011 2010

Goods in process: Beginning of year P=11,044,416 P=9,592,365 P=10,986,869 End of year (4,921,809) (11,044,416) (9,592,365)

Cost of goods manufactured 2,911,435,834 2,996,797,692 2,787,171,448 Finished goods and merchandise: Beginning of year 356,903,543 459,963,297 337,345,179 Add purchases (Note 23) 1,559,035,723 1,968,525,952 1,920,886,928 End of year (308,209,273) (356,903,543) (459,963,297)

P=4,519,165,827 P=5,068,383,398 P=4,585,440,258

16. Selling Expenses


2012 2011 2010

Sales promotions P=633,285,007 P=820,509,386 P=692,052,044 Freight 177,169,107 178,764,762 193,974,367 Provision for warranty

claims (Note 12) 36,472,059 41,985,176 47,127,554

Advertising 39,252,933 93,055,396 39,972,367 Sales commission (Note 23) 11,172,045 9,877,598 9,799,577

P=897,351,151 P=1,144,192,318 P=982,925,909

17. General and Administrative Expenses

This account consists of: 2012 2011 2010

Salaries, wages and employees benefits (Note 18) P=200,932,226 P=216,711,396 P=198,467,976

Technical assistance fees (Note 23) 93,629,033 102,136,797 100,024,742


Brand license fees (Note 23) 29,129,372 30,825,754 31,026,058 Travel 22,337,355 26,905,257 26,923,482 Taxes and dues 20,344,306 22,227,103 21,003,248 Repairs and maintenance 15,531,765 15,430,476 13,534,210 Communications 17,263,613 14,662,746 17,280,274 Allocated costs (Note 23) 15,625,668 14,291,651 13,366,613 Electricity, gas and water 10,982,674 12,200,137 12,778,825 (Forward)

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2012 2011 2010

Insurance P=11,054,347 P=8,100,028 P=8,152,840 Outsourcing 10,124,219 9,111,308 7,507,672 Supplies 8,713,314 8,588,966 9,619,723 Rent 7,854,142 8,926,141 11,388,322 Freight and storage 5,744,008 4,643,044 4,454,006 Provision (reversal of

allowance) for doubtful accounts (Note 5) 1,847,580 8,086,000 (987,025)

Provision (reversal) for other estimated liabilities 823,360 (7,761,000) 2,028,714 Others (Note 20) 24,415,839 27,575,001 32,192,450

P=532,289,907 P=554,521,388 P=539,338,383

18. Employee Benefits

Employee benefits consists of:

2012 2011 2010

Compensation P=390,084,069 P=424,440,176 P=375,544,807 Net benefit expense (Note 24) 18,687,165 15,985,263 15,284,220 Other benefits 35,997,868 36,214,933 38,024,054

P=444,769,102 P=476,640,372 P=428,853,081

Personnel expenses are shown in the consolidated statements of comprehensive income as follows:

2012 2011 2010

Cost of goods sold (Note 15) P=243,836,876 P=259,928,976 P=230,385,105 General and administrative

expenses (Note 17) 200,932,226 216,711,396 198,467,976

P=444,769,102 P=476,640,372 P=428,853,081

19. Depreciation and Amortization

2012 2011 2010

Cost of goods sold (Note 15) P=101,334,433 P=103,775,207 P=119,223,660 General and administrative

expenses (Note 17) 35,937,086 31,860,583 30,576,253

P=137,271,519 P=135,635,790 P=149,799,913

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Entertainment, Amusement and Recreation (EAR) Expenses

Details of EAR expenses required to be disclosed under Revenue Regulation No. 10-2002 of the Bureau of Internal Revenue, which authorizes the imposition of a ceiling on EAR expenses, follow:

2012 2011 2010

Cost of goods sold (Note 15) P=23,797 P=41,744 P=67,865 General and administrative

expenses (Note 17) 410,991 882,331 1,127,908

P=434,788 P=924,075 P=1,195,773

20. Other Income - net

2012 2011 2010

Interest income (Note 4) P=55,538,652 P=51,733,196 P=53,930,787 Rent income (Notes 9 and 3) 27,553,506 28,811,113 30,681,954 Income from scrap sales 6,505,860 3,393,855 3,173,905 Gain on sale of property and equipment 1,182,413 1,360,000 − Foreign currency exchange gain (loss) 1,649,786 (4,179,458) 1,907,214 Interest expense (980,267) (1,124,178) (729,914) Dividend income (Note 7) 200 670 17,484 Impairment loss on PPE − − (3,482,820) Miscellaneous income (expense) - net (Note 23) 141,739 (2,657,764) (4,138,057)

P=91,591,889 P=77,337,434 P=81,360,553

21. Lease Agreements

Finance Lease The Group leases certain motor vehicles with terms of three years at which point title to the property passes to the Group. The Group is required to pay the monthly principal and interest amounts specified in the lease agreements.

Total principal and interest payments amounted to P=3.7 million, P=4.0 million and P=3.1 in 2012, 2011 and 2010, respectively.

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The future minimum lease payments as of March 31 under the lease agreements follow:

2012 2011

Minimum payments

Present value of payments

Minimum payments

Present value of payments

Within one year P=2,768,907 P=2,441,045 P=2,280,968 P=1,780,825 After one year but not more

than five years 4,515,453 4,106,141 3,913,840 3,660,643

Total minimum lease payments 7,284,360 6,547,186 6,194,808 5,441,468 Less amounts representing

finance charges (737,174) − (753,340) −

Present value of minimum lease payments P=6,547,186 P=6,547,186 P=5,441,468 P=5,441,468

Operating Lease The Group has an operating lease agreement on its building and building improvements with Panasonic Precision Devices Philippines Corporation (PPRDPH). The contract is renewable upon mutual agreement with the lessee (see Note 23). The future minimum lease receivables under this noncancellable operating lease follow:

22. Related Party Transactions

The Parent Company has entered into various transactions with related parties. Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. Transactions with related parties are made substantially on the same terms as with other individuals and businesses. The companies under common control of Panasonic Corporation (PC) (referred to as affiliates) that the Parent Company has transactions are as follows:

Panasonic Procurement Malaysia SDN. BHD. (PPMY)

Panasonic Logistics Asia Pacific Pte Ltd. (PA-PLAP)

Panasonic Factory Solutions Asia Pacific Pte Ltd. (PFSAP)

Panasonic Communications Products Service Co., Ltd.

2012 2011

Within one year P=27,428,352 P=20,796,523 After one year but not more than five years 20,571,264 −

P=47,999,616 P=20,796,523

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Panasonic Industrial Asia Pte. Ltd. (PIAP)

Panasonic Corporation Lighting & Devices Business

Panasonic Corporation AVC Marketing Division (Japan)

Panasonic Corporation Eco Solutions Company Energy Systems Business Group

Panasonic Corporation Appliances Marketing Division(Japan)

Panasonic Precision Devices Philippines Corporation (PPRDPH)

Panasonic Taiwan Co., Ltd. AVC Networks Company

PT.Panasonic Manufacturing Indonesia Eco System Division

Panasonic Corporation Corporate Procurement Division Procurement Company Materials

Procurement BU

Panasonic Hong Kong Co., Ltd.

Panasonic Corporation AVC Networks Company Consumer Products Business Group

Panasonic Corporation Export Center

Panasonic Corporation Appliances Company Air-Conditioner BU

Panasonic Appliances Air-conditioning R&D (M) SDN.BHD

Panasonic Corporation Appliances Company Refrigerator BU

Panasonic Eco Solutions (Hong Kong) Co., Ltd.

Panasonic Corporation Corporate Procurement Division Procurement Company Components &

Devices Procurement

Panasonic Ecology Systems (Thailand) Co.,Ltd.

Panasonic Corporation Appliances Company Laundry Systems And Vacuum Cleaner BU

Panasonic Corporation Global Consumer Marketing Sector

Panasonic Taiwan CO. LTD. AVC Networks Company

Panasonic Industrial Devices Sales (M) SDN.BHD.

Panasonic Trading Singapore Pte. Ltd. (PTS)

Significant transactions with related parties are as follows:

a. The Parent Company imports substantially all of its raw material requirements,

merchandise, machinery and equipment, and other spare parts and supplies from PC and affiliates. Purchases from PC amounted to P=193.4 million, P=246.2 million and P=93.0 million in 2012, 2011 and 2010, respectively. Purchases made from affiliates amounted to P=1.9 billion in 2012 and P=2.5 billion 2011 and 2010 (see Note 15).

b. The Parent Company sells various products to related parties. Sales to affiliates amounted to P=894.4 million, P=1.1 billion and P=818.2 million in 2012, 2011 and 2010, respectively. As of March 31, 2012, major customer is PA-PLAP for which the related receivable balance amounted to P=124.5 million. As of March 31, 2011, PTS, PPMY and PPRDPH are the major customers for which the related receivable balance amounted to P=137.8 million, P=.2 million and P=.1 million, respectively.

c. The Parent Company has several Technical Assistance Agreements with PC.

Under the terms of the agreements, the Parent Company pays semi-annual technical assistance fees equivalent to a certain percentage of sales of selected products ranging from 3.0% to 3.5%. Technical assistance fees charged to the Parent Company amounted to P=93.6 million, P=102.1 million and P=100.0 million in 2012, 2011 and 2010, respectively (see Note 17).

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d. The Parent Company has existing agreements with PC and whereby the Parent Company reimburses PC based on a certain percentage of sales and allocated costs attributable to the services rendered by PC. Allocated costs charged to operations amounted to P=15.6 million, P=14.3 million and P=13.4 million in 2012, 2011 and 2010, respectively (see Note 17).

e. The Parent Company has existing trademark license agreements with PC and affiliates. Under the terms of the agreements, the Parent Company is granted a non-exclusive license to use the trademark “KDK” and “Panasonic” on or in relation to its products starting April 2004. The Parent Company pays royalty equivalent to 1.0% of the sales price of the products bearing the brands. Brand license fees charged by the Ultimate Parent Company amounted to P=28.3 million, P=29.2 million and P=29.60 million in 2012, 2011, and 2010, respectively, while brand license fees charged by the affiliates amounted to P=0.8 million, P=1.6 million and P=1.4 million in 2012, 2011 and 2010, respectively (see Note 17).

f. The Parent Company has existing Commission Agreements with PC and

affiliates, usually renewable on an annual basis, wherein the Parent Company pays commissions to such affiliates. The commission expense covers various export products and are computed based on a certain percentage of the invoice amount or on a fixed amount per unit sold. Commission expense charged to selling expenses amounted to P=11.2 million, P=9.9 million and P=9.8 million in 2012, 2011 and 2010, respectively (see Note 16).

g. The Parent Company has a Memorandum Agreement with PIAP. Under the terms of the agreement, the Parent Company will render services in the form of general advice and assistance to PIAP. Assistance fee reflected under miscellaneous income amounted to P=0.7 million and P=0.9 million in 2011 and 2010, respectively (see Note 21). The agreement with PIAP has ended in March 2011. In 2012, the Parent Company has entered into a Memorandum Agreement with PFSAP. Under the terms of the agreement, the Parent Company will render services in the form of general advice and assistance to PFSAP. In return, PFSAP agrees to pay the Parent Company service fees on a monthly basis in US Dollars (USD) plus a 5% markup which are equal to the direct and indirect costs incurred by the Parent Company. Assistance fee reflected under miscellaneous income amounted to P=0.3 million as at March 31, 2012 (see Note 21).

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h. The Group’s key management personnel include the president and directors. The compensation of key management personnel consists of:

2012 2011 2010

Short-term employee benefits P=54,834,719 P=49,085,582 P=34,399,665 Post-employment benefits 4,082,357 4,043,326 2,600,075

P=58,917,076 P=53,128,908 P=36,999,740

There are no agreements between the Group and any of its key management personnel providing for benefits upon termination of employment, except for such benefits to which they may be entitled under the Group’s retirement plan.

j. On March 1, 2008, the Parent Company entered into a two-year renewable

contract of lease with PPRDPH for the rent of its building with some covered areas or improvements, comprising approximately 15,072.6 square meters more or less, located at Brgy. Don Jose, Laguna Technopark, Sta. Rosa City, Laguna. The leased properties are accounted for by the Parent Company as “Investment properties” (see Note 9). The lease contract was renewed on March 1, 2012 and 2010 covering the same terms and conditions. Rent income recognized under miscellaneous income amounted to P=27.6 million, P=28.8 million and P=30.7 million in 2012, 2011 and 2010, respectively (see Note 21).

As a result of the related party transactions, the Parent Company has outstanding balances with related parties as follows. Amounts due from and due to related parties are non interest bearing and are normally settled within one year.

2012 2011

Receivable from related parties Trade receivables from affiliates P=124,823,673 P=138,085,362 Other receivables: Affiliates 55,221,667 13,940,861 PC − 20,220,747 Loans to officers and employees 671,492 786,348

P=180,716,832 P=173,033,318

Payable to related parties Trade payables: Affiliates P=111,914,398 P=193,177,279 PC 37,251,912 15,954,128 Accrued expenses: Affiliates 28,892,916 9,165,039 PC 2,918,020 8,601,370 Technical assistance fees payable 39,981,585 48,677,824

P=220,958,831 P=275,575,640

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Receivable from and payable to related parties are presented under “Receivables” and “Accounts payable and accrued expenses”, respectively. The sales to and purchases from related parties are made at terms equivalent to those that prevail in arm’s length transactions. Outstanding balances as at March 31, 2012, 2011 and 2010 are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. As of March 31, 2012, 2011 and 2010, the Group has not recorded any impairment of receivables relating to amounts owed by related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

23. Retirement Plan

The Parent Company has a funded, noncontributory defined benefit retirement plan covering all of its regular employees. The benefits are based on the years of service and percentage of latest monthly salaries.

The principal actuarial assumptions used in determining retirement benefits for the Parent Company’s plan are as follows:

2012 2011 2010

Discount rate Beginning 7.60% 8.25% 9.00% Ending 6.70% 7.60% 8.25%

Salary increase rate Beginning 5.00% 5.00% 5.00% Ending 5.00% 5.00% 5.00%

The expected rate of return on plan assets is 5.0% in 2012 and 7.0% in 2011 and 2010, respectively.

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The net benefit expense recognized in the profit and loss for the years ended March 31, 2012, 2011 and 2010 are as follows:

2012 2011 2010

Interest cost P=21,395,784 P=19,356,514 P=17,692,933 Expected return on plan

assets (18,754,173) (17,565,170) (12,753,338) Current service cost 16,045,554 14,193,919 12,136,957 Net actuarial gain recognized during the year − − (1,792,332)

Net benefit expense (Note 18) P=18,687,165 P=15,985,263 P=15,284,220

Actual return on plan assets amounted to P=0.7 million, P=8.6 million and P=2.7 million in 2012, 2011 and 2010, respectively. The net pension liability recognized in the statements of financial position as of March 31, 2012 and 2011 are as follows:

2012 2011

Fair value of plan assets P=278,202,065 P=267,916,760 Present value of defined benefit obligation (334,077,101) (281,523,478)

(55,875,036) (13,606,718) Unrecognized actuarial losses 55,875,036 13,606,718

Pension liability P=− P=−

The reconciliations of the present value of defined benefit obligation as of March 31, 2012 and 2011 are as follows:

2012 2011

Beginning of year P=281,523,478 P=234,624,407 Interest cost 21,395,784 19,356,514 Current service cost 16,045,554 14,193,919 Benefits paid (9,143,554) (7,556,738) Actuarial loss on obligation 24,255,839 20,905,376

End of year P=334,077,101 P=281,523,478

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The reconciliations of the fair value of plan assets as of March 31, 2012 and 2011 are as follows:

2012 2011

Beginning of year P=267,916,760 P=250,930,995 Expected return on plan assets 18,754,173 17,565,170 Benefits paid (9,143,554) (7,556,738) Contributions 18,687,165 15,985,263 Actuarial loss on plan assets (18,012,479) (9,007,930)

End of year P=278,202,065 P=267,916,760

The rollforward of unrealized actuarial gains (losses) is as follows:

2012 2011

Balances at beginning of year (P=13,606,718) P=16,306,588 Plan obligation (24,255,839) (20,905,376) Plan assets (18,012,479) (9,007,930)

Balances at end of year (P=55,875,036) (P=13,606,718)

The amounts for the current period and the four previous periods are as follows:

2012 2011 2010 2009 2008

Fair value of plan assets P=278,202,065 P=267,916,760 P=250,930,995 P=182,190,536 P=289,880,756 Present value of defined benefit obligation

(334,077,101) (281,523,478) (234,624,407) (196,588,145) (358,659,983)

Surplus (deficit) (55,875,036) (P=13,606,718) P=16,306,588 (P=14,397,609) (P=68,779,227)

Experience adjustments on plan obligations

P=24,255,839 P=20,905,376 P=2,357,848 P=19,154,535 P=29,645,117

Experience adjustments on plan assets (P=18,012,479) (P=9,007,930) P=10,058,642 P=12,802,786 P=12,153,730

The major categories of plan assets as a percentage of the fair value of the total plan assets are as follows:

2012 2011 2010

Cash 1.54% 5.69% 23.52% Investments in government securities and other debt instruments 97.31% 94.31% 62.09% Others 1.15% − 14.39%

Total 100.00% 100.00% 100.00%

The Group’s plan contribution in the next twelve months amounted to P=29.7 million.

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24. Registration with the PEZA

The Parent Company is registered with the PEZA pursuant to the provision of RA No. 7916 (otherwise known as the “Special Economic Development Zone Act of 1995”), for Ecozone Export Enterprise for the manufacture of air conditioners and related service parts. Under the terms and conditions of its registration, the Parent Company is subject to certain requirements primarily related to the monitoring of its registered activities.

As a PEZA registered nonpioneer enterprise, the Parent Company’s existing

Board of Investments (BOI) operations, which were transferred to PEZA, are entitled to certain tax benefits and nontax incentives provided for the original project by the aforementioned law, which includes, among others, income tax holiday (ITH) for three years for incremental sales of air-conditioners starting April 1, 2003, 5.0% gross income taxation for air conditioners in lieu of national and local taxes, tax and duty-free importation of capital equipment and raw materials, exemption from realty taxes on machinery for four years from the date of acquisition, employment of foreign nationals and others. Any local sale of its registered products shall be subject to a separate application and prior PEZA approval.

The Parent Company’s BOI registration is deemed cancelled upon approval of its

PEZA registration. The Parent Company also agrees that a first lien shall automatically be

constituted upon any of its real or personal property found, existing and/or located in its registered operations to answer for any and all outstanding obligations or accounts owing, due and/or payable by the Parent Company to PEZA in the future, if any.

25. Income Taxes

The provision for income tax consists of:

2012 2011 2010

Current MCIT P=33,772,705 P=− P=44,457,249 RCIT − 17,545,158 − Deferred (5,240,385) − 58,794,262

P=28,532,320 P=17,545,158 P=103,251,511

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The reconciliation of income before income tax computed at the statutory tax rate to provision for income tax as shown in the consolidated statements of comprehensive income follows:

2012 2011 2010 Income tax at statutory income tax

rate P=25,653,615 P=18,897,576 P=32,523,878 Additions to (reductions in)

income taxes resulting from: Expired MCIT 28,411,155 − 34,591,267 Income subjected to final tax

and dividend income exempt from tax (15,461,655) (15,478,942) (15,914,894)

Movement in unrecognized deferred tax assets (6,653,055) 19,299,000 44,353,621

Income from PEZA registered activities (8,657,885) (9,870,500) (9,193,482)

Non-deductible expenses 1,233,311 1,014,864 860,780 Expired NOLCO − − 15,179,088 Others 4,006,834 3,683,160 851,253 Provision for income tax P=28,532,320 P=17,545,158 P=103,251,511

The components of the Group’s net deferred tax assets are as follows:

2012 2011 Deferred tax assets: Provisions for estimated liabilities and

other accruals P=79,590,001 P=74,094,000 Allowance for inventory losses 25,428,600 19,852,500 Unamortized pension fund contribution 15,319,307 19,927,548 Allowance for doubtful accounts 9,060,900 10,347,150 Unrealized foreign currency exchange

loss - net − 248,385 Deferred tax liability: Net book value of replacement and

burned property, plant and equipment (8,595,127) (9,466,015)

Unrealized foreign currency exchange gain - net (559,728) −

P=120,243,953 P=115,003,568

As of March 31, 2012 and 2011, the Group has the following unrecognized deferred tax assets:

2012 2011

Excess of MCIT over RCIT P=38,441,404 P=60,999,296 Provisions for estimated liabilities and other accruals 61,204,094 45,299,257

P=99,645,498 P=106,298,553

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In addition, the Group did not recognize deferred tax assets from Philippine Economic Zone Authority (PEZA) registered activities amounting to P=0.1 million, P=6.4 million and P=2.9 million as of March 31, 2012, 2011 and 2010, respectively. The Group assesses that it may not be probable that sufficient taxable income will be available in the foreseeable future against which these tax benefits can be realized.

The Group has MCIT that can be credited against regular corporate income tax. As of March 31, 2012, details of the unexpired MCIT for which no DTA was recognized follows:

MCIT Expiry Year

March 31, 2012 P=5,853,263 March 31, 2015 March 31, 2010 32,588,141 March 31, 2013

P=38,441,404

The following are the movements in MCIT:

2012 2011

Balance at beginning of year P=60,999,296 P=94,326,240 Additions 5,853,263 − Applied − (33,326,944) Expired (28,411,155) −

Balance at end of year P=38,441,404 P=60,999,296

In 2007, the Group incurred NOLCO amounting to P=65.1 million. Out of this amount, the Group was able to utilize P=14.5 million in 2010. The remaining balance amounting to P=50.6 million expired in 2010. The Group did not incur NOLCO subsequent to 2007.

26. Contingencies

The Group is contingently liable for lawsuits and tax assessments arising from the ordinary course of business. In the opinion of management and its legal counsels, the ultimate liability for the said lawsuits and tax assessments, if any, would not be material in relation to the Group’s financial position and operating results.

27. Basic/Diluted Earnings Per Share

Basic earnings per share are calculated by dividing net income attributable to the equity holders of the Parent Company by the weighted average number of common shares outstanding during the year. Diluted earnings per share is the

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same as the basic earnings per share as there are no potential dilutive shares outstanding.

The following are the income and share data used in the basic and diluted earnings per share computations:

2012 2011 2010

Net income attributable to the equity holders of the Parent Company (a) P=57,342,731 P=45,311,952 P=4,894,780 Weighted average number of common Shares (b) (Note 13) 422,718,020 422,718,020 422,718,020

Basic/diluted earnings per share (a/b) P=0.14 P=0.11 P=0.01

There have been no other transactions involving common shares or potential common shares between the reporting date and the date of the completion of the consolidated financial statements.

28. Reporting Segments

For management purposes, the Group’s business segments are grouped in accordance with that of PC’s lines of business, which are grouped on a product basis as follows: Audio Visual Communication (AVC) Networks, Home Appliances and Others. Under this structure, each business domain will integrate its research and development, manufacturing and sales, thereby establishing an autonomous structure that expedites business operations to accelerate growth.

Products under each business segment are as follows:

AVC Networks - This segment includes audio, video and communication equipment primarily related to selling products for media and entertainment industry.

Home Appliances - This segment includes home appliances and household equipment primarily related to selling for household consumers. Others - This segment includes electronic parts mounting machines, industrial and other equipment related to both business and household consumers.

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Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, income taxes are managed on a group basis and are not allocated to operating segments.

The Group’s segment information for the fiscal years ended March 31 is as follows (in thousands): 2012

AVC

Networks Home

Appliances Others Adjustments/ Eliminations Total

Revenues

External customers P=426,397 P=4,923,358 P=592,972 P=– P=5,942,727

Subsidiary 28,860 (28,860) −

Results Cost of goods sold (366,695) (3,657,490) (494,981) – (4,519,166)

Selling expenses (55,702) (765,645) (76,004) – (897,351)

General and administrative expenses (24,991) (303,340) (203,959) – (532,290)

Other income 505 7,528 83,559 – 91,592

Income before income tax (P=20,486) P=204,411 (P=69,553) (P=28,860) P=85,512

Segment assets P=1,351,161 P=1,129,299 P=2,253,770 P=120,2441 P=4,854,474 Segment liabilities 603,623 317,596 222,669 8302 1,144,718 Other disclosures Capital expenditures3 P=8,253 P=38,333 P=27,484 – P=74,070 Depreciation and amortization4 16,861 73,791 46,620 – 137,272 Interest income5 − − 55,539 − 55,539

Interest expense5 − − 980 − 980

1. Segment assets do not include deferred tax assets amounting to P=120,244. 2. Segment liabilities do not include income tax payable amounting to P=830. 3. Capital expenditures include acquisition of fixed assets and software costs. 4. Depreciation and amortization is divided between cost of goods sold and general and administrative 5. Interest income and expense are included in other income. 2011

AVC

Networks Home


(In thousands) Revenues External customers P=1,006,575 P=5,167,905 P=578,272 P=− P=6,752,752 Subsidiary 28,860 (28,860) −

Results Cost of goods sold (777,233) (3,836,164) (454,986) – (5,068,383)

Selling expenses (275,926)

(800,143) (68,123) − (1,144,192) General and administrative

expenses (46,357) (450,913) (57,252) − (554,522)

Other income 1,422 19,109 56,806 – 77,337

Income before income tax (P=91,519) P=99,794 P=83,577 (P=28,860) P=62,992

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Segment assets P=1,335,939 P=1,384,387 P=2,021,429 P=115,0031 P=4,856,758 Segment liabilities 817,614 11,208 352,191 1,8332 1,182,846 Other disclosures Capital expenditures3 P=46,932 P=134,622 P=20,800 P=− P=202,354 Depreciation and amortization4 2,326 73,237 60,073 − 135,636 Interest income − − 51,733 − 51,733 Interest expense − − 1,124 − 1,124 1. Segment assets do not include deferred tax assets amounting to P=115,003. 2. Segment liabilities do not include income tax payable amounting to P=1,833. 3. Capital expenditures include acquisition of fixed assets and software costs. 4. Depreciation and amortization is divided between cost of goods sold and general and administrative expenses. 5. Interest income and expense are included in other income.

2010

AVC

Networks Home


(In thousands) Revenues External customers P=858,273 P=4,708,694 P=567,790 P=− P=6,134,757 Subsidiary 28,860 (28,860) −

Results Cost of goods sold (626,124) (3,483,622) (475,694) – (4,585,440) Selling expenses (205,252) (744,047) (33,627) − (982,926) General and administrative

expenses (26,943) (377,649) (134,746) −

(539,338) Other income 5,364 31,247 44,749 – 81,360

Income before income tax P=5,318 P=134,623 (P=2,668) (P=28,860) P=108,413

Segment assets P=1,744,913 P=1,356,552 P=1,399,031 P=115,0031 P=4,615,499 Segment liabilities 501,864 278,824 159,948 4,1302 944,766 Other disclosures Capital expenditures3 P=6,203 P=24,598 P=11,083 P=− P=41,884 Depreciation and amortization4 6,476 91,478 51,846 − 149,800 Interest income5 − − 53,931 − 53,931 Interest expense5 − − 730 − 730

1. Segment assets do not include deferred tax assets amounting to P=115,003. 2. Segment liabilities do not include income tax payable amounting to P=4,130. 3. Capital expenditures include acquisition of fixed assets and software costs. 4. Depreciation and amortization is divided between cost of goods sold and general and administrative expenses. 5. Interest income and expense are included in other income.

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Geographic Information The tables below show the revenue information of the Group based on the location of the customer (in thousands):

2012 2011 2009

Philippines P=5,048,989 P=5,690,864 P=5,317,659 Hongkong 711,824 867,959 726,817 Africa 141,824 133,098 27,052 Singapore 23,221 9,308 19,317 Cambodia 15,568 48,489 25,696 Bangladesh 1,301 471 16,404 Myanmar − 1,493 1,497 Fiji − 946 315 Thailand − 124 −

Total revenue P=5,942,727 P=6,752,752 P=6,134,757

The Group has no single customer which accounts for 10.0% or more of the Group’s total revenue.

29. Financial Risk Management Objectives and Policies

The Group’s principal financial instruments comprise cash and cash equivalents and AFS investments. The main purpose of these financial instruments is to raise finances for the Group’s operations. The Group has various other financial instruments such as receivables, accounts payable and accrued expenses, dividends payable and technical assistance fees payable which arise from normal operations.

The main risks arising from the Group’s financial instruments are liquidity risk, market risk and credit risk. The Group also monitors the market price risk arising from all financial instruments.

Risk management structure All policy directions, business strategies and management initiatives emanate from the BOD which strives to provide the most effective leadership for the Parent Company. The BOD endeavors to remain steadfast in its commitment to provide leadership, direction and strategy by regularly reviewing the Group’s performance. For this purpose, the BOD convenes in quarterly meetings and in addition, is available to meet in the interim should the need arise.

The Group has adopted internal guidelines setting forth matters that require BOD approval. Under the guidelines, all new investments, any increase in investment in businesses and any divestments require BOD approval.

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The normal course of the Group’s business expose it to a variety of financial risks such as credit risk, liquidity risk and market risks which includes foreign currency exposure and interest rate risk and equity price risk. The Group’s principal financial liabilities comprise of accounts payable and accrued expenses, technical assistance fees payable and finance lease liability. The main purpose of these financial liabilities is to finance the Group’s operations. The Group has various financial assets such as cash and cash equivalents, receivables, and meralco refund, which arise directly from its operations.

The Group’s policies on managing the risks arising from the financial instruments follow:

Liquidity Risk The Group’s objective is to maintain a balance between continuity of funding and flexibility through collection of receivables and cash management. Liquidity planning is being performed by the Group to ensure availability of funds needed to meet working capital requirements.

Overall, the Group’s funding arrangements are designed to keep an appropriate balance between equity and debt to give financing flexibility while continuously enhancing the Group’s business.

The tables below summarize the maturity profile of the financial assets and liabilities, based on the contractual undiscounted payments as of March 31:

2012

Less than

30 days 2 to 3 months 3 to 12 months 1 to 5 years Total

Financial assets Cash and cash equivalents P=2771,241,822 P=− P=− P=− P=2,771,241,822

Receivables Trade Domestic 529,600,158 49,836,215 − − 579,436,373

Export 124,616,071 207,602 − − 124,823,673

Others 100,909,378 413,183 5,076,849 − 106,399,410

3,526,367,429 50,457,000 5,076,849 − 3,581,901,278

Financial Liabilities Accounts payable and accrued expenses* 923,760,996 − 200,052 − 923,961,048

Technical assistance fees payable 39,981,585 − − − 39,981,585 Finance Lease Liability 271,834 543,668 2,962,605 3,245,221 7,023,328

964,014,415 543,668 3,162,657 3,245,221 970,965,961

P=2,562,353,014 P=49,913,332 P=1,914,192 (P=3,245,221) P=2,610,935,317

*Excludes statutory liabilities amounting to P=17,188,866.

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2011

Less than

30 days 2 to 3 months 3 to 12 months 1 to 5 years Total

Financial assets Cash and cash equivalents P=2,536,563,130 P=15,178,567 P=− P=− P=2,551,741,697 Receivables Trade Domestic 485,791,928 44,072,660 32,337,431 − 562,202,019 Export 134,545,992 3,539,370 − − 138,085,362 Others 78,160,343 16,126,091 6,777,016 − 101,063,450 Meralco Refund (included under other receivables and other assets) − − 1,260,213 1,260,213

3,235,061,393 78,916,688 40,374,660 − 3,354,352,741

Financial Liabilities Accounts payable and accrued expenses* P=666,042,285 P=175,627,064 P=66,444,233 P=27,003,742 P=935,117,324 Technical assistance fees payable 48,677,824 − − − 48,677,824 Finance Lease Liability − − 2,280,968 3,913,840 6,194,808

714,720,109 175,627,064 68,725,201 30,917,582 989,989,956

P=3,234,112,270 (P=78,916,688) (P=28,350,540) (P=30,917,582) P=2,363,413,663

*Excludes statutory liabilities amounting to P=19,219,665.

Market Risk Market risk is the risk to earnings or capital arising from adverse movements in factors that affect the market value of financial instruments. The Group manages market risks by focusing on two market risk areas such as foreign currency risk and equity price risk. Foreign currency risk Exposure to currency risk arises from sales and purchases in currencies other than the Group’s functional currency. Foreign currency risk is monitored and analyzed systematically and is managed by the Group. The Group ensures that the financial assets denominated in foreign currencies are sufficient to cover the financial liabilities denominated in foreign currencies.

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As of March 31, 2012 and 2011, the foreign currency-denominated financial assets and financial liabilities in original currencies and their Philippine Peso (PHP) equivalents are as follows:

2012

USD JPY Equivalents

in PHP

Financial assets Cash in banks and cash equivalents 877,277 6,030,586 40,798,904 Receivables – net 3,881,173 12,551,958 173,128,308

4,758,451 18,582,544 213,927,212

Financial liabilities Accounts payable and accrued expenses 3,526,429 48,035,429 176,414,398

2011

USD JPY Equivalents

in PHP

Financial assets Cash in banks and cash equivalents 5,826,665 21,957,642 264,326,995 Receivables – net 3,291,596 47,634,040 167,787,338

9,118,261 69,591,682 432,114,333

Financial liabilities Accounts payable and accrued expenses 5,919,886 34,808,569 275,107,041

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The following tables demonstrate the sensitivity to a reasonably possible change in the US dollar (USD) and Japanese yen (JPY) currency rates, with all variables held constant, of the Group’s income before tax from continuing operations (due to changes in the fair value of monetary assets and liabilities).

Increase/ decrease in

USD rate

Effect on income

before tax

2012 +8% P=4,230,271 -8% (4,230,271) 2011 +8% P=11,102,197 -8% (11,102,197) 2012 +7% (P=1,075,590) -7% 1,075,590 2011 +7% P=1,276,088 -7% (1,2766,088)

The sensitivity analysis has been determined assuming the change in foreign currency exchange rates has occurred at the reporting date and has been applied to the Group’s exposure to currency risk for financial instruments in existence at that date, and all other variables, interest rates in particular, remain constant. The stated changes represent management assessment of reasonable possible changes in foreign exchange rates over the period until the next annual report date. There is no impact on the Group’s equity other than those already affecting profit or loss.

Equity price risk The Group’s exposure to equity price pertains to its investments in quoted shares which are classified as AFS investments in the consolidated statements of financial position. Equity price risk arises from the changes in the level of equity indices and the value of individual stocks traded in the stock exchange. The effect on equity (as a result of a change in fair value of equity instruments held as available-for-sale at March 31, 2012 and 2011) due to a reasonably possible change in equity indices is not material to the consolidated financial position of the Group.

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Credit Risk The Group trades only with recognized, creditworthy third parties. It is the Group’s practice that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis.

The Group does not hold collateral for cash and cash equivalents (excluding cash on hand, receivables, AFS investments and Meralco refund (included in other receivables and other assets), thus carrying values represent maximum exposure to credit risk at reporting dates.

The tables below summarize the credit quality of the Group’s financial assets (gross of allowance for credit and impairment losses) as at March 31:

2012

Neither Past Due nor Impaired Past Due or Impaired Total High Grade Standard Grade

Cash in banks and cash equivalents P=2,734,614,606 P=− P=− P=2,734,614,606

Receivables Trade Domestic − 484,461,069 94,975,304 579,436,373 Export 124,616,071 − 207,602 124,823,673

Others 106,399,410 − − 106,399,410

AFS investments 2,341,458 − − 2,341,458

Total P=2,967,971,545 P=484,461,069 P=95,182,906 P=3,547,615,520

2011

Neither Past Due nor Impaired Past Due or Impaired Total High Grade Standard Grade

Cash in banks and cash equivalents P=2,522,778,241 P=− P=− P=2,522,778,241 Receivables Trade Domestic − 476,600,730 85,601,289 562,202,019 Export 134,545,992 − 3,539,370 138,085,362 Others 84,102,292 − 16,961,158 101,063,450 AFS investments 2,340,861 − − 2,340,861 Meralco refund 1,260,213 − − 1,260,213

Total P=2,745,027,599 P=476,600,730 P=106,101,817 P=3,327,730,146

The credit quality of financial assets was determined as follows: Cash in banks and cash equivalents - are composed of bank deposits and money market placements made with reputable financial institutions and hence, graded as “high grade”.

Receivables - high grade receivables are receivables from related parties and employees while standard grade receivables are receivables from dealers who pay within the Group’s normal credit terms.

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AFS investments - the quoted investments are graded as “high grade” since these are investments in highly rated companies.

Meralco refund - the Group’s Meralco refund is considered as “high grade” since collectibility of the refund is reasonably assured.

Capital Management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.

The Group’s capital as of March 31, 2012 and 2011 are as follows:

2012 2011

Capital stock P=422,718,020 P=422,718,020 Additional paid-in capital 4,779,762 4,779,762 Retained earnings Appropriated 2,867,400,000 2,767,400,000 Unappropriated 336,958,448 400,751,618

P=3,631,856,230 P=3,595,649,400

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or issue new shares.

The Parent Company declared cash dividends amounting to P=21.1 million in 2012 and P=42.7 million in both 2011 and 2010 (see Note 14).

There were no changes made in the objectives, policies or processes for the years ended March 31, 2012, 2011 and 2010, respectively.

Financial Assets and Financial Liabilities The Company’s financial instruments comprise of cash and cash equivalents, loans and receivables, AFS investments, accounts payable and accrued expenses, technical assistance fees payable and finance lease liability. Considering that these accounts are short-term in nature, the carrying amount approximate fair values as of March 31, 2012 and 2011, except for the following: AFS investments- is based on quoted market prices

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Finance lease liability - is estimated by discounting the future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. The fair value hierarchy of financial instruments recognized at fair value follows: Level 1 - Financial instruments based on quoted prices in active markets for identical assets or liabilities. Level 2 - Those involving inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 - Those inputs for the asset or liability that are not based on observable market data (unobservable inputs). The only instruments carried at fair value are the AFS investments. These are classified within level 1 of the fair value hierarchy. There were no transfers between Level 1 and Level 2 of the fair value hierarchy for AFS investments for the years ended March 31, 2012, 2011 and 2010. Also, there were no financial assets or liabilities included within the Level 3 of the hierarchy.

30. Events after Reporting Date

On April 19, 2012, the BOD of the Parent Company declared a 10.0% cash dividend equivalent to P=0.10 per share or an aggregate amount of P=42.3 million to all its stockholders of record as of May 4, 2012 payable on May 30, 2012.

31. Notes to Statements of Cash Flows

The Group’s noncash investing and financing activity pertains to the acquisition of vehicles under finance lease amounting to P=1.7 million, P=0.8 million and P=3.9 million in 2012, 2011 and 2010, respectively, classified under Property, plant and equipment. (see Notes 8 and 22).

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32. Comparative Information Sales discounts The Parent Company provides discounts on its sales to customers/dealers consisting of sales discounts on installment and institutional sales, prompt payment discounts and other special discounts, based on percentage of sales ranging from 2.0% to 5.0%. Previously, the Parent Company presented these discounts as part of Selling expenses in the statement of comprehensive income. In 2012, the Parent Company presented these discounts amounting to P=225.7 million as reduction of sales. Accordingly, the 2011 and 2010 discounts amounting to P=354.6 million and P=325.7 million, respectively, were reclassified from selling expenses to reduction of sales to conform with the current year presentation. The reclassification in 2011 and 2010 has no impact on the total assets, liabilities and equity as of March 31, 2011 and 2010.

Creditable withholding taxes (CWT) In 2012, the Group presented CWT amounting to P=61.8 million in Other current assets. Previously, the Group presented the CWT in the Receivables account (included in Other Receivables). Accordingly, the corresponding amount as of March 31, 2011 of P=64.3 million was reclassified to conform with the current year presentation (see Note 10). As of April 1, 2010, the beginning of the earliest comparative period presented, CWT reclassified from Receivables to Other current assets amounted to P=61.8 million. Both Receivables and Other current assets are presented under current assets in the consolidated statement of financial position. There is no other impact in the comparative consolidated statement of financial position.

- 113 -

- 114 -

PANASONIC MANUFACTURING PHILIPPINES CORPORATION

INDEX TO THE FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES Annex I: Schedule of retained earnings available for dividend declaration Annex II: Schedule of all Philippine Financial Reporting Statements (PFRS)

[which consist of PFRSs, Philippine Accounting Standards (PAS) and Philippine Interpretations] effective as at March 31, 2012

Annex III: List of financial ratios Annex IV: The map showing the relationships between and among the company

and its ultimate parent company and subsidiary.

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Annex I


SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATION MARCH 31, 2012 Unappropriated retained earnings, available for dividend

declaration, beginning of year P=216,881,545

Add: Net income actually earned/realized during the year: Net income per audited parent company’s financial

statements 57,584,731 Benefit from deferred income tax (5,240,385) Unrealized foreign exchange gain - net (except those

attributable to cash and cash equivalents) (1,002,492) 51,341,854

Unappropriated retained earnings, as adjusted, before dividend declaration, reversal of appropriations 268,223,399

Less: Dividends declared and paid during the year (21,135,901)

Add: Appropriation during the year (100,000,000)

Unappropriated retained earnings, as adjusted to available for dividend declaration, end of year P=147,087,498

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Annex II


SUPPLEMENTARY SCHEDULE OF ALL PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRSs) [which consist of PFRSs, Philippine Accounting Standards (PAS) and Philippine Interpretations] effective as at March 31, 2012

PFRSs and PIC Q&As

Adopted/Not

Adopted/Not

Applicable

PFRS 1, First-time Adoption of Philippine Financial Reporting Standards Adopted

PFRS 2, Share-based Payment Not Applicable

PFRS 3, Business Combinations Adopted

PFRS 4, Insurance Contracts Not Applicable

PFRS 5, Non-current Assets Held for Sale and Discontinued Operations Adopted

PFRS 6, Exploration for and Evaluation of Mineral Resources Not Applicable

PFRS 7, Financial Instruments: Disclosures Adopted

PFRS 8, Operating Segments Adopted

PAS 1, Presentation of Financial Statements Adopted

PAS 2, Inventories Adopted

PAS 7, Statement of Cash Flows Adopted

PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors Adopted

PAS 10, Events after the Reporting Period Adopted

PAS 11, Construction Contracts Not Applicable

PAS 12, Income Taxes Adopted

PAS 16, Property, Plant and Equipment Adopted

PAS 17, Leases Adopted

PAS 18, Revenue Adopted

PAS 19, Employee Benefits Adopted

PAS 20, Accounting for Government Grants and Disclosure of Government Assistance Not Applicable

PAS 21, The Effects of Changes in Foreign Exchange Rates Adopted

PAS 23, Borrowing Costs Adopted

PAS 24, Related Party Disclosures Adopted

PAS 26, Accounting and Reporting by Retirement Benefit Plans Not Applicable

PAS 27, Consolidated and Separate Financial Statements Adopted

PAS 28, Investments in Associates Not Applicable

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PAS 29, Financial Reporting in Hyperinflationary Economies Not Applicable

PAS 31, Interests in Joint Ventures Not Applicable

PAS 32, Financial Instruments: Presentation Adopted

PAS 33, Earnings per Share Adopted

PAS 34, Interim Financial Reporting Adopted

PAS 36, Impairment of Assets Adopted

PAS 37, Provisions, Contingent Liabilities and Contingent Assets Adopted

PAS 38, Intangible Assets Adopted

PAS 39, Financial Instruments: Recognition and Measurement Adopted

PAS 40, Investment Property Adopted

PAS 41, Agriculture Not Applicable

Philippine Interpretation IFRIC–1, Changes in Existing Decommissioning, Restoration and Similar Liabilities Not Applicable

Philippine Interpretation IFRIC–2, Members' Shares in Co-operative Entities and Similar Instruments Not Applicable

Philippine Interpretation IFRIC–4, Determining whether an Arrangement contains a Lease Adopted

Philippine Interpretation IFRIC–5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds Not Applicable

Philippine Interpretation IFRIC–6, Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment Not Applicable

Philippine Interpretation IFRIC–7, Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies Not Applicable

Philippine Interpretation IFRIC–9, Reassessment of Embedded Derivatives Not Applicable

Philippine Interpretation IFRIC–10, Interim Financial Reporting and Impairment Adopted

Philippine Interpretation IFRIC–12, Service Concession Arrangements Not Applicable

Philippine Interpretation IFRIC–13, Customer Loyalty Programmes Not Applicable

Philippine Interpretation IFRIC–14, PAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Not Applicable

Philippine Interpretation IFRIC–16, Hedges of a Net Investment in a Foreign Operation Not Applicable

Philippine Interpretation IFRIC–17, Distributions of Non-cash Assets to Owners Not Applicable

Philippine Interpretation IFRIC–18, Transfers of Assets from Customers Not Applicable

Philippine Interpretation IFRIC–19, Extinguishing Financial Liabilities with Equity Instruments Not Applicable

Philippine Interpretation SIC–7, Introduction of the Euro Not Applicable

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Philippine Interpretation SIC–10, Government Assistance - No Specific Relation to Operating Activities Not Applicable

Philippine Interpretation SIC–12, Consolidation - Special Purpose Entities Not Applicable

Philippine Interpretation SIC–13, Jointly Controlled Entities - Non-Monetary Contributions by Venturers Not Applicable

Philippine Interpretation SIC–15, Operating Leases – Incentives Adopted

Philippine Interpretation SIC–21, Income Taxes - Recovery of Revalued Non-Depreciable Assets Not Applicable

Philippine Interpretation SIC–25, Income Taxes - Changes in the Tax Status of an Entity or its Shareholders Not Applicable

Philippine Interpretation SIC–27, Evaluating the Substance of Transactions Involving the Legal Form of a Lease Adopted

Philippine Interpretation SIC–29, Service Concession Arrangements: Disclosures Not Applicable

Philippine Interpretation SIC–31, Revenue - Barter Transactions Involving Advertising Services Not Applicable

Philippine Interpretation SIC–32, Intangible Assets - Web Site Costs Not Applicable

PIC Q&A No. 2006-01: PAS 18, Appendix, paragraph 9 – Revenue recognition for sales of property units under pre-completion contracts Not Applicable

PIC Q&A No. 2006-02: PAS 27.10(d) – Clarification of criteria for exemption from presenting consolidated financial statements Adopted

PIC Q&A No. 2007-03: PAS 40.27 – Valuation of bank real and other properties acquired (ROPA) Not Applicable

PIC Q&A No. 2008-01 (Revised): PAS 19.78 – Rate used in discounting post-employment benefit obligations Adopted

PIC Q&A No. 2008-02: PAS 20.43 – Accounting for government loans with low interest rates under the amendments to PAS 20 Not Applicable

PIC Q&A No. 2009-01: Framework.23 and PAS 1.23 – Financial statements prepared on a basis other than going concern Not Applicable

PIC Q&A No. 2010-01: PAS 39.AG71-72 – Rate used in determining the fair value of government securities in the Philippines Not Applicable

PIC Q&A No. 2010-02: PAS 1R.16 – Basis of preparation of financial statements Adopted

PIC Q&A No. 2011-01: PAS 1.10(f) – Requirements for a Third Statement of Financial Position Adopted

Important: If an entity has early adopted any of the following pronouncements, please take note of the: (1) additional disclosures the entity has to make for the early adoption of the said pronouncements and (2) the existing pronouncements that the entity may have to mark as “Not applicable”:

- 119 -

Pronouncements issued but not yet effective

Applicable to annual period

beginning on or after

Early application

allowed Remarks

Amendments to PFRS 7: Disclosures—Transfers of Financial Assets

July 1, 2011 Yes To be adopted when effective

Amendments to PFRS 7: Disclosures—Offsetting Financial Assets and Financial Liabilities

January 1, 2013 Not mentioned To be adopted when effective

PFRS 9, Financial Instruments January 1, 2015 Yes To be adopted when effective

PFRS 10, Consolidated Financial Statements

January 1, 2013 Yes To be adopted when effective

PFRS 11, Joint Arrangements January 1, 2013 Yes Not Applicable

PFRS 12, Disclosure of Interests in Other Entities

January 1, 2013 Yes Not Applicable

PFRS 13, Fair Value Measurement


Amendments to PAS 1: Presentation of Items of Other Comprehensive Income

July 1, 2012 Yes To be adopted when effective

Amendments to PAS 12–Deferred Tax: Recovery of Underlying Assets


PAS 19, Employee Benefits (Revised)


PAS 27, Separate Financial Statements


PAS 28, Investments in Associates and Joint Ventures


Amendments to PAS 32, Offsetting Financial Assets and Financial Liabilities


Philippine Interpretation IFRIC–15, Agreements for the

Deferred by SEC and FRSC

No Not Applicable

- 120 -

Pronouncements issued but not yet effective

Applicable to annual period

beginning on or after

Early application

allowed Remarks

Construction of Real Estate

Philippine Interpretation IFRIC–20, Stripping Costs in the Production Phase of a Surface Mine


PIC Q&A No. 2011-02: PFRS 3.2 – Common Control Business Combinations


PIC Q&A No. 2011-03: Accounting for Inter-company Loans


PIC Q&A No. 2011-04: PAS 32.37-38 – Costs of Public Offering of Shares


PIC Q&A No. 2011-05: PFRS 1.D1-D8 – Fair Value or Revaluation as Deemed Cost

January 25, 2012 Not mentioned Not Applicable

- 121 -

Annex III


LIST OF FINANCIAL RATIOS March 31, 2012 2012 2011

Current ration Current assets

3.61:1 3.44:1 Current liabilities

Debt to equity ratio

Total debt (liabilities) 0.31:1 0.32:1

Total equity (capital)

Solvency ratio Net income + depreciation

0.17:1 0.16:1 Short term + long term debt

Interest rate coverage ratio

Net income before income tax 87.23:1 56.03:1

Interest expense

Asset to equity ratio

Total assets 1.31:1 1.32:1

Total equity (capital)

Sales growth CY sales – PY sales

-12.00% 10.07% PY sales

Gross profit margins

Gross profit 23.95% 24.94%

Net sales

Net income margins

Net income 0.96% 0.67%

Net sales

Return on equity Net income

1.54% 1.24% Total stockholder’s equity

- 122 -

Annex IV


THE MAP SHOWING THE RELATIONSHIPS BETWEEN AND AMONG THE COMPANY AND ITS ULTIMATE PARENT COMPANY AND SUBSIDIARY March 31, 2012

Panasonic Corporation

(PC), Japan

80%

Panasonic Manufacturing Philippines Corporation (PMPC)

Public stockholders

20%

40%

PMPC Employees’

Retirement Plan

60%

Precision Electronics Realty Corporation

(PERC)

- 123 -

ANNEX “D”

QUARTERLY REPORT (SEC FORM 17-Q)

AS OF DECEMBER 31, 2011 (UNAUDITED)

- 124 -

- 125 -





O r t i g A s A v e n u e E x t e N s i o n , T a y t a y ,

A R i z a l


MARLON M. MOLANO (632) 635-22-60 to 65 (Contact Person) (Company Telephone Number)

0 3 3 1 1 7 - Q 0 6 1 7

Month Day (Form Type) Month Day (Fiscal year ) (Annual Meeting)




487 Total No. of Stockholders Domestic Foreign


File Number LCU

Document ID Cashier

S T A M P S


- 126 -

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17- Q

QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SRC RULE 17(2)(b)THEREUNDER

1. For the quarterly period ended December 31, 2011

2. SEC Identification Number 23022 3. BIR Tax Identification No. 000-099-692 4. Exact name of registrant as specified in its charter PANASONIC MANUFACTURING PHILIPPINES CORPORATION 5. Philippines 6. (SEC Use Only) Province, Country or other jurisdiction of Industry Classification Code: incorporation or organization 7. Ortigas Avenue Extension

Taytay, Rizal 1901 Address of principal office Postal Code 8. (632) 635-22-60 to 65 Registrant's telephone number, including area code

9. Not Applicable

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 Sections 4 and 8 of the

RSA. Number of Shares of Common Stock Title of Each Class Outstanding and Amount of Debt Outstanding

Common shares, P=1.00 par value

Class A 84,723,432

Class B 337,994,588

- 127 - 11. Are any or all of these securities listed on a stock exchange. Yes [ X ] No [ ] If yes, state the name of such stock exchange and the classes of securities listed therein.

The Company’s Class A shares are listed in the Philippine Stock Exchange.

12. Check whether the registrant:

(a) Has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 there

under 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 [ X ] No [ ] (b) Has been subjected to such filing requirements for the past 90 days. Yes [ X ] No [ ]

- 128 -

PART I – FINANCIAL INFORMATION

Item I. Financial Statements The Unaudited Consolidated Financial Statements of Panasonic Manufacturing Philippines Corporation (PMPC) and its subsidiary, Precision Electronics Realty Corporation (PERC), as of and for the period ended December 31, 2011 (with comparative figures as of March 31, 2011 and period ended December 31, 2010 & 2009) and selected Notes to Consolidated Financial Statements are on pages 12 to 30.

Item II. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION This discussion summarizes the significant factors affecting the consolidated operating results, financial position, liquidity and cash flows of Panasonic Manufacturing Philippines Corporation (PMPC) and its subsidiary (PERC) for the nine months of fiscal year 2011 ended December 31, 2011. RESULTS OF OPERATION (CONTINUING OPERATION)

For the nine months ended December of FY 2011 vs. 2010 Consolidated sales for the nine months of FY 2011 amounted to P= 4.540 billion, decreased by 17.1% from P= 5.473 billion posted in the same period last year mainly due to slow retail on home appliance products and drop in stock and sale for LCD and PDP due to aggressive price and promo activities of competitors.

Cost of goods sold ratio increased by 2.0% from 71.2% in 2010 to 73.2% in 2011 mainly due to increase in production cost especially on raw materials. Selling expense decreased by 31.6% mainly due to decrease in direct selling expense by 28.6% amounting to P= 341.7 million, advertising expense by 54.1% amounting to P= 39.5 million and provision on warranty expense by 87.0% amounting to P= 19.5 million. Technical assistance and brand license fee was decreased by 8.7% amounting to P= 6.6 million and 6.5% amounting to P= 1.5 million respectively mainly due to low sales achievement by 17.1%. Other income and expense increased by P= 21.2 million from P= 36.2 million in 2010 toP= 57.4 million mainly due to decrease on non-operating miscellaneous expense by 35.1% amounting to P= 28.1 million.

Provision for income tax for the period decreased by 16.5% amounting to P= 5.5 million mainly due to decrease on gross taxable income as a result of low sales achievement.

- 129 - The Group’s net income before tax for the nine months of fiscal year 2011 increased by P= 15.9 million from P= 11.0 million in 2010 mainly due to decrease in direct selling expenses although sales decreased by 17.1%.

For the nine months ended December 31, 2010 vs. 2009 Consolidated sales for the nine months of FY 2010 amounted to P= 5.473 billion, increased by 12.5% from P= 4.864 billion posted in the same period last year mainly due to Aircon export sales and sale of imported products.

Direct selling expense increased by 30.7% mainly due to increase on sales promotion, rebates and discounts by 45.1% amounting to P= 297.8 million to increase sales performance for the year. On the other hand, freight and provision for warranty cost decrease by 11.0% and 6.2% respectively. General and administrative expenses decrease by 4.1% amounting to P= 17.3 million. Non-operating income and expense increased by 31.6% to P= 36.2 million from P= 15.7 million mainly due to decrease on non-operating miscellaneous expense by 55.0% amounting to P= 23.4 million.

The Group’s net income before tax for the nine months period of fiscal year 2010 decreased by 85.9% from P= 77.5 million in 2009 to P= 11.0 million in 2010 mainly due to increase in direct selling expenses although sales increased by 12.5%.

For the nine months ended December 31, 2009 vs. 2008 (Continuing operations) Items related to Production Technology Center (PTC) and Battery Sales were excluded in the line by line consolidated statements of income and presented under “Net Income from Discontinued Operations”. The nine months ended December 31, 2008 unaudited consolidated statement of income was restated to make it comparable with the nine months ended December 31, 2009 results. Consolidated sales for the nine months of FY 2009 amounted to P= 4.864 billion, increased by 4% from P= 4.676 billion posted in the same period last year.

Cost of goods sold ratio decreased by 3.1% from 74.4% in 2008 to 71.3% in 2009 mainly due to cost reduction activities especially on material cost. Operating expenses increased by 15.9% mainly due to increase in direct selling expenses amounting to P= 189.1 million from P= 724.5 million in 2008 to P= 913.6 million in 2009. Other income decreased by P= 60.4 million from P= 76.1 million in 2008 toP= 15.7 million mainly due to decrease in interest income by P= 17.8 million, decrease in gain on sales of property and equipment by P= 11.7 million.

The Group’s net income before tax for the nine months of fiscal year 2009 decreased by 35.8% from P= 120.7 million in 2008 to P= 77.5 million in 2009 mainly due to increase in direct selling expenses and decrease in non-operating income.

- 130 - For the nine months ended December 31, 2008 vs. 2007 (Continuing operations)

Consolidated sales for the nine months of FY 2008 amounted to P=4.676 billion, increased by 1.2% from P=4.622 billion posted in fiscal year 2007.

Cost of goods sold ratio increased by 3.8% from 70.6% in 2007 to 74.4% in 2008 mainly due to rising prices of raw materials, both imported and local.

Operating expenses decreased by 7.3% amounting to P= 90.7 million due mainly to decrease in advertising expense by P= 70.8 million and other selling expenses.

Other income increased by 774.4% amounting to P= 67.4 million due mainly to increase in interest income received by P= 3.5 million and decrease in foreign exchange loss for the period amounting to P= 48.7 million.

The Group's net income before tax for the period amounted to P= 120.7 million, decreased by 4.2% from P= 126.0 million posted in 2007. FINANCIAL POSITIONS As of December 31, 2011 vs. March 31, 2011 The Group continues to maintain its strong financial position with total assets amounting to P=4.755 billion and P= 4.857 billion as of December 31, 2011 and March 31, 2011 respectively, while total equity amounted to P=3.146 billion and P=3.168 billion as of the same period.

Cash and cash equivalents increased by 11.9% from P=2.548 billion in fiscal year 2010 ending March 31, 2011 to P=2.853 billion in December 2011 mainly due to the improvement on collection of accounts for the period. And at the same time, accounts receivable decreased by 29.0% amounting to P=241.3.million. Inventories decreased by 21.1% from P=629.7 million in fiscal year 2010 ending March 31, 2011 to P=496.9 million in December 2011 mainly due to low sales forecast and strict control on finished good and merchandise. Other current assets increased by 61.0% mainly due to non-application of creditable withholding taxes on income tax payment for the 1st quarter and 2nd quarter of FY 2011 ending June 30, 2011 and September 30, 2011. Property, plant and equipment decreased by 8.2% amounting to P=46.8 million mainly due to depreciation expense for the period. Accounts payable and accrued expenses decreased by 10.5% amounting to P=100.1 million mainly due to decrease on purchase of raw materials and merchandise due to low sales achievement and forecast.

- 131 - Provisions for estimated liabilities increased by 25.5% amounting to P=43.9 million mainly due to nine month period provision of expenses that are payable in the future. The 63.3% decrease on technical assistance fees payable amounting to P=30.8 million was mainly due to the amount of payable as of March 31, 2011 is for the second semester of fiscal year 2010 while payable as of December 31, 2011 is for the 3rd quarter of fiscal year 2011 only.

Capital expenditures amounted to P=43.7 million during the year as the Group continues to upgrade its factory facilities, machinery and equipment. As of December 31, 2010 vs. March 31, 2010 The Group continues to maintain its strong financial position with total assets amounting to P=4.690 billion and P= 4.615 billion as of December 31, 2010 and March 31, 2010 respectively, while total equity amounted to P=3.627 billion and P=3.671 billion as of the same period. Decrease on total equity was mainly due to net loss incurred for the period amounting to P=22.1 million.

Cash and cash equivalents increased by 6.8% from P=2.311 billion in fiscal year 2009 ending March 31, 2010 to P=2.469 billion in December 31, 2010 mainly due to increase in sales achievement for the period. Inventories decreased by 23.5% from P=812.6 million in fiscal year 2009 ending March 31, 2010 to P=621.5 million in December 31, 2010 mainly due to increase in sales and strict control on finished good and merchandise. Other current assets increased by 23.9% mainly due to non-application of creditable withholding taxes on income tax payment for the 2nd quarter of FY 2010 ending September 30, 2010. Investment properties decreased by 13.2% mainly due to the accumulated depreciation recorded for the nine months period. Property, plant and equipment increased by 7.4% amounting to P=39.1 million mainly due to purchase of new equipment for new product and also to upgrade factory facilities and equipment. Accounts payable and accrued expenses increased by 8.6% mainly due to increase on reserve for product promotion and output tax due to increase on sales. Provisions for estimated liabilities increased by 56.7% mainly due to provision of expenses that are payable in the future. The difference on technical assistance fee payable was mainly due to the period of set-up, technical assistance fee payable as of March 31, 2010 was for the six months period ended March 31, 2010 while amount as of December was for the three months ended December 2010.

Capital expenditures amounted to P=127.1 million during the year as the Group continues to upgrade its factory facilities, machinery and equipment.

- 132 -

As of December 31, 2009 vs. March 31, 2009

The Group continues to maintain its strong financial position with total assets amounting to P=4.526 billion and P= 4.573 billion as of December 31, 2009 and March 31, 2009, respectively, while total equity amounted to P=3.712 billion and P=3.708 billion as of the same period, respectively.

Cash and cash equivalents slightly decreased by 1.3% from P=2,221 million in fiscal year 2008 ending March 31, 2009 to P=2,192 million in December 2009 mainly due to decrease in interest income and gain on sales of property and equipment for the period. Accounts receivable decreased by 1.2% from P=726 million in fiscal year 2008 ending March 31, 2009 to P=717 million in December 2009 mainly due to decrease in overdue trade accounts receivable on merchandise and finished goods. Inventories increased by 8.9% from P=643 million in fiscal year 2008 ending March 31, 2009 to P=701 million in December 2009 mainly due to increased acquisition of imported products. Other current assets increased by 24.1% mainly due to increase on creditable withholding taxes. Property, plant and equipment decreased by 10.6% amounting to P=65.6 million mainly due to disposal of phased-out and unusable equipments. Other assets decreased by 9.8% mainly due to consumption of deposit paid on various payables. Technical assistance fees payable decreased by 39.6% mainly due to decrease in intra-company sales of manufacturing division to our sales division.

Capital expenditures amounted to P= 34.9 million during the year as the Group continues to upgrade its factory facilities, machinery and equipment.

- 133 - CASHFLOWS A brief summary of cash flow movement is shown below

(In thousands pesos) Dec 2011 Dec 2010

1. Net cash provided by operating activities 316,931 249,505 2. Net cash used in investing activities 8,468 (70,242) 3. Net cash used in financing activities (21,136) (21,136) 1. Net cash flow from operations consists of income for the period less change in non-cash current assets, certain current liabilities and others, which include increase in inventory level. 2. Net cash flows used in investing activities included the following:


Interest received 40,632 40,022 Additions to property and equipment - net (38,356) (110,699) Additions to other assets 5,258 425 3. Major components of net cash flows used in financing activities are as follows:


Cash dividends paid (21,136) (21,136) RETAINED EARNINGS

Retained Earnings in excess of 100% of paid-in capital will be declared as dividends and/or appropriated for plant expansion and modernization and upgrading of factory facilities and equipment in the future. The appropriated retained earnings pertain to the appropriation for plant expansion and modernization and upgrade of factory facilities and equipment of the Parent Company and for purchase of industrial land for future business expansion of PERC.

- 134 - FINANCIAL AND OTHER INFORMATION Key Performance Indicators (Continuing Operations Only)

Name of Index

Calculation

FY 2011 Apr – Dec

FY 2010 Apr – Dec

1. Rate of Sales Increase (a) CY(b) Sales – LY(c) Sales

– 17.1%

12.5% ------------------------------ x 100%

LY Sales

2. Rate of Profit Increase (a) CY Profit Before Tax – LY Profit Before Tax

145.0%

–85.9%

-------------------------- x 100%

LY Profit Before Tax 3. Rate of Profit on Sales (a) Profit Before Tax

0.6%

0.2% -------------------- x 100%

Total Sales

4. Current Ratio Current Assets 3.7

3.4

(as of March 31, 2011)

----------------------

Current Liabilities

5. Dividend Ratio to Capital Dividend 5.0%

5.0% -------------------- x 100%

Average Capital

(a) Continuing operations only (b) Current Year

(c) Last Year

(a) Rate of Sales Increase - This measures the sales growth versus the same period last year. For the nine month of fiscal year 2011, the Company registered a 17.1% decrease in sales to P= 4.540 billion from P= 5.473 billion of the same period last year.

(b) Rate of Profit Increase - This measures the increase in profit before tax versus the

same period last year. Rate of profit improved to 145.0% from negative 85.9% of last year mainly due to 28.6% decrease on direct selling expense amounting to P= 341.7 million.

(c) Rate of Profit on Sales - This measures the percentage of profit before tax versus

total sales for the period. Rate of profit on sale registered at 0.6% for the fiscal year 2011 and 0.2% in 2010.

(d) Current Ratio - This measures the liquidity of the Group and its ability to pay off

current liabilities. The Company registered current ratio of 3.7 as of December 31, 2011 and 3.4 as of March 31, 2011.

(e) Dividend Ratio to Capital - This measures the dividend payout ratio versus capital for the period. The Group declared a 5% cash dividend during the nine month period of fiscal year 2011 and 2010.

- 135 - OTHER MATTERS

a. There were no unusual items as to nature and amount affecting assets, liabilities,

equity, net income or cash flows, except those stated in Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

b. There were no material changes in estimates of amounts reported in prior interim

periods of the current year or changes in estimates of amounts reported in prior financial years.

c. There were no known trends, demands, commitments, events or uncertainties that

will have a material impact on the Group’s liquidity.

d. There were no known trends, events or uncertainties that have had or that are reasonably expected to have a favorable or unfavorable impact on net sales or revenues or income from continuing operation.

e. There were no known events that will trigger direct or contingent financial obligation

that is material to the Group, including any default or acceleration of an obligation and there were no changes in contingent liabilities and contingent assets since the last annual balance sheet date.

f. There were no material off-balance sheet transactions, arrangements, obligations and

other relationship of the Parent Company with unconsolidated entities or other persons created during the reporting period.

g. There were no seasonal aspects that have had a material effect on the financial

condition or results of operations of the Group.

- 136 -

- 137 -

PANASONIC MANUFACTURING PHILIPPINES COPORATION AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011 (Unaudited) and March 31, 2011 (Audited) And for the Nine Months ended December 31, 2011 (Unaudited)

- 138 - PANASONIC MANUFACTURING PHILIPPINES CORP. & SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT DECEMBER 31, 2011 AND MARCH 31, 2011

(In Thousand Pesos) (Unaudited) (Audited)

December 31, 2011

March 31, 2011

ASSETS

Current Assets Cash and cash equivalents (Note 3) P=2,852,526 P=2,548,263 Receivables - net (Notes 4 and 10) 589,808 831,129 Inventories - net (Note 5) 496,875 629,709 Other current assets 75,647 46,996

Total Current Assets 4,014,856 4,056,097

Non-current Assets

Available-for-sale investments (Note 6) 2,341 2,341 Property, plant and equipment - net (Note 7) 525,338 572,106 Investment properties – net (Note 8) 67,920 75,986 Deferred tax assets – net 115,004 115,004 Other assets – net 29,967 35,224

Total Non-current Assets 740,570 800,661

P=4,755,426 P=4,856,758

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities Accounts payable and accrued expenses (Notes 9 and 10) P=854,219 P=954,337 Provisions for estimated liabilities 216,501 172,557 Technical assistance fees payable 17,884 48,678 Income tax payable 7,860 1,833 Finance lease liability 890 1,781

Total Current Liabilities 1,097,354 1,179,186

Noncurrent Liabilities

Finance lease liability

6,086

3,660

Total Liabilities 1,103,440 1,182,846

Stockholders’ Equity

Equity attributable to equity holders of the parent Capital stock - P=1 par value (Note 18)

422,718

422,718

Additional paid-in capital 4,780 4,780 Retained earnings (Note 11) Appropriated 2,767,400 2,767,400 Unappropriated 379,033 400,752 Other comprehensive income 1,380 1,380

3,575,311 3,597,030 Minority interest 76,675 76,882

Total Stockholders’ Equity 3,651,986 3,673,912

P=4,755,426 P=4,856,758

See accompanying Notes to Financial Statements.

- 139 -

PANASONIC MANUFACTURING PHILIPPINES CORP. & SUBDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED DECEMBER 31, 2011 & 2010 (In Thousand Pesos except Earnings per Common Share Amount)


(Unaudited)

Apr-Dec Apr-Dec Oct - Dec Oct - Dec 2011 2010 2011 2010 CONTINUING OPERATIONS

NET SALES P=4,539,853 P=5,473,327 P=1,378,815 P=1,645,650

COST OF GOODS SOLD (Note 12) 3,322,760 3,899,288 985,689 1,184,022

GROSS PROFIT 1,217,093 1,574,039 393,126 461,628

SELLING EXPENSES (Note 13) (852,052) (1,193,799) (283,006) (362,153) GENERAL AND ADMINISTRATIVE EXPENSES (Note 14) (395,588) (405,530) (119,113) (125,621)

INCOME FROM OPERATIONS (30,547) (25,290) (8,993) (26,146)

OTHER INCOME – Net (Note 16) 57,397 36,248 18,640 17,352

INCOME BEFORE INCOME TAX

PROVISION FOR INCOME TAX

26,850

27,646

10,958

33,109

9,647

13,413

(8,794)

14,065

NET INCOME FOR THE PERIOD (P=796) (P=22,151) (P=3,766) (P=22,859)

OTHER COMPREHENSIVE INCOME

TOTAL COMPREHENSIVE INCOME (P=796) (P=22,151) (P=3,766) (P=22,859)

Attributable to:

Equity holders of the parent (P=590) (P=22,347) (P=3,706) (P=22,932)

Minority interest (206) 196 (60) 73

Earnings Per Share (Note 18) (P=0.002) (P=0.05) (P=0.09) (P=0.05)

- 140 -

PANASONIC MANUFACTURING PHILIPPINES CORP. & SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED DECEMBER 31, 2011 & 2010 (In Thousand Pesos)

(Unaudited) (Unaudited) December 2011 December 2010

CAPITAL STOCK (Note 18) P=422,718 P=422,718

ADDITIONAL PAID-IN CAPITAL 4,780 4,780

RETAINED EARNINGS (Note 11) Appropriated: Balance at beginning of period 2,767,400 2,842,400 Appropriations – net

Balance at end of period 2,767,400 2,842,400

Unappropriated: Balance at beginning of period 400,752 322,712 Net income (583) (22,347) Cash dividends (21,136) (21,136) Appropriations – net

Balance at end of period 379,033 279,229

3,573,931 3,549,127 OTHER COMPREHENSIVE INCOME 1,380 1,377

Total Comprehensive Income 3,575,311 3,550,504 Minority interest 76,675 76,943

Total Stockholders’ Equity P=3,651,986 P=3,627,447


- 141 - PANASONIC MANUFACTURING PHILIPPINES CORP. & SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 2011 & 2010 (In Thousand Pesos) (Unaudited) (Unaudited)

December 2011 December 2010

CASH FLOWS FROM OPERATING

ACTIVITIES Income before tax P=26,850 P=10,958 Adjustments for: Depreciation and amortization 93,190 83,692 Gain on sales of property and equipment (934) (10) Interest income (40,632) (40,022)

Operating income before working capital changes 78,474 54,618

Changes in operating assets and liabilities: Decrease (increase) in: Receivables 241,321 (67,911) Inventories 132,834 191,066 Other current assets (28,651) (13,238) Decrease in: Accounts payable and accrued expenses (94,313) 48,192 Provisions for estimated liabilities 43,944 79,601 Technical assistance fees payable (30,794) (22,039)

Cash generated from operating activities 342,815 270,289

Income taxes paid (25,884) (20,784)

Net cash provided by (used in) operating activities 316,931 249,505

CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment –net (38,356) (110,699) Gain on sales of property and equipment 934 10 Interests received 40,632 40,022 Decrease (increase) in other assets 5,258 425

Net cash provided by (used in) investing activities 8,468 (70,242)

CASH FLOW FROM FINANCING ACTIVITY Cash dividends paid (21,136) (21,136)

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS 304,263 158,127 CASH AND CASH EQUIVALENTS

AT BEGINNING OF PERIOD 2,548,263 2,310,847

CASH AND CASH EQUIVALENTS

AT END OF PERIOD P=2,852,526 P=2,468,974

See accompanying Notes to Financial Statements. .

- 142 -

PANASONIC MANUFACTURING PHILIPPINES CORP. & SUBSIDIARY

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information Panasonic Manufacturing Philippines Corporation (the Parent Company) is a subsidiary

of Panasonic Corporation (PC) and was incorporated in the Philippines on May 14, 1963. The Parent Company holds 40% ownership interest in Precision Electronics Realty Corporation (PERC) (the Subsidiary), over which the Parent Company has the ability to govern the financial and operating policies and whose activities primarily benefits the Parent Company.

The Parent Company is a manufacturer, importer and distributor of electronic, electrical,

mechanical, electro-mechanical appliances, other types of machinery, parts and components, battery and other related products bearing the “Panasonic” brand. PERC is in the business of realty brokerage and leases out the land in which the Parent Company’s manufacturing facilities are located.

The Parent Company’s registered address is Ortigas Avenue Extension, Taytay, Rizal.

2. Summary of Significant Accounting and Financial Reporting Policies Basis of Preparation The accompanying unaudited consolidated interim financial statements of the Parent

Company and PERC (collectively referred to as the “Group”) as of and for the period ended December 31, 2011 and comparative financial statements for the same period in 2010 following the new presentation rules under Philippine Accounting Standards (PAS) No. 34, Interim Financial Reporting. The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the Philippines as set forth in Philippine Financial Reporting Standards (PFRS). The accompanying consolidated financial statements are presented in Philippine Peso (P=), which is the Group’s functional currency.

Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Parent Company and it’s Subsidiary over which the Parent Company has the ability to govern the financial and operating policies to obtain benefits from their activities. The financial statements of PERC are prepared for the same reporting period as the parent company, using consistent accounting policies.

All inter-company balances, income and expenses are eliminated in full. Noncontrolling

interest represents the interest in PERC not held by the Parent Company.

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Future Changes in Accounting Policies Effective in 2013

PFRS 9, Financial Instruments: Classification and Measurement, as issued in 2010, reflects the first phase of the work on the replacement of PAS and applies to classification and measurement of financial assets and financial liabilities as defined in PAS 39. In subsequent phases, hedge accounting and derecognition will be addressed. The completion of this project is expected in early 2011. After careful consideration of the result of its impact evaluation, the Group decided not to adopt PFRS 9 (2009) or PFRS 10 (2010) for its 2012 financial reporting ahead of its affectivity date on January 1, 2011, do not reflect the impact of the said standard on its quarterly financial statements.

The Group’s trade receivables, advances to suppliers, due from related parties, other receivables, and investments in equity, accounts payable and accrued and other liabilities may be affected by the adoption of this standard. The Group continues to assess the impact of the above new and amended accounting standards and the interpretations effective subsequent to 2011 on the Group’s consolidated financial statements prior to and in the period of initial application. Additional disclosures required by these standards and interpretations will be included in the consolidated financial statements when these standards and interpretations are adopted

3. Cash and Cash Equivalents This account consists of: (in thousand pesos)

(Unaudited) (Audited) December 2011 March 2011 Cash on hand P=22,796 P=25,485 Cash in banks 271,270 230,908 Short-term investments 2,558,460 2,291,870 P=2,852,526 P=2,548,263

4. Receivables This account consists of: (in thousand pesos)

(Unaudited) (Audited)

December 2011 March 2011

Trade P=483,514 P=700,287 Others 144,680 165,332

628,194 865,620 Less allowance for doubtful accounts 38,386 34,491

P=589,808 P=831,129

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5. Inventories This account consists of: (in thousand pesos)

(Unaudited) (Audited) December 2011 March 2011

At NRV: Finished goods and merchandise P=219,451 P=304,022 Goods in-process 5,790 10,381 Raw materials 130,674 177,196 Spare parts and supplies 4,820 7,109 At cost: Goods in-transit 136,140 131,001

P=496,875 P=629,709

6. Available-for-sale investments This account consists of: (in thousand pesos)

(Unaudited) (Audited)

December 2011

March 2011

Meralco P=2,177 P=2,177 PLDT 164 164

P=2,341 P=2,341

7. Property, Plant and Equipment This account consists of: (in thousand pesos)

Land

and

Improvements

Factory

Machinery,

Equipment

and Tools

Building

and

Improvements

Office

Furniture,

Fixtures and

Equipment

Transportation

Equipment

Total

Cost

Balance at beginning of period P=236,029 P=1,372,588 P=556,834 P=219,194 P=75,064 P=2,459,709

Acquisitions 24,058 5,486 8,311 5,866 43,721

Disposals and write-off (38,714) (3,981) (7,092) (10,887) (60,674)

Balance at end of period P=236,029 P=1,357,932 P=558,339 P=220,413 P=70,043 P=2,442,756

Accumulated Depreciation

And Amortization

Balance at beginning of period P=2,281 P=1,278,526 P=344,587 P=201,980 P=60,229 P=1,887,603

Depreciation (Note 17) 214 50,919 21,948 7,849 6,879 87,809

Sale/write-offs/adjustments (36,886) (3,981) (5,845) (11,282) (55,647)

End of the period P=2,495 P=1,292,559 P=362,554 P=203,984 P=55,826 P=1,917,418

Net Book Value

(Unaudited) DECEMBER 2011 P=233,534 P=65,373 P=195,785 P=16,429 P=14,217 P=525,338

(Audited) March 2011 P=233,748 P=94,062 P=212,247 P=17,214 P=14,835 P=572,106

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8. Investment Properties This account consists of: (in thousand pesos)

Building

Building Improvements

Total

Cost Balance at beginning and end of period P=115,252 P=115,623 P=230,875 Accumulated Depreciation And Amortization Balances at beginning of period 43,680 111,208 154,888 Depreciation and amortization (Note 18) 3,651 4,415 8,066 End of the period 47,331 115,623 162,954 Net Book Value (Unaudited) December 2011 P=67,921 P=0.00 P=67,921 (Audited) March 2011 P=71,571 P=4,415 P=75,986

9. Accounts Payable and Accrued Expenses

(Unaudited) (Audited) December 2011 March 2011 Trade accounts payable P=329,956 P=384,758 Accrued advertising expenses 297,813 270,406 Accrued releasing charges 33,155 21,659 Output vat 17,085 19,220 Brand license fee payable 6,184 14,867 Other accrued expenses 170,026 243,427 P=854,219 P=954,337

10. Related Party Transactions Significant transactions with related parties are as follows (in thousand pesos):

(Unaudited) (Unaudited) DEC 2011 DEC 2010 Sales: Parent Company (PC) P= - P= - Other related parties 640,184 769,459 P=640,184 P=769,459 Purchases: PC P=190,496 P=216,837 Other related parties 1,376,016 1,942,142 P=1,566,512 P=2,158,979 Technical assistance fee P=69,076 P=75,698 Brand license fee P=21,650 P=23,145 Allocated Cost – Regional Headquarters P=12,920 P=11,532

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Outstanding balances to related parties as of December 31, 2011 and March 31, 2011 include the following: (Unaudited) (Audited) DEC 2011 MARCH 2011 Receivable from related parties Trade receivable from affiliates Other receivables:

P=35,254

P=138,085

PC 4,857 20,221 Affiliates 6,506 13,941 Loans to officers and employees 758 786 P=47,375 P=173,033 Payable to related parties Trade payables: PC P=14,938 P=15,954 Affiliates 170,904 193,177 Accrued expenses: PC 16,273 8,601 Affiliates 4,829 57,843 P=206,944 P=275,575

11. Retained Earnings

No subsequent cash dividend declaration. 12. Cost of Goods Sold This account consists of: (in thousand pesos)

(Unaudited) (Unaudited) DEC 2011 DEC 2010

Material costs P=1,861,886 P=1,887,830 Direct labor (Note 15) 65,405 84,891

Manufacturing overhead: Indirect labor (Note 15) 119,024 106,187 Depreciation and amortization (Note 17) 74,556 72,934 Electricity, gas and water 32,447 35,914 Indirect materials 14,420 16,104 Repairs and maintenance 18,887 20,399 Traveling 6,739 7,928 Supplies 5,198 5,624 Insurance 5,201 6,272 Taxes and dues 5,674 5,586 Provision for decline in inventories 3,804 5,703 Product and development cost 2,998 13,115 Provision for estimated liabilities –net 1,200 Rent 1,444 522 Others 2,207 3,512

Total manufacturing overhead 292,599 301,000

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Goods in process:

Beginning of period 11,044 9,592 End of period (5,333) (7,324)

Cost of goods manufactured 2,225,601 2,275,989 Finished goods and merchandise:

Beginning of period 356,904 459,963 Add purchases – net 1,028,377 1,475,472 End of period (288,122) (312,136)

P=3,322,760 P=3,899,288

13. Selling Expenses This account consists of: (in thousand pesos)

(Unadited) (Unaudited) DEC 2011 DEC 2010

Selling

Sales commission, promotion, rebates and discounts P=688,778 P=957,921 Freight 126,774 132,226 Advertising 33,588 73,130 Provision for warranty costs 2,912 30,522

P=852,052 P=1,193,799

14. General and Administrative Expenses This account consists of: (in thousand pesos)

(Unadited) (Unaudited) DEC 2011 DEC 2010

General and Administrative

Salaries, wages and employees’ benefits (Note 15) P=156,994 P=165,231 Technical assistance fees (Note 10) 69,076 75,698 Brand license fees (Note 10) 21,650 23,145 Depreciation and amortization (Note 17) 18,634 10,758 Traveling 17,450 20,543 Taxes and dues 14,621 15,845 Repairs and maintenance 12,187 10,942 Allocated Cost – Regional Headquarter (Note 10) 12,920 11,532 Communication 12,530 10,602 Insurance 7,697 5,592 Supplies 5,980 6,426 Rent 6,133 6,679 Provision for decline in inventories (2,029) 2,158 Provision for doubtful accounts 3,895 4,4727 Provision for other estimated liabilities (684) Others 38,534 35,652

P=395,588 P=405,530

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15. Personnel Expenses Details of personnel expenses are as follows: (in thousand pesos)

(Unaudited) (Unaudited)

DEC 2011 DEC 2010

Compensation P=282,854 P=294,306 Retirement and severance 18,818 20,510 Other benefits 26,414 25,725 Other salaries 13,337 15,768

P=341,423 P=356,309

16. Other Income (Expenses) This account consists of: (in thousand pesos)


DEC 2011 DEC 2010

Interest income P=40,632 P=40,022 Rent income 20,629 21,805 Gain on sale of property and equipments

934 10

Foreign exchange gains (losses) (3,654) 31 Miscellaneous – net (1,144) (25,620)

P=57,397 P=36,248

17. Depreciation and Amortization Expenses Details of depreciation and amortization expenses are as follows: (in thousand pesos)


DEC 2011 DEC 2010

Cost of goods sold (Note 12) P=74,556 P=72,934 Operating expenses (Note 14) 18,634 10,758

P=93,190 P=83,692

18. Earnings Per Share

Earnings per share amounts were computed as follows: (in thousand pesos except for Earnings per share)

(Unaudited) (Unaudited) DEC 2011 DEC 2010

Comprehensive net income after tax (a) (P=796) (P=22,151) Weighted average number of common shares (b) 422,718 422,718

Earnings per share (a/b) (P=0.002) (P=0.05)

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19. Reporting Segments

The Company’s segment information for the periods ended December 31, 2011 and 2010, are as follows (in thousands):

Nine months ended December 31, 2011 vs. 2010 (Unaudited)

2011 NETWORKS APPLIANCES DEVICES OTHERS TOTAL

Sales P=353,543 P=3,761,481 P=107,645 P=317,184 P=4,539,853 Cost of good sold 259,423 2,736,046 61,347 61,347 265,944 3,322,760

Gross profit (loss) 94,120 1,025,435 46,298 51,240 1,217,093 Operating expenses (income) – net 103,552 1,013,214 50,804 80,070 1,247,640

Income (loss) from operations (9,432) 12,221 (4,506) (28,830) (30,547)

Non-operating income / (exp) – net

21 16,102 30 41,244 57,397

Income (loss) from operations (P=9,411) P=28,323 (P=4,476) P=12,414 P=26,850

2010 NETWORKS APPLIANCES DEVICES OTHERS Total TOTAL

Sales P=887,463 P=4,135,189 P=105,796 P=344,879 P=5,473,327 Cost of good sold 640,966 2,906,042 63,774 288,506 3,899,288

Gross profit (loss) 246,497 1,229,147 42,022 56,373 1,574,039 Operating expenses (income) – net 355,879 1,122,262 40,517 80,671 1,599,329

Income (loss) from operations (109,382) 106,885 1,505 (24,298) (25,290)

Non-operating income / (expense) – net

1,028

15,283

(95)

20,032

36,248

Net income / (loss) from operations (P=108,354) P=122,168 P=1,410 (P=4,266) P=10,958

Third Quarter ended December 31, 2011 vs. 2010 (Unaudited)

2011 NETWORKS APPLIANCES DEVICES OTHERS TOTAL

Sales P=143,883 P=1,109,885 P=39,118 P=85,929 P=1,378,815 Cost of good sold 106,399 779,806 22 22,535 76,949 985,689

Gross profit (loss) 37,484 330,079 16,583 8,980 393,126 Operating expenses (income) - net 40,191 325,851 18,011 18,066 402,119

Income (loss) from operations (2,707) 4,228 (1,428) (9,086) (8,993)

Non-operating income / (exp) - net

100 5,539 (10) 13,011 18,640

Income (loss) from operations (P=2,607) P=9,767 (P=1,438) P=3,925 P=9,647

2010 NETWORKS APPLIANCES DEVICES OTHERS Total TOTAL

Sales P=327,620 P=1,169,226 P=44,468 P=104,336 P=1,645,650 Cost of good sold 246,982 819,938 25,426 91,676 1,184,022

Gross profit (loss) 80,638 349,288 19,042 12,660 461,628 Operating expenses (income) – net 102,392 350,962 17,098 17,322 487,774

Income (loss) from operations (21,754) (1,674) 1,944 (4,662) (26,146)

Non-operating income / (expense) – net

168

4,603

13

12,568

17,352

Net income / (loss) from operations (P=21,586) P=2,929 P=1,957 P=7,906 (P=8,794)

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20. Subsequent Events

None

21. Financial Risk Management Objectives and Policies

The Group’s financial instruments comprise cash and cash equivalents, AFS investments and Meralco refund. The main purpose of these financial instruments is to raise finances for the Group’s operations. The Group has various other financial instruments such as receivables, accounts payable and accrued expenses and technical assistance fee payable which arise from normal operations. The main risks arising from the Group’s financial instruments are liquidity risk, market risk and credit risk. The Group also monitors the market price risk arising from all financial instruments. Risk management structure All policy directions, business strategies and management initiatives emanate from the BOD which strives to provide the most effective leadership for the Company. The BOD endeavors to remain steadfast in its commitment to provide leadership, direction and strategy by regularly reviewing the Group’s performance. For this purpose, the BOD convenes in quarterly meetings and in addition, is available to meet in the interim should the need arise.

The Group has adopted internal guidelines setting forth matters that require BOD approval. Under the guidelines, all new investments, any increase in investment in businesses and any divestments require BOD approval.

The normal course of the Group’s business expose it to a variety of financial risks such as credit risk, liquidity risk and market risks which includes foreign currency exposure and interest rate risk and equity price risk.

The Group’s principal financial liabilities comprise of accounts payable and accrued expenses, technical assistance fees payable and finance lease liability. The main purpose of these financial liabilities is to finance the Group’s operations. The Group has various financial assets such as cash and cash equivalents, receivables, and meralco refund, which arise directly from its operations.

The Group’s policies on managing the risks arising from the financial instruments follow:

Liquidity Risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility through collection of receivables and cash management. Liquidity planning is being performed by the Group to ensure availability of funds needed to meet working capital requirements.

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Overall, the Group’s funding arrangements are designed to keep an appropriate balance between equity and debt to give financing flexibility while continuously enhancing the Group’s business. Market Risk Market risk is the risk to earnings or capital arising from adverse movements in factors that affect the market value of financial instruments. The Group manages market risks by focusing on two market risk areas such as foreign currency risk and equity price risk. Foreign currency risk Exposure to currency risk arises from sales and purchases in currencies other than the Group’s functional and presentation currency. Foreign currency risk is monitored and analyzed systematically and is managed by the Group. The Group ensures that the financial assets denominated in foreign currencies are sufficient to cover the financial liabilities denominated in foreign currencies. The following table demonstrates the sensitivity to a reasonably possible change in the US dollar (USD) and Japanese yen (JPY) currency rates, with all variables held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and liabilities).

(in thousand pesos)

Increase/ decrease in USD rate

Effect on income before tax

December 2011 +8% P=831 -8% (831)

March 2011 +8% P=11,102

-8% (11,102)

Increase/ decrease in JPY rate

Effect on income before tax

December 2011 +7% (P=1,070) -7% 1,070

March 2011 +7% P=1,276

-7% (1,276)

There is no impact on the Group’s stockholders’ equity other than those already affecting the consolidated statement of income.

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As of September 30, 2011 and March 31, 2011, the foreign currency-denominated financial assets and financial liabilities in original currencies and their Philippine Peso (PHP) equivalents are as follows:

DECEMBER 2011

MARCH 2011

USD JPY Equivalents

in PHP

Financial assets Cash in banks and cash equivalents US$5,827 JPY21,958 P=264,327 Receivables – net 3,291 47,634 167,787

US$9,118 JPY69,592 P=432,114

Financial liabilities Accounts payable and accrued

expenses US$5,920 JPY34,809 P=275,107

Equity Price Risk

The Group’s exposure to equity price pertains to its investments in quoted shares which are classified as AFS investments in the consolidated balance sheet. Equity price risk arises from the changes in the levels of equity indices and the value of individual stocks traded in the stock exchange.

Credit Risk

The Group trades only with recognized, creditworthy third parties. It is the Group’s practice that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivables balances are monitored on an ongoing basis.

USD JPY Equivalents

in PHP

Financial assets Cash in banks and cash equivalents US$3,414 JPY11,072 P=155,884 Receivables – net 811 6,073 38,962

US$4,225 JPY17,145 P=194,846

Financial liabilities

Accounts payable and accrued expenses US$3,988 JPY44,384 P=199,742

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The table below shows the maximum exposure to credit risk for the components of the balance sheet. The maximum exposure is shown at gross, before the effect of mitigation through the use of master netting arrangements or collateral agreements. (In thousand pesos)

2011 DECEMBER MARCH

Financial Assets Cash in banks and cash equivalents P=2,829,730 P=2,522,778 Receivables 627,089 864,515 AFS investments 2,341 2,341 Meralco refund (included in other receivables and other assets) 1,105 1,105

P=3,460,265 P=3,390,739

The credit quality of financial assets was determined as follows:

Cash in banks and cash equivalents - are composed of bank deposits and money market placements made with reputable financial institutions and hence, graded as “high grade”.

Receivables - high grade receivables are receivables from related parties and employees while standard grade receivables are receivables from dealers who pay within the Group’s normal credit terms.

AFS investments - the quoted investments are graded as “high grade” since these are investments in highly rated companies.

Meralco refund - the Group’s Meralco refund is considered as “high grade” since collectibility of the refund is reasonably assured.

Capital Management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.

The Group’s capital as of December 31, 2011 and March 31, 2011 are as follows: (In thousands pesos)

2011

DECEMBER MARCH

Capital stock P=422,718 P=422,718 Additional paid-in capital 4,780 4,780 Retained earnings Approriated Unappropriated Other comprehensive income

2,767,400 379,033

2,767,400 400,752

P=3,573,931 P=3,595,650

- 154 - The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or issue new shares. The Parent Company declared cash dividends amounting to P= 21.1 million for the nine months of fiscal year 2011 and 2010. There were no changes made in the objectives, policies or processes for the nine months ended December 31, 2011 and 2010 and for the year ended March 31, 2011. Financial Assets and Financial Liabilities

The following table sets forth the Group’s financial assets and financial liabilities recognized as of December 31, 2011 and fiscal year ended March 31, 2011. There are no unrecognized financial assets and financial liabilities as of December 31, 2011 and March 31, 2011. (In thousand pesos) DECEMBER 2011

Carrying Value Fair Value

Financial Assets Loans and receivables:

Cash and cash equivalents P=2,852,526 P=2,852,526

Receivables 588,703 588,703

Receivable from Meralco (included in other receivables and other assets) 1,105 1,105

3,442,334 3,442,334

AFS investments:

Quoted 2,341 2,341

2,341 2,341

P=3,444,675 P=3,444,675

Financial Liabilities Other financial liabilities:

Accounts payable and accrued expenses P=854,219 P=854,219 Technical assistance fees payable 17,884 17,884

P=872,103 P=872,103

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Carrying Value Fair Value

Financial Assets Loans and receivables: Cash and cash equivalents P=2,548,263 P=2,548,263 Receivables – net 830,024 830,024

Receivable from Meralco (included in other receivables and other assets) 1,105 1,105

AFS investments Quoted 2,341 2,341

P=3,381,733 P=3,381,733

Financial Liabilities Other financial liabilities:

Accounts payable, accrued expenses and Estimated liabilities P=954,337 P=954,337 Technical assistance fees payable 48,678 48,678

P=1,003,015 P=1,003,015

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value:

Loans and receivables, except Meralco refund and other financial liabilities - The carrying amounts approximate fair values due to the short-term nature of these accounts.

Meralco refund - Fair values are estimated using the discounted cash flow method using the Parent Company’s current incremental lending rates ranging from 4.0% - 8.0% in 2011 and 2010 and 4.0% - 7.0% in 2009 for similar types of instruments. Finance lease liability - The fair value of the finance lease liability is estimated by discounting the future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. AFS investments - For quoted equity shares, the fair value is based on quoted market prices The fair value hierarchy of financial instruments recognized at fair value follows:

Level 1 - Financial instruments based on quoted prices in active markets for identical assets or liabilities.

Level 2 - Those involving inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3 - Those inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The only instruments carried at fair value are the AFS investments. These are classified within level 1 of the fair value hierarchy.

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PANASONIC MANUFACTURING PHILIPPINES CORP. & SUBSIDIARY AGING OF ACCOUNTS RECEIVABLE AS OF DECEMBER 31, 2011

Amount (Php 1,000)

Trade Receivables: Future Due 259,663 Current Due 103,297 1-30 days 75,345 31-60 days 6,988 61-90 days 5,000 Over 90 days 33,221

483,514 Less: Allowance for doubtful accounts (38,386)

Total 445,128

Other Receivables: BIR excess tax credits 47,534 Retirement benefit paid 23,145 Receivable from affiliates 11,364 PC support – Aircon Dept 36,022 Meralco refund 861 Others 25,754

144,680

Total 589,808