Dear Shareholders

A financial storm blew across the world in 2008.

Despite this phenomenon, I maintained my confidence in the inherent strength of our businesses. Based on their financial and operating results in the year, which were at or above expectations - that faith has demonstrably been substantiated. Recurring profit at US$239.2 million was realized in 2008 - a record high in the twenty seven year history of First Pacific.

Let me give a quick review of the performance of our businesses:

• PLDT recorded its sixth consecutive year of historic high core income - Pesos 38.1 billion
• MPIC expanded its portfolio of businesses and saw significant growth over last year for each of the businesses acquired since its restructuring in 2006
• Indofood posted strong profits in the first nine months of the year, but its overall performance for the year was impacted in the last quarter by the depreciation of the Rupiah and the collapse of Crude Palm Oil prices as the global crisis started to strangle demand
• Philex - our mining investment - had a rather difficult last quarter last year as copper prices fell, cushioned to a degree by the continued strength of gold prices. Significant profits were still produced for the year

Various opportunities were assessed in the course of 2008 against the investment criteria outlined in my letter to you last year. It is anticipated that investment circumstances in Asia will become favorable in 2009 as assets become priced more realistically. In the first quarter of 2009, we have seen an increase in the array of opportunities becoming available. As an example, MPIC, together with PLDT, are in the process of making a significant investment in Meralco, the dominant electricity distributor franchise in the Philippines. Meralco is attractive to us because it fits into our strategy of building an infrastructure segment to our overall investment portfolio.

During the year, we acquired a 21% interest in Philex, the premier mining company in the Philippines. This is an initial step to building a significant mining business considering the mining opportunities available in general in the Philippines, and the specific mining prospects - in particular its Boyongan gold and copper property in Mindanao - that Philex is currently developing.

During the year, PLDT recorded its sixth consecutive year of historic high core net income. At the same time, it has managed to sustain its strong cash flows, enabling the company to increase its capital expenditure level in response to market demand and to its future, and to declare 100% dividend payout of core earnings for the second consecutive year. Whilst we saw growth in the number of cellular subscribers, average spend has dropped as we extended our marketing into the lower economic segments of the market. Economic difficulties have also begun to surface in the latter part of the year and this has caused some of our subscribers to downgrade their subscription service to the lower ARPU bucket priced packages. PLDT has made further progress in transitioning its business and its networks from voice to data, from legacy to IP-based, from pure telephony to multi-media. This evolution will be enhanced during 2009 as broadband and data services continue to show remarkable growth on both the wireline and wireless platforms.

In early March, PLDT announced its intention to acquire a 20% equity interest in Meralco. This is a strategic move made for affirmative and defensive reasons, which have been fully described by PLDT in its official statement. I am confident that in the long-term, the synergistic benefits between these twin utilities can be optimized to their mutual benefit - and to increase value to their respective shareholders.

In 2007, I reported on the turnaround of MPIC, and I am pleased to advise that MPIC’s return to corporate health is now complete. This has been accomplished with:

• The acquisition of a further interest in the Maynilad Water franchise to take MPIC’s stake to a majority 57%
• The acquisition of a 67% interest in the premier tollroad asset in the country, the North Luzon Expressway (NLEX)
• The acquisition of approximately one-third interest each in Makati Medical Centre and in Davao Doctors Hospital, two prime hospital operations

These assets offer significant growth and profit potential for MPIC. In the case of Maynilad Water, following the significant steps taken during 2007 and continued into 2008, we saw a 10% increase in billed water volume over the previous year and lower Non-Revenue Water (NRW) as our capital expenditure and operating management improvements began to take hold.

The Philippines need a viable and seamless tollroad system. Through our investment in NLEX, we are positioned to expand our tollway investment and attain this important national infrastructure objective. Already, we have started to extend NLEX, to enter into discussions to acquire an interest in the South Luzon Expressway (Skyway), and to engage the Philippine Government by way of a Memorandum of Understanding to build a Connector Road linking these two major north/south tollways - NLEX and SLEX.

The acquisition of a 69% interest in Indolakto by Indofood was concluded in December 2008. Indolakto is the second largest dairy products manufacturer in Indonesia with strong brand equity and product complementarily with the portfolio of Indofood’s consumer branded products. Despite cost pressures in all of its business divisions, Indofood’s operating performance was improved during the year. This is the third consecutive year of better operating performance. Whilst commodity prices have fallen in the last quarter of the year and with a bearish outlook ahead, we recognize that our IndoAgri business will face revenue challenges. Consequently, Indofood will need to focus its efforts to reducing production costs and securing the logistical benefits available, given the significant size of its plantation assets.

The operational and financial performance improvement of its various investments have enabled the First Pacific Group, taken as a whole, to make an aggregate investment of slightly over US$1,000 million in 2008. During the year, we were able to capitalize MPIC further to the extent of approximately US$340 million to support the expansion of its infrastructure portfolio (tollways, water distribution, and hospitals), employed US$133 million with respect to our mining investment in Philex, invested US$350 million in Indolakto, acquired a sugar plantation and milling operation in Indonesia for US$41 million, and bought back shares across the Group totaling US$137 million.

Looking ahead to 2009, our view of First Pacific's performance is one of guarded optimism - but optimism nonetheless. I remain confident that our businesses will continue to do well despite the global crisis and its undoubted adverse effects on consumer spending. That optimism has been proven for the past years. For as long as we continue to manage our investments competently and well, I have little doubt that that faith reposed in them will again be rewarded in the new year.

In closing, I would like to thank our Shareholders most sincerely for their continued support and patience, and to the Management of our businesses for a job well done in 2008.

Most cordially

Manuel V. Pangilinan
Managing Director and Chief Executive Officer

25 March 2009