Anglo Philippine Holdings Corporation › disclosures › APO_17A_Dec2005.pdf · 13. Aggregate market value of the voting stock held by non-affiliates: P555,655,543 (653,712,404 share

Anglo Philippine Holdings Corporation

SEC Form 17-A 1 December 31, 2005

COVER SHEET 1 4 1 0 2 S.E.C. Registration Number A N G L O P H I L I P P I N E H O L D I N G S

C O R P O R A T I O N

(Company's Full Name)

6 t h F l o o r , Q u a d A l p h a C e n t r u m

B u i l d i n g , 1 2 5 P i o n e e r S t r e e t

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

Atty. Adrian S. Arias +63(2)6315139 Contact Person Company Telephone Number Dec. 31, 2005 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

3 2 8 7 P571,870,000 Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document I.D. Cashier

S T A M P S

Remarks = pls. use black ink for scanning purposes



TABLE OF CONTENTS

Page No.

PART I BUSINESS AND GENERAL INFORMATION Item 1 Business and General Information 4 Item 2 Properties 8 Item 3 Legal Proceedings 8 Item 4 Submission of Matters to a Vote of Security Holders 9 PART II OPERATIONAL AND FINANCIAL INFORMATION Item 5 Market for Registrant’s Common Equity and Related 9 Stockholder Matters Item 6 Management’s Discussion and Analysis or Plan of Operations 10 Item 7 Financial Statements 14 Item 8 Changes in and Disagreements with Accountants on

Accounting and Financial Disclosure 14 PART III CONTROL AND COMPENSATION INFORMATION Item 9 Directors and Executive Officers of the Registrants 14 Item 10 Executive Compensation 19 Item 11 Security Ownership of Certain Beneficial Owners and 20 Management Item 12 Certain Relationships and Related Transactions 21 PART IV EXHIBITS AND SCHEDULES Item 14 Exhibits and Reports on SEC Form 17-C 22 SIGNATURES 22 INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES INDEX TO EXHIBITS



SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE

1. For the Fiscal Year ended : 31 December 2005 2. SEC Identification Number : 14102 3. BIR Tax Identification Number: 041-000-175-630 4. Exact name of registrant as specified in its charter: Anglo Philippine Holdings Corporation 5. Province, Country or other jurisdiction of incorporation or organization: Philippines

6. Industry Classification Code : (SEC Use Only) 7. Address of principal office : 6th Floor Quad Alpha Centrum 125 Pioneer Street, Mandaluyong City 1550 8. Registrant’s telephone number, including area code: (632) 631-5139; (632) 635-6130 9. Former name, former address, and former fiscal year if changed since last report: N/A 10. Securities registered pursuant to Sections 4 and 8 of the RSA: Number of shares of common stock Title of Each Class outstanding and amount of debt outstanding Common stock (P1.00 par value) 1,072,000,000 shares Loans Payable P571,870,000 11. Are any or all of these securities listed in the Philippine Stock Exchange: YES 12. Check whether the registrant:

a) has filed all reports required to be filed by Section 17 of the Securities Regulation Code (SRC) and Rule 17(a)-1 thereunder and Sections 26 and 141 of the Corporation Code during the preceding 12 months (or for such shorter period that the registrant was required to file such reports). Yes [ X ] No [ ]

b) has been subject to such filing requirement for the past 90 days. Yes [ X ] No [ ]

13. Aggregate market value of the voting stock held by non-affiliates: P555,655,543 (653,712,404 share @ P0.85/share as of December 29, 2005) 14. Document incorporated by reference: 2005 Audited Financial Statements.



PART I - BUSINESS AND GENERAL INFORMATION Item 1. Business (a) Description of Business (1) Business Development Anglo Philippine Holdings Corporation (the “Company”) was incorporated in 1958, originally as an oil and mineral exploration company with the corporate name of “Anglo Philippine Oil Corp.” In 1996, the Company changed its primary purpose to that of an investments holding firm focused on infrastructure and related property development activities, and changed its corporate name to “Anglo Philippine Holdings Corporation”.

Core Investments The Company maintains a 15.79% stake in the North Triangle Depot Commercial Corp. (NTDCC), which owns the development rights on the airspace above the North Triangle depot. As of December 2005, NTDCC has completed 20% of the construction of the commercial center over the North Triangle depot. Ayala Land, Inc. (“ALI”) is the project manager for the commercial center project and will also be the operations manager of the commercial center. The Company continues to maintain its core infrastructure investment in the Metro Rail Transit (MRT) III Project (the “MRT 3 Project”) through its 18.6% equity interest in MRT Holdings, Inc. (MRTHI). As of 31 December 2005, average ridership stood at about 430,000 passengers per day. Contract terms for Phase 2 of MRT 3 (from North Triangle, QC to Monumento, Caloocan City) are being finalized with the Government. The Company continues to maintain a 15.79% stake in the MRT Development Corporation (MRTDC) which owns the development rights over the airspace above the MRT stations and certain lot pads around the perimeter of the North Triangle depot. MRTDC continues to generate revenues from concessionaire rentals, advertising and fees obtained from the assignment of its development rights over certain stations.

Other Investments The Company continues to negotiate with various groups who have expressed interest in pursuing the Bulacan Central Bulk Water Supply Project and the Bohol-Cebu Water Supply Project for the transfer of participating interests and/or transfer of all data and other properties relating to the Projects. Pending the transfer of its petroleum and mineral assets, the Company continues to participate in the following Oil Exploration and Mineral Contracts: Service Contract No. 6A Octon, NW Palawan 11.11000 % Service Contract No. 14D Tara, NW Palawan 2.50000 % Service Contract No. 41 Sulu Sea 1.14700 % GSEC No. 98 Onshore Mindoro 20.54500 %



GSEC Application (SWAN Block) NW Palawan 33.57800 % GSEC Application (ex GSEC 91) Southwest Palawan 0.90000 % Marian Gold Project Cordon, Isabela 10.00000% Service Contract (SC) 6A (Octon) and SC 14D (Tara) – The consortium is in discussion with the Vitol Group for a possible farm-in into the SC 6A block and with Basic Petroleum for a possible farm-in into the SC 14D block. SC 41 (Sulu Sea) – The consortium has decided to proceed to the extended exploration term of the service contract. Basic Consolidated has been elected operator of the block. SC 53 (Onshore Mindoro) (formerly, Geophysical Survey & Exploration Contract (GSEC) 98) - The Company is finalizing the acquisition of a participating interest in the new SC 53 awarded to LAXMI Organic Industries. GSEC 75 (Central Luzon), GSEC Application (SWAN Block), GSEC Application (Southwest Palawan) and Marian Gold Project – The Company is in discussion with investors for the transfer of its various interests in these projects. Subject to obtaining the necessary government approvals, the Company anticipates to be able to effect the transfer of these assets within 2006. In 2005, the Company complemented its natural resources-based investments with the acquisition of a 20% interest in Atlas Consolidated Mining & Development Corp. (hereafter, "Atlas"). Beginning late 2004, Atlas has been undergoing a major business consolidation and re-alignment of its various interests notably in mining, water supply infrastructure and property development. Atlas expects these business centers to be its main revenue drivers for the next 5 years. Likewise, as part of the capital restructuring program of United Paragon Mining Corp. (UPMC), the Company and other creditors of UPMC have agreed to convert their receivables from UPMC into new UPMC equity. UPMC's capital restructuring program has been submitted to the SEC for approval. The Company’s other investments include minority interests in: (1) Philippine Seven Corporation (PSC), the Philippine franchise holder of the 7-Eleven chain of convenience stores; (2) Batangas Assets Corporation (“BAC”), a holding company organized for the purpose of investing in the Calabarzon area; and, (3) Pacific Rim Export & Holdings Corp.(“Primex”), a holding company for export manufacturing. The Company’s wholly-owned subsidiary, Filipinas Energy Corporation (“FEC”), has not undertaken any business operation since its incorporation due to the deferment of the transfer of the Company’s petroleum and mineral assets. NO bankruptcy, receivership or similar proceeding has been filed by or against the Company and/or its subsidiary during the last three (3) years. NO material reclassification, merger, consolidation, or purchase/sale of a significant amount of assets, not in the ordinary course of business, has been undertaken by the Company and/or its subsidiary during the last three (3) years.



(2) Business of Issuer (A) Description of Registrant The Company is an investments holding firm focused on infrastructure and related property development activities. It maintains, and will continue to maintain, investments in property development, rail transit projects, bulk water supply projects, natural resources-based companies, and diversified minority interests in PSC, BAC and Primex.

FEC, the Company’s wholly-owned subsidiary, is a petroleum and mineral exploration company which has not undertaken any business operation since its incorporation due to the deferment of the transfer of the Company’s petroleum and mineral assets. (i) Principal products or services and their markets - The Company, as an

investments holding firm, does not generate sales or revenues from the sale of any product or service; rather, the Company generates revenues and income, principally: (a) from its investments by way of dividends received from, and/or equitizable share in the earnings of, investee companies; and, (b) sale of investments or of the securities to which the investment may have been converted (e.g. bonds), including interest income earned by such securities.

On account of the Company's specialized knowledge on the securitization of the

share distributions from the MRT 3 Project, the structuring of the MRT Bonds and the marketing network therefor, an offshore subscriber to the MRT Bonds engaged the services of the Company to advise, solicit, negotiate and close transactions on the sale of its own MRT Bonds, in consideration for which the offshore investor agreed to pay the Company a percentage-based success fee and a fixed monthly service fee.

(ii) Percentage of sales or revenues and net income contributed by foreign sales –

In 2005, the Company booked around P91 million in success fees and retainer fees for services rendered in connection with the sale of MRT Bonds by an offshore investor for which the Company acted as its adviser. The fees were paid locally in US dollars. In 2003 and 2004, the Company sold US$3 Million, US$4 Million and US$5.253 Million face value worth of its Series 1 MRT Bonds and US$4.091 Million face value worth of its Series 2A MRT Bonds to qualified institutional buyers (QIBs). The sale involved bonds issued by MRT III, a Cayman Island-registered company. Proceeds from this sale were all applied against the Company’s then outstanding loan obligations with LBP and PCIC.

(iii) Distribution methods of the products or services – Not applicable.

(iv) Status of any new product or service – Not applicable.

(v) Competitive business conditions – With its avowed vision/mission of “Helping Build the Filipino Future”, the Company focuses its investments in infrastructure and related property development projects.



The infrastructure and property development industries are still in their growth stage as the infrastructure and property development needs of the country far exceed the available supply of funds for these projects. This imbalance is seen to persist beyond the immediate future. Private sector financing, such as that provided by the Company, will continue to supplement, if not totally supplant, Government funding for infrastructure projects, while funding for property development projects are mostly private-sector driven. The infrastructure and property development industries are not confined within any specific geographic area. So far, the Company has participated in projects undertaken or to be undertaken in Metro Manila, Bulacan and the Visayas region. The Company participates in infrastructure and property development projects as as a pure equity holder without involving itself directly in the operations of the venture beyond the level of the board of directors. The Company invests only in infrastructure and related property development projects that yield or would yield a return on investment consistent with the economic thresholds set by the Company which are, in turn, based on accepted investment grade standards set by the international business community.

(vi) Sources and availability of raw materials – Not applicable.

(vii) Major customers - The Company is not dependent on any major customer. The Company’s revenues and income are dependent on the financial performance of its investee companies.

(viii) Related party transactions – See Note 11 of the Company’s 2005 Audited

Financial Statements.

(ix) Patents, etc. – NONE (x) Government approvals - The Company is a participant in a consortium which

submitted to the Bohol Provincial Government and the Metropolitan Cebu Water District an unsolicited BOT proposal to undertake a proposed Bohol-Cebu Water Supply Project. Discussions are being pursued with both agencies and affected communities in Bohol and Cebu.

(xi) Effect of Government regulations - Existing government regulations do not

adversely affect the business of the Company. Probable government regulation, if economically restrictive, may adversely affect the business of the Company and its subsidiary.

(xii) Research and development activities - The Company did not undertake any

research and development activities and did not incur any expenses for such activities during the last three (3) years.

In the ordinary course of business, the projects in which the Company is or becomes involved in may incur expenses in commissioning feasibility and/or other evaluatory studies. In cases where a separate entity specific to the project is formed, these expenses form part of project development costs of that entity and are, in turn, carried as part of project investment by the Company. In cases where



no separate entity is formed or the proposed project is shelved for various reasons, such expenses are charged as ordinary operating expenses of the Company.

(xiii) Costs and effects of compliance with environmental laws – Compliance with

environmental laws have not, and are not anticipated to, adversely affect the businesses and financial conditions of the Company. Costs of compliance with environmental laws are either charged as ordinary operating expenses or credited as part of project investment by the Company and its subsidiary. The Company did not incur any expenses for such activities during the last three (3) years.

(xiv) Employees - As of 31 December 2005, the Company has twelve (12) full-time

employees (including officers). (B) Additional Requirements as to Certain Issues or Issuers (i) Debt Issues – Not applicable.

(ii) Investment Company Securities – Not applicable. (iii) Mining and Oil Companies - In line with its previous primary business purpose,

now retained as one of its secondary purposes, the Company remains a participant in certain petroleum and mineral exploration ventures pending the transfer of its petroleum and mineral assets. The amount of the Company’s interests in these contracts and a brief description of the areas and status of works therein are provided in Item 1(a)1 above, under the heading “Other Investments”.

Item 2. Properties Properties of the Company and its subsidiary consist of transportation, office and communications equipment, all generally located in the principal offices of the Company and its subsidiary. These properties are carried at cost less accumulated depreciation. The Company and its subsidiary do not own any plant, mine or other property. As discussed under the heading “Other Investments” above, the Company maintains participating interests in certain petroleum and mineral concession areas. To the extent of its Participating Interests in the petroleum and mineral exploration areas, the Company shares co-ownership rights with the other concessionaires over the respective Joint Accounts and Joint Properties pertaining to each concession area which are generally expressed in monetary terms as “Deferred Exploration Costs and Other Charges” in the Company’s books of accounts. Owing to the intermittent nature of petroleum and mineral exploration, no permanent physical property, plant or equipment are situated or being maintained in the concession areas as they are brought in only, under lease or charter, whenever there is any exploration activity to be undertaken in the areas. Item 3. Legal Proceedings There is NO material pending legal proceeding to which the Company or its subsidiary or affiliate is a party or which any of their property is the subject, and no such proceeding where the Company or its subsidiary or affiliate was a party or any of their property was the subject was terminated during the fourth quarter of the fiscal year 2005.



Item 4. Submission of Matters to a Vote of Security Holders NO matter was submitted to a vote of security holders during the fourth quarter of the fiscal year 2005. The amendment of the Company's By-laws to include a provision on the nomination and election of independent directors as required by the Securities and Exchange Commission was submitted to and voted upon by stockholders in July 2005.

PART II – OPERATIONAL AND FINANCIAL INFORMATION Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters (a) Market Price of and Dividends on Registrant’s Common Equity and Related

Stockholder Matters (1) Market Information The Company’s shares are listed and traded in the Philippine Stock Exchange. The high and low sale price of the Company’s shares for each quarter during the last two (2) fiscal years 2005 and 2004 and the first quarter of the current fiscal year 2006, expressed in Philippine Pesos, are as follows:

Stock Prices (Php)

High Low 2006 – 1st quarter 0.89 0.88 2005 – 1st quarter 0.47 0.43

2nd quarter 0.53 0.34 3rd quarter 0.75 0.70

4th quarter 0.90 0.79

2004 – 1st quarter 0.145 0.12 2nd quarter 0.23 0.27

3rd quarter 0.195 0.11 4th quarter 0.32 0.31

(2) Holders As of 31 December 2005, shareholders of record totaled 3,287, while common shares outstanding were 1,072,000,000 shares. The Company’s top 20 Stockholders as of 31 December 2005 are as follows:

Stockholders Total Share Percentage

PCD NOMINEE CORP. (Filipino) 442,732,495 41.30% NATIONAL BOOK STORE, INC. 330,614,705 30.84% THE PHILODRILL CORPORATION 49,874,000 4.65%



ALAKOR SECURITIES CORPORATION 37,034,333 3.45% S.J. ROXAS & CO., INC. 24,122,666 2.25% PRESENTATION S. RAMOS 19,999,999 1.87% JOSE D. SANGALANG 19,734,100 1.84% JIMMY DY SY &/or LETTY DY SY 13,600,000 1.27% ALAKOR CORPORATION 8,631,607 0.81% VULCAN IND’L. & MINING CORP. 8,000,000 0.75% DAVID GO SECURITIES, INC. 5,851,751 0.55% PCD NOMINEE CORP. (Non-Filipino) 4,772,504 0.45% ELEVEN SEVEN PROFITMAKER, INC. 4,075,000 0.38% BA SECURITIES, INC. 3,156,000 0.29% FERNANDO GONZALES 2,666,664 0.25% ALYROM PROPERTY HOLDINGS, INC. 2,659,000 0.25% TAN PANG ENG 2,100,000 0.20% RAMON R. RIVERO 1,600,000 0.15% SOLEDAD V. NAVARRO 1,250,500 0.12% LUTGARDA D. SANGALANG 1,050,000 0.10%

(3) Dividends NO dividends were declared during the last two (2) fiscal years 2004 and 2005 and the first quarter of the current fiscal year 2006. The Company’s ability to declare and pay dividends on common equity is restricted by the availability of sufficient retained earnings. (4) Recent Sales of Unregistered Securities

NO unregistered securities were sold during the past three (3) years. All of the Company’s issued and outstanding shares of stock are duly registered in accordance with the provisions of the SRC.

(a) Securities Sold – not applicable; NO securities were sold (b) Underwriters and Other Purchases – not applicable; NO securities were sold (c) Consideration – not applicable; NO securities were sold (d) Exemption from Registration Claimed – not applicable; NO securities were sold.

Item 6. Management’s Discussion and Analysis or Plan of Operation. (a) Management’s Discussion and Analysis or Plan of Operation The Company, as an investments holding firm, became operational only as of the third quarter of 2000. (1) Plan of Operation (A) The Company expects to be able to satisfy all its working capital requirements for

the next twelve (12) months. Should the Company’s cash position be not sufficient to meet current requirements, the Company may do any one or all of the following actions:



(i) Sell some or all of its non-core investments to generate cash; (ii) Exchange/Convert its petroleum equity interests into marketable or other

more liquid securities, or sell the same;

(iii) Call on its Accounts Receivables or convert these into marketable securities or investments; and

(iv) Offer for subscription its unissued capital stock worth P928 Million based

on par value as of 31 December 2005;

(B) Owing to the nature of the business of the Company as an investments holding firm, no product research and development is expected to be undertaken in the next twelve (12) months.

(C) The Company is finalizing the terms for the acquisition of the office space that it

is currently leasing now. Other than this, the Company does not expect to make any purchase or sale of any plant and/or significant equipment within the next twelve (12) months.

(D) The Company does not expect any significant change in the number of its employees in the next twelve (12) months.

The Company will continue to be affected by the Philippine business environment as may be influenced by any local/regional financial and political crises. The Company’s financial statements for the year ended 31 December 2005 reflect foreign exchange losses on the Company’s dollar denominated loans with the Land Bank of the Philippines. (2) Management’s Discussion and Analysis of Financial Condition and Results of

Operations Financial highlights for the years 2005, 2004, and 2003 are presented below:

2005 2004 2003 Revenues 363,292,196 476,529,916 104,372,231 Net income (loss) 308,126,038 204,321,895 (461,290,008) Total assets 2,077,583,141 1,819,600,263 2,333,087,398 Net worth 746,373,742 438,247,704 256,056,331 Issued & subscribed capital 1,072,000,000 1,072,000,000 1,072,000,000

The top five (5) key performance indicators of the Company and its majority-owned subsidiary are as follows:

December 31, 2005 December 31, 2004 December 31, 2003 Current Ratio 1.12: 1 1.21: 1 0.56: 1 Current Assets 901,074,292 1,031,480,190 __834,116,309 Current Liabilities 807,228,625 851,954,389 1,477,464,401



Debt to Equity Ratio 1.78 : 1 3.15 : 1 8.11 : 1 Total Liabilities 1,331,209,399 1,381,352,559 2,077,031,067 Stockholders Equity 746,373,742 438,247,704 256,056,333 Equity to Debt Ratio 0.56 : 1 0.32 : 1 0.12 : 1 Stockholders Equity __746,373,742 __438,247,704 __256,056,333 Total Liabilities 1,331,209,399 1,381,352,559 2,077,031,067 Book Value per share 0.70 0.41 0.24 Stockholders Equity __746,373,742 __438,247,704 __256,056,333 Total # of shares 1,072,000,000 1,072,000,000 1,072,000,000 Earnings (Loss) per share 0.29 0.19 (0.43) Net Income (Loss) __308,126,038 __204,321,895 (461,290,008) Total # of shares 1,072,000,000 1,072,000,000 1,072,000,000 Current Ratio increased in 2004 from 2003 figures due to the increase in Cash and Cash Equivalents arising from the sale of the Company's Olympic Gold investment, coupled with a decrease in Current Liabilities due to a lower level of outstanding borrowings. On the other hand, Current Ratio decreased in 2005 from 2004 figures due to a decrease in Cash and Cash Equivalents as the Company paid off its loans payable. Debt-to-Equity ratio from 2003-2005 showed a steady decline as the Company was able to settle and discharge a significant portion of its outstanding loan obligations, with banks and its affiliates. Contrariwise, Equity-to-Debt ratio steadily improved on account of the net income generated by the Company in 2005 and 2004. The consistent increase in the Company’s Book Value Per Share from 2003-2005 is mainly due to the positive income posted by the Company in 2005 and in 2004. The P0.29 Earnings Per Share (EPS) recorded in 2005, as well as the P0.19 EPS posted in 2004 are directly attributable to the net income generated by the Company for the said years.

(i) There are no known trends, events or uncertainties that have or are reasonably

likely to have a material impact on the Company’s short-term or long-term liquidity, EXCEPT that the possible sale of the Company's non-core assets may generate additional one-time revenues for the Company.

(ii) The Company’s internal source of liquidity comes, primarily, from revenues generated from operations. The Company’s external source of liquidity comes, primarily, from loans/financing obtained from financial institutions and, alternatively, may also come from the collection of its accounts receivables and issuance of additional capital stock. (iii) The Company has no material commitments for capital expenditures, but

is expected to contribute its equity share in the capital expenditures of its investee companies. However, the bulk of the funding for such expenditures will be sourced from project financing.



(iv) There are no known trends, events or uncertainties that have had or are reasonably expected to have a material impact on the revenues or income from continuing operations, save as stated in Item 6, paragraph (a)2(i) above.

(v) There are no significant elements of income or loss that did not arise from

the Company's continuing operations. (vi) There have been no material changes from period to period in one or more

line items of the registrant‘s financial statements, EXCEPT that:

a. Revenues generally increased in 2005 on account of corresponding increases in: (i) Interest Income (from P51 Million in 2003 to P72 Million in 2004 to P272 Million in 2005); and, (ii) Other income (from P53 Million in 2003 to P404 Million in 2004 down to P91 Million in 2005). As a result, the Company was able to generate a Net Income of P308 Million in 2005 compared to P204 Million in 2004 and a Net Loss of P461 Million in 2003.

b. Account Receivables decreased to P665 Million in 2005 compared to

P791 Million in 2004 and P818 Million in 2003 as certain Advances to Affiliates were settled.

c. Investments and Advances increased to P993 Million in 2005 due to

the Company’s investment in Atlas Consolidated Mining and Development Corp. The decrease in the Investments and Advances account from P1.3 Billion in 2003 to P607 Million in 2004 was due to the Company sale of all its MRT Bonds.

d. Total Assets increased to P2.08 Billion in 2005 due to the Company's

investment in Atlas Consolidated Mining and Development Corp. The decrease in Total Assets from P2.3 Billion in 2003 to P1.8 Billion in 2004 was due to the sale of the Company's MRT Bonds.

e. The Company’s Net Worth increased from P256.06 Million in 2003 to

P438 Million in 2004 and to P746 Million in 2005 as a result of the Net Income of P204 Million and P308 Million generated by the Company in 2004 and 2005 respectively.

f. Long Term Debt Current and Non Current portions represent investor

advances to the Company for future transaction (covering the potential sale/assignment of the Company's non-core assets, subject to the results of due diligence)

g. Stockholders' Equity increased by P308 Million as of the end of 2005

due to the Net Income generated by the Company during the year. (vii) There have been no seasonal aspects that had a material effect on the

financial condition or results of operations of the Company.



(viii) There are NO events that will trigger direct or contingent financial obligation that is material to the Company, including any default or acceleration of an obligation.

(ix) There are NO material off-balance sheet transactions, arrangements,

obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons created during the reporting period.

(2) Interim Periods

No interim financial statements are included in this report. Item 7. Financial Statements Refer to the Audited Financial Statements as of December 31, 2005 and 2004. Item 8. Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure. There have been no changes in, nor disagreements with, accountants on accounting and financial disclosure for fiscal year 2005.

PART III - CONTROL AND COMPENSATION INFORMATION Item 9. Directors and Executive Officers of the Registrant (a) Directors, Executive Officers Promoters and Control Persons (1) Identify Directors and Executive Officers (A) Names and Ages of Directors and Executive Officers

Name Age

Citizenship Position Period of service as such officer

Alfredo C. Ramos 62 Filipino Chairman of the Board 1989 to present Christopher M. Gotanco 56 Filipino Director 1987 to present President 1988 to present Adrian S. Arias 43 Filipino VP-Legal & Corporate Affairs 1998 to 2005 Asst. Corporate Secretary 1998 to present Executive Vice President 2005 to present Francisco A. Navarro 62 Filipino Director 1984 to present Executive Vice President 1986 to 2005 Augusto B. Sunico 77 Filipino Director 1984 to present Treasurer 1986 to present Iluminada P. Rodriguez 57 Filipino Director 1998 to 2004 General Manager 2003 to 2005 VP-Finance and Administration 2005 to present Roberto V. San Jose 64 Filipino Director 1998 to present Corporate Secretary 1979 to present Presentacion S. Ramos 64 Filipino Director 1984 to present Maximo G. Licauco III 56 Filipino Director 1986 to March 2006 Patrick V. Caoile 47 Filipino Director 1989 to present Victor V. Benavidez 54 Filipino Director 1991 to present



Adrian S. Ramos 27 Filipino Director March 2006-present Leonardo R. Arguelles, Jr. 56 Filipino Independent Director 2004 to present Noel T. del Castillo 67 Filipino Independent Director 2002 to present

Messrs. Arguelles and del Castillo are the Company’s independent directors. (B) Positions and offices that each person named above held with the Company

Mr. Alfredo C. Ramos has been a Director since 1975 and the Chairman of the Board since 1989.

Mr. Christopher M. Gotanco has been a Director since 1987 and the President since 1988. He was previously the VP-Finance and Administration. Atty. Adrian S. Arias was appointed Executive Vice President in 2005 and has been Assistant Corporate Secretary since 1998. He was previously VP-Legal and Corporate Affairs. Mr. Francisco A. Navarro has been a Director since 1984 and Executive Vice President from 1986 to 2005.

Atty. Augusto B. Sunico has been a Director since 1984 and a Treasurer since 1986. Ms. Iluminada P. Rodriguez was appointed VP-Finance & Administration in 2005. She was previously a director (1998-2004), General Manager (2003-2005) and Accounting Manager (1984-2003). Atty. Roberto V. San Jose has been the Corporate Secretary since 1979 and a Director since 1998. Mrs. Presentacion S. Ramos, Mr. Patrick V. Caoile and Mr. Victor V. Benavidez have been Directors since 1984, 1986 and 1991, respectively.

Mr. Noel T. del Castillo has been an Independent Director since 2002, while Mr. Leonardo R. Arguelles, Jr. was elected Independent Director in 2004. Mr. Maximo G. Licauco III resigned as director effective March 2006. He had been a director of the Company since 1989. Mr. Licauco was replaced by Mr. Adrian S. Ramos in March 2006 and will serve the unexpired term of Mr. Licauco.

(C) Term of Office as Director and Period of Service

The Directors of the Company are elected at the Company’s annual stockholders’ meeting to hold office until the next succeeding annual meeting and until their successors shall have been elected and qualified. Officers are appointed/elected annually by the Board of Directors at the organizational meeting following the annual stockholders’ meeting, to hold office until the next organizational meeting of the Board of Directors in the following year or until a successor shall have been elected/appointed and qualified, in accordance with Company By Laws.



(D) Business experience of directors/officers during the past five (5) years

Mr. Alfredo C. Ramos is the Chairman of the Board and Chief Executive Officer of the Company. For the past five (5) years, he has served as a director and/or executive officer, and maintained business interests, in companies involved in the printing, publication, sale and distribution of books, magazines and other printed media, transportation, financial services, oil and gas exploration, mining, property development, shopping center, department store, gaming and retail, among others.

Mr. Christopher M. Gotanco is a Director and the President/COO/CFO of the Company. For the past five (5) years, he has served as a director and/or executive officer in companies involved in transportation, mining, oil and gas exploration, and retail, among others. Atty. Adrian S. Arias is the Company’s Executive Vice President and Assistant Corporate Secretary. He has been in active corporate law practice for more than five (5) years.

Atty. Augusto B. Sunico is a Director and the Treasurer of the Company. For the past five (5) years, he has served as a director and/or executive officer, and maintained business interests, in a university and companies engages in oil and gas exploration, mining, shipbuilding, stock brokerage, property development, financial services and shopping center, among others.

Ms. Iluminada P. Rodriguez is the Vice President for Finance and Administration of the Company. For the past five (5) years, she has served as an executive officer of companies involved in garments, manufacturing, oil and gas exploration and mining.

Atty. Roberto V. San Jose is a Director and the Corporate Secretary of the Company. He has been in the active practice of law and is a Senior Partner at the Castillo Laman Tan Pantaleon & San Jose Law Offices for more than five (5) years. Mr. Francisco A. Navarro is a Director of the Company. For the past five (5) years, he has headed the petroleum exploration and development group of The Philodrill Corporation and served the boards of condominium companies.

Ms. Presentacion S. Ramos is a Director of the Company. For the past five (5) years, she has served as a director and/or executive officer, and maintained business interests, in companies involved in the printing, publication, sale and distribution of books, magazines and other printed media, department store, stock brokerage, oil and gas exploration and mining, among others.

Mr. Patrick V. Caoile is a Director of the Company. For the past five (5) years, he has served as a director and/or executive officer in companies involved in mining and aggregates, oil and gas exploration and manufacturing.



Mr. Victor V. Benavidez is a Director of the Company. For the past five (5) years, he has served as an officer of a stock brokerage firm and property development company. Mr. Maximo G. Licauco III was a Director of the Company since 1989. He resigned as director effective March 2006. Mr. Adrian S. Ramos was elected director of the Company in March 2006, replacing Mr. Licauco. For the past five (5) years, Mr. Ramos has worked as an Instructor at a business school, Operations Manager for a major book retailer, and Business Analyst for McKinsey & Company. After obtaining his Masters in Business Administration from Northwestern University, Mr. Ramos is currently working in various management capacities and serving as a director to companies engaged in investment holdings, securities and water infrastructure.

Mr. Noel T. del Castillo is an Independent Director of the Company. For the past five (5) years, he has served as an executive officer of an agro-industrial holding company and a director of a manufacturing company and a magazine publication company. Mr. Leonardo R. Arguelles, Jr. is an Independent Director of the Company. For the past five (5) years, he has served in various executive and investment advisory capacities in financial and securities institutions.

(E) Directors with directorship(s) held in reporting companies

Alfredo C. Ramos Atlas Cons.Mining & Dev’t. Corp. Penta Capital Finance Corp. EDSA Properties Holdings, Inc. Penta Capital Investment Corp. Kuok Phil. Properties, Inc. Phil. Gaming & Mgt. Corp. Metro Rail Transit Corp. Philippine Seven Corporation MRT Holdings, Inc. Shangrila Plaza Corporation MRT Dev’t. Corp. The Philodrill Corporation National Book Store, Inc. United Paragon Mining Corp.

North Triangle Depot Comm’l Corp. Vulcan Industrial & Mining Corp.

Christopher M. Gotanco MRT Development Corp. The Philodrill Corporation MRT Holdings, Inc. Vulcan Industrial & Mining Corp. North Triangle Depot Comm’l Corp.

Augusto B. Sunico

Alakor Securities Corp. Shangrila Plaza Corporation EDSA Properties Holdings Inc. The Philodrill Corporation Manuel L. Quezon University United Paragon Mining Corp. Penta Capital Finance Corp. Vulcan Industrial & Mining Corp.

Penta Capital Investment Corp.



Presentacion S. Ramos

Alakor Securities Corp. The Philodrill Corporation National Book Store, Inc. Vulcan Industrial & Mining Corp.

Roberto V. San Jose

Atlas Resources Management Group MAA Consultants, Inc, CP Group of Companies Mabuhay Holdings Corp. CP Equities Corporation

Francisco A. Navarro

The Philodrill Corporation Vulcan Industrial & Mining Corp. Mr. Patrick V. Caoile is a director of Vulcan Industrial & Mining Corp., Mr. Noel T. del Castillo is a director of Atlas Consolidated Mining Corp., and Mr. Leonardo R. Arguelles Jr. is an Independent director of ABN-AMRO Bank

(2) Significant Employees

Other than its current officers and employees, the Company has not engaged the services of any person who is expected to make significant contributions to the business of the Company.

(3) Family Relationships

Mr. Alfredo C. Ramos, Chairman of the Board, is the husband of Mrs. Presentacion S. Ramos, Director, and the brother-in-law of Atty. Augusto B. Sunico, Director and Treasurer, Director. Mr. Adrian S. Ramos, Director, is the son of Mr. Alfredo C. Ramos and Mrs. Presentation S. Ramos.

(4) Involvement in Certain Legal Proceedings

The Company is not aware of: (1) any bankruptcy petition filed by or against any business of which a director, person nominated to become a director, executive officer, promoter, or control person of the Company was a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior that time; (2) any conviction by final judgment in a criminal proceeding, domestic or foreign, or being subject to a pending criminal proceeding, domestic or foreign, excluding traffic violations and other minor offenses of any director, person nominated to become a director, executive officer, promoter, or control person; (3) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement in any type of business, securities, commodities or banking activities of a director, person nominated to become a director, executive officer, promoter, or control person of the Company; and, (4) judgment against a director, person nominated to become a director, executive officer, promoter, or control person of the Company found by a domestic or foreign court of competent jurisdiction (in a civil



action), the Philippine Securities and Exchange Commission or comparable foreign body, or a domestic or foreign exchange or electronic marketplace or self-regulatory organization, to have violated a securities or commodities law, and the judgment has not been reversed, suspended, or vacated. Item 10. Executive Compensation (1) Summary Compensation Table

The aggregate compensation paid to the Company’s Chief Executive Officer and most highly compensated executive and non-executive officers named below as a group for the two most recently completed fiscal years (2003 and 2002) and the ensuing fiscal year (2004) are: Name Position 2004 2005 2006 (est.) Alfredo C. Ramos Chairman Christopher M. Gotanco President Adrian S. Arias EVP Iluminada P. Rodriguez VP Francisco A. Navarro EVP (2004) Almario Z. Balce VP (2004) Adrian S. Arias VP (2004) Iluminada P. Rodriguez GM (2004) TOTAL P2,340,000.00 P2,441,850.00 P2,686,035.00 All officers and directors as a group unnamed P2,411,500.00 P3,156,850.00 P3,472,535.00 (2) Compensation of Directors (A) Standard Arrangement For the most recently completed fiscal year, directors received and will receive a per diem of P5,000.00 per month to defray their expenses in attending board meetings.

(B) Other Arrangements There are no other arrangements for compensation of directors, as such, during the last fiscal year and for the ensuing fiscal year. (3) Employment Contracts and Termination of Employment and Change-in-

Control (A) The Company maintains standard employment contracts with Messrs. Alfredo C.

Ramos and Christopher M. Gotanco, both of which provide for their respective compensation and benefits, including entitlement to health benefits, representation expenses and company car plan.

(B) Other than what is provided under applicable labor laws, there are no compensatory plans or arrangements with executive officers entitling them to



receive more than P2,500,000.00 as a result of their resignation or any other termination of employment, or from a change in control of the Company, or a change in the executive officers’ responsibilities following a change in control of the Company.

The Company maintains a retirement policy pursuant to which an eligible

employee will receive one month's pay for every year of service for the first 10 years and two month's pay for every year of service beyond the first 10 years. Based on this policy, the retirement pay of some officers of the Company may exceed P2,500,000.00.

(C) There are no warrants or options outstanding in favor of directors and officers of the Company.

Item 11. Security Ownership of Certain Beneficial Owners and Management (1) Security Ownership of Certain Record and Beneficial Owners As of 31 December 2005, the Company is not aware of anyone who beneficially owns more than 5% of its outstanding stock, except as set forth below: Company’s voting securities as of December 31, 2005:

Title Name and address Name of Beneficial of Class of record owner Owner and relationship

and relationship with Issuer with record owner Citizenship Number of shares held Percent

Common PCD Nominee Corporation Various clients Filipino 442,732,495 (of record) 41.30% Makati Stock Exchange Bldg. (see note 1 below)

6767 Ayala Avenue, Makati City Stockholder of record

Common National Book Store, Inc. National Book Store Filipino 330,614,705 (of record) 30.84% 4th Floor, Quad Alpha Centrum

125 Pioneer St., Mandaluyong City Stockholder of record

Pasig City

Note: 1. Various clients beneficially own the shares registered in the name of PCD Nominee Corporation (PCNC). Based on PCNC’s books as of 31 December 2005, there are 162 beneficial owners of the Company’s voting stocks, of which only Alakor Securities Corporation (ASC) is the record owner of more than 5% of the Company’s voting securities and among the clients of ASC, National Book Store, Inc. is the beneficial owner of more than 5% of the Company’s voting securities. (2) Security Ownership of Management As of 31 December 2005, the Company’s directors and officers own the following number of shares registered in their respective names:

Amount and nature of Beneficial ownership

Percent

Type Name of beneficial owner Direct Indirect Citizenship Of Class

Common Alfredo Ramos (D/CEO) 14,667,853 7,790,000 Filipino 2.095%Common Christopher M. Gotanco (D/O) 100 0 Filipino <0.01%Common Adrian S. Arias (O) 0 50,000 Filipino <0.01%Common Augusto Sunico (D/O) 200,002 100,000 Filipino 0.02%Common Iluminada P. Rodriguez (O) 30,000 370,000 Filipino 0.03%Common Roberto V. San Jose (D/O) 393,866 0 Filipino 0.04%Common Francisco A. Navarro (D) 404,166 0 Filipino 0.04%Common Presentacion S. Ramos (D) 19,999,999 0 Filipino 1.87%



Common Patrick V. Caoile (D) 223,333 0 Filipino 0.02%Common Victor V. Benavidez (D) 10,333 0 Filipino <0.01%Common Maximo G. Licauco III (D) 200,000 0 Filipino 0.02%Common Noel T. Del Castillo (ID) 210,000 0 Filipino 0.02%Common Leonardo R. Arguelles, Jr. (ID) 100 0 Filipino <0.01%

There are no additional shares of the Company which the above listed directors and officers have the right to acquire beneficial ownership of from options, warrants, conversion privileges, or similar obligations. (3) Voting Trust Holders of 5% or More To the extent known to the Company, there is no person holding more than 5% of the Company’s securities under a voting trust or similar arrangement. (4) Changes in Control To the extent known to the Company, there are no arrangements which may result in a change in control of the Company. Item 12. Certain Relationships and Related Transactions (1) Related Transactions There had been NO transactions during the last two (2) years, nor is any transaction presently proposed, to which the Company was or is to be a party in which any director or executive officer of the Company, or nominee for election as a director, or owner of more than 5% of the Company’s voting securities, or voting trust holder of 5% or more of any class of the Company’s securities, or any member of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons had or is to have a direct or indirect material interest. In the ordinary and regular course of business, the Company had or may have transactions with other companies in which some of the foregoing persons may have an interest.

(2) Not Applicable (3) Parent of the Company NO person holds more than 50% of the Company’s voting securities, and the Company has no parent company. (4) Transaction with Promoters The Company has had no transaction with promoters during the last (5) years.

ANGLO PHILIPPINE HOLDINGS CORPORATION

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULE

SEC FORM 17-A

Page Financial Statements Statement of Management’s Responsibility for Financial Statements Report of Independent Public Accountants Balance Sheets as of December 31, 2004 and 2003 Statement of Operations for the year ended December 31,2004, 2003,2002 Statements of Changes in Stockholders Equity for the Years Ended December 31, 2004, 2003, 2002 Statements of Cash Flows for the Years Ended

December 31, 2004, 2003, 2002 Notes to Financial Statements 1-20 Supplementary Schedules A. Marketable Securities - (Current Marketable Equity Securities 21 and Other Short -Term Cash Investments) B. Amounts Receivable from Directors, Officers, Employees, Related Parties and Stockholders (Other Than Affiliates) * C. Long Term Investment in Shares of Stock 22 D. Advances to Unconsolidated Subsidiaries and Affiliates * E. Property, Plant and Equipment * F. Accumulated Depreciation * G. Intangible Assets - Other Assets *

H. Accumulated Amortization of Intangibles * I. Long-term Debt *

J. Indebtedness to Affiliates and Related Parties * K. Guarantees of Securities of Other Issuers * L. Reserves *

M. Capital Stock 23 N. List of Top 20 Stockholders of Record 24

*These Schedules, which are required by Part IV (e) of RSA Rule 48, have been omitted because they

are either not required, not applicable or the information required to be presented is included in the Company’s financial statements or the notes to financial statements


FINANCIAL STATEMENTS December 31, 2005 and 2004

Units 142/144 & 146/148 Unit 503, 5th Floor, Keppel Center Ground Floor, Alpha Building Samar Loop corner 2nd Floor, Uy Building Subic International Hotel Compound Cardinal Rosales Avenue Sen. B. Aquino Avenue Suite 3, Doll Building Rizal corner Sta. Rita Roads Cebu Business Park Mandurriao 6th Street Subic Bay Freeport Zone 2222 Cebu City 6000 Iloilo City 5000 Bacolod City 6100 Philippines Philippines Philippines Philippines Laya Mananghaya & Co., Telephone +63 (47) 252 2825 Telephone +63 (32) 233 9337 Telephone +63 (33) 321 3821 Telephone +63 (34) 434 9225 a professional partnership established +63 (32) 233 9339 +63 (33) 321 3822 under Philippine law, is a member of Fax +63 (47) 252 2826 Fax +63 (32) 233 9327 Fax +63 (33) 321 3823 Fax +63 (34) 434 8015 KPMG International, a Swiss cooperative. e-Mail [email protected] e-Mail [email protected] e-Mail [email protected] e-Mail [email protected]

ABCD Laya Mananghaya & Co. Telephone +63 (2) 885 7000 Certified Public Accountants & Management Consultants +63 (2) 893 8507 22/F, Philamlife Tower, 8767 Paseo de Roxas Fax +63 (2) 894 1985 Makati City 1226, Metro Manila, Philippines +63 (2) 816 6595 e-Mail [email protected] PRC-BOA Registration No. 0003 SEC Accreditation No. 0004-FR-1 BSP Accredited

REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Anglo Philippine Holdings Corporation 6th Floor, Quad Alpha Centrum Building 125 Pioneer Street, Mandaluyong City We have audited the accompanying balance sheets of Anglo Philippine Holdings Corporation as of December 31, 2005 and 2004, and the related statements of income, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the Philippines. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Anglo Philippine Holdings Corporation as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the Philippines.

ANGLO PHILIPPINE HOLDINGS CORPORATION BALANCE SHEETS

December 31

2004 (As restated - 2005 Notes 2 and 14)

ASSETS Current Assets Cash and cash equivalents (Note 3) P121,305,049 P149,906,665 Short-term investments (Note 4) 114,149,678 89,691,860 Receivables - net (Notes 5 and 11) 665,435,949 791,488,250 Prepayments and other current assets 183,616 393,415

Total Current Assets 901,074,292 1,031,480,190 Investments and Advances (Note 6) 992,919,654 606,811,968 Property and Equipment - net (Note 7) 409,058 191,651 Deferred Income Tax Asset (Note 15) 4,452,286 4,452,286 Deferred Exploration and Other Charges - net (Note 8) 178,727,851 176,664,168 P2,077,583,141 P1,819,600,263

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities Accounts payable and accrued expenses (Note 11) P753,278,625 P749,398,833Current portion of long-term debt (Note 10) 53,950,000 55,555,556 Loans payable (Note 9) - 47,000,000

Total Current Liabilities 807,228,625 851,954,389Long-Term Debt - net of current portion (Note 10) 517,920,000 529,398,170 Deferred Income Tax Liability (Note 15) 6,060,774 - Stockholders' Equity 746,373,742 438,247,704 P2,077,583,141 P1,819,600,263

See Notes to Financial Statements.

ANGLO PHILIPPINE HOLDINGS CORPORATION STATEMENTS OF INCOME

Years Ended December 31


NET REVENUES Interest (Note 12) P271,800,047 P71,919,764 Others 91,492,149 404,610,152 363,292,196 476,529,916

COSTS AND EXPENSES General and administrative (Note 13) 24,011,821 22,328,087 Interest and other bank charges (Notes 9 and 10) 21,027,893 127,371,722 Provision for decline in value of marketable securities 1,973,981 3,689,870 Foreign exchange (gains) losses (4,595,680) 8,224,101 Difference on asset exchange - 81,807,978 Bond securitization expense - 22,484,180 42,418,015 265,905,938

INCOME BEFORE PROVISION FOR INCOME TAX 320,874,181 210,623,978

PROVISION FOR INCOME TAX (Note 15) Current 6,687,369 4,890,977 Deferred 6,060,774 1,411,106 NET INCOME P308,126,038 P204,321,895

Earnings Per Share (Note 16) P0.29 P0.20


ANGLO PHILIPPINE HOLDINGS CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY



CAPITAL STOCK - P1 par value Authorized - 2,000,000,000 shares Issued and outstanding - 1,046,430,374 shares P1,046,430,374 P1,046,430,374 Subscribed - 25,569,626 shares 25,569,626 25,569,626 Subscription receivable (9,687,574) (9,687,574) 1,062,312,426 1,062,312,426

ADDITIONAL PAID-IN CAPITAL 4,658,460 4,658,460 1,066,970,886 1,066,970,886

DEFICIT Balance at beginning of year, as previously reported (628,723,182) (810,914,555)Transitional effect of adoption of new standard

(Notes 2 and 14) - (22,130,522)Balance at beginning of year, as restated (628,723,182) (833,045,077)Net income for the year 308,126,038 204,321,895Balance at end of year (320,597,144) (628,723,182)

P746,373,742 P438,247,704


ANGLO PHILIPPINE HOLDINGS CORPORATION STATEMENTS OF CASH FLOWS



CASH FLOWS FROM OPERATING ACTIVITIES Income before provision for tax P320,874,181 P210,623,978 Adjustments for:

Interest income (271,800,047) (71,919,764)Interest expense 21,027,893 127,371,722 Unrealized foreign exchange (gain) loss (4,595,680) 8,224,101 Provision for decline in value of marketable securities 1,973,981 3,689,870 Depreciation 121,730 37,255

Operating income before working capital changes 67,602,058 278,027,162 Decrease (increase) in:

Short term investments (26,431,799) (80,246,573)Receivables 126,052,301 27,004,875 Prepayments and other

current assets 209,799 162,040 Increase in accounts payable and accrued expenses 1,788,103 222,081,356 Cash generated from operations 169,220,462 447,028,860 Interest received 271,800,047 71,919,764 Interest paid (21,027,893) (127,371,722)Net cash provided by operating activities 419,992,616 391,576,902

CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in:

Deferred exploration and other charges (2,063,683) 10,174,875 Investments and advances (386,107,686) 699,411,981

Acquisitions of property and Equipment (339,137) (184,200)

Net cash provided by (used in) investing activities (388,510,506) 709,402,656

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 571,870,000 - Payments of borrowings (631,953,726) (953,005,465)Net cash used in financing activities (60,083,726) (953,005,465)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (28,601,616) 147,974,093

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 149,906,665 1,932,572

CASH AND CASH EQUIVALENTS AT END OF YEAR P121,305,049 P149,906,665


ANGLO PHILIPPINE HOLDINGS CORPORATION NOTES TO FINANCIAL STATEMENTS

1. Organization and Nature of Business

Anglo Philippine Holdings Corporation (the “Company”), a corporation duly organized and existing under the laws of the Republic of the Philippines, was incorporated and registered with the Securities and Exchange Commission (SEC) on March 13, 1996, as a holding company. The Company purchases or otherwise acquires, for the purpose of holding or disposing of the same, property of every kind and description, including the goodwill, stocks, rights and property of any person, firm, association or corporation and to generate all kinds of investment opportunities or fields of investments. The Company started commercial operations on August 1, 2000 and its shares are listed in the Philippine Stock Exchange. The registered office address of the Company is 6th Floor, Quad Alpha Centrum Building 125 Pioneer Street, Mandaluyong City, Philippines. The Company continues to be adversely affected by the slowdown in the business and economic environment and has accumulated deficit of P320.6 million and P628.7 million as of December 31, 2005 and 2004, respectively. To counter the negative impact of the business and economic slowdown, the Company has undertaken, or plans to undertake, the following steps and measures: a. Sell some or all of its non-core investments to generate cash; b. Exchange/convert its petroleum equity interests into marketable or other more liquid

securities, or sell the same; c. Call on its accounts receivables or convert these into marketable securities or

investments; and d. Offer for subscription its unissued capital stock worth P928 million based on par

value as of December 31, 2005. The ultimate outcome of the foregoing matters cannot be presently determined. The financial statements do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. The Company’s financial statements as of and for the year ended December 31, 2005 were approved and authorized for issue by the Board of Directors on March 24, 2006.

- 2 -

2. Summary of Significant Accounting Policies and Impact of the New and Revised Accounting Standards

The significant accounting policies are set forth to facilitate understanding of data presented in the financial statements. Basis of Preparation The accompanying financial statements are presented and prepared in Philippine Pesos under the historical cost convention, except for certain financial instruments which are required to be stated at fair value.

Statement of Compliance The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the Philippines. These are the Company’s first financial statements prepared in accordance with Philippine Financial Reporting Standards (PFRS), where PFRS 1, First-time Adoption of Philippine Financial Reporting Standards, was then applied. As allowed by the Notice of Amendments to Securities Regulation Code Rules 68 and 68.1 issued by the Securities and Exchange Commission on October 25, 2005 for public companies, which include listed companies, for the year ending December 31, 2005, the Company is presenting a comparative format of only two (2) years for the statements of income, changes in stockholders’ equity and cash flows for the year to give temporary relief for the first time adoption of the more complex Philippine Financial Reporting Standards (PFRS). The requirement for three-year comparative presentation will resume for year-end reports beginning the year ending December 31, 2006 and onwards. The Company prepared its financial statements until December 31, 2004 in accordance with Statements of Financial Accounting Standards/International Accounting Standards.

Use of Estimates and Judgments The preparation of the financial statements in conformity with PFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Although these estimates are based on Management’s best knowledge of current events and actions, actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgments are made by management on the development, selection and disclosure of the Company’s critical accounting policies and estimates and the application of these policies and estimates. Financial Assets and Liabilities The Company carries certain financial assets and liabilities at fair value, which requires extensive use of accounting estimates and judgment. While significant components of fair value measurement are determined using verifiable objective evidence (i.e., foreign

- 3 -

exchange rates) the amount of changes in fair value would differ if the Company will utilize a different valuation methodology. Estimating Allowances for Doubtful Accounts Provisions are made for accounts specifically identified to be doubtful of collection. An estimate of allowance is generally provided for the receivables when collection of full amount is no longer probable.

Estimating Realizability of Deferred Tax Assets The Company 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. Any deferred tax asset will be re-measured if it might result in derecognition where the expected tax law to be enacted has a possible risk on the realization. Retirement Benefits The determination of the Company’s obligation and cost for pension and other retirement benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. The assumptions described in Note 14 include among others, discount rates and rates of compensation increase. In accordance with PFRS, 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. While Management believes that the assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in assumptions may materially affect pension and other retirement obligations.

Provisions and Contingencies The Company, in the ordinary course of business, sets up appropriate provisions for its present legal or constructive obligations in accordance with its policies on provisions and contingencies. Adoption of New and Revised Accounting Standards The Accounting Standards Council approved in 2004 the issuance of new and revised accounting standards which are based on new International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and revised International Accounting Standards arising from the improvements project of the IASB. The new and revised standards are effective for annual periods beginning on or after January 1, 2005. Accordingly, effective January 1, 2005, the Company adopted the following PFRS and Philippine Accounting Standards (PAS) which are relevant to its operations: PFRS 1, First-time Adoption of Philippine Financial Reporting Standards, requires

an entity adopting PFRS for the first time (a first-time adopter) to comply with each PFRS that has come into effect at the reporting date for its first PFRS financial statements. It also requires a first-time adopter to prepare an opening PFRS balance sheet at the date of transition to PFRS, the beginning of the earliest adoption to which it presents the full comparative information under PFRS. PFRS 1 grants limited exemptions from these requirements in specified areas where the cost of complying with them would likely to exceed the benefits to users of financial statements. It prohibits retrospective application of PFRS in some areas, particularly where retrospective application would require judgments by management about past conditions after the outcome of a particular transaction is already known. Further, it requires disclosure that explains how the transition from previous generally accepted

- 4 -

accounting principles (GAAP) to PFRS affected the entity’s reported financial position, financial performance and cash flows.

PAS 19, Employee Benefits, which prescribes the accounting and disclosure for employee benefits. The standard requires an entity to recognize a liability when an employee has provided service in exchange for employee benefits to be paid in the future and an expense when the entity consumes the economic benefit arising from service provided by the employee in exchange for economic benefits.

The standard also prescribes the use of the projected unit credit method in measuring retirement benefit expense and a change in the manner of computing benefit expense relating to past service cost and actuarial gains and losses. It requires the company to determine the present value of defined benefit obligations and the fair value of any plan assets with sufficient regularity that the amounts recognized in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date. Upon adoption of this standard, “Retained earnings” decreased by P22,130,522 as of January 1, 2004 due to the immediate recognition of transitional liability. “Accounts payable and accrued expenses” increased by P25,937,155 as of December 31, 2004 and “Pension expense” increased by P3,806,633 as of December 31, 2004.

PAS 32, Financial Instruments: Disclosure and Presentation, covers the disclosure

and presentation of all financial instruments. It requires more comprehensive disclosures about a company’s financial instruments, whether recognized or unrecognized in the financial statements. New disclosure requirements include terms and conditions of financial instruments used by the company; types of risks associated with both the recognized and unrecognized financial instruments (price risk, credit risk, liquidity risk and cash flow risk); fair value information of both recognized and unrecognized financial assets and financial liabilities; and the company’s financial risk management policies and objectives. It also requires financial instruments to be classified as liabilities or equity in accordance with its substance and not its legal form; and

PAS 39, Financial Instruments: Recognition and Measurement, establishes the

accounting and reporting standards for recognizing, measuring and disclosing information about a company’s financial assets and financial liabilities. The standard requires a financial asset or financial liability to be recognized initially at their fair value. Subsequent to initial recognition, the company should continue to measure financial assets at their fair values, except for loans and receivables and held-to-maturity investments, which are to be measured at cost or amortized cost using the effective interest rate method, subject to test for impairment. Financial liabilities are subsequently measured at cost or amortized cost, except for liabilities classified as “at fair value through profit and loss” and derivatives, which are subsequently to be measured at fair value.

The Company also adopted the following revised standards in 2005:

PAS 1, Presentation of Financial Statements, (a) provides a framework within which

an entity assesses how to present fairly the effects of transactions and other events; (b) provides the base criteria for classifying liabilities as current or noncurrent; (c) prohibits the presentation of items of income and expenses as extraordinary items in the financial statements; and (d) specifies the disclosures about key sources of estimation, uncertainty and judgments management has made in the process of applying the entity’s accounting policies;

- 5 -

PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, requires changes in accounting policies and correction of errors be accounted for retrospectively. The allowed alternative of recognizing the cumulative effect in the current period has been removed;

PAS 10, Events After the Balance Sheet Date, provides a limited clarification of the

accounting for dividends declared after the balance sheet date; PAS 16, Property, Plant and Equipment, provides additional guidance and

clarification on recognition and measurement of items of property, plant and equipment. It also provides that each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

PAS 17, Leases, provides a limited revision to clarify the classification of a lease of

land and buildings and prohibits expensing of initial direct costs in the financial statements of the lessors;

PAS 24, Related Party Disclosures, provides additional guidance and clarity in the

scope of the standard, the definitions and disclosures for related parties; PAS 33, Earnings Per Share, prescribes principles for the determination and

presentation of earnings per share for companies with publicly traded shares, companies in the process of issuing ordinary shares to the public, and companies that calculate and disclose earnings per share. The standard also provides additional guidance in computing earnings per share including the effects of mandatorily convertible instruments and contingently issuable shares, among others.

PAS 28, Investments in Associates, reduces alternatives in accounting for associates in the separate financial statements of an investor. Investments in associates will be accounted for either at cost or in accordance with PAS 39 in the separate financial statements. Equity method of accounting will no longer be allowed in the separate financial statements, and

PAS 36, Impairment of Assets, prescribes additional guidance on making cash flow

projections for the purpose of a value in use calculation and on using present value techniques.

Effective January 1, 2006, the Company will adopt the following new PFRS which is relevant in its operations: PFRS 6, Exploration for and Evaluation of Mineral Resources, requires entities

recognizing exploration and evaluation assets to perform an impairment test on those assets when facts and circumstances suggest that the carrying amount of the assets may exceed their recoverable amount.

Unless otherwise indicated, adoption of the new and revised standards did not result in a significant change and adjustment. Additional disclosures required by the new and revised standards were included in the financial statements when applicable. Cash and Cash Equivalents Cash and cash equivalents are carried in the balance sheets at cost. For the purpose of the cash flow statements, cash and cash equivalents consist of cash on hand and in banks, and other short term highly liquid investments with original maturities of three months or

- 6 -

less from date of acquisition and that are subject to an insignificant risk of change in value.

Receivables Receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Investment in Associate Investments in share of stock of associates, where the percentage of ownership is 20% or more, or where the Company can exercise significant influence over the investee’s operating and financial policies, are accounted for under the equity method. Under the equity method, the cost of investment is increased or decreased by the Company’s equity in the net earnings or losses of the investees, adjusted of the straight-line amortization over five (5) years of the difference between the cost of such investments and the proportionate share in the underlying net assets of such investments, since the dates of acquisition. Dividends received are treated as a reduction in the carrying value of the investments.

Investments in companies over which no significant influence is exercised are stated at cost. An allowance is set up for any substantial decline in carrying value of the investment.

Property and Equipment Property and equipment are carried at cost less accumulated depreciation and any impairment in value. Initially, an item of property and equipment is measured at its cost, which comprises its purchase price and any directly attributable costs of bringing the asset to working condition. Subsequent expenditures are added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance, will flow to the Company. All other subsequent expenditures are recognized as expenses in the period in which they are incurred. Depreciation is computed based on the carrying values of the assets using the straight-line method over the following estimated useful lives:

Number of Years Transportation equipment 5 Office equipment 2 – 5 Communication equipment 2

The useful lives and depreciation method are reviewed periodically to ensure that such useful lives and depreciation method are consistent with the expected pattern of economic benefits from those assets.

When an asset is disposed of, or is permanently withdrawn from use and no future economic benefits are expected from its disposal, the cost and accumulated depreciation and impairment losses, if any, are removed from the accounts and any resulting gain or loss arising from the retirement or disposal is credited to or charged against current operations.

- 7 -

Impairment of Financial Assets Financial instruments are reviewed for impairment at each balance sheet date. For financial assets carried at amortized cost, whenever it is probable that the Company will not collect all amounts due according to the contractual terms of receivables, an allowance for doubtful accounts is recognized in the statements of income. Reversal of allowance for doubtful accounts previously recognized is recorded when the decrease can be objectively related to an event occurring after the write-down. Such reversal is recorded in the statements of income. However, the increased carrying amount is only recognized to the extent that it does not exceed what amortized cost would have been had the impairment not been recognized.

Deferred Exploration and Other Charges All exploration costs and related expenses incurred prior to the start of commercial operations, reduced by incidental revenues, are carried as deferred exploration and other charges. The costs and expenses for exploration activities which do not result in the discovery of petroleum or mineral deposits that are commercially productive are charged to operations after the project is abandoned and when management expects no further recovery. Income Taxes Income tax on the profit or loss for the year is composed of current and deferred income tax. Income tax is recognized in the statements of income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax assets are recognized for the future tax consequences attributable to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes and the carryforward benefits of net operating loss carryover (NOLCO) and the minimum corporate income tax (MCIT) over the regular corporate income tax. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. The carrying amount of the deferred tax asset is reviewed at each balance sheet date and reduced, if appropriate. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax laws that have been enacted or substantively enacted at the balance sheet date. Foreign Currency Transactions Foreign currency transactions are recorded in Philippine peso based on the exchange rates prevailing at the transaction dates. Foreign currency denominated assets and liabilities are translated into Philippine peso at the exchange rates prevailing at the balance sheet date. The resulting foreign exchange gains and losses are credited to or charged against current operations.

- 8 -

Retirement Benefit Costs The Company has a non-contributory defined retirement benefit plan covering substantially all regular employees. The cost of providing benefits is valued every year by a professionally qualified independent actuary. The obligation and costs of retirement benefits are determined using the projected unit credit method. This method considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Gains or losses on the curtailment or settlement of retirement benefits are recognized when the curtailment or settlement occurs. Actuarial gains and losses are recognized as income or expenses when the net cumulative unrecognized actuarial gains and losses for the retirement plan at the end of the previous reporting exceeded 10% of the higher of the defined benefit obligation and the fair value of plan assets at the date. These gains or losses are recognized over the expected average remaining working lives of the employee participating in the plan. The defined benefit liability is the aggregate of the present value of the defined benefit obligation and actuarial gains and losses not recognized reduced by past service cost not yet recognized and the fair value of plan assets out of which the obligations are to be settled directly. If such aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of cumulative unrecognized net actuarial losses and past service cost at the present value of any economic benefits available in 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 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 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 economic benefits, the entire net actuarial gains of the current period after the deduction of past service cost of the current period are immediately recognized. Any transitional liability is either recognized immediately or amortized as an expense on a straight-line basis over 5 years from the date of adoption. Earnings per Share Earnings per share is determined by dividing net income for the year by the weighted average number of common shares outstanding during the year.

Interest and Other Income Interest income on bank deposits and temporary investments are recorded when earned and presented net of applicable final tax. Other income is recorded when earned. Costs and Expenses Costs and expenses, not directly attributable to capitalizable projects, are recognized and charged to operations as incurred.

- 9 -

Operating Lease Payments Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are recognized in the statements of operations on a straight-line basis over the term of the lease.

Related Parties Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. It includes companies in which one or more of the directors and/or controlling shareholders of the Company either have a beneficial controlling interest or are in a position

Provisions and Contingencies Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and 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 assessments 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 an interest expense. Contingent liabilities are not recognized in the financial statements but are disclosed in the notes to financial statements unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed in the notes to financial statements when an inflow of economic benefits is probable. Events After the Balance Sheet Date Post year-end events that provide additional information about the Company’s position at the balance sheet date (adjusting events) are reflected in the financial statements when material. Post year-end events that are not adjusting events are disclosed in the notes when material.

3. Cash and Cash Equivalents

Cash and cash equivalents consist of: 2005 2004Cash in bank and on hand P28,655,834 P147, 906,665Short-term investments with maturities of less than three months 92,649,215

2,000,000

P121,305,049 P149,906,665

- 10 -

4. Short-term Investments Short-term investments consist of:

2005 2004Short term investments in banks with maturities of

more than three months but less than a year P98,753,371 P80,246,572Held for trading securities in:

Oriental Petroleum 1,457 1,457Philodrill 1,157,394 1,157,394Philippine Seven Corporation 33,732,239 33,732,239SM Investment Corporation 5,000,000 - Manila Water Company 2,925,000 - Allowance for decline in market value (27,419,783) (25,445,802)

P114,149,678 P89,691,860 5. Receivables

Receivables consist of:

2005 2004Due from related parties (Note 11) P663,753,087 P786,239,051Others 1,834,561 5,400,898 665,587,648 791,639,949Less allowance for doubtful accounts 151,699 151,699

P665,435,949 P791,488,250 6. Investments and Advances

This account includes investments and advances for joint venture participation on certain Build-Operate-Transfer (BOT) projects and in shares of stock and warrants of other companies as follows: 2005 2004Joint Venture Participation/Advances:

North Triangle Depot Commercial Corp. (Note 6c) P304,252,558 P44,326,530

MRT Development Corporation (Note 6b) 235,097,800 520,767,142 Bulacan Bulk Water Supply Project 22,078,134 22,078,134 Bohol-Cebu Water Supply Project (Note 6e) 11,523,162 11,523,162 Other Projects 54,500 54,500 573,006,154 598,749,468

Shares of Stock of: Investment in Atlas Mining 411,851,000 - Pacific Rim Export and Holdings Corp. 5,250,000 5,250,000 Batangas Assets Corporation 2,200,000 2,200,000 Filipinas Energy Corporation 612,500 612,500 419,913,500 8,062,500

P992,919,654 P606,811,968

- 11 -

Details of the joint venture projects are as follows:

a. Metro Rail Transit Holdings, Inc./Metro Rail Transit Corporation

The Company continues to hold a participation in the EDSA Metro Rail Transit (MRT III) through an 18.6% interest in the MRT Holdings, Inc. which owns 84.9% of MRT Holdings II, Inc., the successor in interest of the Hong Kong-registered Metro Rail Transit Corporation Limited (MRTCL), which obtained a concession from the Philippine government to design, construct, finance, and maintain the MRT III light rail transit system.

b. Metro Rail Transit Development Corporation

The Company has a 15.79% interest in EDSA-MRT Development Corporation (formerly EDSA-LRT Development Corporation) which has the right to develop a 16-hectare property in North Metro Manila.

c. North Triangle Depot Commercial Corporation

The Company owns a 15.79% stake in the North Triangle Depot Commercial Corporation (NTDCC) which acquired the development rights over the MRT 3 depot from MRT Development Corporation in exchange for shares of stock. NTDCC commenced construction of the commercial center over the North Triangle depot on June 9, 2005 and expects the commercial center to be fully operational by mid-2007.

d. MRT Securitization

On January 18, 2001, the Company entered into a Sale Agreement whereby the Company’s interest in the future share distributions from the MRT 3 Project were sold to TBS Kappitel Corporation Pte., Ltd. (TBS) in exchange for bonds. The assignment represented a step towards the securitization of the Company’s interest in the future share distribution out of the MRT Project. The securitization process resulted in the receipt of asset-backed bonds and/or the proceeds from the sale thereof.

On August 7, 2002, the Company and certain members of the MRT 3 Project consortium, entered into various agreements with, among others, TBS and MRT III Funding Corp. Ltd. (MRT III). These agreements completed the securitization of the participating companies’ share in the equity rental payments of the Department of Transportation and Communications (DOTC) to MRTC under the Build-Lease-Transfer Agreement covering the MRT 3 Project. Asset backed bonds (the “MRT Bonds”) issued by MRT III represented the securitized portion accounting for approximately 77.7% of future share distributions from the MRT 3 Project.

In February 2003, August 2003 and February 2004, the Company was credited with

the 9.5% coupon rate due from its Series 1 MRT Bonds. Proceeds from these coupon earnings were applied against the Company’s outstanding loan with the Land Bank of the Philippines, (LBP) which loan, among others, was used to fund the Company’s investment in the MRT 3 Project.

In October 2003, the Sellers formally mandated Penta Capital Investment

Corporation (PCIC) to act as Lead Underwriter and Offer Manager for the secondary offering of the MRT Bonds. The US Dollar-denominated MRT Bonds were assigned a credit rating of “Aa” by the Philippine Ratings Service Corp. (Philratings).

- 12 -

The Company sold US$3 million, US$4 million and US$5.253 million face value worth of Series 1 MRT Bonds in November 2003, February 2004 and May 2004, respectively, and US$4.091 million face value worth of Series 2A MRT Bonds in October 2004, all to qualified institutional buyers (QIBs). Proceeds from these bond sales were used to fully settle and discharge the Company’s outstanding loans with LBP and PCIC.

e. Bohol-Cebu Water Supply Project / Bulacan Central Bulk Water Supply Project

The Company is negotiating with various groups who have expressed interest in pursuing the Bohol-Cebu Water Supply Project and Bulacan Central Bulk Water Supply Project. Part of the arrangement will be the transfer of participating interests and/or transfer of all data and other properties relating to the Projects, including ownership rights over water well sites and test wells, as well as intellectual property rights over hydrological studies, financial modeling data, construction design and layout of bulk supply lines, storage and pumping stations.

Other investments are described below:

a. Pacific Rim Export and Holdings Corporation (PRIMEX)

The Company owns 3.5% or 5,250,000 A&B shares at P1 par of PRIMEX, an export holding company.

b. Batangas Assets Corporation

The Company has 2% interest in Batangas Assets Corporation, a holding company formed in December 1996 for the purpose of investing in the fast-growing and rapidly industrializing province of Batangas in the Calabarzon area.

c. Filipinas Energy Corporation

The Company subscribed to 2,450,000 shares at P1.00 par value in Filipinas Energy Corporation (Fil-Energy) for 98% ownership and paid 25% correspondingly. The contract for the exchange of the Company’s oil exploration assets for shares of stock of Fil-Energy is still being worked out.

d. Philippine Seven Corporation

In 1999, the Company held 5,151 warrants with attached perpetual income bonds, convertible into 1,287,750 shares, issued by Philippine Seven Corporation (PSC). On September 22, 2000, the Company exercised all of its stock warrants with PSC at P1.732 exercise price. On November 16, 2000, 947,470 shares were sold to the President Chain Store (Labuan) Holdings, Ltd. under a tender offer. The Company subsequently purchased a total of 3,993,101 shares of PSC from its affiliates at P8.30 per share. Such trading securities acquired were shown under Marketable Securities in the balance sheets.

- 13 -

7. Property and Equipment Property and equipment consist of:

Transportation

EquipmentOffice

EquipmentCommunication

Equipment 2005

TotalGross carrying amount January 1, 2005 P2,318,500 P1,187,761 P79,156 P3,585,417Additions - 339,137 - 339,137Disposals (2,318,500) - - (2,318,500)December 31, 2005 - 1,526,898 79,156 1,606,054

Accumulated depreciation: January 1, 2005 2,318,500 996,110 79,156 3,393,766Depreciation for the year - 121,730 - 121,730Disposals (2,318,500) - - (2,318,500)December 31, 2005 - 1,117,840 79,156 1,196,996

Carrying amount: January 1, 2005 P - P191,651 P - P191,651

December 31, 2005 P - P409,058 P - P409,058

Transportation

Equipment Office EquipmentCommunication

Equipment 2004 Total

Gross carrying amount January 1, 2004 P2,318,500 P1,003,561 P79,156 P3,401,217Additions - 184,200 - 184,200December 31, 2004 2,318,500 1,187,761 79,156 3,585,417

Accumulated depreciation: January 1, 2004 2,318,500 958,855 79,156 3,356,511Depreciation for the year - 37,255 - 37,255December 31, 2004 2,318,500 996,110 79,156 3,393,766

Carrying amount: January 1, 2004 P - P44,706 P - P44,706

December 31, 2004 P - P191,651 P - P191,651

8. Deferred Exploration and Other Charges

Deferred exploration and other charges represent the exploration costs and expenses associated with the following projects:

2005 2004GSEC No. 75 (Central Luzon Basin) P56,308,990 P56,308,990Service Contract (SC) No. 41(GSEC 74, SC 35) South Sulu Sea Basin 23,283,899 22,158,664SWAN BLOCK SC No. 39/GSEC 34/39 (Busuanga/Calauit) 15,891,445 15,891,445 GSEC No. 86 (Northwest Malampaya) 5,296,238 5,296,238 GSEC No. 83 (North Calamian Project) 101,969 101,969SC 6A (Salvacion) Octon Prospect 50,941,723 50,003,275 Saddle Rock Prospect 7,325,361 7,325,361 Esperanza Prospect 823,118 823,118SC No. 13 (Offshore Palawan) 12,423,415 12,423,415GSEC No. 98 (Mindoro Project) 11,764,751 11,764,751SC No. 14 (Tara Production Area) 4,194,784 4,194,784

Forward

- 14 -

2005 2004GSEC No. 87 (Sibutu Project) P2,015,343 P2,015,343SC No. 31 (North Cagayan Valley) 1,023,984 1,023,984SC No. 5 (Northwest Palawan - Signal Project) 983,558 983,558Cuyo Shelf Geophysical Survey and Exploration 693,028 693,028SC No. 64 (Southwest Palawan) 266,244 266,244GSEC No. 73 (Cotabato Basin Project) 38,648 38,648Marian Gold Project 1,611,285 1,611,285 194,987,783 192,924,100Less allowance for unrecoverable costs 16,259,932 16,259,932

P178,727,851 P176,664,168

This account includes charges incurred pertaining to certain geophysical survey, exploration and service contracts, some of which have expired. Consistent with the industry practice, management expects that the Company, being one of the former partners, would be among those given the option to participate whenever the terms of the above contracts are extended or new contracts over the areas covered are awarded.

The recovery of these charges is dependent upon the success of obtaining farm-in arrangements with other companies, discovery and development of petroleum resources by the Contractor, and approval by the Department of Energy to extend the terms of the contracts or to grant new geophysical survey or service contracts.

9. Loans Payable

Loans payable represents short-term loans from banks, with average interest rates of 13% to 15%, being repriced monthly based on prevailing market rates. Loans outstanding were fully paid in 2005.

10. Long-term Debt

This account represents long-term borrowings payable in quarterly installments through 2006, which bear interest rate of 1% in 2005 and interest rates ranging from 9% to 22% in 2004. 2005 2004Foreign denominated loan P571,870,000 P - Peso denominated loans - 584,953,726 571,870,000 584,953,726Less current portion 53,950,000 55,555,556 P517,920,000 P529,398,170

- 15 -

The aggregate maturities of long-term loan for each year subsequent to December 31, 2005 are as follows: Year Amount2006 P53,950,0002007 - 2008 and thereafter 517,920,000 P571,870,000

11. Related Party Transactions

The Company and its related parties grant or obtain interest bearing and non-interest bearing advances. Due from related parties consist of receivables from the following:

2005 2004United Paragon Mining Corporation P487,119,897 P349,232,278 Europhil Textile Corporation 143,563,212 43,000,767 Alakor Corporation 16,600,000 335,895,374 Atlas Consolidated Mining 11,837,500 - Philodrill 2,802,292 242,899Vulcan Industrial Mining Corporation 1,830,186 1,830,059Filipinas Energy - 45,444,883 Penta Capital Investment Corporation - 7,941,690Others - 2,651,101 P663,753,087 P786,239,051

The Company plans to convert all of its receivables from United Paragon Mining Corporation’s (UPMC) into new UPMC equity. However, the SEC’s approval of the UPMC restructuring is still pending. Due to related parties included in the Accounts Payable and Accrued Expenses account in the balance sheets are as follows:

2005 2004

National Book Store P - P71,137,566 Atlas Publishing Inc. - 10,000,000 P - P81,137,566

Directors of the Company and their immediate relatives control 34.9% of the voting shares of the Company. In addition to their salaries, the Company also provides non-cash benefits to executive officers and employees, and has post-employment defined benefit plan on their behalf. In accordance with the terms of the plan, executive officers and employees retire at age 60 and will be entitled to receive a percentage of plan salary for every year of credited service equivalent to 100 percent of their salary for the first 10 years and 200 percent for the succeeding years thereafter.

- 16 -

The key management personnel compensations include short term employee benefits amounting to P458,372 and P571,706 in 2005 and 2004, respectively.

Total remuneration is included in “General and administrative expenses” (note 13):

2005 2004Executive officers P2,441,850 P2,340,000Directors 715,000 500,500 P3,156,850 P2,840,500

12. Interest Income

This account consists of interest earned from bank placements, receivables and advances to affiliates, with interest rates ranging from 5% to 22%.

13. General and Administrative Expenses

General and administrative expenses consist of: 2005 2004Rent P5,926,427 P4,181,143Salaries, wages and employee benefits 5,555,292 7,622,638Pension expense (Note 14) 4,236,883 3,806,633Representation and entertainment 3,094,199 3,139,273Communication, light and water 1,105,105 1,099,492Outside services 1,019,149 351,251Office supplies 411,760 145,118Repairs and maintenance 209,036 287,727Depreciation (Note 7) 121,730 37,255Taxes and licenses 34,408 34,208Transportation and travel 24,355 305,589Miscellaneous 2,273,477 1,317,760 P24,011,821 P22,328,087

14. Retirement Benefit Costs

The Company has a non-contributory retirement plan covering all regular employees. Retirement costs (income) charged to the Company’s operations shown under “Pension expense” amounted to P4,236,883 and P3,806,633 in 2005 and 2004, respectively. The amounts recognized by the Company’s in the statements of income are as follows: 2005 2004 Current service cost P1,101,764 P1,150,970 Interest cost 3,189,781 2,655,663 Net periodic pension expense 4,291,545 3,806,633Actuarial gain (54,662) - Total pension expense (income) P4,236,883 P3,806,633

- 17 -

Since the company is still in the process of finalizing its retirement plan, Present Value of Obligation (PVO) as of January 1, 2004 amounting to P22,130,522 is also the transitional liability and is presented as an adjustment to the balance of Deficit as of January 1, 2004. Change in PVO is as follows: 2005 2004PVO, beginning of year P22,784,148 P22,130,522 Current service cost 1,101,764 1,150,970 Interest cost 3,189,781 2,655,663 Unrecognized gain (1,025,036) (3,153,007)PVO, end of year P26,050,657 P22,784,148

Movements in net liability recognized in the balance sheet are as follows: 2005 2004Liability at beginning of year P25,937,155 P22,130,522Total expense 4,236,883 3,806,633 P30,174,038 25,937,155

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages): Annual rates 2005 2004Discount rate 11% 14%Expected rate of return on plan assets 8% 8%Salary increases 8% 8%

15. Income Taxes

The Company’s net deferred tax pertains to unrealized foreign exchange gain of P1,608,488 in 2005 and unrealized loss of P4,452,286 in 2004. The Company’s provision for current income tax in 2005 and 2004 represents the 2% MCIT. The reconciliation of statutory income tax rate to effective income tax rate follows:

2005 2004Statutory income tax rate 32.50% 32.00%Addition to (reduction in) income tax rate

resulting from:

Interest income subjected to final tax and others 28.36% 28.92%Effective income tax rates 4.14% 3.08%

NOLCO can be claimed as deduction from taxable income for three years. As of December 31, 2005, the Company has NOLCO of P130,768,760 which is available up to 2006. Deferred tax assets have not been recognized on NOLCO because management believes that it is not probable that the carry forward benefits will be realized prior to expiration.

- 18 -

Due to the enactment of the new tax law, the net deferred income tax assets as of December 31, 2005 were measured at 35% and 30%, the tax rates that are expected to apply to the period when the assets are realized or the liabilities are settled [see Note 18a].

16. Earnings Per Share

2005 2004Net income P308,126,038 P204,321,895Divided by average outstanding shares 1,046,430,374 1,046,430,374 P0.29 P0.20

17. Financial Instruments

Financial Risk Management Objectives and Policies The Company’s financial instruments consist of cash and cash equivalents, trade receivables/payables and bank loans. The main risks arising from the use of these financial instruments are interest rate risk, credit risk and liquidity risk. Interest Rate Risk The Company’s exposure to the risk for changes in market interest rate relates primarily to its long-term debt obligations with variable interest rates. Most of the Company’s existing debt obligations are based on fixed interest rates with relatively small component of the debts that are subject to interest rate fluctuation. Credit Risk Credit risk represents the loss that the Company would incur if counterparty failed to perform under its contractual obligations. The Company has established controls and procedures in its credit policy to determine and monitor the credit worthiness of customers and counterparties. Liquidity Risk The Company manages liquidity risk by maintaining a balance between continuity of funding and flexibility. Treasury controls and procedures are in place to ensure that sufficient cash is maintained to cover daily operational and working capital requirements. Management closely monitors the Company’s future and contingent obligations and sets up required cash reserves as necessary in accordance with internal policies.

18. Other Matters

a. Republic Act No. 9337 (“RA 9337”) As part of its revenue enhancement program, the Philippine government has enacted certain changes to its existing tax law. RA 9337 removes Value Added Tax (“VAT”) exemptions on the sale of electricity, oil products, coal and natural gas, among others, but allows the VAT to be passed on to the consumers. It also gives the President of the Philippines the power to raise the VAT rate to 12% from 10% starting January 1, 2006, after certain conditions have been satisfied.

- 19 -

The Supreme Court of the Philippines has upheld the constitutionality of the new tax law, which became effective on November 1, 2005, after applicable publication requirements were met. On January 31, 2006, in accordance with the provisions of RA 9337, the President of the Philippines raised the VAT rate from 10% to 12% starting February 1, 2006. The new tax law increase corporate income tax rate over the next three years (2006 to 2008) from 32% to 35%. Starting in 2009, the corporate income tax rate will decrease to 30%. In addition, the amount of interest expense disallowed as tax-deductible expense applied to the interest income subjected to final tax was changed from 38% to 42% starting November 1, 2005 and 33% starting January 1, 2009.

b. Foreign Currency Exchange Fluctuations The exchange rate of the Philippine peso vis-à-vis the US dollar decreased from P56.267 as of December 31, 2004 to P53.10 as of December 31, 2005. The fluctuation in the foreign currency exchange rates has decreased the outstanding balances of the foreign currency denominated monetary assets and liabilities in terms of the Philippine peso.

The Company’s foreign currency denominated monetary assets and liabilities (translated in US dollar) are as follows:

2005 2004Assets $816,384 $3,174,387Liabilities 24,124,213 11,187,881Net foreign currency liabilities ($23,307,829) ($8,013,494)

Peso equivalent (P1,237,645,720) (P450,895,267)

c. Revitalization of the Minerals Industry Program Previously, on January 27, 2004 decision, the Supreme Court (SC) ruled that the Financial and Technical Assistance Agreement (FTAA) provision of the Philippine Mining Act of 1995 is unconstitutional. However on September 13, 2004, President Gloria Arroyo issued Memorandum Circular No. 67 "Directing the Operationalization of the Mineral Action Plan for Mineral Resources Development," and Executive Order 270, "National Policy Agenda on Revitalizing Mining in the Philippines." These presidential memoranda basically lay out the major policy guidelines to revitalize the mining industry by giving more economic and political privileges to mining companies. The Mineral Action Plan (MAP) effectively amended the Implementing Rules and Regulations of the Mining Act to simplify and fast-track the procedures of processing mining applications and issuance of permits to mining companies. It also aims to harmonize conflicting laws towards the Mining Act and downgrade the authority of local government units.

- 20 -

On December 1, 2004, the SC upheld the constitutionality of the Mining Act of 1995. Large investments are expected to pour in because of this SC decision.

d. Reclassification

Where necessary, comparative figures have been reclassified to conform with changes in presentation in the current year.

Name of Issuing Entity Beginning Ending

Balance Additions Disposals Balance

Domestic Corporation

Oriental Petroleum 1,457 - - 1,457

The Philodrill Corporation 1,157,394 - - 1,157,394

Philippine Seven Corporation 33,732,239 - - 33,732,239

SM Investment Corporation - 5,000,000 - 5,000,000

Manila Water Company - 2,925,000 - 2,925,000 34,891,090 7,925,000 - 42,816,090

Less: Allowance for Decline in Value 25,445,802 1,973,981 - 27,419,783 9,445,288 5,951,019 - 15,396,307

ANGLO PHILIPPINE HOLDINGS CORPORATIONSCHEDULE A - MARKETABLE SECURITIES

December 31, 2005

- 21 -

Number of Amount Number of Amount Distribution Number AmountName of Issuing Entity Shares/ in Shares/ in of of Shares/ in Dividends

and Description of Investment Bond Units Pesos Bond Units Pesos Earnings Others Bond Units Pesos Received

Domestic Corporation

Atlas Consolidated Mining and Dev't Corp. - - 60,000,000 411,851,000 - - 60,000,000 411,851,000 -

Pacific Rim Export and Holdings Corp. 5,250,000 5,250,000 - - - - 5,250,000 5,250,000 -

Batangas Assets Corporation 1,250,000 2,200,000 - - - - 1,250,000 2,200,000

Filipinas Energy Corporation 2,450,000 612,500 - - - - 2,450,000 612,500 8,062,500 60,000,000 411,851,000 - - 68,950,000.00 419,913,500 -

- 22 -

ANGLO PHILIPPINE HOLDINGS CORPORATIONSCHEDULE C - INVESTMENT IN SHARES OF STOCKS

December 31, 2005

Beginning Balance Addition Deductions Ending Balance

Number of Number of Shares Shares Held by

TITLE OF ISSUE Authorized Issued and Reserved for Directors Outstanding Subscribed Options, etc. Affiliates and Employees Others

Common Shares at P1 par value 2,000,000,000 1,046,430,374 25,569,626 - - 44,929,752 1,027,070,248

2,000,000,000 1,046,430,374 25,569,626 - 44,929,752 1,027,070,248

ANGLO PHILIPPINE HOLDINGS CORPORATIONSCHEDULE M - CAPITAL STOCK

December 31, 2005

- 23 -


Total Number of Percentage toShares Issued and Total

Rank Name of Stockholder Outstanding Outstanding

1 PCD NOMINEE CORPORATION (Filipino) 442,732,495 41.30%

2 NATIONAL BOOK STORE INC. 330,614,705 30.84%

3 PHILODRILL CORPORATION 49,874,000 4.65%

4 ALAKOR SECURITIES CORPORATION 37,034,333 3.45%

5 S.J. ROXAS & CO., INC. 24,122,666 2.25%

6 PRESENTACION S. RAMOS 19,999,999 1.87%

7 JOSE D. SANGALANG 19,734,100 1.84%

8 JIMMY DY SY &/OR LETTY DY SY 13,600,000 1.27%

9 ALAKOR CORPORATION 8,631,607 0.81%

10 VULCAN INDUSTRIAL CORPORATION 8,000,000 0.75%

11 DAVID GO SECURITIES CORP. 5,851,754 0.55%

12 PCD NOMINEE CORPORATION (Non Filip 4,772,504 0.45%

13 ELEVEN SEVEN PROFITMAKER INC. 4,075,000 0.38%

14 BA SECURITIES, INC. 3,156,000 0.29%

15 FERNANDO GONZALEZ 2,666,664 0.25%

16 ALYROM PROPERTY HOLDINGS, INC. 2,659,000 0.25%

17 TAN PANG ENG 2,100,000 0.20%

18 RAMON R. RIVERO 1,600,000 0.15%

19 SOLEDAD V. NAVARRO 1,250,500 0.12%

20 LUTGARDA D. SANGALANG 1,050,000 0.10%983,525,327 91.75%

OTHERS 88,474,673 8.25% 1,072,000,000 100.00%

SCHEDULE N - LIST OF TOP 20 STOCKHOLDERS OF RECORD December 31, 2005

- 24 -

Documents

Anglo Philippine Holdings Corporation › disclosures › APO_17A_Dec2005.pdf · 13. Aggregate market value of the voting stock held by non-affiliates: P555,655,543 (653,712,404 share