To our Shareholders

Despite a rather unsettled year in the aftermath of the Wall Street collapse in late 2008, First Pacific was able to report another historic high recurring profit for 2009. All businesses within our portfolio either improved their performance over the previous year, or raised their contribution to First Pacific - in either case, benefitting our results for the entire year.

• PLDT recorded its seventh consecutive year of historic high core net income equivalent to Pesos 41.1 billion (US$859.7 million)
• MPIC's expanded portfolio of businesses resulted in a 4.9 times growth in core net income of Pesos 2,047 million (US$42.8 million)
• Indofood posted strong earnings following the robust performance from the consumer branded business - despite the lower crude palm oil and flour prices for 2009 compared with 2008
• Philex increased its contribution to First Pacific as metal prices recovered during the year and managed various production and milling challenges that were faced

This year has been headlined by the acquisition of a substantial equity interest in the dominant power distribution utility company in the Philippines: Meralco. MPIC and Piltel have decided to consolidate their respective interests in Meralco into Beacon Electric Asset Holdings, Inc. and will consequently manage their investments in Meralco through this jointly controlled investment vehicle. Beacon Electric will shortly hold 28.2% interest in Meralco and has an option to acquire a further 6.6%. Meralco's performance during 2009 proved to be encouraging, with core net income of Pesos 7.0 billion (US$146.5 million) versus Pesos 2.6 billion (US$58.3 million) in 2008. This improvement reflects a modest growth in volume of electricity delivered and the implementation of a Performance Based Rate increase which has been held in abeyance for quite some time.

First Pacific also increased its investment in Philex, the preeminent mining operator in the Philippines. Apart from its significant mine in Padcal, northern Philippines, Philex is moving forward with the development of a second mine in Surigao del Norte, northern Mindanao for gold and copper. As well, Philex is actively considering at other mining and petroleum-related assets as it seeks to develop greater scale in its operations.

During the year, PLDT continued to increase its subscriber number, with cellular subscribers reaching 41.3 million and broadband subscribers (fixed and wireless) growing to 1.6 million total as at year end. It will continue to deliver more data and ICT services across its many networks. Its capital management initiatives have enabled PLDT to declare a 100% payout of its core net income for the third consecutive year.

I reported last year that competition had become more intense such that subscribers have downgraded their service to the bucket priced packages, translating into lower ARPU. The competitive environment have meant that consumers - particularly the lower income customers - has more options available to them. This means that the marketing challenges for 2010 will be formidable.

MPIC entered the year with a strong portfolio of businesses and I am happy to note that in this full year of contribution from its water distribution, tollroad and healthcare businesses, all of them showed improved performance in line with or above expectations. Since the acquisition of Maynilad in 2007, a further 137,000 customers in the concession area have been connected to the water network. Apart from increased customer count, non-revenue water as at year-end has declined to below 60%, and water usage per head has also risen. All this translated into increased volume of water delivered.

The tollroad business has seen daily vehicle volume improve to over 150,000 - largely as a result of marketing efforts addressed to the tourist traffic and commercial vehicles as fuel prices dipped, and economic activity picked up in the course of the year. The 2.7 kilometer long Segment 8.1 will be opened in May 2010 and this is expected to raise toll traffic further. Plans are being finalized for additional extensions to the network, comprising principally the Connector Road of some 26 kilometers in total, cutting through Metro Manila, and connecting the North with the South Expressway. I reported last year on the commencement of discussions in respect of a potential investment in the Skyway, in which MPIC already has a modest equity interest. Discussions on Skyway are continuing and the technical appraisal of the Connector Road is nearing finalization. Financing of these developments will require considerable funding and the indications of funding availability, whilst at an early stage, are looking promising.

Indofood's strength is in the breadth of its portfolio of businesses. The development of the consumer branded products portfolio, the brand development of its products and the expansion of its distribution network over the last few years encouraged growth in revenue and margins. This has more than offset the comparatively weaker Agribusiness performance in the face of lower CPO prices. We have still to realize in full economies and efficiencies from the integration of Lonsum and the impact of the changing consumer habits that will drive the enhancement of the Indolakto dairy businesses. With CPO prices recovering and the outlook for the Indonesian economy becoming more positive, consumer demand on Indofood's products is expected to remain strong. I am expecting another strong performance for Indofood in 2010.

Philex increased its contribution to First Pacific in 2009 despite a challenging last quarter, as ore and milling problems in the course of the year were finally managed. The Padcal Mine's life has been extended to 2017 because of improved gold and copper prices and additional resources identified, and has consequently provided a base to the business's value. Progress continues to be pushed in the Silangan Project. We anticipate that our mineral resource study will be released in respect of the Bayugo deposit in the second quarter of 2010. We continue to strengthen Philex such that in the future it is able to access other mining opportunities.

Looking ahead to 2010, our view of the Company's prospects is encouraging. I remain confident that our businesses will do well in the new year, and consider that they are reaching a stage of development that will see strong cash flows - with improving returns from higher dividend payouts. I am pleased that First Pacific itself has increased its dividend rate for the fourth consecutive year to 20% of Recurring Profit. Given our confidence in the future, and with promising positive cash flows from our business portfolio, First Pacific has committed to a dividend policy of at least 25% of the Recurring Profit commencing 2010 - coupled with the intention to a sustained share buyback program over the medium-term.

In closing, I would like to thank the shareholders most sincerely for their continued support, patience and constructive feedback to the Management. We look forward to reporting improved results in 2010.

Most cordially

Manuel V. Pangilinan
Managing Director and Chief Executive Officer

23 March 2010