a n n u a lr e p o r t

Steering the Right Course through Best PracticesBonifacio Drive, South HarborPort Area, Manila, 1018 PhilippinesP.O. Box 436, Manila, PhilippinesTel. No. (0632) 527-8356, Fax: (0632) 527-4855

w w w . p p a . c o m . p h

1Vision and Mission 2Message of the General Manager6Shipping and Trade Performance 12Port Services

18Physical Infrastructure Development & Maintenance24Financial Performance 28Sustainability, Environment & People

342010 PPA Performance at A Glance 36Port Statistics 42Independent Auditors Report

44Financial Statements 48Notes to Financial Statements60Board of Directors 62Executive Officers/Department Managers

64PDO/PMO Managers

TABLE OF CONTENTS

The PPA 2010 Annual Report cover is printed on 9 lives, 55% Recycled Silk 300gsm. The usage of 9 lives, which is made of 55% - 100% post consumer fiber, is a sustainable solution in illustrating environmental approach without compromising printing quality.

OUR COVERSteering the Right Course through Best Practices

From sun up till sun down, the Philippine Ports Authority (PPA) tirelessly contributes to the countrys national progress and economic development through facilities and services borne out of its more than three decades of expertise in the port industry.

PPA continually strives to employ and adapt the best practices in the industry through efficient and round-the-clock services in its nationwide network of port facilities. Hence, the theme of the annual report, Steering the Right Course through Best Practices, captures the various elements that lead to the desired directions of excellence and good governance that PPA consciously undertakes.

With a ships steering wheel as graphic element, the cover of the annual report presents PPAs continuing resolve to employ widely-accepted and best practices through technology-backed systems and facilities. The designs primary hue, the color violet, represents stability and steadfastness as interpreted in color psychology.

VISIONBy 2030, customers doing business in our

ports shall experience full and sustained Productivity, Efficiency, Comfort, Connectivity, Safety and Security.

MISSIONWe commit to provide reliable and responsive services in our ports, sustain

development of our port communities and the environment, and be a model corporate agency of the government.

CORPORATE VALUES Creativity: Innovation, Adaptability. Responsibility: Accountability, Taking and Managing Risks.

Ethics: Integrity within Moral Bounds. Sincerity: Commitment to Fulfill Mandate

Teamwork: Synergy of Working Together

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Port of Ormoc

Port of Iligan

Port of Cagayan de Oro

Passenger Terminal underPMO Pulupandan

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MESSAGE OF THE GENERAL MANAGERWith benign indications in the economic environment favoring this fiscal year, I am pleased to inform you that our organization, the PPA turned in another strong performance as it surpassed imposed targets and hurdled risks attendant to its operations. PPA ended 2010 with gross revenues of P8.295 billion, 16.36 percent higher than its 2009 earnings and a net income of P1.491 billion, albeit 7.5 percent lower than the previous year. The top three traditional sources which account for 74.42 percent of total revenues derived by PPA from port operations - fees being remitted by the ICTSI (International Container Terminal Services, Inc.), wharfage dues and share in arrastre/stevedoring income continued to boost PPAs coffers. Our total asset base or resources

showed steady expansion, ending the year at P95 billion and is expected to breach the P100 billion mark in a year or two.

Your Management is pleased to report that the robust economic expansion in 2010 mirrored the double-digit growth in the volume of cargo, passenger and shipcalls at the ports. Total cargo volume rose by 11.01 percent; shipcalls by 10.04 percent; container volume in TEUs by 12.12 percent; and passenger by 20.12 percent . The growth in cargo volume in particular was fuelled by the 23.91 percent increase in foreign cargoes, more than offsetting the 2.97 percent decrease in domestic cargo. Our major gateways with the exception of Cagayan de

Oro, Nasipit, Pulupandan and Batangas, experienced dramatic jump in their foreign cargoes with the most contribution coming from Surigao, San Fernando, MICT, South Harbor, Iloilo, Limay and Davao in that order. While stiff competition from budget airline carriers persisted and posed a threat, a significant jump in passenger volume was realized in 2010. The marked increase in passengers travelling by sea likewise reinforces the contribution of our well-entrenched nationwide Ro-Ro links in inter-island sea travel.

In 2010, PPA invested P 3.42 billion in 74 port projects and completed 40 projects amounting to P1.74 billion in various port districts. The commitment to sustain investments in infrastructure facilities shall always be in line with our mandate and the priority corporate goal of boosting the capacity of our ports to handle increased volume of cargo, passengers and ship calls.

With the numeric fundamentals pointing to a much improved overall performance, our strategic thrusts will remain tightly hinged on sustaining efficient port operations and management of our ports and applying best practices in all facets of our business operations and processes and delivery of services to our stakeholders and clientele.

For instance, we are on the road to being fully compliant in one of our most widely employed operational processes VESSEL ENTRANCE AND CLEARANCE (VEC). We are within reach of the final stages of securing our first ISO 9001:2008 Certificate for the Facilitation of Vessels Entrance and Clearance Processes at the pilot Port of Batangas. Subsequently, we are targeting for replication this ISO certification in our other key ports nationwide. Getting the ISO-QMS certification on the vessel entrance and clearance process at Batangas Port and our other key ports nationwide affirms our commitment to apply internationally accepted best practices in port operations.

We will also continuously find ways to raise the bar of efficiency and quality management in our port operations particularly on the areas of safety and security of the passengers and cargoes that pass through the major gateways. Most of our baseports are now equipped or are in the process of being equipped with the ISPS-mandated security-related equipment such as baggage x-ray machines, walk-thru metal detectors, CCTVs, etc. On the other hand, we have included the mandatory implementation of weighbridges to ensure that vehicles will carry only their corresponding capacity load limits.

We will not limit our efforts on securing the safety of cargoes. The welfare of the passengers, especially women and children transiting through our seaports is equally paramount. Towards this end and as part of our corporate social responsibility, we are happy to note that PPA now has seven (7) strategically-located halfway houses or Bahay Silungan sa Daungan or BSDs nationwide, namely, in Manila, Batangas, Iloilo, Matnog, Surigao, Davao and Zamboanga which which we co-manage with our partner Visayan Forum Foundation, Inc. or VFFI , a non-government organization focused on migrant workers and childrens welfare and victims

of human trafficking. Our BSD operation which we conceptualized as early as 1998 through our Gender and Development Program (GAD) at the seaports is cited as a pioneer effort and a best practice on curbing Trafficking in Persons (TIP) by several international groups, among them the United States State Department. We are also eyeing the implementation of a Passenger Boarding Monitoring and Control System or simply the E-Ticketing System in our high volume passenger servicing ports. As a participating government agency, PPA stands to benefit from the use of a web-configured technology-based system that will facilitate data entry, storage, retrieval and generation of reports of on-board accurate passenger count that is within the optimum carrying capacity of the vessel and security verification of passengers and cargoes that are on board the vessel. The E-Ticketing System will hopefully address the problems associated with overloading of passengers and provide our sea travelling public with a safe, pleasurable and hassle-free journey to their respective destinations.

There are many more areas in our entire operations requiring the application of best practices. At the center of our continuous improvement processes, the nationwide MIS Computerization Program, which is now nearing its final stages of acceptance has made possible the widespread use of technology in the transmission, storage, retrieval and sharing of PPA-wide mission-critical information/data designed to facilitate short-and long-term Management decision-making and application to our daily work.

As we dare to challenge the status quo and overcome barriers to achieve best practices in all facets of our operations, we will always be inspired by our over 2000-strong workforce who has contributed more than their share in running PPA 24/7. Looking forward to many more years of successful operation, we shall always consider as dominant the belief that the application of best practices comes with a corresponding take on good governance processes. With the proper trust and support of our Board of Directors and the cooperation of our stakeholders, we are confident that PPA shall at all times stay on the right course in establishing water transport as the main catalyst of trade and economic development.

JUAN C. STA. ANA General Manager

3Port of Bauan

SHIPPING AND TRADEPERFORMANCE

4

55South Harbor, Manila

6SHIPPING ANDTRADE PERFORMANCE

South Harbor, Manila

Port of Iloilo Port of Iligan

Cargo, Passenger and Ship TrafficCargo

Trade Performance

Stirred by the 7.3 percent growth of the countrys economy for 2010, total cargo volume handled at the ports nationwide rose by 11.01 percent. Overall trade performance is shown in the following table.

Table 1: CY 2010 Cargo Throughput, Container, Passenger & Ship Calls

2010 2009Inc/(Dec)

Volume %Cargo m.t. 166,395,680 149,895,054 16,500,626 11.01

Domestic 69,796,900 71,936,419 (2,139,519) (2.97)Foreign 96,598,780 77,958,635 18,640,145 23.91

Import 55,131,588 47,583,576 7,548,012 15.86 Export 41,467,192 30,375,059 11,092,133 36.52

Container (in TEUs) 4,497,634 4,011,531 486,103 12.12 Domestic 1,639,859 1,593,039 46,820 2.94 Foreign 2,857,775 2,418,492 439,283 18.16

Import 1,443,501 1,221,914 221,587 18.13 Export 1,414,274 1,196,578 217,696 18.19

Passenger 52,701,645 43,872,565 8,829,080 20.12 Domestic 52,638,664 43,820,426 8,818,238 20.12 Foreign 62,981 52,139 10,842 20.79

Shipcalls 346,000 314,421 31,579 10.04Domestic 335,202 304,643 30,559 10.03Foreign 10,798 9,778 1,020 10.43 7

Port of Bacolod

8Cargo

Total cargo throughput during the year was 11.01 percent or 16.5 million metric tons (MMT) higher vis-a-vis 2009 signifying a more intense movement of goods passing through the countrys ports. Foreign cargo went up by 18.64 MMT or a double-digit increase of 23.91 percent. Domestic cargo, however, went down by 2.97 percent or 2.14 MMT.

The Exports industry is by far the most dynamic, growing as much as 36.52 percent or 11.09 MMT during the period. Imports, likewise, went up by about 7.55 MMT or 15.86 percent. The higher demand for prime export commodities such as mineral ores, nickel ores, limestone, cold rolled coils and coco oil, etc.; and, importation of rice, coal and other raw materials was evident in the sharp increase of foreign cargo throughput at the various ports led by PMOs Surigao (5.53 MMT), San Fernando (3.37 MMT), MICT (2.54 MMT), South Harbor (2.23 MMT) and, Iloilo (1.78 MMT). Domestic cargo, on the other hand, declined in 8 of the 24 PMOs. The decrease was highly felt at PMOs North Harbor - 2.26 MMT (15.95 percent); Legazpi - 2.23 MMT (47.03 percent); Pulupandan - 0.14 MMT (2.42 percent); and Batangas - 0.86 MMT (12.19 percent), among others.

Overall, six (6) PMOs did not fare well and posted decreases in 2010, namely: PMOs Legazpi, North Harbor, Batangas, Pulupandan, Nasipit and Cotabato.

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100

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Foreign & DomesticCargo Volume(2010 vs 2009)

2009 Domestic

2010 Foreign

9Container (in TEUs)

Container traffic continued its strong showing during the year as it reached a total of 4.497 million TEUs, a notable 12.12 percent improvement from last year. In fact, import container traffic grew by 18.13 percent while export posted a growth of 18.19 percent. The robust traffic in foreign containerized cargoes contributed to the upward trend as it grew 18.16 percent.

Of the total volume of containers handled in Philippine ports, 2.60 million TEUs or 57.83 percent passed through the ports of MICT and PMO South Harbor (which includes the Pasig Terminal). The combined share in foreign container traffic of these two ports accelerated by 0.34 MMT or 16.59 percent by 2010.

All PMOs registered growth in the volume of their container throughput with the exception of five PMOs which reported declines in 2010 compared to 2009: Surigao (18.86 percent); North Harbor (13.27 percent); Dumaguete (3.47 percent); Pulupandan (3.44 percent); and Dapitan (2.16 percent). Gainers were led by PMO Davao (28.97 percent), PMOs South Harbor (17.80 percent) and MICT (15.14 percent) which are the traditional major

staging areas of containers. The transition from PPA-managed to privately-managed terminal might have affected business operations in North Harbor.

Passengers

The 2010 election as well as the continuing shift towards the use of the SRNH route in travelling from Manila to Visayas contributed to the marked increase in the volume of passengers that availed of water transport. Nationwide domestic and foreign traffic surged by 20.12 percent or 8.82 million and 20.79 percent, respectively, during the year. Growth in passenger traffic was evident in the PMOs of Batangas (31.59 percent); Calapan (31.30 percent); Iligan (45.03 percent); Legazpi (34.05 percent); and Tacloban (38.41 percent).

Ship Calls

The countrys ports serviced 346,000 vessels in 2010, a growth of 10.04 percent compared to the previous year. Domestic and foreign ship calls grew by 10.03 percent and 10.43 percent, respectively, an indication of recovery and improvement in both global and domestic economy.

MICT & SH. 57.83%

Other Ports 42.17%

2010 Distribution ofContainerized Cargoes

Passenger Terminal, Port of Iloilo

Port of Iloilo

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PORT SERVICES

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1111

Port of Iloilo

1212

Port of Iloilo

South Harbor, Manila

South Harbor, Manila

PORT SERVICESTable 4: APPROVED COR / PTO, CY 2010

COMPANY LOCATIONPDO MLA./NORTHERN LUZONIsland Integrated Offshore Services., Inc. Cristobal St., Paco, Manila

La Filipina Uy Gongco Corp.Manila Habor Center Complex, Tondo, Manila

La Paz Milling Corp.Manila Habor Center Complex, Tondo, Manila

Oilink International Corp. Lucanin Pt., Mariveles, Bataan

PNOC Alternative Fuels Corp. Batangas Dos, Mariveles, Bataan

SM Land Inc.Mall of Asia Complex, Pasay City

Petron Corp. Limay, Bataan

SMC Shipping & Lighterage Corp.BASECO Compound, Mariveles, Bataan

PDO SOUTHERN LUZON

EEI Corp. Bauan, BatangasInvestment Mineral Development Corp.

Calambayungan, Brgy, Larap, Jose Panganiban, Camarines Norte

J.G. Summit Corp. Mabini, Batangas

Rio Tuba Nickel Mining Corp. Rio Tuba, Bataraza, PalawanPDO VISAYAS

Central Azucarera de Bais Brgy. Luka, Tanjay, Negros Oriental

Iloilo Jar Corp. Bo. Obrero, La Paz, Iloilo CityLazi Bay Resources Development, Inc. Bo. Simacolong, Lazi Siquijor

Nicua Corp. MacArthur, Leyte

Orica Nitrate Phils. Inc. Brgy. Buntis, Bacong, Neg. Or.Phil. Associated Smelting & Refining Corp.

Leyte Industrial Development Estate, Isabel, Leyte

Pilipinas Shell Petroleum Corp.Brgy. Rawis, Anibong, Tacloban City

San Carlos Bioenergy Inc. Brgy. I, San Carlos City, Neg. Occ.

Tacloban Oil Mills Inc.Brgy. Opong, Tolosa, Northern Leyte

PDO NORTHERN MINDANAO

Global Steel Phils. Camp Overton, Iligan City

SR Metals Inc.La Fraternidad, Tubay, Agusan del Norte

PDO SOUTHERN MINDANAO

Craft Haven International KM. 15 Panacan, Davao City

Davao Bay Coconut Oil Mills, Inc. Brgy. Panacan, Davao City

Himmel Industries Inc. Sasa, Davao City

Insular Oil Corp. Km.10, Sasa, Davao City

Legaspi Oil Co. Sasa, Davao CityPhil. International Development Inc.

Baliwasan Seaside, Zamboanga City

San MIguel CorporationBaliwasan Seaside, Zamboanga City

Tagum Agricultural Development Co. Inc. Panabo, Davao del Norte

Private Ports OperationsPermit/Clearance to Develop

As of end of December 2010, the PPA has approved Clearance to Develop private port facilities in favor of the following three (3) private corporations:

Table 2: APPROVED CLEARANCE TO DEVELOP, 2010

COMPANY LOCATION1. Carlos Gothong Lines Port of Nasipit

2. H.Y. Chromite Mining & Devt. Corp.

Brgy. Esperanza, Loreto, Dinagat

3. Niera Corporation Brgy. Tugbo, Mobo, Masbate

Lease Contracts

The Authority approved the 10-year contract application of Goldwin CFS located at Blk. 168, Railroad St., cor. 18th and 19th Sts., South Harbor.

Certificate of Registration (COR)/Permit to Operate (PTO)In 2010, the Authority issued thirty-one (31)certificates of registration or permit to operate (COR/PTO) to various corporations of which eight (8) were under PDO Manila/Northern Luzon, four (4) under PDO Southern Luzon, nine (9) under PDO Visayas, two (2) under PDO Northern Mindanao and eight (8) under PDO Southern Mindanao. (Table 4).

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Cargo Handling Service Contracts/Permits/Hold-Over Authority (CHO/PTO/HOA)

PPA awarded a total of twenty one (21) CHO/PTO/HOA with varying duration of one (1) month to 15 years (long term) during the year, as shown in table 5.

Table 5: Issued CHO/PTO/HOA, CY 2010

COMPANY LOCATION

3 - MONTHS (HOA)1. Sunriser Arrastre & Stevedoring Svcs. Port of Clarin, Clarin, Bohol

1 - MONTH (HOA)2. Odiongan Integrated Arrastre & Stevedoring

Contract Svcs. Corp.Port of Poctoy, Odiongan, Romblon

1 - YEAR3. FTM Brokerage & Port Svcs., Inc. Anchorage Area, Dinapigue, Isabela4. Prudential Customs Brokerage Svcs., Inc. Port of Brooks Point, Palawan5. United Plywood Corp. Anchorage area Molugan, El Salvador, Misamis Oriental

3 - YEARS6. Doming Arrastre & Stevedoring Svcs. San Jose, Dinagat Island7. Dapa Labor Svcs. Port of Dapa, Siargao Island, Surigao del Norte

5 - YEARS8. Aurum Pacific Consolidated Inc. Port of Currimao, Ilocos Norte9. Prudential Customs Brokerage Svcs., Inc. Port of Coron, Puerto Princesa10. Antique Cargo Handling & Port Terminal Svcs. Port of Lipata, Culasi, Antique11. FTM Brokerage & Port Svcs. Inc. Port Estancia, Estancia, Iloilo12. Jagna Arrastre & Terminal Svcs. Port of Jagna, Bohol13. Leyte Integrated Port Svcs. Inc. Port of Palompon, Leyte14. San Vicente Arrastre & Stevedoring Svcs. Port of Hilongos, Hilongos, Leyte15. Ubay Arrastre & Stevedoring Corp. Port of Ubay, Bohol16. Northeastern Mindanao Handlers & Forwarders Inc. Port of Aras-asan, Cagwait, Surigao del Sur17. Apollo Arrastre & Stevedoring Svcs., Inc. Port of Tandag, Surigao del Sur

8 - YEARS18. Mega Equipment International Corp. Govt berths along Pasig River

SUPPLEMENTAL CONTRACT

10 - YEARS19. Oroport Cargo Handling Svcs. Inc. Port of Cagayan de Oro

NOTICE OF AWARD ISSUED

25 - YEARS20. Asian Terminals, Inc. Container Terminal A-1 (Phase 2), Port of Batangas

MEMORANDUM OF AGREEMENT

3 - YEAR (MOA)21. LGU- Sarangani Port of Mabila, Mun. of Sarangani, Davao del Sur

Harbor Pilot Appointments

For 2010, PPA issued appointments for 4 chief pilots, 5 regular pilots and 4 probationary pilots at various pilotage districts.

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Port of Cagayan de Oro

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PHYSICAL INFRASTRUCTURE DEVELOPMENT AND MAINTENANCE

Port of Iligan

Port of Pulupandan

Port of Cagayan de Oro

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PHYSICAL INFRASTRUCTURE DEVELOPMENT AND MAINTENANCE

Ongoing Improvement at Port of Coron

Ongoing Improvement at Port of Banago under PMO Pulupandan

Completed and Ongoing Locally-Funded Projects The year 2010 saw the completion of 40 Locally-Funded Projects (LFPs) amounting to P1.74 billion. PPA invested a total of P3.42 billion for 74 LFPs nationwide: 10 projects in PDO Manila/Northern Luzon; 31 in PDO Southern Luzon; 14 in PDO Visayas; 9 in PDO Northern Mindanao; and 10 in PDO Southern Mindanao. As of yearend, 34 projects amounting to P1.68 billion are in various stages (i.e. ongoing/ suspended/ terminated/under procurement).

As in previous years, PDO Southern Luzon captured the lions share of the total capital investment with a share of 34.93 percent or P1.20 billion. This is followed closely by PDO Visayas (P1.17 billion or 34.23 percent). Completing the distribution are PDO Manila/Northern Luzon (P446.10 million or 13.03 percent), PDO Northern Mindanao (P415.38 million or 12.13 percent) and PDO Southern Mindanao (P194.61 million or 5.68 percent).

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CY 2010 Completed & OngoingLocally-Funded Projectsin billion

1.74 Completed

1.68 Ongoing

PHYSICAL INFRASTRUCTUREDEVELOPMENT AND MAINTENANCE

Among the big Capital Expenditure Program (CAPEX) infrastructure projects completed within the year are the Dumaguete Port Expansion Project and the Ubay Port Expansion Project Phases 1 & 2. PPA also completed the construction of the Catagbacan Cruise Ship Berth at a total cost of P71.73 million to further boost tourism in the Bohol Region, while the Upgrading of Existing Breakwater Project at the South Side of South Harbor, Cagayan de Oro Port Improvement and Ozamiz Port Expansion Projects are ongoing as of yearend.

Dredging Operations To ensure the safe navigation of large vessels calling at the ports, PPA allotted some P546.64 million for its CY 2010 Dredging Program. The amount covered the removal of 1.84 million cubic meters of silts from 9 ports nationwide and was implemented under the privatized set-up with F.F. Cruz & Company, as contrator.

PDO Northern Mindanao PDO Manila/Northern Luzon

PDO Southern Mindanao PDO Visayas

PDO Southern Luzon

Distribution of 2010 LFPs

12.13%

5.68%34.93%

13.03%34.23%

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Passenger Terminal, Port of Iloilo

Passenger Terminal, Port of Iligan

of Iloilo

Hydrographic and Topographic Surveys A total of fifty-three (53) hydrographic and topographic surveys were undertaken and completed in 2010. Thirty-five (35) of these surveys were programmed during the start of the calendar year and 18 were unprogrammed and undertaken to support port planning, project development and identification of areas for port zone delineation.

Repair and Maintenance ProgramTo maintain the serviceability and safety of existing port facilities nationwide, PPA allocated P1 billion for its repair and maintenance program for CY 2010. Of this amount, P795.58 million or 79.58 percent were allotted for repair projects, P189.66 million or 18.97 percent for maintenance projects, P3.50 million for Head Office engineering projects, P10.00 million or 1.00 percent for GAD-related projects and P1.26 million or 0.13 percent for other unprogrammed projects.

Of the 112 repair and maintenance projects pursued during the year, 26 were completed and 42 are ongoing, 43 are under procurement and 1 project was cancelled/deferred as of year-end. PDO Southern Luzon received the biggest allotment of the R&M Budget at P383.11 million with 37 projects, followed by PDO Visayas (P207.34 million, 21 projects), PDO Northern Mindanao (P177.44 million, 25 projects), PDO Manila/Northern Luzon (P129.03 million, 17 projects), and PDO Southern Mindanao (P88.32 million, 12 projects).

Areas Covered by CY 2010 Dredging

North Harbor Entrance Channel (starting from Breakwater)

South Harbor Fairway Channel leading to Piers 9 & 13

South Harbor Fairway Channel leading to Piers 3 & 5

South Harbor Anchorage

Batangas Baseport (Phase II)

Brookes Point, Puerto Princesa

Cajidiocan, Romblon

Matnog, Sorsogon

Iloilo River (Phase 1), Baseport, Iloilo

MICT (carry-over, completed in 2010)

Dumaguete (carry-over, completed in 2010)

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Port of Iligan

PMO Iloilo Staff

of Iloilo

Consultancy Services for Engineering-Related Studies In 2010, consultancy services for the formulation of master plans and conduct of feasibility study (MP/

FS) of priority ports for development totalling P17.01 million were undertaken. Ports covered were those under PDO Northern Mindanao, i.e. Surigao, Cantilan, Dona Helene, Hayangabon, Jubang,

Lipata Ferry Terminal, Jimenez, Silanga, Opol and Banga-an and Sultan Naga Dimaporo. Pre-Bidding, Opening of Technical Proposal and Financial Bid were held in December

2010. The MP/FS was undertaken to determine the long-term directions in the development of the selected ports and to evaluate the technical soundness,

operational and economic feasibility and financial viability of any proposed short-term improvements and/or expansion of these ports.

Complementing the MP/FS are Initial Environmental Examinations (IEEs) of each of the study port.

In addition, consultancy services for the conduct of soil investigation for 35 identified ports in Luzon, Visayas

and Mindanao worth P17.90 million was undertaken to provide the needed information for foundation design

analysis and for the evaluation of alternative type of structures. The work shall cover the drilling and

testing of soil samples. Pre-Bidding Conference, Opening of Technical Proposal and Financial Bid

were also held in December 2010.

GAD Unprogrammed Manila/Northern Luzon Southern Luzon

Visayas Northern Mindanao Southern Mindanao E&A Exp

Repair & Maintenance CY 2010 Budgetin million

21

P207.34 P383.11

P177.44

P88.32P3.50

P10.00 P1.26

P129.03

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FINANCIAL PERFORMANCE

A vessel approaching the Port of Iligan

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Manager Noeme W. Calderon with staff

FINANCIAL PERFORMANCERevenueIn 2010, PPAs gross revenue reached P8,295.62 million, an increase of at least P1,166.49 million or 16.36 percent from the 2009 figure. Port revenue generated amounted to P8,123.39 million, a substantial increase of P1,136.62 million or 16.27 percent from last year. Fund Management Income (FMI) also grew from P142.35 million in 2009 to P172.32 million this year, which is at least a P29.97 million or 21.05 percent increase.

ICTSI fees contributed the bulk of PPAs revenue amounting to P2,760.14 million (34 percent), followed by wharfage dues at P1,671.02 million (21 percent), vessel charges at P1,190.93 million (15 percent), ATI Fees at P923.57 million (11percent), arrastre/stevedoring income at P678.07 million (8 percent), other sources of income at P423.50 million (5 percent), and pilotage/storage fees at P320.49 million (4 percent), and VTMS and Terminal Fees at P226.30 million (21 percent).

Gross Revenue by PDO

Port performance in terms of revenue generation for the year 2010 has been very satisfactory with the five PDOs contributing to combined earnings of more than P8 billion or 16 percent higher than the figure posted during the same period in 2009.

Growth was spearheaded by Manila/Northern Luzon followed by Southern Luzon and then by Southern Mindanao with each one having grown by P744 million, P134 million, and P123 million respectively.

Port by PDOCY 2010, In Million Pesos

PDO 2010 2009 DeviationManila/Southern Luzon 5,455.28 4,711.11 15.80%

Southern Luzon 904.00 769.66 17.45%

Visayas 499.75 437.29 14.28%

Northern Mindanao 534.08 466.61 14.46%

Southern Mindanao 724.17 597.31 21.24%

Total 8,117.28 6,981.98 16.26%

PDO Northern Mindanao and Visayas likewise posted positive growth of P70 million and P62 million respectively.

Overall improvement in the performance of PPA ports appears to have been driven by the countrys increased economic activity during the year, as spurred by election-related activities and renewed trust by foreign investors.

Revenue by Source or Tariff ItemPPA derives its port revenue from wharfage, dockage, port dues, usage fees, storage, pilotage, terminal fees, rental, share in arrastre/stevedoring, management fees, and other ancillary services. Revenue shares by source are shown below. Port Revenue by Source, 2010(in million pesos)

COMPARATIVE PORT REVENUE2010 vs. 2009

Account 2010 % of Total 2009 Increase/ (Decrease)Port Dues 383.87 4.73% 347.51 10.46%Dockage 521.29 6.42% 443.34 17.58%Usage Fees 273.47 3.37% 239.81 14.04%Lay-up Fees 12.30 0.15% 1.91 543.98%Wharfage Dues 1,671.02 20.57% 1,394.00 19.87%Storage 289.42 3.56% 200.50 44.35%Arrastre/Stevedoring 678.07 8.35% 461.21 47.02%

Other Income 423.50 5.21% 352.19 20.25%Pilotage 31.07 0.38% 23.34 33.12%ICTSI Fees 2,760.14 33.98% 2,526.89 9.23%ATI Fees 923.57 11.37% 769.76 19.98%VTMS Fees 16.23 0.20% 15.13 7.27%Terminal Fees 139.34 1.72% 211.17 -34.02%Total 8,123.29 100.00% 6,986.77 16.27%

Manager Edgar C. Pilar with staff

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ExpendituresTotal Expenses reached P6,327.22 million, at least P985.05 million or 18.44% higher than last years P5,342.17 million expenditures. This is largely due to higher Operating Expenses brought about by increases in Repairs & Maintenance; Personal Services due to the implementation of the 2nd tranche of Salary Standardization III;, and Dredging costs. Likewise, Non-Operating expense rose by 280.34 percent due to loss on revaluation of loans. Foreign exchange revaluation registered positive in 2009.

Net IncomePPAs Net Income amounted to P1,968 billion, 5.49 percent lower than last years net income of P2,082 billion. PPA would be left with a Net Income After Tax of P1.491 billion after deducting income tax amounting to P476.54 million.

Collection EfficiencyLooking into the overall collection effort of the Authority, the collection efficiency ratio (CER) for Prior Year accounts (PY) stood at 87.55 percent where Receivables amounting to P858.80 million at the beginning of the year, was reduced to P106.88 million with

actual amount collected reaching P751.92 million. This exceeded the annual PY collection target of 60 percent. With regard to Current

Year (CY) accounts, the Authority projected 100 percent CER for receivables of P7,420.63 million. However, a slight negative deviation

was posted with only P7,372.20 million actual collections for the current year, or about P48.4369 million short of the target resulting to a

CER of 99.35 percent.

Manager Edgar C. Pilar with staff

25

SUSTAINABILITY,ENVIRONMENT AND PEOPLE

26

27

Port of Nasugbu

2828

Manager Leopoldo C. Biscocho and Staff

Manager Winfred G. Elizalde with Staff

SUSTAINABILITY, ENVIRONMENT AND PEOPLE

Port Safety, Security and Environmental ProtectionImplementation of the International Ship and Port Facility Security Code (ISPS)

Statement of Compliance of Port Facility

In addition to the 21 compliant ports, five (5) more PPA ports were issued Statement of Compliance Issued to a Port Facility by the Office for Transportation Security in 2010: Balanacan, Cagayan de Oro, Iloilo, Lamao and Lucena. Efforts are underway for the renewal of application of port with expired or expiring certificates as of yearend.

Vessel Traffic Management System (VTMS)

The Vessel Traffic Management System (VTMS) Control Center is a state-of-the-art vessel monitoring facility managed and operated by PPA on a 24/7 basis. The operation of VTMS focuses on giving round-the-clock assistance as well as relaying information to pertinent government agencies cases of vessel distress, accidents, piracy and other incidents, for appropriate action. At present, VTMS is installed at North Harbor, Corregidor in Bataan and the port of Batangas.

In 2010, a total of 33,980 vessel voyages were monitored from the VTMS Control Center in Bataan, of which 8,533 and 25,447 were foreign and domestic ships, respectively. The Batangas Control Tower on the other hand tracked a total of 30,764 vessels in 2010 with 29,508 domestic and 1,256 foreign vessels. Total vessels monitored by the two Control Centers reached 64,744 broken down into 54,955 domestic and 9,789 foreign ships.

Special Projects

MIS Computerization

The contractor for the PPA MIS Computerization Project continues to resolve implementation issues as part of the acceptance process of the computerized applications mainly related to the Accounting and Financial Management System (AFMS) applications developed for PPA. About 90 percent of these applications have already been accepted and implemented as of the end of 2010.

Manila North Harbor Modernization Project (MNHMP)

PPA is awaiting the submission of the conceptual master plan for Phase I (Terminal 1) of North Harbor Modernization from MNHPI. This is expected to be completed by April 2011. Upon approval, detailed engineering design of the planned container terminal and tendering of bids will follow for Phase 1 covering Pier 14 up to the Marine Slipway. To restate, North Harbor was turned over to MNHPI on April 11, 2010 after issues that were raised following the contract award had been successfully addressed by the latter.

2929

Quality Management System (QMS)

The Port Management Office of Batangas was chosen as the pilot port for the launch and implementation of the Quality Management System (QMS) which aims to secure the issuance of ISO Certification for Vessel Entrance and Clearance at the Port of Batangas. In adherence to Executive Order No. 605 mandating the institutionalization of the structure, mechanisms and standards to implement a Government Quality Management Program, the PPA Quality Policy was crafted to consistently provide and continually improve the quality of its port operations and services particularly in one of PPAs widely employed procedure vessel entrance and clearance - to satisfy the need of its clients and comply with international and national statutory and regulatory requirements. Since 2009, the QMS Policy Procedure Manual for Batangas is already being implemented.

The second (2nd) Internal Audit was conducted last Dec. 13-16, 2010 to verify closure of the previous non-conformities and observations raised during the 2009 Internal Audit and Opportunities for Improvements raised during the Stage 1 Certification Audit. It is expected that this would pave the way for the issuance of the ISO-QMS certification to Batangas Port by early 2011.

Meanwhile, the same activities are also being replicated at the ports of Cagayan de Oro, Davao, Gen. Santos, Iloilo, Ozamiz and Zamboanga. Writeshops for the revision of certain QMS-VEC Procedures were held in these ports towards the end of the year.

Port Safety Health Environment Management System (PSHEMS)

The PSHEM Code was developed by the GEF/UNDP/IMO Regional Programme of Partnerships in Environmental Management for the Seas of East Asia (PEMSEA), in collaboration with the various international non-governmental organizations representing the port industry. The objective is to have a voluntary standard against which ports can measure their performance with regard to quality management, safety and health of port workers, and protection of the environment.

The PSHEM Code specifies requirements for an effective port safety, health and environmental management system (PSHEMS) to enable an organization to develop and implement policy and objectives that take into account legal requirements and information about hazards associated with its activities, which have or can have significant risk or impact to safety, health and environment.

In line with this, PPA adopted the System to enhance maritime safety, protection of the marine environment, and sustainable development in the country. It is programmed to be initially implemented at the Port of Iloilo. Initial Status Review of the PSHEMS Workshops/Training was conducted by yearend. Writeshop documentation and manual preparation is scheduled to be conducted within the 1st quarter of 2011.

E-Ticketing

The E-Ticketing System which is being spearheaded by the DOTC is an Inter-Agency Committee (PPA, PCG, MARINA, the Shipping Lines and other stakeholders in the ports) is expected among others to (1) provide accurate data/information and statistics on passengers (2) issue E-Tickets only up to the vessels corresponding load limits/maximum load capacity of passengers. The E-Ticketing System, once in place, is expected to provide sea travelling public with a safe, pleasurable and hassle-free journey to their respective destinations.

As of year-end, consultation with shipping companies, PCG and MARINA on the proposed implementation of E-Ticketing was being conducted.

This system has been undergoing pilot implementation at the Passenger Terminal Building 2 of Batangas port since 2008 and will commence pilot testing at the port of Calapan in 2011. Internal Audit Program

In 2010, the Internal Control Department (ICD) conducted six (6) Revenue Audits in various ports nationwide, namely:

Revenue Audit, CY 20101. Ormoc Baseport (vessel charges)2. PMO Ozamiz3. Integrated Port Services of Ozamiz4. TMO Balingoan5. PMO General Santos6. PMO Zamboanga

Meanwhile, audits conducted by the Internal Control Services Staff of the respective PDOs/PMOs/TMOs/LGUs during the year are as follows:

PDO Manila/Northern Luzon1. Aurum Pacific Consolidated Inc.2. Asian Terminals Inc. 3. Vitas Port Arrastre Corp.4. LGU Basco5. International Container Terminal Services Inc.

PDO Southern Luzon1. Tabaco Port Cargo Corp.

PDO Visayas1. PMO-Tagbilaran2. Tagbilaran Maritime Services, Inc.3. New Eagle Arrastre Services, Inc.4. PMO-Dumaguete 5. PCBSI (Iloilo Wharf) 6. Ormoc (baseport)

30

31

Port Terminal of Lucena

A PPA GAD-Managed Day Care Center

32

Operations Staff of PMO Cagayan de Oro

As part of ensuring gender responsiveness of PPA policies and operational processes, PPA also adopted the Civil Service Commission Guidelines on the Availment of the Special Leave Benefits for Women under RA 9710 (An Act Providing for the Magna Carta of Women).

Conduct of Capacity-Building Activities

To foster better understanding and appreciation of GAD values, issues and concerns, the PPA GAD Focal Point facilitated the conduct of the following activities in 2010: (1) Participation in Womens Month, Environment Month, Maritime Week and other GAD-related fora; (2) Maintenance of GAD library, gallery/display room; (3) Teambuilding; (4) Seminars on Responsible Parenthood, Trafficking and Gender Laws, Time Management, Womenomics and others; and (5) GAD Planning Workshops.

Client-Focused Projects

Collection of Data on Passengers and Port Workers

In 2010, ten (10) Responsibility Centers or RCs conducted surveys to gather data on passengers and port users. The data are necessary in facilitating a gender analysis and identifying gender issues that need intervention. The resultant output will be used as basis for formulating programs/activities to improve the conditions of the passengers and port users. Management has set aside sufficient fund for this activity so that it can be replicated by other PPA RCs which are similarly situated.

Provision of Gender-Sensitive Facilities/Services for Port Users

In 2010, efforts have been undertaken for the provision of gender-sensitive facilities/services for port users as follows:

a) Construction of womens desk, public assistance and information booth, public address system, and computer/communication station;

b) PTB amenities such as breastfeeding area, family room, kids playing area, interfaith prayer room, first-aid station, telephone booth priority lanes, safe drinking water, wheelchairs, hand sanitizers and paper towels;

c) Operation and maintenance of Half-way houses; and d) Provision of separate cell for women offenders

GAD Information Drive for Port Users

To develop awareness of clients and travelers on available port facilities/amenities for women, children and disadvantaged groups, PPA through its GAD Focal Point has endeavoured the production of informative materials through networking with local and foreign agencies to establish best practices on facilities; delivery of services

PDO Northern Mindanao1. Iligan Merged Arrastre Services Co.

PDO Southern Mindanao1. Sindangan Arrastre Brokerage Corp. 2. Liloy Cargo Handling Services, Corp. 3. PMO Davao4. PMO Dapitan5. PMO General Santos6. PMO Zamboanga7. Filipinas Port Services, Inc.8. Davao Integrated Port Services Corp.9. South Cotabato Integrated Port Services, Inc.10. Zamboanga City Integrated Port Services, Inc.

Maintaining Corporate StatureCommunity Support Program thru Gad-Focal Points

As part of its community support program, PPA implements through its GAD Focal Points socially-directed initiatives in support of the government program on Gender and Development (GAD).

Organization-Focused Projects

Information and Data Bank Generation

To support the formulation of GAD-related polices, a baseline sex-disaggregated database was started. Personal and professional data of employees with information on past livelihood training attended were collected and an inventory of GAD facilities per terminal was conducted to assess and determine the appropriate intervention programs for gender concerns among PPA employees. At the end of the year, this was 60 percent complete.

Programs/Services for Employees

In 2010, PPA allotted some P23.76 million for gender-responsive programs and services specifically intended for the well-being of its personnel. Among these were counseling services and legal assistance to women employees who are victims of domestic violence, shuttle services, Child/Day Care Centers, establishment/maintenance of GAD Center, forum/symposia on health concerns, Family/Childrens Day and entrepreneurial/livelihood skills training.

33

for women, children and disadvantaged groups; and information campaign through fosters and film showing at PTBs. For instance, the Forum on Magna Carta for Women was conducted at the Port Terminal Building of Nasipit and anti-trafficking posters and leaflets were given to the passengers in Iloilo. A film entitled Ingat sa Byahe was shown in Port Terminal Buildings in Batangas and Lucena.

Gender Sensitivity Training for Port Workers

In 2010, sixteen (16) RCs conducted GST training which was participated in by employees of cargo handling operators, porterage companies and shipping companies and their family members. GSTs among port workers aim to develop their self-awareness and enhance their relationship with others to deal with conflicts and to improve teamwork.

Conduct of Activities to Maintain and Preserve the Environment

To enhance awareness on environmental issues and concerns and their effects on men and women living in port communities, PPA undertook in coordination with LGUs and other government agencies the following: clean and green projects such as tree planting and landscaping, conduct of eco-waste management seminar, ports and coastal clean-ups, and construction of material recovery facility. Likewise, activities related to health concerns of target beneficiaries in the marginal segment of the port communities such as medical and dental mission, feeding program, and blood pressure watch program were conducted.

People Development Program

In 2010, the Human Resource Department has successfully undertaken, in cooperation with various sponsoring institutions a total of 46 courses which produced 2,909 graduates from Head Office and Field Offices. The courses conducted focused on various subjects ranging from Port Management and Operations; Seminar on Emergency and Disaster Response; Port Safety; Integrated Port Operations; Change Management/Corporate/Governance and Mgt. Ethics; Seminar-Workshop on R.A. 9184; Quality Customer Relations; Gender Sensitivity Training; and, Port Safety, Health and Environment Mgt. System (PSHEMS), among others.

During the year, 19 PPA participants were recipients of 12 foreign scholarship/training grants in the following countries: New Zealand, Japan, Cambodia, Malaysia, Singapore, Vietnam and USA. Courses attended were in the areas of: business management, strategic maintenance of port structures, regional security and development, port management and operations, sustainable port development and planning, maritime transport, global network terminal, mitigating impacts of climate change in the port industry, port facility security and maritime safety management.

Complementing the training programs for organic personnel, the PPA through its training arm the PPA Training Center or PPATC has completed the conduct of

25 courses focusing on port operations and benefiting 914 recipients.

Maintaining Global Ties

As a member, PPA lends its support to, among others, various international maritime associations such as the International Maritime Organization (IMO), Asia-Pacific Economic Cooperation (APEC), ASEAN Port Authorities (APA), and (Brunei-Indonesia-Malaysia-Philippines East Asia Growth Association (BIMP-EAGA) by actively participating with its counterparts in policy-making, capacity building and dialogues on common endeavors related to port facility standards/benchmarking, anti-terrorism, anti-human trafficking, environmental protection, port security and safety. In 2010, PPA officials attended 12 meetings/conferences in Thailand, Malaysia, Vietnam, Cambodia, Singapore, Japan and London to tackle common endeavors and to keep abreast with global maritime trends and developments.

1. ASEAN-GTZ Regional Inception Workshop held in Bangkok, Thailand on January 21 22, 2010;

2. 19th ASEAN Maritime Transport Working Group Meeting held in Kuala Lumpur, Malaysia on April 20 22, 2010;

3. 104th Session of the International Maritime Organization (IMO) held in London, United Kingdom on 07 11 June 2010;

4. 2nd BIMP-EAGA Ports and Ships Security Officials Meeting held in Tawau, Sabah, Malaysia on 22 25 June 2010;

5. ASEAN-GTZ Planning Workshop in connection with the project Sustainable Port Development in the ASEAN Region held in Ho Chi Minh City, Vietnam on 17 18 August 2010;

6. 31st ASEAN Ports Association Working Committee Meeting held in Yangon, Myanmar on 20 -23 September 2010

7. 33rd APEC Transportation Working Group (TPT-WG33) Meeting held in Tokyo, Japan on 10 15 October 2010;

8. Regional Expert Group Meeting on the Development of Dry Ports along the Asian Highway and Trans-Asian Railway Networks held in Bangkok, Thailand on 01 03 November 2010;

9. 105th Session of the International Maritime (IMO) Council held in London on 01 05 November 2010;

10. Better Air Quality (BAQ) Conference in connection with the ASEAN-GTZ Project Sustainable Port Development in the ASEAN Region held in Singapore on 09 11 November 2010; and

11. 88th Session of the Maritime Safety Committee be held in London on 24 November to 03 December 2010.

12. 36th ASEAN Ports Association Meeting held in Siem Reap, Cambodia on 8 11 December 2010;

34

2010 PPA PERFORMANCEAT A GLANCE

CARGO THROUGHPUT

166.40 MILLION METRIC TONS

UP BY 16.5 MILLION METRIC TONS OR 11% FROM 2009

CONTAINER TRAFFIC

4.50 MILLION TEUs

UP BY 0.49 MILLION OR 12% FROM 2009

PASSENGER TRAFFIC

52.70 MILLION

UP BY 8.82 MILLION OR 20% FROM 2009

35

GROSS INCOMEP8.295 BILLIONUP BY 16.36% FROM 2009

EXPENSESP6.33 BILLIONUP BY 12.23% FROM 2009

NET INCOMEP1.491 BILLIONDOWN BY 7.5% FROM 2009

SHIP TRAFFIC or VESSEL CALLS

346,000

UP BY 10% FROM 2009

ENGINEERING

40 LOCALLY FUNDED PROJECTS COMPLETED VALUED AT P1.74 BILLION

26 R&M PROJECTS COMPLETED VALUED AT P760.73 MILLION

36

Port/LocationImple-

mentingOffice

Project Description Date Started Completion Project Cost

PDO MANILA/NORTHERN LUZONPMO Limay

1 Orion Port, Bataan FO Constuction of Power Transformer Pedestal Dec 28 2009 Jan 15 2010 248,579.10 2 Orion Port, Bataan FO Improvement of PTB May 7 2010 Jun 20 2010 11,251,482.62 3 Sasmuan, Pampanga FO Construction of Wharf Jun 24 2010 Oct 15 2010 8,389,619.55

PMO North Harbor4 Slip 0, North Harbor FO Roadway Nov 6 2009 May 16 2010 9,137,192.56

PMO South Harbor5 South Harbor FO Upgrading of Port Police Firing Range Nov 17 2009 Jul 30 2010 13,960,371.59 6 South Harbor (GAD Project) FO Improvements of PPA Educational & Sports Complex Apr 19 2010 Jun 17 2010 4,391,731.00

Sub-Total PDO Manila/Northern Luzon 47,378,976.42 PDO SOUTHERN LUZON

PMO-Batangas7 Cotta Port, Lucena City FO Port Development Project Mar 26 2010 Dec 15 2010 18,675,870.81 8 Lucena Port, Quezon HO Port Expansion Project (Construction of Back-up Area) Oct 12 2009 Oct 15 2010 54,598,511.83 9 Poctoy Port, Odiongan, Romblon HO Port Expansion Project (Back-up Area, Mooring & Fendering System,

Drainage System, Port Lighting System)Jul 24 2007 Feb 16 2010 84,553,040.93

10 Mulanay Port, Quezon FO Concreting of Rock Causeway & Construction of Back-up Area May 9 2010 Apr 9 2010 9,594,630.17 11 Nasugbu Port, Batangas FO Widening of Rock Causeway Aug 3 2010 May 10 2010 19,826,161.82 12 Nasugbu Port, Batangas FO Rehabilitation/Improvement of Slope Protection Structure; provision

of Deflector Wall; Concreting of Back-up Area, Disposal of underwater obstruction

May 31 2010 Aug 14 2010 45,049,083.37

PMO-Calapan13 Calapan, Oriental Mindoro FO Provision of Additional Ticketing Booth & Public Comfort Room Apr 8 2010 Jun 27 2010 1,887,380.01 14 Roxas Port, Oriental Mindoro FO Expansion of Back-up Area Apr 8 2010 Jul 22 2010 19,065,000.00

PMO Legazpi15 Legazpi Port, Albay FO Concreting of Back-up Area & installation of Port Lighting System Dec 7 2009 Apr 15 2010 20,591,971.00 16 Cataingan Port, Masbate HO Port Improvement Project (Demolition Work, Construction of RoRo Ramp

& RC Platform)Mar 5 2010 Dec 29 2010 32,454,478.49

17 Caramoan Port, Camarines Sur HO Port Expansion Project (RC Platform, RoRo Ramp, Breasting Dolphin, Back-up Area, Port Lighting System)

Jul 26 2007 Mar 25 2010 63,431,898.43

18 Esperanza Port, Masbate HO Port Improvement & Rehabilitation Apr 29 2010 Sept 28 2010 20,091,821.26 19 Pasacao Port, Camarines Sur HO Construction of RC Pier Extension Sept 1 2009 Feb 25 2010 23,063,787.33 20 Pio Duran Port, Albay HO Port Development Project (Rock Causeway, Port Lighting System) Sept 15 2009 Jul 5 2010 59,290,907.03 21 Sorsogon Port, Sorsogon HO Port Improvement Project (Construction of Rock Bulkhead) Apr 9 2010 Jun 7 2010 25,330,853.29 22 Tandoc Port, Siruma, Cam. Sur. HO Port Development Project (RoRo Ramp & Rock Causeway) Mar 19 2009 Jan 12 2010 51,349,323.13

PMO Puerto Princesa23 Puerto Princesa Port, Palawan FO Concrete paving of back-up area with drainage system Jan 17 2010 Aug 14 2010 17,569,239.14

Sub-Total PDO Southern Luzon 566,423,958.04 PDO VISAYAS

PMO Pulupandan24 Himamaylan Port, Negros Occ. FO Port Construction, Phase II Jun 18 2009 Jan 18 2010 47,734,547.33 25 Danao Port, Escalante City, Negros Occ. FO Additional development/Improvement of Perimeter Fence & Perimeter

LightingsDec 28 2009 May 17 2010 9,221,645.30

PMO Dumaguete26 Dumaguete Port, Negros Occ. HO Port Expansion Project, Phase II (Excavation/ Disposal, Reclamation,

Mooring & Fendering System, Drainage & Fencing, Port Lighting System)Jun 17 2008 Feb 25 2010 430,753,591.28

27 Dumaguete Port FO Passenger Terminal Building Nov 06 2007 Feb 3 2010 52,188,064.93 PMO Tacloban

28 Catbalogan Port, Western Samar HO Rehabilitation Project (Rehabilitation Works) Feb 4 2010 Jul 3 2010 35,827,466.13 29 Tacloban Port, Leyte FO Three Phase Primary Line & Installation of Transformer for PMO

Operations Bldg.Feb 11 2010 Jul 15 2010 576,423.68

PMO Tagbilaran30 Catagbacan Port, Bohol HO Cruise Ship Berth (Rehabilitation, Widening & Extension of RC Pier w/

Breasting Dolphin)Apr 8 2009 May 21 2010 71,726,919.13

31 Talibon Port, Bohol HO Improvement Project (Parking, Basement & Back-up Area, Port Lighting System)

Feb 4 2010 Dec 29 2010 38,812,368.45

32 Ubay Port, Poblacion, Bohol HO Port Expansion Project, Phase I (Construction of Back-up Area; RC Pier; RoRo Ramp; Dredging & Disposal Work; Mooring & Fendering System; Provisional item; Port Lighting System)

Mar 20 2008 Mar 9 2010 233,048,645.73

33 Ubay Port, Poblacion, Bohol HO Port Expansion Project, Phase II (Construction of Back-up Area of about 17,574 sq.m. including Rock Bulkhead, Fill Materials & RC Curb)

Nov 16 2009 Jul 26 2010 138,681,967.42

Sub-Total PDO Visayas 1,058,571,639.38 PDO NORTHERN MINDANAO

PMO Cagayan de Oro34 Cagayan de Oro Port FO Passengers Shed (Covered Walkway) Feb 20 2010 Aug 20 2010 4,651,514.93

PMO Nasipit35 Masao Port, Agusan del Norte FO Rehabilitation of Lighting System Dec 2 2009 Jan 21 2010 985,101.04

PMO Surigao36 Surigao Port, Surigao del Norte FO Construction of Port Managers Quarter Aug 27 2010 Nov 18 2010 4,462,882.39 37 Surigao Port, Surigao del Norte FO Construction of Gate & Guardhouse Dec 18 2009 Mar 12 2010 3,009,579.19

Sub-Total PDO Northern Mindanao 13,109,077.55 PDO SOUTHERN MINDANAO

PMO General Santos38 Gen. Santos Port, Makar Wharf FO Security Fence at Newly Constructed Wharf Jan 28 2010 Sept 4 2010 2,278,391.19 39 Gen. Santos Port, South Cot. HO Paving of the Newly Constructed Back-up Area; Paving of the Newly

Reclaimed AreaSept 3 2009 Dec 10 2010 51,761,487.91

40 Mabila Port, Saranggani FO Concreting of Rock Causeway Nov 21 2009 Jun 15 2010 5,072,932.80 Sub-Total PDO Southern Mindanao 59,112,811.90 GRAND TOTAL 2010 1,744,596,463.29

Completed loCally Funded projeCtsHead Office & Field Office-implemented(For the Year 2010)

37

p h i l i p p i n e p o r t sa u t h o r i t y

a n n u a lr e p o r t

ongoing loCally FundedprojeCts For 2010 (Carry-Over & New Projects)Head Office & Field Office-implementedAs of 2010 Year End, in pesos

Port/LocationImple-

menting Office

Project Description Date Started Completion Project Cost Status

PDO MANILA/NORTHERN LUZONPMO Limay

1 Dingalan Port, Aurora FO Rehabilitation of Rock Causeway Oct 14 2010 Apr 11 2011 16,279,475.05 Ongoing-42.82%PMO San Fernando

2 Sual Port, Pangasinan HO Port Development Project (RoRo Ramp on-fill & Rock Causeway) Feb 12 2010 Feb 6 2011 80,352,839.67 Suspended3 Casiguran Port, Aurora HO Development of Back-up Area Nov 16 2010 Nov 10 2011 36,458,949.78 Ongoing-5.05%

PMO South Harbor4 South Harbor, Manila HO Upgrading of Existing Breakwater, South Side (Phase II) Sept 3 2009 Feb 24 2011 265,629,689.00 Ongoing-87.95%

Sub-Total PDO Manila/Northern Luzon 398,720,953.50 PDO SOUTHERN LUZON

PMO Batangas5 Bauan Port, Batangas HO Construction of RC Pier May 13 2010 June 8 2011 25,942,235.16 Ongoing-79.84%6 Poctoy Port, Odiongan, Romblon HO Port Expansion Project, Phase II (RoRo Ramp & Breasting

Dolphin, Reclamation)Nov 20 2009 May 1 2011 40,850,532.46 Ongoing-91.01%

7 Mauban Port, Quezon HO Port Improvement Project (RoRo Ramp, Breasting Dolphin & RC Platform)

Mar 4 2010 Apr 10 2011 32,797,551.71 Ongoing-59.96%

8 San Andres Port, Quezon HO Port Improvement Project (RC Pier, RoRo Ramp & Breasting Dolphn; Rock Causeway & Back-up Area; Port Lighting System)

Dec 31 2007 Jul 9 2010 78,375,102.06 Terminated-99.20%

9 San Andres Port, Quezon HO Phase 2-RC Pier, RORO Ramp & Breasting Dolphin; Rock Causeway & Port Lighting System

Under Procure-ment

10 San Jose Port, Batangas HO RC Pier, RoRo Ramp & RC Wharf; Back-up Area & Rock Causeway, Port Lighting System)

May 19 2010 Oct 14 2011 148,336,887.36 Ongoing-54.56%

11 San Juan Port, Batangas HO Improvement Project (RoRo Ramp & Breasting Dolphin, Back-up Area, PTB)

Apr 30 2010 Apr 24 2011 48,639,199.66 Ongoing-89.98%

PMO Calapan12 Abra de Ilog Port, Occ. Min. HO Port Expansion Project (Back-up Area, Widening & Access Road,

Port Lighting System)Oct 15 2009 Mar 18 2011 75,322,879.61 Ongoing-85.08%

13 Bulalacao Port, Oriental Min. HO Port Development Project, Phase II (RoRo Ramp; Rock Causeway) Mar 25 2010 May 1 2011 70,838,651.52 Ongoing-60.47%14 Calapan, Oriental Mindoro FO Provision of Covered Walk Nov 22 2010 Mar 21 2011 2,751,347.00 Ongoing-86.82%15 Roxas Port, Oriental Mindoro FO Provision of Covered Walk Nov 22 2010 Dec 29 2010 689,200.00 Ongoing-95.00%16 Roxas Port, Oriental Mindoro FO Provision of X-Ray Facilities Nov 22 2010 Jan 21 2011 1,316,494.00 Ongoing-95.00%

PMO Legazpi17 Pantao Port, Albay HO Upgrading & Rehabilitation of Port (RC Wharf, Back-up Area) Oct 20 2009 Feb 25 2011 91,114,815.00 Ongoing-88.32%18 Pio Duran Port, Albay FO Construction of Roro ramp & R.C. platform Dec 22 2010 Jun 21 2011 12,496,136.43 OngoingSub-Total PDO Southern Luzon 629,471,031.97 PDO VISAYAS

PMO Iloilo19 Basiao Port, Ivisan, Capiz FO Additional Improvement of Basiao Port Nov 19 2010 Aug 15 2011 28,575,426.21 Ongoing-54.73%

PMO Ormoc20 Hilongos Port, Southern Leyte FO Widening of Causeway & Reclamation May 24 2010 May 16 2011 48,634,407.74 Ongoing-94.70%

PMO Tacloban21 Babatngon, Leyte FO Port Development May 24 2010 Mar 16 2011 8,839,158.67 Ongoing-93.29%

PMO Tagbilaran22 Loay River Quay, Bohol FO Port Development May 24 2010 Aug 17 2011 27,510,910.36 Ongoing-69.90%Sub-Total PDO Visayas 113,559,902.98 PDO NORTHERN MINDANAO

PMO Cagayan de Oro23 Balbagon Port, Mambajao, Cam. FO Port Improvement Feb 20 2010 Apr 20 2011 27,042,882.62 Ongoing-63.98%24 Cagayan de Oro Port, CDO HO Improvement Project (RC Wharf Extension, Relieving

Platform, Back-up Area)Apr 13 2010 Oct 4 2011 187,898,070.18 Ongoing-52.40%

PMO Nasipit25 Masao Port, Agusan del Norte FO Construction of Transit Shed Dec 19 2009 Dec 9 2010 21,890,358.26 Ongoing-94.33%

PMO Ozamis26 Ozamiz Port, Ozamis City HO Port Expansion Project (Back-up Area, Port Lighting System) Nov 24 2009 Jun 15 2011 150,033,820.63 Ongoing-46.61%

PMO Surigao27 Sta. Monica Port, Surigao del Norte FO Improvement of port facilities/Concrete causeway May 26 2010 15,408,298.60 SuspendedSub-Total PDO Northern Mindanao 402,273,430.29 PDO SOUTHERN MINDANAO

PMO Davao28 Pantukan Port, Compostela Valley FO Port Development (Construction of RoRo Ramp & Rock

Causeway)Dec 4 2009 Nov 21 2011 29,760,654.89 Ongoing-8.50%

29 Tagpopongan Port, Samal, Davao del Norte

FO Port Development (Construction of RoRo Ramp, RC Wharf & Rock Causeway)

Dec 8 2009 Aug 11 2011 37,797,602.52 Ongoing-53.68%

PMO Dapitan30 Dapitan Port, Zambo. del Norte HO Passenger Terminal & Operations Building-Construction

of two-storey building with Roof DeckUnder Procure-

mentPMO General Santos

31 General Santos Port, Makar Wharf FO Construction of Waste Water Treatment Plant Mar 5 2010 Aug 2 2010 12,079,691.35 Ongoing-95.05%32 Glan Port, Sarangani Province FO Port Improvement 26,042,032.32 Ongoing-11.20%

PMO Zamboanga33 Zamboanga Port, Zamboanga del Sur FO Concreting of Damaged Paving Blocks at Marshalling Yard &

Rehabilitation of Drainage SystemMar 11 2010 Mar 8 2011 23,053,297.01 Ongoing-97.44%

34 Zamboanga Port, Zamboanga del Sur FO Construction of Fence and ISPS Delineation Area Mar 2 2010 Dec 22 2010 6,762,863.00 Ongoing-96.26%Sub-Total PDO Southern Mindanao 135,496,141.09 Grand Total 1,679,521,459.83

38

Cargo throughput (in m.t.) By Port District/Port Management OfficeAt Berth/Anchorage

PDO/PMO GRAND TOTAL2010

GRAND TOTAL2009

DOMESTIC FOREIGN DOMESTIC FOREIGN

PDO MNL/NORTHERN LUZON 70,316,061 24,861,197 45,454,864 61,687,825 26,667,432 35,020,393Manila - N. Harbor 16,146,329 11,929,164 4,217,165 17,406,085 14,183,402 3,222,683Manila - S. Harbor 12,958,525 5,374,364 7,584,161 10,734,949 5,385,457 5,349,492 - M.I.C.T. 18,266,554 913,378 17,353,176 15,639,479 822,314 14,817,165Limay 16,314,686 6,274,691 10,039,995 14,670,054 5,929,723 8,740,331San Fernando 6,629,967 369,600 6,260,367 3,237,258 346,536 2,890,722

PDO SOUTHERN LUZON 26,882,615 10,614,469 16,268,146 29,820,142 13,328,832 16,491,310Batangas 18,724,059 6,175,429 12,548,630 20,807,830 7,032,623 13,775,207Calapan 1,558,560 1,558,560 0 1,279,234 1,279,234 0Legazpi 2,230,180 1,482,714 747,466 4,210,246 3,712,950 497,296Puerto Princesa 4,369,816 1,397,766 2,972,050 3,522,832 1,304,025 2,218,807

PDO VISAYAS 23,768,003 16,030,126 7,737,877 20,771,261 15,301,624 5,469,637Dumaguete 1,919,351 1,696,120 223,231 1,676,118 1,517,029 159,089Iloilo 7,724,638 3,376,511 4,348,127 5,757,577 3,191,403 2,566,174Ormoc 4,368,848 2,276,490 2,092,358 3,949,240 2,104,973 1,844,267Pulupandan 6,045,063 5,675,037 370,026 6,267,092 5,815,762 451,330Tacloban 1,688,880 1,328,378 360,502 1,346,944 1,184,671 162,273Tagbilaran 2,021,223 1,677,590 343,633 1,774,290 1,487,786 286,504

PDO NORTHERN MINDANAO 28,823,840 9,751,271 19,072,569 22,823,025 8,702,033 14,120,992Cagayan de Oro 6,229,040 5,028,157 1,200,883 5,698,752 4,186,894 1,511,858Iligan 2,493,573 1,569,548 924,025 2,446,272 1,679,738 766,534Nasipit 2,466,396 1,599,869 866,527 2,818,802 1,449,656 1,369,146Ozamiz 1,022,834 916,300 106,534 865,597 834,954 30,643Surigao 16,611,997 637,397 15,974,600 10,993,602 550,791 10,442,811

PDO SOUTHERN MINDANAO 16,605,161 8,539,837 8,065,324 14,792,801 7,936,498 6,856,303Cotabato 56,544 56,544 0 70,036 70,036 0Dapitan 617,480 413,477 204,003 585,120 415,651 169,469Davao 10,624,929 4,120,627 6,504,302 9,299,841 3,813,631 5,486,210General Santos 2,668,433 1,580,445 1,087,988 2,520,255 1,454,737 1,065,518Zamboanga 2,637,775 2,368,744 269,031 2,317,549 2,182,443 135,106TOTAL 166,395,680 69,796,900 96,598,780 149,895,054 71,936,419 77,958,635

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passenger traFFiCBy Port District/Port Management OfficeAt Berth/Anchorage

PDO/PMO GRAND TOTAL2010

GRAND TOTAL2009

DISEM-BARKED EMBARKED

DISEM-BARKED EMBARKED

PDO MNL/NORTHERN LUZON 1,863,037 913,921 949,116 1,938,251 1,003,890 934,361Manila - N. Harbor 821,983 375,750 446,233 821,565 420,222 401,343Manila - S. Harbor 1,004,780 522,028 482,752 1,116,662 583,644 533,018 - M.I.C.T. 0 0 0 0 0 0Limay 36,254 16,129 20,125 24 24 0San Fernando 20 14 6 0 0 0

PDO SOUTHERN LUZON 16,513,171 8,357,922 8,155,249 12,634,440 5,980,585 6,653,855Batangas 6,826,589 3,543,981 3,282,608 5,187,821 2,270,312 2,917,509Calapan 5,604,719 2,808,733 2,795,986 4,268,677 2,125,982 2,142,695Legazpi 3,800,785 1,863,689 1,937,096 2,835,355 1,422,150 1,413,205Puerto Princesa 281,078 141,519 139,559 342,587 162,141 180,446

PDO VISAYAS 17,688,740 9,001,991 8,686,749 15,416,793 7,750,136 7,666,657Dumaguete 3,207,250 1,649,272 1,557,978 2,867,827 1,472,288 1,395,539Iloilo 2,585,835 1,293,915 1,291,920 2,276,740 1,121,538 1,155,202Ormoc 2,315,381 1,164,399 1,150,982 2,049,001 1,031,080 1,017,921Pulupandan 3,270,403 1,649,690 1,620,713 2,935,436 1,460,020 1,475,416Tacloban 2,511,202 1,276,006 1,235,196 1,814,376 908,252 906,124Tagbilaran 3,798,669 1,968,709 1,829,960 3,473,413 1,756,958 1,716,455

PDO NORTHERN MINDANAO 10,576,589 5,527,332 5,049,257 8,150,251 4,111,714 4,038,537Cagayan de Oro 2,178,430 1,098,723 1,079,707 1,663,946 842,037 821,909Iligan 3,301,809 1,855,614 1,446,195 2,276,667 1,062,302 1,214,365Nasipit 315,284 172,175 143,109 281,626 139,951 141,675Ozamiz 3,468,781 1,702,946 1,765,835 2,798,180 1,476,152 1,322,028Surigao 1,312,285 697,874 614,411 1,129,832 591,272 538,560

PDO SOUTHERN MINDANAO 6,060,108 3,049,838 3,010,270 5,732,830 2,877,354 2,855,476Cotabato 57 36 21 1,216 387 829Dapitan 584,519 307,751 276,768 498,887 265,152 233,735Davao 1,329,277 674,660 654,617 1,571,942 803,674 768,268General Santos 108,285 51,612 56,673 114,106 54,032 60,074Zamboanga 4,037,970 2,015,779 2,022,191 3,546,679 1,754,109 1,792,570TOTAL 52,701,645 26,851,004 25,850,641 43,872,565 21,723,679 22,148,886

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number oF shipCallsBy Port District/Port Management OfficeAt Berth/Anchorage

PDO/PMO GRAND TOTAL2010

GRAND TOTAL2009

DOMESTIC FOREIGN DOMESTIC FOREIGN PDO MNL/NORTHERN LUZON 23,093 17,645 5,448 22,341 17,368 4,973Manila - N. Harbor 4,967 4,436 531 5,043 4,602 441Manila - S. Harbor 7,810 5,709 2,101 7,650 5,822 1,828 - M.I.C.T. 1,942 103 1,839 2,042 105 1,937Limay 7,474 6,939 535 6,924 6,435 489San Fernando 900 458 442 682 404 278 PDO SOUTHERN LUZON 96,853 95,321 1,532 88,168 86,806 1,362Batangas 43,990 42,922 1,068 40,331 39,264 1,067Calapan 22,800 22,800 0 22,122 22,122 0Legazpi 23,814 23,706 108 20,617 20,547 70Puerto Princesa 6,249 5,893 356 5,098 4,873 225 PDO VISAYAS 132,904 132,250 654 117,195 116,697 498Dumaguete 37,019 36,962 57 34,937 34,892 45Iloilo 22,751 22,534 217 19,266 19,140 126Ormoc 13,313 13,140 173 12,082 11,900 182Pulupandan 25,962 25,883 79 24,009 23,938 71Tacloban 10,854 10,745 109 8,422 8,364 58Tagbilaran 23,005 22,986 19 18,479 18,463 16 PDO NORTHERN MINDANAO 53,189 52,354 835 48,875 48,123 752Cagayan de Oro 14,868 14,551 317 12,542 12,175 367Iligan 14,305 14,180 125 14,296 14,186 110Nasipit 1,083 1,063 20 1,103 1,076 27Ozamiz 13,809 13,781 28 13,659 13,650 9Surigao 9,124 8,779 345 7,275 7,036 239 PDO SOUTHERN MINDANAO 39,961 37,632 2,329 37,840 35,647 2,193Cotabato 272 272 0 461 461 0Dapitan 3,201 3,166 35 2,640 2,617 23Davao 20,741 18,908 1,833 22,234 20,546 1,688General Santos 1,464 1,127 337 1,504 1,107 397Zamboanga 14,283 14,159 124 11,001 10,916 85TOTAL 346,000 335,202 10,798 314,419 304,641 9,778

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number oF Containers handled (in T.E.U.)By Port District/Port Management OfficeAt Berth/Anchorage

PDO/PMO GRAND TOTAL2010

GRAND TOTAL2009

DOMESTIC FOREIGN DOMESTIC FOREIGN

PDO MNL/NORTHERN LUZON 3,158,023 747,649 2,410,374 2,877,638 810,118 2,067,520Manila - N. Harbor 553,548 553,548 0 638,263 638,263 0Manila - S. Harbor 988,268 101,764 886,504 838,950 86,608 752,342 - M.I.C.T. 1,612,886 89,542 1,523,344 1,397,594 82,932 1,314,662Limay 3,321 2,795 526 2,831 2,315 516San Fernando 0 0 0 0 0 0 PDO SOUTHERN LUZON 38,182 37,091 1091 18,946 18,749 197Batangas 5,737 4,646 1091 1,649 1,452 197Calapan 0 0 0 0 0 0Legazpi 740 740 0 1 1 0Puerto Princesa 31,705 31,705 0 17,296 17,296 0 PDO VISAYAS 246,873 246,873 0 238,492 238,492 0Dumaguete 20,453 20,453 0 21,188 21,188 0Iloilo 99,374 99,374 0 90,850 90,850 0Ormoc 7,416 7,416 0 6,721 6,721 0Pulupandan 92,709 92,709 0 96,013 96,013 0Tacloban 15,788 15,788 0 13,258 13,258 0Tagbilaran 11,133 11,133 0 10,462 10,462 0 PDO NORTHERN MINDANAO 256,379 236,648 19,731 222,786 193,461 29,325Cagayan de Oro 170,975 151,244 19,731 149,189 119,864 29,325Iligan 21,940 21,940 0 15,380 15,380 0Nasipit 34,250 34,250 0 29,804 29,804 0Ozamiz 27,687 27,687 0 26,531 26,531 0Surigao 1,527 1,527 0 1,882 1,882 0 PDO SOUTHERN MINDANAO 798,177 371,598 426,579 653,669 332,219 321,450Cotabato 0 0 0 0 0 0Dapitan 6,156 6,156 0 6,292 6,292 0Davao 584,669 212,129 372,540 453,348 181,227 272,121General Santos 140,027 85,988 54,039 130,907 81,578 49,329Zamboanga 67,325 67,325 0 63,122 63,122 0TOTAL 4,497,634 1,639,859 2,857,775 4,011,531 1,593,039 2,418,492

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independent auditors report

The Board of DirectorsPhilippine Ports AuthorityBonifacio DrivePort Area, Manila

Report on the Financial Statements

We have audited the accompanying financial statements of the Philippine Ports Authority (PPA), which comprise the statement of financial position as at December 31, 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Managements Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with state accounting principles generally accepted in the Philippines, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

Expenditures incurred for major repairs and maintenance and for acquisition of certain items of property and equipment amounting to P49.56 million and P2.4 million, respectively, were not capitalized but were instead recognized in profit or loss for the period, while the loss of P17.02 million incurred in the derecognition of certain items of property and equipment was not recognized in profit or loss for the period. The accounting treatment for the above-mentioned transactions and events is contrary to Philippine Accounting Standard No. 16 on Property, Plant and Equipment (PPE) and resulted in the understatement of PPE by P51.96 million, net overstatement of expenses by P51.96 million and understatement of loss on derecognition of property and equipment by P17.02 million or net understatement of income of P34.94 million.

The validity of recorded liabilities in the total amount of P21.27 million is doubtful as these are not properly supported with documents.

Republic of the PhilippinesCOMMISSION ON AUDIT

Commonwealth Avenue, Quezon City, Philippines

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Qualified Opinion

In our opinion, except for the effects and the possible effects on the financial statements of the matters described in the Basis for Qualified Opinion paragraphs, the financial statements present fairly, in all material respects, the financial position of the Philippine Ports Authority as at December 31, 2010, and of its financial performance and its cash flows for the year then ended in accordance with state accounting principles generally accepted in the Philippines.

Emphasis of Matter

We draw attention to Note 49 to the financial statements which describes the uncertainty related to the outcome of the various lawsuits involving the Authority.

Other Matter

As part of our audit of the 2009 financial statements, we also audited the adjustment described in Notes 9 and 27 that were applied to amend the 2009 financial statements. In our opinion, such adjustments are appropriate and have been properly applied.

Report on the Supplementary Information Required Under Revenue Regulations 15-2010

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on taxes, duties and license fees in Note 48 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of management. The information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

COMMISSION ON AUDIT

DIARALCASAN B. IBRAHIMSupervising Auditor

June 29, 2011

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statement oF FinanCial positionDecember 31, 2010(With Comparative Figures as of December 31, 2009)(In Philippine Peso)

Notes 2010 As Restated

2009

ASSETSCurrent AssetsCash on Hand and in Banks 6 2,602,511,853 2,631,730,631 Receivables - Net 7 1,048,221,739 1,045,491,495 Inventories 8 128,314,048 130,483,931 Prepayments 9 449,528,860 414,884,987 Other Current Assets 10 72,838,471 205,338,127

Total Current Assets 4,301,414,971 4,427,929,171

Non-Current AssetsProperty and Equipment - Net 11 87,521,901,017 86,616,988,316 Investments in Securities 12 2,173,209,147 916,048,743 Notes Sinking Fund 13 835,924,367 548,409,944 Other Non-Current Assets 14 380,378,832 1,220,069,271

Total Non-Current Assets 90,911,413,363 89,301,516,274

95,212,828,334 93,729,445,445

LIABILITIES AND EQUITYCurrent LiabilitiesAccounts Payable 15 2,982,448,396 2,327,034,294 Payables to Other Government Agencies 16 601,145,599 1,802,518,940 Current Portion of Foreign Loans Payable 17 788,167,167 728,292,112 Other Current Liabilities 18 549,987,846 362,343,557

Total Current Liabilities 4,921,749,008 5,220,188,903

Non-Current LiabilitiesLoans Payable - Foreign 19 8,297,850,502 8,554,895,762 Loans Payable - Domestic 20 500,000,000 500,000,000 Corporate Notes 21 2,000,000,000 2,000,000,000 Retirement Payable 22 430,497,299 379,426,612

Total Non-Current Liabilities 11,228,347,801 11,434,322,374

Deferred Credits 23 113,032,871 145,904,150

Equity 78,949,698,654 76,929,030,018

95,212,828,334 93,729,445,445

See accompanying Notes to Financial Statements.

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Notes 2010 As Restated

2009

REVENUESICTSI Fees 28 2,760,143,493 2,526,887,668 Wharfage Dues 29 1,671,023,309 1,394,003,399 Share in Arrastre/Stevedoring Income 30 1,601,639,218 1,230,974,879 Dockage Fees 31 521,291,362 443,338,689 Port Dues 32 383,871,349 347,506,688 Storage Charges 33 289,422,380 200,501,075 Port Usage Fees 34 273,473,539 239,813,135 Terminal Fees 35 139,336,910 211,168,990 Vessel Traffic Management Service Fees 36 16,234,724 15,130,260 Pilotage 37 31,065,731 23,339,822 Lay-Up Fees 38 12,297,495 1,907,294 Other Income 39 406,414,307 334,738,800

8,106,213,816 6,969,310,699 OPERATING EXPENSESPersonal Services 40 1,313,540,451 1,242,469,260 Maintenance and Other Operating Expenses 41 3,988,847,768 3,597,940,082

5,302,388,219 4,840,409,342

PROFIT FROM OPERATIONS 2,803,825,597 2,128,901,357

OTHER INCOME/(EXPENSES)Fund Management Income 42 172,321,940 142,350,268 Other General Income 43 16,952,837 17,449,706 Foreign Exchange Gain(Loss) on Revaluation 44 (533,373,996) 295,763,460 Financial Expenses 45 (491,460,392) (501,761,120)Gain on Sale of Disposed Assets 141,073 -

(835,418,538) (46,197,686)

NET INCOME BEFORE INCOME TAX 1,968,407,059 2,082,703,671

INCOME TAX EXPENSE 46 476,543,671 469,866,369

NET PROFIT 1,491,863,388 1,612,837,302

See accompanying Notes to Financial Statements.

statement oF Comprehensive inComeFor the Year Ended December 31, 2010(With Comparative Figures as of December 31, 2009)(In Philippine Peso)

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statement oF Changes in equityFor the Year Ended December 31, 2010(With Comparative Figures as of December 31, 2009)(In Philippine Peso)

Notes 2010 As Restated

2009

CAPITAL CONTRIBUTION 24National Government ContributionBalance at Beginning of Year 4,312,337,376 4,312,418,376 Derecognition of Land (Batalay- Legaspi) - (81,000)Balance at End of Year 4,312,337,376 4,312,337,376

Donated Surplus 25Balance at Beginning of Year 845,327,671 845,077,671 Donations Received from Mindanao Development Authority 95,960 - Donations Received from LGU and Other Entities - 250,000

Balance at End of Year 845,423,631 845,327,671

APPRAISAL SURPLUS 26Balance at Beginning of Year 57,635,542,897 57,623,437,073 Adjustments in Assets Appraised Values (650,400) 12,105,824 Balance at End of Year 57,634,892,497 57,635,542,897

RETAINED EARNINGS 27Balance at Beginning of Year 14,135,822,074 14,033,813,395 Prior Years Adjustment 529,359,688 212,115,749 Net Profit During the Year 1,491,863,388 1,612,837,302 Dividends Paid During the Year - (200,000,000)Provision for Additional Dividends - (1,522,944,372)Balance at End of Year 16,157,045,150 14,135,822,074

TOTAL EQUITY 78,949,698,654 76,929,030,018

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statement oF Cash FlowsFor the Year Ended December 31, 2010(With Comparative Figures as of December 31, 2009)(In Philippine Peso)

2010 2009

CASH FLOWS FROM OPERATING ACTIVITIESCollection of Port Revenues 7,691,706,150 6,761,069,712 Receipt of Fund Management Income 172,321,940 142,350,268 Receipt of Other Income 423,367,144 19,355,257 Receipt of Depository Liabilities 62,227,402 5,800,158 Refund (Payment) of Guaranty Deposits, Net 441,625 (120,192)Payment of Operating Expenses (2,313,238,322) (2,598,636,464)Remittance of Trust Liabilities (529,866,126) (984,459,106)Payment of Accrued Interest (156,436,748) (52,614,514)Receipt (Payment) of Miscellaneous Liabilities/Deferred Credits, Net (32,871,279) 4,978,541

Net Cash from Operating Activities 5,317,651,786 3,297,723,660

CASH FLOWS FROM INVESTING ACTIVITIESNet Inflows (Outflows) from Investments (1,544,674,827) 23,441,815 Payments for Construction in Progress (2,074,441,405) (1,897,565,801)Acquisition (Disposal) of Property and Equipment, Net (148,571,511) 1,053,934,831

Net Cash Used in Investing Activities (3,767,687,743) (820,189,155)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from Term Loan - 500,000,000 Loan Repayments (728,292,111) (745,265,687)Dividend Payments (880,505,789) (200,000,000)Calamity Loans Collected(Granted), Net 31,867,167 (78,672,406)

Net Cash Used in Financing Activities (1,576,930,733) (523,938,093)

EFFECT OF EXCHANGE RATE CHANGES ON CASH ON HAND AND IN BANKS (2,252,088) (847,057)

NET INCREASE (DECREASE) IN CASH ON HAND AND IN BANKS (29,218,778) 1,952,749,355

CASH ON HAND AND IN BANKS AT BEGINNING OF THE YEAR 2,631,730,631 678,981,276

CASH ON HAND AND IN BANKS AT END OF THE YEAR 2,602,511,853 2,631,730,631

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notes to FinanCial statements

1. AGENCY BACKGROUND

The Philippine Ports Authority (PPA) was created by virtue of Presidential Decree (PD) No. 505 dated 11 July 1974, revised by substitution on 23 December 1975 by PD 857. Its functions are to coordinate, streamline, improve and optimize the planning, development, financing, construction, maintenance and operations of ports or port system for the entire country. Subsequent amendments under Executive Order (EO) Nos. 523 & 546, issued on 16 November 1978 and 23 July 1979, respectively, as well as Letter of Instruction (LOI) dated 11 April 1981 further enhanced PPAs corporate powers to be more responsive to the requirements of optimum port utilization, development and operation. In Executive Order No. 159 dated 13 April 1987, corporate autonomy was reverted to the PPA to insure the rapid development of port or the port system directly under it and authority was granted to execute port projects under its port program. The PPA is not exempted from payment of all taxes, duties, fees, imports and other charges imposed directly or indirectly by the Republic of the Philippines and its instrumentalities.

The PPA is a government-owned corporation attached to the Department of Transportation and Communications for policy and program coordination. The corporate powers of the Authority are vested to its Board of Directors composed of nine (9) members. Its top management is headed by a General Manager and three (3) Assistant General Managers, one each for Engineering Services, for Operations and for Finance, Legal and Administrative Services. Delivering the front line services are five (5) Port District Offices (PDOs) and twenty-four (24) Port Management Offices (PMOs) and about twenty three (23) base ports and sixty four (64) terminals ports. A Port District Manager heads each PDO, exercising supervision over PMOs that are headed by PMO Managers.

As of December 31, 2010, the PPA has a total of 2,219 employees, composed of 443 Head Office personnel and 1,776 filled positions at the PDOs and PMOs.

The major accomplishments of the PPA for CY 2010 are as follows:

Billion pesos worth of projects were pursued in line with the PPAs vision of developing at least 10 ports that would meet international standards. The development of SONA Ports and Roll-ON Roll-OFF (RORO) ports were PPAs priority on capital expenditures for the year. Implemented were 30 locally-funded projects, 16 of which were completed during the year and the remaining are still on-going.

Implementation of maintenance and repair projects on 108 port facilities, 23 of which were completed, 42 were on-going and the rest are still physically unstarted.

Implementation of dredging projects which covered 11 port areas/channels under the 2010 Revised Harbor Maintenance Program, of which three (3) were completed, six (6) are still on-going while the remaining two (2) are for implementation in year 2011.

Generation of P8,288.44 million in revenue which was P1,159.33 million or 16.26% higher than the previous year.

Awarding of 13 contracts to various Cargo Handling Operators (CHOs) either thru bidding or renewal of expired contracts.

Implementation of PPA ISO-Quality Management System (QMS) project for the Ports of Batangas, Cagayan de Oro, Davao, General Santos, Zamboanga, Ozamis and Iloilo, in support and compliance of Executive Order No. 605 dated 23 February 2007. For the Port of Batangas, second internal audit was recently carried-out to verify closure of the previous non-conformities and observations raised during the 2009 Internal Audit and Opportunities for Improvements raised during the Stage 1 Certification Audit. For Cagayan de Oro Port, training on Basic Quality and Productivity Improvement Tools for QMS has been conducted in November 2010. Meanwhile, the Ports of Davao, General Santos, Zamboanga, and Ozamis revised their policy and procedure manuals based on the comments and observations raised by the Head Office. For the Iloilo Port, the Head Office is currently undergoing review and evaluation of its QMS Policy Procedure Manual.

Continued implementation of the following special projects:

o MIS Computerization Projecto Manila North Harbor Modernization Projecto Vessel Traffic Management Systemo International Ship and Port Facility Security Codeo Shore Reception Facilityo E-Ticketingo Formulation of Standards for Port Development and

Maintenance

2. PPA COMPUTERIZATION PROJECT

The Authority had embarked into its Management Information System Computerization Project, otherwise known as the PROMPT (Providing Reliable Operations and Management of Ports Thru Technology). The project covers the automation of all aspects of the business processes of the PPA. Components of the project, consisting of the Port Operations Management System (POMS), Real Estate Management System (REMS), and Legal Support System (LSS), were rolled out for use at different offices of the PPA in year 2007. The other components, namely, Accounting and Financial Management System (AFMS) and Projects and Engineering Management System (PEMS) were rolled out for use in 2009. In 2010, the last two components, namely, the Electronic Procurement (eProc) and Executive Information System (EIS), passed the MISD testing process and will be scheduled for users training and roll out in the year 2011.

As of December 31, 2010, the total cost incurred for the project was P1.11 billion which includes payments to contractor, consultants, softwares, IT hardware/equipment, furniture and fixtures, and administrative expenses.

3. THE MANILA NORTH HARBOR MODERNIZATION PROJECT

In line with PPAs policy of implementing an integrated program for planning, development, financing and operation of ports, the public bidding for the Manila North Harbor Modernization Project was conducted. The 25-year contract for the exclusive development, management, operation and maintenance of North Harbor, comprising of Pier 2 up to the Slipway, including Isla Puting Bato, was awarded to the Manila North Harbour Port Incorporated (MNHPI) on 18 October 2009. As agreed upon, the contractor