PLDT
Annual Report 2016

Plain-text annual report

D i g i ta l l i k e n e v e r b e f o r e 1 raD! goals! A 2 0 1 6 a n n u a l r e p o r t PLDT 2016 ANNUAL REPORTdigital like never beforeour Cover Breaking boundaries. Defying limitations. Engaging in a millennial way. This is PLDT, bringing to the fore the exciting lifestyle of the digital age to every home, every enterprise, every generation. PLDT opens the door to numerous opportunities. Optimizing great opportunities. Ushering in new technologies. And heralding earth-shaking innovations. All these – and more – like never before. Contents 02 Comparative Highlights 03 Consolidated Financial Performance Highlights 04 Message from the Chairman, President and CEO The PLDT Group Corporate Milestones 09 The PLDT Group Corporate Social Responsibility Report 17 The PLDT Group Corporate Governance Report 23 The PLDT Group Enterprise Risk Management Report 41 Board of Directors 42 45 Advisory Board PLDT Executive Officers 46 PLDT Officers 48 Financial Review 49 93 Audit Committee Report 94 Statement of Management’s Responsibility for Consolidated Financial Statements Independent Auditor’s Report 95 100 Consolidated Statements of Financial Position 102 Consolidated Income Statements 103 Consolidated Statements of Comprehensive Income 104 Consolidated Statements of Changes in Equity 105 Consolidated Statements of Cash Flows 107 Notes to Consolidated Financial Statements 246 Contact Information ShAreD CompAny GoAlS 2 4 Deliver awesome CX through superior network and reliable products, services and touch points Accelerate Group-wide synergy and collaboration as a competitive advantage Achieve business profitability by hitting our target core net income Transform our culture and talent to be the employer of choice Be the undisputed market leader in all key businesses 1 3 5 PLDT is one of the leading telecommunications and digital services providers in the Philippines. Through its principal business segments – wireless, digital, fixed line and others – PLDT offers the largest and most diversified range of telecommunications services across the Philippines’ most extensive fiber optic backbone, wireless and fixed line networks. subsiDiaries Wireless Smart Communications, Inc. and Subsidiaries Digitel Mobile Philippines, Inc. Smart Broadband, Inc. and Subsidiary Voyager Innovations, Inc. and Subsidiaries PLDT is listed on the Philippine Stock Exchange (PSE:TEL) and its American Depositary Shares are listed on the New York Stock Exchange (NYSE:PHI). In 2016, PLDT was one of the largest Philippine-listed companies in terms of market capitalization. vision Lead and inspire Filipinos to create a better tomorrow. mission Empower Filipinos everywhere with customer-focused digital innovations that unlock and share their infinite potential. values Deliver awesome customer experience Take care of our people Collaborate to win Fast is better than perfect Malasakit Humility to listen and learn Fixed line PLDT Clark Telecom, Inc. PLDT Subic Telecom, Inc. PLDT Global Corporation and Subsidiaries PLDT-Philcom, Inc. and Subsidiaries PLDT-Maratel, Inc. Digital Telecommunications Philippines, Inc. ePLDT, Inc. and Subsidiaries Pilipinas Global Network Limited and Subsidiaries Others PLDT Communications and Energy Ventures, Inc. PLDT Digital Investments Pte. Ltd. and Subsidiaries PLDT Global Investments Holdings, Inc. PLDT Global Investments Corporation Mabuhay Investments Corporation Comparative highlights 2012 2013 2014 2015 2016 FInAnCIAl InFormATIon (in million pesos, except cash dividends declared per common share) Revenues Service Revenues Non-Service Revenues Expenses Depreciation and Amortization Compensation and Employee Benefits Cost of Sales Repairs and Maintenance Asset Impairment Interconnection Costs Professional and Other Contracted Services Selling and Promotions Rent Others 2 Net Income for the Year Continuing Operations Discontinued Operations Core Income Continuing Operations Discontinued Operations EBITDA 159,619 3,295 162,914 32,354 21,999 8,747 12,604 5,286 11,105 6,050 9,708 5,860 8,816 122,529 36,099 35,556 543 36,907 36,356 551 75,269 163,932 4,279 168,211 30,304 21,369 11,806 13,107 5,542 10,610 7,173 9,776 6,041 9,786 125,514 35,453 33,384 2,069 38,717 38,816 (99) 77,432 162,930 8,173 171,103 157,210 8,052 165,262 164,943 5,892 170,835 31,379 18,749 13,512 14,988 6,046 10,420 7,748 10,619 6,692 10,304 130,457 34,090 34,090 31,519 21,606 16,389 15,035 9,690 10,317 8,234 9,747 6,376 10,355 139,268 22,075 22,075 - - 37,410 37,410 - 76,750 35,212 35,212 i- 70,218 34,455 19,928 16,753 15,212 11,042 9,573 9,474 7,687 6,912 9,523 140,559 20,162 20,162 - 27,857 27,857 - 61,161 Property and Equipment Accumulated Depreciation, Amortization and Impairment Carrying Value Capital Expenditures Short and Long-Term Debts Net Debt Equity Attributable to Equity Holders of PLDT Cash Dividends Declared Per Common Share Out of the Earnings for the Year 481,033 581,286 605,598 632,918 665,653 280,955 200,078 36,396 115,792 78,057 145,550 388,621 192,665 28,838 104,090 71,467 137,147 413,614 191,984 34,759 130,123 102,821 134,364 437,136 195,782 43,175 160,892 113,008 113,608 462,465 203,188 42,825 185,032 143,572 108,175 172 179 156 122 77 operATInG InFormATIon Number of Mobile Subscribers(1) Number of Fixed Line Subscribers Number of Broadband Subscribers Home Broadband (Wireless)(1) Fixed Line Broadband Total Number of Subscribers Number of Stockholders 71,798,246 2,063,794 1,331,096 427,236 903,860 75,193,136 12,169 72,063,359 2,069,419 1,415,478 436,094 979,384 75,548,256 12,005 72,511,422 68,612,118 62,763,209 2,438,473 2,303,454 2,207,889 1,720,753 1,514,640 1,481,109 270,203 258,776 331,781 1,450,550 1,149,328 1,255,864 76,200,420 72,430,212 66,922,435 11,774 11,880 11,837 Number of Employees Wireless 17,899 7,745 10,154 (1) Mobile and Home Broadband (Wireless) subscribers were adjusted to conform with the 2016 presentation. 19,125 8,663 10,462 Fixed Line 17,496 7,786 9,710 17,176 7,505 9,671 18,038 7,343 10,695 PLDT 2016 ANNUAL REPORTdigital like never before Comparative highlights ConsoliDateD finanCial performanCe highlights 160 140 120 100 80 60 40 20 0 80 70 60 50 40 30 20 10 0 157.2 61.2 27.9 36.9 38.7 37.4 35.2 159.6 163.9 164.9 162.9 75.3 77.4 76.8 70.2 47.5 48.9 51.5 53.7 58.1 112.1 115.0 113.4 109.2 99.1 80 70 60 50 40 30 20 10 0 40 35 30 25 20 15 10 5 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 ServICe revenueS (in billion pesos) Wireless Fixed line ebitdA (in billion pesos) Core InCome (in billion pesos) 3 66.9 49.0 294.9 75.2 1.3 2.1 75.5 1.4 2.1 76.2 1.5 2.2 72.4 1.5 2.3 1.7 2.4 71.8 72.0 72.5 68.6 62.8 2012 2013 2014 2015 2016 80 70 60 50 40 30 20 10 0 80.4 73.8 66.0 69.7 546.6 576.1 627.9 445.1 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 SuBSCrIBer BASe (in millions) moBIle Fixed line brOAdbAnd CASh Flow From operATIonS (in billion pesos) mArkeT CApITAlIzATIon (Year-end, in billion pesos) PLDT 2016 ANNUAL REPORTdigital like never beforemessage from the Chairman, presiDent anD Ceo TO MY FELLOW SHAREHOLDERS In 2016, we set off on a three-year journey to transform PLDT into the country’s leading integrated provider of digital services, solutions, and digital content. We were aware at the outset that this would be a difficult and complex process and that indeed has been the case, as shown by the Company’s financial results for the year. The ride this year has been rough at times with stops and starts, and we have had to make adjustments along the way. In any event, despite a tough start, your Company has clearly set the direction of its digital journey and steady progress has been made in the three key tasks that I listed in my message to you last year. First, we are upgrading and expanding the reach of our fixed and mobile networks, enabling us to better meet the rising demand for data and digital services. Second, we are broadening the range of compelling digital services that we offer our consumer and enterprise customers. And third, we have pressed ahead in transforming the PLDT group of companies into an integrated, digitally-empowered and customer-centric organization. These tasks have acquired even greater urgency as the world moves rapidly towards a global digital economy driven by quantum technologies, machine learning and artificial intelligence. Many of these changes are now upon us and the Philippines must accelerate its own efforts to go digital. PLDT shall play a leading role in the transformation of the country into a Smart Nation. Our Key results Our financial and operating results for 2016 reflect not only the challenges and opportunities posed by digital transformation, but also the intense competition within the industry. Consolidated service revenues, net of interconnection costs, totaled P147.6 billion, 3% less than the prior year. Excluding international and national long distance (ILD and NLD) revenues and interconnection costs, service revenues reached P133.5 billion, just 1% less than 2015. Data, broadband and digital platforms powered the growth of our business, their aggregate revenues rising 18% to P60.2 billion, accounting for 41% of consolidated services revenues, up from 34% in the previous year. This class of revenues now make up 60% and 31% of fixed line and wireless service revenues, respectively. However, SMS and landline and mobile domestic voice revenues declined 14% and 12%, to P28.1 billion and P43 billion, respectively. Consolidated core income amounted to P27.9 billion, in line with our guidance provided earlier in the year. This is about 21% less than the previous year, due to lower EBITDA and costs arising from higher capital expenditures for the roll-out of the fixed and mobile networks of PLDT and Smart Communications, respectively. Recurring core income reached P20.2 billion, net of asset sales, accelerated depreciation, one-time provisions and subsidies, as well as lower taxes from deferred tax assets recognized during 2016. Consolidated core eBITDA declined 6% to P65.8 billion, largely due to lower wireless service revenues and higher provisions, moderated by lower cash operating expenses. Including one-time provisions and handset subsidies, the underlying EBITDA stood at P61.2 billion versus our guidance of P60 billion. Consolidated EBITDA margin was 39%, after margins improved in the 2nd half of the year. In line with our dividend policy, dividends per share amounted to P77, equivalent to 60% of 2016 core earnings. As of end-2016, PLDT’s net debt and net debt to EBITDA rose to US$2.9 billion and 2.36 times, respectively. This was due to added obligations stemming from our acquisition of half of the telecom business of San Miguel Corporation (SMC). Gross debt stood at US$3.7 billion, of which only 9% is unhedged. Refinancing facilities for 2017 maturities are in place, including a US$228 million bond which was repaid on 6th March 2017. As of end-December 2016, PLDT’s investment grade ratings remain unchanged. What’s worth highlighting is the elevated contribution of PLDT Home and Enterprise to consolidated service revenues, growing by 10% to P29.3 million and 9% to P30.6 billion, respectively. These are traditional areas of strength for PLDT, and have now acquired greater value because industry revenue on fixed is forecasted to grow much faster than wireless revenue in the medium-term. Given the rising demand for digital services in the Home and Enterprise markets and our superior infrastructure and brand strength, PLDT Home and Enterprise will continue to set the pace for revenue growth and will likely account for more than half of total revenues by 2017 and onwards. The Wireless Consumer Group – which handles mobile services for Smart, TNT, and Sun individual subscribers – posted revenues of P66.4 billion, 9% less than the prior year. But there were bright spots, such as the 20% growth in mobile data which accounted for 34% of wireless consumer revenues, edging out SMS and domestic voice for the first time, which had shares of about 33% each. The challenge for us is precisely the manner of accelerating the shift to mobile data and digital services, and to help our customers make that transition as quickly and efficiently as possible. All these business initiatives hinge to a large degree on the success of our ongoing network modernization and expansion efforts. Cutting-edge digital infrastruCture Our network strategy is straightforward: We are building the latest, fastest, most resilient and extensive fixed and mobile data networks in the country. To accomplish this, we are pouring substantial resources and effort into developing this digital infrastructure. Our capex budget for 2017 is P46 billion, inclusive of carryovers from 2016. In 2016, we spent P42.8 billion of the P48 billion programmed last year. On the wireless front, Smart is rolling out two complementary technology platforms: LTE and WiFi. P L D T 2 0 1 6 A N N U A L R E P O R T 4 I D G T A L I L I k E N E V E R B E F O R E plDt shall play a leaDing role in the transformation of the Country into a smart nation. P L D T 2 0 1 6 A N N U A L R E P O R T 5 5 I D G T A L I L I k E N E V E R B E F O R E PLDT 2016 ANNUAL REPORTdigital like never before 6 Smart is undertaking a three-year program through to 2018 that will bring its LTE and 3G coverage to 95% of the country’s over 1,500 cities and municipalities. This roll-out, which started in the metropolitan centers of Davao, Cebu and Manila in 2016, is using a combinations of low- and high-band frequencies for LTE and 3G, including the 700 MHz and other frequencies obtained through the acquisition of the telecoms business of SMC. Smart’s efforts are producing the desired results. In Metro Davao, for example, where the network roll out was completed in October 2016, internal tests show that our subscribers are benefiting from much improved LTE coverage, particularly indoors where people use data services the most. Internal tests show that average 3G data download speeds rose six times to 6 Mbps, while average LTE speeds jumped four times to 17 Mbps. As I write this message, similar positive results are being achieved in Metro Manila and Metro Cebu where average LTE and 3G speeds of around 20 Mbps and 5 Mbps, respectively, are being posted in a growing number of areas, as the roll out proceeds in the first few months of 2017. Indeed, third-party studies are providing corroborating information that Smart’s LTE is the fastest in the country. Moreover, Smart has also installed LTE-Advanced (LTE-A) equipment in a number of cell sites, enabling LTE-A capable handsets to post data speeds of up to 80 to 90 Mbps. This positions us to take our mobile internet service to the next level quickly. As more LTE-A capable handsets become available, it becomes relatively easy to boost wireless internet services to the next level by deploying LTE-A. Complementing our LTE/3G mobile internet roll-out, Smart is also building an extensive network of carrier-grade WiFi hotspots, taking advantage of PLDT’s extensive fiber network in the country. Initially, Smart WiFi was installed in key transportation facilities like airports, seaports and the Light Rail Transit (LRT) System in Metro Manila. In 2017, this wireless service is being deployed in a growing number of public spaces, schools, malls, retail and entertainment areas. The combination of Smart’s LTE/3G mobile data and Smart WiFi network will provide subscribers the best possible wireless data experience. For its part, PLDT is rolling out its Fibr City program to bring its ultra-fast fiber-to-the-home (FTTH) service to more areas all over the country. Working with the local governments of these cities, PLDT set up the first Fibr Cities in Toledo, Cebu and General Santos, South Cotabato where residents can now use FTTH to experience equal upload and download speeds of up to 1 Gbps. The target is to expand the footprint of PLDT’s FTTH network from 2.8 million homes passed as at end-2016 to 4.4 million homes by end-2017, and to 6 million by 2020. At the same time, PLDT is deploying hybrid fiber technologies such as G.fast, which can deliver fiber-like data speeds through our copper wires in buildings and residences. We intend to equip 1.7 million of PLDT’s copper-line connections with G.fast. This will raise the quality of customer experience for those on copper, and enable PLDT to increaser its data subscribers. Eventually, all of PLDT’s data customers will be using either an FTTH or G.fast connection within two years. Another key component of PLDT’s digital infrastructure is its network of Data Centers, the largest and most resilient in the country. Through its subsidiary ePLDT, PLDT operates nine data centers, including its newest in the Clark Freeport Zone in Pampanga. By end-2017, its 10th data center will go online in Cebu, raising the total capacity of our data center network to over 9,000 racks. Bundled, COnverged, targeted serviCes As we expand and strengthen our fixed and mobile data infrastructure, PLDT is further able to enrich the portfolio of digital services and solutions we offer to consumer and enterprise customers. PLDT Home, for example, is using its high-speed connectivity to enhance its suite of family-friendly services under its Smart Home program. Its entertainment package, for example, already provides Filipino families the broadest range of live TV and video-on-demand content with the help of its affiliate, Cignal TV, and its partnerships with leading global and local content providers and aggregators like iflix, Netflix, Roku and iWant TV. Smart Home also offers family security services such as Fam Cam, the CCTV service that lets parents monitor their homes while at work, and, Fam Zone, which enables parents to manage their children’s access to the Internet. Faster data speeds enable PLDT and Smart to offer popular video content across their fixed and mobile networks. Smart’s popular prepaid load Giga Surf 50, for example, provides 1 GB of open access data allowance, bundled with 300 MB for access to iflix, the music service Spinnr and YouTube. Increasingly, data is becoming the headline offer of our product bundles with communications services like voice calls and text included as sweeteners in the package. In Smart’s All Out Surf packages, for example, data is blended with Unli All-Net SMS and allocations for calls to Smart, TNT and Sun. Moreover, other bundles include calls to PLDT, such as Sun’s prepaid package TU200 which provides five hours of calls to Sun, Smart, TNT and PLDT landlines. Converged offers are a competitive advantage of PLDT that we are increasingly utilizing. Leveraging its large overall subscriber base, PLDT offers the country’s first data sharing plan that lets its fixed line customers to share their data allocation with up to four Smart mobile phones bundled with the plan. PLDT Home also combines fixed line voice and data with CignalTV content under the offer “Cignal over Fibr”. More such initiatives are forthcoming. Banking on its extensive ties in Government and the business community, PLDT Enterprise has been actively offering converged services for several years now. Increasingly, Enterprise is offering cloud-based services delivered through fixed and mobile platforms. A recent example is the Smart SOS Dispatch, a cloud-based emergency communications system designed for local governments, communities and corporations. Such services take advantage of PLDT’s unmatched ability to support cloud-services through its extensive data center network. The Enterprise Group is also offering the eCommerce and ePayment solutions developed by the Voyager Innovations Group, the digital arm of PLDT and Smart. Voyager solutions like TackThis! and Takatack, for example, now enable the online stores of companies Philippine Airlines, Uber, ShopTV and fashion brands like Giordano. Voyagers freenet enables companies to increase usage of their apps and websites by offering their customers free sponsored access. The PayMaya app continues to be the leading mobile payment application in the Philippines, its growth fueled by strong adoption among millennials. PayMaya Business remains the leading mobile payments acquirer in the Philippines and enables companies to accept card payments via their mobile app, website or point of sale terminals. Moving forward, we are endeavoring to make our product and service offers more and more relevant to our customers. We are doing this for example by building an Enterprise team that better understands the changing needs of our corporate customers, and can act as their trusted adviser in acquiring the right solutions for their businesses. PLDT 2016 ANNUAL REPORTdigital like never before In the Consumer business, we are using more extensively big data analytics in combination with a more engaged marketing and sales organization in order to develop and deliver compelling products to customers in the right place at the right time and at the most affordable price. integrated and empOwered OrganizatiOn PLDT also remains active in the fields of environmental protection, livelihood promotion and health care. We are also committed to developing Philippine sports. Working with the MVP Sports Foundation (MVPSF), PLDT continues to support collegiate and national programs in basketball, boxing, golf, cycling, badminton, football, taekwondo, amongst others. A relatively recent focus of interest is weight lifting, which has got a big boost following the Silver Medal win of Hidilyn Diaz in the 2016 Olympics. To serve our customers with converged digital services more effectively, the PLDT organization, including its wireless and digital subsidiaries, needs to become more integrated and collaborative than ever before. Our dream of hosting the FIBA Basketball World Cup in 2023 through the Samahang Basketbol ng Pilipinas burns bright as ever. We may win, or we may not. Either way, the pursuit of this dream will help us raise our level of excellence in the sport. That is why new senior executives were appointed in the areas of Human Resources, Customer Experience and Data Analytics, Platforms and Networks in the later part of 2016. The designation of Ernesto R Alberto as Chief Revenue Officer places all the major revenue-generating business units – PLDT Home, Enterprise and Wireless Consumer – under one head and opens the door to greater collaboration among them. Placing Corporate Services across PLDT and Smart under Ray C Espinosa as Chief Corporate Services Officer aims to strengthen support for the frontline business units. We have also reinforced our Customer Experience and Data Analytics groups so that we can utilize the most advanced digital tools to understand better our customers’ changing needs and tastes. This is a fast-moving field, where global technology giants are rewriting the rules of the games. We intend to keep apace by strengthening our internal capabilities and partnering with global leaders in this field. COrpOrate aCtiOn: pursuing the digital shift In step with our business, our corporate social action programs are pursuing an increasingly digital tack. In education, for example, teacher and student training remains a strong focus and is increasingly going online. Gabay Guro (2G), the flagship program of the PLDT Smart Foundation (PSF) and the PLDT Managers’ Club, Inc. (MCI), the PLDT Infoteach Outreach Program and the Smart Wireless Engineering Education Program (SWEEP) provided various sorts of training for about 7,900 teachers and students of public schools all over the country in 2016. In the case of 2G, the stress is on raising the level of teacher competencies, while the Infoteach Outreach Program focused on Internet and computer literacy. For SWEEP, the objective is to help colleges and universities to produce more industry-ready graduates, an effort that won for Smart inclusion in the “Change the World” list of Fortune Magazine – a yearly recognition given to 50 companies from around the world for conducting programs with significant social impact. Some of our programs have produced digital innovations. For example, PLDT launched a new disaster preparedness mobile app called Handa through which employees of PLDT and Smart and their subsidiaries can receive relevant safety information, real-time situation updates and send calls for help during emergencies. Smart launched SHINE OS+, the mobile app version of the Secured Health Information Network and Exchange – an open-source electronic medical record platform developed in partnership with the Ateneo Java Wireless Competency Center. But we still have plenty of brick and mortar activities. 2G is still building and turning over public school classrooms – 43 as of end- 2016. In disaster resilience, PLDT built and turned over 30 “butterfly houses” to families in Tacloban, Leyte which had been displaced by Typhoon Yolanda. This was part of a joint program of the US AID and the Philippine Disaster Resilience Foundation (PDRF). OutlOOK In this era of alternative facts, fake news, and populist politics, there is growing unease about the widening circles of creative disruption being caused by digital technologies like artificial intelligence, machine learning and robotics. There are fears for example that AI-driven software will wipe out work in our business process outsourcing industry, just as workers in advanced countries are worried that increasingly more affordable robots will take over their manufacturing jobs. If our experience is any guide, embracing change is ultimately more beneficial than trying to hold it back. We have learned ourselves that resisting change is a futile exercise – it will come anyway whether one likes it or not. The painful lessons are simply these – embrace change, disrupt yourself, get ahead by pivoting digitally. That is why in our current efforts, we are profoundly mindful not only of the urgent needs of today, but also the emerging challenges and opportunities of tomorrow. For example, even as we roll out our LTE network, we are designing this deployment so that this will help us prepare for the coming of 5G in just three years from now. This explains why Smart conducted 5G tests with our technical partner Nokia in December 2016 and why PLDT signed an agreement with Huawei Technologies in February 2017 to do research and development (R&D) work on 5G. We are building the digital infrastructure of tomorrow – today. And we are working with the best partners here and abroad to develop the ecosystems of digital services that will transform business, government and improve the lives of our people. To get from here to there requires us to disrupt the businesses we have – profitable as they were in the past. We have pressed the 2016 Start Button as a period for resetting. Profitability was adjusted to a lower but realistic level, taking into account how our business, customer base and organization are being reshaped by the forces of technology and market changes. Our new baseline is P21.5 billion in 2017 in underlying core income without exceptionals, compared with the 2016 core of P20.2 billion. Moving forward, we aim to progressively raise profitability, starting with this baseline of P21.5 billion in 2017. To get back on this path of sustained growth and profitability, all of us in the PLDT group of companies need to exert concerted, relentless efforts to serve our customers in the best possible way. Digitally. Like never before. Let me close by thanking our shareholders for their unstinting support, our Board of Directors for their wise counsel, and our Management and Staff for their tenacity and creativity in overcoming obstacles to building a new future for our Company, our Customers and our Country. Manuel V Pangilinan Chairman of the Board, President and Chief Executive Officer 7 PLDT 2016 ANNUAL REPORTdigital like never beforelove! 8 bonding like never before Capture golden moments with precious ones – anytime, anywhere! PLDT 2016 ANNUAL REPORTdigital like never beforeTHE PLDT GROUP Corporate milestones enriching the Digital experience The PLDT Group is enriching the digital life of Filipinos like never before with innovative products and services for home, enterprises, and individual customers. In line with its digital pivot, the parent company changed its name from “Philippine Long Distance Telephone Company” to “PLDT Inc.” to represent its decisive shift from being a telecommunications firm into a digital services provider. Along with this brand identity change, PLDT adopted a new logo shaped like a triangle to represent its meaningful innovations, exceptional people, and reinvigorated mission to always delight its customers. The new logo also symbolizes the powerful convergence of PLDT and its wireless unit, Smart Communications, with both companies carrying the same triangle symbol. 9 Building the smart hOme PLDT is making Filipino homes safer, more comfortable and more enjoyable via its growing suite of Smart Home services which combine powerful connectivity with innovative products and services that provide peace of mind, rich entertainment, automation and converged communications. PLDT Home offers the widest range of video content via live TV and video- on-demand. To accomplish this, the PLDT Group established partnerships with leading global and Philippine content providers and aggregators. These include leading US video streaming platform Roku Inc. for Internet TV; global internet television leader Netflix for an extensive library of award-winning PLDT 2016 ANNUAL REPORTdigital like never before 1 0 TV and movie titles; e-commerce giant Amazon for online shopping; and iWant TV, the leading player in the over-the-top (OTT) content platform in the Philippines. These complement PLDT’s partnerships with iflix for Asian video-on-demand and Fox International Channels for live streaming and catch-up TV. The entertainment suite at home also includes well-loved kid-friendly content like games and e-books via Disney through Telpad, sports through Fox Sports and NBA Premium HD via Cignal, and gaming with Steam. Subscribers also enjoy the benefits of compact access to information and entertainment through the most powerful PC in a stick – the TVolution Stick. PLDT Home also enhanced its family security services by adding the Fam Zone, which enables parents to manage their children’s access to the Internet, and Smart Watch, which lets parents track the location of their children. It had earlier launched Fam Cam, the CCTV service that lets homeowners check and talk with their children at home while they are outside. To provide customers converged fixed and mobile communications, PLDT HOME introduced in January 2016 the country’s first data sharing plan that allowed fixed line subscribers to share their data allocation with up to four Smart mobile phone lines bundled with the plan. To deliver these communications and digital services, PLDT has accelerated the roll-out of its fiber-to-the-home (FTTH) facilities, extending its reach to 2.8 million homes passed at the end of 2016 – the most extensive in the country. With the strength of fiber, PLDT can offer asymmetrical speeds of up to 1 gigabit per second (Gbps) to families nationwide. PLDT also deployed advanced hybrid fiber technologies that can deliver fiber-fast broadband service through regular phone lines in buildings and residences in partnership with Huawei Technologies Co. Ltd. Called G.fast, this technology solution can provide data speeds per user of up to 600 to 700 megabit per second (Mbps), depending on the length of the local copper loop. enhanCed mOBile serviCes In 2016, Smart Communications stepped up the roll out of its LTE and 3G networks to address the growing demand for mobile data services. It launched a three-year program to expand LTE coverage to 95% of the country’s cities and municipalities by 2018. To support this effort, Smart began utilizing the 700 MHz and other radio frequency bands that it acquired access to as a result of PLDT’s participation in the acquisition of the telecom business of SMC. Riding on this network enhancement program, Smart introduced more data and digital services. For example, it released the enhanced version of its My Smart application, allowing subscribers to manage their postpaid and prepaid accounts virtually anywhere, view their account usage in real-time, and buy load and add-ons directly on the app. The new app also provided easy access to content such as videos, music, daily live streaming of TV5 and Fox Sports. In August 2016, the Smart Life app streamed live and for free the 2016 Rio Olympics, bringing Filipinos closer to the world’s biggest sports event. In partnership with MCA Music, Smart Music Live treated subscribers to a series of concerts including ones that featured Selena Gomez, Nathan Sykes, Autotelic, Up Dharma Down and Ely Buendia among others. Smart users were treated to tickets and meet and greet events. PLDT 2016 ANNUAL REPORTdigital like never before In August 2016, Smart offered free access to the phenomenal hit game Pokemon GO, followed by free access to Snapchat app for subscribers. These treats aimed to introduce more subscribers to the digital lifestyle and enjoy the enhanced mobile experience offered by Smart. In November 2016, Smart introduced Chat Abroad, the country’s first chat-only data roaming subscription, which allows Smart subscribers to stay connected in over 130 countries, via six top chat apps – Facebook Messenger, Line, Telegram, Viber, WeChat and WhatsApp – at a very affordable rate of only P150 per day. Smart also launched Smart Travel WiFi, a pocket WiFi rental service that allows Smart and non-Smart users to enjoy and share mobile internet access across multiple gadgets in over 100 countries for as low as P390 per day. For its prepaid customers, Smart introduced several offers that help them enjoy the digital lifestyle. Its leading data offer has been GigaSurf 50, which provides a 1 Gb data package plus 300 Mb for popular apps like iFlix, Spinnr and YouTube and Unli text to all networks. Other popular prepaid offers include ItsATropaTreat and Babad Apps. Smart also continued to engage the digital Filipino youth with “Smart Launchpad,” a first-of-its-kind online talent search that aims to discover and nurture the next generation of YouTube content creators. From 1,537 entries, the top 100 advanced to the workshop where they were mentored by industry experts and top online stars. Three finalists were ultimately named the Next Big Pinoy Creators. Smart’s value brand, TNT, also launched its new logo, brand ambassadors and theme song “It’s a Tropa Thing” in June 2016, expanding its target market to include the more tech-savvy, fun-loving and budget-conscious Filipino youth belonging to Generation Z. For postpaid subscribers, Smart launched Giga Plans which offer up to ten times more than Smart’s previous data allocations, plus call and text credits, and a free subscription to their choice of value added services (VAS) such as iFlix, Spinnr, YouTube, and other streaming services. Sun Cellular, on the other hand, enhanced its data plans to include a free phone and tablet bundle, plus unlimited calls and texts to Sun, more text messages to other networks and higher data allocation for surfing. In February 2016, Smart Bro signed a multi-year partnership with UFC, the world’s largest mixed martial arts organization, to bring the fast-growing sport closer to Filipinos through digital offers, exclusive experiences and promos. Smart Bro also brought the BRO-kada, comprised of today’s favorite millennial celebrities, around the country to make data more accessible to its target market, offering the Prepaid Pocket WiFi and the iPad Mini 2 at affordable plans. It has also partnered with PLDT to offer the Pocket WiFi even in far-flung areas that can be served with the wireless broadband access that Smart Bro can provide. In celebration of Independence Day, Smart offered free Viber and Viber Out calls to any mobile and landline here and select destinations abroad from June 12 to 14, 2016 – the first time in the world that it was offered free to mobile subscribers. The service allowed Smart subscribers to connect to any number in the Philippines, India, US, Uk, Canada, Norway, Nigeria, Australia, China, korea, Malaysia, Italy, Qatar, Singapore, Hong kong kuwait, Japan, Taiwan and Bahrain. 1 1 PLDT 2016 ANNUAL REPORTdigital like never before 1 2 mOst trusted partner fOr enterprises To bolster its leadership in the enterprise market, PLDT further expanded its network of world-class data centers. By March 2017, PLDT was operating nine data centers in different parts of the country including its biggest facility at the Makati central business district, another one in the Clark Freeport Zone, and one more in Davao City, the first data center in Mindanao. This brought the capacity of its data center network to over 9,000 racks, the largest in the country. Alongside the Davao VITRO Data Center, PLDT set up its fourth cable landing station and a state-of-the-art Innovations Laboratory (Innolab) – the company’s seventh. These facilities will further support economic development in Mindanao. To support its development of digital infrastructure, PLDT partnered with NTT Communications, the ICT solutions and international communications business within the NTT Group, strengthening the Company’s global network infrastructure by leveraging the 100Gbps connectivity powered by NTT Com’s Tier 1 Global IP backbone. On the global front, PLDT launched a digital Mobile Virtual Network Operator (MVNO) in Japan, its first in this country. It also established its newest global Point-of-Presence (PoP) in Australia, the sixth in PLDT’s fast growing global network which includes PoPs currently serving international customers in the U.S., U.k., Singapore, Japan, and Hong kong. To help improve local internet traffic, PLDT established a bilateral IP peering arrangement with Globe Telecom that improves the internet experience of subscribers of both operators. This followed the setting up of a link to the Philippine Open Internet Exchange (PHOpenIX) of the Department of Science and Technology in order to improve access to government websites. Starting July 2016, the PLDT Group rolled-out carrier-grade Smart WiFi in key transport hubs, identified by the Department of Transportation, in line with the Group’s commitment to make available to the public internet at world-class speeds. Apart from the Ninoy Aquino International Airport, the country’s biggest airport, Smart WiFi is now available in key airports all over the country, including Davao City’s Francisco Bangoy International Airport, Laguindingan Airport in Misamis Oriental, Bacolod-Silay International Airport and Iloilo International Airport, Roxas Airport, Zamboanga Airport, Clark International Airport, Dumaguete-Sibulan Airport, Laoag International Airport, General Santos International Airport, kalibo International Airport and Puerto Princesa International Airport. Smart WiFi was also installed in the sea ports of Batangas City and Calapan in Mindoro. It is scheduled for rollout in more regional airports, sea ports, and the rail-based MRT and LRT lines 1 and 2 in Metro Manila and the rest of the country. Innovating the way enterprises make their hotlines available to their customers, PLDT Enterprise introduced the PLDT #MyNumber to businesses that make hotlines easier to remember as well as accessible to customers nationwide. keeping close to its customers, the PLDT Group together with the International Data Corporation hosted “Digital Now,” a Philippine ICT Leadership Convention participated in by top Philippine companies to take a close look at how digital technologies are changing the rules of the game for their businesses. PLDT also named a new generation of digital business leaders under its #BeTheBoss Awards. PLDT also launched Facebook at Work (now called Workplace), creating a virtual community for the over 17,000 employees of PLDT, Smart and Voyager Innovations. With its useful productivity features, Workplace enables employees to quickly connect and hold online meetings with colleagues using features like the Work Chat app. PLDT 2016 ANNUAL REPORTdigital like never before 1 3 vOyager innOvatiOns keeping its focus on eCommerce and ePayments, Smart subsidiary Voyager Innovations through its solutions such as TackThis! and Takatack are now supporting the online stores of leading companies like Philippine Airlines, Uber, MyPhone, ShopTV, and top fashion brands like Giordano and Folded & Hung. Its Takatack Rewards is enabling companies like Unionbank and a number of business outsourcing companies to engage their employees with rewards and benefits. Voyager’s freenet is enabling companies to engage customers with free sponsored data access to their apps and websites while HATCH and VYGR deliver rich mobile marketing and digital advertising campaigns for enterprises. Meanwhile, PayMaya remains the leading mobile payment application in the country, retaining its No.1 spot in Google Play Philippines since November 2015. PayMaya has entered into strategic collaboration with top global tech brands like Uber and Paypal to help sustain its growth. It also powered the Smart Mastercard, the prepaid payment card for Smart, Sun, and TNT subscribers. PayMaya is also the leading mobile payments acquirer in the Philippines that allow leading companies to accept card payments through their mobile app, website, or physical point of sale terminals. Recently, it partnered with Metro Pacific Tollways Corp. to enable the first Mastercard contactless and beep card payments acceptance in the North Express Tollways and the Cavite Expressway. glOBal and natiOnal awards In 2016, the PLDT Group’s efforts to serve its customers garnered numerous awards and recognitions from Philippine and global organizations. Finance Asia Awards Best Investor Relations #2 Philippines – PLDT Best Corporate Social Responsibility #8 Philippines – PLDT Most Committed to Corporate Governance #5 Philippines – PLDT Best Managed Company #9 Philippines – PLDT Institutional Investors’ Governance Award For publicly-listed companies with US$10 billion and up of market cap – PLDT Fortune’s Change the world list 36th in the list – Smart for Smart Wireless Engineering Education Program (SWEEP) PLDT 2016 ANNUAL REPORTdigital like never before Institutional Investor magazine’s 2016 All-Asia executive Team Best Investor Relations Program – Telecommunications (Sell-side) – PLDT Best IR Professional – Melissa Vergel de Dios (#3) (Overall and Sell-side) – PLDT 15th Annual CIo Asia Awards Leadership category – PLDT Home (data sharing plan with Smart) Included in the Roll of Honour list (1 of 5) – PLDT Home voyager Awards Cards and Payments Asia Smart Awards Best eCommerce Technology Provider – TackThis! Asia Communications Awards Best SME Service – TackThis! Best SME Service Award – TackThis! E-Commerce Platform Telecom Asia Awards Best Mobile Security Innovation of the Year – LockByMobile Customer experience in Financial Services (CXFS) Asia Awards 2016 Best in Customer Experience award for mobile – FINTQ & LANDBANk’s Mobile Loan Saver 9th Annual emerging payments Awards Best online payments solution for enabling instant access to the digital economy – PayMaya visa Best New Digital Product of 2016 – PayMaya lafferty Global Awards 2016 Excellence in Lending – FINTQ’s LANDBANk Mobile Loan Saver International Finance magazine Best Innovative Lending Platform – FINTQ’s Mobile Loan Saver IABC CEO Excel Award – Eric Alberto (as CEO of ePLDT) 1 4 PLDT 2016 ANNUAL REPORTdigital like never beforeQuill Awards Excellence Awards PLDT’s annual Gabay Guro Grand Gathering for teacher-beneficiaries PLDT Gabay Guro’s classroom donations for calamity-affected areas PLDT ALPHA Enterprise’s Annual Track Day PLDT ALPHA Enterprise’s HOT JOE Magazine PLDT Smart SME Nation’s Bossing Ako campaign Merit Awards PLDT Gabay Guro’s Teacher Training Program PLDT Gabay Guro’s Crossover video PLDT ALPHA Enterprise’s PLDT Pasasalamat Night: A Glittering ALPHA Experience Enterprise Customer Care Engagement campaign PLDT Smart SME Nation’s Small Business Month campaign Anvil Awards Gold Awards for PR Tools: Multi-Media category PLDT Alpha’s Hot Joe Magazine PLDT Home’s Most Beautiful Connection video Gold Awards for PR Programs PLDT Home’s “Strengthening the Volleyball Community with the Volley Friends” PLDT Home’s “Gabay Guro 2016” Silver Awards for PR Tools: Publications PLDT Annual Report: Virtual is Real PLDT Home Fibr Planner Silver Awards for PR Tools: Multi-media Digital and Social Media PLDT Alpha’s Customer Testimonials AVPs PLDT Inc.’s “Changing the Way You Do Business.” Silver Awards for PR Tools: Exhibits PLDT Home’s Regine Series Nationwide Tour 2016 PLDT Gabay Guro’s Teacher Fest 2016 PLDT SME Nation’s Techmobile Tech Island 2.0. Silver Awards for PR Programs PLDT Home’s Data Sharing PLDT Home’s Smart Watch PLDT Alpha for its Customer Engagement PLDT SME Nation’s “Big Talks” PLDT SME Nation’s “Be The Boss” PLDT SME Nation’s “Make It Big” International Conference on education and Social Science in Singapore Excellence Award for Best Presentation and Content – PLDT for Infoteach Outreach Program Business in the Community’s 2016 Annual responsible Business Gala in london UPS International Disaster Relief Award – Philippine Disaster Resilience Foundation (PDRF) Asia Communication Awards in Singapore and the world Communications Awards in the united kingdom Social Contribution Award – Smart for Smart Technocart plDt, smart unveil new logo in line with ‘digital pivot’ plDT and its mobile subsidiary, Smart Communications, welcomed a new day in 2016 with a fresh brand identity that reflects their desire to empower their customers who are increasingly embracing digital services in their daily lives. A new logo was launched in line as well with the recent change in its name from “philippine long Distance Telephone Company” into “plDT Inc.” The change was implemented to better represent its new thrust to decisively shift its business to data-driven services. The new logo symbolizes the powerful convergence of plDT and Smart, combining fixed and wireless technologies to serve individual and enterprise customers. Shaped like a triangle, the three sides represent people, innovations, and customers. The triangle is also the symbol for Delta, the fourth letter in the Greek alphabet, which stands for “Change.” The new plDT logo replaces the iconic 33-year old Company logo formed through a repetition of the abstract figure of the telephone receiver to complete four sides. 1 5 1940s 1970s 1983 1996 2016 PLDT 2016 ANNUAL REPORTdigital like never before great! 1 6 connecting like never before Coach him about things that matter – about life, love and the future! PLDT 2016 ANNUAL REPORTdigital like never beforeTHE PLDT GROUP Csr report PLDT and its subsidiaries pursued their various corporate social responsibility (CSR) programs in 2016 with a more pronounced digital thrust in various fields – particularly education, disaster preparedness and resiliency, health, livelihood and sports. And garnered recognition along the way. 43 ClASSroom dOnAtiOns 542 GABAy Guro puBlIC SChool TeACher SCholArS In 2016 26,140 STuDenTS & TeACherS GrADuATeS oF The plDT InFoTeACh TrAInInG CourSe prOpagating digital literaCy Education continued to be a major focus of the PLDT Group’s CSR efforts. In 2016, 2G supported 542 public school teacher scholars of which 150 graduated – 34 with distinction. Moreover, 79 2G scholars passed the Licensure Examinations for Teachers (LET). The flagship program of PSF and MCI, 2G also entered into a partnership agreement with 51Talk, an online English tutorial service for Chinese-speaking students, to provide opportunities for over 2,500 teachers to augment their income. In line with its school building program, 2G has turned over 43 classrooms – an ongoing project until March 2017. In partnership with Asian Carriers Conference and Huawei, 2G provided 50 laptops and 50 Samsung tablets to 3 public high schools in Cebu province during the 2016 Asian Carrier Convention. The program also donated three laptops to the Arnel Pineda Foundation, Inc. under its Libreng Aral Libreng Turo Tuwing Linggo Project. To date, 2G has built strong partnerships with 47 universities and colleges. The plDT Infoteach outreach program provided digital and computer literacy training to some 3,000 student and 3,320 teachers from 139 public schools in 10 school divisions of the Department of Education in 18 cities and municipalities in Luzon, the Visayas and Mindanao. Over the past 12 years, the program has benefitted 26,140 student and teacher graduates of its training courses. In cooperation with the University of the Philippines Open University (UPOU), the program also provides scholarship grants to outstanding teachers, enabling them to enroll in the Diploma in Computer Science program or other programs offered online by the UPOU. Participants eligible for this grant are the Division level grand champion winners per area during the PLDT Home DSL Broadband Quiz which is held at the end of the training program. Managed by PLDT’s Community Relations, the program won an Excellence Award for Best Presentation and Content at the International Conference on Education and Social Science in Singapore. 1 7 PLDT 2016 ANNUAL REPORTdigital like never before Angelica Marie Zamora is a senior high school teacher from Lucban, Quezon Province and is one of the raffle winners during the 2G Teacher Fest. The PLDT Infoteach Outreach Program is culminated by the regional quiz bee which gathers all top seeds hailed during the regional competition. The award-winning UPOU program has provided scholarship grants enabling beneficiaries to enroll in UPOU online programs. 1 8 PLDT also supported the launching of the PLDT Community Outreach Alternative Learning System Community Learning. Program mentors were teacher-graduates of the PLDT Infoteach Outreach Program at Brgy. Lanit, Iloilo City. It is the only learning center for the indigenous people or ati in the City of Iloilo. To enlist high technology in nation-building, PSF and leading educators Dr. Chris and Marivic Bernido, designed the Semana de Trabajo program for experts from different universities to gather and discuss the potential impact of Big Data on businesses and the challenge of addressing shortage of skills in this area. PLDT’s mobile subsidiary Smart Communications had a bumper crop of awards for its education programs. The Smart wireless engineering education program (SWEEP), which helps colleges and universities produce industry-ready graduates and future technology entrepreneurs, was recently included in the yearly “Change the World” list of Fortune magazine. This recognition is given to 50 companies around the world that “do well by doing good.” Smart was particularly cited for helping improve engineering and ICT education in the country. In 2016, SWEEP provided training to 995 students and faculty, bringing the grand total to 34,676 over the past 13 years. The Smart Technocart program won two international awards – the Social Contribution Award at the Asia Communication Awards in Singapore and the World Communications Awards in the United kingdom. The Technocart is a mobile digital laboratory that helps public school kindergarten students learn to read and write. It contains 20 tablets, a laptop loaded with various educational applications bundled with a projector and mobile WiFi unit. In 2016, Smart deployed 20 Technocarts in public schools in different parts of the country. Smart also launched School-in-a-Bag, a learning tool package donated to public schools in remote areas without electricity. The bag contains a solar panel and battery, LED TV, laptop and tablet for the teacher, five tablets for students, lapel mic, hard drive, and pocket WiFi with starter load. It also includes teachers’ training on a 21st century teaching pedagogy, k+12 content, learning activity sheets, and a learning management system. Smart donated 20 units to remote schools in Luzon, Visayas, and Mindanao. School-in-a-Bag nicely complements the Smart Technocart and both have evolved into easy-to-implement partnership programs. For example, UBS Philippines, a subsidiary of the global financial firm, struck a partnership with the PLDT Smart Foundation in order to provide educational assistance to remote communities. UBS donated P1 million to the PLDT Smart Foundation in order to fund the deployment of 10 School-in-a-Bags to schools of their choice. PLDT 2016 ANNUAL REPORTdigital like never before A group of school children navigate through one of the gadgets found in Smart’s Technocart. School kids happily hold together Smart’s innovative School-in-a-Bag. PLDT, through USAID’s Breach Project in partnership with PDRF, turns over “30 butterfly houses”. 1 9 20 TeChnoCArTS provIDeD All over The CounTry 34,676 TrAInInGS provIDeD By Sweep over The pAST 13 yeArS 30 “BuTTerFly houSeS” TurneD over To TACloBAn rallying fOr disaster resilienCe and reCOvery Disaster resilience begins at home – and the work place. In this spirit, PLDT launched a new mobile app called Handa through which employees can receive relevant safety information, real-time situation updates in their area, and send calls for help with their location details. The app was developed by the Enterprise Business Continuity and Resilience Office of the PLDT Group of Companies. Working with the USAID, PLDT turned over 30 “butterfly houses”, in Tacloban, Leyte for the benefit of the families rendered homeless by Super Typhoon Yolanda. This was part of the joint effort of USAID and PDRF to help families in Leyte get back on their feet through the Building Resilient and Economically Adept Communities and Households (BREACH) program. PLDT won the UPS International Disaster Relief Award at the Business in the Community’s 2016 Annual Responsible Business Gala in London. PLDT’s award was in recognition for its role in developing the PDRF into an effective platform for collaboration between the private sector, national and local government, and international agencies for disaster resiliency programs. Initially set up after Typhoon Ondoy, PLDT helped PDRF to effectively mobilize the resources of the private sector in response to Super Typhoon Yolanda. PLDT 2016 ANNUAL REPORTdigital like never before Working with the National Disaster Risk Reduction and Management Council (NDRRMC), Smart helped organize disaster communications summits, or, ICT Bayanihans in eight regions of the country. Each summit was attended by at least 100 representatives from the police and military, radio and TV broadcast companies, local two-way radio groups, schools, government agencies and businesses that have communications equipment. The summit participants threshed out disaster communications protocols and set up rapid emergency telecoms teams (RETTs) in each region in order to respond to disaster situations. Smart network teams have become part of these RETTs. Smart also kicked off a disaster-readiness educational caravan nationwide, dubbed “Tropang Ready” especially designed for children, featuring the video series Maging Laging Handa which covers precautionary measures and safety tips for various calamities. Maging Laging Handa materials are also being used by DepEd as additional resources for the disaster risk reduction education of elementary students. MVP Tulong kapatid, the CSR consortium of the companies led by MVP in partnership with the provincial government of Davao Oriental, formally turned over 266 housing units to the families rendered homeless by Typhoon Pablo. The five-hectare resettlement site in Barangay Lambajon was developed by PSF, with support from TV5’s Alagang kapatid Foundation, One Meralco Foundation, First Pacific Leadership Academy, MPIC Foundation, First Pacific, North Luzon Expressway, Makati Medical Center Foundation, Philex Group Foundation, and Maynilad. enaBling livelihOOd OppOrtunities PLDT Smart SME Nation and PSF, with the Micro Business Group, hosted the kick-off meeting of the leaders of the ASEAN Business Women Working Group and the ASEAN Women Entrepreneurs’ Network. The group launched the GREAT Women Forum, a Stakeholders “Market Match” Forum and Trade Exchange. Empowering women’s economic growth, the event encouraged stakeholders to purchase and source from women vendors under the GREAT WOMEN Platform. PLDT Smart SME Nation, in partnership with PSF, Business and Professional Women Makati, and IBM Philippines developed the GREAT WOMEN ICT Platform to enable women entrepreneurs to use broadband internet connectivity and digital services to grow their businesses. PSF is also one of the members of the Gender Responsive Economic Actions for the Transformation of Women program led by the Philippine Commission on Women. prOmOting Better health Care In 2016, Smart launched SHINE OS+, the mobile app version of the Secured Health Information Network and Exchange (SHINE) — an open-source electronic medical record (EMR) platform developed in partnership with Ateneo Java Wireless Competency Center (AJWCC). In 2016, SHINE was used by 34 municipalities mostly in Central and Western Visayas, generating over 160,000 records. 2 0 PLDT 2016 ANNUAL REPORTdigital like never before To promote the use of SHINE OS+, Smart, in partnership with the Department of Health and the Department of Science and Technology-Philippine Council for Health Research and Development, held #ThinkOpenHealth, the country’s first health hackathon where developers were challenged to design plug-ins and modules for SHINE OS+ that can be customized to fill current gaps in the health sector. Smart and the Ateneo Java Wireless Competency Center piloted the Operation Smile Patient Mapping App which aims to track cleft patients, digitize their medical information and store it for future reference and further research. prOteCting the envirOnment Advocating a clean and greener environment, PLDT has consistently supported the Balik-Baterya Program of Motolite and Philippine Business for Social Progress (PBSP). The program aims to encourage proper disposal and recycling of used batteries. Funds from donated used batteries are used to support CSR projects of PLDT and PBSP. In 2016, PLDT donated 163,000 kilos of batteries amounting to almost P4 million. PLDT remains to be the biggest benefactor of the program with a total donation of two million kilos of used-lead acid batteries (ULABs) amounting to P48 million as of December 31, 2016. empOwering grassrOOts spOrts The MVP Sports Foundation (MVPSF) maintained its support for collegiate and national programs in such sports as basketball, boxing, golf, and cycling. MVPSF forged partnerships with universities, associations, and organizations such as the Samahang Basketbol ng Pilipinas (SBP), Association of Boxing Alliances in the Philippines (ABAP), LBC Sports Development Corp., National Golf Association of the Philippines (NGAP), San Beda College, and the Ateneo de Manila University. MVPSF also extended its support to Filipino athletes who competed during the 2016 Olympics held in Rio de Janeiro, Brazil. Since its inception in 2011, MVPSF has contributed to the growth of the Taekwondo and Boxing programs in the Philippines, which greatly helped the three Filipino Olympians competing in these two sports. As MVPSF strives to expand its reach in Philippine Sports, it has been recognized as a partner of the Philippine Weightlifting Association (PWA) in growing the sport in the Philippines. Bouyed by the success of 2016 Olympic Silver Medalist, Hidilyn Diaz, MVPSF and PWA have both committed to further develop weightlifting through grassroots initiatives and programs in the Philippines. 2 1 Olympic Silver Medalist Hidilyn Diaz shows her winning form. 34 munICIpAlITIeS uSeD ShIne oS+ 266 houSeS TurneD over To Typhoon pABlo vICTImS 163,000 kIloS oF BATTerIeS DonATeD AmounTInG To AlmoST php4 mIllIon An aerial shot of the 266 MVP Tulong Kapatid Homes officially turned over in February 2016. PLDT 2016 ANNUAL REPORTdigital like never before 2 2 doing business like never before Ace that presentation with great confidence – and win the trust of your customer! PLDT 2016 ANNUAL REPORTdigital like never beforeTHE PLDT GROUP Corporate governanCe report Corporate Governance is the cornerstone of our strategy. It enhances our business performance and enables us to safeguard the interests of our stakeholders by keeping us focused on our commitments to: • Seek to enhance value for our shareholders and proactively engage with our stakeholders • Be guided by the principles of integrity, accountability, transparency and fairness. Governance for us is the business of all - the Board, Management and employees. HigHligHts in 2016 • new vision, mission and Corporate values • Comprehensive program to revitalize network and IT platforms • business Transformation program on Culture, people and processes • Annual Stockholders’ meeting • 16 Board meetings and 22 Board Committee meetings • Training on Digital Transformation, risk management & Governance Our corporate governance framework was established to enable us to create sustainable value for the Company, fulfill our commitments to our stakeholders and develop a strong corporate culture. It is embodied in the integrated system of governance structures, policies and processes set forth in PLDT’s Articles of Incorporation, By-Laws, Manual on Corporate Governance (CG Manual), Code of Business Conduct and Ethics (Code of Ethics) and Corporate Social Responsibility Statement. The Company continuously seeks to raise the standards of its business conduct. We comply with applicable rules and benchmark with international best practices. PLDT follows the governance standards of the Philippines as a public company listed in the Philippine Stock Exchange (PSE) and of the United States as a foreign private issuer with American Depositary Shares listed and traded in the New York Stock Exchange (NYSE). PLDT also benchmarks with the governance standards of Hong kong being an associated company of First Pacific Company Ltd., a company listed in the Hong kong Stock Exchange. BOard Of direCtOrs duties and responsibilities The primary responsibility for ensuring good corporate governance in PLDT is vested in our Board of Directors (“Board”). The Board has the authority and responsibility to exercise the corporate powers, conduct the business and control the properties of the Company. Directors are expected to perform their duties diligently and in good faith and devote sufficient time and attention for such purpose. The Board and the directors are bound to act in the best interest of the Company and for the common benefit of its stockholders and other stakeholders. To ensure a high standard of governance for the Company, the Board performs the following functions and duties with the assistance of the Board Committees: • Corporate Governance. The Board, with the assistance of the Governance and Nomination Committee, establishes the Company’s corporate governance framework and policies and oversees their implementation. • Determination and review of Company’s Vision, Mission and strategic objectives. The Board, in coordination with Management, determines the Vision, Mission and strategic objectives and reviews the same annually. • Management oversight. The Board exercises oversight on Management in its execution of the strategic direction and implementation of the policies set by the Board. • Stakeholder Engagement and Corporate Social Responsibility. The Board oversees the Company’s stakeholder engagement and corporate social responsibility programs. It ensures that the Company has an investor relations program and programs for engagement and communication with sectors of the community in which the Company operates. 2 3 PLDT 2016 ANNUAL REPORTdigital like never before • Financial reporting, internal control, internal audit and independent audit. The Board, with the assistance of the Audit Committee, carries out its oversight responsibilities for the Company’s financial reporting, internal control system, internal audit and independent audit mechanisms. • Enterprise risk management. The Board, with the assistance of the Risk Committee, fulfills its oversight responsibilities for the Company’s assessment and management of enterprise risks, and reviews and discusses with Management the Company’s major risk exposures and the corresponding risk mitigation measures. • Technology. The Board, with the assistance of the Technology Strategy Committee, reviews and approves the Company’s technology strategy and roadmap and capital expenditures for network and technology. • Succession planning, professional development and executive compensation. The Board, through its Executive Compensation Committee, reviews the criteria for employment and promotion and professional development plans for Senior Management, keeps track of their performance, and evaluates their potential career paths. • Selection process for directors and appointment of officers. The Board, with the assistance of the Governance and Nomination Committee, implements a selection process to ensure that the Board has an effective and balanced mix of knowledge, expertise, experience and diversity in terms of, among others, age, gender and ethnicity, and reviews the qualifications of officers to be appointed. • Annual Board assessment. The Board conducts an annual self- assessment to evaluate the performance of the Board as a whole, the Board Committees and the individual directors. Our Board and our directors have access to independent professional advice, at the Company’s expense, as well as access to Management as they may deem necessary to carry out their duties. In July 2016, the Board approved the new Vision, Mission and Corporate Values for the Company. In pursuit of its Vision to Lead and Inspire Filipinos to Create a Better Tomorrow, PLDT’s new Mission is to Empower Filipinos everywhere with customer-focused digital innovations that unlock and share their infinite potential. In line with the new Mission, the Board adopted the strategy to undertake a digital pivot to meet the challenges of rapid consumer and technological changes. The strategy will be executed through a roadmap to revitalize the PLDT Group’s network and IT platforms and a business transformation program that aim to reshape the organization’s culture, people and processes to align with the digital pivot. 2 4 shArehOlders Election Report Accountability BoArD oF DIreCTorS Report Appointment Appointment Committee Charter Designation Report Assurance Appointment BoArD CommITTeeS externAl AuDITor AuDIT CommITTee rISk CommITTee eXeCuTIve CompenSATIon CommITTee TeChnoloGy STrATeGy CommITTee GovernAnCe & nomInATIon CommITTee Report Oversight Guidance Report Report Oversight Guidance Oversight Guidance Report Information internAl AuDIT CFo/Group rISk mGmnT DepArTmenT CorporATe GovernAnCe oFFICe Audit Report Guidance Oversight Guidance Oversight Guidance Appointment Oversight Annual Audit Ceo mAnAGemenT Report Accountability PLDT 2016 ANNUAL REPORTdigital like never beforeComposition Our Board is composed of 13 members, with three independent directors, seven non-executive directors and three executive directors. All the directors are qualified and competent members with diverse and complementing skills, expertise, experience and knowledge which enrich the collective processes and practices of our Board. Our directors have extensive experience in their respective fields or industries, such as telecommunications, Information and Communication Technology (ICT), business processing, infrastructure, power, banking, insurance, real property development, retail and agriculture businesses, law and public administration. Our independent directors, namely, former Supreme Court Chief Justice Artemio V. Panganiban, Mr. Pedro E. Roxas and Mr. Bernido H. Liu, were selected pursuant to the specific independence criteria set out under applicable laws and rules, our By-Laws and CG Manual. Under our CG Manual, an independent director is broadly, “a person who is independent of Management and who, apart from his fees and shareholdings, is free from any business or other relationship with the Company which could, or reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director of the Company.” More specific independence standard criteria are enumerated in our By-Laws and CG Manual. Diversity. Our CG Manual promotes diversity in our Board and does not impose restrictions respecting age, race, gender, cultural or religious belief for directors. Diversity in our Board is reflected in the composition of the Board in terms of the varied business experience and professional background, the number of male and female directors and ethnicity. In 2016, another female director was appointed, bringing the total of the Company’s female directors to three. Directors 14 12 10 8 6 4 2 0 ed (3) id (3) ned (7) FemAle (3) mAle (10) rOle GenDer 71-80 (4) 61-70 (5) 51-60 (4) AGe 2 JApAneSe 11 FIlIpInoS <10 (3) 10-20 (6) >20 (4) eThnICITy TeleCom-ICT eXperIenCe (yeArS) Directors’ Professional Background 12 10 8 6 4 2 0 (10) 77% (5) 38% (4) 31% BuSIneSS leGAl enGIneerInG -ICT (3) 23% puBlIC ADmIn Our Board, through the Governance and Nomination Committee, ensures the diversity of its membership and the selection of qualified, competent and capable directors and independent directors through a selection process. The selection process follows the Company’s Guidelines on the Search, Screening and Selection of Directors and Screening Checklist which contain, among others, the criteria and qualifications for directorship and a matrix on the skills, expertise and experience relevant to the responsibilities of the Board, and considers other relevant factors, such as conflict of interest and directorships and/ or positions in other corporations. The process ensures that the selection of directors and independent directors is aligned with the Company’s Mission, Vision and strategic objectives. With regard to directorships in other stock or non-stock corporations, our Board adheres to a performance-based standard in determining whether other directorships compromise the capacity of a director to serve or perform his/ her duties and responsibilities to the Company diligently and efficiently. Differences in individual capabilities and the nature and demands of directorships in other companies are given due consideration in determining fitness and capacity to serve in our Board. Chairman and CEO. Mr. Manuel V. Pangilinan, the Chairman of the Board, concurrently holds the position of President and CEO since January 1, 2016. With the guidance of the Governance and Nomination Committee, Mr. Pangilinan shall manage the search for a new President and CEO of PLDT. The Company has in place checks and balances to ensure that the Board will get the benefit of independent views: clearly defined duties and responsibilities of the Chairman and the President & CEO in the By-Laws and CG Manual; independent Board oversight, supported by three independent directors, seven non- executive directors, the Audit Committee composed entirely of independent directors, and the Governance and Nomination Committee, Executive Compensation Committee and Risk Committee with independent directors constituting majority of their respective voting members; and Company policies and procedures which have been established to manage conflicts of interests (COI). meetings Our Board meets, more or less, on a monthly basis in accordance with the schedule of meetings that it sets at the end of the preceding year. Invariably, some of these meetings are devoted to the review and/or approval of the Company’s Vision and Mission, the strategic plans and budget, business operations updates, network and technology updates, capital expenditures and investments, and CSR programs. Once every quarter, our Board reviews the quarterly financial reports. In 2016, our Board held 16 meetings. In each meeting, a quorum of at least two-thirds of the Board members, including at least one independent director, was present. All of the independent directors were present in the Annual Stockholders’ Meeting held on June 14, 2016. The respective Chairmen of the Audit, Governance and Nomination, Executive Compensation, Risk and Technology Strategy Committees were present as well in the said meeting. 2 5 PLDT 2016 ANNUAL REPORTdigital like never beforeAttEnDAnCE in BOARD MEEtings AnD AnnUAl stOCKHOlDERs’ MEEting Director Designation Board meetings Annual Stockholders’ meeting Manuel V. Pangilinan Ray C. Espinosa Executive Director Executive Director Ma. Lourdes C. Rausa-Chan Executive Director Bernido H. Liu Artemio V. Panganiban Pedro E. Roxas Helen Y. Dee James L. Go Tadashi Miyashita1 Independent Director Independent Director Independent Director Non-Executive Director Non-Executive Director Non-Executive Director Napoleon L. Nazareno2 Non-Executive Director Hideaki Ozaki Albert F. del Rosario2 Juan B. Santos3 Atsuhisa Shirai1 Tony Tan Caktiong4 Amado D. Valdez3 Marife B. Zamora4 Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director 16/16 16/16 16/16 12/16 16/16 15/16 12/16 16/16 10/11 9/9 14/16 7/7 14/14 5/5 4/14 2/2 2/2 2 6 Director executive Directors Manuel V. Pangilinan Ray C. Espinosa Ma. Lourdes C. Rausa-Chan Independent Directors Bernido H. Liu Artemio V. Panganiban Pedro E. Roxas non-executive Directors Helen Y. Dee James L. Go Tadashi Miyashita Napoleon L. Nazareno Hideaki Ozaki Albert F. del Rosario Juan B. Santos Atsuhisa Shirai Tony Tan Caktiong Amado D. Valdez Marife B. Zamora Total BOARD REMUnERAtiOn in 2016 (in PHP) remuneration for AShm and Board meetings Attended remuneration for Committee meetings Attended 3,750,000 3,750,000 3,750,000 2,750,000 3,750,000 3,500,000 3,000,000 3,750,000 2,250,000 2,000,000 3,250,000 1,750,000 3,250,000 1,250,000 1,000,000 500,000 500,000 875,000 250,000 500,000 2,125,000 2,500,000 2,500,000 -- 1,875,000 1,375,000 250,000 -- -- -- 1,000,000 -- -- -- x x -- -- x -- -- Total 4,625,000 4,000,000 4,250,000 4,875,000 6,250,000 6,000,000 3,000,000 5,625,000 3,625,000 2,250,000 3,250,000 1,750,000 3,250,000 2,250,000 1,000,000 500,000 500,000 43,750,000 13,250,000 57,000,000 * Only one per diem was given to directors for attendance in the Annual Stockholders’ Meeting, regular meeting and organizational meeting on June 14, 2016. 1 Mr. Atsuhisa Shirai was elected as director effective August 30, 2016 vice Mr. Tadashi Miyashita who resigned on August 29, 2016. 2 Mr. Albert F. del Rosario was elected as director effective July 11, 2016 vice Mr. Nazareno who resigned on even date. 3 Mr. Amado D. Valdez was elected as director by the Board on November 14, 2016 vice Mr. Juan B. Santos who resigned on October 24, 2016. 4 Ms. Marife B. Zamora was elected as director by the Board on November 14, 2016 vice Mr. Tony Tan Caktiong who resigned on November 13, 2016. PLDT 2016 ANNUAL REPORTdigital like never beforeThe Board holds executive sessions with the independent directors and non-executive directors, excluding executive directors, at least once a year and at such other times as the Board may deem necessary or appropriate. The Board held one executive session in 2016. Compensation. All of our directors are entitled to a per diem of Php250 thousand for attendance in each Board meeting and Php125 thousand for attendance in each meeting of the Board Committees in which some of them are members. Save for our executive directors, our directors do not receive stock options, performance incentives, bonuses or any other form of compensation from the Company. Training. The Board keeps abreast of industry developments, business trends and legal requirements relevant to the Company and its operations. In this regard, the Company conducts regular and continuing training for our directors, including PLDT’s Annual Corporate Governance Enhancement Sessions which provide an opportunity for our leadership to engage in discussion with international and local experts on selected topics, including emerging technologies, new laws, and best business practices. In 2016, the Company organized Annual Corporate Governance Enhancement Sessions for its directors and officers on: (i) Digital Transformation, Risk Management & Governance in the 21st Century, (ii) Digital Governance: Issues in Emerging Technologies, and (iii) The Philippine Competition Act and Philippine Competition Commission. program Date of Training Training Institution name of Director BOARD tRAining Digital Transformation, Risk Management & Governance in the 21st Century November 23, 2016 Speaker: Mr. Mike Walsh CEO, Tomorrow Digital Governance: Issues in Emerging Technologies November 23, 2016 Speaker: Mr. Chia Ling koh Director, Singapore Law Practice of Queen Street Legal LLC The Philippine Competition Act and Philippine Competition Commission May 3, 2016 Speakers: Attys. Emmanuel M. Lombos and Arlene M. Maneja SyCip Salazar Hernandez and Gatmaitan Law Office Corporate Governance Seminar on Financial Reporting and Audit February 5, 2016 Speaker: SGV & Co. ESG Reporting – HkEx Requirements October 12, 2016 Speaker: Mr. Coleman Ng kPMG Hong kong Corporate Governance Seminar December 21, 2016 Speaker: SGV & Co. December 8, 2016 November 12, 2016 Corporate Governance Orientation Program November 23, 2016 August 25, 2016 Corporate Governance Training Program August 8, 2016 SEC Corporate Governance Forum August 3, 2016 Speaker: Risks, Opportunities, Assessment and Management, (ROAM) Inc. Speaker: Institute of Corporate Directors Securities and Exchange Commission Cyber Security in the 21st Century: The Threat Landscape February 18, 2016 Speaker: Christopher Camejo Manuel V. Pangilinan Ray C. Espinosa Artemio V. Panganiban Ma. Lourdes C. Rausa-Chan Albert F. del Rosario Marife B. Zamora Manuel V. Pangilinan Ray C. Espinosa Artemio V. Panganiban Ma. Lourdes C. Rausa-Chan Albert F. del Rosario Marife B. Zamora Manuel V. Pangilinan Napoleon L. Nazareno Helen Y. Dee Ray C. Espinosa James L. Go Bernido H. Liu Tadashi Miyashita Hideaki Ozaki Artemio V. Panganiban Ma. Lourdes C. Rausa-Chan Pedro E. Roxas Juan B. Santos Tony Tan Caktiong Artemio V. Panganiban Pedro E. Roxas Manuel V. Pangilinan Ray C. Espinosa Bernido H. Liu Hideaki Ozaki Helen Y. Dee Atsuhisa Shirai Juan B. Santos Tony Tan Caktiong Ma. Lourdes C. Rausa-Chan Napoleon L. Nazareno Ray C. Espinosa Tadashi Miyashita Ma. Lourdes C. Rausa-Chan 2 7 PLDT 2016 ANNUAL REPORTdigital like never beforeFor the orientation of new directors, the Chairman, President and CEO, Chief Financial Officer, Corporate Secretary and Chief Governance Officer give a newly appointed director a briefing on the Company’s structure, business, operating and financial highlights, responsibilities of the Board and its Committees and how each operates. The new director is also furnished with copies of all relevant corporate documents, including the Company’s Articles, By-Laws, Annual Report, CG Manual, Code of Ethics, and the Charters of the Board Committees. Updates on business and governance policies and requirements principally from the PSEC, PSE, U.S. Securities and Exchange Commission (U.S. SEC), and NYSE, and new laws applicable or relevant to the Company and its business, particularly on financial reporting and disclosures and corporate governance, are presented in Board meetings and/or furnished to the directors. Board Assessment. Our directors take part in an annual assessment process which reviews and evaluates the performance of the whole Board, the Board Committees and the individuals that comprise these bodies. This process enables the Board to identify its strengths and areas for improvement and elicit individual directors’ feedback and views on the Company’s strategies, performance and future direction. Each Board Committee also conducts an annual self-assessment of its performance. BOard advisory Committee audit Committee (aC) governance & nomination Committee (gnC) executive Compensation Committee (eCC) risk Committee (rC) technology strategy Committee (tsC) 2 8 BOard COmmittees advisory Committee Our Board is supported by an Advisory Committee. Our Advisory Committee is composed of Mr. Roberto R. Romulo, Mr. Benny S. Santoso, Mr. Orlando B. Vea, Mr. Christopher H. Young, Mr. Oscar S. Reyes and Mr. Washington Z. SyCip. The Advisory Committee provides guidance and suggestions, as necessary, on matters deliberated upon during Board meetings. PLDT’s other Board Committees, namely Audit, Governance and Nomination, Executive Compensation, Risk and Technology Strategy Committees, assist the Board in the performance of their functions and responsibilities. The respective charters of the Board Committees provide that each shall have the necessary resources and authorities to discharge their responsibilities, including obtaining external legal or professional advice. Advisory Committee Designation Board meetings Annual Stockholders’ meeting Oscar S. Reyes Roberto R. Romulo Benny S. Santoso Washington Z. SyCip Orlando B. Vea Christopher H. Young Advisor Advisor Advisor Advisor Advisor Advisor 16/16 16/16 15/16 15/16 16/16 16/16 x PLDT 2016 ANNUAL REPORTdigital like never before AttEnDAnCE in BOARD COMMittEE MEEtings member Audit Committee (AC) Governance & nomination Committee (GnC) executive Compensation Committee (eCC) risk Committee (rC) Technology Strategy Committee (TSC) Manuel V. Pangilinan Ray C. Espinosa Ma. Lourdes C. Rausa-Chan Bernido H. Liu* Artemio V. Panganiban* Pedro E. Roxas* James L. Go Tadashi Miyashita5 Napoleon L. Nazareno6 Albert F. del Rosario6 Atsuhisa Shirai5 Roberto R. Romulo Oscar S. Reyes Orlando B. Vea 9/11 11/11 11/11 10/107 4/47 4/47 10/107 4/4 4/48 4/4 4/4 4/4 2/2 2/2 1/1 1/1 1/1 1/1 1/1 - 3/4 4/4 4/4 3/4 2/2 2/2 2/2 2/2 2/2 2/2 2/2 - - 2/28 2/28 Corazon S. Dela Paz-Bernardo 11/117 Menardo G. Jimenez, Jr. 4/48 1/18 audit Committee (aC) The AC assists the Board in fulfilling its oversight responsibility for: (i) accounting and financial reporting principles and policies, system of internal controls and the integrity of financial statements; (ii) compliance with legal and regulatory requirements; and (iii) the performance of the internal audit organization and the external auditors. Our AC is composed of three members, all of whom are independent directors. The Audit Committee members are former Supreme Court Chief Justice Artemio V. Panganiban, Mr. Bernido H. Liu and Mr. Pedro E. Roxas who is the chairman of this committee. All of the members of our Audit Committee are financially literate. The Audit Committee has four advisors, namely, Mr. Atsuhisa Shirai and Mr. James L. Go, non-executive members of our Board; Mr. Roberto R. Romulo, a member of our Advisory Committee; and Ms. Corazon S. Dela Paz- Bernardo, a former member of our Board. Ms. Dela Paz- Bernardo has expertise in accounting and financial management and is a former Chairman and Senior Partner of Joaquin Cunanan & Company, now Isla Lipana & Co., a member firm of Pricewaterhouse Coopers. The charter of the AC may be viewed and downloaded from the PLDT website through the following link: http://pldt.com/ docs/default-source/company-leadership/audit-committee-charter-. pdf?sfvrsn=2. The purposes, duties and powers of the AC are set forth in the charter. Activities of the AC in 2016 include the following: With respect to the external auditor SyCip, Gorres, Velayo and Co (SGV & Co.), a member practice of Ernst & Young Global Limited (EY), discussed, reviewed and approved, or noted: 2 9 • SGV & Co.’s report on the results of their integrated audit of the 2015 financial statements of PLDT and its subsidiaries which were prepared in accordance with the Philippine Financial Reporting Standards (PFRS) and International Financial Reporting Standards (IFRS), and of the internal controls over financial reporting (ICFR) based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (COSO IC-IF 2013); • SGV & Co.’s required communications to the AC, including their independence from PLDT; • Various audit, audit-related and non-audit services and fees of SGV & Co. and EY for PLDT and its subsidiaries; • SGV & Co.’s plan and status reports on the integrated audit of PLDT’s and its subsidiaries’ 2016 financial statements and ICFR; • SGV & Co.’s updates on various new accounting standards which will become effective in 2018 and 2019; and • Appointment and engagement of external auditors for PLDT and certain subsidiaries and affiliates of PLDT. 5 Mr. Shirai was appointed as a member of the GNC, ECC, RC and TSC and an advisor to the AC effective August 30, 2016 vice Mr. Miyashita who resigned on August 29, 2016. 6 Mr. Albert F. del Rosario was appointed as a member of the TSC effective July 11, 2016 vice Mr. Nazareno who resigned on even date. 7 Advisor to the AC 8 Non-voting member PLDT 2016 ANNUAL REPORTdigital like never before3 0 With respect to the Internal Audit group, discussed, reviewed and approved, or noted: • The Internal Audit and Fraud Risk Management Group’s (IAFRMG) performance report for the year 2015 and the IAFRMG Head’s statement of compliance with the International Standards for the Professional Practice of Internal Auditing, and required confirmation of the organizational independence of PLDT Internal Audit organization; • The retention of the existing PLDT Internal Audit Charter until the next review in 2017; • PLDT’s Internal Audit Plans for 2016 and 2017; • Internal Audit’s report on PLDT Group’s Sarbanes-Oxley Act – Section 404 (SOX 404) Compliance – Management’s Overall Assessment and Conclusions as of December 31, 2015; • The PLDT Group’s SOX 404 compliance scoping and approach for 2016; and • The major IAFRMG activities and accomplishments, including the internal audit organizational updates, and succession plan for PLDT and Smart internal audit organizations. The AC also conducted an evaluation of the qualifications and performance of the incumbent Head of Internal Audit organization, and resolved to re-appoint Mr. Jun R. Florencio as the Chief Audit Officer/Internal Audit Head. With respect to financial reporting and controls, reviewed and discussed the following with PLDT Finance Officers and/ or SGV & Co.: • PLDT’s audited financial statements for 2015 prepared in accordance with PFRS and IFRS, the report of SGV & Co. on the final results of its integrated audit of 2015 PFRS and IFRS financial statements and ICFR, the PLDT Group’s 2015 Annual Report on Form 17-A (for PSEC filing) and Annual Report on Form 20-F (for US SEC filing); and • PLDT’s unaudited consolidated financial results and reports for the three months ended March 31, 2016, the six months ended June 30, 2016, and the nine months ended September 30, 2016. With regard to governance, general internal controls and risk management process: • Reviewed and approved the 2015 AC Report for inclusion in the Annual Report and the retention of the amended PLDT Audit Committee Charter until the next review in 2017; • Discussed with the Corporate Secretary, Chief Legal Counsel and Chief Governance Officer the Information Statement for the annual stockholders’ meeting, the status of Company’s compliance with regulations and applicable laws, updates on significant legal matters, and the status of whistleblowing complaints received by the Corporate Governance Office; • Discussed with the Group Enterprise Risk Management Officer the report on PLDT Group’s top key enterprise risks for 2016 and the corresponding risk responses; • Discussed the Chief Financial Officer’s updates on the changes in the governance structures of PLDT’s Beneficial Trust Fund, MediaQuest and its subsidiaries, the conduct of an independent review of investments in MediaQuest and its subsidiaries, and updates on the said independent review; • Discussed with the various business and operational unit heads concerned relevant tax rulings, regulatory matters and compliance with applicable regulations, the Wireless Business Segment’s “No Payment Since Activation” (NOPSA) issues, and updates on credit control and collection performance for Smart’s postpaid business; and • Discussed with the Head of PLDT’s IAFRMG the Internal Audit’s research regarding the oversight of subsidiaries, the Internal Audit’s response to the NOPSA related fraud in the Wireless Business, and updates on the status of NOPSA investigations. The AC submitted to the Board its Semi-Annual Reports of Activities and Performance Self-Assessment Report for 2015. governance and nomination Committee (gnC) The GNC assists the Board in the performance of its functions to: (i) oversee the development and implementation of corporate governance principles and policies; (ii) review and evaluate the qualifications of the persons nominated to the Board as well as those nominated to other positions requiring appointment by the Board; (iii) identify persons deemed qualified to become members of the Board and/or the Board Committees; (iv) make an assessment of the Board’s effectiveness in the process of replacing or appointing new members of the Board and/or Board Committees; and (v) develop and implement the Board’s performance evaluation process. Our GNC is composed of five voting members and two non- voting members. Three of the voting members are independent directors, namely, former Supreme Court Chief Justice Artemio V. Panganiban, Mr. Pedro E. Roxas and Mr. Bernido H. Liu; and two are non-independent directors, namely, Mr. Atsuhisa Shirai and Mr. Manuel V. Pangilinan who is the chairman of this committee. Mr. Menardo G. Jimenez, Jr. 9 and Atty. Ma. Lourdes C. Rausa-Chan are the non-voting members. The charter of the GNC may be viewed and downloaded from the PLDT website through the following link: http://www.pldt. com.ph/about/management/Documents/Governance%20and%20 Nomination%20Committee%20Charter.pdf. The purposes, duties and powers of the GNC are set forth in the charter. In the performance of its governance functions, the GNC’s activities in 2016 included the following: • With regard to policy review and development, reviewed and assessed the Code of Ethics and the Conflict of Interest Policy and determined that the principles and procedures therein remain sound and continue to be appropriate for the Company, and approved recommendations to continue to strengthen the implementation of said policies; 9 Until December 31, 2016. Replaced by Chief People and Culture Officer Maria Elizabeth S. Sichon effective February 7, 2017. PLDT 2016 ANNUAL REPORTdigital like never before• With respect to education and communication, reviewed and approved the content for the corporate governance training and continuing education program, including the Annual Corporate Governance Enhancement Sessions for Directors and Officers, the PLDT Corporate Governance Report, and the themes for PLDT’s communication materials for 2017; • With respect to compliance and enforcement, reviewed and noted or approved, as applicable, the COI disclosures of key personnel and the initial implementation of the online disclosure systems for COIs and gifts, the whistleblowing cases and the handling thereof, including those of the PLDT subsidiaries, and received updates on the Company’s compliance with circulars issued by the PSEC and PSE relating to corporate governance; • Assisted the Board in implementing the Board Assessment for 2015 performance, which included the performance evaluation of the Board Committees and Individual Directors, including the Chief Executive Officer; and • As part of its oversight on governance matters, received updates from Management on the Company’s procurement activities and sustainability reporting in relation to, among others, the Environmental, Social and Governance (ESG) reporting requirements of the Hong kong Stock Exchange. In the performance of its nomination functions, the GNC’s activities in 2016 included the following: • Pre-screened candidates nominated to become directors and the qualifications of candidates for independent directors, and submitted to the Board the final list of qualified director and independent director nominees for election at the Annual Stockholders’ Meeting held on June 14, 2016; • Pre-screened and recommended to the Board the appointment of 4 directors to fill the vacancies in the Board and the Board Committees; • Reviewed and confirmed the Human Resources Group’s evaluation of the qualifications of officers and recommended their re-appointment as such at the Organizational Meeting of the Board held on June 14, 2016; and • Reviewed and confirmed the Human Resources Group’s evaluation of proposed promotions to officer rank for approval by the Board. Finally, the GNC submitted the following reports to the Board for year 2015: (a) Consolidated Report on the Board and Board Committees Assessment; (b) GNC Annual Report of Activities; and (c) GNC Performance Self-Assessment. executive Compensation Committee (eCC) The ECC assists the Board in the performance of its functions to: (i) develop a compensation philosophy or policy consistent with the culture, strategy and control environment of PLDT; (ii) oversee the development and administration of PLDT’s executive compensation programs, including long term incentive plans and equity based plans for officers and executives; and (iii) conduct the performance evaluation of and succession planning for officers, including the CEO, and oversee the development and implementation of professional development programs for officers. 3 1 Our ECC is composed of five voting members and one non- voting member. Three of the voting members are independent directors, namely, former Supreme Court Chief Justice Artemio V. Panganiban, Mr. Pedro E. Roxas and Mr. Bernido H. Liu; and two are non-independent directors, namely, Mr. Atsuhisa Shirai and Mr. Manuel V. Pangilinan who is the chairman of this committee. Mr. Menardo G. Jimenez, Jr. 10 is the non-voting member. The charter of the ECC may be viewed and downloaded from the PLDT website through the following link: http:// www.pldt.com.ph/about/management/Documents/Executive%20 Compensation%20Committee%20Charter.pdf. The purposes, duties and powers of the ECC are set forth in the charter. In 2016, the ECC discussed and approved the payout of the variable pay for officers and executives of PLDT and Smart and additional variable pay contingent on the 2016 first half results tracking the Core Income Budget. The ECC submitted to the Board its Annual Report of Activities and Performance Self- Assessment Report for 2015. risk Committee (rC) The RC assists the Board in the performance of its functions to: (i) oversee Management’s adoption and implementation of a system for identifying, assessing, monitoring and managing key risk areas; (ii) review Management’s reports on the Company’s major risk exposures; and (iii) review Management’s plans and actions to minimize, control or manage the impact of such risks. Our RC is composed of five voting members. Three of the voting members are independent directors, namely, former Supreme Court Chief Justice Artemio V. Panganiban, Mr. Bernido H. Liu and Mr. Pedro E. Roxas who is the chairman of this committee; and two are non-executive directors, namely, Mr. Atsuhisa Shirai and Mr. James L. Go. The Charter of the RC may be viewed and downloaded from the PLDT website through the following link: http://pldt.com/ docs/default-source/company-leadership/risk-committee-charter. pdf?sfvrsn=2. The purposes, duties and powers of the RC are set forth in the charter. In 2016, the major accomplishments of the RC are the following: • Reviewed and noted the framework and process followed by the Group Enterprise Risk Management Department (GRMD), and the top risks of the PLDT Group as identified by the CEO Council; 10 Until December 31, 2016. Replaced by Chief People and Culture Officer Maria Elizabeth S. Sichon effective February 7, 2017. PLDT 2016 ANNUAL REPORTdigital like never before exeCutive implementatiOn Our Board exercises oversight on Management in accordance with the standards set forth in our CG Manual. The roles of Management and other offices involved in ensuring the implementation of the corporate governance policies and requirements are discussed below. President and CEO. The President and CEO provides leadership for Management in developing and implementing business strategies, plans and budgets. He ensures that the business and affairs of the Company are managed in a sound and prudent manner and that operational, financial and internal controls are adequate and effective to ensure reliability and integrity of financial and operational information, effectiveness and efficiency of operations, safeguarding of assets and compliance with laws, rules, regulations and contracts. Corporate Secretary. The Corporate Secretary informs the directors of the schedule and agenda of Board meetings and ensures that Management provides the Board with complete and accurate information that will enable the directors to make informed decisions on matters that require their approval. Internal Audit Organization. Our Internal Audit organization determines whether our structure of risk management, control and governance processes, as designed and represented by Management, are adequate and functioning to ensure that: • Risks are appropriately identified, managed and reported; • Significant financial, managerial, and operating information are accurate, reliable and timely; • Employees’ actions are in compliance with policies, standards, procedures, and applicable laws and regulations; • Resources are acquired economically, used efficiently and adequately protected; • Programs, plans and objectives are achieved; • Quality and continuous improvement are fostered in our control processes; and • Significant legislative or regulatory issues impacting us are recognized and addressed appropriately. The Chief Audit Officer/Internal Audit Head reports functionally to the AC and administratively to the President and CEO. In the discharge of his duties, the Chief Audit Officer/Internal Audit Head is required to: • Provide annually an assessment on the adequacy and effectiveness of our processes for controlling our activities and managing our risks; • Report significant issues related to the processes of controlling our activities, including potential improvements to those processes, and provide information concerning such issues; and • Periodically provide information on the status and results of the annual internal audit plan and the sufficiency of our internal audit organization’s resources. 3 2 • Reviewed and noted the GRMD’s progress in the conduct of Enterprise Risk Management Workshops in subsidiaries and the development of a risk register software; and • Reviewed and discussed with Management: (i) PLDT’s Procurement Risk profile; (ii) People Risk; (iii) mitigation strategies of the Project Management Office on Execution Risk; (iv) the PLDT Group’s Business Continuity Plan; and (v) relevant activities of PLDT’s Business Transformation Office. technology strategy Committee (tsC) The TSC assists the Board in the performance of its functions to: (i) review and approve the strategic vision for the role of technology in PLDT’s overall business strategy, including the technology strategy and roadmap of PLDT; (ii) fulfill its oversight responsibilities for PLDT’s effective execution of its technology-related strategies; and (iii) ensure the optimized use and contribution of technology to PLDT’s business and strategic objectives and growth targets. Our TSC is composed of five voting members and two non- voting members. The five voting members are non-independent directors Mr. Manuel V. Pangilinan who is the chairman of the committee, former Ambassador Albert F. del Rosario, Atty. Ray C. Espinosa, Mr. James L. Go and Mr. Atsuhisa Shirai; and the two non-voting members are Mr. Oscar S. Reyes and Mr. Orlando B. Vea who are members of our Advisory Committee. A copy of the charter of the TSC may be viewed and downloaded from the PLDT website through the following link: http://www.pldt.com.ph/about/management/Documents/ Technology%20Strategy%20Committee%20Charter.pdf. The purposes, duties and powers of the TSC are set forth in the charter. In 2016, the TSC discussed with the PLDT Top Management and Technology Group technology projects, initiatives, plans and concepts, with a focus on projects that will improve quality of service for better customer experience and operational efficiency, and support business requirements in terms of network capacity and growth. Technology innovations in different stages of implementation were also discussed in its meetings. The TSC submitted to the Board its Annual Report of Activities and Performance Self-Assessment Report for 2015. PLDT 2016 ANNUAL REPORTdigital like never beforeThe charter of the Internal Audit organization complies with the International Standards for the Professional Practice of Internal Auditing of the Institute of Internal Auditors. External Auditor. The Company’s external auditor is appointed by the AC which reviews its qualifications, performance and independence. To ensure objectivity in the performance of its duties, the external auditor is subject to the rules on rotation and change, every five years, general prohibition on hiring by the Company of staff of the external auditor, and full and appropriate disclosure to, and prior approval by, the AC of all audit and non- audit services and related fees. Approval of non-audit work by the external auditor is principally tested against the standard of whether such work will conflict with its role as an independent auditor or would compromise its objectivity or independence as such. Our external auditor is SGV & Co., a member practice of EY. Group Risk Management Department. The GRMD implements an integrated risk management program with the goal of identifying, analysing and managing the PLDT Group’s risks to an acceptable level, so as to enhance opportunities, reduce threats, and thus sustain competitive advantage. The implementation of the enterprise risk management (ERM) process ensures that high-priority risks are well understood and effectively managed across all functions and units within the PLDT Group. The ERM process used by the GRMD is based on the ISO 31000 standard on risk management. The GRMD reports to the Risk Committee and the Board on developments with regard to the Group’s risk management activities. Chief Governance Officer. The primary responsibilities of the Chief Governance Officer include monitoring compliance with the provisions and requirements of corporate governance laws, rules and regulations, reporting violations and recommending the imposition of disciplinary actions, and adopting measures to prevent the repetition of such violations. The Chief Governance Officer assists the Board and the GNC in the performance of their governance functions. Under the supervision and direction of the Chief Governance Officer, the Corporate Governance Office assists in the implementation of the corporate governance policies adopted by the Board. pOliCies and praCtiCes The Company promotes a culture of good CG through the implementation of its CG policies, including the CG Manual, Code of Ethics and related policies. CG Manual. Our CG Manual defines our corporate governance framework and structure. Together with PLDT’s Articles of Incorporation and By-Laws, it assigns and delineates functions and responsibilities, and entrusts powers, authorities and resources for the execution of such functions and responsibilities. The CG Manual provides, among other matters, the composition and responsibilities of the Board, the Company’s duties towards its shareholders in general, its minority shareholders and its other stakeholders, and the Company’s obligation to comply with applicable disclosure rules. A copy of the CG Manual is posted at http://pldt.com/docs/default-source/corporate-governance-files/cg- manual-/pldt-manual-on-corporate-governance-.pdf?sfvrsn=0. Code of Business Conduct and Ethics (Code of Ethics). Our Code of Ethics defines the Company’s corporate governance values of integrity, accountability, transparency and fairness, which the Company shall observe in the conduct of its business. It sets the governance and ethical standards that shall govern and guide all business relationships of the Company, its directors, officers and employees. A copy of the Code of Ethics is posted at: http://pldt. com/docs/default-source/policies/pldt-code-of-business-conduct-and- ethics.pdf?sfvrsn=4. The implementation of the Code of Ethics is reinforced by enabling policies such as the Conflict of Interest Policy, Policy on Gifts, Entertainment and Sponsored Travel, Supplier/Contractor Relations Policy and Expanded Whistleblowing Policy. The Company adopted the Policy on PLDT’s Gift-Giving Activities which, together with the Code of Ethics, embodies the Company’s anti- corruption policy. Conflict of Interest Policy. This policy enjoins PLDT’s directors, employees and consultants to promptly disclose conflict of interest situations to the relevant authorities. If warranted, the person concerned should obtain appropriate approvals and inhibit himself from any action, transaction or decision involving an existing or potential conflict of interest. The Company has established an online COI disclosure system to facilitate the disclosure of conflicts of interests. Guidelines on the Proper Handling of Related Party Transactions (RPT Guidelines). This guidelines provides the process of review, approval and disclosure of the Company’s related party transactions (RPTs). RPTs are reviewed and approved by the designated approving authorities. The review’s principal focus is on whether an RPT is on arm’s length terms and the transaction is in the best interest of PLDT and its stakeholders, as a whole, considering all relevant circumstances. Material RPTs are reviewed by the AC, which is composed entirely of independent directors, and subject to approval by the Board. The Head of Financial Reporting and Controllership Sector, in coordination with the Company’s Disclosure Committee, is responsible for the disclosure of RPTs in the relevant financial reports of the Company as required under Philippine Accounting Standard 24, Related Party Disclosures, and other applicable disclosure requirements. Policy on Gifts, Entertainment and Sponsored Travel and Policy on Gift-Giving Activities. The Policy on Gifts, Entertainment and Sponsored Travel provides safeguards in the receipt and acceptance of gifts given by third parties to ensure that such gifts would not affect the objective, independent or effective performance by directors, officers and employees. The Policy on Gift-Giving Activities provides guidance and procedural safeguards with respect to gift-giving activities to government officials and employees and to business partners, for or on behalf of, PLDT. The policy seeks to ensure that such activities are compliant with applicable laws and consistent with the Company’s core values and policies. Supplier/Contractor Relations Policy. This policy establishes clear rules for arm’s length transactions and fair treatment of prospective and existing suppliers. The policy specifically adopts the processes of vendor accreditation and competitive bidding as the general rule to ensure that contracts are awarded only to qualified and duly-accredited vendors who offer the best value for money for PLDT’s requirements. 3 3 PLDT 2016 ANNUAL REPORTdigital like never beforeExpanded Whistleblowing Policy (EWB Policy). This policy provides guidelines on handling employee disclosures or complaints regarding violations of the CG Manual, Code of Ethics, Conflict of Interest Policy, Gifts Policy and Supplier/Contractor Relations Policy, as well as questionable accounting and auditing matters and violations of the Personnel Manual. The EWB Policy protects whistleblowers from retaliation and to ensure confidentiality and fairness in the handling of a disclosure or complaint, PLDT maintains a Whistleblowing Hotline and other reporting facilities, such as a dedicated electronic mailbox, post office box and facsimile transmission system. All employees and stakeholders who come forward in good faith to report violations or any act that may be considered as contrary to the Company’s values may submit a disclosure or complaint regarding such violation to the CGO. Anonymous disclosures or complaints are allowed and duly processed, subject to certain conditions. In all processes and activities related to a whistleblowing disclosure/complaint, utmost confidentiality is observed in order to ensure the integrity of the process and protect the parties, employees or officers who are allegedly involved therein. For 2016, there were four new whistleblowing complaints received by the CGO. These were referred to the appropriate investigating units for further investigation. As at December 31, 2016, four cases are pending while four cases were closed. The complaints covered allegations of violation of the Code of Ethics, Conflict of Interest Policy, Gifts Policy, Supplier/Contractor Relations, Policy on Employees Running for Public Office and the Personnel Manual. The Company has not received any complaint on retaliation. All CG policies, including the Code of Ethics, are reviewed at least once every two years to ensure that they are appropriate for PLDT, benchmarked with global best practices, and compliant with applicable law and regulations. PLDT’s key subsidiaries have adopted corporate governance rules and policies similar in substance and form to the foregoing corporate governance policies and suited to their particular business environments and contexts, and appointed their respective corporate governance or compliance officers. Protection of Technology Resources and Information. PLDT has a Unified Information Technology Policy that is applicable to PLDT, Smart and Sun, and which contains policy statements on social media and data privacy, and provides for the protection of information assets and the proper use of technology resources. On February 1, 2017, the Data Privacy Office was created and the Chief Data Privacy Officer was appointed. training and eduCatiOn The Company provides continuous training for its Board, Management and employees. In 2016, the Company organized corporate governance enhancement sessions for our Board and Management on the following topics: (i) The Philippine Competition Act and Philippine Competition Commission; (ii) Digital Transformation, Risk Management and Governance in the 21st Century; and (iii) Digital Governance: Issues in Emerging Technologies. Apart from participating in PLDT-organized training, our directors also attend external training. The training sessions attended by our directors in 2016 are presented in this report. One of our directors, Mr. James Go, has been granted by the PSEC permanent exemption from its corporate governance training requirements. In addition to orientation and periodic training sessions for employees, the CGO conducted two refresher sessions on corporate governance in May and June 2016 with newly- promoted PLDT managers as part of the Human Resources Group’s Executive CSI (Competent, Strategic, Inspiring) Course. Education and training is supplemented by the production and dissemination of relevant communication materials, including thematic posters, calendars and newsletters, and advisories on corporate governance. mOnitOring and evaluatiOn PLDT monitors and evaluates the effectiveness of its corporate governance through the annual performance self-assessment conducted by the Board and the Board Committees, the periodic review of the effectiveness of the implementation of the Company’s CG policies, the annual compliance evaluation conducted by Management, and other tools employed to monitor the implementation of the CG policies. In 2016, PLDT confirmed its compliance with its CG Manual which contains relevant provisions of the PSEC Revised Code of Corporate Governance and certain corporate governance standards under the U.S. Securities Exchange Act and NYSE Listed Company Manual. In compliance with the respective memorandum circulars of the PSEC and the PSE, PLDT disclosed its Annual Corporate Governance Report with Consolidated Changes for Year 2015 on January 8, 2016 and filed its PSE Corporate Governance Guidelines Disclosure Report for Year 2015 on March 30, 2016. Our Board conducts a self-assessment each calendar year to evaluate the performance of the Board as a whole, the Board Committees and the individual directors. The process, which also includes an evaluation of the performance of the CEO and Management, enables the Board to identify strengths and areas for improvement and to elicit individual director’s feedback and views on the Company’s strategy, performance and future direction. Similarly, each Board Committee also conducts an annual self-assessment of its performance. The members of the Board and the Board Committees accomplish their respective self-assessment questionnaires for this purpose. The Board’s self- assessment questionnaire contains the following criteria based on leading practices and principles on good governance: (1) for the Board: Leadership, Roles and Responsibilities, Independence, Stewardship, Reporting and Disclosure, Shareholders’ Benefits and Training; (2) for individual directors: the specific duties and responsibilities of a director; and (3) for the Board Committees: Performance and Compliance. The Board Committee’s self- assessment questionnaire contains the following criteria: Performance & Compliance and Committee Governance. For the 2015 performance period, the results of the assessment process was duly reported to, and discussed with, the Board in 2016. 3 4 PLDT 2016 ANNUAL REPORTdigital like never beforeThe Board promotes transparency and fairness in the conduct of the annual and special stockholders’ meetings of the Company. The Company explores and implements steps to reduce excessive or unnecessary costs that impede stockholders’ participation in annual and special stockholders’ meetings and acts with transparency and fairness in said meetings. Stockholders are encouraged to personally attend such meetings, raise questions and exercise their voting rights. Within a reasonable period of time before the meeting, stockholders are apprised of their right to appoint a proxy, in case they could not personally attend such meetings and give their voting instructions in the proxy form provided. Appropriate steps to remove excessive or unnecessary costs and other administrative impediments to stockholders’ participation in annual or special stockholders’ meetings, whether in person or by proxy, are undertaken. Relevant and timely information is made available to the stockholders in printed or digital form and through the Company’s website to enable them to make a sound judgment on all matters tabled for their consideration or approval. The Board also ensures the timely disclosure and appropriate filing with the PSEC, PSE and, as applicable, U.S. SEC and NYSE, of material information and/or transactions that could potentially affect the market price of the Company’s shares and such other information which are required to be disclosed pursuant to relevant laws and regulations. Shareholders who wish to raise matters or concerns relating to the business of the Company, their investments and rights may elevate such matters to the Corporate Secretary, the Investor Relations Officer, concerned units of PLDT’s Management or the Board. The Company held its Annual Stockholders’ Meeting on June 14, 2016, with holders of 94.6% of total outstanding capital present or represented by proxy in the meeting. To view the Minutes of the 2016 PLDT Annual Stockholders’ Meeting, please click on this link http://www.pldt.com/docs/default-source/annual-meeting-of- stockholders/2016/minutes-of-annual-meeting-of-stockholders-2016. pdf?sfvrsn=0. PLDT’s Code of Ethics prohibits directors, officers and employees from dealing in the Company’s shares when in possession of material nonpublic information about and involving the Company. Directors, officers and employees are enjoined to report to the Company their dealings in the Company’s shares, regardless of whether such dealings were effected during or outside the blackout period, within three trading days from the date of the transaction, to enable the timely filing of the required disclosures to the PSEC and the PSE. During blackout periods, dealing in Company shares by directors, officers or employees is not allowed and in any exceptional case, prior notice to the Company should be made of any such dealing in Company shares, in accordance with the Company’s policy on Blackout Period/Restriction on Trading of Shares. 3 5 PLDT monitors and assesses compliance with the CG rules through a cross-functional evaluation system whereby the heads of the various business and support groups/units conduct an evaluation of their group/unit’s compliance. The process uses an evaluation questionnaire consisting of the governance standards and regulations applicable and relevant to their respective functions, including the requirements of the PSEC Revised Code of Corporate Governance and the PSE Corporate Governance Guidelines. The results of the evaluation conducted by the heads are submitted to the Chief Financial Officer and the Chief Governance Officer, who submit the consolidated report to the President and CEO for approval. The results of the compliance evaluation are reported to the GNC by the CGO. In line with all of these, PLDT has incorporated CG standards in the performance evaluation of employees and has included violations of CG rules as a cause for disqualification from incentives and rewards in its Policy on Employee Qualification for Incentives and Rewards. PLDT conducts focus group discussions and employee surveys in order to gain insights into the effectiveness of its CG programs and initiatives. Valuable information is also obtained and analyzed from the results of and feedback from our education activities, reports from business partners, customer complaints, reported violations and other sources of relevant information. staKehOlder engagement Corporate social responsibility In fulfilling our commitments to our stakeholders, we are guided by our Code of Ethics and Corporate Social Responsibility Statement (CSR Statement). The CSR Statement articulates our belief that helping to improve the overall well-being of the Filipino people is an integral part of our business. The CSR Statement enumerates the broad responsibilities that PLDT assumes as it operates and conducts its business. A copy of the CSR Statement is posted at http://pldt.com/corporate-governance- in-pldt/our-stakeholders. Pursuant to the CSR Statement, the PLDT Group’s social programs leverage its communications and digital services and the volunteer spirit of its employees to implement projects in education, health, livelihood, disaster preparedness and resiliency, the environment, digital tourism and sports that aim to help Filipinos change their lives for the better. These CSR programs and activities are presented in the CSR section of this Annual Report and in the Company’s Sustainability Report. Investors/Shareholders. PLDT respects, promotes and upholds shareholders rights such as: the right to vote; pre-emptive right; the right to inspect corporate books and records, including minutes of Board meetings and stock registries, subject to certain conditions; right to timely receive relevant information, whether in printed or digital form; right to dividends; and appraisal right. It makes timely disclosures of material information and transactions that could potentially affect the market price of the Company’s shares. In this regard, information on earnings results, acquisition or disposal of significant assets, off balance-sheet transactions, related party transactions, Board membership changes, shareholdings of directors and officers and any changes thereto, and remuneration of directors and officers are promptly and accurately disclosed. PLDT 2016 ANNUAL REPORTdigital like never beforesHAREHOlDings OF tHE BOARD AnD OFFiCERs in 2016 number of Company Shares11 number of Company Shares11 Acquired Disposed ending Balance13 Starting Balance12 Acquired Disposed 3,000 1,945 249,450 8. Ma. Lourdes C. Rausa-Chan 199 25,080 9. Albert F. Del Rosario15 15,743 10. Pedro E. Roxas 206,790 231 134,914 50,000 59,000 125,914 11. Atsuhisa Shirai16 1 1 1 1 12. Amado D. Valdez18 13. Marife B. Zamora18 7. Artemio V. Panganiban 1,771 1,771 Starting Balance12 246,450 23,13514 15,743 A. Directors 1. Manuel V. Pangilinan 2. Helen Y. Dee 3. Ray C. Espinosa 4. James L. Go 5. Bernido H. Liu 6. Hideaki Ozaki B. officers 1. Ernesto R. Alberto 2. Isaias P. Fermin19 3. Alejandro O. Caeg 4. Anabelle L. Chua 5. Jun R. Florencio 6. Menardo G. Jimenez, Jr. 7. katrina L. Abelarde 8. Marco Alejandro T. Borlongan 9. Alfredo B. Carrera 10. Cesar M. Enriquez20 11. Juan Victor I. Hernandez 12. Florentino D. Mabasa, Jr 13. Leo I. Posadas 3 6 14. June Cheryl Cabal Revilla 15. Oscar Enrico A. Reyes, Jr. 16. Martin T. Rio 17. Ricardo M. Sison 18. Emiliano R. Tanchico, Jr. 19. Melissa V. Vergel de Dios 20. Benedict Patrick V. Alcoseba21 21. Jerameel A. Azurin21 22. Rafael M. Bejar 23. Jose Arnilo S. Castañeda21 24. Gerardo Jose V. Castro 25 Marissa V. Conde 26. Gene S. de Guzman 27. Margarito G. Dujali, Jr.23 - - 200 12,028 515 22 - - 300 - - - 10 - - - 4,400 1,539 - -22 -22 - -22 - - - - ending Balance13 199 64,380 142,410 231 1 1 5 - - - - - 117 117 517 - - - - - - - 28. Gil Samson D. Garcia 29. Joseph Ian G. Gendrano 200 30. Elisa B. Gesalta 12,028 31. John John R. Gonzales 515 32. Ma. Josefina T. Gorres 22 33. Ma. Criselda B. Guhit 1,250 1,250 - - 34. Emeraldo L. Hernandez 35. Marven S. Jardiel 300 36. Princesita P. katigbak - - - 37. Alexander S. kibanoff 38. Joseph Nelson M. Ladaban 39. Javier C. Lagdameo 10 40. Joselito S. Limjap - - - 41. Albert Mitchell L. Locsin 42. Luis Ignacio A. Lopa 43. Paolo Jose C. Lopez 4,400 44. Ma. Carmela F. Luque 1,539 45. Oliver Carlos G. Odulio 46. Aileen D. Regio 47. Ricardo C. Rodriguez 48. Genaro C. Sanchez 49. Arvin L. Siena21 50. Ana Maria A. Sotto 51. Julieta S. Tañeca24 52. Patrick S. Tang 53. Victor Y. Tria - - - - - - - - - - - - - - - - - - - - - - 5,712 4,460 5022 - 5 570 - - - - - - - - - - - - - - 5,712 4,460 50 - 5 570 - 11 Includes directly and indirectly owned shares in the Company. Changes in shareholdings were disclosed in the Statements of Changes in Beneficial Ownership of Securities filed with the PSEC and PSE and posted on the Company website at PLDT Investor Relations>Shareholder Information>Beneficial Ownership. 12 As at December 31, 2015 unless otherwise indicated. 13 As at December 31, 2016. 14 Includes 835 shares for the account of Michelle Y. Dee-Santos and 245 shares under the name of Helen Y. Dee, both under PCD Nominee Corporation and 21,957 shares owned by Hydee Management Corporation. As chairperson and president of Hydee Management Corporation, Ms. Dee may exercise the voting right in respect of the 21,957 shares of Hydee Management Corporation 15 Elected as director effective July 11, 2016. 16 Elected as director effective August 30, 2016. 17 As at date of election as director. 18 Elected as director effective November 14, 2016. 19 Separated effective January 01, 2017. 20 Separated effective September 01, 2016. 21 Appointed as officer of the Company on August 30, 2016. 22 As at date of appointment as officer. 23 Separated effective March 01, 2017. 24 Separated effective March 31, 2017. PLDT 2016 ANNUAL REPORTdigital like never beforeOn August 2, 2016, the Board approved the amendment of our dividend policy, reducing the regular dividend payout rate to 60% from 75% of our Core Earnings Per Share (EPS) as regular dividends. The change in the dividend policy takes into account: (i) the elevated levels of capital expenditures to build a robust, superior network to support the continued growth of data traffic; (ii) plans to invest in new adjacent businesses that will complement the current business and provide future sources of profits and dividends; and (iii) management of our cash and gearing levels. In the event that no investment opportunities arise, the Company may consider the option of returning additional cash to shareholders in the form of special dividends or share buybacks. PLDT was able to pay out approximately 60% of its core earnings for the year 2016. Customers. PLDT serves a broad range of customers from residential, micro, small and medium enterprise (SME) and large enterprise, including the public sector. PLDT strives to satisfy its customers’ requirements and expectations regarding innovative products and services, quality of service, pricing, application process, service provisioning process, repair and restoration service and the billing process. We continuously engage with our customers through various touchpoints with the end in view of knowing and understanding their product and service needs, promptly addressing their concerns and identifying areas where we could further enhance customer experience. In 2016, the Company significantly increased its capital expenditures to support the roll-out of high speed data infrastructure in order to provide a higher level of internet service to its customers. Employees. PLDT respects the rights of its personnel, among which are the right to self-organization, safe working conditions, rest and leisure, and work-life balance. It also provides opportunities for skills development and improvement, leadership and competency training as well as career development. PLDT provides adequate opportunity for career advancement on a merit-based system. Compensation and incentives are likewise determined on the basis of performance and accomplishment. Dedicated staff and facilities are made available for the training and development programs of the Company. The Company also organizes programs that support the well-being of employees, allow them to participate in PLDT’s CSR activities, and obtains their feedback on Company concerns. Employees’ surveys are conducted at regular intervals to gauge employee engagement as well as obtain the pulse of PLDT employees across the organization at different levels and positions concerning topics and issues which are prioritized and addressed in the various people programs of the Company. In accordance with the Company’s Personnel Manual, the Company provides medical and dental benefits for our employees, which include hospitalization, doctor consultation, medicines and laboratory tests. The Company monitors and submits reports on employee health and safety in accordance with applicable regulations. 3 7 PLDT 2016 ANNUAL REPORTdigital like never beforeSuppliers. PLDT aspires to maintain mutually beneficial relationships only with like principled suppliers that uphold PLDT’s core values of fairness, accountability, integrity and transparency in their own businesses. Suppliers are required to undergo an accreditation process before they engage in business with PLDT. Among the criteria for accreditation are financial capability, technical capability, compliance with applicable laws, including those pertaining to industrial relations, environment, health and safety, and intellectual property rights. The Company’s purchases, as a general rule, are made on the basis of competitive bidding among accredited and qualified suppliers. Creditors. In accordance with our Code of Ethics, we protect the rights of our creditors by publicly disclosing all material information, such as earnings results and risk exposures relating to loan covenants. Our disclosure controls and procedures also include periodic reports to our creditors such as our latest certified financial statements, no default certification, and certification on compliance with financial ratio limits. PLDT’s credit has been rated at investment grade by the three major international credit rating agencies. Communities. Serving the community is an integral part of the mission of connecting the digital divide, and with their technology and services, PLDT and Smart are well-positioned to provide much needed assistance to communities. As good corporate citizens, PLDT and Smart are leveraging their core business and infrastructure to act as enablers, especially in communities with greatest need, through their CSR programs in education, health, community, environment, livelihood development, youth development and sports, and disaster relief operations. Environment. PLDT is committed to environmental protection and compliance with environmental laws. To intensify the environmental compliance of the Company, a Risk Management and Compliance Division was established to oversee compliance of all PLDT establishments/buildings with the regulations and environmental laws. We have also implemented stack and ambient emission monitoring of standby generator sets, construction of temporary storage facilities and safekeeping of hazardous waste, and construction of waste water treatment plant facility in order to comply with applicable environmental laws such as the Philippine Clean Air Act (RA 8749), Toxic Substances and Nuclear Waste Control Act (RA 6969), Ecological Solid Waste Management Act (RA 9003), Philippine Clean Water Act (RA 9275) and Pollution Control Law (PD 984). The PLDT Group has taken tangible measures to reduce its carbon footprint. As such, it ensures compliance with rules and regulations of local government regulatory offices and agencies, institutes programs on energy conservation and waste disposal, and conducts regular campaigns to raise the awareness and competency of employees on sustainable business practices. Energy conservation and resource consumption efficiency are among the performance key result areas that are monitored and measured for long-term solutions because effective energy management directly impacts the business, its competitiveness, and reliability of service. In line with this, the programs we have implemented include migration from old Legacy Switches to the New Generation Network, upgrade of lighting equipment in our buildings into more efficient technologies, replacement of old air-conditioners with energy saving-type units, and space optimization in workplaces. Apart from mitigating the Company’s environmental footprint, numerous measures to address the threats arising from climate change impact have been put in place. Our facilities and network are focused on climate- proofing efforts to assure business continuity during times of natural calamities. Structural retrofitting of Company buildings and offices, relocation to safer location of diesel generators and strategic deployment of mobile units, and placing more underground fiber optic cables comprise some of such resiliency programs. Advocacy and Networking. PLDT supports the advocacy for better governance and ethics in business as manifested in the Company’s policy against corruption and bribery as set forth in its Code of Ethics and reinforced in specific policies such as the Policy on Gift-Giving Activities, Policy on Gifts, Entertainment and Sponsored Travel, Supplier/Contractor Relations Policy, Corporate Governance Guidelines for Suppliers, which prohibit bribery or acts which may be construed as bribery involving third parties in business dealings with the Company. These policies are implemented through anti-corruption programs and measures such as internal controls, training and communication, our whistleblowing system, third party due diligence, and support for and participation in multi-sectoral anti-corruption initiatives to eliminate graft and corruption. PLDT continues to work with institutions and organizations engaged in programs and advocacy efforts in the corporate governance, compliance and business ethics field. We are an active sponsoring partner member of the Ethics and Compliance Initiative (ECI). Our continuing membership at the ECI gives PLDT access to its vast online library on corporate governance and related topics, opportunities to interact with other corporate governance and ethics professionals around the world, and benchmark our governance practices against those of leading companies. Locally, PLDT is a premium member of the Integrity Initiative, Inc. and a member of the Good Governance Advocates and Practitioners of the Philippines (GGAPP). PLDT also participates in the activities of the Institute of Corporate Directors (ICD) and its sister-institute in the public sector the Institute for Solidarity in Asia (ISA). PLDT was a major sponsor of the ISA’s Islands of Good Governance Program in 2015. PLDT recognizes that corporate governance will be one of the key factors in its digital pivot and business transformation program. The Company’s determined focus to achieve its Mission and strategic objectives shall be sustained by PLDT’s commitment to its customers, shareholders and stakeholders and adherence to the principles of good governance. 3 8 PLDT 2016 ANNUAL REPORTdigital like never before3 9 the Company’s determined focus to achieve its mission and strategic objectives shall be sustained by plDt’s commitment to its customers, shareholders and stakeholders and adherence to the principles of good governance. PLDT 2016 ANNUAL REPORTdigital like never beforesweet! 4 0 create like never before Share your recipe for success – and allow others savor the sweet taste of triumph. PLDT 2016 ANNUAL REPORTdigital like never beforeTHE PLDT GROUP enterprise risk management report the group enterprise risk management department The PLDT Group’s commitment to the proactive management of existing and emerging risks is reinforced by the Group Enterprise Risk Management Department (GRMD). The GRMD develops and manages a comprehensive integrated risk management program that is implemented across all levels of the organization, with the goal of managing the Group’s risks to an acceptable level, so as to enhance opportunities, reduce threats, and thus create even more value for the business and its stakeholders. the pldt group risk management philosophy statement The PLDT Group adopts a risk philosophy that recognizes risks as integral to its business thereby committing itself to managing these risks with the aim of attaining its business objectives, thus enhancing shareholder value. The PLDT Group operates in a complex and dynamic business environment which gives rise to a variety of risks that can be both threat and opportunity. Recognizing that these risks are an integral part of its business, the PLDT Group is committed to managing its overall risk exposure in a systematic way and in such a manner that supports its strategic decision-making process. Accordingly, the PLDT Group employs a comprehensive, integrated risk management program, effected across all levels of the organization, with the goal of identifying, analyzing and managing the Group’s risks to an acceptable level, so as to enhance opportunities, reduce threats, and thus sustain competitive advantage. The PLDT Group believes that an effective risk management program will contribute to the attainment of objectives by PLDT and its subsidiaries, thus creating value for the business and its stakeholders. the enterprise risk management framework and process The GRMD promulgates and encourages the adoption of a standard risk evaluation process focused on the need to properly identify, analyze, evaluate, treat and monitor risks that may affect the achievement of business objectives. The ERM process implemented is based on the International Standard of ISO 31000. isO 31000: risk management process The implementation of the ERM process ensures that high-priority risks are well understood and effectively managed across all functions and units within the PLDT Group. risk Committee The Risk Committee assists the PLDT Board in overseeing Management’s adoption and implementation of a system for identifying, assessing, monitoring and managing key risk areas. The committee reviews Management’s reports on the Company’s major risk exposures as well as Management’s plans and actions to minimize, control or manage the impact of such risks. The GRMD reports to the PLDT Risk Committee on a quarterly basis and to the PLDT Board of Directors on a semi-annual basis on developments with regard to the Group’s risk management activities. pldt group top 10 risks A risk assessment exercise was undertaken by the CEO Council to identify and prioritize the most important risks affecting the PLDT Group for 2016. These top risks were: 1. Competitive Situation 2. Recruitment and Retention of Appropriate Personnel 3. Execution of Network Roll-out 4. Monetization of Data Traffic 5. Changes in Political/Regulatory Landscape 6. Execution of Digital Pivot/Transformation 7. Regular Occurrence of Natural Disasters 8. Dependence on Vendors 9. Exposure to Financial Risk 10. Increase in Cybersecurity Issues The PLDT Group is committed in pursuing measures to ensure that all these risks are effectively managed. Treatment strategies have been developed, and mitigation initiatives were put in place. Risk management activities are continuously monitored and reviewed to ensure that critical risks are appropriately addressed across the organization. ISo 31000: rISk mAnAGemenT proCeSS eSTABlISh The ConTeXT T l u S n o C D n A e T A C n u m m o C I T n e m S S e S S A k S I r w e I v e r D n A r o T n o m I IDenTIFy rISkS AnAlyze rISkS evAluATe rISkS TreAT rISkS 4 1 PLDT 2016 ANNUAL REPORTdigital like never before manuel v. pangilinan ray C. espinosa helen y. dee James l. go 4 2 boarD of DireCtors MANUEL V. PANGILINAN • 70, FILIPINO Director of PLDT since November 24, 1998. He was appointed as Chairman of the Board of Directors of PLDT after serving as its President and Chief Executive Officer from November 1998 to February 2004. Effective January 1, 2016, he concurrently holds the position of President and Chief Executive Officer of PLDT and Smart Communications, Inc. (Smart). He is the Chairman of the Governance and Nomination, Executive Compensation and Technology Strategy Committees of the Board of Directors of PLDT. He also serves as Chairman of Metro Pacific Investments Corporation (MPIC), Manila Electric Company (Meralco) and Philex Mining Corporation, all of which are PSE-listed companies, and of several subsidiaries or affiliates of PLDT or MPIC, including, among others, Smart Communications, Inc. (Smart) Beacon Electric Assets Holdings Inc. (Beacon), Manila North Tollways Corporation, Maynilad Water Services Corporation (Maynilad), Landco Pacific Corporation, Medical Doctors Incorporated (Makati Medical Center), Colinas Verdes Corporation (Cardinal Santos Medical Center), Davao Doctors Incorporated, Riverside Medical Center Incorporated, Our Lady of Lourdes Hospital and Asian Hospital Incorporated. He is also the Chairman of PLDT-Smart Foundation, Inc. Mr. Pangilinan founded First Pacific Company Limited (First Pacific), a Hongkong Stock Exchange-listed company, in 1981 and served as Managing Director until 1999. He was appointed as Executive Chairman until June 2003, when he was named as Chief Executive Officer and Managing Director. Within the First Pacific Group, he also holds the position of President Commissioner of P.T. Indofood Sukses Makmur Tbk, the largest food company in Indonesia. Outside the First Pacific Group, Mr. Pangilinan is the Chairman of the Board of Trustees of San Beda College and the Hong Kong Bayanihan Trust, a non-stock, non-profit foundation which provides vocational, social and cultural activities for Hongkong’s foreign domestic helpers. He is a Co-Chairman of the Philippine Disaster Resilience Foundation, Inc., a non-stock, non-profit foundation established to formulate and implement a reconstruction strategy to rehabilitate and rebuild areas devastated by floods and other calamities, and of the US-Philippine Business Society, a non-profit society which seeks to broaden the relationship between the United States and the Philippines in the areas of trade, investment, education, foreign and security policies and culture. Mr. Pangilinan has received numerous prestigious awards including the Business Icon Gold Award for having greatly contributed to the Philippine economy through achievements in business and society by Biz News Asia magazine (2008), Global Filipino Executive of the Year for 2010 by Asia CEO Awards, and Philippines Best CEO for 2012 by Finance Asia. Mr. Pangilinan graduated cum laude from the Ateneo de Manila University, with a Bachelor of Arts Degree in Economics. He received his Master’s Degree in Business Administration from Wharton School of Finance & Commerce at the University of Pennsylvania, where he was a Procter & Gamble Fellow. He was conferred a Doctor of Humanities Degree (Honoris Causa) by the San Beda College (2002), Xavier University (2007), Holy Angel University (2009) and Far Eastern University (2010). HELEN Y. DEE • 73, FILIPINO Director of PLDT since June 18, 1986. She is the Chairperson or a director of EEI Corporation, House of Investments, National Reinsurance Corporation of the Philippines, Petro Energy Resources Corporation, Rizal Commercial Banking Corporation and Seafront Resources Corporation, all of which are PSE-listed companies. She is the Chairperson, Vice Chairperson or a director of several companies engaged in banking, insurance and real property businesses. She is also the President and/or Chief Executive Officer of Hydee Management and Resource Corp., Moira Management, Inc., Tameena Resources, Inc., YGC Corporate Services, Inc., GPL Holdings, Inc. and Mijo Holdings, Inc., and the Vice President of A. T. Yuchengco, Inc. Ms. Dee received her Master’s Degree in Business Administration from De La Salle University. RAY C. ESPINOSA • 61, FILIPINO Director of PLDT since November 24, 1998, and is member of the Technology Strategy Committee of the Board of Directors of PLDT. He has served as Chief Corporate Services Officer of PLDT since December 1, 2016 and General Counsel of Meralco since 2009. In June 2013, he joined First Pacific and was appointed as First Pacific Group’s Head of Government and Regulatory Affairs and Head of Communications Bureau for the Philippines. He is also a director of Meralco, Metro Pacific Investments Corporation and Roxas Holdings, Inc., and an independent director and Chairman of the Audit Committee of Lepanto Consolidated Mining Company, which are PSE-listed companies. He is the Chairman of PhilStar Group of Companies, Business World Publication Corporation, a director and Corporate Secretary of Philippine Telecommunications Investment Corporation, a director of Metro Pacific Resources, Inc. and BTF Holdings, Inc. and a trustee of the Beneficial Trust Fund of PLDT and PLDT- Smart Foundation, Inc. Atty. Espinosa served as President & CEO of MediaQuest,TV5 and Cignal TV until May 2013 and, prior thereto, was the President & CEO of ePLDT and its subsidiaries until April 2010. Atty. Espinosa has a Master of Laws degree from the University of Michigan Law School and is a member of the Integrated Bar of the Philippines. He was a partner at Sycip Salazar Hernandez & Gatmaitan from 1982 to 2000, and a foreign associate at Covington and Burling (Washington, D. C., USA) from 1987 to 1988. JAMES L. GO • 78, FILIPINO Director of PLDT since November 3, 2011, and is a member of the Technology Strategy and Risk Committees and Advisor of the Audit Committee of the Board of Directors of PLDT. He is the Chairman and Chief Executive Officer of JG Summit Holdings, Inc. and Oriental Petroleum and Minerals Corporation, the Chairman of Universal Robina Corporation and Robinsons Land Corporation, the Vice Chairman of Robinsons Retail Holdings, Inc., and a director of Cebu Air, Inc and Meralco, which are PSE-listed companies. He is also the Chairman of JG Summit Petrochemical Corporation and JG Summit Olefins Corporation, and a director of CFC Corporation, United Industrial Corporation Limited, Marina Center Holdings Private Limited and Hotel Marina City Private Limited. He is also the President and a Trustee of the Gokongwei Brothers Foundation. He was the Vice Chairman and President and Chief Executive Officer of Digital Telecommunications, Inc. (Digitel) until October 26, 2011. Mr. Go received his Bachelor of Science Degree and Master of Science Degree in Chemical Engineering from Massachusetts Institute of Technology, USA. BERNIDO H. LIU • 54, FILIPINO Independent director of PLDT since September 28, 2015 and is an independent member of the Audit, Governance and Nomination, Executive Compensation and Risk Committees of the Board of Directors of PLDT. He is the Chairman, President and Chief Executive Officer of Golden ABC, Inc. (GABC), a fashion retail company which creates PLDT 2016 ANNUAL REPORTdigital like never before Bernido h. liu hon. artemio v. panganiban hideaki Ozaki amb. albert f. del rosario 4 3 and sells its own clothing, personal care and accessory lines marketed and retailed under a fast-growing dynamic portfolio of well-differentiated proprietary brands. He is the Group Chairman and President of LH Paragon Incorporated, a business holdings company which has under its management GABC and other companies in various industries, namely, Matimco Incorporated, Oakridge Realty Development Corporation, Basic Graphics Incorporated, Essentia Medical Group Incorporated, and Red Logo Lifestyle Inc. He is also the Chairman of Greentree Food Solutions, Inc., a director of GABC International Pte Limited, Children’s Hour Philippines and Mga Likha ni Inay, Inc., a trustee of Philippine Retailers Association, a member of the Visayas Advisory Council of Habitat for Humanity Philippines and an independent member of the Board of Trustees of the PLDT-SMART Foundation, Inc. Mr. Liu graduated with a Bachelor of Science Degree in Architecture from the University of San Carlos, Cebu, and completed the Executive Education Owner/President Management Program of the Harvard Business School. Over the years, Mr. Liu has been recognized by different award-giving bodies. His awards include, among others, the Agora Award for Outstanding Achievement in Entrepreneurship from the Philippine Marketing Association, Ten Outstanding Young Men for Entrepreneurship, and Grand Bossing from PLDT SME Nation. HIDEAKI OZAKI • 52, JAPANESE Director of PLDT since December 6, 2011. He is the President and Chief Executive Officer of NTT Com Asia Ltd, a data center, network and cloud provider in Hong Kong and the North Asia Regional Headquarters of NTT Communications Corporation (NTT Com). He served as Vice President of Corporate Planning and Carrier Relations, Global Business of NTT Com from October 2006 to July 2016 and as part-time Director of NTT Communications Philippines from July 2009 to February 2012. Prior to that, he served as Vice President of Global Strategy, Global Business Division of NTT Com since 2006 and as Director of Legal and Internal Audit Department of NTT Com from 2003 to 2006. He also served as Vice President of Sales and Corporate Planning of NTT Communications (Thailand) Co., Ltd. from 1999 to 2003 and as Manager of Overseas Business Planning, Global Service Division of Nippon Telegraph and Telephone Corporation from 1995 to 1999. Mr. Ozaki obtained his Bachelor’s Degree in Law from University of Tokyo and Master’s Degree in Law from University of Pennsylvania. HON. ARTEMIO V. PANGANIBAN • 80, FILIPINO Independent director of PLDT since April 23, 2013 and is an independent member of the Audit, Governance and Nomination, Executive Compensation and Risk Committees of the Board of Directors of PLDT. He served as an independent member of the Advisory Board and an independent non-voting member of the Governance and Nomination Committee of the Board of Directors of PLDT from June 9, 2009 to May 6, 2013. Currently, he is also an independent director of Meralco, Petron Corporation, First Philippine Holdings Corporation, Metro Pacific Investments Corporation, Robinsons Land Corporation, GMA Network, GMA Holdings, and Asian Terminals, Inc., and a regular director of Jollibee Foods Corporation, all of which are PSE-listed companies. He also holds directorships in Metro Pacific Tollways Corporation, Tollways Management Corporation, Liberty Telecoms Holdings, Inc. and Team Energy Corporation, is a senior adviser of Metropolitan Bank and Trust Company, a member of the Advisory Council of the Bank of the Philippine Islands and adviser of Double Dragon Properties, Corp. He is the Chairman of the Board of Trustees of the Foundation for Liberty and Prosperity, and the Board of Advisers of Metrobank Foundation, Inc., a trustee of Claudio Teehankee Foundation and Tan Yan kee Foundation, President of the Manila Metropolitan Cathedral- Basilica Foundation, member of the Board of Advisers of De La Salle University College of Law, University of Asia and the Pacific College of Law and Johann Strauss Society, member of the Advisory Board of World Bank (Philippines), Senior Adviser of V. Mapa Falcon Honor Society, Chairman-Emeritus of the Philippine Dispute Resolution Center, Inc., Chairman of Philippine National Committee of the Asean Law Association, consultant of the Judicial and Bar Council, and a column writer of the Philippine Daily Inquirer. Hon. Panganiban served the Supreme Court of the Philippines for more than 11 years, first as Associate Justice (October 10, 1995 to December 20, 2005) and later, as Chief Justice (December 21, 2005 to December 6, 2006) during which he sat concurrently as Chairperson of the Presidential Electoral Tribunal, Judicial and Bar Council and Philippine Judicial Academy. He has received over 250 awards in recognition of his role as jurist, practicing lawyer, professor, civic leader, Catholic lay worker and business entrepreneur, including as “The Renaissance Jurist of the 21st Century” given by the Supreme Court on the occasion of his retirement from the Court. Hon. Panganiban graduated cum laude from Far Eastern University with a Bachelor of Laws Degree in 1960, and was conferred a Doctor of Laws Degree (Honoris Causa) by the University of Iloilo (1997), Far Eastern University (2002), University of Cebu (2006), Angeles University (2006) and Bulacan State University (2006). He was co- founder and past president of the National Union of Students of the Philippines. AMB. ALBERT F. DEL ROSARIO • 77, FILIPINO Director of PLDT since July 11, 2016 and is a member of the Technology Strategy Committee of the Board of Directors of PLDT. He was the former Secretary of Foreign Affairs of the Philippines from February 2011 to March 2016 and also served as Philippine Ambassador to the United States of America from October 2001 to August 2006. Prior to entering public service, he was on the Board of Directors of over 50 firms. His business career for over four decades has spanned the insurance, banking, real estate, shipping, telecommunications, advertising, consumer products, retail, pharmaceutical and food industries. Ambassador del Rosario is the Chairman of Philippine Stratbase Consultancy, Inc., Gotuaco del Rosario Insurance Brokers, Inc., Stratbase ADR Institute, Inc., and a director of First Pacific Company, Indra Philippines, Inc., Metro Pacific Investments Corporation (a PSE-listed company), Metro Pacific Tollways Corporation, Cavitex Infrastructure Corporation, Sarimonde Foods Corporation, Two Rivers Pacific Holdings Corporation, Metro Pacific Resources, Inc., Metro Pacific Holdings, Inc., Metro Pacific Asset Holdings, Inc., Philippine Telecommunications Investment Corporation, Enterprise Investments Holdings, Inc. and Asia Insurance (Phil.) Corp. He is also a trustee of the Carlos P. Romulo Foundation for Peace & Development and an Advisory Board of CSIS Southeast Asia Program. Ambassador del Rosario received numerous awards and recognition for his valuable contributions to the Philippines and abroad. In September 2004, he was conferred the Order of Sikatuna, Rank of Datu, by H.E. President Gloria Macapagal-Arroyo for his outstanding efforts in promoting foreign relations for the Philippines and the Order of Lakandula with a Rank of Grand Cross (Bayani) for acting as Co-Chair of the 2015 APEC in December 2015. He was a recipient of the EDSA II Presidential Heroes Award in recognition of his work in fostering Philippine democracy in 2001 and the Philippine Army Award from H.E. President Corazon Aquino for his accomplishments as Chairman of the Makati Foundation for Education in 1991. He was awarded as 2013 Professional Chair for Public Service and Governance by Ateneo School of Government and the Metrobank Foundation, 2014 Management Man of the Year by Management Association of the Philippines, 2016 Outstanding Government National Official by Volunteers Against Crime and Corruption (VACC), 2016 Asia CEO Awards as Life Contributor, and Manuel L. Quezon Gawad Parangal as Quezon City’s Most Outstanding Citizens for 2016. He PLDT 2016 ANNUAL REPORTdigital like never before 4 4 pedro e. roxas dean amado d. valdez atsuhisa shirai marife B. zamora ma. lourdes C. rausa- Chan was elevated to the Xavier Hall of Fame in New York City in 2006. He received the AIM Washington Sycip Distinguished Management Leadership Award in 2011, Doctor of Laws (Honoris Causa) for “principled commitment to democracy, integrity and the rule of law both at home and around the globe” conferred by the College of Mount Saint Vincent, New York City in September 2015, Rotary Club Makati West’s First “Albert del Rosario Award” (Tungo sa Makatarungang Pamumuhay) in August 2016, Outstanding Leadership in Diplomatic Service by Miriam College Department of International Studies and Philippine Tatler’s Diamond Award both in November 2016. Ambassador del Rosario graduated from New York University with a Bachelor of Science Degree in Economics. PEDRO E. ROXAS • 61, FILIPINO Director of PLDT since March 1, 2001 and qualified as an independent director since 2002. He is the Chairman of the Audit and Risk Committees and serves as an independent member of the Governance and Nomination and Executive Compensation Committees of the Board of Directors of PLDT. He is the Chairman of Roxas Holdings, Inc. and Roxas and Company, Inc., and an independent director of Meralco, BDO Private Bank and CEMEX Holdings Phil. Inc., which are reporting or PSE-listed companies. He is also the Chairman, President or a director of companies or associations in the fields of agri-business, sugar manufacturing and real estate development including Brightnote Assets Corporation, Club Punta Fuego, Inc., Hawaiian-Philippine Co. and Philippine Sugar Millers Association, and a member of the Board of Trustees of Philippine Business for Social Progress and Fundacion Santiago (where he is also the President) and Roxas Foundation, Inc.. Mr. Roxas received his Bachelor of Science Degree in Business Administration from the University of Notre Dame, Indiana, U.S.A. ATSUHISA SHIRAI • 56, JAPANESE Director of PLDT since August 30, 2016. He is a member of the Governance and Nomination, Executive Compensation, Technology Strategy and Risk Committees, and an Advisor of the Audit Committee of the Board of Directors. From May 2015 to July 2016, he was the President of Mobile Innovation Co., Ltd., a company that provides fleet management services in Thailand, and through its subsidiaries, in Vietnam and Indonesia, and through dealers in Myanmar. He served as Director of DOCOMO Wi-Fi Service, 2M2 Business Department and Director of International Roaming, Global Business Department of NTT DOCOMO from July 2013 to April 2015 and from April 2009 to June 2013, respectively. He also served as Director of Wireless Broadband Alliance from July 2010 to June 2015. Prior to that, he was the Director of Singapore Project, Global Business Office of NTT West Corporation from July 2007 to March 2009, Director of Housing Services and Data Center, IT Management Services Department and Director of Internal IT System, Global Business Department of NTT Communications Corporation from April 2005 to June 2007 and from January 2002 to March 2005, respectively. Mr. Shirai received his Master’s Degree in Electrical and Electronic Engineering from Chiba University. DEAN AMADO D. VALDEZ • 71, FILIPINO Director of PLDT since November 14, 2016. He is the Chairman of the Social Security Commission and is an independent director of Radiowealth Finance Corporation. Dean Valdez’ service in the national government started during the term of then President Corazon C. Aquino where he served as Director of the Bureau of Agrarian Legal Assistance and as member of the Cabinet Assistance System. In 2001, he served as Government Corporate Counsel with the rank of Presiding Justice of the Court of Appeals. He also served as Senior Undersecretary at the Office of the President of the Philippines and concurrent Executive Director of the Presidential Commission on the Visiting Forces Agreement. Prior thereto, he worked as General Attorney at the Law Center of the U.S. Naval Base Subic Bay and Associate at the law firm Martin, Davis & Lewis Law Firm in Los Angeles, California. His past business, professional, and civic involvement includes holding positions such as Dean of the University of the East College of Law, President and Chairman Emeritus of the Pamantasan ng Lungsod ng Maynila and Ospital ng Maynila, President of the International Association of Constitutional Law-Philippine Branch and the Philippine Association of Law Schools, member of the Board of Trustee of the Philippine Judicial Academy and the Universidad de Manila, director of Philex Mining Corporation, John Hay Management Corporation and Rotary Club of Manila, among others. Dean Valdez obtained his Bachelor of Laws Degree from the University of the East and Bachelor of Arts Degree from Manuel L. Quezon University. He also attended special studies in International Business Law at the National University in Singapore and completed academic requirements in Master in Business Economics at University of Asia and the Pacific. He was conferred with Doctor of Humanities Degree by the Laguna State Polytechnic University and Doctor of Philosophy Degree by the Akamai University in Hawaii. . MARIFE B. ZAMORA • 64, FILIPINO Director of PLDT since November 14, 2016. She is the Chairperson of Convergys Philippines, Inc., the Philippine branch of Convergys Corporation (NYSE:CVG), a global leader in customer management. She is the 3rd Woman President and the 68th President of the Management Association of the Philippines since its inception in1950, a member of the Board of Directors of the American Chamber of Commerce of the Philippines, 2017-2018, Secretary and member of the Board of Trustees of the Integrity Initiative, and Board Adviser of ABS CBN Lingkod kapamilya Foundation Inc. She co-founded and is Chair of the Filipina CEO Circle, an organization of Filipina CEOs who rose through the ranks to lead large corporations in the country’s private sector. She served as the first country manager of Convergys Philippines, setting up its first contact center in 2003 and leading its growth into being the country’s largest private employer. In 2011, she became managing director for Asia Pacific and EMEA, responsible for Convergys contact centers in the Philippines, India, United kingdom, and Malaysia. In April 2014, she was named Chair of Convergys Philippines. Prior to her work at Convergys Philippines, Ms. Zamora served as managing director for Headstrong Incorporated, a global provider of integrated solutions and digital technologies. Previously, she was with IBM Philippines where she held a number of sales, marketing and management positions during her 18-year tenure with the company. Ms. Zamora received her Bachelor of Arts Degree (major in Mathematics & History) from the College of the Holy Spirit and studied in the University of the Philippines and the Wharton School of the University of Pennsylvania. Honors conferred on Ms. Zamora include the Asia CEO Awards 2011 Global Filipino Executive of the Year, the ‘Go Negosyo’ Woman STARpreneuer Award 2012, and the 100 Most Influential Filipino Women in the World Award (Founders & Pioneers Category) 2013. MA. LOURDES C. RAUSA-CHAN • 63, FILIPINO Director of PLDT since March 29, 2011 and is a non-voting member of the Governance and Nomination Committee of the Board of Directors of PLDT. She has been serving as Corporate Secretary, Corporate Affairs and Legal Services Head and Chief Governance Officer of PLDT since November 1998, January 1999 and March 2008, respectively. She is a director of ePLDT, PLDT Global Investments Holdings, Inc., PLDT Communications and Energy Ventures, Inc. and ACeS Philippines Cellular Satellite Corporation and also serves as Corporate Secretary of several subsidiaries of PLDT, PLDT-Smart Foundation Inc. and Philippine Disaster Resilience Foundation, Inc. Prior to joining PLDT, she was the Group Vice President for Legal Affairs of Metro Pacific Corporation and the Corporate Secretary of some of its subsidiaries. Ms. Rausa-Chan received her Bachelor of Arts Degree in Political Science and Bachelor of Laws Degree from the University of the Philippines. PLDT 2016 ANNUAL REPORTdigital like never before aDvisory boarD roberto r. romulo Oscar s. reyes Benny s. santoso 4 5 washington z. sycip Christopher h. young Orlando B. vea PLDT 2016 ANNUAL REPORTdigital like never before4 6 alejandro O. Caeg anabelle l. Chua June Cheryl a. Cabal-revilla manuel v. pangilinan ernesto r. alberto plDt exeCutive offiCers ERNESTO R. ALBERTO • 56, FILIPINO Group Chief Revenue Officer for PLDT and Smart since December 1, 2016, is responsible for generating revenues from all the market segments of the group (Enterprise, International, Home, and Wireless businesses). Prior thereto, he was the Head of PLDT Group Enterprise, International and Carrier Business since January 2012. He also has served as the President and Chief Executive Officer of ePLDT since 2013 and is a member of the PLDT and Smart top management team. He is the Chairman or a director of several subsidiaries and affiliates of PLDT, Smart and ePLDT. He is also the Chairman of the Junior Achievement of the Philippines, member of the Board of Trustees of the Advertising Foundation of the Philippines, member of the Management Association of the Philippines and Makati Business Club, and founding member of the Board of Trustees of IBM Analitika Philippines. Mr. Alberto brings with him over thirty years of extensive experience in telecommunications, corporate banking, relationship management and business development, having held key positions in the PLDT Group and leading local and foreign banks. Prior to joining PLDT in May 2003, he was Vice President, Senior Banker and Group Head of the National Corporate Group of Citibank, N.A., Manila from November 1996 to April 2003 and previously served as Vice President and Group Head of the Relationship Management Group of Citytrust Banking Corporation. He graduated with a Bachelor’s Degree (major in Economics and minor in Mathematics and Political Science) from San Beda College and pursued his masters studies in Economics Research at the University of Asia and the Pacific. JUNE CHERYL A. CABAL-REVILLA • 43, FILIPINO Controller and Financial Reporting and Controllership Head and is concurrently the Chief Financial Officer of Smart since May 18, 2015. She is also a director and/or the Chief Financial Officer/Treasurer of several subsidiaries of PLDT, the Chief Financial Officer and Treasurer of PLDT-Smart Foundation, the Philippine Disaster Resilience Foundation and TOYM Foundation, Comptroller of First Pacific Leadership Academy Foundation and director and trustee of Tahanan Mutual Building and Loan Association. Prior to joining PLDT in June 2000 as an executive trainee in the Finance Group, Ms. Cabal-Revilla was a senior associate in the business audit and advisory group of SGV & Co. Ms. Cabal-Revilla received her Bachelor of Science Degree in Accountancy from De La Salle University and Master’s Degree in Business Management Major in Finance from Asian Institute of Management. ALEJANDRO O. CAEG • 57, FILIPINO Appointed Head of WCD Sales and Distribution of Smart effective December 1, 2016. Prior to that, he served as Head of International & Carrier Business from March 1, 2009 until November 30, 2016. Previously, he was Smart’s representative to the Conexus Mobile Alliance (one of Asia’s largest cellular roaming alliances), where he was also designated as its Deputy Chairman until 2012 and Conexus Chairman until 2014. Prior to joining PLDT in 2009, he worked in PT Smart Telecom (Indonesia) as its Chief Commercial Strategy Officer from July 2008 to December 2008 and as Chief Commercial Officer from January 2006 to June 2008. He also held various sales, marketing and customer service-related positions in Smart including that of Group Head of Sales and Distribution (2003-2005), Group Head of Customer Care and National Wireless Centers (1998-2001) and Marketing Head of International Gateway Facilities and Local Exchange Carrier (1997-1998). He also served as President and Chief Executive Officer of Telecommunications Distributors Specialist, Inc. in 2002 and as Chief Operations Adviser of I-Contacts Corporation (Smart’s Call Center subsidiary) from 2001 to 2002. Mr. Caeg graduated with a Bachelor’s Degree in AB Applied Economics and obtained MBA credits from De La Salle University Manila. ANABELLE L. CHUA • 56, FILIPINO Chief Financial Officer of the PLDT Group effective May 18, 2015. She was the Chief Financial Officer of Smart from 2006 and Chief Financial Officer of Digitel Mobile from 2013 until May 2015. She holds directorships in several subsidiaries of PLDT, Smart and Digitel. She is also a member of the Board of Directors of Philippine Stock Exchange, PLDT 2016 ANNUAL REPORTdigital like never before victorico p. vargas Jun r. florencio ray C. espinosa maria elizabeth s. sichon ma. lourdes C. rausa- Chan menardo g. Jimenez, Jr. 4 7 Securities Clearing Corporation of the Philippines and Philippine Telecommunications Investment Corporation and the Board of Trustees of the PLDT-Smart Foundation and PLDT Beneficial Trust Fund (PLDT-BTF), a director of the companies owned by PLDT- BTF, and a director and member of the Finance, Audit and Nomination and Governance Committees of the Board of Directors of Meralco. Ms. Chua has over 30 years of experience in the areas of corporate finance, treasury, financial control and credit risk management and was a Vice President at Citibank, N.A. where she worked for 10 years prior to joining PLDT in 1998. Ms. Chua graduated magna cum laude from the University of the Philippines with a Bachelor of Science Degree in Business Administration and Accountancy. JUN R. FLORENCIO • 61, FILIPINO As Internal Audit and Fraud Risk Management Head, Mr. Florencio handles the overall coordination of the internal audit function of the PLDT group of companies and is in- charge of the fraud risk management function of the PLDT Fixed Line business. Mr. Florencio has over 25 years of work experience in the areas of external and internal audit, revenue assurance, credit management, information technology, financial management, and controllership. Mr. Florencio was the Financial Controller of Smart for four years before he joined PLDT in April 1999 as Head of Financial Management Sector. He held various positions in the finance organization of another telecommunications company prior to joining Smart. Mr. Florencio received his Bachelor of Science Degree in Commerce, Major in Accounting from the University of Santo Tomas and attended the Management Development Program of the Asian Institute of Management. MENARDO G. JIMENEZ, JR. • 54, FILIPINO Business Transformation Office Deputy Head effective January 1, 2017. Prior thereto, he served as Human Resources Group Head and Fixed Line Business Transformation Office Head from August 1, 2010 to November 30, 2016. Mr. Jimenez holds directorships in several subsidiaries of PLDT. Prior to joining PLDT, he had a stint at GMA Network, Inc., where he served as head of a creative services and network promotions. Mr. Jimenez received his AB Economics Degree from the University of the Philippines. VICTORICO P. VARGAS • 65, FILIPINO Appointed as Business Transformation Office Head effective January 1, 2016. Mr. Vargas joined First Pacific in January 2016, overseeing First Pacific Group businesses operating in the Philippines and its region, with particular focus on leading the Business Transformation of PLDT. Prior to his appointment as Assistant Director of First Pacific, Mr. Vargas was the President and Chief Executive Officer of Maynilad Water Services, Inc. since August 2010. Mr. Vargas joined PLDT in 2000 as its Human Resources Group Head and through his stay at PLDT got involved in managing the PLDT Business Transformation Office, Asset Protection and Management Group, and the PLDT International Carrier Business. He has worked in senior roles at Union Carbide, Pepsi Cola, Colgate Palmolive and Citibank. Mr. Vargas is a director of PLDT Subic Telecom, Inc. and PLDT Clark Telecom, Inc., President and Member of the Board of Trustees of the First Pacific Leadership Academy, Trustee of the MVP Sports Foundation, and Ideaspace Foundation and President of the PhilPop Music Fest Foundation. Mr. Vargas was educated at Ateneo de Manila and University of Santo Tomas with a Bachelor of Science Degree in Psychology. MARIA ELIZABETH S. SICHON • 59, FILIPINO Chief People and Culture Officer effective December 1, 2016. A seasoned global HR executive, she has previously held HR roles across the Americas, Europe, Middle East and Africa, Asia Pacific and Latin America in high tech, financial and health care industries. Most recently she had her own consulting company, Executive HR Coach, LLC based in Silicon Valley, California, where she worked with companies on their culture transformation and leadership development. Prior to this, Ms. Sichon was VP Human Resources of Hewlett Packard, and VP Human Resources International of Avaya, Inc. Ms. Sichon received her Master of Arts Degree in Organizational Psychology from Teachers College, Columbia University and BS Psychology from the University of the Philippines. PLDT 2016 ANNUAL REPORTdigital like never before plDt offiCers FINANCIAL REVIEW manuel v. pangilinan Chairman of the Board, President and Chief Executive Officer (CEO) ricardo m. Sison FVP, Consumer Credit and Business System Management Joseph nelson m. ladaban VP, PLDT Group Corporate-wide Chief Credit, Collection and Churn Management Officer ernesto r. Alberto EVP, Chief Revenue Officer ray C. espinosa Chief Corporate Services Officer ma. elizabeth S. Sichon1 Chief People and Culture Officer Human Resources emiliano r. Tanchico FVP, Human Resources Management and Development melissa v. vergel de Dios FVP, Investor Relations minerva m. Agas6 VP, Logistics Javier C. lagdameo VP, Corporate Relationship Management B Joselito S. limjap VP, Mainstream Business Development and Research luis Ignacio A. lopa VP, Enterprise Subsidiaries Account Management Overview victorico p. vargas Head, Business Transformation Office (BTO) Benedict patrick v. Alcoseba VP, Disruptive Business paolo Jose C. lopez VP, HOME Customer Care and Sales Support Alejandro o. Caeg2 SVP, Head of Smart WCD Sales and Distrsibution Jerameel A. Azurin VP, SME Marketing maria Carmela F. luque VP, Financial and Revenue Audit Anabelle l. Chua SVP, PLDT Chief Financial Officer rafael m. Bejar VP, Medical Services Jun r. Florencio SVP, Internal Audit and Fraud Risk Management Juan victor I. hernandez3 SVP, Enterprise Business menardo G. Jimenez, Jr. SVP, Deputy BTO Head 4 8 ma. lourdes C. rausa-Chan SVP, Corporate Affairs and Legal Services General Counsel Chief Governance Officer Corporate Secretary Jose Arnilo S. Castañeda VP, HOME Product Development Gerardo Jose v. Castro VP, Luzon Customer Service Opeations District marisa v. Conde VP, Financial Planning Gene S. De Guzman VP, Enterprise Service Assurance Management katrina l. Abelarde FVP, International and Carrier Business Gil Samson D. Garcia VP, Revenue and Cash Accounting marco Alejandro T. Borlongan FVP, Customer Service Operation Management Home and Sales Distribution Joseph Ian G. Gendrano VP, Enterprise Business oliver Carlos G. odulio VP, Asset Protection and Risk Management – Enterprise Business Continuity and Resilience Office Carlo S. ople7 VP, Digital Marketing Strategy harold kim A. orbase3 VP, Enterprise Service Fulfilment Management (GMM and Global) Dale m. ramos8 VP, Network Build Aileen D. regio VP, Business Transformation Office ricardo C. rodriguez VP, Compensation, Rewards and Performance Management Genaro C. Sanchez VP, Head of International Network and Concurrent Head of Carrier Business Arvin l. Siena VP, Network Planning and Fixed Network Engineering Ana maria A. Sotto VP, Project Management Resource and Operations Support Alfredo B. Carrera FVP, Regulatory Strategy and Support leah Camilla r. Besa-Jimenez4 FVP, Data Privacy Office Albert mitchell l. locsin5 FVP, SME Business Florentino D. mabasa, Jr. FVP, Legal Services and Assistant Corporate Secretary leo I. posadas FVP, Treasury elisa B. Gesalta VP, Buildings and Enterprise Access Network Project Management John John r. Gonzales VP, Enterprise Strategic Solutions maria Josefina T. Gorres VP, Office of the Chief Revenue Officer ma. Criselda B. Guhit VP, Tax Management Carla elena A. Tabuena3 VP, Enterprise Client Care emeraldo l. hernandez VP, Technical Operations Center patrick S. Tang VP, Office of the Chief Revenue Officer Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes as at December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016 included elsewhere in this Annual Report. This discussion contains forward-looking statements that reflect our current views with respect to future events and our future financial performance. These statements involve risks and uncertainties, and our actual results may differ materially from those anticipated in these forward-looking statements. We are the largest and most diversified telecommunications company in the Philippines which delivers data and multi-media services nationwide. We have organized our business into business units based on our products and services and have three reportable operating segments which serve as the bases for management’s decision to allocate resources and evaluate operating performance:  Wireless  wireless telecommunications services provided by Smart Communications, Inc., or Smart, and Digital Mobile Philippines, Inc., or DMPI, a wholly-owned subsidiary of Digital Telecommunications Philippines, Inc., or Digitel, our cellular service providers; Voyager Innovations, Inc., or Voyager, and certain subsidiaries, our mobile applications and digital platforms developers and mobile financial services provider; Smart Broadband, Inc., or SBI, and Primeworld Digital Systems, Inc., or PDSI, our wireless broadband service providers; ACeS Philippines Cellular Satellite Corporation, or ACeS Philippines, our satellite information and messaging services provider; and certain subsidiaries of PLDT Global Corporation, or PLDT Global, our mobile virtual network operations, or MVNO, provider;  Fixed Line  fixed line telecommunications services primarily provided by PLDT. We also provide fixed line services through PLDT’s subsidiaries, namely, PLDT Clark Telecom, Inc., PLDT Subic Telecom, Inc., PLDT-Philcom, Inc. or Philcom, and its subsidiaries, or Philcom Group, PLDT-Maratel, Inc., SBI, PDSI, Bonifacio Communications Corporation, PLDT Global and certain subsidiaries and Digitel, all of which together account for approximately 4% of our consolidated fixed line subscribers; data center, cloud, big data, managed IT services and resellership provided by ePLDT, Inc., or ePLDT, IP Converge Data Services, Inc., or IPCDSI, and subsidiary, or IPCDSI Group, ABM Global Solutions, Inc., or AGS, and its subsidiaries, or AGS Group, Curo Teknika, Inc. and ePDS, Inc., or ePDS; business infrastructure and solutions, intelligent data processing and implementation services and data analytics insight generation provided by Talas Data Intelligence, Inc., or Talas; distribution of Filipino channels and content by Pilipinas Global Network Limited and its subsidiaries; and  Others  PLDT Communications and Energy Ventures, Inc., or PCEV, PLDT Global Investment Holdings, Inc., Mabuhay Investments Corporation, PLDT Global Investments Corporation, PLDT Digital Investments Pte. Ltd., or PLDT Digital, and its subsidiary, our investment companies. Adoption of New Standards and Interpretations Our accounting policies are consistent with those of the previous financial year except for the adoption of certain amendments which are effective for annual periods beginning on or after January 1, 2016. The adoption of these amendments to the standards as at January 1, 2016 did not have any significant impact on our consolidated financial position or performance. Please see Note 2 – Summary of Significant Accounting Policies to the accompanying audited consolidated financial statements for further discussion. June Cheryl A. Cabal-revilla FVP, Financial Reporting and Controllership oscar enrico A. reyes, Jr. FVP, HOME Business marven S. Jardiel VP, Enterprise Operations Readiness and Resource Management princesita p. katigbak VP, Office of the Chief Revenue Officer martin T. rio FVP, Property and Facilities Management Alexander S. kibanoff VP, Organization Development victor y. Tria VP, Corporate Business 1 Appointed effective December 1, 2016 2 Effective December 1, 2016 3 Promoted effective March 23, 2017 4 Hired effective February 1, 2017 5 Promoted effective February 7, 2017 6 Hired effective September 1, 2016 7 Hired effective December 1, 2016 8 Hired effective September 16, 2016 1 PLDT 2016 ANNUAL REPORTdigital like never before 

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