Defined Benefit Plan

The Company has a funded, noncontributory, final salary defined benefit plan covering substantially all of its regular and full time employees. The Company has a Retirement Committee, which is composed mainly of the Company’s employees, that sets the policies for the plan and has appointed two Philippine banks as trustees to manage the retirement fund pursuant to the plan. Annual cost is determined by a qualified actuary using the projected unit credit method. The latest actuarial valuation was made on December 31, 2013.

Under the existing regulatory framework, Republic Act 7641, “The Retirement Pay Law”, a company is required to provide retirement pay to qualified private sector employees in the absence of any retirement plan in the entity, provided, however, that the employee’s retirement benefits under collective bargaining and other agreement shall not be less than those provided under the law. The law does not require minimum funding of the plan.

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The determination of the Company’s net defined benefit liability and retirement cost is dependent on the selection of certain assumptions used by the actuary in calculating such amounts. Remeasurements of the net defined benefit liability are recognized in other comprehensive income and comprise of actuarial gains and losses on the net defined benefit liability, return on plan assets, excluding amounts included in the net interest of the net defined benefit liability and any change in the effect of asset ceiling, excluding amounts included in the net interest on the net defined benefit liability.

The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit liability and its components:

Defined Benefit Included in profit or loss

Current service cost 53,772 45,622 - - 53,772 45,622

Benefits paid directly by the

Company (44,284) - - - (44,284) -

Benefits paid (17,387) (62,089) (17,387) (62,089) - -

(61,671) (62,089) 12,613 (62,089) (74,284) - Balance at December 31 P747,836 P644,043 P129,325 P109,767 P618,511 P534,276

The current portion of accrued retirement cost (included under “Accounts payable and accrued expenses” account in the statements of financial position) amounted to P50.0 million as at December 31, 2013 and 2012, while the noncurrent portion (included under “Other noncurrent liabilities” account in the statements of financial position) amounted to P568.5 million and P484.3 million as at December 31, 2013 and 2012, respectively.

Retirement cost is allocated between “Cost of Goods Sold” account in the statements of profit or loss and other comprehensive income, which amounted to P4.5 million, P4.8 million and P4.7 million for the years ended December 31, 2013, 2012 and 2011, respectively, and “Operating Expenses” account in the statements of profit or loss and other comprehensive income, which amounted to P76.4 million P64.4 million and P40.6 million for the years ended December 31, 2013, 2012 and 2011, respectively (see Notes 16, 17, 18 and 20).

As at December 31, 2013 and 2012, the present value of defined benefit obligation amounting to P747.8 million and P644.0 million, respectively, pertains to active members.

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Principal actuarial assumptions used in determining retirement cost at reporting date (expressed as weighted averages) are as follows:

2012 (As restated - 2013 see Note 3)

Discount rate 5.00% 6.25%

Rate of future salary increase 5.00% 5.00%

Plan assets at December 31 comprised:

2013 2012

Cash and cash equivalents P24,651 P4,327

Debt securities:

Investment in government securities 102,418 99,993

Investment in debt securities 773 806

Investment in other debt securities - 2,970

103,191 103,769 Investment in equity securities*

Real estate 118 129

Food and drink 44 71

Holding Company 330 330

492 530

Others 991 1,141

Total P129,325 P109,767

*includes investment in NHC amounting to P330,000

Debt instruments have quoted prices in active markets, except for fixed rate corporate notes. All government bonds and securities are issued by the Philippine government.

which are rated at “BBB-” by Standard and Poor’s Financial Services.

Other financial assets held by the Plan are primarily receivables and payables.

Maturity analysis of the benefit payments:

During the year ending December 31

Expected Benefit Payments

2014 P34,464

2015 64,044

2016 37,806

2017 54,500

2018 48,164

2019 through December 31, 2023 326,441

Sensitivity Analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

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Sensitivity Analysis

Effect on DBO

Discount rate 6.00% 1.00% increase -9.83%

Discount rate 4.00% 1.00% decrease 11.74%

Rate of salary increase 6.00% 1.00% increase 11.62%

Rate of salary increase 4.00% 1.00% decrease -9.62%

As at December 31, 2013, the weighted-average duration of the defined benefit obligation is 21.51 years.

These defined benefit plans expose the Company to actuarial risks, such as longevity risk, interest rate risk, and market (investment) risk.

The Retirement Committee reviews the level of funding required for the retirement fund.

Such a review includes the asset-liability matching (ALM) strategy and investment risk management policy. The Company’s ALM objective is to match maturities of the plan assets to the retirement benefit obligation as they fall due. The Company monitors how the duration and expected yield of the investments are matching the expected cash outflows arising from the retirement benefit obligations.

The Company’s expected contribution to the plan for the year 2014 is P50.0 million. Any future contribution to the plan is determined taking into account the cash flow and financial condition as at the date of intended contribution, as well as other factors as the Company may consider relevant.

The Company’s funding policy is to contribute to the Plan’s fund as required under actuarial principles to maintain the fund balance in sound condition. In addition, the Company reserves the right to discontinue, suspend or change the rate and amount of the contributions to the fund at any time due to the business necessity or economic conditions.

The impact on income tax expense of the adoption of the amended PAS 19 amounted to P2.0 million and P1.7 million in 2012 and 2011, respectively.