COVER SHEET

P W - 2 7 7
S. E. C. Registration Number

S A N

M I G U E L

C O R P O R A T I O N

(Company’s Full Name)

N o. 4 0 S a n M i g u e l A v e.

M a n d a l u y o n g C i t Y
(Business Address: No. Street City/Town/Province)

(632) 632-3000
Contact Person Company Telephone Number
SEC FORM
1 2 3 1 1 7 - A
Month Day FORM TYPE Month Day
Annual Meeting

Secondary License Type, If Applicable

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

Total No. of Stockholders Domestic Foreign

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To be accomplished by SEC Personnel concerned

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File Number LCU

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Document I. D. Cashier

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STAMPS

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Remarks = pls. Use black ink for scanning purposes
 SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17

OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended December 31, 2008

2. SEC Identification Number PW 000277 3. BIR Tax Identification No. 041-000-060-741-V

4. Exact name of issuer as specified in its charter SAN MIGUEL CORPORATION

5. Philippines 6.
Province, Country or other jurisdiction of Industry Classification Code:
incorporation or organization

7. No. 40 San Miguel Avenue, Mandaluyong City 1550

Address of principal office Postal Code

8. (02) 632-3000
Issuer's telephone number, including area code

9. N/A
Former name, former address, and former fiscal year, if changed since last report.

10. Securities registered pursuant to Sections 8 and 12 of the SRC

Title of Each Class Number of Shares of Common Stock

Outstanding and approximate Debt
Outstanding (as of December 31, 2008)
Class “A” Common Shares 1,921,277,855
Class “B” Common Shares 1,235,715,222
3,156,993,077

Total Debt P 171,149,000,000.00

11. Are any or all of these securities listed on a Stock Exchange?

Yes [√ ] No [ ]

If yes, state the name of such stock exchange and the classes of securities listed therein:

Philippine Stock Exchange Class “A” and Class “B” Common

12. Check whether the issuer:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17
thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the
preceding twelve (12) months (or for such shorter period that the registrant was required to file
such reports)

Yes [√ ] No [ ]

(b) has been subject to such filing requirements for the past ninety (90) days.

Yes [ √ ] No [ ]

13. The aggregate market value of the voting stock held by non-affiliates of the Company as of
December 31, 2008 is P 93,355,146,507.50.
.

DOCUMENTS INCORPORATED BY REFERENCE

14. The following documents are attached and incorporated by reference:

None.

2
 PART I – BUSINESS AND GENERAL INFORMATION

Item 1. Business

San Miguel Corporation (SMC or the Parent Company), together with its subsidiaries
(collectively referred to as the Group), is the largest publicly listed food, beverage and packaging
company in Southeast Asia. The Parent Company is also authorized to invest corporate funds
and/or engage in the power generation/transmission, water and other utilities, mining and
infrastructure business. Established in 1890 as a single-product brewery, the Group today has
over 100 facilities in the Philippines, Southeast Asia and China. In 2008, the Group accounts for
about 2.03 % of the country’s gross national product and 2.24% of the country’s gross domestic
product.

The Group’s extensive product portfolio includes beer, hard liquor, and non-carbonated
non-alcoholic beverages, processed and packaged food products, meat, poultry, dairy products
and a number of packaging products.

The Group’s flagship product, San Miguel Beer, is among the world's largest selling
beers and among the top three brands in Southeast Asia.

From its original cerveza, the Group now owns a wide range of popular beverage brands
and products that extends from beer to hard liquor, bottled water, powdered juice and juice
drinks.

The Group's food operations includes the production and marketing of fresh, ready-to
cook and processed chicken, pork and beef, milk, butter, cheese, margarine, ice cream, flour,
pancake mix, snack foods, coffee, cooking oil and animal and aquatic feeds.

Through the partnerships it has forged with major international companies, the Group has
gained access to the latest technologies and expertise, thereby enhancing the Group’s status as
a world-class organization.

The Parent Company has strategic partnerships with international companies, among
them Nihon Yamamura Glass Company, Ltd., Hormel Foods International Corporation of the
United States and Kirin Holdings Company Limited, one of the largest beer manufacturing
company in Japan.

The Group is one of the nation’s biggest private employers with more than 15,000
employees. In addition, the Group contributes to the growth of downstream industries and
sustains a network of hundreds of third party suppliers.

Major developments in the Group are discussed in Management’s Discussion and

Analyses of Financial Conditions and Results of Operations, attached herein as Annex “D”, and
in Note 10 of the 2008 Audited Consolidated Financial statements, attached herein as Annex
“E”.

Beverages

San Miguel Brewery Inc. (SMB) has five breweries in the Philippines strategically located
in Luzon, Visayas and Mindanao.

The international beer group operates one brewery each in Indonesia, Vietnam, Thailand,
and two breweries in China.

3
 Apart from beer, the Group also produces hard liquor through its majority-owned
subsidiary, Ginebra San Miguel, Inc. (GSMI). GSMI is not only the leader in the domestic hard
liquor market, but also the world’s largest gin producer by volume and the fourth largest spirits
company.

The Group also produces non-carbonated ready-to-drink tea and fruit juices in the
Philippines, Thailand, China, Vietnam and Indonesia through its subsidiaries GSMI, SMBI and
San Miguel Foods & Beverage Int’l Ltd.

Below is a list of the beverage subsidiaries:

San Miguel Brewery Inc.

San Miguel Brewing International Ltd. and subsidiaries – including:
San Miguel Brewery Hong Kong Limited and subsidiaries including
San Miguel Guangdong Brewery Limited
Guangzhou San Miguel Brewery Co. Ltd.
San Miguel (Baoding) Brewery Co. Ltd
San Miguel Brewery Vietnam Ltd
PT Delta Djakarta Tbk
San Miguel Beer (Thailand) Ltd.
Ginebra San Miguel, Inc. and subsidiaries – including:
Distileria Bago, Inc.
Ginebra San Miguel International Limited (BVI)
San Miguel (Thailand) Co. Ltd.
San Miguel (Guangdong) Foods & Beverages Co. Ltd.
San Miguel (Vietnam) Co Ltd.
PT San Miguel Marketing Indonesia
PT San Miguel Indonesia Foods & Beverages
San Miguel (Malaysia) Sdn Bhd

Food

The Group’s domestic food operations are comprised of San Miguel Pure Foods
Company, Inc. (SMPFC) and its subsidiaries, which include San Miguel Foods, Inc., San Miguel
Mills, Inc., The Purefoods-Hormel Company, Inc., Magnolia Inc, San Miguel Super Coffeemix Co.,
Inc. and Monterey Foods Corporation.

With a business portfolio that is unparalleled in the industry, the Group offers a complete
line of food products and services for both individual and food service customers. Its businesses
range from feeds, flour and flour-based products, poultry, fresh and processed meats, breadfill,
dairy, snacks, noodles, cooking oils and coffee. The Group carries some of the best-known
brands in the Philippine food industry, among them Magnolia, Monterey, Star, Pure Foods, Dari
Crème, Pure Blend and B-Meg.

The Food group’s partner in its processed foods business is Hormel Foods International
Corporation of the United States.

Expansion in the region came from the 75% increase in equity participation of SMPFC in
P.T. San Miguel Pure Foods Indonesia (formerly P.T. Purefoods Suba Indah), a company
engaged in the manufacture and trade of processed meats and related products in Indonesia.
The Food Group also maintains a hogs and feed mill business in Binh Duong, Vietnam through
the acquisition of San Miguel Pure Foods Investment (BVI) Limited, a joint venture between San
Miguel Foods and Beverage International (BVI) Limited and Hormel Netherlands B.V. ,who owns
100% of San Miguel Pure Foods (VN) Co., Ltd.

4
 The establishment of San Miguel Super Coffeemix Company, Inc. (SMSCCI), through
partnership with Super Coffeemix Manufacturing Ltd. of Singapore, marked the entry of SMPFC
in the coffee business. SMSCCI imports, packages markets and distributes coffee and coffee-
related products in the Philippines.

The Food Group operates through the following subsidiaries and divisions:

San Miguel Pure Foods Company, Inc. (SMPFC) is a 99.92%-owned business of the
Parent Company. It was incorporated in 1956 to engage primarily in the business of
manufacturing and marketing of processed meat products. SMPFC is the Parent
Company of the food business. SMPFC, through its subsidiaries, later on diversified into
poultry and livestock operations, feeds and flour milling, dairy and coffee operations,
franchising (Smokey’s) and young animal ration manufacturing and distribution. SMPFC
was consolidated with SMC in April 2001.

Great Food Solutions (GFS) is the food service unit of SMPFC that caters to hotels,
restaurants and institutional accounts for their meat, poultry, dairy and flour-based
requirements, as well as provides food solutions/ recipes and menus. GFS also handles
Smokey’s franchising operations and operates San Mig Café restaurant and Outbox
food-to-go stall / cart.

San Miguel Foods, Inc. (SMFI) is a 100%-owned subsidiary of SMPFC and operates the
integrated Poultry and Feeds business and the San Miguel Food Shop franchising
operations.

(a) Poultry business – engage in integrated poultry operations and sell live birds,
frozen and fresh chilled birds and cut-ups. The business supplies the chicken
meat requirements of Purefoods-Hormel Company, Inc. for the manufacturing
of its chicken-based value-added products.

(b) Feeds business – manufactures and sells different types of feeds to

commercial growers. Internal requirements of SMFI’s Poultry Business and
Montery Foods Corporation are likewise being served by the Feeds business.

(c) San Miguel Food Shop – engages in franchising operations, established

primarily to showcase San Miguel Group’s food and beverage products and to
further enhance consumer awareness. There are fourteen (14) outlets
operating as of December 31, 2008.

San Miguel Mills, Inc. (SMMI) is a 100%-owned subsidiary of SMPFC and engages in the
manufacture and distribution of flour, premixes, related cereal-based branded products
like snack foods and instant noodles.

The Purefoods-Hormel Company, Inc (PF-Hormel), is a 60%-40% joint venture between

SMPFC and Hormel Netherlands B.V., which produces and markets fresh processed
meats (hotdogs, hams, bacons, cold cuts and gourmet meat) and canned meat products
(corned beef, luncheon meat, Vienna sausage, pork and beans, liver spread and meat
loaf). PF-Hormel also distributes value added-pork, beef and poultry products such as
chicken, cordon bleu, beef burger, budget patty, longganisa lines and ready-to-eat meat
products.

Magnolia, Inc. (Magnolia), a 100%-owned business of SMPFC, manufactures and

markets butter, margarine and cheese, milk and ice cream. The business also handles
the sale and marketing of jellies and desserts. Third party tollers were contracted by

5
 Magnolia to handle the production of jellies and desserts after Magnolia’s subsidiary-
toller, Sugarland, ceased operations in February 2008.

Monterey Foods Corporation (Monterey), a 97.68% owned subsidiary of SMPFC, is into

livestock farming, processing and selling of meat products mainly pork and cattle. Fresh
produce from Monterey’s farms, as well as further processed or value added meat
products, are sold in Monterey met shop.

PT San Miguel Purefoods Indonesia (PTSMPFI, formerly PT Purefoods Suba Indah) – a

75% owned subsidiary of SMPFC, which manufactures and distributes processed meats
in Indonesia. The remaining 25% is owned by La Salle Financial Inc. of Indonesia.

San Miguel Pure Foods (Vn) Co., Ltd., wholly-owned subsidiary of San Miguel Pure
Foods Investments (BVI) Ltd., a 51% - 49% joint venture between SMC (through San
Miguel Foods and Beverage International BVI Limited) and Hormel Netherlands B. V.
Ltd., which primarily engaged in the business of raising and trading pigs and poultry,
processing of frozen meat and secondary products from livestock.

San Miguel Super Coffeemix Company, Inc. (SMSCCI), is a 70%-30% joint venture
between SMPFC and Super Coffemix Manufacturing, Ltd of Singapore. It imports,
packages, markets and distributes coffee and coffee-related products in the Philippines.

Below is a list of food subsidiaries:

San Miguel Foods and Beverage International Limited and subsidiaries,

including
San Miguel Pure Foods Investment (BVI) Limited including subsidiary,
San Miguel Pure Foods (Vn) Co. Ltd.
San Miguel Pure Foods Company, Inc. and subsidiaries – including:
San Miguel Foods, Inc.
San Miguel Mills, Inc.
The Purefoods-Hormel Company, Inc.
Magnolia, Inc. and subsidiary
Sugarland Corporation
San Miguel Super Coffeemix Co., Inc.
P.T. San Miguel Purefoods Indonesia Ltd.
RealSnacks Mfg. Corp.
Monterey Foods Corporation
Star Dari, Inc.

Packaging

The San Miguel Packaging Group (Packaging Group) is a total packaging solutions
business servicing many of the region's leading food, pharmaceutical, chemical, beverages, and
personal care manufacturers. With clients in the Asia-Pacific, Middle East, Africa and U.S.
markets, the Packaging Group is involved in the production and marketing of the following
packaging products, among others, glass containers, glass molds, polyethylene terephthalate
(PET) bottles and preforms, PET recycling, plastic closures, corrugated cartons, woven
polypropylene/Kraft sacks and paperboard, pallets, flexible packaging, plastic crates, plastic
floorings, plastic films, plastic trays, plastic pails and tubs, crate and plastic pallet leasing, metal
closures and two-piece aluminum cans, woven products, industrial laminates and radiant barriers.
It is also involved in PET bottle filling graphics design, packaging research and testing, packaging
development and consultation, contract packaging and trading.

6
 Apart from supplying the internal requirements of the Group, the Packaging Group also
supplies major Philippine-based multinational corporations such as Nestlé, Unilever, Kraft,
Diageo, Del Monte, Coca-Cola and Pepsi-Cola Products Phils., Inc.

Glass. The glass business is the largest business segment of the Packaging Group. It
has three glass manufacturing facilities in the Philippines and one glass mold plant
serving the requirements of the beverage, food, pharmaceutical, personal care and
health care industries. The bulk of the glass bottle requirements served by this segment
are for the beverage industries.

In July 1991, SMC through its San Miguel Packaging Products Division, (SMPP)
embarked on a joint venture with Yamamura Glass Co., Ltd of Japan (now Nihon
Yamamura Glass Co. (NYG), incorporating San Miguel Yamamura Asia Corporation
(SMYAC), rated as the country’s most technologically advanced glass manufacturing
facility. Another strategic alliance forged by SMPP was with NYG and Fuso Machine &
Molds Manufacturing Co., Ltd. of Japan, forming SMC Yamamura Fuso Molds
Corporation (SMYFMC).

Metal. The metal business manufactures metal caps, crowns, resealable caps and two-
piece aluminum beverage cans for a range of industries that include beer, softdrinks and
food. The Packaging Group’s metal container plant is the country’s only aluminum
beverage can plant in the Philippines and pioneered in the production of two-piece cans
and ends for the beverage market.

Plastics. The plastics business provides plastic crates and pallets, plastic poultry
flooring, plastic trays to domestic markets, and caters to the requirements of SMC’s
brewing operations in Vietnam and China.

PET. The PET business produces PET preforms and bottles, plastic caps & handles and
offers filling services as well.

Paper. San Miguel Rengo Packaging Corporation (SMRPC), SMC’s joint venture with
Rengo Co. of Japan, supplies the packaging needs of a broad range of manufacturing
and agricultural industries. Another subsidiary of SMC in the paper business is Mindanao
Corrugated Fibreboard Inc. (Mincorr) based in Davao.

Composites. Through its Rightpak plant, the Packaging Group manufactures flexible
packaging for the food, beverage, personal care, chemical and healthcare industries.

The Packaging Group has nine international packaging facilities located in China (glass,
metal, plastic), Vietnam (glass, metal) and Malaysia (flexibles, paperboard, plastic films, woven
bags, industrial laminates, and a Packaging Research Center). Aside from extending the reach
of the packaging business overseas, these facilities also serve the packaging requirements of
SMC breweries in China and Vietnam.

In January 2008, SMC finalized a joint venture agreement with NYG pursuant to which
NYG purchased 35% of San Miguel Packaging Specialist, Inc. (SMPSI) and San Miguel
Packaging International Limited (SMPIL). SMPSI owns all of the domestic plants of the
Packaging Group, except the two corrugated carton plants (i.e. SMRPC and Mincorr) and of San
Miguel Yamamura Asia Corp., which is already an existing joint venture between SMC and NYG.
SMPIL’s subsidiaries are composed of the Packaging Group’s international facilities.

In connection with the joint venture of SMPSI and NYG, SMPSI changed its corporate
name to “San Miguel Yamamura Packaging Corporation” as approved by the SEC on June 4,
2008. In addition, the BOD of SMPIL likewise approved the change in the corporate name of

7
SMPIL to “San Miguel Yamamura Packaging International Limited” (SMYPIL) on January 3, 2008
and such change become effective on June 11, 2008.

Below is a list of domestic and international packaging subsidiaries:

San Miguel Yamamura Packaging Corporation (formerly San Miguel Packaging Specialists, Inc.)
and subsidiary,
San Miguel Yamamura Fuso Molds Corporation (SYFMC)
San Miguel Yamamura Packaging International Limited (SMYPIL) (formerly San Miguel
Packaging International Limited [SMPL]) and subsidiaries including
San Miguel Yamamura Haiphong Glass [Co., Ltd. (SMYHG),
San Miguel Yamamura Phu Tho Packaging Company, Ltd.
Zhaoqing San Miguel Yamamura Glass Co., Ltd.,
Foshan San Miguel Yamamura Packaging Company, Ltd.
PT San Miguel Sampoerna Packaging Industries Ltd.
San Miguel Yamamura Packaging & Printing Sdn. Bhd.,
San Miguel Yamamura Woven Products Sdn. Bhd.,
Packaging Research Center Sdn. Bhd.
San Miguel Yamamura Plastic Films Sdn. Bhd.
Mindanao Corrugated Fibreboard, Inc.
San Miguel Rengo Packaging Corporation
San Miguel Yamamura Asia Corporation

Properties

San Miguel Properties, Inc. (SMPI) was created in 1990 as an independent developer. It
is the Group’s primary property subsidiary, currently owned 99.68% by SMC. SMPI was created
by a merger of San Miguel Properties Philippines, Inc. and publicly-listed Monterey Farms
Corporation on January 30, 1998, where Monterey Farms Corporation emerged as the surviving
entity. Upon the merger’s effectivity, Monterey Farms Corporation changed its name to San
Miguel Properties, Inc. On December 9, 2002, SMPI merged with another subsidiary, HOC
Realty, Inc. (“HRI”), with SMPI as the surviving entity.

SMPI is presently engaged primarily in the development, sale and lease of real
properties. It is the corporate real estate arm of the Group. SMPI also has a significant interest in
Bank of Commerce (“BOC”), which has been serving the Philippine banking community for over
15 years.

Other subsidiaries include the following:

SMC Shipping and Lighterage Corporation

Challenger Aero Air Corp.
San Miguel Distribution Co., Inc.
Anchor Insurance Brokerage Corporation
SMC Stock Transfer Service Corporation
ArchEn Technologies Inc.
SMITS, Inc. and subsidiary
SM Bulk Water Company Inc.
San Miguel Energy Corporation)
Iconic Beverages, Inc.
Brewery Properties, Inc.
Pacific Central Properties, Inc.
Seaside Industrial Estate, Inc.
Philippine Breweries Corporation
San Miguel Holdings Corp (formerly San Miguel Logistics Asia Corporation) and
subsidiaries
San Miguel Kuok Food Security, Inc.

8
Principal products or services

The principal products of the Group are attached hereto as Annex “A”.

Percentage of sales or revenues and net income contributed by foreign sales

The Group’s 2008 foreign operations contributed about 12.14% of consolidated sales and
21.04% of consolidated net income. Foreign sales are broken down by market as follows:

% to Consolidated Sales
Market 2008 2007 2006
Continuing Operations:
China 3.76 2.78 3.06
Indonesia 2.33 1.28 1.20
Vietnam 1.82 1.23 .95
Others 4.23 1.69 1.58
Discontinued Operations:
Australia - 33.81 30.45

Distribution Methods

The Group employs various means to ensure product availability at all times. It
distributes through a network of dealers, wholesalers, and various retailers. The Group owns, as
well as contracts third parties for, fleet of trucks, delivery vans, and barges, to ensure timely and
cost efficient distribution of its various products, from food to beverages.

Status of any publicly-announced new product or service

New products of the Group are discussed in Annex “D” hereto.

Competition

The Group has the leading brands with the highest quality in the industry, substantial
market share leads over its nearest competitors, successful pricing strategies and strong financial
position.

Sources and Availability of Raw Materials and Supplies

The Group obtains its principal raw materials on a competitive basis from various
suppliers here and abroad. The Group is not aware of any dependency upon one or a limited
number of suppliers for essential raw materials as it continuously looks for new principals/traders
where the strategic raw materials could be sourced out and negotiations are done on a regular
basis. The Group has contracts with various suppliers (from a related party and third parties) for
varying periods ranging from 1 to 5 years. All contracts contain renewal options.

Among the Group’s third party supplier of major raw materials in 2008 are as follows:

Beverage Business

Molasses/Alcohol Balayan Distillery Inc.

Berbacs Chemicals, Inc.

9
 Ed & F Man
Heindrich Trading Corporation
Kooll Company, Inc.
Progressive Chemicals Trade, Inc.
Schuurmans & Van Ginneken Phils., Inc.
Second Consolidated Sugar Corporation
Yantai City Charles Commerce Co. Ltd
Yantai Whisno Charles Winery Co., Ltd

Malt COFCO Malt (Jiangyin) Co. Ltd.

Joe White Maltings Pty Ltd.
Malteurop (Baoding) Malting Co. Ltd.
Malteurop S.A.

PET Bottles Emson Arwin Plastic Technologies

Taiwan Hon Chuan Enterprise Co., Ltd.

PET Resins Far Eastern Textile Ltd.

Cartons Cavite Packaging Corporation

Twinpack Container Corporation

Flavors Archer Daniels Midland Company (ADM)

BASF Philippines Inc.
CP Kelco Singapore Pte. Ltd.
DSM Nutritional Products Asia Pacific Pte Ltd.
Etablissements V. Mane Fils
Firmenich Asia Pte Ltd.
Givaudan Nederland BV
Givaudan Roure Pte Ltd.
Givaudan UK Ltd
Givudan Singapore Pte Ltd.
International Flavors & Fragrances (Philippines) Inc.
Kerry Food Ingredients (Philippines) Inc.
Mane Investissements
Mastertaste Inc.
Nutra Asia Enterprise
P.T. Mane Indonesia
Quest International Philippines Corporation
Sensient Technologies Corporation
Symrise Inc.

10
 Vitachem Industries, Inc.

Concentrates / Fruit Purees Breko GmbH

Chia Meei Food Industrial Corp.
EAC (Philippines), Inc.
Kerr Concentrates Inc.
Cenmaco, Inc.
Del Monte Philippines, Inc.
Dohler Germany
Iprona AG/Spa
Marsman-Drysdale Foods Corporation
Positif Corporation
Profoods International Corporation / Tropical Fruit Asia
Corporation

Brandy Concentrate Jose Estevez, S.A.

Sugar Sunnix, Incorporated

All Asian Countertrade, Inc.
Central Azucarera Don Pedro Inc.
Second Consolidated Sugar Corporation
S M C Food 21 Pte Ltd

Other Ingredients Far East Corn Cebu

Granville
Purchem Corp.
R&P Enterprise
Syrodec Corporation
Tate & Lyle Sucralose, Inc.
United Coconut Chemicals, Inc. (Cocochem)

Chemicals Arvin International

Atom Chemical, Inc.
Bacolod Chemical Supply
Beauchem Industries International Inc.
Crown Agri Trading Corp.
Danrey Unisaver Safety Products
Ecolab
Emerald Chemicals, Inc.
Fabcon Philippines Inc.
GE Philippines Inc.

11
 Mabuhay Vinyl Corporation
Marsons Farm Trading
PLM Chemical Corp.
Siemens
Sytengco Philippines Corporation
Taihon Chemicals & Services Inc.
TFE Sales Marketing Corp.
TNC Chemicals Philippines, Inc.
United Coconut Chemicals, Inc. (Cocochem)
Universal Aquarius Inc.
Vitachem Industries, Inc.
Zi-TechAsia (Pilipinas), Inc.

Corn Grits/Tapioca/Rice Cagayan Corn Products Corp.

Franklin M&M Agri Int'l Inc.
Heinrich Trading Limited
RJJ Enterprises

Packaging Materials Printwell Inc.

Food Business

Corn / Corn Grits / Corn Bran Ana Hidalgo Palay & Corn Dealer
Anson Grains Dealer
Cagayan Corn Products Corp.
Cauayan Grains Center
Cosko Export & Import Inc.
Davao Wesscon Trade Corp.
Dingras Grains Center
E & G Grains Buying Station
Escano-Sison Agricultural Supply & Escano Rice Mill
Holynest Farm Supply
J & M Comprada & Poultry Supply
J & M Trucking
JEJ Palay Buying Station
JM Agri Enterprises
June Tanglao Trading
Leonardo Pua Grain Dealer
Leyte Circle Trading
Lucky Grains Rice Mill

12
 Macam Soraino Agricultural Trading
Magno Y. Lim Cereal Trading
Maring Agri Supply
Maymatan Farmers Multi-Purpose Cooperative
Mendoza Farm Supply
Mindanao Grain Processing Co., Inc.
Minsayap Copra Buyer
MMGR Farm Supply
Muñoz Macam Agricultural & Poultry Supply
N.G. Salvador Palay & Corn Buying
Nan’s Marketing Corporation
NJP Grains Dealer
PMG Trading
Ricor Mills Corporation
Sanicom Trading
Southern Mindanao Commodities Inc.
WBA Trading
Ylarde Rice Mill
Yuemms Agricultural Products

Hogs Canary Square Int'l Corporation

Cavite Pig City, Inc.
Fil-Am Foods, Inc.
Jaro Development Corp.
Kalookan Slaughterhouse
Linsangan Trading Corp.
Nian's Trading Inc.
Pic Philippines, Inc.
Rombe Philippines, Inc.
Three Brother's Piggery Farm
Unifive Farm Inc.

Indian Buffalo Meat Allanasons Limited

Hind Agro Industries Ltd.

Rice Bran Lucky Grains Rice Mill

Northern Star Rice Mill, Inc.

Soybean and Soybean Meals Ag Processing Inc.

Louis Dreyfus Asia Pte Ltd.
Paritas

13
 Simon Enterprises Inc.

Cassava / Tapioca Residue

A C M Commodities Co.
Pellets
AGB Agricultural Enterprises
Aldar Buy & Sell
Aligre Marketing
Alrazon Farm Products
Ana S. Celis
Aristocrat Interiors
Baganian Peninsula Planters Multi-Purpose
Cooperative
Bais Good Earth Enterprises
Balubal Integrated Social Forestry
Balugo Farmers Multi-Purpose Cooperative
Calabanga Liga ng Mga Barangay
Concepcion C. Ang
Darruba Agro-Forest Ass'n
DBA Traders & Industrial Works
Dennis H. Yu
Ernie A. Inson
Farmers' Cooperative Marketing Association Inc.
First Crown Cassava Inc.
Francisco D. Uyguanco, Sr.
FTS Agrifood Corp.
G. Banal Buying Station
G.L. Besanes Milling
Gango Samahang Nayon Multi-Purpose Cooperative
Genesis Agri-Business Ventures, Inc.
Heindrich Agri Corporation
HP Cassava Production, Inc.
IBC Trading Corporation
J & M Enterprises
Jonathan Sayson Tome
JVA Enterprises
Kakadil Corporation
Larry Kris Enterprises
LJC Cassava Buy & Sell
Magsaysay Farmers Multi-Purpose
Majent Agro Industrial Corporation
Maligaya Farmers Multi-Purpose Cooperative
Mangloy Multi-Purpose Cooperative

14
 Manila de Bugabos Multi Purpose Cooperative
Maymatan Farmers Multi-Purpose Cooperative
McComm Philippines Inc.
Miraya Development Corp.
Mountain Bliss Agri-Industrial Trading
MRD Agri-Products Buy & Sell
Nilo J. Jardeleza
Pobussilla Agrarian Reform
Polo Samahang Nayon, Multi-Purpose Cooperative
Porac Federation Multi-Purpose Cooperative
Predal's Store
RB Herbs Direct Sales Enterprise
Reynaldo N. Palabrica
Ricop Monkayo Farmworkers Ben. Multi Purpose
Cooperative
RL Morning Star Trading & Services
Sadava Agri Buy & Sell
San Jose Multi Purpose Cooperative
Saranay Multi Purpose Cooperative
Sitio Paniguian Multi-Purpose
Sitio Pedregosa Multi-Purpose Cooperative
SRT Libjo Agri Fishery Multi-Purpose
St. James Multi-Purpose Cooperative
Surigao City Cassava Growers Multi-Purpose
Cooperative
Ulysses Luardo
Villa Luna Multi-Purpose
Water Garden Multi-Purpose
Western Visayas Agro Industrial

Spring / Soft Wheat The Canadian Wheat Board

Columbia Grain International, Inc.
Toyota Tsusho Corporation

Packaging Business

ADHESIVES Julu Cornstarch Corporation

Trans World Trading Co. Inc.

ALUMINUM - COIL Alcoa Australia Rolled Products Pty Limited

Macro International Corporation

15
ALUMINUM - FOIL Daching Enterprises Limited
Daihan Eunpakgy Industrial Co. Ltd.
Lotte Aluminum Company Ltd.

ALUMINUM - SHEET Macro International Corporation

Samhwa Trading & Packaging Co. Ltd.

CAP/CROWN LINER Chemdis Manufacturing Corp

First In Colors Inc.
Fortune Plastics Processing & Chemical Corporation
Samhwa Trading & Packaging Co. Ltd.
Sancap Liner Technology, Inc.

COATINGS - HOT MELT Michelman Asia-Pacific Pte Ltd

W.R. Grace (Philippines), Inc.

COATINGS - OVERPRINT CDI Sakata Inx Corp.

Chemdis Manufacturing Corp
Inkote Philippines, Inc.
The Valspar (Singapore) Corporation Pte Ltd
W.R. Grace (Philippines), Inc.

COATINGS - POWDER Henkel Philippines, Inc.

CORRUGATED CARTON Milestone Paper Products, Inc.

Superior Packaging Corporation

FELDSPAR Feldspar Corporation

FILMS PT Argha Karya Prima Industry, Tbk.

Synergy Sales International Corporation
Tri-Pack Philippines Corporation

KRAFT PAPER Carter Holt Harvey Limited

DaiEi Papers (USA) Corp.
Kwok Fung (Sino HK) Enterprise Limited
Milestone Paper Products, Inc.
Price & Pierce International Inc.
United Pulp and Paper Co., Inc.
Visy Pulp And Paper Pty. Ltd.

16
PAINT - ACL CDI Sakata Inx Corp.

PET - PREFORMS HC (Asia) Holdings Co., Ltd.

Taiwan Hon Chuan Enterprise Co., Ltd.

PIGMENTS Masterbatch Philippines, Inc.

RESIN - COATING / LAMINATE Dow Chemical Pacific (Singapore) Pte. Ltd

JG Summit Petrochemical Corporation

RESIN - HDPE Basell Asia Pacific Limited

Basell International Trading FZE
JG Summit Petrochemical Corporation
SK Plastic Reliance Company

RESIN - LDPE Chemvision Inc.

Dow Chemical Pacific (Singapore) Pte. Ltd
Trans World Trading Co., Inc.

RESIN - LLDPE Chemvision Inc.

Filplast Enterprises

RESIN - PET Far Eastern Textile Ltd.

Indorama Polymers Public Company Limited

SAND Cephas Piscium Corporation

Connell Bros. Co. Pilipinas, Inc.
Woodward Japan Inc.

SODA ASH Arvin International Marketing Inc.

Connell Bros. Co. Pilipinas, Inc.

TFS Macro-Lite Korea Corporation

Metal One Corporation
Mitsui & Co., Ltd. (Japan)

CULLET Coca-Cola Bottlers Philippines, Inc.

JJPS General Merchandise
Sanven Marketing Corporation

17
 INK CDI Sakata Inx Corp.
Toyo Ink (Philippines) Co., Inc.

Dependency upon a single customer or a few customers

Due to constant drive toward customer satisfaction and continuous improvement, the
Group is able to maintain its wide base of customers. The Group is not dependent upon a single
or a few customers.

Transactions with and /or dependence on related parties

The Group and certain related parties, in the normal course of business, purchase
products and services from one another. Please see Note 29 of the Consolidated Financial
Statements attached hereto as Annex “E”.

Registered Trademarks/Patents, Etc.

All marks used by the Group in its principal products are either registered or pending
registration in the name of the Parent Company or its subsidiaries in the Philippines and in foreign
markets of said products.

Government Approval

The Group has obtained all necessary permits, licenses and government approvals to
manufacture and sell its products.

Government Regulation

The Group has no knowledge of recent or impending legislation, the implementation of

which can result in a material adverse effect on the Group’s business or financial condition.

Research & Development

The Group’s expenses for research and development are as follows (amounts in
millions):

2008 2007 2006

Research and Development P 427 P 58 P 117
Percentage to Net Income 0.% 0.67% 1.13%

Human Resources and Labor Matters

As of December 31, 2008, the Group has about 15,344 employees and has 46 existing
collective bargaining agreements ("CBA"). Of the 46 CBAs, 10 will be expiring in 2009.

The list of CBAs entered into by the Company and its subsidiaries with their different
employee unions, is attached hereto as Annex “B”.

The Group does not expect any significant change in its existing workforce level within
the ensuing twelve (12) months.

18
 There have been no strikes experienced by the Group in the last three (3) years. While
notices of strike were filed against certain packaging and food subsidiaries of the Parent
Company in 2008, these were subsequently resolved by the parties amicably.

The Company and majority of its subsidiaries have funded, noncontributory retirement
plans covering all of their permanent employees. The retirement plan is described in Note 31 of
the 2008 Audited Consolidated Financial Statements of the Company attached hereto as Annex
“E”.

Major Business Risk/s

The major business risks facing the Group are as follows:

a) Competitor Risks

New and existing competitors can erode the Group’s competitive advantage through the
introduction of new products, improvement of product quality, increase in production
efficiency, new or updated technologies, costs reductions, and the reconfiguration of the
industry’s value chain. The Group has responded with the corresponding introduction of
new products in practically all businesses, improvement in product propositions and
packaging, and redefinition of the distribution system of its products.

b) Catastrophy and Environmental Risks

War, terrorism, fire, severe weather conditions, health issues and other similar events
that are completely beyond the control of the Group were mitigated with the re-
channeling of volumes from mostly on-premise outlets to retail stores.

c) Political Risks

The risk of adverse consequences through political actions by way of discouraging

alcoholic consumption in Indonesia where the Group has a sizeable investment in a
brewery is being gradually addressed with the introduction of non-alcoholic beverages
that can cater to the predominantly Muslim population. Marketing and distribution efforts
for the Group’s beer products have focused only in outlets where alcoholic beverages are
allowed to be sold and consumed.

d) Regulatory Risks

Changes in regulations and actions by national or local regulators can result in increased
competitive pressures, such as the recent legislation on excise tax increases for alcoholic
beverages.

e) Social and Cultural Risks

The way people live, work and behave as consumers can affect the industry’s products
and services. For example, more women in the workplace, concerns about drug use,
increasing crime rate, increased health consciousness, etc. The Group has introduced
products that try to address or are attuned to the evolving lifestyles and needs of its
consumers. San Mig Light was introduced to address increasing health consciousness
and San Miguel Strong Ice Beer for the upwardly mobile market. Initiatives similar to this
have been pushed in the food division for years.

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 f) Sourcing Risks

Alternative sources of raw materials are used in the Group’s operations to avoid and
manage risks on unstable supply and higher costs.

g) Financial Risk

The Group enters into various commodity derivatives to manage its price risks on
strategic commodities. Commodity hedging allows stability in prices, thus offsetting the
risk of volatile market fluctuations. Through hedging, prices of commodities are fixed at
levels acceptable to the Group, thus protecting raw material cost and preserving margins.

Prudent fund management is employed to manage exposure to changes in earnings as a

result of fluctuations of interest rates, currency rates, etc.

Cash flows and financial risks are managed to ensure adequate liquidity of the Group.
Accounts receivables, inventory, loans and payables are monitored to ensure liquidity.

Please refer to Note 36 of the Notes to the Audited Consolidated Financial Statements
attached hereto as Annex “E” for the discussion of the Group’s Financial Risk
Management Objectives and Policies.

Item 2. Properties

A summary of information on the Parent Company and its significant subsidiaries’

principal plants and conditions thereof, is attached hereto as Annex “C”.

The Parent Company and its significant subsidiaries have no principal properties that are
subject to a lien or mortgage or any specific limitations in usage or ownership. There are no
imminent acquisitions by the Parent Company of any material property that cannot be funded by
working capital of the Parent Company or its significant subsidiaries.

Item 3. Legal Proceedings

The Parent Company or any of its subsidiaries or affiliates is not a party to, and its
properties are not the subject of, any material pending legal proceeding that could be expected to
have a material adverse effect on the Group or its results of operations.

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

There are no matters which were submitted to a vote of the Company’s stockholders,
through the solicitation of proxies or otherwise, during the fourth quarter of 2007.

PART II – OPERATIONAL AND FINANCIAL INFORMATION

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

The Company's common equity is traded in the Philippine Stock Exchange.

The Company’s high and low closing prices for each quarter of the last two (2) fiscal
years are as follows:

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 2007 2008
Class A Class B Class A Class B
High Low High Low High Low High Low
1st 67.50 61.00 79.50 69.50 61.50 38.50 62.00 39.00
2nd 80.00 64.00 88.00 71.50 47.00 38.00 49.00 38.50
3rd 76.50 59.00 87.00 59.50 61.00 39.00 62.00 39.00
4th 65.00 42.50 67.00 43.00 59.50 39.50 60.00 40.50

The closing prices as of April 3, 2009, the latest practicable trading date, are as follows:

Class “A” Common P 54.50

Class “B” Common P 55.00

The approximate number of shareholders as of December 31, 2008 is 42,189.

The top 20 stockholders as of December 31, 2008 are as follows:

Total No. of % of
Rank Name of Stockholders Class “A” Class “B” Shares Total O/S
1 San Miguel Corporation 745,307,648 111,808,267 857,115,915 27.17%
Retirement Plan
2 Kirin Holdings Company Limited 0 628,640,175 628,640,175 19.93%
3 ASC Investors, Inc. 144,673,424 22,809,671 167,483,095 5.31%
4 ARC Investors, Inc. 12,160,662 93,528,698 105,689,360 3.35%
5 PCD Nominee Corporation 37,777,540 64,003,861 101,781,401 3.23%
(Filipino)
6 Primavera Farms, Inc. 94,738,250 0 94,738,250 3.00%
7 Toda Holdings, Inc. 74,880,174 0 74,880,174 2.37%
8 Misty Mountains Agricultural 63,158,769 0 63,158,769 2.00%
Corp.
9 Pastoral Farms, Inc. 63,158,769 0 63,158,769 2.00%
10 Black Stallion Ranch, Inc. 63,158,769 0 63,158,769 2.00%
11 Te Deum Resources, Inc. 58,483,000 4,823 58,487,823 1.85%
12 Rock Steel Resources, Inc. 4,138,792 54,098,611 58,237,403 1.85%
13 San Miguel Officers Corp., Inc. 35,719,434 18,143,601 53,863,035 1.71%
14 Roxas Shares, Inc. 7,032,718 45,782,476 52,815,194 1.67%
15 Silver-Leaf Plantations, Inc. 47,369,061 0 47,369,061 1.50%
16 Meadow-Lark Plantations, Inc. 47,369,039 0 47,369,039 1.50%
17 AP Holdings, Inc. 33,592,251 1,077,154 34,669,405 1.10%
18 Valhalla Properties Limited 13,700,183 17,711,665 31,411,848 1.00%
19 Soriano Shares, Inc. 0 301,123,850 301,123,850 0.95%
20 PCGG in Trust for the 19,324,884 8,246,525 27,571,409 0.87%
Comprehensive Agrarian

Cash dividends declared per share amounted to P1.40 in 2008 and 2007.

Description of the following securities of the Company may be found in the indicated Notes to the
2008 Audited Consolidated Financial Statements, attached herein as Annex “E”:

Long-term Debt Note 19

Stockholders’ Equity Note 21
Share-Based transactions Note 35

21
 There were no securities sold by the Company within the past three (3) years which were
not registered under the Securities Regulation Code. The Company has not issued any exempt
security or any securities pursuant to an exempt transaction other than the common shares
issued under the Employee Stock Purchase Program and Long Term Incentive Program for Stock
Options for eligible senior and key management officers of the Company described in Note 35 of
the 2008 Audited Consolidated Financial Statements attached hereto as Annex “E”.

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

The information required by Item 6 (A) may be found on Annex “D” hereto.

Item 7. Financial Statements

The 2008 Audited Consolidated Financial Statements and Statement of Management’s

Responsibility with the Supplementary Schedules are attached as Annex “E” hereto.

Item 8. Information on Independent Accountant and Other Related Matters

(A) External Audit Fees and Services

The accounting firm of Manabat Sanagustin & Company (formerly Laya Mananghaya &
Co.) served as the Company’s external auditors for the last two fiscal years.

The Parent Company paid the external auditor Audit Fees amounting to P9 million and
P6 million in 2008 and 2007, respectively.

The stockholders approve the appointment of the Company’s external auditors. The Audit
Committee reviews the audit scope and coverage, strategy and results for the approval of the
board and ensures that audit services rendered shall not impair or derogate the independence of
the external auditors or violate SEC regulations.

(B) Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure

There are no disagreements with the Company’s external auditors on accounting and
financial disclosure.

PART III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer

The names of the incumbent and key executive officers of the Company, and their
respective ages, periods of service, directorships in other reporting companies and positions held
in the last five (5) years, are as follows:

Eduardo M. Cojuangco, Jr., Filipino, 73, is the Chairman and Chief Executive Officer of the
Company, a position he has held since July 7, 1998. He also holds the following positions:
Chairman and Chief Executive Officer of Ginebra San Miguel, Inc.; and Chairman of San Miguel
Pure Foods Company, Inc. He is also the Chairman of ECJ & Sons Agricultural Enterprises, Inc.

22
and the Eduardo Cojuangco, Jr. Foundation, Inc., and a Director of Cainaman Farms, Inc., Petron
Corporation and Manila Electric Company.

Ramon S. Ang, Filipino, 55, is the Vice Chairman, President and Chief Operating Officer of San
Miguel Corporation. He also holds, among others, the following positions: Chairman and
President of San Miguel Brewery Inc.; Chairman of San Miguel Properties, Inc., The Purefoods-
Hormel Company, Inc., San Miguel Yamamura Packaging Corporation, Anchor Insurance
Brokerage Corporation and San Miguel Brewery Hong Kong Limited (Hong Kong); and a Director
of Ginebra San Miguel, Inc. and San Miguel Pure Foods Company, Inc. He is also the Chairman
and Chief Executive Officer of Petron Corporation; Chairman of Liberty Telecoms Holdings Inc.,
Philippine Diamond Hotel & Resort, Inc., Philippine Oriental Realty Development, Inc., Atea Tierra
Corporation and Cyber Bay Corporation; Vice Chairman of Manila Electric Company; and an
Independent Director of Philweb Corporation. Mr. Ang has held directorships in various
subsidiaries of SMC in the last five years.

Estelito P. Mendoza, Filipino, 79, is a Director of San Miguel Corporation, Petron Corporation,
Manila Electric Company and Philippine Airlines, Inc., and Chairman of Prestige Travel, Inc. Atty.
Mendoza, a former Solicitor General, Minister of Justice, Member of the Batasang Pambansa and
Governor of the Province of Pampanga, heads the E.P. Mendoza Law Office. He is also a former
Chairman of Dutch Boy Philippines, Inc. and Alcorn Petroleum and Minerals Corporation, and
Director of East-West Bank.

Iñigo Zobel, Filipino, 52, has been a Director of the Company since May 5, 1999; and a Member
of the Company’s Executive Committee, Executive Compensation Committee, Nominations and
Hearing Committee and Audit Committee. He is also an Independent Director of San Miguel
Brewery Inc, Ginebra San Miguel, Inc. and San Miguel Properties, Inc. He also holds the
following positions: President and Chief Executive Officer of E. Zobel, Inc., President of Ayala
España S.A., Calatagan Golf Club, Inc. and Hacienda Bigaa, Inc.; and a Director of Frontier
Investment Holdings, Inc., Global 5000 Investments, Inc., Calatagan Resort, Inc., Calatagan Gulf
Realty, Inc., and Mermac, Inc. He was previously the President of Diamond Star Agro Products,
Inc. (1985-2007) and an Independent Director of San Miguel Pure Foods Company, Inc. (2006-
2009).

Winston F. Garcia, Filipino, 50, has been a Director of the Company since February 1, 2001;
and a Member of the Company’s Nominations and Hearing Committee. Atty. Garcia is the
President and General Manager of the Government Service Insurance System and Vice
Chairman of its Board of Trustees. He also holds the following positions: Chairman of the
National Reinsurance Corporation of the Philippines, GSIS Mutual Fund, Inc., PCIB Securities
and Equitable Savings Bank, Inc.; Vice Chairman of Philippine Social Security Association,
Equitable Card Network, Inc. and Equitable PCI Bank, Inc.; a Director of Philippine National
Construction Corporation, Philippine Health Insurance Corporation, Asean Forum, Inc., PCI
Capital Corporation, EBC Investments, Inc. and Asean Social Security Association; and a
Member of the International Insurance Society, Inc. and International Social Security Association.
Atty. Garcia is a practicing lawyer since 1983.

Menardo R. Jimenez, Filipino, 76, has been a Director of the Company since February 27, 2002.
He is also a Director of San Miguel Pure Foods Company, Inc., and Magnolia, Inc. His other
positions include: President and Chief Executive Officer of Albay-Agro Industrial Development
Corporation; Chairman and President of Majent Management and Development Corporation,
Majent Agro Industrial Corporation, M. A. Jimenez Enterprises, Inc., Pac Rim Realty
Development Corporation, Television International Corporation, Alta Tierra Resources, Inc. and
Fibers Trading, Inc.; Chairman of Cable Entertainment Corporation, Majent Foundation, Inc.,
Marathon Building Technologies, Inc. and Meedson Properties Corporation; and a Director of
First Metro Investment Corporation, Cunickel Mining Corporation, Electronic Realty Associates,
Inc., Mabuhay Philippines Satellite Corporation, Franchise One Corporation, CBTL Holdings, Inc.,
CCC Insurance Corporation and Pan-Phil Aqua Culture Corporation.

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Pacifico M. Fajardo, Filipino, 65, has been a Director of the Company since November 4, 2004
and for the years 2002 to 2004. He also holds the following positions: Chairman and President of
Harvestgold Shipping, Transport and Trading Corporation and P.M. Fajardo Youth Development
and Scholarship Foundation, Inc.; Chairman of RICNOR Farms, Inc.; and a Member of the Board
of Regents of the Nueva Ecija University of Science and Technology. He previously served as
Congressman of the Third District of Nueva Ecija (1992-2001), City Mayor (1988-1992) and
Officer-in-Charge/City Mayor (1986) of Palayan City, Nueva Ecija, and Administrator of the Light
Rail Transit Authority (2004).

Leo S. Alvez, Filipino, 66, has been a Director of the Company since February 27, 2002. He is
also a Director of Ginebra San Miguel, Inc. and San Miguel Pure Foods Company, Inc. Ret. Major
General Alvez is a former Security Consultant to the Prosecution Panel of the Senate
Impeachment Trial of President Joseph Estrada (2000-2001), Vice Commander of the Philippine
Army (1998), and Division Commander of the 7th Infantry Division (1996-1998).

Egmidio de Silva Jose, Filipino, 62, has been a Director of the Company since April 20, 2004.
He also holds the following positions: President of Valerie Products Manufacturing, Inc., Sanoh
Fulton (Philippines), Inc., VA Components, Inc., Optimum Securities Corporation, Kyoei Kogyo
(Philippines) Corporation and ESJ Properties. He is also a Director of Hanano Philippines
Corporation, Asahi Cast Philippines, Inc., Metal Press Assembly and Jupiter Logistics Philippines.

Silvestre H. Bello III, Filipino, 64, has been a Director of the Company since October 2, 2006.
He is the Presidential Adviser on New Government Centers, Office of the President and a partner
at the Yulo and Bello Law Offices (since 2001). Mr. Bello is a former Chief Executive Officer and
General Manager of the Philippine Reclamation Authority (2006); Chief Executive Officer and
President of PNOC-Development and Management Corporation (2004-2005); and Chairman of
the GRP Panel for Talks with the CCP-NPA-NDF (2001-2004).

Koichi Matsuzawa, Japanese, 60, is a Director of the Company since July 24, 2007. He is
Managing Executive Officer and General Manager, Strategic Planning Department of Kirin
Holdings Company Limited. His previous work experience with Kirin Brewery Company Limited
includes: President and Chief Executive Officer (2008), Managing Director (2006-2007);
Managing Executive Officer and General Manager (2005), Executive Officer and General
Manager (2004), and General Manager (2003), Production and Quality Control Department,
Production Division; and General Manager, Hokuriku Plant (2002). He was also a former
President of Kirin Europe GmbH (1996).

Hirotake Kobayashi, Japanese, 54, has been a Director of the Company since July 24, 2008. He
is Executive Officer and General Manager, Strategic Planning Department of Kirin Holdings
Company Limited. His previous work experience includes: Executive Officer and General
Manager, Accounting and Finance Department, Kirin Business Expert Company Limited (2007)
and Director, Lion-Nathan Limited (1998).

Hector L. Hofileña, Filipino, 79, has been a Director of the Company since July 24, 2008. He is a
former Associate Justice of the Court of Appeals (1994-1999) and currently Director of San
Miguel Properties, Inc. Justice Hofileña is a professor at the Ateneo De Manila University.

Carmelo L. Santiago, Filipino, 66, has been an Independent Director of the Company since July
24, 2008. He is an Independent Director of San Miguel Brewery Inc., San Miguel Properties, Inc.
Anchor Insurance Brokerage Corporation, San Miguel Brewery Hong Kong Limited (Hong Kong)
and Liberty Telecoms Holdings Inc.; and Director of Terbo Concept. Mr. Santiago is the founder
and owner of several branches of Melo’s Restaurant and has held directorships in Ginebra San
Miguel, Inc. (1998-2004), Manila Standard, Inc. (1998-2004), National Power Corporation (1998-
2004) and Philippine National Bank – Hong Kong (1998-2004).

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Keisuke Nishimura, Japanese, 52, has been a Director of the Company since March 26, 2009.
His previous work experience includes: Chairman and CEO of Kirin (China) Investment
Company, Limited (2005); and Manager, Corporate Planning Department (2002), Chief Executive
Assistant to the Board (2001), Executive Assistant to the President (1997) and Manager,
Personnel Department (1992) of Kirin Brewery Company, Limited.

Ferdinand K. Constantino, Filipino, 57, is Senior Vice President, Chief Finance Officer and
Treasurer of San Miguel Corporation. He also holds, among others, the following positions: Chief
Finance Officer of Manila Electric Company; President of Anchor Insurance Brokerage
Corporation; and a Director of San Miguel Brewery Inc., Ginebra San Miguel, Inc., San Miguel
Properties, Inc., San Miguel Yamamura Packaging Corporation, Bank of Commerce, Magnolia,
Inc., San Miguel Brewery Hong Kong Limited and San Miguel Foods, Inc. Mr. Constantino
previously served San Miguel Corporation as Chief Finance Officer of the San Miguel Beer
Division (1999-2005) and as Chief Finance Officer and Treasurer of San Miguel Brewery Inc.
(2007-2009), and has held directorships in various subsidiaries of San Miguel Corporation during
the last five years.

Francis H. Jardeleza, Filipino, 59, is the Corporate Secretary (since April 2, 2001), Senior Vice-
President and General Counsel (since 1996) and Compliance Officer of the Company. He is also
Director, Corporate Secretary and Compliance Officer of San Miguel Brewery Inc.; Corporate
Secretary and Compliance Officer of Ginebra San Miguel, Inc., San Miguel Pure Foods
Company, Inc. and San Miguel Properties, Inc.; Corporate Secretary of The Purefoods-Hormel
Company, Inc.; and Chairman and President of SMC Stock Transfer Service Corporation. Mr.
Jardeleza has been a director, corporate secretary and/or assistant corporate secretary of various
subsidiaries of San Miguel Corporation during the last five (5) years and is a professorial lecturer
at the University of the Philippines (1992-2003, 2007-2009).

Francisco S. Alejo III, Filipino, 60, is the President (since May 20, 2005) and a Director (since
May 22, 2001) of San Miguel Pure Foods Company, Inc. He also holds the following positions:
Chairman and Chief Executive Officer of Monterey Foods Corporation; Vice Chairman of San
Miguel Foods, Inc.; President of The Purefoods-Hormel Company, Inc., Magnolia, Inc.and San
Miguel Super Coffeemix Co., Inc.; and Chairman and President of Sugarland Corporation and
Star Dari, Inc.

Ferdinand A. Tumpalan, Filipino, 48, is the President of San Miguel Yamamura Packaging
Corporation (since September 16, 2005). He is also President of San Miguel Yamamura Asia
Corporation, San Miguel Rengo Packaging Corp., Mindanao Corrugated Fibreboard, Inc. and
SMC Yamamura Fuso Molds Corporation. He is a former President of the Company’s Packaging
Products Division (2005).

Roberto N. Huang, Filipino, 60, is the Director and General Manager of San Miguel Brewery Inc.
He also holds the following positions: Senior Vice President of SMC and Director of SMBI. He
also served as Director of GSMI (2004-2008) and SMPFC (2004-2008); President of Coca-Cola
Bottlers Philippines, Inc., Cosmos Bottling Corporation and Philippine Beverage Partners, Inc.
(2003-2007); and Senior Vice President, Director, Corporate Sales for the Food, Beverage,
Corporate Key Accounts and Corporate Export Sales Groups (2002-2003) and Vice President
and Director, Corporate Sales for the Beverage Group (2001-2002) of SMC.

Gerardo C. Payumo, Filipino, 51, is the President of Ginebra San Miguel, Inc. (since August 9,
2006). He was a former Senior Vice President and Director of the Corporate Procurement Unit of
San Miguel Corporation (1998-2006).

Carlos Antonio M. Berba, 44, is the Chairman and Managing Director of San Miguel Brewing
International. He previously served the Company as President of the San Miguel Beer Division
(2006-2007, Vice President, CFO for International Beer Operations and Director for Business
Planning and Information Management, San Miguel Beer Division (2002-2006). Mr. Berba was

25
formerly the Chief Finance Officer of Baxter Healthcare Philippines (2001-2002) and First Vice
President of All AsiaCapital Managers, Inc. (2000-2001).

Term of Office

Pursuant to the Company’s By-Laws, the directors are elected at each annual
stockholders' meeting by stockholders entitled to vote. Each director holds office until the next
annual election and his successor is duly elected, unless he resigns, dies or is removed prior to
such election.

Independent Directors

The independent directors of the Company are as follows:

1. Iñigo Zobel
2. Winston F. Garcia
3. Carmelo L. Santiago

Significant Employees

The Company has no employee who is not an executive officer but who is expected to
make a significant contribution to the business.

Family Relationships

There are no family relationships up to the fourth civil degree either by consanguinity or
affinity among the Company’s directors, executive officers or persons nominated or chosen by the
Company to become its directors or executive officers.

Involvement in Certain Legal Proceedings

None of the directors, nominees for election as director, executive officers or control
persons of the Company have been involved in any legal proceeding, including without limitation
being the subject of any (a) bankruptcy petition, (b) conviction by final judgment in a criminal
proceeding, domestic or foreign, or a pending criminal proceeding, domestic or foreign, excluding
traffic violations and other minor offenses, (c) order, judgment or decree of any court of
competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business, securities, commodities
or banking activities, which is not subsequently reversed, suspended or vacated, or (d) judgment
of violation of a securities or commodities law or regulation by a domestic or foreign court of
competent jurisdiction (in a civil action), the SEC or comparable foreign body, or a domestic or
foreign exchange or other organized trading market or self regulatory organization, which has not
been reversed, suspended or vacated, for the past five (5) years up to the latest date that is
material to the evaluation of his ability or integrity to hold the relevant position in the Company.

Item. 10 Executive Compensation

The aggregate compensation paid or incurred during the last two (2) fiscal years and
estimated to be paid in the ensuing fiscal year to the Chief Executive Officer and senior executive
officers of the Company are as follows:

26
 NAME YEAR SALARY BONUS OTHERS TOTAL
Total 2009 P 138.1 P 31.6 P 32.6 P 202.3
Compensation of (estimated) Million Million Million Million
the Chief Executive 2008 P 127.5 P 44.1 P 31.3 P 202.9
Officer and Senior Million Million Million Million
Executive Officers1 2007 P 126.0 P 97.3 P 39.1 P 262.4
Million Million Million Million

All other officers 2009 P 115.9 P 37.2 P 41.0 P 194.1

and directors as a (estimated) Million Million Million Million
group unnamed 2008 P 172.2 P 31.3 P 77.8 P 281.3
Million Million Million Million
2007 P 416.4 P 134.8 P 158.0 P 709.2
Million Million Million Million
Total 2009 P 254.0 P 68.8 P 73.6 P 396.4
(estimated) Million Million Million Million
2008 P 299.7 P 75.4 P 109.1 P 484.2
Million Million Million Million
2007 P 542.4 P 232.1 P 197.1 P 971.6
Million Million Million Million

Section 10 of the Amended By-Laws of the Company provides that the Board of Directors
shall receive as compensation no more than 2% of the profits obtained during the year after
deducting therefrom general expenses, remuneration to officers and employees, depreciation on
buildings, machineries, transportation units, furniture and other properties. Such compensation
shall be apportioned among the directors in such manner as the Board deems proper.

The Long-Term Incentive Plan for Stock Options (“LTIP”) of the Company grants stock
options to eligible senior and key management officers of the Company as determined by the
Committee administering the said Plan. Its purpose is to further and promote the interests of the
Company and its shareholders by enabling the Company to attract, retain and motivate senior
and key management officers, and to align the interests of such officers and the Company's
shareholders.

On November 10, 2005, the Company approved the grant of stock options to 1,096
executives and middle managers of about 4.43 million shares based on the closing price of the
Company's shares, computed in accordance with the LTIP. Also on March 1, 2007, the Parent
Company approved the grant of options to 822 executives consisting of 18.31 million shares. ON
June 26, 2008, the Parent Company approved the grant of options to 742 executives consisting
of 7.46 million shares.

Options to purchase 12.45 million shares and 6.65 million shares in 2008 and 2007,
respectively, were outstanding at the end of each year. Options which were exercised and

1
The Chief Executive Officer and senior executive officers of the Company for 2009 are Eduardo M.
Cojuangco, Jr., Ramon S. Ang, Ferdinand K. Constantino, Francis H. Jardeleza, Carlos Antonio M.
Berba, Emmanuel E. Eraña, Virgilio S. Jacinto, Joseph N. Pineda and Sergio G. Edeza; for 2008: Eduardo
M. Cojuangco, Jr., Ramon S. Ang, Ferdinand K. Constantino, Francis H. Jardeleza, Carlos Antonio M.
Berba, Emmanuel E. Eraña, Virgilio S. Jacinto, Joseph N. Pineda and Rosabel T. Balan; and for 2007:
Eduardo M. Cojuangco, Jr., Ramon S. Ang, Ferdinand K. Constantino, Francis H. Jardeleza, Francisco S.
Alejo III, Roberto N. Huang, Ferdinand A. Tumpalan, Gerardo C. Payumo and Carlos Antonio M. Berba;

27
cancelled totaled about 1.76 million shares and 2.48 million shares in 2008 and 2007,
respectively.

There were no employment contracts between the Company and a named executive
officer.

There were neither compensatory plans nor arrangements with respect to a named
executive officer.

Item 11. Security Ownership of Certain Beneficial Owners and Management

Owners of more than 5% of the Company's voting securities as of December 31, 2008
were as follows:

Title of Name, Address of Name of Citizenship No. Of Shares Percent

Class Record Owner and Beneficial Held
Relationship with Owner and
Issuer Relationship
with Record
Owner

2
Class “A” CIIF Companies N.A. Filipino 446,452,536 23.88%
Common c/o 16/F, UCPB Building,
Class “B” Makati City 307,395,776
Common

2
ASC Investors, Inc., ARC Investors, Inc., Anglo Ventures Corporation, AP Holdings, Inc., Fernandez
Holdings, Inc., First Meridian Development, Inc., Randy Allied Ventures, Inc., Rock Steel Resources, Inc.,
Roxas Shares, Inc., San Miguel Officers Corps., Inc., Soriano Shares, Inc., Te Deum Resources, Inc., Toda
Holdings, Inc. and Valhalla Properties Limited, Inc. None of these companies owns more than 5% of the
Company's voting securities except ASC Investors, Inc. which has 144,673,424 Class “A” common shares
and 22,809,671 Class "B" common shares or a total of 167,483,095 common shares equivalent to 5.31% of
the Company's voting securities as of December 31, 2008. The administrator of the CIIF Companies is the
United Coconut Planters Bank and the Chairman of the Board or its President or the designate of the
Chairman is authorized to vote in person or by proxy the shares registered in the name of the CIIF
Companies.

28
Class “A” ECJ Companies3 N.A. Filipino 473,332,727 15.52%
Common c/o 18/F, Northeast
Tower, The Goldloop
Tower,
One Goldloop Plaza,
Ortigas Center, Pasig
City

Class “B” 16,652,544

Common

Class “B” Kirin Brewery Co., Ltd.4 N.A. Japanese 628,640,175 19.93%
Common 10-1 Shinkawa, 2-
Chome, Chuo-Ku, Tokyo,
Japan

Class “A” San Miguel Corporation Filipino 28.68%5

Common Retirement Plan, 751,482,791
Class “B” 40 San Miguel Avenue, 153,869,424
Common Mandaluyong City

The following are the number of shares comprising the Company’s capital stock (all of
which are voting shares) owned of record by the directors, Chief Executive Officer, key officers of
the Company, and nominees for election as director, as of December 31, 2008:

Title of Name of Owner Amount and Nature Citizenship Total No. of

Class of Shares
Ownership
Class A Class B
Common Eduardo M. Cojuangco, Jr. 292,388 0 Filipino 292,388
(0.01%)
3
Primavera Farms, Inc., Misty Mountains Agricultural Corporation, Black Stallion Ranch, Inc., Pastoral
Farms, Inc., Meadow-Lark Plantations, Inc., Silver-Leaf Plantations, Inc., Agricultural Consultancy
Services, Inc., Archipelago Realty Corporation, Balete Ranch, Inc., Christensen Plantation Corporation,
Discovery Realty Corporation, Dream Pastures, Inc., Echo Ranch, Inc., Far East Ranch, Inc., First United
Transport, Inc., Habagat Realty Development Corporation, Kalawakan Resorts, Inc., Kaunlaran
Agricultural Corporation, Labayug Air Terminals, Inc., Land Air International Marketing Corporation,
LHL Cattle Corporation, Lucena Oil Factory, Inc., Metroplex Commodities, Inc., Northeast Contract
Traders, Inc., Northern Carriers Services Management Corporation, Oceanside Maritime Enterprises, Inc.,
Oro Verde Services, Inc., PCY Oil Manufacturing Corporation, Philippine Technologies, Inc., Punong
Bayan Housing Development Corporation, Pura Electric Co., Inc., Radio Audience Developers Integrated
Org., Inc., Radyo Pilipino Corporation, Rancho Grande, Inc., Reddee Developers, Inc., San Esteban
Development Corporation, Southern Service Traders, Inc., Southern Star Cattle Corporation, Spade One
Resorts Corporation, Unexplored Land Developers, Inc., Verdant Plantations, Inc., Vesta Agricultural
Corporation and Wings Resort Corporation. None of these corporations owns more than 5% of the voting
securities of the Company. The shares owned by these companies are voted, either in person or by proxy,
by the authorized designate of their respective boards.
4
The shares owned by Kirin Brewery Co., Ltd. are voted, in person or by proxy, by its authorized
designate.
5
Includes shares lodged with the Philippine Depository and Trust Corporation

29
 Title of Name of Owner Amount and Nature Citizenship Total No. of
Class of Shares
Ownership
Common Ramon S. Ang 6,050 0 Filipino 6,050
(0.00%)
Common Estelito P. Mendoza 31,972 0 Filipino 31,972
(0.00%)
Common Iñigo Zobel 16,171 0 Filipino 16,171
(0.00%)
Common Winston F. Garcia 5,000 0 Filipino 5,000
(0.00%)
Common Menardo R. Jimenez 5,000 0 Filipino 5,000
(0.00%)
Common Pacifico M. Fajardo 5,000 0 Filipino 5,000
(0.00%)
Common Leo S. Alvez 14,326 0 Filipino 14,326
(0.00%)
Common Egmidio de Silva Jose 5,500 0 Filipino 5,500
(0.00%)
Common Koichi Matsuzawa 0 5,000 Japanese 5,000
(0.00%)
Common Kazuhiro Tsukahara 0 5,000 Japanese 5,000
(0.00%)
Common Hirotake Kobayashi 0 5,000 Japanese 5,000
(0.00%)
Common Carmelo L. Santiago 5,000 0 Filipino 5,000
(0.00%)
Common Silvestre H. Bello III 5,000 0 Filipino 5,000
(0.00%)
Common Hector L. Hofileña 12,303 0 Filipino 12.303
(0.00%)
Common Ferdinand K. Constantino 163,800 60,000 Filipino 223,800
(0.01%)
Common Francis H. Jardeleza 70,001 130,000 Filipino 200,001
(0.01%)
Common Francisco S. Alejo III 0 96,900 Filipino 96,900
(0.00%)
Common Roberto N. Huang 42,430 32,750 Filipino 75,180
(0.00%)
Common Gerardo C. Payumo 348 20,000 Filipino 20,348
(0.00%)
Common Carlos Antonio M. Berba 1,045 0 Filipino 1,045(0.00%)

The aggregate number of shares owned of record by the Chief Executive Officer, key
officers and directors as a group as of December 31, 2008 is 1,035,984 shares or approximately
0.0328% of the Company's outstanding capital stock.

The aggregate number of shares owned by all officers and directors as a group as of
December 31, 2008 is 1,748,579 shares or approximately 0.0554% of the Company’s outstanding
capital stock.

None of the above key officers have exercised their options under LTIP in 2008 and
2007.

30
Voting Trust

There is no person holding more than 5% of the Company’s voting securities under a voting
trust arrangement.

Changes in Control

The Company is not aware of any change in control or arrangement that may result in a
change in control of the Company since the beginning of its last fiscal year.

Item 12. Certain Relationships and Related Transactions

See Note 29 (Related Party Disclosures) of the Notes to the Audited Consolidated
Financial Statements attached hereto as Annex “E”.

PART IV – CORPORATE GOVERNANCE

Item 13. Corporate Governance

The evaluation by the Company to measure and determine the level of compliance of the
Board of Directors and top level management with its Manual of Corporate Governance
(“Manual”) is vested by the Board of Directors in the Compliance Officer. The Compliance Officer
is mandated to monitor compliance by all concerned with the provisions and requirements of the
Manual. The Compliance Officer has certified that, save for the requirement under the Manual for
the Company’s directors, before assuming their positions as such, to attend a seminar on
corporate governance conducted by a duly recognized private or government institute, for 2008,
the Company has substantially adopted all the provisions of the Manual.

Pursuant to its commitment to good governance and business practice, the Company
continues to review and strengthen its policies and procedures, giving due consideration to
developments in the area of corporate governance which it determines to be in the best interests
of the Company and its stockholders.

PART V – EXHIBITS AND SCHEDULES

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

(a) Exhibits
The 2008 Audited Consolidated Financial Statements and the Supplementary Schedules
are attached as Annex “E” hereto. The other Schedules as indicated in the Index to Schedules
are either not applicable to the Company or require no answer.

(b) Reports on Form 17-C

A summary list of the reports on Form 17-C filed during the last 12- month period covered
by this report is attached as Annex “F”.

31
 Annex “A”
PRODUCTS
Beer Brands

San Miguel Pale Pilsen

San Mig Light
San Miguel Super Dry
San Mig Strong Ice
San Miguel NAB
San Miguel Dark Beer
San Miguel Premium All – Malt Beer
Red Horse
Gold Eagle
Cerveza Negra
Octoberfest Brew
San Miguel Premium Lager
Hess
Blue Ice
Valor
Dragon
Blue Star
Super Cool
Kuda Putih
Anker Brands
W1N Bia
Batavia Draft Beer

Non-Beer Brands

Cali
Sodaku

Ginebra San Miguel, Inc.

Ginebra San Miguel

G.S.M. Blue
Ginebra San Miguel Premium Gin
Ginebra San Miguel Lite
Gran Matador Brandy Solera
Bran Matador Brandy Solera Gran Reserva
Tondeña Premium Rum
Añejo Rum
Antonov Vodka
St. George Premium Whisky
Don Enrique Mixkila Distilled Spirit
ERG
Vino Kulafu
Infinit’ Ready-to-Drink Alcoholic Beverage

Non-Alcoholic Beverages

Supremo Cane Vinegar

Big M
Pura UHT Milk
Magnolia in Returnable Glass Bottle
Magnolia Healthtea Lemon
Magnolia Healthtea Apple
Magnolia Fruit Drink Orange
Magnolia Fruit Drink Pineapple
Magnolia Fruit Drink Dalandan
Magnolia Healthtea Tamarind
Magnolia Healthtea Peach
Magnolia in PET Bottle
Magnolia Healthtea Lemon
Magnolia Healthtea Apple
Magnolia Fruit Drink Orange
Magnolia Fruit Drink Pineapple
Magnolia Healthtea Lemon
Magnolia Healthtea Apple
Magnolia Fruit Drink Orange
Magnolia Fruit Drink Pineapple
Magnolia Purewater
Magnolia Powdered Juice & Tea
Magnolia Powdered Juice - Calamansi
Magnolia Powdered Juice - Calamansi
Magnolia Powdered Juice - Orange Mango
Magnolia Powdered Juice - Orange Mango
Magnolia Powdered Juice - Ponkan
Magnolia Powdered Juice - Ponkan
Magnolia Powdered Juice - Lemonade
Magnolia Powdered Juice - Lemonade
Magnolia Powdered Tea - Lemon
Magnolia Powdered Tea - Lemon
Magnolia Powdered Tea - Mango
Magnolia Powdered Tea - Mango
Magnolia Powdered Tea - Apple
Magnolia Powdered Tea - Apple
Magnolia Powdered Milk
Magnolia Powdered Milk - Ube
Magnolia Powdered Milk - Melon
Magnolia Powdered Milk - Green Apple
BERRI (imported for domestic sale)
Apple
Apple Blackcurrant
Apple Pear
Dark Grape
Multi V
Orange
Orange Mango
Morning Start
Apple Cranberry
Cranberry
Grapefruit
Apple
Dark Grape
Orange
Tomato
SUNCATCH (for export sale)
Mango
Mango
Calamansi
Calamansi
San Miguel Foods, Inc.

POULTRY
Wholes
‰ Magnolia Fresh Chicken (Fresh Chilled & Frozen)
‰ Magnolia Spring Chicken (Fresh Chilled & Frozen)
‰ Magnolia Chicken Cut-ups (Fresh Chilled & Frozen)
‰ Magnolia Chicken Giblets
‰ Supermanok Fresh Chicken (Fresh Chilled & Frozen)
‰ Supermanok Chicken Cut-ups (Fresh Chilled & Frozen)
‰ Housebrands Fresh Chicken & Cut-ups
‰ Unbranded Fresh Chicken & Cut-ups

Magnolia Chicken Station Products

‰ Convenient cuts
‰ Cook-Easy Line

FEEDS
SMFI Animal & Aquatic Feeds
‰ B-MEG Premium Hog, Layer, Broiler, Duck, Quail, Tilapia, and Bangus Feeds
‰ B-MEG Dynamix Hog Pellets
‰ B-MEG Export Hog Pellet & Mash, Layer And Fish Feeds
‰ Bonanza Hog Pellets
‰ Pureblend Hog, Layer, Broiler, Duck, and Quail Feeds
‰ Jumbo Hog Mash
‰ B-MEG Dry Sow Feeds
‰ B-MEG Nutrifloat Fish Feeds
‰ B-MEG Expert Fish Feeds
‰ B-MEG Derby Ace Premium Game Fowl Feeds
‰ B-MEG Prize Catch Floating fish Feeds
‰ B-MEG Aquaration Fish Feeds
‰ B-MEG CE-90 Shrimp Feeds
‰ B-MEG Concentrates and Pre-mixes
‰ Maton Feeds

San Miguel Animal Heath Care

‰ Antibacterials
‰ Supplements
‰ Dewormers
‰ Disinfectants
‰ Parenteral

San Miguel Mills, Inc.

FLOUR MILLING
Hard Wheat Flour
‰ Emperor
‰ King
‰ Monarch
‰ Count
‰ Pacific
‰ Silver Dragon
Soft Wheat Flour
‰ Queen Soft flour
‰ Countess
 ‰ Red Dragon

Specialty Flour
‰ Baron All-Purpose Flour
‰ Princess Cake Flour
‰ Duchess Cake Flour
‰ Golden Wheat Whole Wheat Flour (Course & Fine)

Customized Flour
‰ Harina de Pan de Sal
‰ Royal Premium Noodle Flour
‰ Prince Noodle Flour
‰ Hi-Gluten Flour
‰ Soft Roll Flour
‰ Siopao Flour
‰ Miki Flour

Premixes
‰ Pancake & Waffle Mix
‰ Brownie Mix
‰ Cookie Mix
‰ Muffin Mix
‰ Siopao Mix
‰ Doughnut Mix
‰ Puto Mix
‰ Pizza Mix
‰ Crinkle Mix
‰ Bread Mix
‰ Spicy Batter Mix
‰ Choco Cake Mix
‰ Yeast-Raised Doughnut Mix

Bakery Ingredients
‰ Zuprim Bread Improver
‰ Bake Best Baking Powder

BRANDED SNACKS
E-aji Dip Snax
‰ Fries with Dip (Cheesy Garlic, Sweet Chili, Mayo Ketchup and Peppered Mayo)
‰ Nachos with Dip (Cheesy Garlic, Fiesta Salsa, Mayo BBQ, Chili Con Carne, Flamin’ Hot
Salsa, Peppered Mayo and Groovy Mayo Dip)
‰ Ridges with Dip (Cheddar Cheese and Sweet Chili)
‰ Nachos Party Pack with Dip (Cheesy Garlic, Salsa, Cheddar Cheese and Chili Con
Carne)

E-aji Potato Chips

‰ E-aji Potato Chips Lightly Salted
‰ E-aji Potato Chips Fiery Hot BBQ
‰ E-aji Potato Chips Cheddar Cheese
‰ E-aji Potato Chips Sour Cream and Chives
‰ E-aji Potato Chips Party Pack Lightly Salted
‰ E-aji Potato Chips Party Pack Cheddar Cheese

E-aji Tortilla Chips

‰ E-aji Tortilla Chips Thin & Light Cheese
‰ E-aji Tortilla Chips Thin & Light Mexican
 ‰ E-aji Tortilla Chips Thin & Light Pesto
‰ E-aji Tortilla Chips Thin & Light Taco

Magnolia Real Good Instant Noodles

‰ Mami Chicken Champ
‰ Mami Beefy Garlic
‰ Mami Beef & Mushroom
‰ Pancit Chunky Chicken
‰ Party Spaghetti
‰ Hearty Vegetables
‰ Garlic Chicken Mami
‰ Spicy Miki Sotanghon Guisado
‰ Classic Miki Sotanghon Guisado

Premixes
‰ Magnolia Pancake Plus with Syrup
(Maple, Chocolate, Strawberry)
‰ Magnolia Pancake & Waffle Mix

Services
‰ Product Customization
‰ Recipe Development
‰ Technical Training in Baking

The Purefoods-Hormel Company, Inc.

REFRIGERATED MEATS
Hotdogs
‰ Purefoods Tender Juicy Hotdog (Classic, Cheesedog Balls, Footlong)
‰ Purefoods Beefies Hotdog (Classic, Lots a Cheese)
‰ Moby Hotdog
‰ Magnolia Low Fat Chicken Hotdog
‰ Purefoods Chick’N Tasty Chicken Hotdog (Classic, Cheese)
‰ Pure Delight Chicken Hotdog
‰ Vida Hotdog (Classic, Cheese, Footlong, Balls, Chicken)
‰ Purefoods German Franks, Beef Franks and Cheese Franks
‰ Manyaman Hotdog
‰ Star Hotdog

Sliced Hams
‰ Purefoods Sweet Ham
‰ Purefoods Cooked Ham
‰ Purefoods Ham Selections (Salami, Bologna, Spiced, Sausage, Sweetened and Cheese)
‰ Purefoods Pritong Pinoy (Tocino, Tapa, Longanisa, Barbecue, Bistek Tagalog, Batutay,
Sweet Longanisa)
‰ Vida Sweet Ham
‰ Gusto Sliced Ham
Whole Hams
‰ Purefoods Fiesta Ham
‰ Purefoods Jamon de Bola
‰ Purefoods Chicken Ham
‰ Purefoods Chinese Ham
‰ Purefoods Brick Ham
‰ Purefoods Pear Shaped Ham
‰ Purefoods Jamon Royale
Bacons
‰ Purefoods Honey Cured Bacon
‰ Purefoods Maple Flavored Bacon
‰ Purefoods Lean N Mean Bacon
‰ Vida Bacon
‰ Hormel Bacon

Native and Specialty Lines

‰ Purefoods Ready-to-Cook products

Ready-to-Cook Magnolia Convenience Line

‰ Magnolia Chicken Classics Institutional Products
‰ Magnolia Rotisserie Chicken Battered, Breaded, & Fried
‰ Magnolia & Purefoods Chicken Products

Street Food Line

‰ Vida products

Gourmet Meat
‰ Purefoods
‰ Hormel

Ready-to-Cook Monterey Line

‰ Monterey Altanghap, Filipino Favorites & Oriental Lines Snack Line
‰ Monterey Burger Line
‰ Purefoods Hamburger Products
‰ Vida Hamburger & Cheeseburger
‰ Monterey Hamburger

Cook Easy Products

GROCERY PRODUCTS

Corned Meats
‰ Purefoods Corned Beef
‰ Purefoods Chunkee Corned Beef
‰ Purefoods Carne Norte
‰ Purefoods Carne Norte Patatas
‰ Gusto Corned Beef

Luncheon Meats
‰ Purefoods Luncheon Meat
‰ Purefoods Chinese Lucheon Meat
‰ Purefoods Chinese Lucheon Meat with Cheese
‰ Purefoods Chinese Lucheon Meat Hot & Spicy
‰ Purefoods Beef Loaf Superior
‰ Gusto Meat Loaf
‰ Purefoods Chicken Luncheon Meat
‰ Hormel SPAM

Sausages
‰ Purefoods Vienna Sausage
‰ Purefoods Vienna Tidbits
‰ Purefoods Chicken Vienna Sausage
‰ Gusto Sausage
‰ Gusto Tidbits
 ‰ Gusto Frankfurters
‰ Hormel Vienna Sausage
Canned Beans
‰ Purefoods Pork & Beans
‰ Purefoods Corned Beef & Beans
‰ Purefoods Hotdog & Beans
‰ Purefoods Chilicon (Regular)
‰ Purefoods Chilicon Dynamite Hot

Canned Viands
‰ Purefoods Sizzling Delights Sisig
‰ Purefoods Mom’s Kitchen Dinuguan
‰ Purefoods Mom’s Kitchen Bopis
‰ Ulam King- Asado
‰ Ulam King- Caldereta
‰ Ulam King- Gravy

Specialty Grocery Products

‰ Purefoods Liver Spread
‰ Gusto Liver Spread
‰ Purefoods Spaghetti Meat Sauce
‰ Purefoods Chorizo Filipino
‰ Purefoods Chicken Chunks in Water
‰ Purefoods Chicken Chunks in Vegetable Oil
‰ Purefoods Chicken Chunks in Brine

Monterey Chicharon
‰ Monterey Chicharon Salted
‰ Monterey Chicharon Chili Vinegar

Magnolia, Inc.

BUTTER, MARGARINE & CHEESE

Butter
‰ Magnolia Gold and Magnolia Gold Lite
‰ Magnolia Dairy Blend
‰ Magnolia Spreadable

Refrigerated Margarine
‰ Dari Crème and Dari Crème Lite
‰ Dari Crème Blends (Strawberry, Orange)
‰ Buttercup
‰ Baker’s Best

Non-Refirgerated Margarine
‰ Star Margarine (Classic, Sweet Blend, Garlic)
‰ Delicious Margarine

Cheese
‰ Magnolia Cheezee (Block and Spread)
‰ Daily Quezo
‰ Magnolia Quickmelt
‰ Magnolia Cheddar
 ‰ Magnolia Cream Cheese (Block and Spread)
‰ Magnolia Christmas Cheeseballs (Seasonal)

GEL-BASED SNACKS AND DESSERTS

‰ JellYace Fruiteez
‰ JellYace Bites
‰ JellYace Stixx
‰ JellYace Ice Ice Jelly
‰ JellYace Snackers
‰ JellYace Market Stall Pack
‰ Magnolia Best Fruits Jam (Strawberry, Pineapple, Apple Cinnamon, Pink Guava, Mango)

MILK
‰ Magnolia Chocolait
‰ Magnolia Chocolait Choco Magic
‰ Fresh Milk
‰ Low Fat Milk
‰ Big M (Strawberry, chocolate, Ice Coffee)
‰ Masters Pura (Fresh Milk)

ICE CREAM
Bulk Ice Cream
‰ Magnolia Classic (Vanilla, Chocolate, Mocca, Strawberry, Ube, Mango, Sweet Corn)
‰ Magnolia Gold Label (Double Dutch, Rocky Road, Cookies N’ Cream, Dulce de Leche,
Creamy Halo-halo, Macapuno Ube Swirl,Quezo Primero, Buko Salad Royale, Choco
Chip Cookie Dough and Coffee Vienna)

Frozen Delights
‰ Magnolia Potong (Ube, Black Glutinous Rice [Pulut Hitam] and Red Monggo)
‰ Magnolia Spinner (Chocolate, Vanilla)
‰ Magnolia Pop-a-Cup (Chocolate and Raspberry)
‰ Magnolia Rainbow Bar
‰ Magnolia Mochi (Ube and Sesame)
‰ Magnolia Party Cup (Chocolate, Vanilla, Ube and Mongo)

SPECIALTY OILS
‰ Magnolia Nutri-Oil Pure Coconut & Palm Vegetable Oil
‰ Pure-Oil Cooking Oil

Monterey Foods Corporation

BASIC MEATS
Monterey Meatshop
‰ Fresh Meats- Pork, Beef & Lamb
‰ Ready-to-Cook Meats (Timplados)

Monty’s (Monterey Food-to-Go)

‰ Pork BBQ Ready to Eat

San Miguel Super Coffeemix Co., Inc.

COFFEE
‰ San Mig Coffee Regular 3-in-1 Coffeemix- Mild, Original, Strong & Extra Strong
‰ San Mig Coffee Sugar Free 3-in-1 Coffeemix- Mild, Original, Strong & Extra Strong
‰ Grandeur Premium 3-in-1 Coffeemix- Original, Hazelnut, Italian Original & Mocha
 ‰ San Mig Coffee 100% Premium Instant Black Coffee
‰ San Mig Coffee Regular 2-in-1 Coffeemix – Mild, Original & Strong
‰ San Mig Coffee Sugar Free 2-in-1 Coffeemix – Mild, Original & Strong

Great Food Solutions (GFS)

Branded Food Service Products

VALUE-ADDED MEATS/POULTRY
‰ Primo D’ Italian TM Pizza Topping Line
‰ Sizzlers TM Sausage Links and Patties Line
‰ Deli Ready TM Sliced Deli Meats Line
‰ Tender Cuts Tm Product Line
‰ SPAM Chubs and Slices
‰ Fast N’ Easy Prepared Meals and Cuts
‰ Purefoods TM Foodservice product line
‰ Purefoods TM Foodservice Meatballs, Chickenballs, Burgerballs, and Corned Beef Balls
‰ Magnolia Pritong Manok
‰ Purefoods TM Corned Beef in Chubs – 1 kg
‰ Purefoods Corned Beef Blue Label Institutional Corned Beef 800g can
‰ Purefoods TM Breakfast Sausages
‰ Purefoods Corned Beef Pandesal
‰ Product Customization

BUTTER, MARGARINE, CHEESE, and OILS

In Institutional Sizes
‰ Magnolia Gold Butter
‰ Dairy Crème Margarine
‰ Baker’s Best Margarine
‰ Buttercup Margarine
‰ Magnolia Non-Refrigerated Margarine
‰ Primex Shortening
‰ Magnolia Cheese (block fomat)
‰ Magnolia Cheese Sauce
‰ Magnolia Mozzarella
‰ Magnolia Parmesan
‰ Magnolia Real Mayonnaise
‰ Magnolia Nutri-Oil and Palm Olein
‰ Magnolia Quickmelt
‰ Magnolia Melting Cheese
‰ Magnolia Cream Cheese Spread
FLOUR and PREMIXES

GFS COMMISSARY PRODUCTS

‰ Beef, Pork and Chicken Patties
‰ Breaded, Battered and Fried products
‰ Ready-to-Eat “Cook Express”
1. Heat n’ Serve
2. Marinated Value-Added Meats
3. Ready to Eat Snacks
4. Sauces and Dips

GFS SERVICES
‰ Product Customization
‰ Menu & Recipe Development
‰ Packing Development
‰ Food Safety Trainings and Consultancy
 ‰ Quality Assurance Services
‰ Food Laboratory Analysis
‰ Marketing Services and Promotional Tie-Ups

DISTRIBUTION
‰ San Miguel Food Shop
‰ Monterey Neighborhood Meat Shop
‰ Purefoods Market Shop
‰ Magnolia Chicken Stations

P.T. San Miguel Pure Foods Indonesia

REFRIGERATED MEATS
Bakso (Meat Balls)
‰ Farmhouse (Sapi, Ayam)
‰ Vida (Sapi, Hemat)

Sausages
‰ Farmhouse (Beef Cocktail, Beef Frankfurter, Beef Weiner, Sosis Sapi, Sosis Ayam)
‰ Fun Kidz Chubbies
‰ Gusto (Pork Breakfast Sausage, Pork Cabanosi, Pork Cocktail, Pork Hotdog)
‰ Purefoods Choice (Bakery Sosis, Beef Weiner)
‰ Vida (Frank, Weiner)

Cold Cuts
‰ Farmhouse (Beef Pepperoni, Chicken Roll, Garlic Salami, Smoked Beef, Smoked
Chicken)
‰ Gusto (Cooked Ham, Back Bacon, Gammon Ham, Smoked Ham, Streaky Bacon)
‰ Purefoods Choice (Chicken Chunk, Kornet, Meat Block, Sosis Sapi, Sosis Ayam,
Smoked Beef)

Burger
‰ Farmhouse (Burger Sapi, Burger Ayam)
‰ Purefoods Choice (Bakery Burger, Beef Burger)
‰ Vida (Mini Burger, Burger Sapi, Hemat Sosis, Sosis Sapi, Sosis Ayam, Sosis Goreng)

Value-Added
‰ Farmhouse (Corned Beef, Ground Beef)
‰ Fun Kidz Nuggies
‰ Vida Naget Ayam

SERVICES
‰ Customization
S M P G P A C K A G I N G P r o d u c t s

Glass
Containers
GlassLite bottles
Molds and Machine Parts
Metal
Crowns
Caps
Two-piece Aluminum Beverage Cans
Coated/ lithographed sheets

Plastics
Crates
Bread and Food Trays
Pallets
• Pallet Lite
• Pallet Plus
• Twin pallet
• Racking System
• Floor Stacking
TUFFMat Plastic Flooring
Poultry flooring
Buckets and Pails

Paper
Corrugated Carton Boxes
HardiBOX Reinforced Cartons
EZ Tear and RipTOP cartons
Gastord Anti-Corrosive Cartons
Mill Run Sheets
Partitions and Pads
Corrugated Trays
Corrugated Paper Pallets and Bulk Bins.
Cartondola Point-of-Purchase Displays
Paperboard
Labels

Composites
Flexibles
Plastic films
Industrial laminates
Envirotuff radiant barrier (trademarked)
Woven bags
PET
PET Preforms
PET Bottles
Caps and handles
PET Regrind Flakes (Food & Non-food grade)

Services
Graphic Design
Contract Packaging
Trading
Crate and Pallet Leasing
PET Bottle Filling
PET Recycling Services
Packaging Development Consultation
Performance Knowledge & Training
Packaging research
Package Testing
 SAN MIGUEL FOOD GROUP Annex "B"
MONITORING OF CBAS
As of Dec. 31, 2008

EXPIRATION BARGAINING AGENT (UNION) & NO. OF

INSTALLATION/SCOPE EXPIRATION REPRESENTATION AFFILIATION MEMBERS
MAGNOLIA INC.
Progressive Workers' Union (PWU) IBM Local 47 -
1 Dailies Union Feb. 28, 2008 Feb. 28, 2010 134
KMU
2 Monthlies Union July 31, 2008 July 31, 2011 PDPC Employees Union IBM Local 85 - KMU 76
MONTEREY FARMS CORPORATION
Bukluran ng Manggagawa sa Monterey-Ilaw at
Rank and File Union [ Quilo , Alfonso, &
3 April 30, 2009 April 30, 2009 Buklod ng Manggagawa (BMM-IBM) IBM Local 69 - 74 (D-65,M-9)
Isabela] (3/2)
KMU
4 Senior Employees Union (3/2) July 31,2010 July 31,2009 Monterey Farms Senior Employees Union-PTGWO 40
Bukluran ng Manggagawa sa Monterey-Ilaw at
Meat Plant Employees Union [Dasmariñas,
5 Sep. 30, 2008 Sept. 30, 2010 Buklod ng Manggagawa (BMM-IBM) Monterey Mea 37 (D-28,M-9)
Cavite] (3/2)
Plt. Loc. 70 -KMU
SMPF Monterey Angat Farm Workers' Union-
6 Angat Farm Dec. 31,2008 Dec. 31,2010 55
PULO Local No.. 019
THE PUREFOODS-HORMEL COMPANY INC.
Purefoods-Hormel Company Administrative
HO (JMT & Marikina) Purefoods-Hormel 163 (52-Plant,
7 Nov. 30, 2008 Nov. 30, 2009 Marketing Employees Union (PHCAMEU) -
Monthlies Union (Sales and Support Staff) 111-JMT)
Independent
Nagkakaisang Samahang Manggagawang
Purefoods-Hormel Marikina Blue-Collar
8 Feb. 28, 2009 Feb. 28, 2010 Purefoods-Hormel Rank and File (NAGSAMA-PHC- 222
Rank-and-File Union (Dailies/Monthlies)
PULO)-Independent
SAN MIGUEL FOODS INC.
SMFI-Magnolia Poultry Processing Plant Workers
9 San Fernando MPPP Dailies Union Mar. 15, 2011 Mar. 15, 2010 115
Union -Independent
San Fernando Poultry Processing Plt. Magnolia Poultry Processing Plant Monthly
10 June 30, 2008 June 30, 2012 58
Monthlies Union Employees Union (MPPPMEU) - PTGWO
Sta. Rosa Laguna Feed Mill Blue Collar Kapisanan ng mga Manggagawa sa Purefoods
11 Jan. 31, 2010 Jan. 31, 2010 26
Employees (Dailies/Monthlies) Union (KAMPU) - PTGWO
12 GMA Monthlies Union June 30, 2010 October 22, 2011 SMFI Employees Union (SMFIEU)-PTGWO 104
13 Sta. Rosa Monthlies Union June 30, 2010 June 30, 2011 Magnolia Poultry Employees Union-PTGWO 40
Iwag sa Baroganan sa Mamumuo (IBM) sa MPPP-
14 Cebu Processing Dailies Union Sep. 30, 2010 Sep. 30, 2010 36
Cebu -IBM sa Cebu
SAN MIGUEL MILLS, INC.
Mabini Batangas Flour Mill Employees Purefoods Corporation Flour Mill Employees Union
15 July 31, 2008 July 31, 2007 45
Union (Monthlies/Dailies) (PFMEU) - Independent
Total 1,225
 EXPIRATION NO. OF
INSTALLATION / DESCRIPTION UNION
ECONOMIC REPRESENTATION MEMBERS

SMC YAMAMURA FUSO MOLDS CORPORATION

1 Monthlies Union Dec. 31, 2009 Dec. 31, 2008 SMC Yamamura Fuso Molds Monthlies Union - PTGWO 42
SAN MIGUEL YAMAMURA CORPORATION
2 SMYPC Main Office- Monthlies June 30, 2010 June 30, 2012 SMYPC-PTGWO-Main Office-Local 887 53
3 Manila Plastics Plant-Dailies June 30, 2010 June 30, 2012 SMYPC-Progressive Union of MPP-IBM 24
4 Manila Plastics Plant-Monthlies June 30, 2010 Oct. 02, 2012 SMYPC-PTGWO-Local 888 59
5 Manila Glass Plant-Dailies June 30, 2010 Feb. 26,2013 Concerned Workers of SMPSI-Manila Glass Plant 129
6 Manila Glass Plant-Monthlies June 30, 2010 June 30, 2012 SMYPC-PTGWO-Local 889 102
7 Metal Closure & Lithography Plant-Dailies June 30, 2010 June 30, 2012 SMPSI-MCLP-Progressive Union-IBM 93
8 Metal Closure & Lithography Plant-Monthlies June 30, 2010 June 17, 2012 SMYPC-PTGWO-Local 890 83
SAN MIGUEL RENGO PACKAGING CORPORATION
9 Monthlies Union Oct. 15, 2010 Oct. 15, 2012 San Miguel Rengo Employees Labor Union - AWATU 102
MINDANAO CORRUGATED FIBREBOARD INC.
10 Monthlies Union Dec. 31, 2010 Dec. 31, 2012 Mincorr Independent Workers Union (MIWU) 42
SAN MIGUEL PACKAGING SPECIALISTS, INC.-
CANLUBANG PET & CAPS PLANT
11 Monthlies Union Dec. 31, 2010 Dec. 31, 2012 SAMAHAN ng MALAYANG MANGGAGAWA sa BPSI-Can 36
SMY BALL CORPORATION
Kristiyanong Organisasyon ng Manggagawa sa San Miguel
12 Monthlies Union Dec. 31, 2010 Dec. 31, 2009 Yamamura Ball Corporation (Kristong Manggagawa-SMYBC) - 82
Inc.
SMC YAMAMURA ASIA CORPORATION
Buo Organisadong Samahan ng Empleyado sa SMYAC-
13 Monthlies Union Dec. 31, 2010 Dec. 31, 2013 218
Independent (BOSES-SMYAC)
RIGHTPAK INTERNATIONAL CORPORATION
14 Monthlies Union May 31, 2011 May 31, 2012 Rightpak Employees Union-PTGWO 128
SMYPC-MANDAUE PACKAGING PLANTS (Glass,
MCLP,Power)
Kahugpong Sa Ligdong Mamumuo-SMPSI Mandaue (KLM-
15 Dailies Union Dec. 31, 2011 Dec. 31, 2010 166
SMPSI Mandaue)
TOTAL 1,359
 SMG CBAs
as of March 31, 2009

EXPIRATION
NO. OF
INSTALLATION / DESCRIPTION REPRESENTATIO UNION
ECONOMIC MEMBERS
N
SAN MIGUEL BREWERY INC.
Ilaw at Buklod ng Manggagawa (IBM) - SMC Chapter
1 GMA Dailies Union - (CSU/SMB) June 30, 2010 June 30, 2009 248
(IBM-SMC Chapter)
2 GMA Monthlies Union (CSU/SMB) June 30, 2010 June 30, 2009 SMC Employees Union (SMCEU) - PTGWO 196
San Fernando Brewery Monthlies San Fernando Complex Monthly-Paid Emp. Union IBM
3 Dec. 31, 2010 Dec. 31, 2009 108
Union No. 48
4 GMA Sales Force Union Jan. 31, 2011 Jan. 31, 2010 New San Miguel Corporation Sales Force Union 64
Ilaw at Buklod ng Manggagawa (IBM) Local No. 42-San
5 San Fernando Brewery Dailies Union Feb. 15, 2011 Feb. 15, 2010 297
Fernando Beer Bottling Plant Chapter
6 Mandaue Dailies Union - SMB Dec. 31, 2011 Dec. 31, 2010 Ilaw at Buklod ng Manggagawa (IBM)-Mandaue 140
7 Cebu Sales Force Union Feb. 15, 2009 Feb. 15, 2011 New SMC Sales Force Union - Cebu 11
San Miguel Davao Brewery Employees Independent
8 Davao Brewery Dailies Union Nov. 30, 2009 Nov. 30, 2012 76
Union
San Miguel Bacolod Brewery Employees Union-
9 Bacolod Brewery Dailies Union July 31, 2010 April 27, 2009 65
Independent
Phil. Agricultural, Commercial and Industrial Workers
10 Bacolod Brewery Monthlies Union Oct. 31, 2010 Oct. 31, 2013 46
Union

1,251

/mvlm - 1
 SMG CBAs
as of March 31, 2009

EXPIRATION
NO. OF
INSTALLATION / DESCRIPTION REPRESENTATIO UNION
ECONOMIC MEMBERS
N
SAN MIGUEL CORPORATION
1 GMA Monthlies Union (CSU) June 30, 2010 June 30, 2009 SMC Employees Union (SMCEU) - PTGWO 29
SMC SHIPPING AND LIGHTERAGE
1 SMCSL Daily Paid Employees 15-Dec-08 15-Dec-11 SMC Wharf Shipping and Lighterage Independent 16

TOTAL 45

/mvlm - 1
Description of Property ANNEX “C”

Company Name / Subsidiary Address Rented / Owned Condition

Beverage
1 San Miguel Brewery Inc.
Polo Brewery Marulas McArthur High-way Owned Good
Valenzuela City
San Fernando Brewery SMC Complex, Quebiawan, San Owned Good
Fernando, Pampanga
Mandaue Brewery SMC Mandaue Complex, Hi-way, Owned Good
Mandaue City, Cebu
Bacolod Brewery Sta. Fe, Bacolod City Owned Good
Davao Brewery Darong, Sta. Cruz, Davao del Sur Owned Good
Warehouse – Supply Center
GMA – South Pureza S. O, ; Pureza, Sampaloc Owned Good
District, Manila
GMA – South M. Carreon St. Sta Ana, Manila Owned Good
GMA – South Pananaque S. O, ; Bernabe Subd., San Owned Good
Dinisio, Sucat, Paranaque City
GMA – North Cubao S. O. ; 20th Ave., Cubao Q. C. Owned Good
GMA – South Taytay S. O. ; East Road, Taytay, Rizal Owned Good
GMA – East Pasig S.O. ; Mercedes Ave., Pasig Rented Good
GMA – N. West Caloocan S.O. ; Asistio., Bo. Biglang Owned Good
Awa, Caloocan City
GMA – N. West Tondo S. O. ; Honorio Lopez St., Owned Good
Tondo Manila
GMA – North Valenzuela S. O. ; Plastic City Rented Good
GMA – North Novaliches S.O. ; Bo. Kaligayahan, Rented Good
Quirino Highway
CNLA – NCL Dagupan S.O. ; Caranglaan Dist., Owned Good
Dagupan City

CNLA – NCL Carmen S.O.; Carmen East, Rosales, Owned Good

Pangasinan
GMA – North San Isidro S.O.; Gapan-Olongapo Owned Good
Rd.,Pob. S. Isidro,N.E.
CNLA – ECL Cabanatuan S.O.; Maharlika Rd.,Bitas, Rented Good
Cabanatuan
CNLA – ECL Guiguinto S.O.Brgy. Sta. Cruz, Owned Good
Guiguinto, Bulacan
CNLA – ECL Angeles S.O.; S. Jacinto St., S.Angelo Owned Good
Subd.Angeles City
CNLA – Ilocos San Nicolas Region Office Bgy. Owned Good
Catuguing, San Nicolas Ilocos Norte
CNLA – Cordillera Carlatan S.O.; Madayegdeg, San Owned Good
Fernando,La Union
CNLA – Cordillera Baguio S.O.; Irisan, Baguio City Owned Good
Company Name / Subsidiary Address Rented / Owned Condition
CNLA – Ilocos Candon Whse, Tablac, Candon, Ilocos Owned – leased to Good
Sur dealer
CNLA – Cag. Valley Cauayan S.O.; Nat'l Highway, Owned Good
S.Fermin, Cauayan; Isabela
CNLA – Cag. Valley Santiago S.O.; Mabini, Santiago, Owned Good
Isabela
CNLA – Cag. Valley Lal-lo S.O., Sta. Maria, Lal-lo, Owned – leased to Good
Cagayan dealer
SLA – Laguna Canlubang S.O.; Silangan Industrial Owned Good
Park, Canlubang; Laguna
SLA – Laguna San Pedro S.O.; 106 Mabini St., Rented Good
National Highway, San Pedro, Laguna
SLA – Laguna Sta. Cruz S.O.; Bgy. Pagsawitan, Sta. Rented Good
Cruz; Laguna
SLA – Quezon Lucena S.O. ; Bgy. Isabang, Lucena Owned Good
City
SLA – Quezon Gumaca S.O.; Natl. Hi-way,Villa Bota, Owned Good
Gumaca, Quezon
SLA – Batangas Batangas S.O.; Bo. Balagtas, Batangas Owned Good
City
SLA – Batangas Balayan Whse.; Bo. Lanatan, Balayan Lot Rented, Bldg. Good
Batangas (Leased to Dealer) Constructed by
SMC
SLA – Batangas Lipa S.O.; Ayala Hi-way, Lipa City, Owned – leased to Good
Batangas dealer
SLA – Cavite Bacoor S.O.; BINHEPCO Rented Good
Cmpd,Tirona Hi-way, Cavite
SLA – Cavite Dasmarinas S. O. Rented Good
SLA – STIP Puerto Princesa S.O. Owned – leased to Good
dealer
SLA – STIP San Jose, Occidental Mindoro Owned – leased to Good
dealer
SLA – SBicol Gotladera St., Zone 2, Bulan, Sorsogon Rented Good
SLA – NBicol Naga S.O.; Concepcion Grande, Naga Owned Good
City
SLA – SBicol Legaspi S.O.; Cogon St., Bgy. Cruzada, Rented Good
Legaspi City, Bicol
SLA – SBicol Masbate S.O.; Matungao,Tugbo, Rented Good
Masbate
Visayas – CVNSO Mandaue S.O.; Mandaue Complex, Owned Good
Mandaue City
Visayas – CVSSO Tagbilaran S.O.; CPG Ave., Rented Good
Tagbilaran, Bohol
Visayas – EVSO Tacloban S.O.Fatima Vill., Tacloban Owned Good
City, Leyte
Visayas – Panay Pavia-Solid Manila Bldg., Diversion Rented Good
Road, Bgy. San Rafael, Mandurriao,
Iloilo
 Company Name / Subsidiary Address Rented / Owned Condition
Visayas – Panay Numancia S.O.; Camansi Norte, Owned Good
Numancia ; Aklan
Visayas – Panay Roxas S.O.; Bo. Libas, Roxas City Owned Good
Visayas – WV Metro Iloilo S.O.; Muelle Loney, Iloilo Owned Good
Visayas – WV Metro Bacolod S.O.; Bacolod Brewery, Owned Good
Bacolod
Visayas – Negros Sum-Ag Warehouse; Bgy. Sum-Ag, Owned Good
Bacolod City
Visayas – Negros Himamaylan S.O.; Himamaylan, Owned Good
Negros Occidental
Visayas – Negros Dumaguete S.O.; W.Rovira Rented Good
Rd.,Pulantubig,Dumaguete City
Mind – Caraga Butuan S.O.; Fort Poyohan, Butuan Owned Good
City
Mind – Caraga Tandag S.O. Sema St. Bgy., Bongtod, Owned Good
Tandag City, Surigao del Sur
Mind – Cotabato Prov Gen. Santos S.O.; Lagao Road, South Owned Good
Cotabato
Mind – Cotabato Prov Marbel, Koronadal City (Leased to Owned Good
Dealer)
Mind – Davao Prov Davao S.O.; Ulas, Davao City Owned Good
Mind – Davao Prov Tagum S.O.; National Highway,Tagum Owned Good
City (Leased to Dealer)
Mind – North Mindanao Opol S.O.; Opol, Cagayan de Oro City Owned Good
Mind – North West Iligan S.O.; Sta. Filomena, Iligan City Rented Good
Mind – North West Ozamis S.O.; Elim Compound, Lam- Rented Good
an, Ozamis City
Mind – North West Dipolog S.O., Sta. Filomena, Dipolog Rented Good
City
Mind – Cenmin Digos, Rizal St., Digos City Owned Good
Mind – Zambo-Sulu Liloy S.O.; Poblacion Rented Good
Liloy,Zamboanga del Norte
Mind – Zambo-Sulu Zamboanga S.O.; Baliwasan Drive, Owned Good
Zamboanga City
2 San Miguel Brewery Hong Kong Ltd. Yuen Long Industrial Estate, New Owned Good
Territories, Hong Kong
4 San Miguel (Baoding) Brewery Company Jiangcheng Road, Baoding City, Hebei Owned Good
Ltd. Province, PRC
5 San Miguel (Guangdong) Brewery Co., Renmin Road, Longjang Town, Owned Good
Ltd. Shunde, Guandong, PRC
6 PT Delta Djakarta Tbk Inspeksi Tarum Barat, Bekasi Timur, Owned Good
Indonesia
7 San Miguel Brewery Vietnam Company Suoi Hiep Hamlet, Dien Khanh Dist., Owned Good
Ltd. Khanh Hoa Province, Vietnam
San Miguel Beer (Thailand) Limited 89 Moo 2 Tivanon Road, Tambol Owned Good
Bann-Mai, Amphur, Muang,
Pathumthani, Thailand 12000
 Company Name / Subsidiary Address Rented / Owned Condition
8 J. Boag & Sons Limited 21 Shields Street, Launceston, Owned Good
Tasmania, Australia
10 Ginebra San Miguel, Inc
Canlubang Silangan Industrial Estate, Bgy Owned Good
Pittland, Terelay Phase, Cabuyao,
Laguna
Lucena Bgy. Gulang-gulang, Lucena City, Owned Good
Quezon
Sta. Barbara Tebag West, Sta. Barbara, Pangasinan Owned Good
Cebu Subandaku, Mandaue City, Cebu Owned Good
Distileria Bago, Inc. (Alcohol Km 13.5 Bgy. Taloc, Bago City, Owned Good
Distillery) Negros Occidental
Packaging
1 SAN MIGUEL YAMAMURA
PACKAGING CORPORATION
Main Offie SMPC Bldg., St. Francis Ave., Ortigas Rented Good
SMYPC Rightpak Plant Canlubang Industrial Estate, SMC Owned Good
Canlubang, Laguna
SMYPC Metal Container Plant Bgy. San Francisco de Malabon, Gen. SMYPC Owned Good
Trias, 4107 Cavite
SMYPC Cebu Bev. Packaging SMC Mandaue Complex, Hi-way, SMC Owned Good
Plant Mandaue City, Cebu
SMYPC Davao Bev. Packaging SMC Complex, Darong, Sta. Cruz, SMC Owned Good
Plant Davao City
SMYPC San Fernando Bev. Barangay Maimpis, City of San SMYPC Owned Good
Packaging Plant Fernando, Pampanga (Gate 2, SMC Pet
Plant)
SMYPC Pet Recycling Plant SMC San Fernando Complex, SMC Owned Good
Quebiauan, San Fernando City
SMYPC Canlubang PET & Caps Canlubang Industrial Estate, SMC Owned Good
Plant Canlubang, Laguna
SMYPC Manila Glass Plant Muelle dela Industria St., Binondo SMC Owned Good
Manila
SMYPC Manila Plastics Plant Tomas Claudio St., Beata, Pandacan, SMC Owned Good
Manila
SMYPC MCLP Canlubang Silang Canlubang Industrial Park, SMC Owned Good
Canlubang Laguna
SMYPC MCLP San Fernando SMC San Fernando Complex, SMC Owned Good
Quebiauan, San Fernando City
SMYPC Mandaue Glass Plant SMC Mandaue Complex, Hi-way, SMC Owned Good
Mandaue City, Cebu
SMYPC MCLP Mandaue SMC Mandaue Complex, Hi-way, SMC Owned Good
Mandaue City, Cebu
SMYPC Mandaue Plastics Plant SMC Mandaue Complex, Hi-way, SMC Owned Good
Mandaue City, Cebu
SMYPC Trading SMPC Bldg., St. Francis Ave., Ortigas Rented Good
SMYPC Contract Packaging SMPC Bldg., St. Francis Ave., Ortigas Rented Good
 Company Name / Subsidiary Address Rented / Owned Condition
2 San Miguel Yamamura Asia Corporation Km 12, Aguinaldo Highway, Imus, Owned Good
Cavite
3 San Miguel Yamamura Fuso Mold Corp. Governor Dr., Bo. De Fuego, Bgy. San Owned Good
Francisco, Gen. Trias, Cavite
4 San Miguel Rengo Packaging Dr. A Santos Avenue, Sucat, Parañaque Owned Good
Corporation City
5 Mindanao Corrugated Fibreboard Inc. Km 12 Sasa, Davao City Owned Good
6 Mandaue Power Plant SMC Mandaue Complex, Hi-way, SMC Owned Good
Mandaue City, Cebu
7 Zhaoqing San Miguel Glass Company 12 North Avenue, Housha St., Land Use Rights Good
Ltd. Zhaoqing City Guangdong Province,
PRC
8 Foshan San Miguel Packaging Company 9 Dongdi Road, Junan Township, Land Use Rights Good
Ltd. Guangdong Province, PRC
9 PT San Miguel Sampoerna Packaging Jalan Jababeka V 42-43, Kawasan Land Use Rights Good
Industries Ltd. Industri Jababeka, Cikarang, Bekasi
17530, Indonesia
10 San Miguel Yamamura Haiphong Glass 17-A Ngo Quyen St., Ngo Quyen Land Use Rights Good
Company Ltd. District, Haiphong City, Vietnam
11 San Miguel Phu Tho Packaging Company 152 Lac Long St., District 11, Ho Chi Land Use Rights Good
Ltd. Minh City, Vietnam
12 San Miguel Plastics Films Sdn. Bhd. No. 172, Jalan Usaha 5, lots 83, 84, 85, Land Lease Rights Good
75, 76 Ayer Keroh Industrial Estate,
75450 Melaka, Malaysia.
13 San Miguel Packaging and Printing Sdn
Bhd.
- Converting plant Lot 5078 and 5079, Jalan Jenjarom Owned Good
28/39, Seksyen 28, 40000 Shah Alam,
Salangor Darul Ehsan, Malaysia

- Duplex plant Lot 9, Jalan Perusahaan Empat, Tapak Rented Good

Perindustrian P.K.N.S., 68100Batu
Caves, Selangor Darul Ehsan, Malaysia
14 San Miguel Woven Products Sdn. Bhd. Lot 9 and 10, Ayer Keroh Industrial Land Lease Rights Good
Estate, Jalan Usuha 4, 75450 Melaka,
Malaysia
15 Packaging Research Centre Sdn. Bhd. Lot 5078 and 5079, Jalan Jenjarom Owned Good
28/39, Seksyen 28, 40000 Shah Alam,
Selangor Darul Ehsan,Malaysia
16 San Miguel Yamamura Packaging 9/F Citimark Building, 28 Yuen Shun Rented Good
International Ltd. Circuit, Diu Lek Yuen, Shatin, N.T.
Hongkong

Foods
1 San Miguel Purefoods (Vietnam) Co., Cau Sat Hamlet, Lai Hung Village, Ben Bldg. - Owned Good
Ltd. Cat District, Binh Duong Land - Rented
Province, Vietnam
 Company Name / Subsidiary Address Rented / Owned Condition
2 Tien Giang Sales Office Phuoc Hoa Hamlet, Phuoc Thanh Warehouse and Good
Village, Chau Thanh District, Tien Land Rented
Giang
Province, Vietnam
3 Dong Nai Sales Office 39/2 An Hoa Hamlet, Tay Hoa Village, Warehouse and Good
Trang Bom District, Dong Nai Land Rented
Province, Vietnam
4 Can Tho Sales Office 60 High Way 1, Ba Lang Ward, Cai Warehouse and Good
Rang Distric, Can Tho Land Rented
Province, Vietnam
5 Long An Sales Office 73 High Way 1A, 1 Hamlet, My Yen Warehouse and Good
Village, Ben Luc District, Long An Land Rented
Province, Vietnam
6 Lam Dong Sales Office 1023, Tran Phu Road, Loc Tien Ward, Warehouse and Good
Bao Loc Land Rented
Lam Dong
Province, Vietnam
7 San Miguel Pure Foods Company Inc.
and Subsidiaries
JMT Corporate Condominium Building ADB Avenue, Ortigas Center, Pasig Owned Good
City
Feeds & Poultry Iloilo Office Melliza St., Iloilo City Owned Good
Processed Meats Marikina Plant Bo. San Roque, Marikina City Owned Good
Processed Meats Cavite Plant Bo. De Fuego, Brgy. San Francisco, Owned Good
Gen. Trias, Cavite
Mabini Flourmill Brgy. Bulacan, Mabini, Batangas Owned Good
Tabangao Flourmill Brgy. Tabangao, Batangas City Owned Good
Pampanga Poultry Dressing Plant SMC Complex, Bo. Quebiawan, San Owned Good
Fernando, Pampanga
Cabuyao Poultry Dressing Plant Cabuyao, Laguna Owned Idle
Cebu Poultry Dressing Plant Brgy. Canduman, Mandaue City Owned Good
Davao Poultry Dressing Plant Toril, Sirawan, Davao City Owned Good
Feeds Spent Drying Plant San Fernando, Pampanga Owned Good
Laguna Feedmill Brgy. Malitlit, Sta. Rosa, Laguna Owned Good
Tarlac Feedmill Luisita Industrial Park, San Miguel, Owned Good
Tarlac City
B-Meg Pangasinan Plant Km. 189, Brgy. Bued, Binalonan, Lot Owned by Good
Pangasinan Ginebra San
Miguel, Inc.
General Santos Feedmill Bo. Calumpang, Gen. Santos City Owned Good
Isabela Feedmill Bo. Soyung, Echague, Isabela Owned Good
Bataan Feedmill Mindanao Avenue, cor 10th Avenue, Owned Good
BEZ, Mariveles, Bataan
Feeds Spent Grain Drying Plant SMC Complex, Highway, Mandaue Owned Good
City
Cagayan de Oro Feedmill Brgy. Baloy, Tablon, Cagayan de Oro Rented Lot Good
City
Bukidnon Feedmill Milmar Cpmd., Impalutao, Impasug- Owned Good
ong, Bukidnon
 Company Name / Subsidiary Address Rented / Owned Condition
Magnolia Plant Bo. De Fuego Governor’s Drive, Gen. Owned Good
Trias, Cavite
Monterey Meat Plant Governor’s Drive, Dasmariñas, Cavite Owned Good
Processed Meats Indonesia Plant Jl. Raya Bogor Km. 37 Sukamaju, Owned Good
Sukmajaya, Indonesia
Calamba Hatchery Brgy. Licheria, Calamba City Owned Good
Poultry Breeding Farm San Rafael, San Pablo City Owned Idle
Bulacan Hatchery Km. 37, Pulong Buhangin, Sta, Maria, Owned Good
Bulacan
Grandparent Hatchery Kapitan Bayong, Impasug-ong, Owned Good
Bukidnon
Calauan Experimental Farms SMC Cmpd., Brgy. Mabacan, Calauan, Owned Good
Laguna
Angat Hog Farm Pulong Yantok Angat, Bulacan Owned Good
Alfonso Hog Farm Buck Estate, Alfonso, Cavite Owned Good
Calamias Hog Farm Calamias, Ibaan, Batangas Owned Good
Lipa Hog Farm San Jose East, Lipa, Batangas Owned Good
Quilo Hog Farm Lot No. 2489, Quilo, Ibaan, Batangas Owned Good
Sta. Maria Hog Farm Guyong, Sta. Maria, Bulacan Owned Good
Isabela Cattle Farm Bo. San Lius, Cauayan, Isabela Owned Good
Polomolok Cattle Farm Silway 8, Polomolok, South Cotabato Owned Good
Processed Meats Fairview Cold Storage Consul St., cor Carmel St., District 2, Owned Good
North Fairview, Quezon City
Otis Warehouse Otis, Pandacan, Manila Owned Good
Great Food Solutions Commissary North Bay Blvd., Navotas, Metro Rented Good
Manila
SMFI Admin Office (TDR Inc.) JMT Corporate Condominium Rented Good
Building, ADB Avenue, Ortigas
Center, Pasig City
San Miguel Food Group Admin Office SMFG Cmpd., Legaspi cor Eagle St., Lot Owned by San Good
Magnolia Head Office Ugong, Pasig City Miguel
Corporation
San Miguel Food Group Purchasing 808 Bldg., No. 8 San Antonio Gate 2, Rented Good
Office Meralco Ave, Ortigas, Pasig City
Food Group Consolidated Warehouse F. Legaspi St., Maybunga, Pasig City Rented Good
Poultry Pangasinan Brgy. San Vicente, San Jacinto, Rented Good
Pangasinan
Poultry Isabela Brgy. Rizal, Santiago City, Isabela Rented Good
Poultry Zambales Brgy. Mangan-vaca, Subic, Zambales Rented Good
Poultry VAO Office Emmanuel SJB Dev’t., San Isidro, Rented Good
Cabuyao, Laguna
MIPC Office 114 East Science Drive, Laguna Rented Good
Techno Park, Binan, Laguna
Poultry Laguna Office 3F, Sta. Cecilia Bus. Center, Parian, Rented Good
Calamba City
Poultry Quezon Brgy. Lagalag, Tiaong, Quezon Rented Good
Poultry Albay Brgy. Anislag, Daraga, Albay Rented Good
Poultry Bohol Albur Dressing Plant, Eastern Rented Good
Poblacion, Alburquerque, Bohol
 Company Name / Subsidiary Address Rented / Owned Condition
Poultry Bacolod Daalco IV Bldg., Singcang, Araneta Rented Good
St., Bacolod City
Poultry Dumaguete Magatas, Sibulan, Negros Oriental Rented Good
Poultry Tacloban Wab Traders Corp., Brgy. Abucay, Rented Good
Tacloban City
Poultry Cebu 6th Flr. Cleotilde Bldg., Casuntingan, Rented Good
Mandaue City, Cebu
Poultry Ormoc Door 4, 2nd Flr., Tan Bldg., Lilia Ave., Rented Good
Cogon, Ormoc
Poultry Davao Coaco Road, Sasa, Davao City Rented Good
Poultry Zamboanga Door #2, Nuño Bldg., MCLL Highway, Rented Good
Guiwan, Zamboanga City
Poultry Cagayan de Oro Dacudao Cmpd, Corrales Ext. Cagayan Rented Good
de Oro City
Poultry Ozamis Mailen, Clarin, Misamis Occidental Rented Good
Poultry Butuan Km 9, Tag-ibo, Butuan City Rented Good
Feeds Cebu Office 1st Flr, GSMI Bldg., Subangdaku, Rented Good
Mandaue City, Cebu
Bacolod Feeds Sales Office JA Building, San Patrico, Banago, Rented Good
Bacolod City
Feeds Cagayan de Oro Sales Office HBL Bldg., Gusa, Cagayan de Oro City Rented Good
Feeds Bukidnon Office Malaybalay, Bukidnon Rented Good
Feeds Butuan Sales Office Brgy. 23, Langihan Road, Butuan City Rented Good
Feeds Ozamis Sales Office Elim Cmpd, Lam-an, Ozamis City Rented Good
Flour Libis Warehouse Mercury Avenue, Libis, Q. C. Rented Good
Flour Bulacan Warehouse Sta. Rita, Guiginto, Bulacan Rented Good
Prifoods Corporation (Snacks) Brgy. Paciano, Calamba, Laguna Rented Good
San Miguel Properties, inc. Pines cor Reliance St. , Brgy. Highway Rented Good
Hills, Mandaluyong
Tacoma (Feeds) Port Area, Manila Rented Good
RIDJO (Feeds) Judge Juan Luna St., San Francisco Del Rented Good
Monte, Quezon City
PNOC (Feeds) Bauan, Batangas Rented Good
Nawaco (Feeds) Port Area, Manila Rented Good
NFA Isabela Warehouse (Feeds) Northern Philippines Grains Complex, Rented Good
Echague, Isabela
Lucky 103 Realty Corp. (Feeds) Pulilan, Bulacan Rented Good
Fieldman Warehouse (Feeds) Brgy. Poblacion, Bacnotan, La Union Rented Good
Gordon Agritech (Feeds) Carmen, Pangasinan Rented Good
Kenwood Warehouse San Vicente, San Jacinto, Pangasinan Rented Good
NFA San Manuel Warehouse San Manuel, Pangasinan Rented Good
Jimmy Sim Rosales, Pangasinan Rented Good
Corfarm 1&2 Umingan, Pangasinan Rented Good
Bautista Warehous Bautista Pangasinan Rented Good
CBP Rice Mill Manaogan , Bautista, Tarlac City Rented Good
Juan Mataragno San Juan, Bautista, Tarlac City Rented Good
Golden Mountain San Juan, Bautista, Tarlac City Rented Good
Morning star warehouse Brgy. Rizal, Moncada, Tarlac Rented Good
 Company Name / Subsidiary Address Rented / Owned Condition
YKK Warehouse Mabini, Moncada, Tarlac Rented Good
Warrensburg Warehouse Mariveles, Bataan Rented Good
UGMC Warehouses Cabatuan, Isabela Rented Good
CLU Warehouses Cabatuan, Isabela Rented Good
Richfield San Mateo San Mateo, Isabela Rented Good
E&G Warehouse Ramon, Isabela Rented Good
MCAR Warehouse (Feeds) Bacnotan, La Union Rented Good
Malitlit Warehouse Brgy. Malitlit, Sta. Rosa Laguna Rented Good
Alejo Sim (Feeds) Pangasinan Rented Good
William Sim (Feeds) Urdaneta, Pangasinan Rented Good
PKS Shipping (Feeds) Sitio Tawagan, Consolacion, Cebu Rented Good
San Miguel Shipping and Lighterage Looc, Mandaue City, Cebu Rented Good
(Feeds)
Rocksun Warehouse (Feeds) Marasbaras, Tacloban City Rented Good
Bacolod Warehouse B (Feeds) JA Building, San Patricio, Banago, Rented Good
Bacolod City
SIAIAN Warehouse (Feeds) Brgy. Loboc, Lapaz, Iloilo City Rented Good
Bassett Land, Inc. (Feeds) Sitio Tawagan, Consolacion, Cebu Rented Good
LMDC Warehouse Tayud, Consolacion Cebu
BUHAYCO (Feeds) Puntod, Cagayan de Oro City Rented Good
KIMWA Warehouse (Feeds) KIMWA Const. & Dev’t Corp Rented Good
Baloy, Cagayan de Oro City
MITIMCO Warehouse (Feeds) Mitimco Compound, Baloy, Cagayan Rented Good
de Oro City
CATIMCO Warehouse (Feeds) Puntod, Cagayan de Oro City Rented Good
BUDEX (Feeds) Bangcud, Malaybalay Rented Good
Western Feedmill Warehouse (Feeds) Coaco Road, Sasa, Davao City Rented Good
Southern Philippine Coco Charcoal Green Coaco Road, Sasa, Davao City Rented Good
Warehouse (Feeds)
Pioneer warehouse Coaco Road, Pampanga, Sasa, Davao Rented Good
LSL Multi-Serve Company Km 8 Pareñas Compound, Diversion Rented Good
Road, Buhangin, Davao
Greenhills Milling Corporation MCLL Highway, Culianan, Rented Good
Zamboanga City
Rojo Warehouse Sta. Catalinga, Zamboanga City Rented Good
Lipa Office (Monterey) Lipa, Batangas Rented Good
Pampanga Livestock Selling Station Sta. Barbara, Bacolor, Pampanga Rented Good
(Monterey
Batangas Livestock Selling Station Brgy. San Felix., Sto. Tomas, Batangas Rented Good
Tacloban Office (Monterey) 17 Justic Romualdez, Tacloban City Rented Good
Mandaue Office (Monterey) SFI Bldg., S. E. Jayme St., Pakna-an, Rented Good
Mandaue City
Bukidnon Live Operations Office Propia St., Malaybalay City Rented Good
(Monterey)
Cebu (Great Food Solutions office) SMDCI Bldg., SMC Complex, Rented Good
Highway, Mandaue City
Davao (Great Food Solutions office) Coaco Road, Bo. Pampanga, Sasa, Rented Good
Davao City
 Company Name / Subsidiary Address Rented / Owned Condition
Bandung Office (PT SMPF Indonesia) Jl Sukarno Hatta No 606 Bandung Rented Good
Surabaya Office (PT SMPF Indonesia) Perumahan Citra Harmoni Block C1 Rented Good
Bi.25 Troso Bo Jawa Timur Surabaya
Yogyakarta Office (PT SMPF Indonesia) Jl. Angga II Gang Merak No. 219A Rented Good
Condang Catur Slemos Yogyakarta
Bali Office (PT SMPF Indonesia) Jl Mertasari No 61 Sawung Beton Rented Good
Kendal Sidakarya Bali
Medan Office (PT SMPF Indonesia) Jl. Tirtosari No 102 B, Kel Bantan, Kec Rented Good
Tembung, Medan
Makasar Office (PT SMPF Indonesia) Jl. Anggrek I Block EA No 17, Nusa Rented Good
Tomdarea Indah Makassar
Tiga Raksa Satria Jl Soekarno Hatta No 606 Bandung
PT Hagajaya Kemasindo Sarana (PT Graha Cempaka Block C28, Jl Letjend Rented Good
SMPF Indonesia) Suprapto,
Jakarta Selatan
A. Raqub Salim (PT SMPF Indonesia) Jl. Mertasari No 61 Sawung Beton Rented Good
Kendal Sidakarya Bali
UD Sari Jaya (PT SMPF Indonesia) Jl. Tirtosari No 102 B, Kel Bantan, Kec Rented Good
Tembung, Medan
Angin Selatan (PT SMPF Indonesia) Jl. Prof. Ir. Sutami No. 46-55 Makasar Rented Good
PT. Sewu Segar Nusantara (PT SMPF Jl. Beringin Bendo Kawasan Industri Rented Good
Indonesia) Ragam II Kav. 8 RT 06/09 Taman
Sepayang Surabaya
Joko P (PT SMPF Indonesia) Jl. Ring Road Utara Pandega Patma DP Rented Good
16D Yogyakarto
Staples Food Corporation (Poultry) Navotas, Metro Manila Rented Good
Diaz Dressing Plant (Poultry) Km. 104, Brgy. Tabuating, San Rented Good
Leonardo, Nueva Ecija
Kenwood Construction (Poultry) Brgy. San Vicente, San Jacinto, Rented Good
Pangasinan
Lolim’s Dressing Plant (Poultry) Brgy. Rabon, Rosario, La Union Rented Good
Cheers Trade Star, Inc. (Poultry) Brgy. Rizal. Santiago City, Isabela Rented Good
New Breed Dressing Plant (Poultry) Brgy. Mangan-vaca, Subic, Zambales Rented Good
Reitoh Cold Storage, Inc. (Poultry) Km. 30 Amante St., San Pedro, Laguna Rented Good
Johanna’s Chicken Proc. Center (Poultry) Brgy. Bocohan, Lucena City Rented Good
IP3 (Poultry) Brgy. Lagalag, Tiaong, Quezon Rented Good
Cariño & Sons Agri-Dev’t Inc. (Poultry) Brgy. Aya, San Jose, Batangas Rented Good
Gallintina Ind Corp (Poultry) GIC Compound, Brgy. Tagbong Pili, Rented Good
Camarines Sur
Palmas Agri Bus Inc. (Poultry) Brgy. Anislag, Daraga, Albay Rented Good
Silangan Poultry Farms (Poultry) San Jose, Lipa City Rented Good
MKC Poultry Dressing Plant (Poultry) Brgy. Tagburos, Puerto Princesa City, Rented Good
Palawan
Technofreeze, Inc. 114 East Science Drive, Laguna
Technopark, Binan, Laguna
AOG Enterprises (Poultry) Sitio Canmingming, Brgy. Valencia, Rented Good
Ormoc City
Albur Dressing Plant (Poultry) Eastern Poblacion, Alburquerque, Rented Good
Bohol
Poultry Bacolod (1) Singko de Nyubembre St., Silay City, Rented Good
Negros Occidental
 Company Name / Subsidiary Address Rented / Owned Condition
First Farmers Foods Corp. (Poultry) Brgy. Dos Hermanos, Talisay City, Rented Good
Neg. Occidental
Iloilo (Poultry) Brgy. Tungay, Sta. Barbara, Iloilo
DCTV Network (Poultry) Riverside, Canduman, Mandaue City, Rented Good
Cebu
Big Blue (Poultry) Brgy. Paknaan, Mandaue City, Cebu
Mincool (Poultry) Dacudao Cmpd., Corrales Ext., Rented Good
Cagayan de Oro City
ZAVI (Poultry) Boalan, Zamboanga City Rented Good
ECA Cold Storage (Poultry) Tambler, General Santos City
Davao Fresh Foods Corporation (Poultry) Km. 20 Los Amigos, Tugbok, Davao Rented Good
City
Sirawan Ice Plant (Poultry) Brgy. Toril, Sirawan, Davao City Rented Good
Polar Bear Corporation (Poultry) Davao Fishing Port Complex, Toril, Rented Good
Davao City
Green Pine Dressing Plant (Poultry) Km 9., Tag-ibo, Butuan City Rented Good
St. Jude Dressing Plant (Poultry) Mohon, Tagoloan, Misamis Oriental Rented Good
Reefer Van Specialists Alubijid, Misamis Oriental Rented Good
Elim Dressing Plant (Poultry) Mialen Clarin, Misamis Occidental Rented Good
PMC Logistics (Purefoods-Hormel) Marcos Highway, Barrio Mayamot, Rented Good
Antipolo City
Estrella Ice Plant (Purefoods-Hormel) Valenzuela, Bulacan Rented Good
Royal Cargo Combined Logistic Sta. Acqueda Ave., Pascor Drive, Rented Good
(Purefoods-Hormel) Parañaque City
Vifel Ice Plant and Cold Storage North Bay Blvd., Navotas, Metro Rented Good
(Purefoods-Hormel) Manila
Magnolia Cebu SMC Complex, Hi-Way, Mandaue City Lot Owned by San Good
Miguel
Corporation
IRAJ Corporation A. Bonifacio Ave., Balintawak, Quezon
City
Royal Cargo (Monterey) Dasmariñas, Cavite Rented Good
Refrigerated Transport Services Pasig City Rented Good
(Monterey)
Reefer Van Specialists, Inc. (Monterey) Pasig City Rented Good
Icon Reefer Corp. (Monterey) Makati City Rented Good
Supreme Aqua Resources Corporation Tacloban City, Leyte Rented Good
(Monterey)
Big Blue Logistic Corporation Cebu City Rented Good
(Monterey)
Sunpride Foods, Inc. (Monterey) Pakna-an, Mandaue City, Cebu Rented Good
Big Blue Logistic Corporation Cagayan de Oro City Rented Good
(Monterey)
Las Piñas (Food Shop) Enriquez Business Center, Real St., Rented Good
Alabang-Zapote Road, Pamplona 3,
Las Piñas
Retiro (Food Shop) 474-486 N. S. Amoranto Ave., Sta. Rented Good
Mesa Heights, Q. C.
 Company Name / Subsidiary Address Rented / Owned Condition
Lagro (Food Shop) Ground Floor Roncal Bldg., Quirino Rented Good
Highway near cor. Ascension St.,
Pasong Putik, Lagro Quezon City
Parang (Food Shop) Lot 2-B, Block 9, Gen. N. C. Molina Rented Good
St., cor. E. Rodriguez St., Parang,
Marikina City
Commonwealth (Food Shop) 313 Commonwealth Ave., near cor. Rented Good
Tandang Sora Ave., Culiat, Quezon
City
Countryside (Food Shop) Ground Floor, RCJ Bldg., Ortigas Ave. Rented Good
cor. Countryside Ave., Brgy. Sta.
Lucia, Pasig City
San Pablo (Food Shop) Ex-Manila Bank Bldg., Rizal Ave. cor. Rented Good
Brion St., Brgy. Poblacion, San Pablo
City
Sangandaan (Food Shop) 1584 A. Mabini St., Sangandaan, Rented Good
Caloocan City
UST (Food Shop) Space 13 Level 1 & Space 25B Leve2, Rented Good
UST-Multi-Deck Parking, Leon Ma.
Guerrero Drive, UST Manila
Novaliches (Food Shop) 248 Gen. Luis St., Novaliches Proper, Rented Good
Novaliches, Quezon City
Molino (Food Shop) Lot 5541-A-3G Molino Road, Molino Rented Good
III, Bacoor, Cavite
Redemptorist (Food Shop) 83 Redemptorist Rd., Baclaran, Rented Good
Parañaque City
Ruby (Food Shop) Ground Floor. Agustin I Bldg., Ruby Rented Good
St., near cor. Julia Vargas St., Ortigas
Center, Pasig City
Mabalacat (Food Shop) Mc Arthur Highway, Mabalacat, Brgy. Rented Good
Tabun, Pampanga
Lipa (Food Shop) MVL Center, J. P. Laurel, Nat’l Rented Good
Highway, Brgy. Tambo, Lipa, Batangas
City
San Pedro (Food Shop) B22 L8 D’ Great Building, Juan Ave. Rented Good
cor. Amorsolo St., Chrysanthenum
Village, Brgy. San Vicente, San Pedro,
Laguna
Lucena (Food Shop) M. L. Tagarao cor. M. H. Del Pilar St., Rented Good
Lucena City
Rosario (Food Shop) Lolo Polo Bldg., Gen. Trias Drive, Rented Good
Barangay Tejeros Convention, Rosario,
Cavite
Kalayaan (Food Shop) 9608 Kalayaan Ave. near cor. Rented Good
Anastacio St., Brgy. Guadalupe Nuevo
Makati City
Baliuag (Food Shop) B. S. Aquino Ave., Bagong Nayon, Rented Good
Baliwag, Bulacan
San Mig Café (Great Food Solutions) Ground Floor., SMPC Bldg., St. Rented Good
Francis St., Mandaluyong City
Great Food Solutions Cebu Depot SMC SL Compound, M. Ceniza St., Rented Good
Ouano Wharf, Brgy. Looc, Mandaue
City, Cebu
 Company Name / Subsidiary Address Rented / Owned Condition
Great Food Solutions Bacolod Depot Zone 2 Calong Calong, Airport Subd., Rented Good
Bacolod City
Great Food Solutions Iloilo Depot Fishing Port, Tanza, Iloilo City Rented Good
Great Food Solutions Cagayan de Oro Door 4 Alwana Business Park, Rented Good
Depot Cugman, Cagayan de Oro City
Great Food Solutions Davao Depot Km. 6 Amon Building, Lanang, Davao Rented Good
City
10 San Miguel Corporation - Agribusiness
Iligan Coconut Oil Mill Sta. Filomena, Iligan City Owned Good
11 San Miguel Corporation
Land Bo. Sagcahan, Tacloban City Owned Good
14 Memorial Lots at Golden Haven
Land Memorial Park (Manila) Owned Good
Land Antipolo, Rizal Owned Good
Land Bacolod Shrimp Processing Plant Owned Good
Land Baguio City BMD Warehouse Owned Good
Land Bagumbayan, San Jose Antique Owned Good
Land Balibagohan, Mabini, Batangas Owned Good
Land Banauan, Davao PPC Owned Good
Land Banaybanay, Lipa City Batangas Owned Good
Land Barcaistegue, San Miguel Owned Good
Land Baungon, Bukidnon Owned Good
Land Baybay, Leyte Owned Good
Land Binalonan (Sumabmit) Pangasinan Owned Good
Land Bo. Matina Davao Owned Good
Land Bo. San Dionisio, Paranaque Owned Good
Land Bo. Halayhay, Tanza, Cavite Owned Good
Land Bula, Gen. Santos City, South Cotabato Owned Good
Land Bulawen, Palaueg, Zambales Owned Good
Land Cabcaben, Mariveles, Bataan Owned Good
Land Calamba, Laguna Owned Good
Land Calauan Owned Good
Land Carmen Rosales, Pangasinan Owned Good
Land Cebu City Owned Good
Land Cupang, Antipolo, Rizal Owned Good
Land Damar Village Owned Good
Land Dampol, Pulilan, Bulacan Owned Good
Land Gen. T. De Leon Valenzuela City Owned Good
Land Gen. Tinio, Nueva Ecija Owned Good
Land Gen. Santos Feed Center Owned Good
Land Ibazeta Farm Owned Good
Land Iloilo City Owned Good
Land J.Panganiban Cam/Norte Owned Good
Land Karaan Farm Owned Good
Land Kaytaiyan Tanay, Rizal Owned Good
Land Kisolon Sumbo, Bukidnon Owned Good
Company Name / Subsidiary Address Rented / Owned Condition
Land Lambaquin Jaen, Nueva Ecija Owned Good
Land Ulas Property Davao Owned Good
Land Lucena City, Quezon Owned Good
Land Malabon, Meto Manila Owned Good
Land Malaybalay, Bukidnon Owned Good
Land Mandaue, Cebu Owned Good
Land Maura Aparri Owned Good
Land Nangka, Markina City Owned Good
Land Opol, Misamis Owned Good
Land Ormoc City Leyte Owned Good
Land Pagoring Libmana Cam. Sur Owned Good
Land Paranaque, Metro Manila Owned Good
Land POB San Pablo City Laguna Owned Good
Land Sto. Tomas, Batangas Owned Good
Land Pusok Lapu-lapu City Mactan Owned Good
Land Pandag Buluan Maguindanao Owned Good
Land San Bartolome, Quezon City Owned Good
Land San Rafael, Lubao, Pampanga Owned Good
Land Valladolid, Carcar Cebu Owned Good
Land San Dionisio Paranaque Owned Good
Land San Matias, San Fernando Pampanga Owned Good
Land San Miguel Cruesot Loire Owned Good
Land San Pedro San Fernando, Pampanga Owned Good
Land Camarines Sur Owned Good
Land Takian La Trinidad, Benguet Owned Good
Land Tunasan, Muntinlupa City Owned Good
Land Walmakar Gen. Santos City Owned Good
Land Bacolod Brewery, Bacolod City Owned Good
Angeles S.O.; S. Jacinto St., S. Angelo
Land Subd., Angeles City Owned Good
Land Baguio S.O, Irisan, Baguio City Owned Good
Batangas S.O., Bo. Balagtas, Batangas
Land City Owned Good
Land Mandaue City, Cebu Owned Good
Land Inviernes, Manila Owned Good
Butuan S.O., fort Poyohan, Butuan
Land City Owned Good
Caloocan S.O., Asistio., Bo. Biglang
Land Awa, Caloocan City Owned Good
Candon Whse, Tablac, Candon Ilocos
Land Sur Owned Good
Carlatan S.O. Madayegdeg, San
Land Fernando, La Union Owned Good
Carmen S.O. Carmen East, Rosales,
Land Pangasinan Owned Good
Company Name / Subsidiary Address Rented / Owned Condition
Cauayan S.O. -Nat'l Highway, S.
Land Fermin, Cauayan, Isabela Owned Good
Land Cubao S.O., 20th Ave., Cubao Q.C. Owned Good
Dagupan S.O.;Carangalan Dist.,
Land Dagupan City Owned Good
Land Digos Rizal, St., Davao City Owned Good
Gen. Santos S.O. , Lagao Road, South
Land Cotabato Owned Good
Guiguinto S.O. Brgy., Sta. Cruz,
Land Guiguinto, Bulacan Owned Good
Gumaca S.O.;Natl Hi-way, Villa Bota,
Land Gumaca, Quezon Owned Good
Himamaylan S.O., Himamaylan,
Land Negros Occidental Owned Good
Land Iloilo S.O., Muelle Loney, Iloilo Owned Good
Lal-lo S.O., Sta. Maria, Lal-lo,
Land Cagayan Owned Good
Lipa S.O., Ayala Hi-way, Lipa City,
Land Batangas Owned Good
Lucena S.O.; Brgy. Isabang, Lucena
Land City Owned Good
Land Lumbangan Nasugbu, Batangas Owned Good
Land Marbel, Koronadal City Owned Good
Naga S.O., Concepcion Grande, Naga
Land City Owned Good
Numancia S.O., Camansi Norte,
Land Numancia Aklan Owned Good
Land Opol S.O., Opol, Cagayan de Oro City Owned Good
Paranaque S.O.; Bernabe Subd.,San
Land Dionisio, Paranaque Owned Good
Land Puerto Princesa S.O., Puerto Princesa Owned Good
Land Pureza S.O., Pureza, Sta. Mesa, Manila Owned Good
Land Roxas S.O., Bo.Libas, Roxas City Owned Good
San Isidro S.O.-Gapan-Olongapo Rd.,
Land Pob. S. Isidro, N.E. Owned Good
Land San Jose Occidental Mindoro Owned Good
Santiago S.O.; Mabini, Santiago,
Land Isabela Owned Good
Sum-ag Warehouse, Brg. Sum-Ag,
Land Bacolod City Owned Good
Tacloban S.O., Fatima Vill, Tacloban
Land City Owned Good
Tagum S.O. National Highway, Tagum
Land City Owned Good
Tandag S.O., Sema St. Brgy. Bongtod,
Land Tandag City Surigao del Sur Owned Good
Land Tarlac S.O.; San Rafael, Tarlac, Tarlac Owned Good
Land Taytay S.O., East Road, Taytay Rizal Owned Good
 Company Name / Subsidiary Address Rented / Owned Condition
Tondo S.O., Honorio Lopez St., Tondo
Land Manila Owned Good
Zamboanga S.O., Baliwasan Drive,
Land Zamboanga City Owned Good
Davao Brewery, Darong Sta. Cruz,
Land Davao Del Sur Owned Good
Mandaue Brewery-SMC Mandaue
Land Complex, Hi-Way, Mandaue City Owned Good
Polo Brewery-Mc Arthur Highway,
Land Malabon City Owned Good
SMC Complex, Quebiawan, San
Land Fernando, Pampanga Owned Good
Km. 71, Aguinaldo Highway,
Land and Building Amuyong, Alfonso, Cavite Owned Good
Land and Building Sta. Filomena, Iligan City Owned Good
A. Del Rosario Ave, Brgy. Tipolo,
Land and Warehouse Mandaue City Owned Good
Muelle dela Industria St., Binondo
Land Manila Owned Good
Tomas Claudio St., Beata, Pandacan
Land Manila Owned Good
Canlubang Indusrial Estate, Canlubang
Land Laguna Owned Good
Land Dr. A. Santos Ave., Sucat, Paranaque Owned Good
Land Teresa Rizal Owned Good
8th flr SMPI Center, St. Francis St.,
Office Building Ortigas Center Mandaluyong Owned Good
Office Building Meralco Ave., Pasig City Rented Good
40 San Miguel Ave., Mandaluyong
Office Building City Rented Good
A. Del Rosario Ave, Brgy. Tipolo,
Warehouse Mandaue City Owned Good
Warehouse Looc, Mandaue City Cebu Owned Good
SMC Mandaue Complex, Hi-way,
Warehouse Mandaue City Owned Good
Northbay Blvd., Navotas, Metro
Warehouse Manila Owned Good
Warehouse Darong, Sta. Cruz, Davao Del Sur Owned Good
SMC Complex, Quebiawan, San
Warehouse Fernando, Pampanga Owned Good

Others
1 San Miguel Properties, Inc.
The Legacy Las Piñas, Metro Manila Owned Good
Bel Aldea Gen. Trias, Cavite Owned Good
Maravilla Gen. Trias, Cavite Owned Good
Office spaces The Enterprise Center, Ayala Avenue, Owned Good
Makati,
 Company Name / Subsidiary Address Rented / Owned Condition
Office spaces PET Plans Tower, Makati Owned Good
Office spaces San Miguel Properties Centre, Owned Good
Mandaluyong
Office building, land San Miguel Avenue, Mandaluyong Owned Good
Industrial plant, land Reliance Street, Mandalyong Owned Good
Industrial plant, land Aurora Avenue, Quezon City Owned Good
Land Meralco Avenue, Pasig Owned Good
Land Filinvest Corporate City, Muntinlupa Owned Good
Land Canlubang, Laguna Owned Good
Land Gen. Trias, Cavite Owned Good
Land Alfonso, Cavite Owned Good
Land Lubao, Pampanga Owned Good
Land Masbate Owned Good
Land Sta. Cruz, Davao del Sur Owned Good
Land Polomolok, South Cotabato Owned Good
Land Boracay Is., Bo. Yapak, Malay, Aklan Owned Good
Legacy Homes, Inc.
Villa de Calamba Calamba, Laguna Owned Good
Primavera Hills Liloan, Cebu Owned Good
Buenavista Homes Jugan, Cebu Owned Good
Excel Unified Land Resources Corp.
Wedge Woods Silang, Cavite Owned Good
Bright Ventures Realty, Inc.
Land Mabini St., Addition Hills, San Juan Owned Good
Bel-Aldea Realty, Inc.
Residential House & Lot La Loma, Quezon City Owned Good
Highriser Group, Inc.
Warehouse, land Pasay Road, Makati Owned Good
Prestigio Realty, Inc.
Land and Residential Building Greenhills, Mandaluyong City Owned Good
Dimanyan Wakes Holdings, Inc.
Land Coron, Palawan Owned Good
Busuanga Bay Holdings Inc.
Land Coron, Palawan Owned Good
Bulalacao Property Holdings, Inc.
Land Coron, Palawan Owned Good
Calamian Prime Holdings, Inc.
Land Coron, Palawan Owned Good
Palawan White Sands Holdings Corp.
Land Coron, Palawan Owned Good
Coron Islands Holdings, Inc.
Land Coron, Palawan Owned Good
 Company Name / Subsidiary Address Rented / Owned Condition
2 San Miguel Stock Transfer Service Corp. 1505,1506,1507 Condominium Owned Good
Units
15th Robinson’s Equitable Tower
ADB Avenue cor Poveda St, Pasig City

Note : All owned properties are free of liens and encumbrances.

updated
Packaging
Archen
GSMI (same last year)
Foods
Beer
Beer Int’l
SMPI
SMSTC
 ANNEX “D”
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

This discussion summarizes the significant factors affecting the consolidated financial performance,
financial position and cash flows of San Miguel Corporation (the Parent Company) and its
subsidiaries (collectively referred to as the “Group”) for the three-year period ended December 31,
2008. The following discussion should be read in conjunction with the attached audited
consolidated balance sheets of the Group as of December 31, 2008 and 2007, and the related
consolidated statements of income, changes in equity and cash flows for each of the three years in
the period ended December 31, 2008. All necessary adjustments to present fairly the Group’s
consolidated financial position as of December 31, 2008 and the results of operations and cash flows
for the year ended December 31, 2008 and for all the other periods presented, have been made.

I. BASIS OF PREPARATION

The consolidated financial statements of the Group have been prepared on a historical cost basis,
except for the following:

ƒ derivative financial instruments are measured at fair value;

ƒ available-for-sale financial assets are measured at fair value; and
ƒ agricultural produce are measured at fair value less estimated point-of-sale costs.

The consolidated financial statements are presented in Philippine peso, which is the Parent
Company’s functional currency under Philippine Financial Reporting Standards (PFRS). All
values are rounded to the nearest million (P000,000), except when otherwise indicated.

Statement of Compliance
The consolidated financial statements have been prepared in compliance with PFRS. PFRS
includes statements named PFRS and Philippine Accounting Standards (PAS), including
Philippine interpretations from International Financial Reporting Interpretation Committee
(IFRIC), issued by the Financial Reporting Standards Council (FRSC).

Significant Accounting Policies

The accounting policies presented in Note 3 of the attached Notes to the Consolidated Financial
Statements have been applied consistently to all periods presented except for the following new
and amended PAS and Philippine Interpretation from International Financial Reporting
Interpretation Committee (IFRIC), which were adopted starting January 1, 2008:

ƒ Philippine Interpretation IFRIC 11, PFRS 2 - Group and Treasury Share Transactions: This
interpretation addresses how to apply PFRS 2, Share-based Payment to share-based payment
arrangements involving equity instruments of the parent company, where a parent company
grants rights to its equity instruments to the employees of its subsidiary or a subsidiary
grants rights to equity instruments of its parent company to its employees. The adoption of
this interpretation did not have a material effect on the consolidated financial statements.
 Management Discussion and Analysis
Page 2

ƒ Philippine Interpretation IFRIC 14, PAS 19 - The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction: This interpretation provides
general guidance on how to assess the limit in PAS 19, Employee Benefits, on the
amount of the surplus that can be recognized as an asset. It also explains how the
pension asset or liability may be affected when there is a statutory or contractual
minimum funding requirement. The adoption of this interpretation did not have a
material effect on the consolidated financial statements.

ƒ Amendments to PAS 39, Financial Instruments: Recognition and Measurement, and

PFRS 7, Financial Instruments: Disclosures: This standard permits an entity to
reclassify non-derivative financial assets, other than those designated at fair value
through profit or loss upon initial recognition, out of the trading category in certain
circumstances. The amendments also permit an entity to transfer from the available-for-
sale category to the loans and receivables category a financial asset that otherwise would
have met the definition of loans and receivables, if the entity has the intention and ability
to hold that financial asset for the foreseeable future. The adoption of these amendments
to standard did not have an effect on the consolidated financial statements.

II. RESULTS OF OPERATIONS

The results of operations of Agribusiness (a Division of Parent Company) in 2008, 2007 and
2006, San Miguel Foods Australia Holdings Pty. Ltd. (SMFAH) and San Miguel Australia
Holdings Ltd. (SMAH) in 2007 and 2006 and Coca-Cola Bottlers Philippines, Inc. (CCBPI) for
the period ended February 22, 2007 and December 31, 2006, were presented as a separate item
under “Income After Income Tax from Discontinued Operations” in the consolidated statements
of income. Accordingly, the comparable 2007 and 2006 consolidated statements of income were
restated.

Comparisons of key operating results for the last three years are summarized in the following
tables.

Years Ended December 31

2007 2006
2008 (As Restated) (As Restated)
(In Millions)
Sales P
=168,041 =148,022
P =
P135,095
Gross Profit 43,969 37,960 35,532
Selling and Administrative Expenses (29,151) (26,333) (22,654)
Financing Income (Charges) - net 598 (5,030) (4,334)
Equity in Net Earnings (Losses) of
Associates (1,132) 164 56
Gain on Sale of Investments and
Property, Plant and Equipment 8,746 2,224 245
Other Income (Charges) (2,262) 3,614 3,192
Income from Continuing Operations 14,670 8,079 8,090
Income after Income Tax from
Discontinued Operations 5,413 272 1,809
Net Income Attributable to Equity
Holders of the Parent Company 19,348 8,630 10,306
 Management Discussion and Analysis
Page 3

2008 vs. 2007

The Group’s 2008 consolidated sales revenue amounted to = P 168,041 million, 14% above last
year as most businesses registered double digit revenue growth versus 2007.

This resulted to a consolidated operating income of =

P 14,818 million, 27% higher than last year.
Beer domestic operation’s income performance was consistently good in 2008. Beer
international ended the year with a positive contribution, turning around from an operating loss
reported in 2007. Packaging business performance ended the year significantly better than a
year ago with improved glass and plastic sales performance. These were, however, partially
offset by slowdown in food and hard liquor’s operating income performance with the higher
costs of operations.

2008 net financing income is =

P 598 million with the interest income on our cash balance.

Equity in net losses include San Miguel Properties, Inc.’s (SMPI) share in net losses of Bank of
Commerce (BOC) partly offset by the equity in net income of Meralco.

Gain on sale of investments and property, plant and equipment include gain from the initial
public offering of San Miguel Brewery Inc. (SMB) shares, sale of KSA Realty Corporation
(KSA) shares and 35% stake in the domestic and regional packaging businesses and the sale of
Aurora property.

Other charges include mainly from marked-to-market loss on commodity and foreign currency
derivatives, net of foreign exchange gains, which ended at =
P2,262 million.

With this, profit from continuing operations for 2008 amounted to = P14,670 million, significantly
higher than last year. Coupled with the gain from discontinued operations, consolidated net
income amounted to = P19,348 million, significantly higher than last year.

Without the non-recurring gains on sale of investments and properties, 2008 net income would
have been =
P 7,221 million, 4% higher than the comparable net income in 2007.

2007 vs. 2006

Consolidated sales revenue grew 10% to = P148,022 million. Operating income was down 10% to
=11,627 million over 2006 due to several factors: a.) having to absorb an 8% increase in excise
P
tax on the liquor business implemented in January, 2007; b.) the cyclical downtrend for glass
bottle requirements; c.) significant increases in raw materials and fuel costs that affected the
food businesses; and d.) increase in ad and promo expenses for new products launched in 2007.

Consolidated net financing charges ended at =

P 5,030 million due to higher interests from
borrowings.

Gain on sale of investments and property, plant and equipment in 2007 pertains mainly to the
sale of Del Monte Pacific Ltd.

With the strengthening of Philippine peso and other Asian currencies versus the United States
dollar (USD), foreign exchange gain in 2007 reached =
P 6,587 million, a significant increase from
= 2,768 million in 2006. Thus, consolidated other income mainly represents foreign exchange
P
gains, partly offset by losses on foreign exchange swaps and impairment losses of the Yuen
 Management Discussion and Analysis
Page 4

Long plant of San Miguel Brewery Hong Kong Limited (SMBHK) and of certain idle assets of
San Miguel Packaging Specialists, Inc. (SMPSI), renamed as San Miguel Yamamura Packaging
Corporation (SMYPC) .

Income from continuing operations ended slightly lower at =

P8,079 million in 2007.

The income from discontinued operations amounted to =

P272 million. This includes the income
and losses recognized from the sale of CCBG and SMFAH and the net consolidated losses of
CCBG, SMFAH, SMAH and Agribusiness in 2007.

Thus, net income attributable to equity holders of the Parent Company ended at P
=8,630 million,
16% lower than 2006.

CONTINUING OPERATIONS

2008 vs. 2007

BEVERAGE

Beer Domestic

SMB sustained its volume uptrend in 2008 despite market difficulties with the economic
slowdown and rising commodity prices. Total SMB volumes grew by 4% to reach 174.5
million cases that brought in revenues of =
P48,787 million, 11% higher than last year, in spite of
the price increase implemented in April to cover escalating costs. Volume expansion was driven
by intensified and innovative sales and marketing activities which enabled SMB to further
strengthen its market position reaching 96%.

These initiatives included various tactical consumer and trade promotions and efforts to gain
exclusive on-premise selling activities in key large-scale fiestas. Volume-generating and
“occasion creation” programs such as Territoryo San Miguel, Beer Plazas, Beer Drinking
Contests, Payday Special and outlet-based events were also implemented to further spur
consumption.

The brands San Mig Light, Red Horse and Gold Eagle all grew in volume over 2007, even as
San Miguel Pale Pilsen (SMPP) embarked on its biggest Oktoberfest yet in 2008. The annual
beer fest was transformed into the SMB’s grandest and longest-running fiesta with nationwide
events lined up during the Oktoberfest’s three-month launch.

SMB sponsored viewing parties for its top endorser, boxing great Manny Pacquiao, in his well-
publicized matches. Visibility for the brand was also achieved through the sponsorship of
concerts by international acts, namely Maroon 5 and Alicia Keys.

To further strengthen SMB’s brand portfolio and grow the upscale segment market, SMB
launched at the Oktoberfest kick-off party, San Miguel Premium All-Malt Beer and its seasonal
offering, San Miguel Oktoberfest brew.

To chart SMB’s future, it crafted its vision-mission with the tagline “Drink to Life” as it aims to
make every occasion a celebration through SMB’s products and services.
 Management Discussion and Analysis
Page 5

All these resulted in an operating income to =

P 15,636 million, a 27% growth from =
P 12,273
million in 2007.

Beer International
The performance of Beer International continues to be encouraging, as the business gains
traction from its efforts to improve its structure and operations.

Volume sales of 48.4 million cases, registered growth of 1% from 2007, the bulk of which can
be attributed to Indonesia’s strong performance and improved sales in Thailand, Hong Kong
and San Miguel Brewing International Ltd’s (SMBIL) export sector.

Sales revenue ended at US$283 million, 24% above 2007. Operating income was at US$1.97
million, a rebound from last year’s loss of US$4.35 million which came from gains from
Indonesia, North China, Thailand, Hong Kong, and SMBIL Exports. The significant turn-
around in SMBIL’s profitability was the result of business restructuring initiatives, outlet-based
promotion programs, sales mix improvements and continuous efficiency enhancements.

In Hong Kong, domestic volumes posted a 5% growth from last year with SMPP reversing
previous year’s declining trend. This was boosted by its integrated marketing activations in
outlets and special events with good output from the retail chains.

South China’s domestic volumes suffered from the economic downturn in Foshan City and the
closure of several key Chinese restaurants and open air outlets due to food safety concerns.
However, exports and tolling volumes had offset much of the shortfall, thus registering a
consolidated volume growth of 4%.

PT Delta Djakarta Tbk (PT-Delta) capped a stellar performance in 2008 registering domestic
volume growth of 18% from 2007 level coming from the positive performance of Anker brand,
San Miguel brand and Carlsberg. Thus, operating income grew 47% versus 2007 driven by
strong volumes, better efficiencies and price increases.

Vietnam volumes remained lower than last year which resulted from competitor buy-outs and
termination of sponsorships.

In Thailand, domestic volumes grew double digit from last year, driven by higher sales of SMPP
and San Mig Light. Tolling and export volumes also grew, contributing significantly to the
marked improvement in over-all profitability of the Thailand operations. San Miguel brands
continued its second year of growth in 2008 which nearly doubled from last year, benefiting
greatly from the increase in number of penetrated outlets ending at 9,386 outlets by year-end.

Export volumes for the year grew 22% against last year driven by SMPP and other San Miguel
brands, particularly Red Horse. Overall, the Middle East and North American markets
contributed the biggest growth over last year.

Liquor and Spirits

In line with a vision to create a total beverage company out of Ginebra San Miguel, Inc. (GSMI)
and further strengthen its operations beyond the mature liquor and spirits market into faster-
growing areas of the non-alcoholic beverage businesses, the board of GSMI approved last
October the purchase of the non-alcoholic beverage assets and operations of San Miguel
Beverage, Inc (SMBI).
 Management Discussion and Analysis
Page 6

GSMI’s GSM Blue and Gran Matador delivered substantial volume gains during the year, with
hard liquor domestic volume growing 9% higher than last year. Following efforts to improve
availability and product penetration, volumes of GSM Blue grew significantly from last year.
Gran Matador’s 1-liter format also enjoyed strong volume growth.

Sales revenue grew 18% to = P15,428 million. However, operating income ended at = P431 million,
33% lower than last year on account of the rise in alcohol and packaging costs, higher ad spend
to support the year’s strong volume growth and increased administrative expenses.
.
With fuel prices rising since the start of 2008 until the 3rd quarter, GSMI entered into a hedge
arrangement to protect GSMI from further surges in fuel prices. However, with the downturn of
prices during the 4th quarter, this resulted to a marked-to-market loss on our hedged fuel prices.
All these dampened profitability, resulting in GSMI ending the year with a net loss of = P279
million.

FOOD
Commodity costs were a challenge across the food industry in 2008. Several initiatives were
implemented to help the Food Group improve its efficiencies, lower its production costs and
generate savings so as to remain competitive in view of the difficult market and operating
conditions.

While volumes contracted across most of the business segments, revenues were nevertheless
robust, with poultry, feeds, flour, value-added meats and Vietnam operations posting double
digit growth rates. Food Group revenues reached = P73,880 million, up by 16%, as the businesses
took some pricing measures to cover rising input costs.

Despite the slowdown in consumer spending, the Food Group managed to maintain market
leadership in a majority of its product segments as major innovations were introduced to keep its
offerings relevant and affordable to consumers.

The integration of outbound logistics allowed the business to maximize synergies among its
branded businesses and standardize outbound logistics processes, policies and guidelines,
resulting in annual savings of about P6 million.

Raw material substitution has been intensified resulting in savings of P

=217 million.

To secure higher margins and manage volatilities in the global commodity markets, the Food
Group continued to pursue efforts towards developing more value-added products. To-date, the
contribution has already gone up to almost 50% from total sales, evidenced by new products
launched during the year - Ulam King, Purefoods Tender Juicy Sweet Corn, San Mig Coffee 2-
in-1 coffeemix, and relaunched Magnolia Chicken Stations and Monterey Meatshops, were just
some of the initiatives in 2008 designed to skew the Food Group’s product portfolio toward the
high-margin, more stable value-added segment. These new product lines are currently enjoying a
favorable response from consumers.

Despite these efforts, the Food group’s operating income fell short of last year due to high raw
material costs, soft consumer demand and increased fixed costs spending.
 Management Discussion and Analysis
Page 7

Agro-Industrial Cluster
Integrated Agro-Industrial Zone. Poultry volumes registered positive growth throughout the
year while the feeds and basic meats posted slight decline from last year. Aided by favorable
prices, sales revenue amounted to =
P48,811 million, 15% higher than 2007.

The Magnolia Chicken Stations yielded rewards for the Poultry sector. From 217 outlets in 2007
to 296 in 2008 delivering 28.7% volume growth and generated revenues of =P3.76 million for the
year.

The Feeds Business introduced various sales recovery programs to preserve profitability amid a
weak market that resulted in lower volumes.

With more than 166 Monterey Neighborhood Meatshops and 250 Monterey Supermarket
Meatshops, the business continued to expand distribution and widen product availability, which
helped in driving sales.

Milling. Our milling operations saw a surge in wheat costs coupled with price controls which
held back its performance. However, with price increases and the growing value-added flour
segment allowed the business to post revenue of P
=8,684 million, a 30% growth from last year.

On the other hand, the business’ efforts in moving flour from basic to customized flour and
premixes have started to pay off, protecting margins and locking in key customers.

Two new product categories were introduced: Magnolia Real Good Instant Noodles and E-Aji
Thin and Light snacks. Both have the “no added MSG” component to address the health and
wellness needs of consumers.

Branded and Value Added Businesses

Processed Meats. Sustained growth in all segments allowed Purefoods-Hormel to increase
volumes by 4% which brought in revenue of = P11,567 million, 11% higher than last year. The
segment’s operating income was =
P626 million, 13% higher than last year.

Innovation paved the way for the business to sustain its strong performance with new product
introductions like Tender Juicy Sweet Corn Hotdog, new and exciting shapes for Chicken Fun
Nuggets, and Ulam King, a new line of affordable canned viands. The health benefits of Chick N
Tasty Hotdog were also emphasized with its choline (an essential food nutrient) component.
These new products further bolstered the business’ portfolio of high-quality and value-for-
money offerings.

Dairy, Oils & Fats. Magnolia Inc’s. (Magnolia) performance for the year was adversely
affected by the rising costs of raw materials. Volumes fell across all major categories, except for
ice cream. While price increases were implemented across all product lines, sales revenue
slipped 7% below the previous year.

Butter, margarine and cheese continued to dominate the market with their flagship brands –
Magnolia and Star Margarine. Products were also launched which aimed to suit to prevailing
consumer disposal income (e.g., Daily Queso, Dairy Blend and new ice cream flavors).
 Management Discussion and Analysis
Page 8

Food Service.
Great Foods Solutions continued to partner with foodservice giants such as the Jollibee Group,
Lots’A Pizza, 7-Eleven and the Bistro Group, among many others. With sustained innovation,
product customization, co-branding activities with key accounts, complemented by the
aggressive technical, culinary and food safety training of all GFS front liners, the business
gained significant improvement in its performance.

Emerging Businesses.
The Super Coffeemix business has sustained its revenue growth. Wider distribution, supported
by sampling campaigns, new billboards and ad campaigns strengthened San Mig Coffee’s hold
of the market. The introduction of San Mig Coffee 2-in-1 Coffeemix also complemented the
range of San Mig Coffee offerings.

The Food Shops’ Snack Bar stations continue to draw customers. Fourteen Food Shops
nationwide are currently in operation to continue providing additional distribution channels to
the wide spectrum of San Miguel products.

Regional Operations
San Miguel Pure Foods Vietnam continued to be a bright spot in the Food Group operations with
revenue and operating income growing 23% and 42% respectively.

Nine more Monterey Meatshop outlets were opened in 2008, with sales volume rising
phenomenally every month. Today, there are 14 Monterey meatshops in Vietnam that are
performing well.

On the other hand, San Miguel Pure Foods Indonesia’s net loss narrowed down during the year,
a big improvement from last year. Revenue grew by 9% as PT San Miguel Pure Foods Indonesia
(SMPFI) focused on internal improvements, market innovation and expanded reach.

SMPFI continues to be the leading producer and marketer of halal processed meat products for
retail and institutional customers and now ranks second in the processed meats industry with
four core brands: Vida, Farmhouse, PF Choice and Gusto.

PACKAGING

The Packaging Group posted a solid recovery this year with sales revenue growing 6% to
= 19,852 million, the result of robust demand from the glass and plastic businesses.
P
Improvements in the group’s cost structure and a renewed focus on developing overseas markets
have also helped.

The Packaging Group has entered into long-term contracts with major external customers such
as Del Monte, Coca-Cola Bottlers Phils., Unilab, Kraft and Fonterra and retained other larger
customers among them, Nestle and Pepsi.

New products were launched to further diversify markets. The Plastics business began
commercial production of margarine tubs and its proprietary chicken flooring. It also
established its plastic pallet leasing operations in Mindanao. The PET business developed tennis
ball canisters using pre-forms with recycled PET content.
 Management Discussion and Analysis
Page 9

The Packaging Group continued its aggressive expansion into export markets outside Asia,
developing more customers and products for Australia, South Africa and the Middle East. Its
glass packaging subsidiary in China further deepened its penetration of the U.S. market with
new customers and distributors.

The Packaging Group was likewise confronted with higher costs for oil and key raw materials.
Packaging Group responded to this with pervasive cost and working capital reduction as well as
value-enhancing programs across the organization. Thus, operating income of =
P 1,315 million is
significantly higher than the previous year.

PROPERTY

SMPI’s performance ended 2008 with a 212% growth in net income attributable to equity
holders of SMPI from P = 380 million to =
P 1,186 million. The sharp increase was due to the
disposal of real property and divestment of shares of stock.

SMPI’s turnaround was also helped by the new initiatives in the areas of project development
and operations, sales and marketing and project finance. Among these initiatives: the launching
of Bel Aldea and Maravilla projects and expanded channels of distribution. SMPI signed a
joint venture agreement with the Government Service Insurance System (GSIS) to develop a
high-end service apartment in Makati City.

Its associate, BOC is supporting SMPI’s operations by way of providing ready and easy access
to mortgage financing. This one-stop-shop concept has since launched the 100%-Guaranteed
Loanable Bank Financing Facility for potential buyers of SMPI projects.

While domestic demand remains strong, SMPI plans to tap the international market, targeting
overseas foreign workers in Asia and the Middle East.

SMPI will also expand its competencies in the area of property management, with the recent
transfer in management of SMC Tagaytay Training Center.

2007 vs. 2006

BEVERAGE

Beer Domestic
Since March 2007, SMB chalked up consecutive months of sustained volume and revenue
growth. Volume grew by almost 8% while revenue and operating income posted a parallel
growth of 9% at = P 44,139 million and =
P 12,273 million, respectively. Volume expansion was
driven by SMB’s intensified marketing and sales programs which were helped along by a more
robust Philippine economy and greater consumer confidence.

SMB undertook various brand activation and marketing initiatives such as the Jet Li campaign
and the highly popular Manny Pacquiao-Erik Morales TVCs. SMB also sponsored the 2007
World Pool Championships, and co-sponsored concerts by internationally renowned music acts.
The National Beer Drinking Contest likewise strengthened SMPP’s equity among local drinkers.

The 632-BEER delivery project was also introduced in selected upscale areas to address
consumer preference for convenience.
 Management Discussion and Analysis
Page 10

On top of the other sales, marketing and cost-management initiatives, outlet-based programs
aimed at increasing consumer off take, brand-building and penetration will be sustained to
further expand coverage, volumes and maintain strong profitability.

Beer International
Beer International operations continued to post improved profitability with revenue of $229
million, higher by 5% versus 2006 despite lower volumes in several key markets.

Operating loss of US$4 million ended significantly lower than 2006 as almost all operating units
registered growth improvements – a result of sustained programs in improving sales, operational
efficiencies and continued vigilance in costs.

The rationalization of the Group’s operations in Hong Kong and the former Guangzhou brewery
will significantly streamline costs and improve the long-term overall profitability of the
business. The decision to restructure operations came as a result of relatively higher production
and operating costs in these locations as compared to SMBHK’s other South China brewery, San
Miguel Guangdong Brewery (SMGB).

Hong Kong saw further recovery in the economy and implemented a reduction of excise duty tax
from 40% to 20% in 2007. SMBHK’s domestic volume grew 2% over 2006 and gained
significant growth rate in the high-priced brands as the consumer preferences have slightly
shifted out of economy brands.

In South China, profit significantly improved resulting from the shift to higher growth markets
and categories.

SMGB continued to register strong growth in 2007 led by domestic sales and tolled volumes,
mainly on the strength of Dragon brand. The continued airing of the “Refreshing to Fly” TVC
and presence of effective brand signage in outlets in Shunde and nearby countries have further
improved the brand equity of Dragon and reinforced its market leadership. The steady volume
growth significantly contributed to the improvement of its operating income over 2006.

SMGB completed Phase 1 of its expansion program in 2006 and has moved to the next stage to
support the growing requirements of SMBHK, GSMB, domestic and toll-packed volumes.

Guangzhou San Miguel Brewery (GSMB) achieved profitability gains following the
restructuring and streamlining of operations in South China. This was further boosted by the
modest growth of San Miguel brands driven by San Mig Light’s strong performance through
continuous effort to reinforce the brand value.

In North China, overall volumes grew for the 6th consecutive year bannered by Blue Star
brands. Volumes increased 7% year-on-year despite flat beer-industry growth and intensified
competition in the Hebei province.

Volumes in Indonesia declined slightly resulting from confluence of different factors – a price
adjustment in late 2006, an increase in the excise tax and an ongoing inventory and receivable
management program.
 Management Discussion and Analysis
Page 11

In Vietnam, volume expansion was accelerated in 2007 propelled by continued growth of W1N
Bia and tolled volumes for Hue Brewery. Total volumes improved by 21% in 2007 which
resulted to further reduction of operating loss.

In Thailand, volumes more than tripled, buoyed by exports and higher sales of San Mig Light.
Expanded coverage and outlet-based initiatives for the brand, particularly in selected areas in
Greater Bangkok and Central Thailand, pushed volumes higher.

Export volumes grew 8% due to higher Red Horse sales to the Middle East and bigger shipments
of other San Miguel brands to Malaysia, South Korea, United Arab Emirates and Taiwan.
Volume growth was likewise propelled by expansion to new markets and development of new
products for selected areas.

Liquor and Spirits

GSMI posted 8% higher volumes in 2007, lifted by its core brands, that in turn delivered
=13,111 million, 5% higher revenues versus 2006.
P

Despite a slowdown in brandy’s sales, the strong performance of GSM Blue, which almost
doubled from 2006, and the resurgence of Ginebra San Miguel Bilog offset the decline in Gran
Matador volumes.

Sustained efforts at reinforcing core brand equity proved effective as sales of flagship gin
products responded positively, even without a commensurate price increase. These included the
sponsorship of high-profile sporting events.

Lower operating costs were achieved through a bottle retrieval system that brought down costs
for packaging materials. The use of imported alcohol and favorable molasses prices also helped
keep costs in check.

These initiatives in all paved the way for a steadily improving operating performance. Although
operating income of = P643 million fell short of 2006 levels, performance during the second half
has showed significant improvements.

Effective working capital and inventory management system allowed GSMI to further
strengthen its balance sheet and reduce dependence on debt – cutting down on interest and other
expenses and boosting profitability in the process.

Overseas, the joint venture with the Thai Life Group completed construction of its production
facilities in November 2007 and is primed for commercial run. This is expected to raise GSMI’s
profile as a regional total liquor company.

FOOD

The food business under San Miguel Pure Foods further reinforced its operational platform –
both in terms of its value-added business proposition and pursuit of an integrated, efficient and
more profitable organization.

Food Group’s revenue grew 11% to = P 63,526 million on account of higher volumes and
favorable selling prices pushing operating income 11% higher year-on-year brought in by
increased turnover from the businesses and effective cost reduction programs.
 Management Discussion and Analysis
Page 12

The drive towards improving efficiencies and lowering costs through raw material substitution
has gathered pace. Over 25,000 hectares of cassava were planted which significantly reduced
input costs.

A total of 146 new products across all businesses expanded the line up of high value, great
tasting and superior quality food products. In addition, the increase in retail channels, reaching
nearly 900 from over 700 in 2006, provided adequate exposure and shelf-space to ensure
availability of the Food Group’s portfolio among a wider consumer base.

Agro-Industrial Cluster
Integrated Agro-Industrial Zone. The agro-industrial business cluster did better than 2006
despite weaker basic meats volumes. New higher-value added and better margin variants were
introduced to preserve profitability despite the dip in volumes.

Revenue of =P42,313 million rose 13%, largely on improved selling prices and higher volumes
from poultry and feeds, ushering in an operating income of =
P1,491 million.

Milling. Revenue of = P6,699 million from the milling business sustained an impressive 12%
growth with income from operation amounting to = P558 million as volumes from new products,
four variants of E-Aji Potato Chips launched in October 2007, combined with favorable selling
prices for bagged and bulk flour offset rising raw material and freight costs.

Exports of customized flour to Thailand as well as shipments of Pancake Mix to the Middle East
and Vietnam and E-Aji Dip Snacks to several markets around the world also added incremental
sales.

Branded and Value Added Businesses

Processed Meats. Volumes of the value-added meats business improved with revenue of
=10,449 million growing 6%. With better margins accruing to these new and existing products
P
like Mom’s Kitchen, Purefoods Ham Selections, and Purefoods Flavored Burgers in Cheese,
Spicy and Chorizo variants, operating income ended 9% higher at =
P554 million.

Dairy, Oils & Fats. For the dairy, oils & fats segment, Magnolia. registered volume growth
across all categories with revenue registering at =
P5,177 million, up by 8%. However, operating
income of = P63 million fell below 2006 as increasing cost of major imported raw materials and
unfavorable mix of low margin products persisted.

Food Service. Great Food Solutions, the food service unit, added to its roster of institutional
clients through sustained product innovation. Revenue of =
P5,512 million was up by 16% and
operating income ending at =
P94 million.

Emerging Businesses. From the new businesses, total revenue reached =

P539 million, higher by
36% from 2006, mainly coming from higher coffee volume. Operating loss of P = 32 million
significantly improved versus 2006.

In addition, 18 San Miguel Food Shops already in operation continue to provide additional
distribution channels for the Food Group’s growing portfolio.
 Management Discussion and Analysis
Page 13

Regional Operations
San Miguel Pure Foods Vietnam. (SMPFV) continued its advance to a branded food platform
generating revenue and income of US$38 million and US$1 million, respectively, significantly
higher than 2006. The acquisition of Le Gourmet and the opening of six Monterey Meat Shops
in the country provided a vehicle for branded meat products and distribution system.

PT San Miguel Pure Foods Indonesia. PT San Miguel Pure Foods Indonesia however, reported
revenue of US$15 million, up by 14% but ended with an operating loss of US$1 million as
prevailing market conditions favored the cheaper and unbranded products available in the
market.

PACKAGING

Packaging Group’s performance continued to lag as internal demand remained weak, with below
break-even levels resulting in a corresponding drop in revenue by 3% at
= 18,777 million. While improvements were noted in the glass, plastics and metal segments,
P
these still fell short to boost the weak performance from other segments with operating income
significantly lower than 2006.

Expanded capacities in glass have already attracted large international customers, bringing in
foreign revenues to augment domestic sales. The rehabilitation and upgrades in some of its key
facilities have improved efficiencies – making it more equipped to meet the growing and
diversifying demand for more sophisticated packaging solutions both here and abroad.

PROPERTY

SMPI posted 44% growth in net income attributable to equity holders of SMPI from =
P 263
million to =
P380 million.

The SMPI’s rental income in 2007 recorded 8% growth, from = P438 million to =
P475 million,
due primarily to the increase in the occupancy rates of San Miguel Properties Centre and the
leasing of 38th floor of The Enterprise.

Apart from delivering strong results across most of its business segments, SMPI made a major
acquisition, signing a share purchase agreement for the acquisition of 30% stake in BOC The
bank will support SMPI’s operations by providing prospective customers ready access to
mortgage financing.

At the end of 2007, SMPI also entered into a share purchase agreement to sell its shares in KSA
to Shang Properties, Inc.
 Management Discussion and Analysis
Page 14

III. FINANCIAL CONDITIONS

2008 vs. 2007

The Group’s consolidated total assets as of December 2008 amounted to = P 339,373 million,
= 51,264 million higher than 2007, basically due to investment in Meralco and net increase in
P
cash amounting to =
P30,845 million and =
P23,658 million, respectively.

Below were the major developments in 2008:

INVESTMENTS AND ACQUISITIONS

ƒ On December 8, 2008, the BOD of the Parent Company approved the transfer of certain
parcels of land used in the domestic beer operations to Brewery Properties, Inc. (BPI), a
wholly-owned realty subsidiary in exchange for shares of stock.

On December 16, 2008, the Parent Company formed BPI with an authorized capital stock of
P1. BPI was incorporated primarily to own, use, improve, develop, sell, exchange, lease and
hold investment or otherwise, real estate of all kinds, including buildings and other
structures. BPI has not yet started commercial operations as of December 31, 2008.

ƒ On December 8, 2008, the BOD of the Parent Company approved the transfer of its
domestic beer and malt-based beverages brands, including related trademarks, copyrights,
patents and other intellectual property rights and know-how (IP Rights) to Iconic Beverages,
Inc (IBI), a wholly-owned subsidiary in exchange for shares of stock.

On December 16, 2008, the Parent Company formed IBI with an authorized capital stock of
P1. IBI was incorporated primarily to engage in the manufacturing, buying, selling (on
wholesale) and dealing in alcoholic and non-alcoholic beverages and to own, purchase,
license and/or acquire such trademarks and other intellectual property rights necessary for
the furtherance of its business. On the same date, the BOD and stockholders of IBI
approved the increase in its authorized capital stock from P1 to P10,000 divided into
100,005,000 shares at P100 par value per share. The Parent Company and IBI executed a
Deed of Assignment of Domestic Intellectual Rights dated December 16, 2008 as
supplemented by a Supplement to the Deed of Assignment of Domestic Intellectual Property
Rights dated January 23, 2009 for the transfer of the IP Rights in exchange for common
shares in IBI.

IBI has not yet started commercial operations as of December 31, 2008.

ƒ On October 27, 2008, the Parent Company entered into a sale and purchase agreement with
the GSIS to acquire the latter’s 300,963,189 shares in Meralco, representing 27% stake for a
total consideration of =
P 27,087 million plus an additional fixed term interest of = P 3,758
million. On November 10, 2008, the Parent Company paid P = 5,417 million representing
downpayment for said shares with the balance payable in three (3) years.

The Group recognized equity in net earnings of Meralco amounting to = P 126 million,
representing its share in Meralco’s net income from the period November 1 to December 31,
2008.
 Management Discussion and Analysis
Page 15

ƒ On May 12, 2008, SMB listed its shares in the Philippine Stock Exchange pursuant to its
listing application approved on March 26, 2008. SMB sold 77,052,000 shares to the public
by way of a primary offer, and the Parent Company sold to the public 809,050,000 shares of
its existing shares in SMB (including shares to cover for over-allotments) by way of a
secondary offer, pursuant to a registration statement rendered effective by the Securities and
Exchange Commission on April 28, 2008. The total shares offered represents 5.75% stake in
SMB. The Group recognized a gain of P5,650 million from the transaction.

ƒ In April 2008, SMPI and San Miguel Corporation Retirement Plan (SMCRP) paid the
balance of its payable to BOC for its subscirption amounting to P1,500 million, of which
P1,249 million and P251 million were paid by SMPI and SMCRP, respectively.

In May 2008, SMPI and SMCRP entered into a subscription agreement with BOC for a total
of 10,000,000 additional shares in BOC, wherein SMPI subscribed to an additional
3,001,779 shares, from the increase in the authorized capital stock of BOC with an aggregate
par value of P300 (P100 per share) for P600 (P200 per share) to maintain its 30% stake in
BOC, while SMCRP will increase its holdings in BOC to 21%. As of December 31, 2008,
SMPI has made an advance payment of P150 million which is presented as part of
noncurrent receivables and deposits under “Other noncurrent assets” account.

ƒ On January 30, 2008, effective on the closing of the SMPSI Stock Purchase Agreement
(SMPSI SPA) on January 31, 2008, the Parent Company and Nihon Yamamura Glass Co.,
Ltd (NYG) entered into a deed of assignment of shares of stock pursuant to which the Parent
Company assigned, transferred and ceded all its rights, interest and/or title over the Parent
Company’s 3,756,501 shares in SMPSI for P4,317 million. On the same date, and effective
on the closing of the SMPIL SPA on January 31, 2008, San Miguel Holdings, Limited
(SMHL) and NYG entered into a deed of assignment of shares of stock pursuant to which
SMHL assigned, transferred and ceded all its rights, interest and/or title over SMHL’s
20,726,119 shares in SMPIL for US$21 million.

Also on January 30, 2008, effective on the closing of the SMPSI SPA on January 31, 2008,
SMPSI and NYG entered into a deed of assignment of shares pursuant to which NYG
assigned its 20% stake in SYFMC with an aggregate book value of P23 million as full
payment for its subscription of 19,659 SMPSI shares. On March 14, 2008, the SEC
approved the valuation of NYG’s shares in SYFMC. The relevant Certificate of Approval of
Valuation was amended on April 23, 2008 to rectify the typographical error in the corporate
name of SMPSI from “San Miguel Packaging Specialist, Inc.” to “San Miguel Packaging
Specialists, Inc.”.

On the closing of the SMPSI SPA and the SMPIL SPA both on January 31, 2008, the Parent
Company and SMHL received P3,691 million and US$17 million, respectively, from NYG.

Pending completion of the closing audit, the Group recognized a gain of P154 million from
the sale of 35% interest in SMPSI and SMPIL.

In connection with the sale, SMPSI changed its corporate name to “San Miguel Yamamura
Packaging Corporation” as approved by the SEC on June 4, 2008. In addition, the BOD of
SMPIL likewise approved the change in the corporate name of SMPIL to “San Miguel
 Management Discussion and Analysis
Page 16

Yamamura Packaging International Limited” on January 3, 2008, and such change became
effective on June 11, 2008.

ƒ On January 14, 2008, SMPI completed the sale of its 354,863 common shares (equivalent to
29.38% ownership) in KSA with carrying amount equivalent to its acquisition cost plus
accumulated equity in net earnings of =
P468 million to Shang Properties, Inc. (SPI) for a total
consideration of =P1,812 million. The Group recognized a gain of = P1,182 million, net of
capital gains tax of P
=162 million.

ƒ On January 2, 2008, San Miguel Beverages (L) Pte. Ltd. (SMBPL) completed the sale of J.
Boag to Lion Nathan Ltd. The Group received A$277 million as payment of purchase price
and recognized a gain of =
P5,425 million, net of deferred income tax.

Detailed discussion of developments relating to the Group’s investments in shares of stock of

subsidiaries is presented in Note 10 of the attached Notes to the Consolidated Financial
Statements.

OTHER RECEIVABLES

In 2008, SMCRP paid the Parent Company P31,708 million (inclusive of P3,411 interest) for its
advances.

A more detailed discussion of this transaction is presented in Note 8 of the attached Notes to the
Consolidated Financial Statements.

BORROWINGS

The Parent Company partially paid off its long-term debt by US$277 million decreasing its loan
balance from US$1,200 million to US$923 million.

ACQUISITION/SALE OF ASSETS

ƒ In July 2008, SMPI sold its Aurora, Quezon City property to Robinsons Land Corp. for a
total consideration of P
=1,616 million. The Group recognized a gain of =
P1,230 million as of
December 31 2008.

ƒ In April 2008, SMPI completed the acquisition of the =

P704 million Boracay property with a
total area of 281,566 square meters pursuant to the Asset Purchase Agreement entered into
by SMPI and Boracay Property Holdings, Inc. in October 2007.
 Management Discussion and Analysis
Page 17

2007 vs. 2006

The Group’s consolidated total assets as of December 2007 amounted to = P 288,109 million,
= 59,684 million lower than 2006 basically due to the sale of investment in National Foods
P
Limited’s (NFL).

Below were the major developments in 2007:

INVESTMENTS AND ACQUISITIONS

a. Effective January 1, 2007, subject to necessary approvals, the Parent Company transferred
its share interest in San Miguel Foods Inc. (SMFI), Magnolia and Monterey Foods
Corporation (Monterey) in exchange for equivalent shares in San Miguel Pure Foods
Company, Inc. (SMPFC). The shares of SMFI, Magnolia and Monterey were valued using
their respective book values as of September 30, 2006 totaling =
P4,591. Following the SEC’s
approval, SMPFC, issued to the Parent Company in November 2007, 70,865,078 shares
valued at the latest trading price as of September 30, 2006. This resulted to an increase in
the Parent Company’s ownership from 99.83% to 99.92%.

b. In April 2007, the Parent Company, through San Miguel Foods Asia Limited, entered into a
Share Purchase Agreement with Well Grounded Limited for the sale of the Group’s 42.22%
equity and other interest in NutriAsia San Miguel Holdings Limited (NSMH) for US$150
million. The amount of US$130 million was received on April 25, 2007 as partial payment
for the transaction. The balance of US$20 million, including interest of 7.2% p.a., is due and
payable on April 24, 2009. The Group recognized a gain from the said transaction
amounting to US$46 million (P =2,149 million).

c. On February 22, 2007, the Parent Company and Coca-Cola South Asia Holdings, Inc.
(CCSAHI) executed a Deed of Sale of Shares of Stock covering the Parent Company’s 65%
equity in CCBPI consisting of 766,121 common shares and 172,942 Class A preferred
shares for US$590 million. The payments to the Parent Company are scheduled on various
dates over a five year period subject to fulfillment of specific conditions attached to each and
every payment due. As of December 31, 2008, receivable from CCSAHI of P4,752 million
is presented as part of noncurrent receivables and deposits under “Other noncurrent assets”
account.

On August 23, 2007, the closing audit for the sale transaction was completed and the selling
price was adjusted to US$520 million. The gain realized from the sale amounted to P824
million, net of P376 million net loss of CCBPI (from January 1 to February 22, 2007).

The adjustment in selling price from US$590 million to US$520 million (net of the assigned
receivables amounting to US$17 million) is a result of a compromise agreement between the
Parent Company and CCSAHI.

c. On November 8, 2007, the Parent Company, through San Miguel Foods (L) Pte. Limited has
reached an agreement with Kirin Holdings (Australia) Pty Ltd. to sell its Australian dairy
and juice business, SMFAH for a purchase price of A$752 million, (net of external debt and
shareholder loans), subject to adjustments at completion of closing audit. The sale includes
NFL’s shares in Berri Ltd., King’s Creameries (S) Pte. Ltd. and Lactos Pty. Ltd.
 Management Discussion and Analysis
Page 18

On December 27, 2007, the Parent Company received A$2,090 million representing
payment of purchase price and settlement of shareholder loans.

Based on the results of the closing audit on April 30, 2008, an adjustment in the purchase
price of A$28 million was received by the Parent Company five business days after
completion of the closing audit. The Group recognized a loss on the sale amounting to =
P513
million, net of =
P1,922 million net income in 2007.

e. On November 8, 2007, the Parent Company, through SMBPL signed a definitive agreement
to sell its SMAH shares including its premium Tasmanian brewer, J. Boag & Son Limited to
Lion Nathan Australia Pty Limited, an Australian alcoholic beverages company, for a
purchase price of A$325 million, subject to adjustment at completion of closing audit.

The closing audit was completed on January 2, 2008 and SMBPL received A$277 million as
payment of purchase price, net of adjustments.

The assets, liabilities and equity of J. Boag were classified as items held for sale in the
consolidated balance sheets as of December 31, 2007.

f. Pursuant to the stockholders’ approval obtained on July 24, 2007, the Parent Company
transferred its domestic beer business net assets as of June 30, 2007, excluding land, brands
and certain payables to its new wholly-owned subsidiary, SMB, in exchange for additional
shares of stocks effective October 1, 2007. Equivalent to the net assets transferred, SMB
issued the Parent Company 15,308,416,960 shares under a tax-free asset-for-share
arrangement as confirmed by the BIR on October 9, 2007.

h. In October 2007, SMPI and SMCRP entered into a subscription agreement pursuant to
which SMPI and SMCRP agreed to subscribe, subject to certain terms and conditions, to the
unissued and unsubscribed common shares of capital stock of BOC, equivalent to 34% stake
for P
=2,000 million, with SMPI holding approximately 30% and SMCRP at approximately
4%. As of December 31, 2007, SMPI have paid =P500 million to BOC.

A more detailed discussion of this transaction is presented in Note 8 of the attached Notes to the
Consolidated Financial Statements.

OTHER RECEIVABLES

The Parent Company has outstanding advances to SMCRP amounting to P =35,721 million as of
December 31, 2007, (presented under “Trade and other receivables” in the consolidated balance
sheets) subject to interest rate of 6.5% p.a. SMCRP used the proceeds of the advances mainly
for the purchase of the Parent Company’s common shares.

A more detailed discussion of this transaction is presented in Note 8 of the attached Notes to the
Consolidated Financial Statements.

BORROWINGS

To have the needed flexibility in its financial ratio covenants, the Parent Company refinanced a
portion of its short-term loans and the remaining balance of its US$ and Peso-denominated long-
term loan with a new unsecured US$1,200 million term loan facility in September 2007.
 Management Discussion and Analysis
Page 19

MATERIAL CHANGES PER LINE OF ACCOUNT

2008 vs. 2007

Cash and cash equivalents increased by 25% from =P93,281 million in 2007 to =P116,939 million
in 2008 primarily due to the collection of advances to a related party, proceeds from sale of
investments in: J. Boag; SM Brewery shares ; 35% stake in packaging business and KSA shares;
partly offset by loan and dividend payments, and investment made in the shares of stock of
Meralco and BOC.

Receivables decreased by = P 11,065 million from = P 61,879 million in 2007 mainly due to
collection of advances to a related party, and collection of receivables of the Parent Company’s
Agribusiness Division, net of increase in advances to suppliers.

The increase in inventories of = P 3,858 million from =P 23,852 million in 2007 is primarily
attributed to the increasing costs of major raw materials such as wheat, corn, soy bean meal,
cassava, oils and cheese curd of the Food Group and of malt and hops of SMB, and higher
production volume of GSMI.

Current biological assets increased by 26% to P

=2,932 million in 2008 due to increase in volume
of growing poultry livestock and goods in process coupled with higher feed costs of broilers and
hogs.

Assets held for sale, liabilities directly associated with assets held for sale and amounts
recognized directly in equity relating to assets held for sale were reversed as a result of the
completion of the sale of J. Boag and KSA in January 2008.

Investments increased from =P771 million to =

P32,253 million in 2008 mainly due to investments
made in the stocks of Meralco and BOC.

Property, plant and equipment increased by = P3,958 million from =

P64,355 million in 2007 due to
various capital expenditures (i.e., on-going expansion of SMGB and multi-product beverage
plant in China and Vietnam; installation of new bottling line for the non-alcoholic beverages,
SMCSL’s acquisition of two barges and two tug boats; construction of Sumilao hog farm;
rehabilitation of pier facility in Tabangao and renovation of Hormel’s Cavite plant and capacity
expansion of Rightpack and upgrade of various plant machineries of GSMI and SMYAC) net of
depreciation and disposals for the year.

Investment properties increased by 12% from P = 1,648 million in 2007 mainly due to
reclassification of the Parent Company’s Agribusiness Division’s property and equipment to
investment properties and additional foreclosed properties of SMPFC from its dealers, net of
disposal and amortization.

Noncurrent biological assets increased by 38% to =

P1,814 million due to the start of operations of
the Sumilao farm in 2008 and the increase in volume of Monterey and Poultry’s breeding stocks
coupled with higher growing costs.

Other intangible assets increased by P = 610 million from =

P 3,202 million in 2007 due to
reclassification of certain land and land improvements to land used rights by San Miguel
 Management Discussion and Analysis
Page 20

Guangdong Food and Beverage Corp., and additional computer software (SAP and Microsoft) of
PF Hormel and SMB, net of amortization.

Deferred tax assets increased by 54% from =

P4,973 million in 2007 to =
P7,399 million in 2008 due
to the effect of recognition of deferred tax on: a.) marked-to-market losses, b.) inventory
obsolescence of SMB and additional set-up of NOLCO and MCIT.

Drafts and loans payable increased by 10% from P

=44,231 million in 2007 mainly due to net
availments for working capital requirements.

Accounts payable and accrued expenses increased by 15% from = P20,311 million in 2007 mainly
due to increase in derivative liabilities and increase in trade payables mostly on imported raw
materials as a result of price increases.

Income and other taxes payable increased by P

=1,102 million to P
=4,429 million in 2008, mainly
due to higher income tax due.

Dividends payable increased by 5% mainly due to higher dividends declared in 2008 compared
to 2007.

Long-term debt decreased by 11% from P =55,834 million in 2007 to = P49,763 million in 2008
mainly due to partial payments made during the year, net of amortization of debt issue costs.

Deferred tax liabilities increased by 40% mainly due to the set up of deferred income tax on the
gain from sale of J. Boag.

Other noncurrent liabilities increased by =

P25,235 million from = P456 million in 2007 mainly due
to the unpaid balance on the acquisition of the investment in shares of stock of Meralco.

Non-controlling interests increased by 62% from = P11,329 million in 2007, mainly due to the
recognition of additional non-controlling interests as a result of the sale of 35% stake in the
domestic and regional packaging businesses to NYG and 5.75% stake in SM Brewery.

The increase in equity in 2008 is due to:

(In millions) 2008

Income during the period =
P20,083
Increase in non-controlling interests 6,751
Issuance of capital stock and stock options 256
Effect of translation adjustments (34)
Cash dividends (4,925)
=22,131
P
 Management Discussion and Analysis
Page 21

2007 vs. 2006

Cash and cash equivalents increased by =P69,001 million mainly due to proceeds from sale of
SMFAH, its Australian dairy and juice business.

Trade and other receivables increased by 44% due to the following: (a) increase in non-trade
receivable mainly due to advances to the SMC Retirement Plan; (b) remaining balance of the
proceeds from the sale of CCBG; (c) net of decrease in trade receivables due to the
deconsolidation of CCBG and SMFAH balances and (d) reclassification of SMAH balances to
assets held for sale.

Inventories decreased by = P 18,698 million from = P 42,550 million in 2006 due to the
deconsolidation of CCBG and SMFAH, lower finished goods inventory of packaging group and
lower alcohol inventories and packaging materials of GSMI.

Current biological assets increased by 24% to =P2,324 million due to the increase in volume of
livestock (poultry and hogs) and higher feed costs.

Prepaid expenses and other current assets increased by 8% to = P5,677 million in 2007 due to
increase in derivative assets and prepaid insurance, net of decrease due to the deconsolidation of
CCBG and SMFAH balances and reclassification of J. Boag's prepaid expenses to assets held for
sale.

Assets held for sale pertains to the total assets of J. Boag amounting to =
P5,324 million and
carrying value of investment in shares of stock of KSA amounting to =
P468 million.

Investments and advances decreased by P =5,218 million from =P5,989 million in 2006 mainly due
to the sale of the equity holdings and other interest in Del Monte Pacific, Ltd., and
reclassification of investment in shares of stock of KSA to assets held for sale.

Property, plant and equipment decreased by = P33,631 million from = P97,986 million in 2006 as a
result of the (a) deconsolidation of CCBG and SMFAH balances; (b) reclassification of = P1,572
million J. Boag's properties to assets held for sale; (c) impairment of SMB Hong Kong's plant
and equipment; and (d) reclassification of certain idle assets of SMPSI.

Investment properties decreased by 6% mainly due to the lower value of properties in SMBIL as
a result of changes in foreign exchange rates and amortizations for the year.

Noncurrent biological assets increased by 5% to =P1,319 million in 2007 mainly due to the effect
of changes in foreign exchange rate to the revaluation of San Miguel Pure Foods (VN) Co. Ltd.’s
assets.

Goodwill decreased by 93% from P

=72,899 million in 2006 to =
P5,348 million in 2007 mainly due
to deconsolidation of CCBPI and SMFAH balances and reclassification of SMAH balance to
Assets held for sale.

Other intangible assets decreased by 89% mainly due to deconsolidation of the balances of
CCBG and SMFAH amounting to = P22,597 million and reclassification of J. Boag's intangible
assets to assets held for sale.
 Management Discussion and Analysis
Page 22

Deferred tax assets decreased by 28% from P

=6,871 million in 2006 due to deconsolidation of
CCBG and SMFAH balances net of Parent Company's deferred tax on its net operating loss
carry over (NOLCO) for the year.

Other noncurrent assets decreased by 14% from P

=15,952 million in 2006 to =
P13,688 million in
2007 mainly due to deconsolidation of CCBG and SMFAH balances, net of the noncurrent
receivables for the sale of CCBPI and NSMH shares.

Accounts payable and accrued expenses decreased by = P 19,191 million in 2007 due to
deconsolidation of CCBG and SMFAH balances, net of increase in derivative liabilities.

Income and other taxes payable increased by P

=312 million to =
P3,327 million in 2007 mainly due
to higher VAT and income tax payable of SMPFC.

Dividends payable increased by =

P1,176 million due to cash dividend declaration in the fourth
quarter.

Liabilities directly associated with noncurrent assets classified as held for sale pertains to the
total liabilities of J. Boag.

Long-term debt decreased by =

P 40,081 million from =
P 95,915 million in 2006 mainly due to
deconsolidation of CCBG and SMFAH balances net of availments of the Parent Company, SMY
Asia, SMFBIL, SMB Hong Kong and GSMI and the effect of the lower US dollar exchange rate.

Deferred tax liabilities decreased by 5% from =

P13,434 million in 2006 to =
P12,721 million in
2007 due to deconsolidation of CCBG and SMFAH balances.

Other noncurrent liabilities decreased by =

P1,701 million to =
P456 million in 2007 mainly due to
deconsolidation of SMFAH balances.

Non-controlling interests decreased by 48% mainly due to the deconsolidation of CCBG.

The decrease in equity in 2007 is due to:

(In millions) 2007

Net income for the year =
P8,351
Issuance of capital stock and stock options 761
Effect of translation adjustments 257
Amount recognized directly in equity relating to
assets held for sale 37
Non-controlling interest associated with discontinued
operations (8,824)
Cash dividends (4,528)
Reduction in non-controlling interests (1,058)
(P
=5,004)
 Management Discussion and Analysis
Page 23

IV. SOURCES AND USES OF CASH

A brief summary of cash flow movements is shown below:

December 31
2008 2007 2006
(In Millions)
Net cash flows from operating activities =
P7,052 =
P30,303 =
P17,289
Net cash flows provided by (used in)
investing activities 31,898 39,535 (16,679)
Net cash flows provided by (used in) financing
activities (13,868) 1,472 3,537

Net cash from operations basically consists of income for the period and changes in noncash
current assets, certain current liabilities and others.

Net cash provided by (used in) investing activities included the following:

December 31
2008 2007 2006
(In Millions)
Acquisition of subsidiaries, net of cash acquired P
=- =-
P (P
=4,981)
Additions to investments and advances (6,667) - (3)
Additions to property, plant and
equipment (6,437) (9,310) (12,593)
Proceeds from sale of investments and property
and equipment 13,663 6,269 2,741
Proceeds from sale of discontinued operations,
net of cash disposed of 9,083 90,684 -
Interest received 6,558 2,374 3,015
Payment by (advances to) a related party 31,708 (35,721) -
Increase in other noncurrent assets and others (16,010) (14,820) (4,931)
Dividends received - 59 73

Major components of cash flow provided by financing activities are as follows:

December 31
2008 2007 2006
(In Millions)
Proceeds from short-term borrowings P
=608,756 =
P345,789 =
P232,386
Payments of short-term borrowings (605,088) (337,512) (222,865)
Proceeds from long-term borrowings 64 84,398 17,354
Payments of long-term borrowings (13,336) (88,342) (19,892)
Cash dividends paid (4,856) (3,351) (4,526)
Increase in non-controlling interests 592 - 480
Issuance of capital stocks - 490 600

The effect of exchange rate changes on cash and cash equivalents amounted to (P
=1,424 million),
(P
=1,016 million) and (P
=743 million) in December 31, 2008, 2007 and 2006 respectively.
 Management Discussion and Analysis
Page 24

V. ADDITIONAL INFORMATION ON UNAPPROPRIATED RETAINED EARNINGS

The following items are not available for declaration as dividends:

December 31
2008 2007
(In Millions)
Accumulated equity in net earnings of subsidiaries and
associates (included in the unappropriated retained
earnings balance) P
=57,482 P44,199
=
Treasury stock (4,053) (4,053)

VI. KEY PERFORMANCE INDICATORS

The following are the major performance measures that the Group uses. Analyses are employed
by comparisons and measurements based on the financial data of the current period against the
same period of previous year. Please refer to Item II “Results of Operations” of the MD & A for
the discussion of the computed certain Key Performance Indicators.

December 31
2008 2007
Liquidity:
Current Ratio 2.35 2.60
Solvency:
Debt to Equity Ratio 1.02 0.97
Profitability:
Return on Average Equity Attributable to Equity Holders of t
the Parent Company 13.59% 6.53%
Operating Efficiency:
Volume Growth 4% 5%
Revenue Growth 14% 10%

The manner by which the Group calculates the above indicators is as follows:

KPI Formula
Current Assets
Current Ratio
Current Liabilities
Total Liabilities (Current + Non-current)
Debt to Equity Ratio
Non-controlling Interest + Equity
Net Income Attributable to Equity Holders of the Parent Company
Return on Average Equity Average Equity Attributable to Equity Holders of the Parent
Company
Sum of all Businesses’ Revenue at Prior Period Prices
Volume Growth
Prior period Net Sales
-1
Current period Net Sales
Revenue Growth
Prior Period Net Sales -1
 Management Discussion and Analysis
Page 25

VII. OTHER MATTERS

a. Subsequent Events

Sale of Assets

On January 27, 2009, the Parent Company’s BOD approved the sale of its domestic beer
and malt-based beverages brands, including related trademarks, copyrights, patents and
other intellectual property rights and know-how (IP Rights) to SMB, through the sale of
all its interests in IBI, to which the Parent Company transferred the IP Rights pursuant to
a Deed of Assignment of Domestic Intellectual Property Rights dated December 16, 2008
as supplemented by a Supplement to the Deed of Assignment of Domestic Intellectual
Property Rights dated January 23, 2009 executed between IBI and the Parent Company,
in exchange for common shares in IBI to SMB. The BOD of SMB approved on the same
date, the purchase of the IP Rights through the purchase of all of the Parent Company’s
interests in IBI after the completion of such transfer to IBI by the Parent Company of the
IP Rights to IBI. The price is P32,000 million.

On the same date, the BOD of the Parent Company likewise approved the sale of the
parcels of land used in domestic beer operations, partly to Brewery Land Holdings, Inc.
(BLI), a wholly-owned subsidiary of San Miguel Brewery Retirement Plan (SMBRP) at
P239 million, and the rest to SMB by the sale of all its interests in BPI, to which the rest
of such parcels of land will be transferred.

SMB’s BOD also approved on January 27, 2009, the purchase of all the interests of the
Parent Company in BPI after completion of the transfer by Parent Company of the said
parcels of land to BPI in exchange for BPI common shares and after SMBRP has
transferred its shares in BLI to BPI in exchange for BPI preferred shares. The purchase
price will be at the appraised value of the land transferred by the Parent Company to BPI
amounting to P6,829 million. The proposed acquisitions will be financed by SMB
through borrowings.

The sale by the Parent Company of its interests in IBI and BPI will be implemented after
obtaining all the required approvals from the appropriate regulatory agencies.

On January 28, 2009, the BOD of BPI approved the increase in the par value of its
common shares from P100 to P350 and the increase in its authorized capital stock from
P1 divided into 10,000 shares with a par value of P100 per share to P800 divided into
2,400,000 preferred shares and 1,600,000 common shares with a par value of P100 and
P350 per share, respectively.

On February 27, 2009, the SEC approved the transfer of the Parent Company’s IP rights
to IBI and the increase in the authorized capital stock of IBI. Shares totaling 100,000,000
were issued to the Parent Company under a tax-free asset-for-share agreement, as
confirmed by the Bureau of Internal Revenue (BIR) in its certification No. SN-405-2008
dated December 24, 2008.

Pursuant to the approvals of the BOD of BPI and the Parent Company, a Master Deed of
Assignment of Land dated March 12, 2009 as superseded by a Master Deed of
 Management Discussion and Analysis
Page 26

Assignment of Land dated March 25, 2009 was filed with SEC in connection with BPI’s
application for increase in its par value of common shares and authorized capital stock.

As of March 26, 2009, the application for increase in the par value of BPI’s common
share and authorized capital stock and the transfer by the Parent Company of certain
parcels of land used in the domestic beer business to BPI are still pending approval of
the SEC.

SMB Bond Issuance

Pursuant to an order by the SEC rendering SMB’s registration statement effective and
the permit to offer securities for sale issued by the SEC, both dated March 17, 2009,
SMB offered for sale and subscription to the public Philippine peso-denominated fixed
rate bonds in the aggregate principal amount of P38,800 (Bonds) Series A Bonds with
the aggregate principal amount of P13,590 million having a term of 3 years beginning
on Issue Date and ending on April 3, 2012, with a fixed interest rate of 8.250% per
annum; Series B Bonds with an aggregate principal amount of P22,400 having a term of
5 years and 1 day beginning on Issue Date and ending on April 4, 2014, with a fixed
interest rate of 8.875% per annum; and Series C Bonds with an aggregate principal
amount of P2,810 million having a term of 10 years beginning on Issue Date and ending
on April 3, 2019, with a fixed interest rate of 10.50% per annum. Proceeds from the
issuance of the bonds will be used to finance SMB’s acquisition of the interests of the
Parent Company in IBI and BPI. The offer period for the Bonds is from March 18 to
March 27, 2009, and issue date is on April 3, 2009.

Sale of SMB Shares

On February 20, 2009, the Parent Company signed a share purchase agreement for the
acquisition by Kirin Holdings Company, Limited (“Kirin”), of a 43.249% stake in SMB.
Under the terms of the agreement, purchase price of the shares amounts to P8.841 per
share, implying a total acquisition price at P58,924 million. Further to the agreement,
the Parent Company, Kirin and SMB will undertake to negotiate exclusively for SMB’s
potential purchase of shares in SMC’s overseas beer business. The exclusivity period is
for six months following SMC’s offer to sell the shares in its overseas beer business.

Parent Company Loan Availment

On February 17, 2009, the Parent Company issued floating rate notes amounting to
P1,000 million. The net proceeds of the term loan facility will be used by the Parent
Company for general financing and corporate requirements.

b. Contingencies

The Group is a party to certain lawsuits or claims (mostly labor related cases) filed by
third parties which are either pending decision by the courts or are subject to settlement
agreements. The outcome of these lawsuits or claims cannot be presently determined.
In the opinion of management and its legal counsel, the eventual liability from these
lawsuits or claims, if any, will not have a material effect on the consolidated financial
statements.
 Management Discussion and Analysis
Page 27

On April 12, 2004 and May 26, 2004, the Parent Company was assessed by the BIR for
deficiency excise tax on one of its beer products. The Parent Company contested the
assessments before the Court of Tax Appeals (CTA) under CTA case numbers 7052 and
7053. In the opinion of management and its legal counsel, the Parent Company has
strong legal grounds to contest the assessments.

In relation to the aforesaid contested assessments, the Parent Company, on January 31,
2006, filed with the CTA, under CTA case number 7405, a claim for refund of taxes
paid in excess of what it believes to be the excise tax rate applicable to it. An
independent Certified Public Accountant commissioned by the CTA to conduct an
examination, verification and audit to validate the documents supporting the claim for
refund has submitted a report stating, among other things, that the claim is properly
supported by the relevant documents.

On November 27, 2007, the Parent Company filed with the CTA, under CTA case
number 7708, a second claim for refund, also in relation to the contested assessments, as
it was obliged to continue paying excise taxes in excess of what it believes to be the
applicable excise tax rate. An independent Certified Public Accountant was likewise
commissioned by the CTA in this case for the purpose of conducting an examination,
verification and audit of the documents supporting the aforesaid claim. In a report
recently submitted to the CTA, the independent CTA stated that the second claim is
properly supported by the relevant documents.

On January 11, 2008, the BIR addressed a letter to the Parent Company, appealing to the
Parent Company to settle its alleged tax liabilities subject of CTA case numbers 7052
and 7053 “in order to obviate the necessity of issuing a Warrant of Distraint and
Garnishment and/or Levy”. The Parent Company’s external counsel responded to the
aforesaid letter and met with appropriate officials of the BIR and explained to the latter
the unfairness of the issuance of a Warrant of Distraint and Garnishment and/or Levy
against the Parent Company, especially in view of the Parent Company’s pending claims
for refund. As of March 26, 2009, the BIR has taken no further action on the matter.

c. Option Agreement with Sea Refinery Holdings B.V. (SEA BV)

On December 24, 2008, the Parent Company entered into an option agreement with SEA
BV pursuant to which SEA BV granted to the Parent Company an option to acquire and
purchase up to 100% of its interests in SEA BV’s wholly-owned subsidiary, SEA
Refinery Corporation (SRC), consisting of 40,000,000 shares of stock with a par value
of P1 per share (Option Shares). SRC owns 50.1% stake in Philippine oil refinery,
Petron Corporation. The option may be exercised by the Parent Company within a
period of two (2) years from December 24, 2008. The exercise price for the Option
Shares will be the sum of (a) the paid-up capital of SEA BV in SRC amounting to P40
and (b) the value of the shares acquired by SRC in Petron Corporation plus the
assumption of, if any, liability or obligation and expenses incurred by SRC for the
acquisition of the said shares. The Parent Company and SEA BV have agreed that the
Parent Company shall have representation in the board and management of Petron
Corporation.
 Management Discussion and Analysis
Page 28

d. Commitments

The outstanding purchase commitments of the Group as of December 31, 2008

amounted to =
P20,656 million.

Amount authorized but not yet disbursed for capital projects as of December 31, 2008 is
approximately =
P7,571 million.

e. Memorandum of Understanding with Qatar Telecom

On December 8, 2008, the Parent Company’s BOD allowed management to pursue a

joint venture partnership with Qatar Telecom QSC (QTel) to look into opportunities in
the wireless broadband, mobile and mobile broadband businesses in the Philippines.
QTel is an integrated telecommunications player based in Qatar, and a majority owned
by the State of Qatar.

On December 15, 2008, the Parent Company signed a memorandum of understanding

with QTel to partner in wireless broadbank and mobile communications projects in the
Philippines. The Parent Company is in talks with QTel for a possible investment in
Liberty Telecoms Holdings Inc.

f. Authority to Invest Corporate Funds and /or Engage in Other Businesses

On July 24, 2007, the shareholders authorized the Parent Company to invest corporate
funds and/or engage in new businesses like power generation or transmission, water,
other utilities, mining and infrastructure. Together with the core business of food,
beverage and packaging - which will form the bulk of the portfolio - these new
businesses aim to provide better aggregate growth margins and a stronger growth
platform moving forward.

g. Restructuring Plan

At the annual stockholders' meeting held on July 24, 2008, the stockholders authorized
(i) the Parent Company to pursue and implement a corporate restructuring plan which
may require, among others, the divestment of the Parent Company's interest in its major
subsidiaries, such as beer, food and packaging subsidiaries, with the Parent Company
retaining controlling interests/ownership of at least 51% in each of these major
subsidiaries, and (ii) the Board of Directors to approve the implementing transactions of
such corporate restructuring plan after evaluation and study by Management, subject to
applicable laws.

h. The foreign exchange rates used in translating the US dollar accounts of foreign
subsidiaries and associates to Philippine peso were closing rates of =
P47.52 in 2008 and
=41.28 in 2007 for balance sheet accounts; and average rates of =
P P44.47 in 2008, P46.18
in 2007 and =P51.32 in 2006 for income and expense accounts.

i. There are no unusual items as to nature and amount affecting assets, liabilities, equity,
net income or cash flows, except those stated in Management’s Discussion and Analysis
of Financial Conditions and Results of Operations.
 Management Discussion and Analysis
Page 29

j. There were no material changes in estimates of amounts reported in prior interim

periods of the current year or changes in estimates of amounts reported in prior financial
years.

k. There were no known trends, demands, commitments, events or uncertainties that will
have a material impact on the Group’s liquidity.

l. There were no known trends, events or uncertainties that have had or that are reasonably
expected to have a favorable or unfavorable impact on net sales or revenues or income
from continuing operation.

m. There were no known events that will trigger direct or contingent financial obligation
that is material to the Group, including any default or acceleration of an obligation and
there were no changes in contingent liabilities and contingent assets since the last annual
balance sheet date, except for Note 21 (c) of the 2008 Audited Consolidated Financial
Statements and Note b of Section VII above, that remain outstanding as of December 31,
2008. No material contingencies and any other events or transactions exist that are
material to an understanding of the current interim period.

n. There were no material off-balance sheet transactions, arrangements, obligations

(including contingent obligations), and other relationship of the Group with
unconsolidated entities or other persons created during the reporting period, except for
the outstanding derivative transactions entered by the Group as of and for the period
December 31, 2008.

o. The effects of seasonality or cyclicality on the interim operations of the Groups’s

businesses are not material.
 ANNEX “E”

SAN MIGUEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008, 2007 and 2006
 SAN MIGUEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Millions)

December 31

Note 2008 2007

ASSETS
Current Assets
Cash and cash equivalents 7, 36, 37 P116,939 P93,281
Trade and other receivables - net 4, 8, 36, 37 50,814 61,879
Inventories - net 4, 9 27,710 23,852
Current portion of biological assets - net 4, 13 2,932 2,324
Prepaid expenses and other current assets 31, 36, 37 5,868 5,677
204,263 187,013
Assets held for sale 6, 10 - 5,792
Total Current Assets 204,263 192,805
Noncurrent Assets
Investments and advances - net 4, 10, 36, 37 32,253 771
Property, plant and equipment - net 4, 11, 28 68,313 64,355
Investment properties - net 4, 12 1,838 1,648
Biological assets - net of current portion 4, 13 1,814 1,319
Goodwill - net 2, 4, 10, 14, 28 5,201 5,348
Other intangible assets - net 4, 14 3,812 3,202
Deferred tax assets 4, 20 7,638 4,973
Other noncurrent assets - net 4, 10, 15, 28, 31, 36, 37 14,241 13,688
Total Noncurrent Assets 135,110 95,304
P339,373 P288,109

LIABILITIES AND EQUITY

Current Liabilities
Drafts and loans payable 16, 36, 37 P48,560 P44,231
Accounts payable and accrued expenses 17, 31, 36, 37 23,292 20,311
Income and other taxes payable 20 4,429 3,327
Dividends payable 32 1,563 1,494
Current maturities of long-term debt - net
of debt issue costs 19, 36, 37 9,044 1,222
86,888 70,585
Liabilities directly associated with assets
held for sale 6 - 3,642
Total Current Liabilities 86,888 74,227
Forward
 December 31

Note 2008 2007

Noncurrent Liabilities
Long-term debt - net of current maturities and
debt issue costs 19, 36, 37 P40,719 P54,612
Deferred tax liabilities 20 17,851 12,721
Other noncurrent liabilities 30, 31, 36, 37 25,691 456
Total Noncurrent Liabilities 84,261 67,789
Equity 21, 32, 35
Equity Attributable to Equity Holders of
the Parent Company
Capital stock 16,112 16,109
Additional paid-in capital 31,183 30,930
Revaluation increment 18 18
Cumulative translation adjustments 4,837 4,834
Retained earnings:
Appropriated for expansion projects 5,522 6,034
Unappropriated 96,298 80,855
Treasury stock (4,053) (4,053)
149,917 134,727
Amounts recognized directly in equity
relating to assets held for sale 6 - 37
149,917 134,764
Non-controlling Interests 18,307 11,329
Total Equity 168,224 146,093
P 339,373 P288,109

See Notes to the Consolidated Financial Statements.

 SAN MIGUEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(In Millions, Except Per Share Data)

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
SALES P168,041 P148,022 P135,095
COST OF SALES 22 124,072 110,062 99,563
GROSS PROFIT 43,969 37,960 35,532
SELLING AND
ADMINISTRATIVE EXPENSES 23 (29,151) (26,333) (22,654)
INTEREST EXPENSE AND
OTHER FINANCING
CHARGES 16, 19, 26 (6,032) (7,117) (7,097)
INTEREST INCOME 27 6,630 2,087 2,763
EQUITY IN NET EARNINGS
(LOSSES) OF ASSOCIATES 6, 10 (1,132) 164 56
GAIN ON SALE OF
INVESTMENTS AND
PROPERTY, PLANT AND
EQUIPMENT 6, 10, 11 8,746 2,224 245
OTHER INCOME (CHARGES) - Net 28 (2,262) 3,614 3,192
INCOME BEFORE INCOME TAX
FROM CONTINUING
OPERATIONS 20,768 12,599 12,037
INCOME TAX EXPENSE 20 6,098 4,520 3,947
INCOME FROM CONTINUING
OPERATIONS 14,670 8,079 8,090
INCOME AFTER INCOME TAX
FROM DISCONTINUED
OPERATIONS 6 5,413 272 1,809
NET INCOME P20,083 P8,351 P9,899
Attributable to:
Equity holders of the Parent Company P19,348 P8,630 P10,306
Non-controlling interests 735 (279) (407)
P20,083 P8,351 P9,899
Earnings Per Share From
Continuing Operations, attributable
to equity holders of the Parent
Company 33
Basic P4.41 P2.59 P2.51
Diluted P4.40 P2.58 P2.50
See Notes to the Consolidated Financial Statements.
 SAN MIGUEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(In Millions)

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax from
continuing operations P20,768 P12,599 P12,037
Income (loss) before income tax from
discontinued operations 6 (19) 2,681 2,822
Gain (loss) from disposal of
discontinued operations 6 5,425 (1,235) -
Income before income tax 26,174 14,045 14,859
Adjustments for:
Depreciation, amortization and
others - net 5 9,677 11,140 11,875
Interest expense and financing
charges 6, 26 6,032 10,101 10,762
Interest income (6,630) (2,404) (2,994)
Equity in net losses (earnings)
of associates 10 1,132 (246) (170)
Loss (gain) from disposal of
discontinued operations 6 (5,425) 1,235 -
Gain on sale of investments
and property and equipment (8,746) (2,219) (272)
Operating income before working
capital changes 22,214 31,652 34,060
Changes in noncash current
assets, certain current liabilities
and others 34 (1,288) 15,205 822
Cash generated from operations 20,926 46,857 34,882
Interest paid (6,039) (10,353) (12,698)
Income taxes paid (7,835) (6,201) (4,895)
Net cash flows provided by
operating activities 7,052 30,303 17,289
CASH FLOWS FROM
INVESTING ACTIVITIES
Acquisitions of subsidiaries, net of
cash and cash equivalents acquired 34 - - (4,981)
Additions to investments and advances (6,667) - (3)
Additions to property, plant and
equipment 11 (6,437) (9,310) (12,593)
Increase in other noncurrent assets
and others (16,010) (14,820) (4,931)
Forward
 2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Payment by (advances to)
a related party 8, 29 P31,708 (P35,721) P -
Proceeds from sale of investments and
property and equipment 13,663 6,269 2,741
Proceeds from disposal of discontinued
operations, net of cash and cash
equivalents disposed of 6 9,083 90,684 -
Interest received 6,558 2,374 3,015
Dividends received - 59 73
Net cash flows provided by (used in)
investing activities 31,898 39,535 (16,679)
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from:
Short-term borrowings 608,756 345,789 232,386
Long-term borrowings 64 84,398 17,354
Payments of:
Short-term borrowings (605,088) (337,512) (222,865)
Long-term borrowings (13,336) (88,342) (19,892)
Cash dividends paid 32 (4,463) (3,228) (4,369)
Issuances of capital stock 21, 35 - 490 600
Dividends paid to non-controlling
shareholders (393) (123) (157)
Increase in non-controlling interests 592 - 480
Net cash flows provided by (used in)
financing activities (13,868) 1,472 3,537
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS (1,424) (1,016) (743)
NET INCREASE IN CASH AND
CASH EQUIVALENTS 23,658 70,294 3,404
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 93,281 24,280 20,876
CASH AND CASH EQUIVALENTS
ASSOCIATED TO ASSETS
HELD FOR SALE 6, 7 - (1,293) -
CASH AND CASH EQUIVALENTS
AT END OF YEAR 7 P116,939 P93,281 P24,280

See Notes to the Consolidated Financial Statements.

 SAN MIGUEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(In Millions)

Non-
controlling Total
Equity Attributable to Equity Holders of the Parent Company Interests Equity
Additional Cumulative
Capital Paid-in Revaluation Translation Retained Earnings Treasury
Note Stock Capital Increment Adjustments Appropriated Unappropriated Stock Total
At January 1, 2008 P16,109 P30,930 P18 P4,871 P6,034 P80,855 (P4,053) P134,764 P11,329 P146,093
Changes in the fair value of cash
flow hedges, net of tax - - - (218) - - - (218) - (218)
Net effect of translation adjustments - - - 184 - - - 184 - 184
Net income for the year - - - - - 19,348 - 19,348 735 20,083
Total income and expense for the
year - - - (34) - 19,348 - 19,314 735 20,049
Issuances of capital stock 21, 35 3 - - - - - - 3 - 3
Stock options 35 - 253 - - - - - 253 - 253
Addition in non-controlling interests - - - - - - - - 6,751 6,751
Appropriations - net 21 - - - - (512) 512 - - - -
Cash dividends 32 - - - - - (4,417) - (4,417) (508) (4,925)
At December 31, 2008 21 P16,112 P31,183 P18 P4,837 P5,522 P96,298 (P4,053) P149,917 P18,307 P168,224
Forward
 Non-
controlling Total
Equity Attributable to Equity Holders of the Parent Company Interests Equity
Additional Cumulative
Capital Paid-in Revaluation Translation Retained Earnings Treasury
Note Stock Capital Increment Adjustments Appropriated Unappropriated Stock Total
At January 1, 2007 P16,067 P30,211 P18 P4,577 P6,036 P76,637 (P4,053) P129,493 P21,604 P151,097
Changes in the fair value of cash
flow hedges, net of tax - - - 162 - - - 162 - 162
Net effect of translation adjustments - - - 95 - - - 95 - 95
Net income for the year - - - - - 8,630 - 8,630 (279) 8,351
Total income and expense for the
year - - - 257 - 8,630 - 8,887 (279) 8,608
Issuances of capital stock 21, 35 42 461 - - - - - 503 - 503
Stock options 35 - 258 - - - - - 258 - 258
Reduction in non-controlling interests - - - - - - - - (1,058) (1,058)
Non-controlling interests associated
with discontinued operations 6 - - - - - - - - (8,824) (8,824)
Appropriations - net 21 - - - - (2) 2 - - - -
Cash dividends 32 - - - - - (4,414) - (4,414) (114) (4,528)
21 16,109 30,930 18 4,834 6,034 80,855 (4,053) 134,727 11,329 146,056
Amounts recognized directly in
equity relating to assets held
for sale 6 - - - 37 - - - 37 - 37
At December 31, 2007 P16,109 P30,930 P18 P4,871 P6,034 P80,855 (P4,053) P134,764 P11,329 P146,093
Forward
 Non-
controlling Total
Equity Attributable to Equity Holders of the Parent Company Interests Equity
Additional Cumulative
Capital Paid-in Revaluation Translation Retained Earnings Treasury
Note Stock Capital Increment Adjustments Appropriated Unappropriated Stock Total
At January 1, 2006, P16,031 P29,647 P18 P5,619 P6,087 P69,581 (P4,053) P122,930 P14,013 P136,943
Changes in the fair value of cash
flow hedges, net of tax - - - 18 - - - 18 - 18
Net effect of translation
adjustments - - - (1,060) - - - (1,060) - (1,060)
Net income for the year - - - - - 10,306 - 10,306 (407) 9,899
Total income and expense for the
year - - - (1,042) - 10,306 - 9,264 (407) 8,857
Issuances of capital stock 21, 35 36 376 - - - - - 412 - 412
Stock options 35 - 188 - - - - - 188 - 188
Addition in non-controlling interests - - - - - - - - 1,234 1,234
Reclassification of redeemable
preferred shares to equity 18 - - - - - - - - 6,917 6,917
Appropriations - net 21 - - - - (51) 51 - - - -
Cash dividends 32 - - - - - (3,301) - (3,301) (153) (3,454)
At December 31, 2006 21 P16,067 P30,211 P18 P4,577 P6,036 P76,637 (P4,053) P129,493 P21,604 P151,097
See Notes to the Consolidated Financial Statements.
 SAN MIGUEL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Millions, Except Per Share Data)

1. Reporting Entity

San Miguel Corporation (SMC or Parent Company) was incorporated in the Philippines.
The consolidated financial statements as at and for the year ended December 31, 2008
comprise the financial statements of the Parent Company and its Subsidiaries
(collectively referred to as the “Group”) and the Group’s interest in associates and jointly
controlled entities. The Parent Company is a public company under Section 17.2 of the
Securities Regulation Code and its shares are listed on the Philippine Stock Exchange
(PSE). The Group is primarily engaged in the production, processing and marketing of
beverage, food and packaging products. The Group is also engaged in the management
and development of real estate properties. The Parent Company is also authorized to
invest corporate funds and/or engage in the power generation/transmission, water and
other utilities, mining and infrastructure business. The registered office address of the
Parent Company is No. 40 San Miguel Avenue, Mandaluyong City.

The consolidated financial statements as at and for the year ended December 31, 2008
were authorized for issue by the Board of Directors (BOD) on March 26, 2009.

2. Basis of Preparation

The consolidated financial statements of the Group have been prepared on a historical
cost basis, except for the following:

derivative financial instruments are measured at fair value;

available-for-sale financial assets are measured at fair value; and

agricultural produce are measured at fair value less estimated point-of-sale costs.

Functional and Presentation Currency

The consolidated financial statements are presented in Philippine peso, which is the
Parent Company’s functional currency under Philippine Financial Reporting Standards
(PFRS). All values are rounded to the nearest million (P000,000), except when
otherwise indicated.

Statement of Compliance
The consolidated financial statements have been prepared in compliance with PFRS.
PFRS includes statements named PFRS and Philippine Accounting Standards (PAS),
including Philippine interpretations from International Financial Reporting Interpretation
Committee (IFRIC), issued by the Financial Reporting Standards Council (FRSC).
Basis of Consolidation
The consolidated financial statements include the accounts of the Parent Company and its
Subsidiaries. The major subsidiaries include the following:

Percentage Country
of Ownership of Incorporation
Beverage Business:
San Miguel Brewery Inc. (SMB)(a) 94.25 Philippines
San Miguel Brewing International Ltd.
and subsidiaries [including San Miguel
Brewery Hong Kong Limited (SMBHK), PT Delta Djakarta
Tbk (PT-Delta), San Miguel Bada (Baoding) Utility Co. Ltd.
(SMBB), San Miguel (Baoding) Brewery Co. Ltd., San
Miguel Brewery Vietnam Ltd. (SMBV) and San Miguel Beer British Virgin
(Thailand) Ltd. (SMHT)] 100.00 Islands (BVI)
Ginebra San Miguel, Inc. (GSMI)
and subsidiaries [including Distileria Bago, Inc. and Ginebra
San Miguel International, Ltd. (GSMIL)] 79.53 Philippines
San Miguel Beverages, Inc. (SMBI)(d) 100.00 Philippines
San Miguel (Thailand) Co. Ltd. 100.00 Thailand
San Miguel (Guangdong) Foods & Beverages Co. Ltd. 100.00 China
San Miguel (Vietnam) Co. Ltd. 100.00 Vietnam
PT San Miguel Marketing Indonesia 100.00 Indonesia
PT San Miguel Indonesia Foods & Beverages 93.75 Indonesia
San Miguel (Malaysia) Sdn Bhd 100.00 Malaysia
San Miguel Australia Holdings Ltd. (SMAH)
and subsidiary, J. Boag & Son Pty Ltd. (J. Boag)(b,c) 100.00 Australia
Food Business:
San Miguel Foods and Beverage International
Limited (SMFBIL) and subsidiaries
[including San Miguel Pure Foods
Investment (BVI) Limited (SMPFI) and
San Miguel Pure Foods (Vn) Co. Ltd. (SMPFVN)] 100.00 BVI
Star Dari, Inc. (SDI) 100.00 Philippines
San Miguel Pure Foods Company, Inc.
(SMPFC) (f) and subsidiaries [including San
Miguel Foods, Inc. (SMFI),
San Miguel Mills, Inc. (SMMI),
The Purefoods-Hormel Company, Inc.,
Magnolia Inc. (Magnolia), San Miguel Super
Coffeemix Co., Inc. (SMSCCI),
Monterey Foods Corporation (MFC)(g),
RealSnacks Mfg. Corporation (RealSnacks)(b,e)
and P.T. San Miguel Pure Foods
Indonesia Ltd. (PTSMPFI) (b)] 99.92 Philippines
Packaging Business:
San Miguel Yamamura Packaging Corporation
(SMYPC) (i, m) and subsidiary,
San Miguel Yamamura Fuso Molds Corporation (SYFMC) ( j) 65.00 Philippines
San Miguel Yamamura Packaging International Limited
(SMYPIL) (i, n) and subsidiaries including San Miguel
Yamamura Haiphong Glass Co. Ltd. (SMYHG), San Miguel
Yamamura Phu Tho Packaging Co. Ltd. (SMYPTPCL) (o),
Zhaoqing San Miguel Yamamura Glass Co., Ltd. (p), Foshan
San Miguel Yamamura Packaging Co. Ltd. (FSMYPC) (q),
PT San Miguel Sampoerna Packaging Industries Ltd.
(PTSMSPIL), San Miguel Yamamura Packaging & Printing
Sdn. Bhd. (r), San Miguel Yamamura Woven Products Sdn.
Bhd. (s), San Miguel Packaging Research Center Sdn. Bhd.
and San Miguel Plastic Films Sdn. Bhd. (SMPF)] 65.00 BVI
Mindanao Corrugated Fibreboard, Inc. (Mincorr)(b) 73.33 Philippines
Forward

-2-
 Percentage Country
of Ownership of Incorporation
San Miguel Rengo Packaging Corporation
(SMRPC)(b) 70.00 Philippines
San Miguel Yamamura Asia Corporation
(SMYAC) 60.00 Philippines
Real Estate Business:
San Miguel Properties, Inc. (SMPI)
and subsidiaries (b) 99.68 Philippines
Brewery Properties, Inc. (BPI) (k) 100.00 Philippines
Others:
SMC Stock Transfer Service Corporation 100.00 Philippines
ArchEn Technologies, Inc. 100.00 Philippines
SMITS, Inc.(b) 100.00 Philippines
SM Bulk Water Company Inc. 100.00 Philippines
San Miguel Energy Corporation (e) 100.00 Philippines
Iconic Beverages, Inc. (IBI) (k) 100.00 Philippines
Pacific Central Properties, Inc. 100.00 Philippines
Philippine Breweries Corporation (PBC) 99.52 Philippines
San Miguel Holdings Corporation(t) and subsidiaries 100.00 Philippines
Seaside Industrial Estate, Inc. (b) 100.00 Philippines
Navotas Ridge Realty Corporation (NRRC) (b, e) 100.00 Philippines
SMC Shipping and Lighterage Corporation
(SMCSLC) 70.00 Philippines
Anchor Insurance Brokerage Corporation
(AIBC) 58.33 Philippines
Challenger Aero Air Corp. 100.00 Philippines
San Miguel Distribution Co., Inc. (SMDCi) (h) 100.00 Philippines
San Miguel Kuok Food Security, Inc. (SMKFSI) (e, l) 100.00 Philippines
(a) This was formerly the Domestic Beer Division of the Parent Company and was incorporated on
July 26, 2007 (Note 10).
(b) The financial statements of these subsidiaries were audited by other auditors.
(c) Discontinued operations (Note 6).
(d) Consolidated effective January 10, 2007.
(e) Not yet operating as of December 31, 2008.
(f) The Parent Company’s percentage of ownership was 99.83% in 2006.
(g) Consolidated to SMPFC effective January 1, 2007.
(h) Consolidated effective June 18, 2007.
(i) The Parent Company’s percentage of ownership was 100% in 2007 and 2006.
(j) Consolidated to SMYPC effective January 2008. As of December 31, 2007, SYFMC was 60%
owned by the Parent Company.
(k) Consolidated effective December 16, 2008.
(l) Consolidated effective September 5, 2008.
(m) Formerly San Miguel Packaging Specialists, Inc.
(n) Formerly San Miguel Packaging International Limited (SMPIL)
(o) Formerly San Miguel Phu Tho Packaging Co. Ltd.
(p) Formerly Zhaoqing San Miguel Glass Co. Ltd.
(q) Formerly Foshan San Miguel Packaging Co. Ltd.
(r) Formerly San Miguel Packaging & Printing Sdn. Bhd.
(s) Formerly San Miguel Woven Products Sdn. Bhd.
(t) Formerly San Miguel Logistics Asia Corporation

A subsidiary is an entity controlled by the Group. Control exists when the Group has the
power, directly or indirectly, to govern the financial and operating policies of an entity so
as to obtain benefit from its activities. In assessing control, potential voting rights that
are presently exercisable or convertible are taken into account. The financial statements
of the subsidiaries are included in the consolidated financial statements from the date
when the Group obtains control, and continue to be consolidated until the date when such
control ceases.

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 The consolidated financial statements are prepared for the same reporting period as the
Parent Company, using uniform accounting policies for like transactions and other events
in similar circumstances. Intergroup balances and transactions, including intergroup
unrealized profits and losses, are eliminated in preparing the consolidated financial
statements.

Non-controlling interests represent the portion of profit or loss and net assets not held by
the Group and are presented in the consolidated balance sheets, separately from equity
attributable to equity holders of the Parent Company.

Non-controlling interests represent the interest not held by the Group in GSMI, SMPFC,
Mincorr, SMRPC, SMYAC, SYFMC, SMPI, PBC, SMCSLC, AIBC, PT-Delta, SMHT,
SMBHK, SMBB, SMBV, SMPFI, PTSMPFI, PTSMSPIL, SMYPTPCL, SMPF,
FSMPC, ZSMYGC and SMYHG in 2008 and 2007 and also SMB, SMYPIL and
SMYPC in 2008.

3. Significant Accounting Policies

The accounting policies set out below have been applied consistently by the Group to all
periods presented in the consolidated financial statements.

Adoption of New Standards, Amendments to Standards and Interpretations

The FRSC approved the adoption of new or revised standards, amendments to standards,
and interpretations as part of PFRS.

Amendments to Standard and Interpretations Adopted in 2008

Starting January 1, 2008, the Group adopted the following amended PAS and Philippine
Interpretations from IFRIC:

Philippine Interpretation IFRIC 11, PFRS 2 - Group and Treasury Share

Transactions: This interpretation addresses how to apply PFRS 2, Share-based
Payment, to share-based payment arrangements involving an entity’s own equity
instruments and share-based payment arrangements involving equity instruments of
the parent company, where a parent company grants rights to its equity instruments
to the employees of its subsidiary or a subsidiary grants rights to equity instruments
of its parent company to its employees. The adoption of this interpretation did not
have a material effect on the consolidated financial statements.

Philippine Interpretation IFRIC 14, PAS 19 - The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction: This interpretation provides
general guidance on how to assess the limit in PAS 19, Employee Benefits, on the
amount of the surplus that can be recognized as an asset. It also explains how the
pension asset or liability may be affected when there is a statutory or contractual
minimum funding requirement. The adoption of this interpretation did not have a
material effect on the consolidated financial statements.

-4-

Amendments to PAS 39, Financial Instruments: Recognition and Measurement, and
PFRS 7, Financial Instruments: Disclosures: This standard permits an entity to
reclassify non-derivative financial assets, other than those designated at fair value
through profit or loss upon initial recognition, out of the trading category in certain
circumstances. The amendments also permit an entity to transfer from the available-
for-sale category to the loans and receivables category a financial asset that otherwise
would have met the definition of loans and receivables, if the entity has the intention
and ability to hold that financial asset for the foreseeable future. The adoption of
these amendments did not have an effect on the consolidated financial statements.

New and Revised Standards, Amendments to Standards and Interpretations Not Yet
Adopted
The following are the new standards, amendments to standards and interpretations which
are not yet effective for the year ended December 31, 2008, and have not been applied in
preparing these consolidated financial statements:

Philippine Interpretation IFRIC 13, Customer Loyalty Programmes, becomes

effective for financial years beginning on or after July 1, 2008. This interpretation
addresses the accounting by entities that operate, or otherwise participate in,
customer loyalty programmes under which the customer can redeem credits for
awards such as free or discounted goods or services. This interpretation is not
expected to have a significant effect on the consolidated financial statements.

Philippine Interpretation IFRIC 16, Hedges of a Net investment in a Foreign

Operation, becomes effective for financial years beginning on or after October 1,
2008. This interpretation applies to all entities using net investment hedging for
investments in foreign operations and clarifies that net investment hedging can be
applied only when the net assets of the foreign operation are included in the financial
statements of the entity. The requirements in the interpretation do not apply to other
forms of hedge accounting under PAS 39 and cannot be applied by analogy. IFRIC
16 provides guidance on the following issues: a) nature of the hedged risk and the
amount of the hedged item for which a hedging relationship may be designated; b)
where the hedging instrument can be held and assessing hedge effectiveness; and c)
disposal of a foreign operation. The Group will assess the impact of this
interpretation upon its adoption.

PFRS 8, Operating Segments, becomes effective for financial years beginning on or

after January 1, 2009 and will replace PAS 14, Segment Reporting. This standard
introduces the “management approach” to segment reporting and will require a
change in the presentation and disclosure of segment information based on the
internal reports regularly reviewed by the Company’s Chief Operating Decision
Maker in order to assess each segment’s performance and to allocate resources to
them. Currently, the Group presents segment information in respect of its business
and geographical segments (Note 5). The Group is currently assessing the impact of
the revised standard on the consolidated financial statements when it adopts the
standard on January 1, 2009.

-5-

Revised PAS 1, Presentation of Financial Statements, becomes effective for
financial years beginning on or after January 1, 2009. The standard has been revised
to introduce the term total comprehensive income, which represents changes in
equity during a period other than those changes resulting from transactions with
owners in their capacity as owners. Total comprehensive income may be presented in
either a single statement of comprehensive income (effectively combining both the
income statement and all non-owner changes in equity in a single statement), or in an
income statement and a separate statement of comprehensive income. The Group is
currently assessing the impact of the revised standard on the consolidated financial
statements when it adopts the standard on January 1, 2009.

Revised PAS 23, Borrowing Costs, becomes effective for financial years beginning
on or after January 1, 2009. The standard removes the option to expense borrowing
costs and requires an entity to capitalize borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset as part of the cost of that
asset. The Group will assess the impact of this revised standard on the consolidated
financial statements when it adopts the standard on January 1, 2009.

Amendments to PAS 32, Financial Instruments: Presentation and PAS 1,

Presentation of Financial Statements – Puttable Financial Instruments and
Obligations Arising on Liquidation, becomes effective for financial years beginning
on or after January 1, 2009. The standard has been amended to require puttable
instruments, and instruments that impose on the entity an obligation to deliver to
another party a pro rata share of the net assets of the entity only on liquidation, to be
classified as equity if certain conditions are met. The Group will assess the impact of
this revised standard on the consolidated financial statements when it adopts the
standard on January 1, 2009.

Amendment to PFRS 2, Share-based Payment - Vesting Conditions and

Cancellations, becomes effective for financial years beginning on or after January 1,
2009. The standard has been amended to clarify the definition of vesting conditions,
introduce the concept of non-vesting conditions, require non-vesting conditions to be
reflected in grant-date fair value and provide the accounting treatment for non-
vesting conditions and cancellations. The Group will assess the impact of this revised
standard on the consolidated financial statements when it adopts the standard on
January 1, 2009.

Amended PFRS 1 and PAS 27, Cost of an Investment in a Subsidiary, Jointly

Controlled Entity or Associate, becomes effective for financial years beginning on or
after January 1, 2009. The amendments to PFRS 1 allow a first-time adopter, at its
date of transition to IFRSs in its separate financial statements, to use deemed cost to
account for an investment in a subsidiary, jointly controlled entity or associate. The
amendments to PAS 27 remove the definition of “cost method” currently set out in
PAS 27, and instead require all dividend from a subsidiary, jointly controlled entity
or associate to be recognized as income in the separate financial statements of the
investor when the right to receive the dividend is established. The Group will assess
the impact of this revised standard on the consolidated financial statements when it
adopts the standard on January 1, 2009.

-6-

Improvements to PFRS 2008 discusses 35 amendments and is divided into two parts:
a) Part I includes 24 amendments that result in accounting changes for presentation,
recognition or measurement purposes ; and b) Part II includes 11 terminology or
editorial amendments that the International Accounting Standards Board expects to
have either no or only minimal effects on accounting. These improvements are
generally effective for annual periods beginning on or after January 1, 2009. The
effect of the improvements in 2009 is not expected to have any material effect on the
consolidated financial statements.

Revised PFRS 3, Business Combinations, incorporates the following changes that are
likely to be relevant to the Group’s operations:

o The definition of a business has been broadened, which is likely to result in

more acquisitions being treated as business combinations.

o Contingent consideration will be measured at fair value, with subsequent

changes therein recognised in profit or loss.

o Transaction costs, other than share and debt issue costs, will be expensed as
incurred.

o Any pre-existing interest in the acquiree will be measured at fair value with
the gain or loss recognised in profit or loss.

o Any non-controlling interest will be measured at either fair value, or at its

proportionate interest in the identifiable assets and liabilities of the acquiree,
on a transaction-by-transaction basis.

Revised PFRS 3, which becomes mandatory for the 2010 consolidated financial
statements, will be applied prospectively and therefore will have no impact on prior
periods in the 2010 consolidated financial statements.

Amended PAS 27, Consolidated and Separate Financial Statements, requires

accounting for changes in ownership interests by the Group in a subsidiary, while
maintaining control, to be recognised as an equity transaction. When the Group loses
control of a subsidiary, any interest retained in the former subsidiary will be
measured at fair value with the gain or loss recognised in profit or loss. The Group
will assess the impact of this amended standard when it becomes mandatory for the
2010 consolidated financial statements.

Amendments to PAS 39, Financial Instruments: Recognition and Measurement –

Eligible Hedged Items, becomes effective for financial years beginning on or after
July 1, 2009. The standard has been amended to provide for the following: a) new
application guidance to clarify the existing principles that determine whether specific
risks or portions of cash flows are eligible for designation in a hedge relationship;
and b) additional application guidance on qualifying items; assessing hedge
effectiveness; and designation of financial items as hedged items. The amendments
to PAS 39, which will become mandatory for the 2010 consolidated financial
statements are not expected to have a significant impact on the consolidated financial
statements.

-7-

Philippine Interpretation IFRIC 17, Distributions of Non-cash Assets to Owners,
becomes effective for financial years beginning on or after July 1, 2009. This
interpretation provides guidance on the accounting for non-reciprocal distributions of
non-cash assets to owners acting in their capacity as owners. It also applies to
distributions in which the owners may elect to receive either the non-cash asset or a
cash alternative. The liability for the dividend payable is measured at the fair value of
the assets to be distributed. The Group will assess the impact of this interpretation on
the consolidated financial statements when it adopts the standard in
July 1, 2009.

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate,
becomes effective for financial years beginning on or after January 1, 2012. This
interpretation applies to the accounting for revenue and associated expenses by
entities that undertake the construction of real estate directly or through
subcontractors. It provides guidance on the recognition of revenue among real estate
developers for sales of units, such as apartments or houses, ‘off plan’, i.e., before
construction is complete. It also provides guidance on how to determine whether an
agreement for the construction of real estate is within the scope of PAS 11,
Construction Contracts, or PAS 18, Revenue, and the timing of revenue recognition.
The Group will assess the impact of this interpretation upon adoption.

Cash and Cash Equivalents

Cash includes cash on hand and in banks which are stated at face value. Cash equivalents
are short-term, highly liquid investments that are readily convertible to known amounts
of cash with original maturities of three months or less and are subject to an insignificant
risk of change in value.

Financial Assets and Liabilities

Date of Recognition. The Group recognizes a financial asset or a financial liability in the
consolidated balance sheets when it becomes a party to the contractual provisions of the
instrument. In the case of a regular way purchase or sale of financial assets, recognition
and derecognition, as applicable, is done using settlement date accounting.

Initial Recognition of Financial Instruments. Financial instruments are recognized

initially at fair value, which is the fair value of the consideration given (in case of an
asset) or received (in case of a liability). The fair value of the consideration given or
received is determined by reference to the transaction price or other market prices. If
such market prices are not reliably determinable, the fair value of the consideration is
estimated as the sum of all future cash payments or receipts, discounted using the
prevailing market rate of interest for similar instruments with similar maturities. The
initial measurement of financial instruments, except for those designated at fair value
through profit and loss (FVPL), includes transaction costs.

Subsequent to initial recognition, the Group classifies its financial assets and liabilities in
the following categories: held-to-maturity (HTM) financial assets, available-for-sale
(AFS) investments, FVPL financial assets and loans and receivables. The classification
depends on the purpose for which the investments are acquired and whether they are
quoted in an active market. Management determines the classification of its financial
assets at initial recognition and, where allowed and appropriate, re-evaluates such
designation at every reporting date.

-8-
Determination of Fair Value. The fair value for financial instruments traded in active
markets at the balance sheet date is based on their quoted market price or dealer price
quotations (bid price for long positions and ask price for short positions), without any
deduction for transaction costs. When current bid and asking prices are not available, the
price of the most recent transaction provides evidence of the current fair value as long as
there has not been a significant change in economic circumstances since the time of the
transaction.

For all other financial instruments not listed in an active market, the fair value is
determined by using appropriate valuation techniques. Valuation techniques include net
present value techniques, comparison to similar instruments for which market observable
prices exist, options pricing models and other relevant valuation models.

Day 1 Profit. Where the transaction price in a non-active market is different from the fair
value of the other observable current market transactions in the same instrument or based
on a valuation technique whose variables include only data from observable market, the
Group recognizes the difference between the transaction price and fair value (a Day 1
Profit) in the consolidated statements of income unless it qualifies for recognition as
some other type of asset. In cases where use is made of data which are not observable,
the difference between the transaction price and model value is only recognized in the
consolidated statements of income when the inputs become observable or when the
instrument is derecognized. For each transaction, the Group determines the appropriate
method of recognizing the ‘day 1’ profit amount.

Financial Assets
Financial Assets at FVPL. Financial assets at FVPL include financial assets held for
trading and financial assets designated upon initial recognition at FVPL.

Financial assets are classified as held for trading if they are acquired for the purpose of
selling in the near term. Gains or losses on investments held for trading are recognized in
the consolidated statements of income.

Financial assets may be designated by management at initial recognition at FVPL, when

any of the following criteria is met:

the designation eliminates or significantly reduces the inconsistent treatment

that would otherwise arise from measuring the assets or recognizing gains or
losses on a different basis; or

the assets are part of a group of financial assets, financial liabilities or both
which are managed and their performance are evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy; or

the financial instrument contains an embedded derivative, unless the embedded

derivative does not significantly modify the cash flows or it is clear, with little
or no analysis, that it would not be separately recognized.

Derivatives are also classified as held for trading unless they are designated as effective
hedging instruments.

The Group accounts for its derivative transactions (including embedded derivatives)
under this category with fair value changes being reported directly to profit or loss,
except when the derivative is treated as an effective accounting hedge, in which the fair
value change is deferred in equity under “Cumulative translation adjustments” account.

-9-
The Group’s derivative assets are classified under this category (Note 37).

The carrying values of financial assets under this category amounted to P191 and P926 as
of December 31, 2008 and 2007, respectively (Note 37).

Loans and Receivables. Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They are not
entered into with the intention of immediate or short-term resale and are not designated
as AFS or financial asset at FVPL. Loans and receivables are carried at cost or amortized
cost, less impairment in value. Amortization is determined using the effective interest
method.

The Group’s cash and cash equivalents, trade and other receivables and noncurrent
receivables and deposits are included in this category (Notes 7, 8 and 15).

The carrying values of financial assets under this category amounted to P175,192 and
P162,597 as of December 31, 2008 and 2007, respectively (Note 37).

HTM Investments. HTM investments are quoted non-derivative financial assets with
fixed or determinable payments and fixed maturities for which the Group’s management
has the positive intention and ability to hold to maturity. Where the Group sells other
than an insignificant amount of HTM investments, the entire category would be tainted
and classified as AFS investments. After initial measurement, these investments are
measured at amortized cost using the effective interest method, less impairment in value.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees that are integral part of the effective interest rate.

Gains and losses are recognized in the consolidated statements of income when the HTM
investments are derecognized or impaired, as well as through the amortization process.

The Group’s HTM investments matured in 2006.

AFS Investments. AFS investments are non-derivative financial assets that are designated
in this category or are not classified in any of the other categories. Subsequent to initial
recognition, AFS investments are carried at fair value in the consolidated balance sheets.
Changes in the fair value of such assets are reported in the equity section of the
consolidated balance sheets until the investment is derecognized or the investment is
determined to be impaired. On derecognition or impairment, the cumulative gain or loss
previously reported in equity is transferred to the consolidated statements of income.
Interest earned on holding AFS investments are recognized in the consolidated
statements of income using effective interest rate.

The Group’s investments in equity securities included under “Investments and advances”
account are classified under this category (Note 10).

The carrying values of financial assets under this category amounted to P590 and P551 as
of December 31, 2008 and 2007, respectively (Note 37).

Financial Liabilities
Financial Liabilities at FVPL. Financial liabilities are classified in this category if these
result from trading activities or derivative transactions that are not accounted for as
accounting hedges, or when the Group elects to designate a financial liability under this
category.

- 10 -
Included in this category are the Group’s derivative financial instruments with negative
fair values (Notes 17 and 37).

The carrying values of financial liabilities under this category amounted to P2,353 and
P897 as of December 31, 2008 and 2007, respectively (Notes 17 and 37).

Other Financial Liabilities. This category pertains to financial liabilities that are not held
for trading or not designated as at FVPL upon the inception of the liability. These
include liabilities arising from operations or borrowings.

Financial liabilities are recognized initially at fair value and are subsequently carried at
amortized cost, taking into account the impact of applying the effective interest method
of amortization (or accretion) for any related premium, discount and any directly
attributable transaction costs.

Included in this category are the Group’s drafts and loans payable, accounts payable and
accrued expenses, long-term debt and other noncurrent liabilities (Notes 16, 17, 19
and 37).

The carrying values of financial liabilities under this category amounted to P144,953 and
P119,935 as of December 31, 2008 and 2007, respectively (Note 37).

Debt Issue Costs

Debt issue costs are shown as deduction against the related debt and are amortized over
the terms of the related borrowings using the effective interest method.

Derivative Financial Instruments and Hedging

Freestanding Derivatives
For the purpose of hedge accounting, hedges are classified as either: a) fair value hedges
when hedging the exposure to changes in the fair value of a recognized asset or liability
or an unrecognized firm commitment (except for foreign currency risk); b) cash flow
hedges when hedging exposure to variability in cash flows that is either attributable to a
particular risk associated with a recognized asset or liability or a highly probable forecast
transaction or the foreign currency risk in an unrecognized firm commitment; or
c) hedges of a net investment in foreign operations.

At the inception of a hedge relationship, the Group formally designates and documents
the hedge relationship to which the Group wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge. The documentation
includes identification of the hedging instrument, the hedged item or transaction, the
nature of the risk being hedged and how the entity will assess the hedging instrument’s
effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash
flows attributable to the hedged risk. Such hedges are expected to be highly effective in
achieving offsetting changes in fair value or cash flows and are assessed on an on-going
basis to determine that they actually have been highly effective throughout the financial
reporting periods for which they were designated.

Fair Value Hedge. Derivatives classified as fair value hedges are carried at fair value
with corresponding change in fair value recognized in the consolidated statements of
income. The carrying amount of the hedged asset or liability is also adjusted for changes
in fair value attributable to the hedged item and the gain or loss associated with that
remeasurement is also recognized in the consolidated statements of income.

- 11 -
When the hedge ceases to be highly effective, hedge accounting is discontinued and the
adjustment to the carrying amount of a hedged financial instrument is amortized
immediately.

As of December 31, 2008 and 2007, the Group has no outstanding derivatives accounted
for as fair value hedges.

Cash Flow Hedge. Changes in the fair value of a hedging instrument that qualifies as a
highly effective cash flow hedge are included in the consolidated statements of changes
in equity under “Cumulative translation adjustments” account. The ineffective portion is
immediately recognized in the consolidated statements of income.

If the hedged cash flow results in the recognition of an asset or a liability, all gains and
losses previously recognized directly in equity are transferred from equity and included
in the initial measurement of the cost or carrying value of the asset or liability.
Otherwise, for all other cash flow hedges, gains and losses initially recognized in equity
are transferred from equity to net income in the same period or periods during which the
hedged forecasted transaction or recognized asset or liability affect the consolidated
statements of income.

When the hedge ceases to be highly effective, hedge accounting is discontinued

prospectively. In this case, the cumulative gain or loss on the hedging instrument that
has been reported directly in equity is retained in equity until the forecasted transaction
occurs. When the forecasted transaction is no longer expected to occur, any net
cumulative gain or loss previously reported in equity is recognized in the consolidated
statements of income.

As of December 31, 2008, the Group has outstanding commodity options accounted for
as cash flow hedge.

Net Investment Hedge. As of December 31, 2008, the Group has no hedge of a net
investment in a foreign operation.

For derivatives that do not qualify for hedge accounting, any gains or losses arising from
changes in fair value of derivatives are taken directly to profit or loss during the year
incurred.

Embedded Derivatives
The Group assesses whether embedded derivatives are required to be separated from host
contracts when the Group becomes a party to the contract.

An embedded derivative is separated from the host contract and accounted for as a
derivative if all of the following conditions are met: a) the economic characteristics and
risks of the embedded derivative are not closely related to the economic characteristics
and risks of the host contract; b) a separate instrument with the same terms as the
embedded derivative would meet the definition of a derivative; and c) the hybrid or
combined instrument is not recognized at fair value through profit or loss. Reassessment
only occurs if there is a change in the terms of the contract that significantly modifies the
cash flows that would otherwise be required.

- 12 -
Derecognition of Financial Assets and Liabilities
Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is derecognized when:

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

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

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

When the Group has transferred its rights to receive cash flows from an asset and has
neither transferred nor retained substantially all the risks and rewards of the asset, the
asset is recognized to the extent of the Group’s continuing involvement in the asset.

Financial Liabilities. A financial liability is derecognized when the obligation under the
liability is discharged or cancelled or expired.

When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognized the consolidated statements of income.

Impairment of Financial Assets

The Group assesses at balance sheet date whether a financial asset or group of financial
assets is impaired.

Assets Carried at Amortized Cost. If there is objective evidence that an impairment loss
on loans and receivables carried at amortized cost has been incurred, the amount of loss
is measured as the difference between the asset’s carrying amount and the present value
of estimated future cash flows (excluding future credit losses) discounted at the financial
asset’s original effective interest rate (i.e., the effective interest rate computed at initial
recognition). The carrying amount of the asset shall be reduced either directly or through
use of an allowance account. The amount of loss shall be recognized in the consolidated
statements of income.

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

- 13 -
If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognized, the
previously recognized impairment loss is reversed. Any subsequent reversal of an
impairment loss is recognized in the consolidated statements of income, to the extent that
the carrying value of the asset does not exceed its amortized cost at the reversal date.

Assets Carried at Cost. If there is objective evidence of an impairment loss on an

unquoted equity instrument that is not carried at fair value because its fair value cannot
be reliably measured, or of a derivative asset that is linked to and must be settled by
delivery of such an unquoted equity instrument, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated future
cash flows discounted at the current market rate of return for a similar financial asset.

AFS Financial Assets. If an AFS financial asset is impaired, an amount comprising the
difference between the cost (net of any principal payment and amortization) and its
current fair value, less any impairment loss on that financial asset previously recognized
in the consolidated statements of income, is transferred from equity to the consolidated
statements of income. Reversals in respect of equity instruments classified as AFS are not
recognized in profit. Reversals of impairment losses on debt instruments are reversed
through profit or loss, if the increase in fair value of the instrument can be objectively
related to an event occurring after the impairment loss was recognized in the consolidated
statements of income.

Classification of Financial Instruments Between Debt and Equity

A financial instrument is classified as debt if it provides for a contractual obligation to:

deliver cash or another financial assets to another entity; or

exchange financial assets or financial liabilities with another entity under

conditions that are potentially unfavorable to the Group; or

satisfy the obligation other than by the exchange of a fixed amount of cash or
another financial asset for a fixed number of own equity shares.

If the Group does not have an unconditional right to avoid delivering cash or another
financial asset to settle its contractual obligation, the obligation meets the definition of a
financial liability.

Offsetting Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the
consolidated balance sheets if, and only if, there is a currently enforceable legal right to
offset the recognized amounts and there is an intention to settle on a net basis, or to
realize the asset and settle the liability simultaneously. This is not generally the case with
master netting agreements, and the related assets and liabilities are presented gross in the
consolidated balance sheets.

Inventories
Finished goods, goods in process and materials and supplies are valued at the lower of
cost and net realizable value.

- 14 -
Costs incurred in bringing each inventory to its present location and conditions are
accounted for as follows:

Finished goods and goods in - cost includes direct materials and labor
process and a proportion of manufacturing
overhead costs based on normal
operating capacity but excluding
borrowing costs; costs are determined
using the moving-average method;
Materials and supplies - at cost using the moving-average
method.

Net realizable value of finished goods and goods in process is the estimated selling price
in the ordinary course of business, less the estimated costs of completion and the
estimated costs necessary to make the sale.

Net realizable value of materials and supplies is the current replacement cost.

Containers (i.e., returnable bottles and shells) are stated at deposit values less any
impairment in value. The excess of the acquisition cost of the containers over their
deposit value is presented under deferred containers included under “Other noncurrent
assets” account in the consolidated balance sheets and is amortized over the estimated
useful lives of two to ten years. Amortization of deferred containers is included under
“Selling and administrative expenses” account in the consolidated statements of income.

Biological Assets and Agricultural Produce

The Group’s biological assets include breeding and growing livestock (poultry, hogs and
cattle) which are grouped according to their physical state, transformation capacity
(breeding, growing or laying), as well as their particular stage in the production process.

Growing livestock are carried at accumulated cost while breeding livestock are carried at
accumulated cost net of amortization. The costs and expenses incurred up to the start of
the productive stage are accumulated and amortized over the estimated productive lives
of the breeding stocks. The Group uses this method of valuation since fair value cannot
be measured reliably. The Group’s biological assets have no active market and no active
market for similar assets is available in the Philippine industry. Further, the existing
sector benchmarks are determined to be irrelevant and the estimates (i.e., revenues due to
highly volatile prices, input costs, efficiency values, production) necessary to compute
for the present value of expected net cash flows comprise a wide range of data which will
not result to a reliable basis for determining the fair value.

The carrying values of the biological assets are reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not be recoverable.

The Group’s agricultural produce which consists of grown broilers, marketable hogs and
cattle harvested from the Group’s biological assets are measured at its fair value less
estimated point-of-sale costs at the point of harvest. The fair value of grown broilers is
based on the quoted prices for harvested mature grown broilers in the market at the time
of harvest. For marketable hogs and cattle, the fair value is based on the quoted prices in
the market at any given time.

The Group in general, does not carry any inventory of agricultural produce for poultry at
any given time as these are either sold as live broilers or transferred to the different
poultry processing plants and immediately transferred into processed or dressed chicken.

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Amortization is computed using straight-line method over the following estimated
productive lives of breeding stocks:

Hogs - sow 3 years or 6 births,

whichever is shorter
Hogs - boar 2.5 - 3 years
Cattle 2.5 - 3 years
Poultry breeding stock 40 - 44 weeks

Investments in Shares of Stock of Associates

The Group’s investments in shares of stock of associates are accounted for under the
equity method of accounting. An associate is an entity in which the Group has
significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in an associate is carried in the consolidated
balance sheets at cost plus post-acquisition changes in the Group’s share in net assets of
the associate. Goodwill relating to an associate is included in the carrying amount of the
investment and is not amortized. After application of the equity method, the Group
determines whether it is necessary to recognize any additional impairment loss with
respect to the Group’s net investment in the associate. The consolidated statements of
income reflect the share in the results of operations of the associate. Where there has
been a change which was recognized directly in the equity of the associate, the Group
recognizes its share in any changes and discloses this, when applicable, in the
consolidated statements of changes in equity. Profits and losses resulting from
transactions between the Group and the associate are eliminated to the extent of the
interest in the associate.

An investment in an associate is accounted for using the equity method from the date
when it becomes an associate. Upon acquisition of the investment, any difference
between the cost of the investment and the investor’s share in the net fair value of the
associate’s identifiable assets, liabilities and contingent liabilities is accounted for in
accordance with PFRS 3, Business Combinations. Consequently:

a. goodwill relating to an associate is included in the carrying amount of investment.

However, amortization of that goodwill is no longer permitted and is therefore not
included in the determination of the Group’s share in the associate’s profit or losses.

b. any excess of the Group’s share in the net fair value of the associate’s identifiable
assets, liabilities and contingent liabilities over the cost of the investment is excluded
from the carrying amount of the investment and is instead included as income in the
determination of the Group’s share in the associate’s profit or loss in the period in
which the investment is acquired.

The Group discontinues applying the equity method when its investment in an associate
is reduced to zero. Additional losses are provided only to the extent that the Group has
incurred obligations or made payments on behalf of the associate to satisfy obligations of
the associate that the Group has guaranteed or otherwise committed. If the associate
subsequently reports profits, the Group resumes applying the equity method only after its
share of the profits equals the share of net losses not recognized during the period the
equity method was suspended.

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The financial statements of the associates are prepared for the same reporting period as
the Parent Company. The accounting policies of the associates conform to those used by
the Group for like transactions and events in similar circumstances.

Interest in Joint Venture

The Group recognizes its interest in the joint venture using proportionate consolidation.
The Group combines its share in each of the assets, liabilities, income and expenses of
the joint venture with similar items, line by line, in its consolidated financial statements.
The financial statements of the joint venture are prepared for the same reporting period as
the Parent Company, using uniform accounting policies for like transactions and other
events in similar circumstances. Adjustments are made to bring into line any dissimilar
accounting policies that may exist.

The joint venture is proportionately consolidated until the date when the Group ceases to
have joint control over the joint venture.

Property, Plant and Equipment

Property, plant and equipment, except land, are stated at cost less accumulated
depreciation and amortization and any accumulated impairment in value. Such cost
includes the cost of replacing part of the property, plant and equipment at the time that
cost is incurred, if the recognition criteria are met, and excludes the costs of day-to-day
servicing. Land is stated at cost less any impairment in value.

The initial cost of property, plant and equipment comprises of its construction cost or
purchase price, including import duties, taxes and any directly attributable costs in
bringing the asset to its working condition and location for its intended use. Cost also
includes any related asset retirement obligation and interest incurred during the
construction period on funds borrowed to finance the construction of the projects.
Expenditures incurred after the asset has been put into operation, such as repairs,
maintenance and overhaul costs, are normally recognized as expense in the period the
costs are incurred. Major repairs are capitalized as part of property, plant and equipment
only when it is probable that future economic benefits associated with the items will flow
to the Group and the cost of the items can be measured reliably.

Construction in progress represents structures under construction and is stated at cost.

This includes the costs of construction and other direct costs. Borrowing costs that are
directly attributable to the construction of plant and equipment are capitalized during the
construction period. Construction in progress is not depreciated until such time that the
relevant assets are ready for use.

Depreciation and amortization are computed using the straight-line method over the
following estimated useful lives of the assets:

Number of Years
Land improvements 5 - 50
Buildings and improvements 5 - 50
Machinery and equipment 3 - 40
Transportation equipment 5-7
Tools and small equipment 2-5
Office equipment, furniture and fixtures 2-6
Molds 2-5
Leasehold improvements 5 - 50
or term of the lease,
whichever is shorter

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The remaining useful lives, residual values and depreciation and amortization method are
reviewed and adjusted, if appropriate, periodically to ensure that such periods and
method of depreciation and amortization are consistent with the expected pattern of
economic benefits from the items of property, plant and equipment.

The carrying values of property, plant and equipment are reviewed for impairment when
events or changes in circumstances indicate that the carrying value may not be
recoverable.

Fully depreciated assets are retained in the accounts until they are no longer in use and no
further depreciation and amortization is credited or charged to current operations.

An item of property, plant and equipment is derecognized when either it has been
disposed of or when it is permanently withdrawn from use and no future economic
benefits are expected from its use or disposal. Any gains or losses arising on the
retirement and disposal of an item of property, plant and equipment (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) are
included in the consolidated statements of income in the period of retirement or disposal.

Investment Properties
Investment properties consist of properties held to earn rentals and/or for capital
appreciation. Investment properties, except for land, are measured initially at cost
including transaction costs less accumulated depreciation and amortization and any
accumulated impairment in value. The carrying amount includes the cost of replacing
part of an existing investment property at the time the cost is incurred, if the recognition
criteria are met, and excludes the costs of day-to-day servicing of an investment property.
Land is stated at cost less any impairment in value.

Depreciation and amortization are computed using the straight-line method over the
following estimated useful lives of the assets:

Number of Years
Land improvements 5 - 50
Buildings and improvements 5 - 50
Machinery and equipment 3 - 40
Tools and small equipment 2-5

The residual values, useful lives and method of depreciation and amortization of the
assets are reviewed and adjusted, if appropriate, at each financial year-end.

Investment property is derecognized when either it has been disposed of or when it is

permanently withdrawn from use and no future economic benefit is expected from its
disposal. Any gains and losses on the retirement and disposal of investment property are
recognized in the consolidated statements of income in the period of retirement or
disposal.

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

- 18 -
For a transfer from investment property to owner-occupied property or inventories, the
cost of property for subsequent accounting is its carrying value at the date of change in
use. If the property occupied by the Group as an owner-occupied property becomes an
investment property, the Group accounts for such property in accordance with the policy
stated under property, plant and equipment up to the date of change in use.

Business Combinations
Business combinations are accounted for using the purchase method of accounting. The
cost of acquisition is the aggregate of the fair values, at the date of exchange of assets
given, liabilities incurred or assumed and equity instruments issued by the acquirer, in
exchange for control over the net assets of the acquired company, plus any directly
attributable costs. The identifiable assets, liabilities and contingent liabilities that satisfy
certain recognition criteria have to be measured initially at their fair values at acquisition
date, irrespective of the extent of any non-controlling interests.

Goodwill
Goodwill acquired in a business combination is initially measured at cost being the
excess of the cost of the business combination over the Group’s interest in the net fair
value of the acquiree’s identifiable assets, liabilities and contingent liabilities.
Subsequently, goodwill is measured at cost less any accumulated impairment in value.
Goodwill is reviewed for impairment, annually or more frequently, if events or changes
in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is,
from the acquisition date, allocated to each of the Group’s cash-generating units, or
groups of cash-generating units that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the Group are assigned
to those units or groups of units. Each unit or group of units to which the goodwill is so
allocated:

represents the lowest level within the Group at which the goodwill is monitored
for internal management purposes; and

is not larger than a segment based on either the Group’s primary or the Group’s
secondary reporting format determined in accordance with PAS 14, Segment
Reporting.

Impairment is determined by assessing the recoverable amount of the cash-generating

unit or group of cash-generating units, to which the goodwill relates. Where the
recoverable amount of the cash-generating unit or group of cash-generating units is less
than the carrying amount, an impairment loss is recognized. Where goodwill forms part
of a cash-generating unit or group of cash-generating units and part of the operation
within that unit is disposed of, the goodwill associated with the operation disposed of is
included in the carrying amount of the operation when determining the gain or loss on
disposal of the operation. Goodwill disposed of in this circumstance is measured based
on the relative values of the operation disposed of and the portion of the cash-generating
unit retained.

When the Group acquires a business, embedded derivatives separated from the host
contract by the acquiree are not reassessed on acquisition unless the business
combination results in a change in the terms of the contract that significantly modifies the
cash flows that would otherwise be required under the contract.

- 19 -
Negative goodwill which is not in excess of the fair values of acquired identifiable
nonmonetary assets of subsidiaries and associates is charged directly to income.

Transfers of assets between commonly controlled entities are accounted for under
historical cost accounting.

When a business combination involves more than one exchange transaction (occurs in
stages), each exchange transaction is treated separately by the Group, using the cost of
the transaction and fair value information at the date of each exchange transaction, to
determine the amount of goodwill associated with that transaction. Any adjustment to
fair values relating to the previously held interest is a revaluation and is accounted for as
such.

When subsidiaries are sold, the difference between the selling price and the net assets
plus goodwill is recognized in the consolidated statements of income.

Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost
of intangible assets acquired in a business combination is its fair value as at the date of
acquisition. Subsequently, intangible assets are measured at cost less accumulated
amortization and provision for impairment losses, if any. Internally generated intangible
assets, excluding capitalized development costs, are not capitalized and expenditure is
charged against profits in the year in which the expenditure is incurred. The useful lives
of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and
assessed for impairment whenever there is an indication that the intangible asset may be
impaired. The amortization period and the amortization method for an intangible asset
with a finite useful life are reviewed at least at each balance sheet date. Changes in the
expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset is accounted for by changing the amortization period or method, as
appropriate, and treated as changes in accounting estimates. The amortization expense
on intangible assets with finite lives is recognized in the consolidated statements of
income in the expense category consistent with the function of the intangible asset.

Amortization is computed using the straight-line method over the following estimated
useful lives of other intangible assets with finite lives:

Number of Years
Computer software 2-8
Franchise 13 - 20
Leasehold rights 20 or term of the lease,
whichever is shorter
Land use rights 25 - 50 or term of the
lease, whichever is shorter

The Group assessed the useful life of the trademarks and brand names to be indefinite
because based on an analysis of all the relevant factors, there is no foreseeable limit to
the period over which the asset is expected to generate cash inflows for the Group.

- 20 -
Trademarks and brand names with indefinite useful lives are tested for impairment
annually either individually or at the cash-generating unit level. Such intangibles are not
amortized. The useful life of an intangible asset with an indefinite life is reviewed
annually to determine whether indefinite life assessment continues to be supportable. If
not, the change in the useful life assessment from indefinite to finite is made on a
prospective basis.

Gains or losses arising from disposition of an intangible asset are measured as the
difference between the disposal proceeds and the carrying amount of the asset and are
recognized in the consolidated statements of income when the asset is derecognized.

Impairment of Other Non-financial Assets

The carrying values of property, plant and equipment, investment properties, containers,
investments and advances, biological assets, other intangible assets with definite useful
lives and idle assets are reviewed for impairment when events or changes in
circumstances indicate that the carrying value may not be recoverable. If any such
indication exists, and if the carrying value exceeds the estimated recoverable amount, the
assets or cash-generating units are written down to their recoverable amounts. The
recoverable amount of the asset is the greater of fair value less costs to sell or value in
use. The fair value less costs to sell is the amount obtainable from the sale of an asset in
an arm’s length transaction between knowledgeable, willing parties, less costs of
disposal. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs. Impairment losses of continuing
operations are recognized in the consolidated statements of income in those expense
categories consistent with the function of the impaired asset.

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

Provisions
Provisions are recognized only when the Group has (a) a present obligation (legal or
constructive) as a result of past event; (b) it is probable (i.e., more likely than not) that an
outflow of resources embodying economic benefits will be required to settle the
obligation; and (c) a reliable estimate can be made of the amount of the obligation. If the
effect of the time value of money is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessment of
the time value of money and, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time is recognized
as interest expense. Where the Group expects a provision to be reimbursed, the
reimbursement is recognized as a separate asset but only when the receipt of the
reimbursement is virtually certain. Provisions are reviewed at each balance sheet date and
adjusted to reflect the current best estimate.

- 21 -
Treasury Shares
Own equity instruments which are reacquired are carried at cost and are deducted from
equity. No gain or loss is recognized on profit or loss on the purchase, sale, issue or
cancellation of the Group’s own equity instruments. When the shares are retired, the
capital stock account is reduced by its par value and the excess of cost over par value
upon retirement is debited to additional paid-in capital to the extent of the specific or
average additional paid-in capital when the shares were issued and to retained earnings
for the remaining balance.

Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will
flow to the Group and the amount of the revenue can be reliably measured. The
following specific recognition criteria must also be met before revenue is recognized:

Sales. Revenue is recognized when the significant risks and rewards of ownership of the
goods have passed to the buyer and the amount of revenue can be measured reliably,
which is normally upon delivery.

Agricultural Produce. Revenue for agricultural produce is measured at fair value less
cost to sell at point of harvest. Fair value is based on the most relevant market price at
point of harvest.

Interest. Revenue is recognized as the interest accrues, taking into account the effective
yield on the asset.

Dividend. Revenue is recognized when the Group’s right as a shareholder to receive the
payment is established.

Gain or Loss on Sale of Investments in Shares of Stock. Gain or loss is recognized if the
Group disposes of its investment in a subsidiary or associate. Gain or loss is computed as
the difference between the proceeds of the disposed investments and its carrying amount,
including the carrying amount of goodwill, if any.

Rent. Revenue is recognized on a straight-line basis over the lease term or based on the
terms of the lease, as applicable.

Cost and Expense Recognition

Cost and expenses are recognized in the consolidated statements of income upon receipt
of goods, utilization of services or at the date they are incurred.

Share-based Transactions
The cost of Long-term Incentive Plan for Stock Options (LTIP) is measured by reference
to the option fair value at the date when the options are granted. The fair value is
determined using Black-Scholes option-pricing model. In valuing LTIP transactions, any
performance conditions are not taken into account, other than conditions linked to the
price of the shares of the Parent Company. The cost of Employee Stock Purchase Plan
(ESPP) is measured by reference to the market price at the time of the grant less
subscription price.

The cost of share-based transactions is recognized, together with a corresponding

increase in equity, over the period in which the performance and/or service conditions are
fulfilled, ending on the date when the relevant employees become fully entitled to the
award (‘the vesting date’). The cumulative expense recognized for share-based
transactions, at each reporting date until the vesting date reflects the extent to which the
vesting period has expired and the Group’s best estimate of the number of equity

- 22 -
instruments that will ultimately vest. Where the terms of a share-based award are
modified, as a minimum, an expense is recognized as if the terms had not been modified.
In addition, an expense is recognized for any modification, which increases the total fair
value of the share-based payment arrangement, or is otherwise beneficial to the employee
as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of

cancellation, and any expense not yet recognized for the award is recognized
immediately.

However, if a new award is substituted for the cancelled award, and designated as a
replacement award on the date that it is granted, the cancelled and new awards are treated
as if they were a modification of the original award, as described in the previous
paragraph.

Leases
The determination of whether an arrangement is, or contains a lease is based on the
substance of the arrangement and requires an assessment of whether the fulfillment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.

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

Leased assets are depreciated over the estimated useful life of the asset. However, if there
is no reasonable certainty that the Group will obtain ownership by the end of the lease
term, the asset is depreciated over the shorter of the estimated useful life of the asset and
the lease term.

Leases which do not transfer to the Group substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Operating lease payments are
recognized as an expense in the consolidated statements of income on a straight-line
basis over the lease term. Associated costs such as maintenance and insurance are
expensed as incurred.

Group as Lessor. Leases where the Group does not transfer substantially all the risks and
benefits of ownership of the assets are classified as operating leases. Lease income from
operating leases is recognized as income on a straight-line basis over the lease term.
Initial direct costs incurred in negotiating an operating lease are added to the carrying
amount of the leased asset and recognized over the lease term on the same basis as rental
income. Contingent rents are recognized as revenues in the period in which they are
earned.

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Borrowing Costs
Borrowing costs are generally expensed as incurred. Borrowing costs are capitalized if
they are directly attributable to the acquisition or construction of a qualifying asset.
Capitalization of borrowing costs commences when the activities to prepare the asset are
in progress and expenditures and borrowing costs are being incurred. Borrowing costs
are capitalized until the assets are substantially ready for their intended use. If the
carrying amount of the asset exceeds its recoverable amount, an impairment loss is
recognized.

Research and Development Costs

Research costs are expensed as incurred. Development cost incurred on an individual
project is carried forward when its future recoverability can reasonably be regarded as
assured. Any expenditure carried forward is amortized in line with the expected future
sales from the related project.

The carrying value of development cost is reviewed for impairment annually when the
related asset is not yet in use. Otherwise, this is reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not be recoverable.

Retirement Costs
The Parent Company and majority of its subsidiaries have separate funded,
noncontributory retirement plans, administered by the respective trustees, covering their
respective permanent employees. Retirement costs are actuarially determined using the
projected unit credit method. This method reflects services rendered by employees up to
the date of valuation and incorporates assumptions concerning employees’ projected
salaries. Retirement cost includes current service cost, interest cost, expected return on
plan assets, amortization of unrecognized past service costs, recognition of actuarial
gains and losses, and effect of any curtailments or settlements. Past service cost is
recognized as an expense on a straight-line basis over the average period until the
benefits become vested. If the benefits are already vested immediately following the
introduction of, or changes to the plan, past service cost is recognized immediately as an
expense. Actuarial gains and losses are recognized as income or expense when the net
cumulative unrecognized actuarial gains and losses at the end of the previous reporting
year exceed the greater of 10% of present value of the defined benefit obligation or the
fair value of plan assets at that date. These gains or losses are recognized over the
expected average remaining working lives of the employees participating in the plan.

The transitional liability as of January 1, 2005, the date of adoption of PAS 19, Employee
Benefits, is recognized as an expense over five years from date of adoption.

The defined benefit liability is the aggregate of the present value of the defined benefit
obligation and actuarial gains and losses not recognized, reduced by past service cost not
yet recognized and the fair value of plan assets out of which the obligations are to be
settled directly. If such aggregate is negative, the resulting asset is measured at the lower
of such aggregate or the aggregate of cumulative unrecognized net actuarial losses and
past service cost and the present value of any economic benefits available in the form of
refunds from the plan or reductions in the future contributions to the plan.

If the asset is measured at the aggregate of cumulative unrecognized net actuarial losses
and past service cost and the present value of any economic benefits available in the form
of refunds from the plan or reductions in the future contributions to the plan, net actuarial
losses of the current period and past service cost of the current period are recognized
immediately to the extent that they exceed any reduction in the present value of those
economic benefits. If there is no change or an increase in the present value of the
economic benefits, the entire net actuarial losses of the current period and past service

- 24 -
cost of the current period are recognized immediately. Similarly, net actuarial gains of
the current period after the deduction of past service cost of the current period exceeding
any increase in the present value of the economic benefits stated above are recognized
immediately if the asset is measured at the aggregate of cumulative unrecognized net
actuarial losses and past service cost and the present value of any economic benefits
available in the form of refunds from the plan or reductions in the future contributions to
the plan. If there is no change or a decrease in the present value of the economic
benefits, the entire net actuarial gains of the current period after the deduction of past
service cost of the current period are recognized immediately.

Foreign Currency Transactions and Translations

The consolidated financial statements are presented in Philippine peso, which is the
Parent Company’s functional currency. Each entity in the Group determines its own
functional currency and items included in the financial statements of each entity are
measured using that functional currency. Transactions in foreign currencies are initially
recorded in the functional currency rate at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are restated at the functional currency
rate of exchange at balance sheet date. All differences are taken to the consolidated
statements of income. Nonmonetary items that are measured in terms of historical cost in
foreign currency are translated using the exchange rates as at the dates of the initial
transactions. Nonmonetary items measured at fair value in foreign currency are
translated using the exchange rates at the date when the fair value was determined.

The functional currency of the Group’s foreign operations is United States (US) dollar.
As at the reporting date, the assets and liabilities of these subsidiaries are translated into
the presentation currency of the Parent Company at the rate of exchange ruling at the
balance sheet date and their income and expense accounts are translated at the quarterly
weighted average exchange rates for the year. The resulting translation differences are
included in the consolidated statements of changes in equity under “Cumulative
translation adjustments” account. On disposal of a foreign entity, the accumulated
exchange differences are recognized in the consolidated statements of income as a
component of the gain or loss on disposal.

Taxes
Current Tax. Current tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the taxation authorities.
The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted at balance sheet date.

Deferred Tax. Deferred income tax is provided using the balance sheet liability method
on all temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes. Deferred tax
liabilities are recognized for all taxable temporary differences, except:

where the deferred tax liability arises from the initial recognition of goodwill or of an
asset or liability in a transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable profit or loss; and

with respect to taxable temporary differences associated with investments in

subsidiaries, associates and interests in joint ventures, where the timing of the
reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.

- 25 -
Deferred tax assets are recognized for all deductible temporary differences, carryforward
benefits of unused tax credits - Minimum Corporate Income Tax (MCIT) and unused tax
losses - Net Operating Loss Carry Over (NOLCO), to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences, and
the carryforward benefits of MCIT and NOLCO can be utilized, except:

where the deferred tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and

with respect to deductible temporary differences associated with investments in

subsidiaries, associates and interests in joint ventures, deferred tax assets are
recognized only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilized.

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
in the year when the asset is realized or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at balance sheet date.

Income tax relating to items recognized directly in equity is recognized in equity and not
in the consolidated statements of income.

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

Value Added Tax (VAT). Revenues, expenses and assets are recognized net of the
amount of VAT, except:

where the tax incurred on a purchase of assets or services is not recoverable from the
taxation authority, in which case the tax is recognized as part of the cost of
acquisition of the asset or as part of the expense item as applicable; and

receivables and payables that are stated with the amount of tax included.

The net amount of tax recoverable from, or payable to, the taxation authority is included
as part of receivables or payables in the consolidated balance sheets.

Assets Held for Sale

Noncurrent assets or disposal groups are classified as held for sale if their carrying
amount will be recovered through a sale transaction rather than through continuing use.
This condition is regarded as met only when the sale is highly probable and expected to
be completed within one year from classification and the asset is available for immediate
sale in its present condition.

- 26 -
Assets classified as held for sale are measured at the lower of carrying value and fair
value less costs to sell.

Discontinued Operations
A discontinued operation is a component of the Group’s business that represents a
separate major line of business or geographical area of operations that has been disposed
of or is held for sale, or is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or when the operation
meets the criteria to be classified as held for sale. When an operation is classified as a
discontinued operation, the comparative consolidated statements of income are
re-presented as if the operation had been discontinued from the start of the comparative
period and show the results of discontinued operation separate from the results of
continuing operation.

Related Parties
Parties are considered to be related if one party has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making
financial and operating decisions. Parties are also considered to be related if they are
subject to common control or common significant influence. Related parties may be
individuals or corporate entities. Transactions between related parties are on an arm’s
length basis in a manner similar to transactions with non-related parties.

Basic and Diluted Earnings Per Common Share (EPS)

Basic EPS is computed by dividing the net income for the period attributable to equity
holders of the Parent Company by the weighted average number of issued and
outstanding common shares during the period, with retroactive adjustment for any stock
dividends declared.

Diluted EPS is computed in the same manner, adjusted for the effects of the shares
issuable to employees and executives under the Parent Company’s ESPP and LTIP,
respectively, which are assumed to be exercised at the date of grant.

Where the effect of the assumed conversion of shares issuable to employees and
executives under the Parent Company’s stock purchase and option plans would be
anti-dilutive, diluted EPS is not presented.

Business Segments
The Group’s operating businesses are organized and managed separately according to the
nature of the products and services provided, with each segment representing a strategic
business unit that offers different products and serves different markets. Financial
information on business and geographical segments is presented in Note 5 to the
consolidated financial statements.

Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. They
are disclosed unless the possibility of an outflow of resources embodying economic
benefits is remote. Contingent assets are not recognized in the consolidated financial
statements but are disclosed when an inflow of economic benefits is probable.

Subsequent Events
Post-year end events that provide additional information about the Group’s position at
balance sheet date (adjusting events) are reflected in the consolidated financial
statements. Post-year end events that are not adjusting events are disclosed in the notes
to the consolidated financial statements when material.

- 27 -
4. Significant Accounting Judgments, Estimates and Assumptions

The Group’s consolidated financial statements prepared in accordance with PFRS

requires management to make judgments, estimates and assumptions that affect amounts
reported in the consolidated financial statements and related notes, at the reporting date.
However, uncertainty about these estimates and assumptions could result in outcome that
could require a material adjustment to the carrying amount of the affected asset or
liability in the future.

Judgments
In the process of applying the Group’s accounting policies, management has made the
following judgments, apart from those involving estimations, which have the most
significant effect on the amounts recognized in the consolidated financial statements.

Operating Leases. The Group has entered into various lease agreements as a lessee. The
Group has determined that the lessor retains all significant risks and rewards of
ownership of these properties which are leased out under operating lease arrangements.

Rent expense charged to operations amounted to P1,796, P1,450 and P1,622 in 2008,
2007 and 2006, respectively (Notes 22 and 23).

Contingencies. The Group currently has various tax assessments, legal and
administrative claims. The Group’s estimate of the probable costs for the resolution of
these assessments and claims have been developed in consultation with in-house as well
as outside legal counsel handling the prosecution and defense of these matters and is
based on an analysis of potential results. The Group currently does not believe that these
tax assessments, legal and administrative claims will have a material adverse effect on its
financial position and results of operations. It is possible, however, that future financial
performance and results of operations could be materially affected by changes in the
estimates or in the effectiveness of strategies relating to these proceedings. No accruals
were made in relation to these proceedings (Note 39).

Estimates
The key estimates and assumptions used in the consolidated financial statements are
based upon management’s evaluation of relevant facts and circumstances as of the date
of the consolidated financial statements. Actual results could differ from such estimates.

Allowance for Impairment Losses on Trade and Other Receivables. Provisions are made
for specific and groups of accounts, where objective evidence of impairment exists. The
Group evaluates these accounts on the basis of factors that affect the collectibility of the
accounts. These factors include, but are not limited to, the length of the Group’s
relationship with the customers and counterparties, the customers’ current credit status
based on third party credit reports and known market forces, average age of accounts,
collection experience, and historical loss experience. The amount and timing of recorded
expenses for any period would differ if the Group made different judgments or utilized
different methodologies. An increase in allowance for impairment losses would increase
the recorded selling and administrative expenses and decrease current assets.

The allowance for impairment losses amounted to P2,884 and P2,541 as of December 31,
2008 and 2007, respectively. The carrying values of trade and other receivables
amounted to P50,814 and P61,879 as of December 31, 2008 and 2007, respectively
(Note 8).

- 28 -
Allowance for Inventory Losses. The Group provides allowance for inventory losses
whenever net realizable value becomes lower than cost due to damage, physical
deterioration, obsolescence, changes in price levels or other causes.

Estimates of net realizable value are based on the most reliable evidence available at the
time the estimates are made of the amount the inventories are expected to be realized.
These estimates take into consideration fluctuations of price or cost directly relating to
events occurring after balance sheet date to the extent that such events confirm conditions
existing at balance sheet date. The allowance account is reviewed periodically to reflect
the accurate valuation in the financial records.

The allowance for inventory losses amounted to P901 and P926 as of December 31, 2008
and 2007, respectively. The carrying values of inventories amounted to P27,710 and
P23,852 as of December 31, 2008 and 2007, respectively (Note 9).

Estimated Useful Lives of Investment Properties, Containers and Property, Plant and
Equipment. The Group estimates the useful lives of investment properties, containers
and property, plant and equipment based on the period over which the assets are expected
to be available for use. The estimated useful lives of investment properties, containers
and property, plant and equipment are reviewed periodically and are updated if
expectations differ from previous estimates due to physical wear and tear, technical or
commercial obsolescence and legal or other limits on the use of the assets.

In addition, estimation of the useful lives of investment properties, containers and

property, plant and equipment is based on collective assessment of industry practice,
internal technical evaluation and experience with similar assets. It is possible, however,
that future results of operations could be materially affected by changes in estimates
brought about by changes in factors mentioned above. The amounts and timing of
recorded expenses for any period would be affected by changes in these factors and
circumstances. A reduction in the estimated useful lives of investment properties,
containers and property, plant and equipment would increase recorded cost of sales and
selling and administrative expenses and decrease noncurrent assets.

Accumulated depreciation and amortization of investment properties and property, plant

and equipment amounted to P52,965 and P47,128 as of December 31, 2008 and 2007,
respectively. Property, plant and equipment, net of accumulated depreciation and
amortization amounted to P72,873 and P68,177 as of December 31, 2008 and 2007,
respectively (Note 11). Investment properties, net of accumulated depreciation amounted
to P2,253 and P2,021 as of December 31, 2008 and 2007, respectively (Note 12).
Deferred containers net of accumulated amortization amounted to P3,708 and P3,187 as
of December 31, 2008 and 2007, respectively (Note 15).

Estimated Useful Lives of Intangible Assets with Finite Lives. The useful lives of
intangible assets are assessed at the individual asset level as having either a finite or
indefinite life. Intangible assets are regarded to have an indefinite useful life when, based
on analysis of all of the relevant factors, there is no foreseeable limit to the period over
which the asset is expected to generate net cash inflows for the Group.

Intangible assets with finite useful life amounted to P1,561 and P1,240 as of
December 31, 2008 and 2007, respectively (Note 14).

- 29 -
Impairment of Goodwill and Trademarks and Brand Names with Indefinite Lives. The
Group determines whether goodwill and trademarks and brand names are impaired at
least annually. This requires the estimation of the value in use of the cash-generating
units to which the goodwill is allocated and the value in use of the trademarks and brand
names. Estimating value in use requires management to make an estimate of the
expected future cash flows from the cash-generating unit and from the trademarks and
brand names and to choose a suitable discount rate to calculate the present value of those
cash flows.

The carrying values of goodwill as of December 31, 2008 and 2007 amounted to P5,201
and P5,348, respectively (Note 14).

The carrying values of trademarks and brand names amounted to P2,251 and P1,962 as of
December 31, 2008 and 2007, respectively (Note 14).

Purchase Price Allocation in Business Combinations. Purchase method requires

extensive use of accounting estimates and judgments to allocate the purchase price to the
fair market values of the acquiree’s identifiable assets and liabilities at acquisition date.
It also requires the acquirer to recognize goodwill. The Group’s acquisitions have
resulted in goodwill and trademarks and brand names with indefinite lives.

The total carrying values of goodwill and trademarks and brand names with indefinite
useful lives arising from business combinations as of December 31, 2008 and 2007
amounted to P7,452 and P7,310, respectively (Note 14).

Realizability of Deferred Tax Assets. The Group reviews its deferred tax assets at each
balance sheet date and reduces the carrying amount to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred
tax asset to be utilized. The Group’s assessment on the recognition of deferred tax assets
on deductible temporary difference and carryforward benefits of MCIT and NOLCO is
based on the projected taxable income in the following periods.

Deferred tax assets amounted to P7,638 and P4,973 as of December 31, 2008 and 2007,
respectively (Note 20).

Impairment of Other Non-financial Assets. PFRS requires that an impairment review be

performed on investments and advances, property, plant and equipment, investment
properties, containers, biological assets, other intangible assets with definite useful lives
and idle assets when events or changes in circumstances indicate that the carrying value
may not be recoverable. Determining the net recoverable value of assets requires the
estimation of cash flows expected to be generated from the continued use and ultimate
disposition of such assets. While it is believed that the assumptions used in the
estimation of fair values reflected in the consolidated financial statements are appropriate
and reasonable, significant changes in these assumptions may materially affect the
assessment of recoverable values and any resulting impairment loss could have a material
adverse impact on the results of operations.

Accumulated impairment losses of property, plant and equipment and investment

properties amounted to P4,975 and P4,195 as of December 31, 2008 and 2007,
respectively. The aggregate amount of investments and advances, property, plant and
equipment, investment properties, biological assets, other intangible assets with definite
useful lives, containers, and idle assets, amounted to P112,484 and P74,966 as of
December 31, 2008 and 2007, respectively (Notes 10, 11, 12, 13, 14 and 15).

- 30 -
Present Value of Defined Benefit Obligation. The present value of the pension
obligations depends on a number of factors that are determined on an actuarial basis
using a number of assumptions. These assumptions are described in Note 31 to the
consolidated financial statements and include discount rate, expected return on plan
assets and salary increase rate. Actual results that differ from the assumptions are
accumulated and amortized over future periods and therefore, generally affect the
recognized expense and recorded obligation in such future periods.

The assumption of the expected return on plan assets is determined on a uniform basis,
taking into consideration the long-term historical returns, asset allocation and future
estimates of long-term investment returns.

The Group determines the appropriate discount rate at the end of each year. It is the
interest rate that should be used to determine the present value of estimated future cash
outflows expected to be required to settle the pension obligations. In determining the
appropriate discount rate, the Group considers the interest rates on government bonds
that are denominated in the currency in which the benefits will be paid. The terms to
maturity of these bonds should approximate the terms of the related pension liability.

Other key assumptions for pension obligations are based in part on current market
conditions.

While it is believed that the Group’s assumptions are reasonable and appropriate,
significant differences in actual experience or significant changes in assumptions may
materially affect the Group’s pension and other pension obligations.

The Group has a net cumulative unrecognized actuarial loss amounting to P268 and P184
as of December 31, 2008 and 2007, respectively (Note 31).

Fair Value of Agricultural Produce. The Group determines the fair value of its
agricultural produce based on most recent market transaction price provided that there
has been no significant change in economic circumstances between the date of
transactions and balance sheet date. Point-of-sale cost is estimated based on most recent
transaction and is deducted from the fair value in order to measure the fair value of
agricultural produce at point of harvest.

Unrealized gain (loss) on fair value adjustments included in the cost of inventories as of
December 31, 2008 and 2007 amounted to (P2) and P52, respectively (Note 9).

Financial Assets and Liabilities. The Group carries certain financial assets and liabilities
at fair value, which requires extensive use of accounting estimates and judgments.
Significant components of fair value measurement were determined using verifiable
objective evidence (i.e., foreign exchange rates, interest rates, volatility rates). The
amount of changes in fair value would differ if the Group utilized different valuation
methodologies and assumptions. Any change in the fair value of these financial assets
and liabilities would affect profit and loss and equity.

Fair value of financial assets and liabilities are discussed in Note 37.

Asset Retirement Obligation. Determining asset retirement obligation requires estimation

of the cost of dismantling property and equipment and other costs of restoring the leased
properties to their original condition. The Group determined that there are no significant
asset retirement obligations as of December 31, 2008 and 2007.

- 31 -
5. Segment Information

Business Segments
The business segment is determined as the primary segment reporting format as the
Group’s risks and rates of return are affected predominantly by differences in the
products and services produced. The operating businesses are organized and managed
separately according to the nature of the products produced and services provided, with
each segment representing a strategic business unit that offers different products and
serves different markets.

The Group is organized into three major business segments – beverage, food and
packaging.

The beverage segment produces and markets alcoholic and nonalcoholic beverages.

The food segment includes, among others, the breeding, hatching, processing and
marketing of chicken; production and marketing of feeds and flour, dairy products, snack
foods, coffee, oil and fresh, ready-to-cook and processed meats.

The packaging segment is involved in the production and marketing of the following
packaging products, among others, glass containers, glass molds, polyethylene
terephthalate (PET) bottles and preforms, PET recycling, plastic closures, corrugated
cartons, woven polypropylene/kraft sacks and paperboard, pallets, flexible packaging,
plastic crates, plastic floorings, plastic films, plastic trays, plastic pails and tubs, crate and
plastic pallet leasing, metal closures and two-piece aluminum cans, woven products,
industrial laminates and radiant barriers. It is also involved in PET bottle filling graphics
design, packaging research and testing, packaging development and consultation,
contract packaging and trading.

Geographical Segments
The Group’s major businesses primarily operate in the following geographical areas –
Philippines, China, Indonesia, Vietnam and Thailand.

Segment Assets and Liabilities

Segment assets include all operating assets used by a segment and consist principally of
operating cash, receivables, inventories and property, plant and equipment, net of
allowances and provisions. Segment liabilities include all operating liabilities and
consist principally of accounts, wages, taxes currently payable and accrued liabilities.
Segment assets and liabilities do not include deferred income taxes.

Inter-segment Transactions
Segment revenues, expenses and performance include sales and purchases between
business segments and between geographical segments. Transfer prices between
business segments are set on an arm’s length basis in a manner similar to transactions
with third parties. Such transfers are eliminated in consolidation.

- 32 -
Financial information about business and geographical segments follow:

Business Segments
For the Years Ended December 31, 2008, 2007 and 2006
Continuing Operations Discontinued Operations Total Operations
Beverage Food Packaging Others Eliminations Total (Note 6)
2008 2007 2006 2008 2007* 2006* 2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007* 2006* 2008 2007* 2006* 2008 2007* 2006*
Sales
External sales P78,599 P69,334 P67,103 P73,830 P63,516 P57,238 P15,612 P15,172 P10,754 P - P - P - P - P - P - P168,041 P148,022 P135,095 P181 P93,948 P114,412 P168,222 P241,970 P249,507
Inter-segment sales - 425 18 50 10 10 4,246 3,605 8,645 - - - (4,296) (4,040) (8,673) - - - - - - - - -
Total sales P78,599 P69,759 P67,121 P73,880 P63,526 P57,248 P19,858 P18,777 P19,399 P - P - P - (P4,296) (P4,040) (P8,673) P168,041 P148,022 P135,095 P181 P93,948 P114,412 P168,222 P241,970 P249,507

Result
Segment result P14,556 P11,359 P9,275 P865 P2,341 P2,106 P1,315 P146 P2,696 (P2,216) (P1,684) (P2,569) P298 (P535) P1,370 P14,818 P11,627 P12,878 (P10) P5,522 P7,277 P14,808 P17,149 P20,155

Interest expense
and financing
charges (6,032) (7,117) (7,097) - (2,984) (3,665) (6,032) (10,101) (10,762)
Interest income 6,630 2,087 2,763 - 317 231 6,630 2,404 2,994
Equity in net
earnings (losses)
of associates (1,132) 164 56 - 82 114 (1,132) 246 170
Gain (loss) on sale
of investments
and property,
plant and
equipment 8,746 2,224 245 - (5) 27 8,746 2,219 272
Other income
(charges) - net (2,262) 3,614 3,192 (9) (251) (1,162) ) (2,271) 3,363 2,030
Income tax benefit
(expense) (6,098) (4,520) (3,947) 7 (1,174) (1,013) (6,091) (5,694) (4,960)
Gain (loss) from
discontinued
operations - - - 5,425 (1,235) - 5,425 (1,235) -
Net income P14,670 P8,079 P8,090 P5,413 P272 P1,809 P20,083 P8,351 P9,899

Attributable to:
Equity holders of
the Parent
Company P13,935 P8,160 P7,887 P5,413 P470 P2,419 P19,348 P8,630 P10,306
Non-controlling
interests 735 (81) 203 - (198) (610) 735 (279) (407)
Net income P14,670 P8,079 P8,090 P5,413 P272 P1,809 P20,083 P8,351 P9,899

* As discussed in Note 6, certain accounts were adjusted due to reclassification of Agribusiness Division of the Parent Company to discontinued operations.

- 33 -
 For the Years Ended December 31, 2008, 2007 and 2006
Beverage Food Packaging Others Eliminations Consolidated
2008 2007 2006 2008 2007* 2006* 2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007* 2006*
Other Information
Segment assets P100,242 P76,617 P123,349 P71,122 P63,300 P74,150 P33,021 P34,787 P39,112 P241,782 P210,355 P108,638 (P154,247) (P115,834) (P109,447) P291,920 P269,225 P235,802
Investments in and advances to
associates - - - - - 301 - - - 31,663 220 5,480 - - - 31,663 220 5,781
Goodwill, trademarks and
brand names 7,452 7,310 99,089
Other assets 700 6,381 250
Deferred tax assets 7,638 4,973 6,871
Consolidated total assets P339,373 P288,109 P347,793

Segment liabilities P26,443 P22,438 P45,689 P24,095 P16,767 P96,336 P7,659 P16,178 P18,664 P146,348 P84,594 P73,866 (P155,935) (P119,603) (P195,498) P48,610 P20,374 P39,057
Drafts and loans payable 48,560 44,231 42,535
Long-term debt and redeemable
preferred shares 49,763 55,834 95,915
Income and other taxes payable 4,429 3,327 3,016
Dividends payable and others 1,936 5,529 2,739
Deferred tax liabilities 17,851 12,721 13,434
Consolidated total liabilities P171,149 P142,016 P196,696

Capital expenditures P3,471 P4,851 P4,134 P215 P1,065 P3,455 P1,354 P2,550 P4,089 P1,397 P844 P915 P - P - P - P6,437 P9,310 P12,593
Depreciation and amortization
and others 2,251 2,372 3,665 868 2,260 2,049 1,491 1,144 1,337 323 304 460 - - - 4,933 6,080 7,511
Noncash items other than
depreciation 796 1,038 3,442 966 972 257 (79) 106 54 2,739 1,200 611 - - - 4,422 3,316 4,364
Loss on impairment of
goodwill, property, plant and
equipment and idle assets - 1,461 - - - - - 283 - 322 - - - - - 322 1,744 -

Geographical Segments
For the Years Ended December 31, 2008, 2007 and 2006
Total Sales Sales from Continuing Operations Sales from Discontinued Operations Segment Assets Capital Expenditures
2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006
Philippines P147,802 P143,282* P156,603* P147,621 P131,155* P118,161* P181 P12,127* P38,442* P183,026 P182,380 P154,133 P4,562 P6,040 P7,381
Australia - 81,821 75,970 - - - - 81,821 75,970 25,142 27,460 40,139 - 86 2,348
China 6,330 6,721 7,636 6,330 6,721 7,636 - - - 22,169 18,458 22,723 1,478 2,164 929
Indonesia 3,925 3,095 2,982 3,925 3,095 2,982 - - - 4,489 4,121 5,370 40 121 186
Vietnam 3,057 2,973 2,378 3,057 2,973 2,378 - - - 1,970 4,258 3,824 145 752 838
Thailand 2,363 595 378 2,363 595 378 - - - 5,694 5,382 6,663 103 129 856
Others 4,745 3,483 3,560 4,745 3,483 3,560 - - - 49,430 27,166 2,950 109 18 55
P168,222 P241,970 P249,507 P168,041 P148,022 P135,095 P181 P93,948 P114,412 P291,920 P269,225 P235,802 P6,437 P9,310 P12,593

* As discussed in Note 6, certain accounts were adjusted due to reclassification of Agribusiness Division of the Parent Company to discontinued operations.

- 34 -
6. Discontinued Operations and Assets Held for Sale

a. Agribusiness Division of the Parent Company

In 2008, the Parent Company ceased the operations of its Agribusiness Division, in
particular the operations of its Iligan Coconut Oil Mill.

b. SMAH (Note 10)

On November 8, 2007, the Parent Company through San Miguel Beverages (L) Pte.
Ltd. (SMBPL), signed a definitive agreement to sell its SMAH shares including its
premium Tasmanian brewer, J. Boag, to Lion Nathan Australia Pty. Ltd., an
Australian alcoholic beverages company, for a purchase price of Australian Dollar
(A$) 325 subject to adjustments at completion of closing audit.

The closing audit was completed on January 2, 2008 and the Parent Company
received A$277 as payment of purchase price, net of adjustments. The Group
recognized a gain of P5,425, net of deferred income tax in 2008.

c. San Miguel Foods Australia Holdings Pty. Ltd. (SMFAH) (Note 10)

On November 8, 2007, the Parent Company through San Miguel Foods (L) Pte.
Limited (SMFL) reached an agreement with Kirin Holdings (Australia) Pty. Ltd. to
sell its Australian dairy and juice business, SMFAH, for a purchase price of A$752
(net of external debt and shareholder loans) subject to adjustments at completion of
closing audit. The sale also includes National Foods Limited’s (NFL) shares in Berri
Ltd. (Berri), King’s Creameries (S) Pte. Ltd. (King’s) and Lactos Pty. Ltd. (Lactos).

On December 27, 2007, the Parent Company received A$2,090 representing payment
of the purchase price and settlement of shareholder loans.

Based on the results of the closing audit on April 30, 2008, an adjustment in the
purchase price of A$28 was received by the Parent Company five business days after
completion of the closing audit. The loss realized from the sale amounted to P513,
net of P1,922 net income of SMFAH in 2007.

d. Coca-Cola Bottlers Philippines, Inc. (CCBPI) (Note 10)

On February 22, 2007, the Parent Company and Coca-Cola South Asia Holdings,
Inc. (CCSAHI) executed a Deed of Sale of Shares of Stock covering the Parent
Company’s 65% equity in CCBPI consisting of 766,121 common shares and 172,942
Class A preferred shares for US$590. The payments to the Parent Company are
scheduled on various dates over a five year period subject to fulfillment of specific
conditions attached to each and every payment due. As of December 31, 2008,
receivable from CCSAHI of P4,752 is presented as part of noncurrent receivables
and deposits under “Other noncurrent assets” account (Note 15).

On August 23, 2007, the closing audit for the sale transaction was completed and the
selling price was adjusted to US$520. The gain realized from the sale amounted to
P824, net of P376 net loss of CCBPI (from January 1 to February 22, 2007).

The adjustment in selling price from US$590 to US$520 (net of the assigned
receivables amounting to US$17) is a result of a compromise agreement between the
Parent Company and CCSAHI.

- 35 -
As required by PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations,
the results of operations of Agribusiness in 2008, 2007 and 2006, SMFAH and SMAH in
2007 and 2006 and CCBPI for the period ended February 22, 2007 and December 31,
2006, were presented as a separate item under “Income After Income Tax from
Discontinued Operations” in the consolidated statements of income. SMAH’s assets,
liabilities and equity were classified as items held for sale in the consolidated balance
sheet as of December 31, 2007.

The results of discontinued operations are presented below:

2007 2006
Note 2008 (As Restated) (As Restated)
Net sales P181 P93,948 P114,412
Cost of sales 168 59,568 73,531
Gross profit 13 34,380 40,881
Selling and administrative expenses (23) (28,858) (33,604)
Interest expense and financing charges 26 - (2,984) (3,665)
Interest income 27 - 317 231
Equity in net earnings of associates - 82 114
Gain on sale of investments and
property, plant and equipment - (5) 27
Other charges - net (9) (251) (1,162)
Income (loss) before income tax (19) 2,681 2,822
Income tax expense (benefit) 20 (7) 1,174 1,013
Income (loss) from discontinued
operations (12) 1,507 1,809
Gain (loss) on sale from disposal of
investment - net of tax of P2,921 and
P4,596 in 2008 and 2007,
respectively 20 5,425 (1,235) -
Net income from discontinued
operations P5,413 P272 P1,809
Attributable to:
Equity holders of the Parent Company 33 P5,413 P470 P2,419
Non-controlling interests - (198) (610)
P5,413 P272 P1,809

Basic and diluted earnings per share from discontinued operations, attributable to equity
holders of the Parent Company, are presented in Note 33.

Cash flows provided by discontinued operations are presented below:

2008 2007 2006

Net cash provided by operating activities P1,312 P4,173 P8,092
Net cash provided by (used in) investing
activities 7,786 97,762 (7,710)
Net cash used in financing activities - (11,221) (258)
Net cash provided by discontinued operations P9,098 P90,714 P124

- 36 -
The effect of disposal on the financial position follows:

2008 2007
Assets
Cash and cash equivalents P - P5,094
Trade and other receivables - net of impairment losses
amounting to P2,164 in 2007 (Note 8) - 19,095
Inventories - net - 13,572
Prepaid expenses and other current assets - net - 1,790
Investments and advances - net - 282
Property, plant and equipment - net - 27,795
Goodwill - net - 62,061
Other intangible assets - net - 22,597
Deferred tax assets - 3,457
Other noncurrent assets - net - 8,265
Assets held for sale 5,324 -
Liabilities
Drafts and loans payable - (2,612)
Accounts payable, accrued expenses and other current
liabilities - (25,129)
Income and other taxes payable - (657)
Current maturities of long-term debt - (23,672)
Long-term debt - net of current maturities - (3,249)
Deferred tax liabilities - (1,193)
Other noncurrent liabilities - (938)
Liabilities directly associated with assets held for sale (3,642) -
Non-controlling interests - (8,824)
Cumulative translation adjustment - 88
Amounts recognized directly in equity relating to
assets held for sale (37) -
Net assets disposed of P1,645 P97,822

Cash consideration received P9,083 P95,778

Less cash and cash equivalents disposed of - 5,094
Net cash flows P9,083 P90,684

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 The major classes of SMAH’s assets and liabilities held for sale in 2007 are as follows:

Note
Assets held for sale
Cash and cash equivalents 7 P1,293
Trade and other receivables - net 491
Inventories - net 233
Prepaid expenses and other current assets 164
Property, plant and equipment - net 11 1,572
Goodwill, other intangibles and other assets - net 1,571
P5,324
Liabilities directly associated with assets held for sale
Loans payable P2,778
Accounts payable, accrued expenses and
income and other taxes payable 852
Other noncurrent liabilities 12
P3,642

Included in the “Assets held for sale” account presented in the consolidated balance sheet
as of December 31, 2007 is the investment in KSA Realty Corporation (KSA), an
associate, amounting to P468. The share of the discontinued operations of KSA included
in the “Equity in net earnings of associates” account in 2007 amounted to P134
(Note 10).

7. Cash and Cash Equivalents

Cash and cash equivalents consist of:

2008 2007
Cash in banks and on hand P8,220 P5,322
Short-term investments 108,719 87,959
P116,939 P93,281

Cash in banks earn interest at the respective bank deposit rates. Short-term investments
are made for varying periods of up to three months depending on the immediate cash
requirements of the Group, and earn interest at the respective short-term investment rates.

Cash and cash equivalents included in the “Assets held for sale” account presented in the
consolidated balance sheet as of December 31, 2007 amounted to P1,293 (Note 6).

8. Trade and Other Receivables

Note 2008 2007

Trade P18,668 P20,775
Amounts owed by related parties 29 6,491 35,721
Others 30, 35 28,539 7,924
53,698 64,420
Less allowance for impairment losses 2,884 2,541
P50,814 P61,879

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Trade receivables are non-interest bearing and are generally on a 30 to 45-day term.

The movements in the allowance for impairment losses are as follows:

Note 2008 2007

Balance at beginning of year P2,541 P4,558
Charges for the year 604 597
Amounts written off (283) (82)
Disposals, reversals and others 6 22 (2,532)
Balance at end of year P2,884 P2,541

As at December 31, 2008 and 2007 the aging of receivables are as follows:

2008
Owed by
related
Total Trade parties Non-trade
Current P28,804 P11,587 P6,491 P10,726
Past due
Less than 30 days 4,255 3,245 - 1,010
30-60 days 1,808 812 - 996
61-90 days 735 412 - 323
Over 90 days 18,096 2,612 - 15,484
P53,698 P18,668 P6,491 P28,539

2007
Owed by
related
Total Trade parties Non-trade
Current P52,629 P12,335 P35,721 P4,573
Past due
Less than 30 days 4,709 3,819 - 890
30-60 days 2,712 1,429 - 1,283
61-90 days 1,644 1,274 - 370
Over 90 days 2,726 1,918 - 808
P64,420 P20,775 P35,721 P7,924

a. The Parent Company has outstanding advances to San Miguel Corporation

Retirement Plan (SMCRP) amounting to P6,323 and P35,721 (Note 29) as of
December 31, 2008 and 2007, respectively, subject to interest of 6.5% per annum.
Interest income pertaining to the said advances amounted to P2,310 and P1,148 for
the years ended December 31, 2008 and 2007, respectively (Note 27).

SMCRP used the proceeds of the advances mainly for the purchase of the Parent
Company’s common shares. Such investment accounts for more than 46% and 50%
of the total plan assets as of December 31, 2008 and 2007, respectively. The fair
market values of these shares as of December 31, 2008, were P40.50 for Class “A”
common shares and P42.50 for Class “B” common shares. As of December 31, 2007,
fair market value of these shares were P59 for Class “A” common shares and P59.50
for Class “B” common shares.

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 On December 27, 2007, SMCRP entered into a Stock Purchase Agreement (the
Agreement) with a third party (Buyer) for the sale of the SMC common shares
(857,115,914 shares). The contract, provides among others, that the shares be sold at
an agreed price, payable on or before December 31, 2008, extendible for additional
three months up to March 31, 2009, subject to interest.

Under the terms of the Agreement, all rights to, interests and title in and ownership of
the shares shall remain with SMCRP. All dividends and other benefits, except for
stock dividends, declared by the Parent Company in relation to the shares shall
accrue fully to SMCRP. All stock dividends declared by the Parent Company in
relation to the shares shall accrue to SMCRP and the Buyer proportionately based on
the consideration paid by the Buyer.

Should any part of the total consideration remain unpaid as of March 31, 2009,
SMCRP shall have the right to demand payment from the Buyer of the relevant
amounts outstanding inclusive of interest and penalties.

On November 25, 2008, SMCRP and the Buyer through amendments to the
Agreement, agreed to extend the maturity of the contract up to December 31, 2009,
subject to a partial payment. Upon remittance of the partial payment, interest, at 7%
per annum, shall accrue on the remaining balance of the contract.

9. Inventories

2008 2007
Finished goods and goods in process - at net
realizable value P8,073 P7,102
Containers - at net realizable value 1,371 1,632
Materials and supplies - at net realizable value 18,266 15,118
P27,710 P23,852

The cost of materials and supplies as of December 31, 2008 and 2007 amounted to
P18,607 and P15,616, respectively.

Containers at deposit value amounted to P1,747 and P2,060 as of December 31, 2008 and
2007, respectively.

Finished goods and goods in process include unrealized gain (loss) on fair valuation of
agricultural produce amounting to (P2) and P52 in 2008 and 2007, respectively (Note 4).
The fair value of agricultural produce, less point-of-sale cost, which formed part of
finished goods inventory amounted to P557 and P319 as of December 31, 2008 and
2007, respectively, with corresponding cost at point-of-harvest amounting to P559 and
P267, respectively.

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10. Investments and Advances

Investments in Shares of Stock of Subsidiaries

The following are the developments relating to the Parent Company’s investments in
shares of stock of subsidiaries in 2008 and 2007:

a. BPI

On December 8, 2008, the BOD of the Parent Company approved the transfer of
certain parcels of land used in the domestic beer operations to BPI, a wholly-owned
realty subsidiary, in exchange for shares of stock.

On December 16, 2008, the Parent Company formed BPI with an authorized capital
stock of P1. BPI was incorporated primarily to own, use, improve, develop, sell,
exchange, lease and hold investment or otherwise, real estate of all kinds, including
buildings and other structures.

BPI has not yet started commercial operations as of December 31, 2008.

b. IBI

On December 8, 2008, the BOD of the Parent Company approved the transfer of its
domestic beer and malt-based beverages brands, including related trademarks,
copyrights, patents and other intellectual property rights and know-how (IP Rights)
to IBI, a wholly-owned subsidiary, in exchange for shares of stock.

On December 16, 2008, the Parent Company formed IBI with an authorized capital
stock of P1. IBI was incorporated primarily to engage in the manufacturing, buying,
selling (on wholesale) and dealing in alcoholic and non-alcoholic beverages and to
own, purchase, license and/or acquire such trademarks and other intellectual property
rights necessary for the furtherance of its business. On the same date, the BOD and
stockholders of IBI approved the increase in its authorized capital stock from P1 to
P10,000 divided into 100,005,000 shares at P100 par value per share. The Parent
Company and IBI executed a Deed of Assignment of Domestic Intellectual Rights
dated December 16, 2008 as supplemented by a Supplement to the Deed of
Assignment of Domestic Intellectual Property Rights dated January 23, 2009 for the
transfer of the IP Rights in exchange for common shares in IBI.

IBI has not yet started commercial operations as of December 31, 2008.

c. SMKFSI

On July 3, 2008, the Parent Company, the Hongkong-based Kuok Group and the
Philippine government, acting through several agencies, signed a Memorandum of
Understanding on the Philippine Food Security Program (MOU) for the development
and cultivation of up to one (1) million hectares of land for the purpose of producing
basic food staples. Under the MOU, the Philippine government will identify and
make available for cultivation or food production suitable tracts of land under its
control, possession or ownership. In turn, the Parent Company and Kuok Group will,
after conducting an evaluation and review of the suitability of the identified tracts of
land, provide financing, technical support and management for agricultural crop
production determined to be suitable for the identified areas, which will include, but
will not be limited to, irrigation, access roads and post-harvest investments.

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 On September 2008, SMKFSI was incorporated with the primary purpose to develop
a sustainable food security program for the Philippines by harnessing idle lands of
the government and private parties for the production of rice, corn, cassava, banana
and other food staples. The Parent Company intends to use SMKFSI as its corporate
vehicle for the implementation of the project described in the MOU.

d. SMB

On July 24, 2007, the stockholders of the Parent Company, during the annual
stockholders’ meeting, approved the transfer of the Parent Company’s domestic beer
business assets (excluding land and brands) to a wholly-owned subsidiary of the
Parent Company, SMB, in exchange for shares of stock. The transfer of such assets
to SMB is pursuant to the listing with the PSE and the public offering of the shares of
SMB.

On July 26, 2007, the Parent Company incorporated SMB, a wholly-owned

subsidiary with an initial authorized capital stock of P100 and paid-up capital of
P6.25. Pursuant to the stockholders approval obtained on July 24, 2007, SMC’s
domestic beer business net assets as of June 30, 2007, excluding land, brands and
certain payables were transferred to this new subsidiary in exchange for additional
shares of stock effective October 1, 2007.

On September 27, 2007, the SEC approved the transfer of the domestic beer business
net assets to SMB and the increase in the authorized capital stock from P100 to
P25,000.

Shares totaling 15,308,416,960, were issued to the Parent Company pursuant to such
transfer under a tax-free asset-for-share agreement, as confirmed by the Bureau of
Internal Revenue (BIR) in its certification No. SN-300-2007 dated October 9, 2007.

As a standard condition of the SEC for approval of applications for increase in

authorized capital stock, where the payment for the shares issued pursuant to such
increase is made in the form of motor vehicles and receivables, 2,557,573,242
common shares that were issued by SMB to the Parent Company in exchange for
motor vehicles and receivables out of the 15,308,416,960 common shares issued by
SMB are being held in escrow by the SEC pending the transfer of ownership of those
motor vehicles in the name of SMB and proof of collection of receivables. Transfer
of ownership of those motor vehicles and proof of collection of receivables are
currently in process.

On November 5, 2008, SMB submitted to the SEC the required documentation for
the transfer of ownership of motor vehicles and proof of collection of receivables.
This is still being reviewed by the SEC, as of March 26, 2009.

On May 12, 2008, SMB listed its shares in the Philippine Stock Exchange pursuant
to its listing application approved on March 26, 2008. SMB sold 77,052,000 shares
to the public by way of a primary offer, and the Parent Company sold to the public
809,050,000 shares of its existing shares in SMB (including shares to cover for over-
allotments) by way of a secondary offer, pursuant to a registration statement
rendered effective by the Securities and Exchange Commission on April 28, 2008.
The total shares offered represents 5.75% stake in SMB. The Group recognized a
gain of P5,650 from the transaction.

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e. Packaging Businesses

On April 12, 2007, the BOD approved the sale of up to 40% of the Parent
Company’s interests in its domestic packaging businesses under SMPSI and in its
regional packaging businesses under SMPIL.

On April 27, 2007, the Parent Company executed the SMPSI Stock Purchase
Agreement (SMPSI SPA) with Nihon Yamamura Glass Co., Ltd. (NYG), a leading
Japanese manufacturer of glass and plastics packaging, for the sale of SMC’s 35%
stake in its domestic packaging businesses, subject to the completion of the closing
terms and conditions under the SMPSI SPA. On the same date, the Parent Company
and its wholly-owned foreign subsidiary, San Miguel Holdings, Limited (SMHL),
also executed the SMPIL Stock Purchase Agreement (SMPIL SPA) with NYG for
the sale of SMHL’s 35% stake in its regional packaging businesses, subject to the
completion of the closing terms and conditions under the SMPIL SPA.

On November 16, 2007, the Parent Company and NYG entered into the SMPSI
Shareholder’s Agreement and, together with SMHL, also entered into the SMPIL
Shareholder’s Agreement, in compliance with the requirements of the SMPSI SPA
and the SMPIL SPA. The shareholders’ agreements provide the terms and conditions
that will govern the relationship among the Parent Company, SMHL and NYG as
shareholders.

Also on the same date, the authorized capital stock of SMPIL was increased from
US$0.001 to US$100. And pursuant to a written resolution of the BOD of SMPIL
dated November 23, 2007, SMPIL approved, among others, the conversion of
SMHL’s shareholder advances in the amount of US$64.3 into 64,281,176 fully paid
shares in SMPIL.

On November 29, 2007, the Parent Company and SMHL received P626 and US$4 as
down payment for their 35% interest in SMPSI and SMPIL, respectively. The said
amounts are presented as part of “Others” under “Accounts payable and accrued
expenses” account (Note 17).

On December 18, 2007, the Parent Company entered into several deeds of
assignment with SMPSI for the following assignments by the Parent Company in
favor of SMPSI: (i) its receivables of P187.5 as full payment of the Parent
Company’s incorporation subscription payables, (ii) its receivables of P6,083 as full
payment of the Parent Company’s additional subscription of 5,294,180 SMPSI
shares, (iii) effective January 1, 2008, its 60% equity in SYFMC with an aggregate
book value of P68 as full payment of the Parent Company’s additional subscription
of 58,977 SMPSI shares, and (iv) certain fixed assets with an aggregate carrying
value of P123 as full payment of the Parent Company’s additional subscription of
106,627 SMPSI shares, subject to the approval by the SEC of SMPSI’s applications
for confirmation of valuation in respect of the issuances of shares from its existing
unissued capital stock and the increase in its authorized capital stock.

On January 21, 2008, the SEC approved the increase in the authorized capital stock
of SMPSI from P10,000 divided into 10,000,000 shares to P11,000 divided into
11,000,000 shares with the same par value of P1,000 each and the valuation of the
assets assigned by the Parent Company in favor of SMPSI as consideration for the
issuance by SMPSI of shares from its existing unissued capital stock.

- 43 -
 On January 30, 2008, effective on the closing of the SMPSI SPA on
January 31, 2008, the Parent Company and NYG entered into a deed of assignment
of shares of stock pursuant to which the Parent Company assigned, transferred and
ceded all its rights, interest and/or title over the Parent Company’s 3,756,501 shares
in SMPSI for P4,317. On the same date, and effective on the closing of the SMPIL
SPA on January 31, 2008, SMHL and NYG entered into a deed of assignment of
shares of stock pursuant to which SMHL assigned, transferred and ceded all its
rights, interest and/or title over SMHL’s 20,726,119 shares in SMPIL for US$21.

Also on January 30, 2008, effective on the closing of the SMPSI SPA on
January 31, 2008, SMPSI and NYG entered into a deed of assignment of shares
pursuant to which NYG assigned its 20% stake in SYFMC with an aggregate book
value of P23 as full payment for its subscription of 19,659 SMPSI shares. On March
14, 2008, the SEC approved the valuation of NYG’s shares in SYFMC. The relevant
Certificate of Approval of Valuation was amended on April 23, 2008 to rectify the
typographical error in the corporate name of SMPSI from “San Miguel Packaging
Specialist, Inc.” to “San Miguel Packaging Specialists, Inc.”.

On the closing of the SMPSI SPA and the SMPIL SPA both on January 31, 2008, the
Parent Company and SMHL received P3,691 and US$17, respectively, from NYG.
Pending completion of the closing audit, the Group recognized a gain of P154 from
the sale of 35% interest in SMPSI and SMPIL.

In connection with the sale, SMPSI changed its corporate name to “San Miguel
Yamamura Packaging Corporation” as approved by the SEC on June 4, 2008. In
addition, the BOD of SMPIL likewise approved the change in the corporate name of
SMPIL to “San Miguel Yamamura Packaging International Limited” on January 3,
2008, and such change became effective on June 11, 2008.

f. SMBI

On January 10, 2007, the Parent Company incorporated SMBI with total authorized
capital stock of P100 and an initial paid-up capital of P6.25. SMBI is engaged in the
manufacturing, exporting, importing, selling and distribution of juice drinks, fruit
drinks, water and water-based drinks, malt-based and coffee-based drinks and other
beverage products. Actual commercial operations of SMBI started on
March 19, 2007.

On November 1, 2008, GSMI entered into an asset purchase agreement with SMBI
for the purchase of SMBI’s assets at net book value totaling P1,039, subject to
adjustments as may be warranted by circumstances transpiring prior to closing date
and which affect the value of the assets. Twenty-five percent (25%) of the purchase
price was settled upon execution of the agreement, and thereafter the remaining
balance shall be payable in six (6) equal monthly installments. On December 8, 2008,
GSMI also entered into a service agreement with SMBI whereby the latter shall
render various services to GSMI related to the production, promotion, sale and
distribution of non-alcoholic beverages products as well as the operation of beverage
assets. In consideration of the services to be rendered by SMBI, GSMI shall pay
monthly service fee in the amount of P21. The term of the agreement is for six (6)
months commencing on November 1, 2008 and expiring on April 30, 2009 and
extendible upon mutual written agreement of the parties.

On December 31, 2008, the closing date of the transaction, the purchase price was
adjusted to P1,117.

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g. SMDCi

On June 18, 2007, the Parent Company formed SMDCi with an authorized capital
stock of P100. SMDCi was incorporated primarily to engage in, conduct, and carry
on the business of distribution and logistic managements. SMDCi started
commercial operations on August 1, 2007.

h. SMAH

On November 8, 2007, the Parent Company through SMBPL, signed a definitive

agreement to sell its SMAH shares including its premium Tasmanian brewer,
J. Boag, to Lion Nathan Australia Pty. Ltd., an Australian alcoholic beverages
company, for a purchase price of A$325, subject to adjustments at completion of
closing audit (Note 6).

i. SMFAH

On November 8, 2007, the Parent Company through SMFL reached an agreement

with Kirin Holdings (Australia) Pty. Ltd. to sell its Australian dairy and juice
business, SMFAH, for a purchase price of A$752 (net of external debt and
shareholder loans) subject to adjustments at completion of closing audit. The sale
also includes NFL’s shares in Berri, King’s and Lactos (Note 6).

j. CCBPI

On December 13, 2006, the BOD approved the Share Purchase Agreement (SPA)
with CCSAHI (the “Purchaser”) for the sale of 65% equity in CCBPI.

On December 23, 2006, the Parent Company together with its two wholly-owned
subsidiaries, SMBPL and SMHL, (collectively referred to as the “Sellers”) entered
into an SPA with the Purchaser for the sale of their combined 65% equity in CCBPI
for a total consideration of US$590. The agreement provides that the closing of the
sale transaction shall be subject to the completion of all the pre-closing conditions
stipulated in the SPA. The closing date shall take place 3 business days after the
satisfaction of all the pre-closing conditions or such other date that may be mutually
agreed in writing by all parties, provided that the closing date shall not be later than
March 31, 2007 without the mutual written agreement of all parties.

On February 20, 2007, SMBPL and SMHL sold to the Parent Company their
respective equity in CCBPI consisting of 726,291 common shares for P11,559 and
119,477 Class A preferred shares for P9,175, respectively.

On February 21, 2007, the Sellers entered into an Amendment to the SPA with the
Purchaser amending certain provisions of the SPA executed on December 23, 2006.
The amendments include, among others, a clarification that the closing accounts
defined in the SPA shall mean the consolidated balance sheet of CCBPI as at
February 23, 2007 and the requirement for the delivery, on closing date, by the
Sellers to the Purchaser of certain documents.

As discussed in Note 6, on February 22, 2007, the Parent Company and the Purchaser
executed a Deed of Sale of Shares of Stock covering the Parent Company’s 65%
equity in CCBPI consisting of 766,121 common shares and 172,942 Class A
preferred shares for US$590.

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k. SMPFC

In December 2005, the Parent Company subscribed to an additional 13,879,434

shares of stock of SMPFC for P850. On February 9, 2006, the SEC approved the
amendment of SMPFC’s Articles of Incorporation to include a provision on the
denial of pre-emptive rights to stockholders with respect to the issuance of said
shares of stock to the Parent Company.

In December 2006, the Parent Company’s BOD approved the transfer to SMPFC,
effective January 1, 2007, subject to necessary approvals, of its share interest in
SMFI, Magnolia and MFC at respective book values as of September 30, 2006
totaling P4,591. In exchange, SMPFC issued to the Parent Company its equivalent
shares valued at the latest traded price as of September 30, 2006.

In September 2007, the applications for the approval of the transfer and SMPFC’s
increase in its authorized capital stock and confirmation of valuation of shares of the
Parent Company in SMFI, Magnolia and MFC given by way of payment for the
shares of SMPFC was approved by the SEC. Following the SEC’s approval, SMPFC
issued 70,865,078 shares to the Parent Company in November 2007 out of its
unissued shares and increase in authorized capital stock. This resulted to an increase
in the Parent Company’s ownership from 99.83% to 99.92%.

On February 1, 2008, the BIR confirmed the tax-free exchange between SMPFC and
the Parent Company.

l. Magnolia

On February 5, 2007, Magnolia issued to SDI 11,116,854 Class “B” common shares
of its stock valued at net book value as of May 31, 2006, in exchange for certain
machinery and equipment with an appraised value of P19.8 as of November 27,
2006. SDI then declared the said Magnolia shares as property dividend to the Parent
Company.

The issuance of shares of stock to SDI in exchange of machinery and equipment and
the declaration of the shares as property dividend by SDI to the Parent Company
were approved by the SEC in February and March 2007, respectively.

m. SMPFVN

In October 2006, the Parent Company through SMPFVN entered into a Sale and
Purchase Agreement (the “SPA”) with Le Gourmet Company Limited
(“Le Gourmet”), for the purchase of certain tangible assets, trademarks, processes
and information, as well as the take over of the land use rights of Le Gourmet for the
purchase price of US$2.1. These assets are used by Le Gourmet in relation to the
processing and sale of its meat products in Vietnam. The completion of the
transaction was subject to the terms and conditions specified in the SPA, including
the relevant governmental approvals of the transaction in Vietnam. The transaction
has been completed on December 12, 2007.

n. SMMI

Pursuant to the Deed of Assignment executed by SMFI and SMMI in 2005

transferring certain assets and liabilities of SMFI’s Flour Division at historical book
value of P1,646 in exchange for SMMI’s shares to be effective January 1, 2006, and

- 46 -
 the SEC’s approval of such transfer and SMMI’s increase in its authorized capital
stock on March 27, 2007, SMMI issued to SMFI 16,454,816 of its common shares on
April 10, 2007 in exchange for the transfer of said assets and liabilities. SMFI
subsequently declared as property dividend its shares in SMMI in favor of the Parent
Company.

In January 2008, the Parent Company executed a Deed of Assignment assigning its
16,454,816 shares in SMMI to SMPFC effective December 28, 2007. Following the
Parent Company’s transfer of its interest, SMFI became a wholly-owned subsidiary
of SMPFC.

As of March 26, 2009, the declaration of SMFI’s shares in SMMI as property

dividend in favor of the Parent Company is still pending approval with the SEC.

o. RealSnacks

As of December 31, 2008, RealSnacks has not yet started commercial operations.

Investments in Shares of Stock and Advances to Associates and Other Investments

Investments in shares of stock of and advances to associates and other investments

consist of:

Note 2008 2007

Investments in associates - at equity:
Acquisition cost
Balance at beginning of year P232 P4,319
Additions 32,594 -
Disposals - (3,851)
Cumulative translation adjustment
and others - (206)
Transfer to assets held for sale - (30)
32,826 232
Accumulated equity in net earnings:
Balance at beginning of year (12) 212
Equity in net earnings (losses) during
the year (1,132) 246
Accumulated equity on investments
disposed of and others (19) (32)
Accumulated equity of investment
transferred to assets held for sale - (438)
Balance at end of year (1,163) (12)
31,663 220
Available-for-sale investments 36, 37 590 551
P32,253 P771

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The carrying values of investments in shares of stock of associates are as follows:

Percentage of
Ownership 2008 2007
Manila Electric Company (Meralco) 27 P30,971 P -
Bank of Commerce (BOC) 30 465 -
Northpine Land, Inc. (Northpine)
[formerly Jardine] 20 227 220
P31,663 P220

Following are the unaudited condensed and combined financial information of the
associates:

2008 2007 2006

Current assets P93,633 P1,678 P12,217
Current liabilities 131,582 889 7,158
Noncurrent assets 172,880 8,079 23,144
Noncurrent liabilities 82,829 2,808 11,662
Revenue 198,577 735 14,654
Net income (loss) (3,493) 515 672

a. Meralco

On October 27, 2008, the Parent Company entered into a sale and purchase
agreement with the Government Service Insurance System to acquire the latter’s
300,963,189 shares of Meralco for a total consideration of P27,087 plus an additional
fixed term interest of P3,758. On November 10, 2008, the Parent Company paid
P5,417 representing downpayment for said shares with the balance payable in
three (3) years.

The fair value of the Parent Company’s investment in Meralco amounts to P16,553
as of December 31, 2008.

b. KSA

On December 14, 2007, the Parent Company through SMPI entered into a Share
Purchase Agreement (SPA) to sell its 354,862 common shares (equivalent to 29.38%
ownership) in KSA with carrying amount equivalent to its acquisition cost plus
accumulated equity in net earnings of P468 to Shang Properties, Inc. (SPI) for a total
consideration of P1,812. The Group recognized a gain of P1,182, net of capital gains
tax of P162. The transaction was completed on January 14, 2008 (Note 6).

c. BOC

In October 2007, SMPI and SMCRP entered into a subscription agreement pursuant
to which SMPI and SMCRP agreed to subscribe, subject to certain terms and
conditions, to 10,000,000 unissued and unsubscribed common shares of BOC with an
aggregate par value of P1,000 (P100 per share) for P2,000 (P200 per share),
equivalent to 34% of the total outstanding capital stock of BOC, with SMPI and
SMCRP holding 30% and 4% equity ownership interest, respectively. In 2007,
SMPI paid P500 to BOC, this was presented as part of noncurrent receivables and

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 deposits under “Other noncurrent assets” account as of December 31, 2007
(Note 15).
In April 2008, SMPI and SMCRP paid the balance of its payable to BOC for its
subscirption amounting to P1,500, of which P1,249 and P251 were paid by SMPI and
SMCRP, respectively.

In May 2008, SMPI and SMCRP entered into a subscription agreement with BOC for
a total of 10,000,000 additional shares in BOC, wherein SMPI subscribed to an
additional 3,001,779 shares, from the increase in the authorized capital stock of BOC
with an aggregate par value of P300 (P100 per share) for P600 (P200 per share) to
maintain its 30% stake in BOC, while SMCRP will increase its holdings in BOC to
21%. As of December 31, 2008, SMPI has made an advance payment of P150 which
is presented as part of noncurrent receivables and deposits under “Other noncurrent
assets” account (Note 15).

In computing for the equity in net losses and comprehensive losses of BOC, SMPI
made adjustments in the 2008 audited financial statements of BOC to conform with
the Group’s accounting policies in accordance with PFRS. Certain accounting
policies applied by BOC in its financial statements are not in accordance with PFRS,
hence the auditors’ report on these financial statements were modified. The
adjustments made by the SMPI relates to (a) inadequate reserves on non-performing
assets, investment properties and financial assets; (b) deferral of losses on sale of
non-performing loans; and (c) misstatement in the values of structured financial
instruments and certain investments properties. Management made an evaluation on
the recoverability of the carrying value of investment in BOC as of December 31,
2008, using discounted cash flow method. Management believes that its acquisition
of the significant equity interest in BOC provided the latter with fresh capital and
better opportunities, such as additional business that the Group may bring in to BOC,
to improve its operations (i.e. liquidity and profitability). The additional subscription
of SMPI and SMCRP will further improve its capital base and liquidity. On the basis
of these premises, management determined that the carrying amount of the
investment is lower than its recoverable amount and that no impairment loss on the
investment is required to be recognized for the year ended December 31, 2008.

d. NutriAsia Pacific San Miguel Holdings Ltd. (NSMH)

In April 2007, the Parent Company, through San Miguel Foods Asia Limited
(SMFAL), entered into a Share Purchase Agreement with Well Grounded Limited
for the sale of SMFAL’s 42.22% equity and other interest in NSMH for US$150.
NSMH is the holding company of Nutri Asia Pacific Limited (NPL), which in turn is
the parent company of Del Monte Pacific Ltd. The amount of US$130 was received
on April 25, 2007 as partial payment for the transaction. The balance of US$20 shall
be subject to interest of 7.2% per annum. The principal amount and all interest
accrued shall be due and payable on April 24, 2009. The unpaid balance is presented
as part of noncurrent receivables and deposits under “Other noncurrent assets”
account (Note 15). The gain recognized from the said transaction amounted to
US$46 (P2,149).

e. Thai San Miguel Liquor Co. Ltd. (TSML) [formerly C.N.T. Wine and Liquor
Company Limited (CNT)]

On November 23, 2004, the Parent Company through GSMI, entered into a Share
Purchase Agreement (“SPA”) with Thai Life Group of Companies (the “Seller”) for
the purchase of 40% of the outstanding shares of TSML, a limited company
organized under the laws of Thailand. TSML holds a license in Thailand to engage in

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the business of manufacturing alcohol and manufacturing, selling and distributing
brandy, wine and distilled spirits products both for domestic and export markets.
Also, on the same date, GSMI and the Seller entered into a Joint Venture Agreement
covering the ownership and operation of TSML and the joint control, rights,
obligations and responsibilities of GSMI and the Seller, as stockholders. In
November 2004, GSMI incorporated GSMIL and subsequently assigned its rights
and obligations under the SPA and the joint venture to GSMIL, including its rights to
purchase 40% ownership of the outstanding shares of TSML. On December 15,
2004, all the closing conditions for the execution of the SPA were satisfied and the
purchase was effected.

On June 29, 2007, GSMI incorporated Ginebra San Miguel International Holdings
Ltd. (GSMIHL), as a wholly-owned subsidiary. GSMIHL was organized to be the
holding company of Thai Ginebra Trading Co. Ltd. (TGT). TGT, which was formed
as another joint venture by GSMI, with its Thai counterparty, will function as the
selling and distribution arm of TSML. GSMI, with GSMIHL as its holding company,
purchased 40% ownership of the outstanding shares of TGT.

On August 27, 2008 and September 11, 2008, GSMI incorporated Global Beverage
Holdings, Limited (GBHL) and Siam Holdings Limited (SHL), respectively, as
wholly-owned subsidiaries. GSMI subscribed to 1,000 shares of GBHL at par value
of US$1 per share for a total subscription value of US$0.001 (P0.05) and 1,000
shares of SHL at par value of US$1 per share for a total subscription value of
US$0.001 (P0.05). Both entities are established as holding companies for the
acquisition of additional investment in TSML and TGT.

On October 14, 2008, GSMI, through SHL, acquired 24,500 shares representing 49%
ownership of the outstanding shares of Siam Wine and Liquor Co. Ltd. (SWLCL), a
limited company organized under the laws of Thailand, for Thailand Baht 2 (P3). On
the same date, SWLCL acquired 1,000,000 shares representing 10% ownership of the
outstanding capital stock of TSML for Thailand Baht 106.48 (P148). SHL’s share on
the share purchase is Thailand Baht 52.2 (P72.) for 490,000 shares at
Thailand Baht 108.68 per share representing 4.9% ownership. Accordingly, the
Group’s share in TSML increased from 40% to 44.9%.

On October 14, 2008, GSMI advanced a total amount of US$3 (P147) to GBHL. On
October 10, 2008, GBHL (“Lender”) entered into a loan agreement with SWLCL
(“Borrower”) for the same amount, to finance the latter’s working capital
requirements and purchase of additional shares in TSML and TGT.

Presented below is the Group’s share in the assets, liabilities, income and expenses of
the joint venture as of and for the years ended December 31, 2008, 2007 and 2006 of
TSML which is included in the Group’s consolidated financial statements:

2008 2007 2006

Current assets P459 P323 P240
Noncurrent assets 911 843 360
Current liabilities 288 86 21
Noncurrent liability 526 526 -
Revenue 402 - -
Cost of goods sold 398 - -
Other income 1 1 3
Expenses 70 34 6
Net loss 65 33 3

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 The Group’s share in the cash flows of TSML for the years ended December 31,
2008, 2007 and 2006 are as follows:

2008 2007 2006

Operating activities P88 (P62) (P62)
Investing activities (70) (483) (168)
Financing activities (20) 536 -

On October 14, 2008, SWLCL acquired 5,000 shares representing 10% ownership of
the outstanding capital stock of TGT for Thailand Baht 0.5 (P0.7). SHL’s share on
the share purchase is Thailand Baht 0.2 (P0.3) for 2,450 shares at Thailand Baht 100
per share representing 4.9% ownership. Accordingly, the Group’s share in TGT
increased from 40% to 44..9%.

Presented below is the Group’s share in the assets, liabilities, income and expenses of
the joint venture as of and for the period ended December 31, 2008 and 2007 of TGT
which is included in the Group’s consolidated financial statements:

2008 2007
Current assets P142 P3
Noncurrent assets 44 1
Current liabilities 219 2
Noncurrent liabilities 29 -
Revenue 153 -
Cost of goods sold 121 -
Other income 0.7 -
Expenses 92 2
Net loss 60 2

The Group’s share in the cash flows of TGT for the period ended December 31, 2008
and 2007 is as follows:

2008 2007
Operating activities P18 (P7)
Investing activities (43) (1)
Financing activities 29 -

TSML and TGT both started commercial operations in March 2008.

f. Philippine Nutrition Technologies, Inc. (PNTI)

In 2007, SMPFC provided full allowance for the impairment in value of its
investment in PNTI, a joint venture between SMPFC and the Great Wall Group of
Taiwan.

As of March 26, 2009, application for the dissolution of PNTI is yet to be filed with
the SEC, pending the receipt of clearance from the BIR.

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g. Available-for-sale investments pertain to various investments in shares of stock
carried at fair value

In 2007, outstanding receivables of the Group with a local bank, including interest
earned were exchanged with 940,560,000 common B shares of another local bank.
The fair market value of the shares amounting to P357 was included as part of
available-for-sale investments under “Investments and advances” account.
Consequently, the Parent Company paid its subsidiaries for the outstanding amounts
due them.

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11. Property, Plant and Equipment

Property, plant and equipment consist of:

Office
Land and Machinery Tools and Equipment,
Land Buildings and and Transportation Small Furniture and Leasehold Construction
Note Improvements Improvements Equipment Equipment Equipment Fixtures Molds Improvements in Progress Total
Gross carrying amount:
December 31, 2006 P16,488 P31,211 P86,212 P5,093 P19,612 P4,270 P879 P800 P10,563 P175,128
Additions for the year 573 1,572 7,430 119 314 218 130 79 (1,125) 9,310
Disposals/reclassifications (6,685) (7,918) (17,960) (2,122) (15,273) (1,696) (596) (54) (1,641) (53,945)
Transfer to assets held
for sale 6 (86) (734) (1,261) - - - - - - (2,081)
Currency translation
adjustments (1,409) (2,917) (5,725) (389) (2,721) (341) (18) - (336) (13,856)
December 31, 2007 8,881 21,214 68,696 2,701 1,932 2,451 395 825 7,461 114,556
Additions for the year 350 1,234 5,143 406 115 97 140 24 (1,072) 6,437
Disposals/reclassifications (187) (50) (7) (226) (282) (4) (17) (9) (1,623) (2,405)
Currency translation
adjustments 145 1,575 3,513 39 89 62 9 - 613 6,045
December 31, 2008 9,189 23,973 77,345 2,920 1,854 2,606 527 840 5,379 124,633
Accumulated depreciation
and amortization:
December 31, 2006 1,661 6,783 46,751 4,022 9,867 3,784 712 282 - 73,862
Additions for the year 174 841 3,448 268 1,162 319 106 45 - 6,363
Disposals/reclassifications (628) (1,723) (12,854) (2,051) (8,119) (1,834) (517) (18) - (27,744)
Transfer to assets held
for sale 6 (5) (69) (435) - - - - - - (509)
Currency translation
adjustments (128) (553) (2,933) (351) (1,351) (264) (13) - - (5,593)
December 31, 2007 1,074 5,279 33,977 1,888 1,559 2,005 288 309 - 46,379
Additions for the year 90 663 3,511 231 121 169 108 40 - 4,933
Disposals/reclassifications (124) (97) (704) (122) (249) (57) 1 (15) - (1,367)
Currency translation
adjustments 14 354 1,292 30 79 40 6 - 1,815
December 31, 2008 1,054 6,199 38,076 2,027 1,510 2,157 403 334 - 51,760
Forward

- 53 -
 Office
Land and Machinery Tools and Equipment,
Land Buildings and and Transportation Small Furniture and Leasehold Construction
Improvements Improvements Equipment Equipment Equipment Fixtures Molds Improvements in Progress Total
Accumulated impairment
losses:
December 31, 2006 P185 P503 P2,710 P - (P129) P9 P2 P - P - P3,280
Additions for the year - 510 950 1 - - - - - 1,461
Disposals/reclassifications (157) (35) (482) - 119 (2) - - - (557)
Currency translation
adjustments (28) (60) (294) - 21 (1) - - - (362)
December 31, 2007 - 918 2,884 1 11 6 2 - - 3,822
Additions for the year - - - - - - - - - -
Disposals/reclassifications - - (46) - (3) 8 - - - (41)
Currency translation
adjustments - 172 604 - 2 1 - - - 779
December 31, 2008 - 1,090 3,442 1 10 15 2 - - 4,560
Net book value:
December 31, 2007 P7,807 P15,017 P31,835 P812 P362 P440 P105 P516 P7,461 P64,355

December 31, 2008 P8,135 P16,684 P35,827 P892 P334 P434 P122 P506 P5,379 P68,313

Depreciation, amortization and impairment losses charged to operations amounted to P4,933, P7,824 and P7,511 in 2008, 2007 and 2006,
respectively. Of the said amounts, P1,659 and P2,482 in 2007 and 2006, respectively, were presented as part of discontinued operations and P1,461
was presented as part of loss on impairment of property, plant and equipment and idle assets under “Other income (charges)” account in 2007
(Notes 6, 24 and 28). These amounts include annual amortizations of capitalized interest amounting to P2, P23 and P90 in 2008, 2007 and 2006,
respectively. No interest was capitalized in 2008.

In 2008, the Group, through SMPI, sold its parcel of land, including improvements located along Aurora Boulevard, Quezon City for a total
consideration of P1,616. The gain recognized by the Group relating to the sale amounting to P1,562, is presented as part of “Gain on sale of
investments and property, plant and equipment”.

Land and land improvements include a 144-hectare property in Sumilao, Bukidnon, acquired by SMFI in 2002, which later became the subject of a
petition for revocation of conversion order filed by MAPALAD, a group of Sumilao farmers, with the Department of Agrarian Reform (DAR), and
appealed to the Office of the President (OP). Total acquisition and development costs included in the account as of December 31, 2008 amounted to
P37.

- 54 -
 To settle the land dispute, a Memorandum of Agreement (MOA) was executed between
SMFI, MAPALAD, OP and DAR on March 29, 2008. The MOA provided for the release
of a 50-hectare portion of the property to qualified farmer-beneficiaries, and the transfer
of additional 94 hectares outside of the property to be negotiated with other Sumilao
landowners. Under the MOA, SMFI shall retain ownership and title to the remaining
portion of the property for the completion and pursuit of the hog farm expansion.
Implementation of the MOA provisions is ongoing.

Construction in Progress (CIP) includes the cost of farm improvements, buildings and
machinery and equipment totaling P481 incurred for Montery hog farm expansion project
situated in Sumilao.

12. Investment Properties

The movements in investment properties, including the effects of currency translation

adjustments follow:

Machinery Tools and

Land and Land Buildings and and Small
Improvements Improvements Equipment Equipment Total
Cost:
December 31, 2006 P1,752 P574 P - P - P2,326
Additions/reclassifications 88 (33) 633 9 697
Currency translation adjustments (249) (4) - - (253)
December 31, 2007 1,591 537 633 9 2,770
Additions/reclassifications 59 64 380 - 503
Disposals (12) (15) - - (27)
Currency translation adjustments 127 85 - - 212
December 31, 2008 1,765 671 1,013 9 3,458
Accumulated depreciation :
December 31, 2006 50 152 - - 202
Additions/reclassifications 15 (9) 541 9 556
Currency translation adjustments (9) - - - (9)
December 31, 2007 56 143 541 9 749
Additions 7 13 7 - 27
Disposals/reclassifications 23 33 353 - 409
Currency translation adjustments (13) 33 - - 20
December 31, 2008 73 222 901 9 1,205
Accumulated impairment losses :
December 31, 2006 341 39 - - 380
Additions/reclassifications 36 - - - 36
Currency translation adjustments (42) (1) - - (43)
December 31, 2007 335 38 - - 373
Additions/reclassifications 5 - - - 5
Disposals - (13) - - (13)
Currency translation adjustments 2 48 - - 50
December 31, 2008 342 73 - - 415
Net book value:
December 31, 2007 P1,200 P356 P92 P - P1,648

December 31, 2008 P1,350 P376 P112 P - P1,838

The fair value of investment properties as of December 31, 2008 and 2007 amounted to
P2,758 and P2,067, respectively, which were determined based on valuations performed
by independent appraisers.

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13. Biological Assets

This account consists of poultry, hogs and cattle as follows:

2008 2007
Current:
Growing stocks P2,707 P2,165
Goods in process 225 159
Total Current 2,932 2,324
Noncurrent breeding stocks - net 1,814 1,319
P4,746 P3,643

The amortization of breeding stocks charged to operations amounted to P863 in 2008,

P754 in 2007 and P614 in 2006.

Growing stocks pertain to growing broilers, hogs and cattle and goods in process pertain
to hatching eggs and carcass.

The movements in biological assets, including the effects of foreign exchange

adjustments are as follows:

2008 2007
Gross:
Balance at beginning of year P5,054 P3,863
Increase (decrease) due to:
Purchases 14,608 10,084
Production 33,540 5,908
Mortality (31) (31)
Sales (2,745) (207)
Harvest (43,593) (14,604)
Currency translation adjustments (66) 41
Balance at end of year 6,767 5,054
Accumulated amortization:
Balance at beginning of year 1,411 724
Additions 863 754
Disposals and others (253) (67)
Balance at end of year 2,021 1,411
Net book value P4,746 P3,643

The Group harvested approximately 322.9 million kgs. and 298.2 million kgs. of grown
broilers, in 2008 and 2007, respectively, and 674,458 and 752,879 heads of marketable
hogs and cattle, in 2008 and 2007, respectively.

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14. Goodwill and Other Intangible Assets

The movements in goodwill, including effects of currency translation adjustments are as

follows:

Note 2008 2007

Balance at beginning of year P5,348 P72,899
Additions - 30
Disposals 6 - (62,061)
Impairment 28 (322) -
Transfer to assets held for sale 6 - (864)
Currency translation adjustments 175 (4,656)
Balance at end of year P5,201 P5,348

The movements in other intangible assets, including the effects of currency translation
adjustments are as follows:

Trademarks and
Brand Names Others Total
Cost:
December 31, 2006 P26,190 P2,712 P28,902
Additions - 254 254
Disposals and reclassifications (23,177) (626) (23,803)
Currency translation adjustments (1,051) (313) (1,364)
December 31, 2007 1,962 2,027 3,989
Additions 78 73 151
Disposals and reclassifications - 241 241
Currency translation adjustments 211 273 484
December 31, 2008 2,251 2,614 4,865
Accumulated amortization and impairment
losses:
December 31, 2006 - 787 787
Additions - 200 200
Disposals and reclassifications - (136) (136)
Currency translation adjustments - (64) (64)
December 31, 2007 - 787 787
Additions - 92 92
Disposals and reclassifications - 102 102
Currency translation adjustments - 72 72
December 31, 2008 - 1,053 1,053
Net book value:
December 31, 2007 P1,962 P1,240 P3,202
December 31, 2008 P2,251 P1,561 P3,812

- 57 -
Goodwill acquired through business combinations and trademarks and brand names with
indefinite lives have been allocated to individual cash-generating units, which are also
reportable segments, for impairment testing as follows:

2008 2007
Trademarks Trademarks
and Brand and Brand
Goodwill Names Goodwill Names
Beverage P1,311 P2,012 P1,230 P1,801
Food 2,950 239 3,255 161
Packaging 879 - 802 -
Others 61 - 61 -
Total P5,201 P2,251 P5,348 P1,962

The recoverable amount of goodwill has been determined based on a valuation using
cash flow projections covering a five year period based on long range plans approved by
management. Cash flows beyond the five year period are extrapolated using a constant
growth rate determined per individual cash-generating unit. This growth rate is
consistent with the long-term average growth rate for the industry. The discount rate
applied to after tax cash flow projections ranged from 6% to 14% in December 31, 2008
and 2007. The discount rates also impute the risk of the cash-generating units compared
to the respective risk of the overall market and equity risk premium.

Management believes that any reasonably possible change in the key assumptions on
which the recoverable amount is based would not cause its carrying amount to exceed its
recoverable amount.

The calculations of value in use are most sensitive to the following assumptions:

Gross Margins. Gross margins are based on average values achieved in period
immediately before the budget period. These are increased over the budget period for
anticipated efficiency improvements. Values assigned to key assumptions reflect past
experience, except for efficiency improvement.

Discount Rates. The Group uses the weighted average cost of capital as the discount
rates, which reflect management’s estimate of the risk specific to each unit. This is the
benchmark used by management to assess operating performance and to evaluate future
investments proposals.

Raw Material Price Inflation. Forecast consumer price are obtained from indices during
the budget period from which raw materials are purchased. Value assigned to key
assumption is consistent with external sources of information.

On December 31, 2008, an impairment loss on the goodwill of SDI amounting to P322
was recognized and is included in “Other income (charges)” account (Note 28). No
impairment loss on goodwill was recognized in 2007.

- 58 -
15. Other Noncurrent Assets

Note 2008 2007

Noncurrent receivables and
deposits - net 6, 10, 30, 35, 36, 37 P7,439 P7,437
Deferred containers - net 4 3,708 3,187
Others - net 28, 31, 36, 37 3,094 3,064
P14,241 P13,688

Idle assets included under “Others” amounted to P65 and P122 as of December 31, 2008
and 2007, respectively (Note 28).

Derivative assets included under “Others” amounted to P1 and P19 as of December 31,
2008 and 2007, respectively (Note 37).

16. Drafts and Loans Payable

This account consists of:

2008 2007
Parent Company
Peso-denominated P22,700 P28,662
Foreign currency-denominated 6,605 2,229
Subsidiaries
Peso-denominated 16,783 11,895
Foreign currency-denominated 2,472 1,445
P48,560 P44,231

Drafts and loans payable mainly represent unsecured peso and foreign currency-
denominated amounts payable to local and foreign banks. Interest rates for peso-
denominated loans range from 7.25% to 9.75% and 4.375% to 8.50% in 2008 and 2007,
respectively. Interest rates for foreign currency-denominated loans range from 2.69% to
15.77% and 5.35% to 6.65% in 2008 and 2007, respectively.

17. Accounts Payable and Accrued Expenses

Note 2008 2007

Trade 36, 37 P9,061 P7,746
Non-trade 10, 36, 37 8,985 9,183
Amounts owed to related parties 29, 36, 37 24 -
Others 10, 31, 36, 37 5,222 3,382
P23,292 P20,311

Derivative liabilities included under “Others” amounted to P2,353 and P895 as of

December 31, 2008 and 2007, respectively (Note 37).

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18. Redeemable Preferred Shares

As of December 31, 2006, the Group’s redeemable preferred shares representing Class
“A” and Class “B” preferred shares of CCBPI, are mandatorily redeemable on March 31,
2007. Such preferred shares, are initially classified as debt due to its mandatory
redemption feature which signifies a contractual obligation on the part of CCBPI to settle
an obligation.

On November 22, 2006, CCBPI’s BOD approved an amendment to its Articles of

Incorporation to add a convertibility feature to CCBPI’s Class “A” and “B” preferred
shares. The Amended Articles of Incorporation of CCBPI was approved by the SEC on
December 19, 2006. Due to the convertibility feature, CCBPI’s redeemable preferred
stock was reclassified as equity as of December 31, 2006.

On February 22, 2007, prior to the date of redemption, the preferred shares were disposed
of (Note 6).

19. Long-term Debt

2008 2007
Parent Company
Foreign currency-denominated:
Floating interest rate based on LIBOR plus
an agreed margin, with maturities up to
2012 [see (a) below] P43,454 P48,758
43,454 48,758
Subsidiaries
Unsecured term notes:
Fixed interest rate of 6.50% and 7.25%
maturing in 2012 and 2014, respectively
[see (b) below] 2,211 2,209
Foreign currency-denominated:
Floating interest rate based on
VNIBOR, THBFIX and
discount from PBOC lending rate, plus an
agreed margin, [see (c) below] 4,098 4,867
6,309 7,076
49,763 55,834
Less current maturities 9,044 1,222
P40,719 P54,612

a. The amount represents drawdown by the Parent Company from the US$1,200
unsecured term loan facility to refinance a portion of its short-term loans and the
remaining balance of its long-term loans. Unamortized debt issue costs related to this
unsecured term loan facility amounted to P407 and P778 as of December 31, 2008
and 2007, respectively.

b. The amount represents unsecured syndicated loans obtained by SMYAC which were
used for capital expenditure. Unamortized debt issue costs related to these loans
amounted to P14 and P16 as of December 31, 2008 and 2007, respectively.

- 60 -
c. The amount includes unsecured loan obtained by SMFBIL’s subsidiaries and
SMYHG, which was used to finance their capital expenditures. It also includes the
44.9% and 40% share of the loan of TSML in 2008 and 2007, respectively, to finance
its plant constructions and start up operations. Unamortized debt issue costs related to
these loans amounted to P3 and P3 as of December 31, 2008 and 2007, respectively.

The debt agreements contain, among others, covenants relating to merger and
consolidation, maintenance of certain financial ratios, working capital requirements,
restrictions on loans and guarantees, disposal of a substantial portion of assets, significant
changes in the ownership or control of subsidiaries, payments of dividends and
redemption of capital stock.

As of December 31, 2008 and 2007, the Group is in compliance with the covenants of the
debt agreements.

The movements in debt issue costs are as follows:

Note 2008 2007

Balance at beginning of year P797 P796
Additions 1 864
Amortization 26 (374) (904)
Cumulative translation adjustments
and others - 41
Balance at end of year P424 P797

Repayment Schedule
As of December 31, 2008, the annual maturities of long-term debt are as follows:

Year Gross Amount Debt Issue Costs Net

2009 P9,233 P189 P9,044
2010 17,411 136 17,275
2011 17,391 78 17,313
2012 4,706 18 4,688
2013 117 2 115
2014 1,329 1 1,328
P50,187 P424 P49,763

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20. Income Taxes

Deferred tax assets and liabilities arise from the following:

2008 2007
Unrealized intercompany charges and others P2,752 (P618)
Allowance for impairment losses on
trade and other receivables and
inventory losses 1,136 1,282
MCIT 916 473
NOLCO 775 2,304
Undistributed net earnings of foreign
subsidiaries (14,858) (11,942)
Cumulative translation adjustments (934) 753
(P10,213) (P7,748)

The above amounts are reported in the consolidated balance sheets as follows:

Note 2008 2007

Deferred tax assets 4 P7,638 P4,973
Deferred tax liabilities (17,851) (12,721)
(P10,213) (P7,748)

The undistributed earnings of foreign subsidiaries and cumulative translation adjustments

for which deferred tax liabilities have not been recognized totaled P10,100 and P21,725
as of December 31, 2008 and 2007, respectively.

As of December 31, 2008, the NOLCO and MCIT of certain subsidiaries that can be
claimed as deduction from future taxable income and deduction from corporate income
tax due, respectively, are as follows:

Year Incurred/Paid Carryforward Benefits Up To NOLCO MCIT

2006 December 31, 2009 P122 P35
2007 December 31, 2010 1,497 427
2008 December 31, 2011 962 454
P2,581 P916

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 The components of the income tax expense are shown below:

Note 2008 2007 2006

Current P7,907 P435 P8,521
Deferred (1,809) 4,085 (4,574)
Income tax expense from
continuing operations 6,098 4,520 3,947
Income tax expense (benefit)
from ordinary activities of
discontinued operations 6 (7) 1,174 1,013
Income tax expense from gain on
disposal of discontinued
operations 6 2,921 4,596 -
P9,012 P10,290 P4,960

The reconciliation between the statutory income tax rate on income from continuing
operations before income tax and non-controlling interests and the Group’s effective
income tax rates are as follows:

2008 2007 2006

Statutory income tax rate 35.00% 35.00% 35.00%
Increase (decrease) in income tax rate
Resulting from:
Interest income subjected to final
tax (7.79) (5.79) (8.03)
Equity in net earnings of associates 1.91 (0.45) (0.16)
Others, mainly income subjected to
different tax rates and change in
tax rate - net 0.25 7.12 5.98
Effective income tax rates 29.37% 35.88% 32.79%

The aggregate current and deferred tax relating to items that are credited (charged) to
equity amounted to (P934) and P753 in 2008 and 2007, respectively.

21. Stockholders’ Equity

a. On July 24, 2007, the stockholders of the Parent Company approved the increase in
SMC’s authorized capital stock from P22,500 to P37,500, which will be made up of
3,600,000,000 Class “A” common shares, 2,400,000,000 Class “B” common shares
and 1,500,000,000 preferred shares, all with a par value of P5 per share.

b. Class “A” common shares and Class “B” common shares have the same rights and
privileges. Only Philippine citizens or corporations or associations that are at least
60% owned by Filipino citizens can own Class “A” common shares.

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 The movements in the number of issued shares of capital stock are as follows:

2008 2007
Class “A”
Balance at beginning of year 1,975,292,245 1,970,380,027
Issuances during the year 648,370 4,912,218
Balance at end of year 1,975,940,615 1,975,292,245
Class “B”
Balance at beginning of year 1,246,527,833 1,243,040,673
Issuances during the year - 3,487,160
Balance at end of year 1,246,527,833 1,246,527,833

c. Treasury shares, totaling 65,475,371 Class “A” and “B” common shares, are stated at
acquisition cost.

Out of the total treasury shares, 25,450,000 common shares (15,274,484 Class “A”
common shares and 10,175,516 Class “B” common shares), with an acquisition cost
of P481, [net of the cost of the 1,000,000 shares paid to Presidential Commission on
Good Government (PCGG) as arbitral fee pursuant to the Compromise Agreement,
as herein defined] were reverted to treasury in 1991 upon implementation of the
Compromise Agreement and Amicable Settlement (Compromise Agreement)
executed by the Parent Company with the United Coconut Planters Bank (UCPB)
and the Coconut Industry Investment Fund (CIIF) Holding Companies in connection
with the purchase of the Parent Company shares under an agreement executed on
March 26, 1986.

Certain parties have opposed the Compromise Agreement. The right of such parties
to oppose, as well as the propriety of their opposition, has been the subject matters of
cases pending before the Sandiganbayan and the Supreme Court.

On September 14, 2000, the Supreme Court upheld a Sandiganbayan resolution

requiring the Parent Company to deliver the 25,450,000 common shares shares that
were reverted to treasury in 1991 to the PCGG and to pay the corresponding
dividends on the said shares.

On October 10, 2000, the Parent Company filed a motion for reconsideration with the
Supreme Court to be allowed to comply with the delivery and payment of the
dividends on the treasury shares only in the event that another party, other than the
Parent Company, is declared owner of the said shares in the case for forfeiture (Civil
Case) filed by the Philippine government (Government).

On April 17, 2001, the Supreme Court denied the motion for reconsideration.

On September 19, 2003, the PCGG wrote the Parent Company to deliver to the
PCGG the stock certificates and cash and stock dividends under the Sandiganbayan
resolution upheld by the Supreme Court. The Parent Company referred the matter to
its external financial advisor and external legal counsel for due diligence and advice.
The external financial advisor presented to the BOD on December 4, 2003 the
financial impact of compliance with the resolution considering “with and without due
compensation” scenarios, and applying different rates of return to the original
amount paid by the Parent Company. The financial advisor stated that if the Parent
Company is not compensated for the conversion of the treasury shares, there will be:
(a) a negative one-off EPS impact in 2003 of approximately 17.5%; (b) net debt

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 increase of approximately P2,100; and (c) a negative EPS impact of 6.9% in 2004.
The external legal counsel at the same meeting advised the BOD that, among others,
the facts reviewed showed that (a) the compromised shares had not been validly
sequestered, (b) no timely direct action was filed to nullify the transaction, (c) no
rescission can be effected without a return of consideration, (d) more importantly,
requiring the Parent Company to deliver what it acquired from the sellers without a
substantive ground to justify it, and a direct action in which the Parent Company is
accorded full opportunity to defend its rights, would appear contrary to its basic
property and due process rights. The external legal counsel concluded that the Parent
Company has “legal and equitable grounds to challenge the enforcement” of the
Sandiganbayan resolution.

On January 29, 2004, the external legal counsel made the additional recommendation
that the Parent Company should file a Complaint-in-Intervention in the Civil Case
(now particularly identified as SB Case No. 033-F), the forfeiture case brought by
the Government involving the so-called CIIF block of the Parent Company shares of
stock of which the treasury shares are a portion. The Complaint-in-Intervention
would pray that any judgment in the Civil Case forfeiting the CIIF block of the
Parent Company shares of stock should exclude the treasury shares.

At its January 29, 2004 meeting, the BOD of the Parent Company unanimously
decided to (a) deny the PCGG demand of September 19, 2003, and (b) authorize the
filing of the Complaint-in-Intervention. Accordingly, the external legal counsel
informed the PCGG of the decision of the Parent Company and the
Complaint-in-Intervention was filed in the Civil Case.

In a Resolution dated May 6, 2004, the Sandiganbayan denied the Complaint-in-

Intervention. The external legal counsel filed a Motion for Reconsideration, which
was denied by the Sandiganbayan in its Decision dated November 28, 2007.

The external legal counsel advised that because the Sandiganbayan had disallowed
the Parent Company’s intervention, the Sandiganbayan’s disposition of the so-called
CIIF block of SMC shares in favor of the Government cannot bind the Parent
Company, and that the Parent Company remains entitled to seek the nullity of that
disposition should it be claimed to include the treasury shares.

The external legal counsel also advised that the Government has, in its own court
submissions, (i) recognized the Parent Company’s right to the treasury shares on the
basis that the Compromise Agreement is valid and binding on the parties thereto; and
(ii) taken the position that SMC and UCPB had already implemented the
Compromise Agreement voluntarily, and that the PCGG had conformed to the
Agreement and its implementation. The Executive Committee of the Parent
Company approved the recommendation of external legal counsel on January 18,
2008 which was ratified by the BOD on March 6, 2008.

In the meantime, the Parent Company has available cash and shares of stock for the
dividends payable on the treasury shares.

d. The Group’s unappropriated retained earnings include its accumulated equity in net
earnings of subsidiaries and associates amounting to P57,482, P44,199 and P40,299
in 2008, 2007 and 2006, respectively. Such amounts are not available for declaration
as dividends until declared by the respective investees.

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 The Parent Company’s unappropriated retained earnings as of December 31, 2008
and 2007 is restricted in the amount of P4,053 representing the cost of shares held in
treasury.

e. The BOD of certain subsidiaries approved additional appropriations amounting to

P176, P273 and P5 in 2008, 2007 and 2006, respectively, to finance future capital
expenditure projects. Reversal of appropriations in 2008, 2007 and 2006 amounted to
P688, P275 and P56, respectively.

22. Cost of Sales

Cost of sales consists of:

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Inventories P76,205 P68,727 P57,328
Taxes and licenses 19,703 18,878 17,822
Depreciation, amortization and
impairment losses 24 4,660 4,461 5,459
Contracted services 4,296 3,206 2,302
Communications, light and water 4,232 4,260 3,985
Freight, trucking and handling 4,230 2,511 3,722
Personnel 25 3,815 2,926 4,340
Fuel and oil 3,267 2,150 2,981
Repairs and maintenance 1,584 1,786 633
Rent 4 550 648 919
Others 1,530 509 72
P124,072 P110,062 P99,563

23. Selling and Administrative Expenses

Selling and administrative expenses consist of:

2007 2006
(As Restated - (As Restated -
2008 Note 6) Note 6)
Selling P13,518 P10,331 P9,462
Administrative 15,633 16,002 13,192
P29,151 P26,333 P22,654

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Selling expenses consist of:
2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Advertising and promotions P5,697 P4,258 P4,123
Personnel 25 3,251 2,592 2,439
Freight, trucking and handling 2,049 1,357 1,206
Rent 4 995 446 413
Supplies 281 447 230
Depreciation, amortization and
impairment losses 24 248 305 231
Taxes and licenses 213 207 104
Communications, light and water 169 536 496
Professional Fees 43 86 18
Others 572 97 202
P13,518 P10,331 P9,462

Administrative expenses consist of:

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Personnel 25 P6,771 P5,900 P6,173
Depreciation, amortization and
impairment losses 24 1,859 1,750 1,036
Advertising and promotion 1,614 2,071 926
Professional fees 1,283 1,150 1,042
Repairs and maintenance 867 1,669 1,493
Supplies 710 433 415
Communications, light and water 692 706 571
Taxes and licenses 617 603 505
Rent 4 251 356 290
Others 969 1,364 741
P15,633 P16,002 P13,192

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24. Depreciation, Amortization and Impairment Losses

Depreciation, amortization and impairment losses are distributed as follows:

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Cost of sales:
Property, plant and equipment 11 P3,604 P3,434 P3,934
Deferred containers, biological assets
and others 1,056 1,027 1,525
22 4,660 4,461 5,459
Selling and administrative expenses:
Property, plant and equipment 11 1,329 1,270 1,095
Deferred containers and others 778 785 172
23 2,107 2,055 1,267
P6,767 P6,516 P6,726

“Others” include amortization of computer software, land use rights, licenses and
investment properties.

25. Personnel Expenses

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Salaries and wages P6,440 P4,530 P6,753
Retirement costs 31 857 1,236 714
Other employee benefits 6,540 5,652 5,485
P13,837 P11,418 P12,952

Personnel expenses are distributed as follows:

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Cost of sales 22 P3,815 P2,926 P4,340
Selling expenses 23 3,251 2,592 2,439
Administrative expenses 23 6,771 5,900 6,173
P13,837 P11,418 P12,952

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26. Interest Expense and Other Financing Charges

2007 2006
(As Restated - (As Restated -
2008 Note 6) Note 6)
Interest expense P5,370 P5,442 P6,490
Other financing charges 662 1,675 607
P6,032 P7,117 P7,097

Amortization of debt issue costs in 2008, 2007 and 2006 included in other financing
charges amounted to P374, P904 and P478, respectively (Note 19).

Interest expense and financing charges amounting to P2,984 and P3,665 in 2007 and
2006, respectively, were presented as part of discontinued operations (Note 6).

Interest expense on drafts and loans payable and long-term debt are as follows:

2007 2006
(As Restated - (As Restated -
2008 Note 6) Note 6)
Drafts and loans payable P2,960 P2,165 P2,588
Long-term debt 2,410 3,277 3,902
P5,370 P5,442 P6,490

27. Interest Income

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Interest from short-term investments,
cash in banks and others 7 P4,320 P939 P2,763
Interest income from a related party 8 2,310 1,148 -
P6,630 P2,087 P2,763

Interest income amounting to P317 and P231 in 2007 and 2006, respectively, were
presented as part of discontinued operations (Note 6).

28. Other Income (Charges)

2007 2006
(As Restated - (As Restated -
2008 Note 6) Note 6)
Foreign exchange gains P8,684 P6,587 P2,768
Loss on impairment of goodwill,
property, plant and equipment and idle
assets [see (a), (b) and (c) below] (322) (1,744) -
Loss on derivatives - net (10,718) (1,598) (34)
Others - net 94 369 458
(P2,262) P3,614 P3,192

- 69 -
 a. On December 31, 2008, the Group reviewed the recoverable amount of its investment
in shares of stock of SDI. It was determined that the carrying amount of the
investment is higher than its value in use and an impairment loss of P322 was
recognized. The discount rate applied to after tax cash flow projections of SDI was
12%. The impairment loss was allocated fully to goodwill (Note 14).

b. On September 30, 2007, the Yuen Long plant of SMBHK has temporarily ceased
operations. SMBHK reviewed the recoverable amount of the fixed assets of its plant
and the carrying amount of such assets was written down by P1,461 to the value in use
(Note 11). Value in use was calculated using the discounted value of the projected
future cash flows to be generated over the remaining useful life of the plant. A pre-tax
discount rate of 9.91% was applied to the projected future cash flows of the plant.

c. In 2007, SMPSI ceased operating two of its plants and one of its furnace. The
corresponding building, machinery and equipment with an aggregate net book value
of P405 have been reclassified from “Property, plant and equipment” account to
“Other noncurrent assets” account (Note 15). These assets have been written down to
their net realizable value based on reports by qualified property appraisers. The
impairment charges relating to these assets amounted to P283.

29. Related Party Disclosures

Transactions with related parties are made at normal market prices. For the periods
ended December 31, 2008, 2007 and 2006, the Group did not make any provision for
impairment losses relating to amounts owed by related parties. An assessment is
undertaken at each financial year by examining the financial position of the related party
and the market in which the related party operates.

a. The Parent Company has advances to SMCRP which amounted to P6,323 and
P35,721 in 2008 and 2007, respectively, included as part of “Trade and other
receivables” account (Note 8).

b. The significant transactions of the Group and Meralco include the following:

Included under Included under

“Trade and other “Accounts payable
Purchases of receivables” and accrued
Year Utilities account expenses” account
2008 P277 P168 P24

c. The compensation of key management personnel of the Group, by benefit type,

follows:

2008 2007 2006

Short-term employee benefits P200 P262 P237
Retirement costs 19 49 28
Share-based payments 53 58 39
P272 P369 P304

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 Some of the personnel performing key management functions in certain subsidiaries
are employed by the Parent Company. This is covered by a management agreement
executed by and between the Parent Company and the subsidiaries. The salaries and
benefits of these personnel are billed to the subsidiaries through management fees,
with details as follows:

Note 2008 2007 2006

Short-term employee benefits P118 P259 P271
Retirement costs 9 87 83
Share-based payments 55 23 22
25 P182 P369 P376

30. Leasing Agreements

Finance Leases

Leases as Lessee
The Group’s finance leases cover automobiles needed for business operations. The
agreements do not allow subleasing. Some leases provide the Group with the option to
purchase the equipment at a beneficial price. As of December 31, 2008, the net carrying
amount of leased transportation equipment was P90.

The Goup’s share in the minimum lease payments for these finance lease liabilities are as
follows:

Minimum
lease
payable Interest Principal
Within one year P15 P2 P13
After one year but not more than five years 32 2 30
P47 P4 P43

Leases as Lessor
The Group’s lease receivable under finance lease as of December 31, 2008 and 2007 are
as follows:

Minimum
lease
2008 receivable Interest Principal
Less than one year P6 P1 P5
Between one and five years 5 - 5
P11 P1 P10
2007
Less than one year P81 P19 P62
Between one and five years 68 12 56
P149 P31 P118

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 Operating Leases

Leases as Lessor
The Group has entered into various property leases. These non-cancellable leases will
expire up to year 2010. All leases include a clause to enable upward revision of the
rental charge on an annual basis based on prevailing market conditions.

As of December 31, 2008, 2007 and 2006, the future minimum lease receipts under
non-cancellable operating leases are as follows:

2008 2007 2006

Within one year P94 P278 P195
After one year but not more than five years 114 280 309
P208 P558 P504

Rent income recognized in the consolidated statements of income amounted to P402,

P256 and P240 in 2008, 2007 and 2006, respectively.

Leases as Lessee
The Group leases a number of office, warehouse and factory facilities under operating
leases. The leases typically run for a period of two to seven years. Some leases provide
an option to renew the lease at the end of the lease term and are being subjected to
reviews to reflect current market rentals.

As of December 31, 2008, 2007 and 2006, non-cancellable operating lease rentals are
payable as follows:

2008 2007 2006

Within one year P290 P118 P69
After one year but not more than five years 748 151 159
More than five years 35 124 82
P1,073 P393 P310

31. Retirement Plans

The Parent Company and majority of its subsidiaries have funded, noncontributory
retirement plans covering all of their permanent employees. Contributions and costs are
determined in accordance with the actuarial studies made for the plans. Annual cost is
determined using the projected unit credit method. The Group’s latest actuarial valuation
date is December 31, 2008. Valuations are obtained on a periodic basis.

Retirement costs recognized by the Parent Company to operations amounted to P422,

P975 and P471 in 2008, 2007 and 2006, respectively, while those charged by the
subsidiaries amounted to P435, P383 and P979 in 2008, 2007 and 2006, respectively. The
Group’s annual contribution to the retirement plans consists of payments covering the
current service cost and amortization of past service liability.

- 72 -
The components of retirement costs recognized in the consolidated statements of income
in 2008, 2007 and 2006 and the amounts recognized in the consolidated balance sheets as
of December 31, 2008 and 2007 are as follows:

2008 2007 2006

Current service cost P532 P493 P548
Interest cost 834 796 1,542
Expected return on plan assets (772) (894) (1,256)
Past service cost 41 - -
Effect of curtailment - 772 -
Net actuarial loss 49 397 124
Effect of asset limit - (102) (60)
Amortization of transitional liability 173 120 552
Others - (224) -
Net retirement costs P857 P1,358 P1,450
Actual return on plan assets P477 P3,614 P1,649

The retirement costs are recognized in the following line items in the consolidated
statements of income:

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Cost of sales P144 P120 P147
Selling and administrative
expenses 713 1,116 567
Retirement costs of continuing
operations 25 857 1,236 714
Reclassified to discontinued
operations - 122 736
P857 P1,358 P1,450

The reconciliation of the assets and liabilities recognized in the consolidated balance
sheets is as follows:

Note 2008 2007

Present value of defined benefit obligation P11,080 P11,332
Fair value of net plan assets 10,232 10,726
848 606
Unrecognized actuarial loss 4 (268) (184)
Unrecognized net transitional liability (66) (241)
Unrecognized past service cost (2) -
Net retirement liabilities P512 P181

Net retirement assets and liabilities in 2008 are included as part of “Others” under “Other
noncurrent assets” accounts amounting to P219 and under “Accounts payable and
accrued expenses” and “Other noncurrent liabilities” accounts amounting to P613 and
P118, respectively (Notes 15 and 17).

- 73 -
Net retirement assets and liabilities in 2007 are included under “Prepaid expenses and
other current assets” and as part of “Others” under “Other noncurrent assets” accounts
amounting to P1 and P11, respectively, and under “Accounts payable and accrued
expenses” and “Other noncurrent liabilities” accounts amounting to P129 and P64,
respectively (Notes 15 and 17).

The movements in the present value of defined benefit obligation are as follows:

2008 2007
Balance at beginning of year P11,332 P14,236
Actuarial losses/(gains) (163) 2,536
Interest cost 834 796
Current service cost 532 493
Past service cost 41 -
Effect of curtailment - (845)
Benefits paid (1,496) (2,946)
Benefit obligation associated with
discontinued operations - (2,938)
Balance at end of year P11,080 P11,332

The movements in the fair value of the net plan assets are as follows:

2008 2007
Balance at beginning of year P10,726 P10,241
Expected return 772 894
Contributions by employer 525 1,119
Benefits paid (1,496) (2,946)
Actuarial gains/(losses) (295) 2,721
Plan assets associated with discontinued
operations - (1,303)
Balance at end of year P10,232 P10,726

Plan assets consist of the following:

In Percentages
2008 2007
Stock trading portfolio 20 12
Fixed income portfolio 40 49
Others 40 39

The plan assets include 751,362,391 and 407,939,071 Class “A” common shares and
153,609,529 and 111,971,529 Class “B” common shares of the Parent Company as of
December 31, 2008 and 2007, respectively. The fair market values per share were P40.50
and P59 for Class “A” common shares and P42.50 and P59.50 for Class “B” common
shares as of December 31, 2008 and 2007, respectively.

The overall expected rate of return is determined based on historical performance of

investments.

- 74 -
 The principal actuarial assumptions used to determine retirement benefits are as follows:

In Percentages
2008 2007
Discount rate 7 - 11 7-8
Salary increase rate 6 6
Expected return on plan assets 9 10

The historical information for the current and previous three annual periods is as follows:

2008 2007 2006 2005

Present value of the defined benefit
obligation P11,080 P11,332 P14,236 P15,045
Fair value of net plan assets 10,232 10,726 10,241 11,873
Deficit in the plan 848 606 3,995 3,172
Experience adjustments on plan liabilities 6 933 (188) -

The Group expects to pay P857 in contributions to defined benefit plans in 2009.

32. Cash Dividends

Cash dividends declared by the Parent Company’s BOD amounted to P1.40 per share in
2008 and 2007, and P1.05 per share in 2006.

33. Basic and Diluted Earnings Per Share

Basic and Diluted EPS is computed as follows:

2007 2006
(As Restated - (As Restated -
Note 2008 Note 6) Note 6)
Net income from continuing operations
attributable to equity holders of the
Parent Company (a) P13,935 P8,160 P7,887
Net income from discontinued operations
attributable to equity holders of the
Parent Company (b) 6 5,413 470 2,419
Net income attributable to equity holders
of the Parent Company P19,348 P8,630 P10,306
Weighted average number of shares
outstanding (in millions) - basic (c) 3,157 3,153 3,143
Effect of dilution 12 7 6
Weighted average number of shares
outstanding (in millions) - diluted (d) 3,169 3,160 3,149
Basic EPS from continuing operations (a/c) P4.41 P2.59 P2.51
Basic EPS from discontinued
operations (b/c) 1.72 0.15 0.77
P6.13 P2.74 P3.28
Diluted EPS from continuing
operations (a/d) P4.40 P2.58 P2.50
Diluted EPS from discontinued
operations (b/d) 1.71 0.15 0.77
P6.11 P2.73 P3.27

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34. Supplemental Cash Flow Information

Supplemental information with respect to the consolidated statements of cash flows is

presented below:

a. Changes in noncash current assets and certain current liabilities and others are as
follows (amounts reflect actual cash flows rather than increases/decreases in the
consolidated balance sheets):

2008 2007 2006

Accounts payable and accrued
expenses P1,779 P23,341 P6,586
Prepaid expenses and other current
assets 759 (2,550) (335)
Trade and other receivables 731 (4,389) 363
Income and other taxes payable and
others (457) (4,198) (4,035)
Inventories (4,100) 3,001 (1,757)
(P1,288) P15,205 P822

b. Acquisitions of subsidiaries:

On May 1, 2006, the King’s Island Company, Ltd., a wholly-owned subsidiary of

NFL, acquired 100% of the share capital of Lactos. In 2007, NFL was sold to Kirin
Holdings (Australia) Pty. Ltd. including its share in Lactos (Note 6).

2006
Cash and cash equivalents P1
Trade and other receivables and other current
assets - net 820
Inventories - net 903
Property, plant and equipment - net 933
Other noncurrent assets - net 1,025
Accounts payable, accrued expenses and other
current liabilities (993)
Other noncurrent liabilities (207)
Net assets 2,482
Cash and cash equivalents (1)
Goodwill in subsidiaries 2,500
Net cash flows P4,981

- 76 -
35. Share-Based Transactions

ESPP
Under the ESPP, 80,396,659 shares (inclusive of stock dividends declared) of the Parent
Company’s unissued shares have been reserved for the employees of the Group until
2009 (as amended and approved by the SEC in 2001 and 2003, respectively).
A participating employee may acquire at least 100 shares of stock through payroll
deductions.

On December 5, 2002, the Parent Company’s BOD approved amendments to the ESPP.
Under the amended ESPP, all permanent Philippine-based employees of the Group, who
have been employed for a continuous period of one year prior to the subscription period,
will be allowed to subscribe at 15% discount to the market price equal to the weighted
average of the daily closing prices for three months prior to the offer period. The
amendments to the ESPP are prospective in application. Existing subscriptions shall not
be entitled to the rights granted under the amendments. The amendments of the ESPP
were approved by the SEC on February 20, 2003.

The ESPP requires the subscribed shares and stock dividends accruing thereto to be
pledged to the Parent Company until the subscription is fully paid. The right to subscribe
under the ESPP cannot be assigned or transferred. A participant may sell his shares after
the second year from the exercise date. The current portion of subscriptions receivable as
of December 31, 2008 and 2007 amounted to P269 and P150, respectively, presented as
part of others under “Trade and other receivables” account (Note 8). The noncurrent
portion of P259 and P483 as of December 31, 2008 and 2007, respectively, is reported as
part of noncurrent receivables and deposits under “Other noncurrent assets” account
(Note 15).

The number of subscribed shares under the ESPP as of December 31, 2008 and 2007 are
as follows:

2008 2007
Class “A”
Paid subscribed shares 26,787,935 25,304,857
Unpaid subscriptions 6,365,600 8,173,728
Class “B”
Paid subscribed shares 9,070,020 8,129,160
Unpaid subscriptions 7,053,700 8,044,410
Total shares subscribed 49,277,255 49,652,155

The ESPP also allows subsequent withdrawal and cancellation of participants’

subscriptions under certain terms and conditions. The shares pertaining to withdrawn or
cancelled subscriptions shall remain issued shares and shall revert to the pool of shares
available under the ESPP.

- 77 -
The table below shows the number and weighted average exercise prices of grants:

2008 2007 2006

Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
Class “A”
Subscribed during the year 3,745,100 42.36 4,045,100 P56.14 4,039,850 P53.89
Cancelled during the year (3,125,900) (53.07) (876,750) (55.71) (89,650) (52.64)
Class “B”
Subscribed during the year 2,602,450 41.53 3,970,300 63.26 2,368,050 64.99
Cancelled during the year (2,602,450) (62.10) (1,010,650) (67.06) (238,150) (70.52)

The average market price of the shares granted was P42.36, P70.40 and P65.30 per share
in 2008, 2007 and 2006, respectively, for Class “A” common shares and P41.53 P74.14
and P76.84 per share in 2008, 2007 and 2006, respectively, for Class “B” common
shares.

The average remaining contractual life of the ESPP was 0.60, 1.06 and 1.28 years as of
December 31, 2008, 2007 and 2006, respectively, for Class “A” common shares and
0.46, 1.06 and 0.82 years as of December 31, 2008, 2007 and 2006, respectively, for
Class “B” common shares.

LTIP
The Parent Company also maintains LTIP for executives of the Group. The options are
exercisable at the fair market value of the Parent Company shares as of date of grant,
with adjustments depending on the average stock prices of the prior three months.
A total of 54,244,905 shares, inclusive of stock dividends declared, are reserved for the
LTIP over its 10-year life. The LTIP is administered by the Executive Compensation
Committee of the Parent Company’s BOD.

On March 1, 2007, the Parent Company approved the grant of stock options to 822
executives consisting of 18,312,782 shares based on the closing price of the Parent
Company’s share, computed in accordance with the provisions of LTIP. Also on June 26,
2008, the Parent Company approved the grant of stock options to 742 executives
consisting of 7,456,452 shares.

Options to purchase 12,450,337 shares and 6,649,520 shares in 2008 and 2007,
respectively were outstanding at the end of each year. Options which were exercised and
cancelled totaled about 1,757,429 shares and 2,477,505 shares in 2008 and 2007,
respectively.

The stock options granted under the LTIP cannot be assigned or transferred by a
participant and are subject to a vesting schedule. After one complete year from the date
of the grant, 33% of the stock option becomes vested. Another 33% is vested on the
second year and the remaining option lot is fully vested on the third year.

Vested stock options may be exercised at any time, up to a maximum of eight years from
the date of grant. All unexercised stock options after this period are considered forfeited.

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A summary of the status of the outstanding share stock options and the related weighted
average exercise price under the LTIP is shown below:

2008 2007 2006

Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Options Price Options Price Options Price
Class “A”
Balance at beginning of
year 16,056,434 P62.36 6,917,048 P59.69 8,313,402 P57.53
Granted during the year 5,219,517 40.50 10,987,673 63.50 - -
Exercised during the year (29,170) (56.53) (1,743,868) (58.93) (854,667) (54.55)
Expired during the year (1,042,841) (62.58) (104,419) (62.97) (541,687) (34.71)
Balance at end of year 20,203,940 P56.71 16,056,434 P62.36 6,917,048 P59.69
Class “B”
Balance at beginning of
year 10,359,853 P76.79 3,663,962 P78.39 4,267,317 P75.13
Granted during the year 2,236,935 40.50 7,325,109 75.50 - -
Exercised during the year - - (527,510) (68.42) (223,072) (64.73)
Expired during the year (685,418) (77.39) (101,708) (84.97) (380,283) (49.83)
Balance at end of year 11,911,370 P69.94 10,359,853 P76.79 3,663,962 P78.39

The shares covered by the LTIP are offered for subscription to the participants for
three years from approval of the LTIP by the SEC.

The fair value of equity-settled share options granted is estimated as at the date of grant
using Black-Scholes option-pricing model, taking into account the terms and conditions
upon which the options were granted.

The inputs to the model used to measure the fair value of the shares granted in 2008 and
2007 are as follows:

2008 grant 2007 grant

Class “A” Class “B” Class “A” Class “B”
Dividend yield 3.46% 3.46% 2.20% 1.85%
Expected volatility 54% 43% 52% 40%
Historical volatility 54% 43% 52% 40%
Risk-free interest rate 6.33% to 6.33% to 4.48% to 4.48% to
9.18% 9.18% 6.47% 6.47%
Expected life option 1 to 8 years 1 to 8 years 1 to 8 years 1 to 8 years
Weighted average share price 40.50 40.50 63.50 75.50

The weighted average fair value of options granted in 2008 and 2007 was P12.31 and
P18.91, respectively for Class “A” common shares and P10.60 and P19.37, respectively,
for Class “B” common shares.

The range of exercise prices for options outstanding was P54.50 to P57.50 and P54.50 to
P65 as of December 31, 2008 and 2007, respectively, for Class “A” common shares and
P62.50 to P89.50, as of December 31, 2007, respectively for Class “B” common shares.

The average remaining contractual life of the LTIP was 1.43, 1.99 and 1.30 years as of
December 31, 2008, 2007 and 2006, respectively, for Class “A” common shares and
1.30, 1.99 and 1.41 years as of December 31, 2008, 2007 and 2006, respectively, for
Class “B” common shares.

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 Share-based payment charged to operations, included under “Administrative expenses”
account, amounted to P253, P258 and P188 in 2008, 2007 and 2006, respectively.

36. Financial Risk Management Objectives and Policies

Objectives and Policies

The Group’s principal financial instruments other than derivatives include cash and cash
equivalents, available-for-sale investments, short-term and long-term loans. The main
purpose of these financial instruments is to raise financing for the Group’s operations.
The Group has various other financial assets and liabilities such as trade and other
receivables, noncurrent receivables and deposits, accounts payable and accrued expenses
and other noncurrent liabilities, which arise directly from its operations.

The Group also enters into derivative transactions such as commodity and currency
options, forwards and swaps. The Group uses derivatives to manage its exposures to
foreign currency, interest and commodity price risks arising from the Group’s operations
and financing activities.

The main risks arising from the use of financial instruments are credit risk, liquidity risk
and market risk - interest rate risk, foreign currency risk and commodity price risk. The
BOD has the overall responsibility for the establishment and oversight of the Group’s
risk management framework. The Group’s risk management policies are established to
identify and analyze the risks faced by the Group, to set appropriate risk limits and
controls, and to monitor risks and adherence to limits. Risk management policies and
systems are reviewed regularly to reflect changes in market conditions and the Group’s
activities.

The Group’s accounting policies in relation to derivatives are set out in Note 3.

Interest Rate Risk

The Group’s exposure to changes in interest rates relates primarily to the Group’s short-
term and long-term debt obligations.

The Group’s policy is to manage its interest cost using a mix of fixed and variable rate
debts.

In managing interest rate, the Group aims to reduce the impact of short-term fluctuations
on the Group’s earnings. Over the longer term, however, permanent changes in interest
rates would have an impact on consolidated earnings.

The sensitivity to reasonably possible 1% increase in the interest rates, with all other
variables held constant, would have decreased the Group’s profit before tax (through the
impact on floating rate borrowings) by P474 and P539 as of December 31, 2008 and
2007, respectively. A 1% decrease in the interest rate would have had the equal but
opposite effect. There is no impact on the Group’s equity.

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As at December 31, 2008 and 2007, the Group’s long-term debt, presented by maturity profile, are as follows:

December 31, 2008 <1 year 1-<2 years >2-<3 years >3-<4 years >4-<5 years >5 years Total
Fixed rate
Philippine peso P - P - P - P955 P - P1,270 P2,225
Interest rate 6.50% 7.25%
Floating rate
Foreign currency-
denominated notes
(expressed in
Philippine peso) 9,233 17,411 17,391 3,751 117 59 47,962
Interest rate LIBOR, THBFIX, LIBOR, THBFIX, LIBOR, THBFIX,
VNIBOR VNIBOR VNIBOR
+margin; +margin; +margin; LIBOR, THBFIX,
and discount from and discount from and discount from VNIBOR
PBOC lending rate PBOC lending rate PBOC lending rate +margin THBFIX +margin THBFIX +margin
P50,187

December 31, 2007 <1 year 1-<2 years >2-<3 years >3-<4 years >4-<5 years >5 years Total
Fixed rate
Philippine peso P - P - P - P - P955 P1,270 P2,225
Interest rate 6.50% 7.25%
Floating rate
Foreign currency-
denominated notes
(expressed in
Philippine peso) 1,225 8,012 15,165 15,124 14,721 159 54,406
Interest rate LIBOR, THBFIX, LIBOR, THBFIX, LIBOR, THBFIX, LIBOR, THBFIX,
VNIBOR VNIBOR +margin; VNIBOR VNIBOR
+margin; and discount from +margin; +margin; LIBOR, THBFIX,
and discount from PBOC lending rate and discount from and discount from VNIBOR
PBOC lending rate PBOC lending rate PBOC lending rate +margin THBFIX +margin
P56,631

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Foreign Currency Risk
The Group’s exposure to foreign currency risk results from its business transactions and
financing arrangements denominated in foreign currency. The Group uses a combination
of natural hedges and derivative hedges to manage its foreign currency exposure. It uses
currency derivatives to reduce earnings volatility related to foreign exchange movements.

Short-term currency forward contracts (deliverable and non-deliverable) are entered into
to manage foreign currency risks arising from importations, revenue and expense
transactions, and other foreign currency-denominated obligations. Currency swaps are
entered into to manage foreign currency risks relating to long-term foreign
currency-denominated debts.

Information on the Group’s foreign currency-denominated monetary assets and liabilities

and their Philippine peso equivalents are as follows:

2008 2007
US Peso US Peso
Dollar Equivalent Dollar Equivalent
Assets
Cash and cash equivalents US$1,845 P87,660 US$1,978 P81,650
Accounts receivable 88 4,159 119 4,930
Noncurrent receivables 118 5,616 20 826
2,051 97,435 2,117 87,406
Liabilities
Drafts and loans payable 191 9,077 89 3,674
Accounts payable and
accrued expenses 102 4,853 106 4,315
Long-term debt 1,009 47,961 1,318 54,406
1,302 61,891 1,513 62,395
Net foreign currency-
denominated monetary
assets US$749 P35,544 US$604 P25,011

The Group reported net foreign exchange gains (losses) amounting to (P7,298), P4,683
and P2,804 in 2008, 2007 and 2006, respectively, with the translation of its foreign
currency-denominated assets and liabilities. These resulted from the movements of the
Philippine peso against the US dollar as shown in the following table:

Peso to US Dollar
December 31, 2006 49.03
December 31, 2007 41.28
December 31, 2008 47.52

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The following table demonstrates the sensitivity to a reasonably possible change in the
US dollar exchange rate, with all other variables held constant, of the Group’s profit
before tax (due to changes in the fair value of monetary assets and liabilities) and the
Group’s equity (due to translation of results and financial position of foreign operations)
as of December 31, 2008 and 2007:

2008
P1 decrease in the US dollar P1 increase in the US dollar
exchange rate exchange rate
Effect on Effect on
Income before Effect on Income before Effect on
Income Tax Equity Income Tax Equity
Cash and cash equivalents (P1,623) (P1,276) P1,623 P1,276
Trade and other receivables (12) (83) 12 83
Noncurrent receivables (99) (82) 99 82
(1,734) (1,441) 1,734 1,441
Drafts and loans payable 140 142 (140) (142)
Accounts payable and
accrued expenses 6 100 (6) (100)
Long-term debt (including
current maturities) 923 686 (923) (686)
1,069 928 (1,069) (928)
(P665) (P513) P665 P513

2007
P1 decrease in the US dollar P1 increase in the US dollar
exchange rate exchange rate
Effect on Effect on
Income before Effect on Income before Effect on
Income Tax Equity Income Tax Equity
Cash and cash equivalents (P1,861) (P1,327) P1,861 P1,327
Trade and other receivables (31) (109) 31 109
Noncurrent receivables - (20) - 20
(1,892) (1,456) 1,892 1,456
Drafts and loans payable 54 70 (54) (70)
Accounts payable and
accrued expenses 11 101 (11) (101)
Long-term debt (including
current maturities) 1,200 898 (1,200) (898)
1,265 1,069 (1,265) (1,069)
(P627) (P387) P627 P387

Commodity Price Risk

The Group enters into various commodity derivatives to manage its price risks on
strategic commodities. Commodity hedging allows stability in prices, thus offsetting the
risk of volatile market fluctuations. Through hedging, prices of commodities are fixed at
levels acceptable to the Group, thus protecting raw material cost and preserving margins.
For hedging transactions, if prices go down, hedge positions may show marked-to-market
losses; however, any loss in the marked-to-market positions is offset by the resulting
lower physical raw material cost.

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Commodity Swaps, Futures and Options. Commodity swaps, futures and options are
used to manage the Group’s exposures to volatility in prices of certain commodities such
as fuel oil, aluminum, soybean meal, wheat, kraft paper and freight.

Commodity Forwards. The Group enters into forward purchases of various commodities.
The prices of the commodity forwards are fixed either through direct agreement with
suppliers or by reference to a relevant commodity price index.

Liquidity Risk
Liquidity risk arises from the possibility that the Group may encounter difficulties in
raising funds to meet commitments from financial instruments or that a market for
derivatives may not exist in some circumstances.

The Group’s objectives to manage its liquidity profile are: a) to ensure that adequate
funding is available at all times; b) to meet commitments as they arise without incurring
unnecessary costs; c) to be able to access funding when needed at the least possible cost;
and d) to maintain an adequate time spread of refinancing maturities.

The table below summarizes the maturity profile of the Group’s financial liabilities based
on contractual undiscounted payments as of December 31, 2008 and 2007:

2008
Non-derivative Carrying Contractual 1year > 1 year >2 years Over
financial liabilities Amount cash flow or less - 2 years - 5 years 5 years
Drafts and loans payable P48,560 P48,790 P48,790 P - P - P -
Accounts payable and
accrued expenses 20,939 20,939 20,939 - - -
Long-term debt
(including current
maturities) 49,763 53,241 10,151 18,402 23,127 1,561
Other noncurrent
liabilities 25,691 25,691 - 7,543 18,148 -

2007
Non-derivative financial Carrying Contractual 1year > 1 year >2 years Over
liabilities Amount cash flow or less - 2 years - 5 years 5 years
Drafts and loans payable P44,231 P44,642 P44,642 P - P - P -
Accounts payable and
accrued expenses 19,416 19,416 19,416 - - -
Long-term debt
(including current
maturities) 55,834 83,326 4,582 11,187 34,121 33,436
Other noncurrent
liabilities 454 454 - 454 - -

Credit Risk
Credit risk, or the risk of counterparties defaulting, is controlled by the application of
credit approvals, limits and monitoring procedures. It is the Group’s policy to enter into
transactions with a diversity of creditworthy parties to mitigate any significant
concentration of credit risk. The Group ensures that sales of products are made to
customers with appropriate credit history and has internal mechanism to monitor the
granting of credit and management of credit exposures. The Group has made provisions,
where necessary, for potential losses on credits extended. Where appropriate, the Group
obtains collateral or arranges master netting agreements.

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With respect to credit risk arising from the other financial assets of the Group, which
comprise of cash and cash equivalents and certain derivative instruments, the Group’s
exposure to credit risk arises from default of the counterparty with a maximum exposure
equal to the carrying amount of these instruments, net of the value of collaterals, if any.
Financial information on the Group’s maximum exposure to credit risk as of
December 31, 2008 and 2007, without considering the effects of collaterals and other risk
mitigation techniques is presented below.

Note 2008 2007

Cash and cash equivalents 7 P116,939 P93,281
Trade and other receivables - net 8 50,814 61,879
Derivative assets 37 191 926
Available-for-sale investments 10 590 551
Noncurrent receivables and deposits - net 15 7,439 7,437
P175,973 P164,074

The Group has no significant concentration of credit risk with any counterparty.

Financial and Other Risks Relating to Livestock

The Group is exposed to financial risks arising from the change in cost and supply of
feed ingredients and the selling prices of chicken, hogs and cattle and related products, all
of which are determined by constantly changing market forces of supply and demand,
and other factors. The other factors include environmental regulations, weather
conditions and livestock diseases for which the Group has little control. The mitigating
factors are listed below.

The Group is subject to risks affecting the food industry, generally, including risks posed
by food spoilage and contamination. Specifically, the fresh meat industry is regulated by
environmental, health and food safety organizations and regulatory sanctions. The Group
has put into place systems to monitor food safety risks throughout all stages of
manufacturing and processing to mitigate these risks. Furthermore, representatives from
the government regulatory agencies are present at all times during the processing of
dressed chicken in all dressing plants and issue certificates accordingly. The authorities,
however, may impose additional regulatory requirements that may require significant
capital investment at short notice.

The Group is subject to risks relating to its ability to maintain animal health status
considering that it has no control over neighboring livestock farms. Livestock health
problems could adversely impact production and consumer confidence. However, the
Group monitors the health of its livestock on a daily basis and proper procedures are put
in place.

The livestock industry is exposed to risk associated with the supply and price of raw
materials, mainly grain prices. Grain prices fluctuate depending on the harvest results.
The shortage in the supply of grain will result in adverse fluctuation in the price of grain
and will ultimately increase the Group’s production cost. If necessary, the Group enters
into forward contracts to secure the supply of raw materials at reasonable price.

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

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

The Group defines capital as paid-in capital stock, additional paid-in capital and retained
earnings, both appropriated and unappropriated. Other components of equity such as
treasury stock and cumulative translation adjustments are excluded from capital for
purposes of capital management.

The BOD has overall responsibility for monitoring capital in proportion to risk. Profiles
for capital ratios are set in the light of changes in the Group’s external environment and
the risks underlying the Group’s business, operation and industry.

The Group monitors capital on the basis of debt-to-equity ratio, which is calculated as
total debt divided by total equity. Total debt is defined as total current liabilities and total
noncurrent liabilities, while equity is total equity as shown in the consolidated balance
sheet.

There were no changes in the Group’s approach to capital management during the year.

The Group is not subject to externally imposed capital requirements.

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37. Financial Assets and Liabilities

The table below presents a comparison by category of carrying amounts and fair values
of the Group’s financial instruments as of December 31, 2008 and 2007:

2008 2007
Carrying Carrying
Amount Fair Value Amount Fair Value
Financial Assets
Cash and cash equivalents P116,939 P116,939 P93,281 P93,281
Trade and other receivables - net 50,814 50,814 61,879 61,879
Derivative assets (included under “Prepaid
expenses and other current assets” and “Other
noncurrent assets” accounts in the consolidated
balance sheets amounting to P190 and P1,
respectively in 2008 and P907 and P19,
respectively in 2007.) 191 191 926 926
Available-for-sale investments (included under
“Investments and advances” account in the
consolidated balance sheets) 590 590 551 551
Noncurrent receivables and deposits - net
(included under “Other noncurrent assets”
account in the consolidated balance sheets) 7,439 7,439 7,437 7,437
Financial Liabilities
Drafts and loans payable 48,560 48,560 44,231 44,231
Accounts payable and accrued expenses 20,939 20,939 19,416 19,416
Derivative liabilities (included under “Accounts
payable and accrued expenses” account in the
consolidated balance sheets amounting to
P2,353 and P895 in 2008 and 2007,
respectively, and “Other noncurrent liabilities”
accounts in the consolidated balance sheets
amounting to P2 in 2007) 2,353 2,353 897 897
Long-term debt (including current maturities) 49,763 49,826 55,834 56,005
Other noncurrent liabilities 25,691 25,691 454 454

The following methods and assumptions are used to estimate the fair value of each class
of financial instruments:

Cash and Cash Equivalents, Trade and Other Receivables and Noncurrent Receivables
and Deposits. The carrying amount of cash and cash equivalents and receivables
approximates fair value primarily due to the relatively short-term maturity of these
financial instruments. In the case of long-term receivables, the fair value is based on the
present value of expected future cash flows using the applicable discount rates.

Derivatives. The fair values of forward exchange contracts are calculated by reference to
current forward exchange rates. In the case of freestanding currency and commodity
derivatives, the fair values are determined based on prices obtained from the market and
counterparties. Fair values are also based on standard valuation models.

Available-for-Sale Investments. The fair values of publicly traded instruments and

similar investments are estimated based on the quoted market prices. For all other
instruments with no quoted market prices, a reasonable estimate of fair value has been
calculated based on the expected cash flows or the underlying net asset base for each
investment.

- 87 -
Drafts and Loans Payable and Accounts Payable and Accrued Expenses. The carrying
amount of drafts and loans payable and accounts payable and accrued expenses
approximates fair value due to the relatively short-term maturity of these financial
instruments.

Long-term Debt. The fair value of interest-bearing fixed-rate loans is based on the
discounted value of expected future cash flows using the applicable rates for similar
types of loans as of balance sheet date. As of December 31, 2008 and 2007, discount
rates used are from 5.7% to 6.9% and 4.8% to 6.6%, respectively. The carrying values of
floating rate loans with quarterly repricing approximate fair value.

Derivative Financial Instruments

The Group’s derivative financial instruments according to the type of financial risk being
managed and the details of freestanding and embedded derivative financial instruments
that are categorized into those accounted for as hedges and those that are not designated
as hedges are discussed below.

The Group enters into various commodity derivative contracts to manage its exposure on
commodity price risk. The portfolio is a mixture of instruments including forwards,
swaps and options covering the Group’s requirements on fuel oil, aluminum, soybean
meal and wheat.

Derivative Instruments Accounted for as Hedges

Cash Flow Hedges

Long-term Interest Rate Swaps

As of December 31, 2006, the Group has outstanding interest rate swaps with an
aggregate amount of US$150. Under the agreement, the Group receives quarterly floating
interest rate based on BBSY and pays quarterly fixed interest rate. The Group effectively
swaps the principal amount of certain A$-denominated debts into A$-denominated debts
with principal payments in December 2008 and December 2010. As of December 31,
2006, the net positive fair value amounted to A$0.9. These were part of discontinued
operations disposed as of December 31, 2007.

Currency Options
As of December 31, 2006, the Group has outstanding interest rate collars to manage its
interest rate exposure on its foreign currency-denominated obligations. These collars
have an aggregate notional amount of US$691 and a net positive fair value of A$1.7.
These options were part of discontinued operations disposed as of December 31, 2007.

Currency Forwards
The Group enters into forward buy US$ and Danish Krone (DKK) contracts with
aggregate notional amounts of US$54.5 and DKK28.0, respectively, to hedge existing
and anticipated foreign currency-denominated purchases. The Group also enters into
forward sell US$ and New Zealand Dollar (NZ$) contracts with an aggregate notional
amounts of US$1.2 and NZ$2.3, respectively, to hedge existing and anticipated foreign
currency-denominated sales. These forward contracts matured in various dates in 2007.
As of December 31, 2006, the net negative fair value of these freestanding currency
forwards amounted to A$19. These were part of discontinued operations disposed as of
December 31, 2007.

- 88 -
Commodity Options
As of December 31, 2008, the Group has outstanding bought and sold options covering
its fuel oil requirements with a notional quantity of 12,000 metric tons. The call and put
options can be exercised at various calculation dates in 2009 with specified quantities on
each calculation date. The net unrealized fair value change (after tax) deferred under
“Cumulative translation adjustments” account on these call and put options as of
December 31, 2008 amounted to P123.

As of December 31, 2007, the Group has no outstanding options designated as hedge on
the purchase of commodity.

Other Derivative Instruments Not Designated as Hedges

The Group enters into certain derivatives as economic hedges of certain underlying
exposures. These include freestanding and embedded derivatives found in host contracts,
which are not designated as accounting hedges. Changes in fair value of these
instruments are accounted for directly in the 2008 and 2007 consolidated statements of
income. Details are as follows:

Freestanding Derivatives

Freestanding derivatives consist of commodity derivatives and currency derivatives

entered into by the Group.

Currency Forwards
As of December 31, 2007, the Group has outstanding forward contracts to sell US$ and
buy PhP to hedge existing and anticipated US$-denominated receivables. The Group
also has outstanding forward contracts to sell A$ and buy US$ to hedge existing and
anticipated A$-denominated receivables. These forwards have an aggregate notional
amount of US$196 to mature in 2008. As of December 31, 2007, the net positive fair
value of these currency forwards amounted to P211.

As of December 31, 2007, the Group has outstanding structured forward contracts to buy
PhP and sell US$ to manage its foreign currency exposure on
US$-denominated receivables. These forwards have an aggregate notional amount of
US$63 in 2007. The net positive fair value of these structured forwards amounted to P81
as of December 31, 2007.

As of December 31, 2007, the Group has outstanding structured forward contract to buy
US$ and sell A$ to manage its foreign currency exposure on A$-denominated
receivables. This forward amounted to US$54 and matured in early 2008. As of
December 31, 2007, the positive fair value of this forward amounted to P37.

Short-term Currency Swaps

As of December 31, 2008 and 2007, the Group has outstanding short-term currency swap
agreements with an aggregate notional amount of US$881 and US$560, respectively.
The net negative fair value of these currency swaps amounted to P905 and P764 as of
December 31, 2008 and 2007, respectively.

Currency Options
As of December 31, 2007, the Group has outstanding sold US$ call options to manage its
foreign currency exposure on US$-denominated receivables. These options have an
aggregate notional amount of US$79 and matured in 2008. As of December 31, 2007, the
net positive fair value of these options was P27.

- 89 -
Commodity Swaps
As of December 31, 2008 and 2007, the Group has outstanding swap agreements,
combined with bought and sold options, covering its aluminum requirements, to mature
in 2008 and 2009. Under the agreement, payment is made either by the Group or its
counterparty for the difference between the agreed fixed price of aluminum and the price
based on the relevant price index. The outstanding equivalent notional quantity covered
by the commodity swaps and options as of December 31, 2008 and 2007 is 450 and
4,800 metric tons, respectively. As of December 31, 2008 and 2007, the negative fair
value of these swaps and options amounted to P19 and P10, respectively.

Commodity Options
As of December 31, 2008 and 2007, the Group has outstanding bought and sold options
covering its fuel oil requirements with notional quantities of 58,800 and 28,800 metric
tons, respectively. These options can be exercised at various calculation dates in 2009
and 2008 with specified quantities on each calculation date. The net negative fair value
of these options as of December 31, 2008 amounted to P920 while the net positive fair
value of these options as of December 31, 2007 was P34.

The Group has outstanding bought and sold options covering its wheat requirements with
notional quantities as of December 31, 2008 and 2007 of 34,292 and 76,748 metric tons,
respectively. These options can be exercised at various calculation dates in 2009 and
2008 with specified quantities on each calculation date. As of December 31, 2008, the net
negative fair value of these options amounted to P94 while the net positive fair value as
of December 31, 2007 was P132.

In 2007, the Group entered into digital path dependent options covering its soybean meal
requirements with a total notional quantity of 45,723 metric tons. These options were
early exercised in 2007.

Embedded Derivatives

The Group’s embedded derivatives include currency derivatives (forwards and options)
embedded in non-financial contracts.

Embedded Currency Forwards

As of December 31, 2008 and 2007, the total outstanding notional amount of currency
forwards embedded in non-financial contracts amounted to US$73 and US$102,
respectively. These non-financial contracts consist mainly of foreign currency-
denominated purchase orders, sales agreements and capital expenditures. As of
December 31, 2008, the net negative fair value of these embedded currency forwards
amounted to P26, while the net positive fair value as of December 31, 2007 amounted to
P443.

Embedded Currency Options

As of December 31, 2008, the total outstanding notional amount of currency options
embedded in non-financial contracts amounted to US$15. These non-financial contracts
consist mainly of sales agreements. As of December 31, 2008, the net positive fair value
of these embedded currency options amounted to P10.

As of December 31, 2007, the Group has no outstanding embedded currency options.

- 90 -
 Fair Value Changes on Derivatives
The net movements in fair value changes of all derivative instruments for the years ended
December 31, 2008 and 2007 are as follows:

2008 2007
Balance at beginning of year P29 P335
Net changes in fair value of derivatives:
Designated as accounting hedges (245) 47
Not designated as accounting hedges (10,832) (1,667)
(11,048) (1,285)
Less fair value of settled instruments (8,886) (1,314)
Balance at end of year (P2,162) P29

Hedge Effectiveness Results

The effective fair value changes, net of tax, on the Group’s cash flow hedges that were
deferred in equity as of December 31, 2008 amounted to P123. As of December 31,
2007, the Group has no outstanding derivatives designated as hedge.

38. Subsequent Events

a. Sale of Assets

On January 27, 2009, the Parent Company’s BOD approved the sale of its domestic
beer and malt-based beverages brands, including related trademarks, copyrights,
patents and other intellectual property rights and know-how (IP Rights) to SMB,
through the sale of all its interests in IBI, to which the Parent Company transferred the
IP Rights pursuant to a Deed of Assignment of Domestic Intellectual Property Rights
dated December 16, 2008 as supplemented by a Supplement to the Deed of
Assignment of Domestic Intellectual Property Rights dated January 23, 2009 executed
between IBI and the Parent Company, in exchange for common shares in IBI to SMB.
The BOD of SMB approved on the same date, the purchase of the IP Rights through
the purchase of all of the Parent Company’s interests in IBI after the completion of
such transfer to IBI by the Parent Company of the IP Rights to IBI. The price is
P32,000.

On the same date, the BOD of the Parent Company likewise approved the sale of the
parcels of land used in domestic beer operations, partly to Brewery Land Holdings,
Inc. (BLI), a wholly-owned subsidiary of San Miguel Brewery Retirement Plan
(SMBRP) at P239, and the rest to SMB by the sale of all its interests in BPI, to which
the rest of such parcels of land will be transferred.

SMB’s BOD also approved on January 27, 2009, the purchase of all the interests of
the Parent Company in BPI after completion of the transfer by Parent Company of the
said parcels of land to BPI in exchange for BPI common shares and after SMBRP has
transferred its shares in BLI to BPI in exchange for BPI preferred shares. The
purchase price will be at the appraised value of the land transferred by the Parent
Company to BPI amounting to P6,829. The proposed acquisitions will be financed by
SMB through borrowings.

The sale by the Parent Company of its interests in IBI and BPI will be implemented
after obtaining all the required approvals from the appropriate regulatory agencies.

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 On January 28, 2009, the BOD of BPI approved the increase in the par value of its
common shares from P100 to P350 and the increase in its authorized capital stock
from P1 divided into 10,000 shares with a par value of P100 per share to P800 divided
into 2,400,000 preferred shares and 1,600,000 common shares with a par value of
P100 and P350 per share, respectively.

On February 27, 2009, the SEC approved the transfer of the Parent Company’s IP
rights to IBI and the increase in the authorized capital stock of IBI. Shares totaling
100,000,000 were issued to the Parent Company under a tax-free asset-for-share
agreement, as confirmed by the Bureau of Internal Revenue (BIR) in its certification
No. SN-405-2008 dated December 24, 2008.

Pursuant to the approvals of the BOD of BPI and the Parent Company, a Master Deed
of Assignment of Land dated March 12, 2009 as superseded by a Master Deed of
Assignment of Land dated March 25, 2009 was filed with SEC in connection with
BPI’s application for increase in its par value of common shares and authorized
capital stock.

As of March 26, 2009, the application for increase in the par value of BPI’s common
share and authorized capital stock and the transfer by the Parent Company of certain
parcels of land used in the domestic beer business to BPI are still pending approval of
the SEC.

b. SMB Bond Issuance

Pursuant to an order by the SEC rendering SMB’s registration statement effective

and the permit to offer securities for sale issued by the SEC, both dated March 17,
2009, SMB offered for sale and subscription to the public Philippine peso-
denominated fixed rate bonds in the aggregate principal amount of P38,800 (Bonds).
The Bonds will be issued in three (3) series: Series A Bonds with an aggregare
principal amount of P13,590 having a term of 3 years beginning on Issue Date and
ending in April 3, 2012, with a fixed interest rate of 8.25% per annum; Series B
Bonds with an aggregate principal amount of P22,400 having a term of 5 years and 1
day beginning on Issue Date and ending on April 4, 2014, with a fixed interest rate of
8.875% per annum; and Series C Bonds with an aggregate amount of P2,810 having
a term of 10 years beginning on Issue Date and ending on April 3, 2019, with a fixed
interest rate of 10.50% per annum. Proceeds from the issuance of the bonds will be
used to finance SMB’s acquisition of the interests of the Parent Company in IBI and
BPI.

The offer period for the Bonds is from March 18 to March 27, 2009 and issue date is
on April 3, 2009.

c. Sale of SMB Shares

On February 20, 2009, the Parent Company signed a share purchase agreement for
the acquisition by Kirin Holdings Company, Limited (“Kirin”), of a 43.249% stake in
SMB. Under the terms of the agreement, purchase price of the shares amounts to
P8.841 per share, implying a total acquisition price at P58,924. Further to the
agreement, the Parent Company, Kirin and SMB will undertake to negotiate
exclusively for SMB’s potential purchase of shares in Parent Company’s overseas
beer business. The exclusivity period is for six months following Parent Company’s
offer to sell the shares in its overseas beer business.

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 d. Parent Company Loan Availment

On February 17, 2009, the Parent Company issued floating rate notes amounting to
P1,000. The net proceeds of the term loan facility will be used by the Parent
Company for general financing and corporate requirements.

39. Other Matters

a. Contingencies

The Group is a party to certain lawsuits or claims (mostly labor related cases) filed
by third parties which are either pending decision by the courts or are subject to
settlement agreements. The outcome of these lawsuits or claims cannot be presently
determined. In the opinion of management and its legal counsel, the eventual
liability from these lawsuits or claims, if any, will not have a material effect on the
consolidated financial statements.

On April 12, 2004 and May 26, 2004, the Parent Company was assessed by the BIR
for deficiency excise tax on one of its beer products. The Parent Company contested
the assessments before the Court of Tax Appeals (CTA) under CTA case numbers
7052 and 7053. In the opinion of management and its legal counsel, the Parent
Company has strong legal grounds to contest the assessments.

In relation to the aforesaid contested assessments, the Parent Company, on

January 31, 2006, filed with the CTA, under CTA case number 7405, a claim for
refund of taxes paid in excess of what it believes to be the excise tax rate applicable
to it. An independent Certified Public Accountant (CPA) commissioned by the CTA
to conduct an examination, verification and audit to validate the documents
supporting the claim for refund has submitted a report stating, among other things,
that the claim is properly supported by the relevant documents.

On November 27, 2007, the Parent Company filed with the CTA, under CTA case
number 7708, a second claim for refund, also in relation to the contested
assessments, as it was obliged to continue paying excise taxes in excess of what it
believes to be the applicable excise tax rate. An independent CPA was likewise
commissioned by the CTA in this case for the purpose of conducting an examination,
verification and audit of the documents supporting the aforesaid claim. In a report
recently submitted to the CTA, the independent CPA stated that the second claim is
properly supported by the relevant documents.

On January 11, 2008, the BIR addressed a letter to the Parent Company, appealing to
the Parent Company to settle its alleged tax liabilities subject of CTA case numbers
7052 and 7053 “in order to obviate the necessity of issuing a Warrant of Distraint and
Garnishment and/or Levy”. The Parent Company’s external legal counsel responded
to the aforesaid letter and met with appropriate officials of the BIR and explained to
the latter the unfairness of the issuance of a Warrant of Distraint and Garnishment
and/or Levy against the Parent Company, especially in view of the Parent Company’s
pending claims for refund. As of March 26, 2009, the BIR has taken no further action
on the matter.

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b. Authority to Invest Corporate Funds and/or Engage in Other Businesses

On July 24, 2007, the shareholders authorized the Parent Company to invest
corporate funds and/or engage in new businesses like power generation or
transmission, water, other utilities, mining and infrastructure. Together with the core
business of food, beverage and packaging - which will form the bulk of the portfolio
- these new businesses aim to provide better aggregate growth margins and a stronger
growth platform moving forward.

c. Restructuring Plan

At the annual stockholders' meeting held on July 24, 2008, the stockholders
authorized (i) the Parent Company to pursue and implement a corporate restructuring
plan which may require, among others, the divestment of the Parent Company's
interest in its major subsidiaries, such as beer, food and packaging subsidiaries, with
the Parent Company retaining controlling interests/ownership of at least 51% in each
of these major subsidiaries, and (ii) the Board of Directors to approve the
implementing transactions of such corporate restructuring plan after evaluation and
study by Management, subject to applicable laws.

d. Commitments

The outstanding purchase commitments of the Group as of December 31, 2008

amounted to P20,451.

Amount authorized but not yet disbursed for capital projects as of December 31,
2008 is approximately P7,571.

e. Foreign Exchange Rates

The foreign exchange rates used in translating the US dollar accounts of foreign
subsidiaries and associates to Philippine peso were closing rates of P47.52 in 2008
and P41.28 in 2007 for balance sheet accounts; and average rates of P44.47 in 2008,
P46.18 in 2007 and P51.32 in 2006 for income and expense accounts.

f. Memorandum of Understanding with Qatar Telecom

On December 8, 2008, the Parent Company’s BOD allowed management to pursue a

joint venture partnership with Qatar Telecom QSC (QTel) to look into opportunities
in the wireless broadband, mobile and mobile broadband businesses in the
Philippines. QTel is an integrated telecommunications player based in Qatar, and a
majority owned by the State of Qatar.

On December 15, 2008, the Parent Company signed a memorandum of

understanding with QTel to partner in wireless broadbank and mobile
communications projects in the Philippines. The Parent Company is in talks with
QTel for a possible investment in Liberty Telecoms Holdings Inc.

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g. Option Agreement with Sea Refinery Holdings B.V. (SEA BV)

On December 24, 2008, the Parent Company entered into an option agreement with
SEA BV pursuant to which SEA BV granted to the Parent Company an option to
acquire and purchase up to 100% of its interests in SEA BV’s wholly-owned
subsidiary, SEA Refinery Corporation (SRC), consisting of 40,000,000 shares of
stock with a par value of P1 per share (Option Shares). SRC owns 50.1% stake in
Philippine oil refinery, Petron Corporation. The option may be exercised by the
Parent Company within a period of two (2) years from December 24, 2008. The
exercise price for the Option Shares will be the sum of (a) the paid-up capital of SEA
BV in SRC amounting to P40 and (b) the value of the shares acquired by SRC in
Petron Corporation plus the assumption of, if any, liability or obligation and
expenses incurred by SRC for the acquisition of the said shares. The Parent Company
and SEA BV have agreed that the Parent Company shall have representation in the
board and management of Petron Corporation.

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 Annex “F”
LIST OF SEC 17-C-2008

Date Reported Subject

December 22, Please be informed that the Company has formed two new wholly
2008 owned subsidiaries, Brewery Properties, Inc. and Iconic Beverages,
Inc. for its land holdings in the beer business and beer brands,
respectively.
December 15, San Miguel Qatar Telecom Sign MOU.
2008
December 8, Please be informed that at the meeting of the Board of Directors
2008 held today, December 8, 2008, the Board authorized the Company
to enter into an option agreement with Ashmore Group for the
purchase of up to a 50.1% stake of Ashmore’s interest in Petron
Corporation.
December 8, Please be informed that at the meeting of the Board of Directors of
2008 San Miguel Corporation held today, December 8, 2008, the Board
declared a cash dividend of P0.35 per share payable on February
10, 2009 to all stockholders of record as of January 16, 2009. The
stock and transfer books of the Corporation will be closed from
January 17, 2009 to January 23, 2009.
December 8, San Miguel to go into broadband, partners with Qatar Telecom.
2009
November 6, SMC posts income of P20.9 billion for first nine months.
2008
October 27, San Miguel Corporation’s Board of Directors gave SMC
2008 management approval to enter into a sale and purchase agreement
with the Government Service Insurance System to acquire the
government agency’s 27% stake in Meralco at the price of 90.00 per
share, the total amount to be payable in three years.
The Board also authorized SMC to initiate talks with the Ashmore
Group for a possible stake in Petron Corporation, and with
Indonesia’s PT Bakrie and Brothers, for an alliance for its PT Bumi
Resources operations.
October 17, SMC interested in Petron.
2008
September 25, Please be informed that at the meeting of the Board of Directors of
2008 San Miguel Corporation held on September 25, 2008, the Board
declared a cash dividend of P0.35 per share payable on November
17, 2008 to all stockholders of record as of November 3, 2008. The
stock and transfer books of the Corporation will be closed from
November 4, 2008 to November 10, 2008.
September 25, Magnolia assures safety of milk and dairy products.
2008
September 12, SMC denies Meralco takeover bid.
2008
Aug. 12, 2008 San Miguel Reports First Half Net Income of P19.7 Billion.
July 24, 2008 SMC Stockholders approve corporate restructuring.
July 24, 2008 At the Annual Stockholders’ Meeting of San Miguel Corporation held
today, July 24, 2008 at the Valle Verde Country Club, the following
directors were duly elected:
 Eduardo M. Cojuangco, Jr., Ramon S.Ang, Estelito P. Mendoza,
Iñigo Zobel, Winston Garcia, Menardo R. Jimenez, Leo S. Alvez,
Egmidio de Silva Jose, Pacifico M. Fajardo, Silvestre H. Bello III,
Kazuhiro Tsukahara, Koichi Matsuzawa, Hirotake Kobayashi, Hector
L. Hofileña, Carmelo L. Santiago.

At the Organizational Meeting, the following by-law officers were

duly elected:
Eduardo M. Cojuangco – Chairman & Chief Exeucitve Officer
Ramon S. Ang – Vice-Chairman, President & Chief Operating Officer
Ferdinand K. Constantino – SVP & CFO-Treasurer
Francis H. Jardeleza – SVP-Gen. Counsel & Corsec
Lorenzo Timbol – Asst. Corporate Secretary
Rosabel Socorro T. Balan – Asst. Corporate Secretary

The following Committee members were also elected:

Executive Committee:
Eduardo M. Cojuangco – Chairman
Ramon S. Ang, Estelito P. Mendoza, Leo S. Alvez, Menardo R.
Jimenez, Iñigo Zobel, Kazuhiro Tsukahara
Audit Committee:
Carmelo L. Santiago – Chairman
Estelito P. Mendoza, Iñigo Zobel, Pacifico M. Fajardo, Kazuhiro
Tsukahara, Hector L. Hofileña
Executive Compensation:
Menardo R. Jimenez – Chairman
Estelito P. Mendoza, Iñigo Zobel, Egmidio de Silva Jose, Kazuhiro
Tsukahara, Carmelo L. Santiago
Nominations Committee:
Estelito P. Mendoza – Chairman
Ramon S. Ang, Iñigo Zobel, Leo S. Alvez, Winston F. Garcia,
Silvestre H. Bello III, David S. Santos – Ex-Oficio Member
July 18, 2008 SMC Packaging Group Reports Strong Growth in First Semester.
July 3, 2008 SMC, Kuok Group to launch US$1-B food security project, Business
titans team up with national government to develop one million
hectares of agricultural lands.
June 26, 2008 Please be informed that at today’s meeting of the Board of Directors
of San Miguel Corporation, the Board declared a cash dividend of
P0.35 per share payable on August 25, 2008 to all stockholders of
record as of August 1, 2008. The stock and transfer books of the
Corporation will be closed from August 2 to August 8, 2008.
June 2, 2008 We refer to your letter dated May 21,2008, which we received on
May 28, 2008, requiring us to explain why the Company should not
be held liable for violation of the SRC Rule 17.1 (1) (A)(i), for its non-
submission of the Company’s annual report on SEC Form 17-A on
April 29, 2008.
Please be informed that the Company files on May 15, 2008 annual
report on SEC Form 17-A. As previously disclosed, the delay in the
submission of the said annual report was due to the non-completion
of the audit by the external auditors on its subsidiary, San Miguel
Pure Foods Company, Inc. (“SMPFC) resulting from certain
adjustments made by Monterey Foods Corporation (MFC), a
subsidiary of SMPFC. Certain asset accounts such as trade
receivables and investments of MFC were adjusted to reflect their
net realizable values. The adjustments resulted in the reduction of
MFC beginning retained earnings for 2007.
May 22, 2008 Please be informed that for the Regular Stockholders’ Meeting of the
Corporation scheduled on July 24, 2008 at 2:00 p.m.
1) the record date for stockholders entitled to vote will be on June
13, 2008.
2) the closing of stock and transfer books will be from Jun 14 – June
20, 2008.
3) the deadline for submission of proxies is on July 10, 2008.
4) the validation of proxies is on July 17, 2008.
May 20, 2008 Please be informed that the Company paid the amount of
P125,000.00 to the Philippine Stock Exchange (PSE) in full
settlement of the fine imposed by the PSE in its letter dated April 30,
2008, for the Company’s failure to submit its SEC Form 17-A by way
of Odisy on April 29, 2008.
May 15, 2008 SMC Posts Strong Q1 Results.
April 25, 2008 SMB sets IPO price at P8.00.
April 21, 2008 Pleas be informed that, to date, the external auditors of san Miguel
Corporation have not completed their audit procedures to enable
them to render a report on the Company’s 2007 financial
statements.
The non-completion of such audit procedures on the Company is
due to the non-completion of the audit on its subsidiary, San Miguel
Pure Foods Company, Inc. (SMPFC), resulting from certain
adjustments made by Monterey Foods Corporation (MFC), a
subsidiary of SMPFC, affecting its receivables and inventories,
resulting in a reduction of MFC’s 2007 net income and retained
earnings as of December 31, 2006. The external auditors of MFC
are still ascertaining the allocation of the adjustments made between
the current year and the prior year’s result of operations.
In view of the foregoing, the Company estimates that the
aforementioned audit will be completed to enable the Company to
submit its 2007 audited financial statements and SEC Form 17-A not
later than May 15, 2008.
April 11, 2008 San Miguel Brewery Posts Strong Start to the Year.
March 6, 2008 Please be informed that at the meeting of the Board of Directors of
San Miguel Corporation held today, march 6, 2008, the Board of
Directors of San Miguel Corporation, the Board declared a cash
dividend of P0.35 per share payable on April 24, 2008 to all
stockholders of record as of March 28, 2008. The stock and transfer
books of the Corporation will be closed from March 29, 2008 to April
4, 2008.
March 3, 2008 SMB Inc. Updates IPO Offering Circular.
January 31, Japanese Joint Venture Partner Buys Into SMC Packaging
2008 Business.
January 18, Please be informed that San Miguel Corporation has re-scheduled
2008 its Annual Stockholders’ Meeting to July 24, 2008. The deadline for
the submission of nominations to the Company’s Board of Directors
is on April 7, 2008.
January 9, San Miguel beer sales accelerate in 2007.
2008
January 7, SMC’s South China Brewing Operations Post Strong Growth.
2008
January 2, San Miguel sells J. Boag & Son to Australian Brewer.
2008