28.	Financial Assets and Liabilities

We have various financial assets such as trade and non-trade receivables, cash and short-term deposits. Our principal financial liabilities, other than derivatives, comprise of bank loans, finance leases, trade and non-trade payables. The main purpose of these financial liabilities is to finance our operations. We also enter into derivative transactions, primarily principal only-currency swap agreements, currency options, interest rate swaps and forward foreign exchange contracts to manage the currency and interest rate risks arising from our operations and sources of financing. Our accounting policies in relation to derivatives are set out in Note 2 – Summary of Significant Accounting Policies – Financial Instruments.

The following table sets forth our consolidated financial assets and financial liabilities as at December 31, 2017 and 2016:

	Cash and cash equivalents		Loans and receivables		HTM investments		Financial instruments at FVPL			Derivatives used for hedging		Available- for-sale financial investments		Financial liabilities carried at amortized cost			Total financial assets and liabilities
	(in million pesos)
Assets as at December 31, 2017
Noncurrent:
Available-for-sale financial investments		—		—		—		—			—		15,165		—			15,165
Investment in debt securities and other long- term investments – net of current portion		—		—		150		—			—		—		—			150
Derivative financial assets – net of current portion		—		—		—		—			215		—		—			215
Advances and other noncurrent assets – net of current portion		—		13,855		—		—			—		—		—			13,855
Current:
Cash and cash equivalents		32,905		—		—		—			—		—		—			32,905
Short-term investments		—		1,074		—		—			—		—		—			1,074
Trade and other receivables		—		33,761		—		—			—		—		—			33,761
Current portion of derivative financial assets		—		—		—		—			171		—		—			171
Current portion of investment in debt securities and other long-term investments		—		100		—		—			—		—		—			100
Current portion of advances and other noncurrent assets		—		6,824		—		—			—		—		—			6,824
Total assets		32,905		55,614		150		—			386		15,165		—			104,220
Liabilities as at December 31, 2017
Noncurrent:
Interest-bearing financial liabilities – net of current portion		—		—		—		—			—		—		157,654			157,654
Derivative financial liabilities – net of current portion		—		—		—		—			8		—		—			8
Customers’ deposits		—		—		—		—			—		—		2,443			2,443
Deferred credits and other noncurrent liabilities		—		—		—		—			—		—		5,680			5,680
Current:
Accounts payable		—		—		—		—			—		—		58,490			58,490
Accrued expenses and other current liabilities		—		—		—		—			—		—		70,648			70,648
Current portion of interest-bearing financial liabilities		—		—		—		—			—		—		14,957			14,957
Dividends payable		—		—		—		—			—		—		1,575			1,575
Current portion of derivative financial liabilities		—		—		—		90			51		—		—			141
Total liabilities		—		—		—		90			59		—		311,447			311,596
Net assets (liabilities)		32,905		55,614		150		(90	)		327		15,165		(311,447	)		(207,376	)
Assets as at December 31, 2016
Noncurrent:
Available-for-sale financial investments		—		—		—		—			—		12,189		—			12,189
Investment in debt securities and other long- term investments – net of current portion		—		224		150		—			—		—		—			374
Derivative financial assets – net of current portion		—		—		—		—			499		—		—			499
Advances and other noncurrent assets – net of current portion		—		9,152		—		—			—		—		—			9,152
Current:
Cash and cash equivalents		38,722		—		—		—			—		—		—			38,722
Short-term investments		—		2,736		—		2			—		—		—			2,738
Trade and other receivables		—		24,436		—		—			—		—		—			24,436
Current portion of derivative financial assets		—		—		—		66			176		—		—			242
Current portion of investment in debt securities and other long-term investments		—		124		202		—			—		—		—			326
Current portion of advances and other noncurrent assets		—		7,916		—		—			—		—		—			7,916
Total assets		38,722		44,588		352		68			675		12,189		—			96,594
Liabilities as at December 31, 2016
Noncurrent:
Interest-bearing financial liabilities – net of current portion		—		—		—		—			—		—		151,759			151,759
Derivative financial liabilities – net of current portion		—		—		—		—			2		—		—			2
Customers’ deposits		—		—		—		—			—		—		2,431			2,431
Deferred credits and other noncurrent liabilities		—		—		—		—			—		—		13,720			13,720
Current:
Accounts payable		—		—		—		—			—		—		50,975			50,975
Accrued expenses and other current liabilities		—		—		—		—			—		—		74,868			74,868
Current portion of interest-bearing financial liabilities		—		—		—		—			—		—		33,273			33,273
Dividends payable		—		—		—		—			—		—		1,544			1,544
Current portion of derivative financial liabilities		—		—		—		16			209		—		—			225
Total liabilities		—		—		—		16			211		—		328,570			328,797
Net assets (liabilities)		38,722		44,588		352		52			464		12,189		(328,570	)		(232,203	)

The following table sets forth our consolidated offsetting of financial assets and liabilities recognized as at December 31, 2017 and 2016:

	Gross amounts of recognized financial assets and liabilities		Gross amounts of recognized financial assets and liabilities set-off in the statement of financial position		Net amount presented in the statement of financial position
	(in million pesos)
December 31, 2017
Current Financial Assets
Trade and other receivables
Foreign administrations		8,536		2,957		5,579
Domestic carriers		4,332		3,950		382
Total		12,868		6,907		5,961
Current Financial Liabilities
Accounts payable
Suppliers and contractors		54,220		24		54,196
Carriers and other customers		7,426		4,943		2,483
Total		61,646		4,967		56,679

December 31, 2016
Current Financial Assets
Trade and other receivables
Foreign administrations		9,391		4,200		5,191
Domestic carriers		15,555		15,335		220
Total		24,946		19,535		5,411
Current Financial Liabilities
Accounts payable
Suppliers and contractors		46,857		37		46,820
Carriers and other customers		5,311		1,446		3,865
Total		52,168		1,483		50,685

There are no financial instruments subject to an enforceable master netting arrangement as at December 31, 2017 and 2016.

The following table sets forth our consolidated carrying values and estimated fair values of our financial assets and liabilities recognized as at December 31, 2017 and 2016 other than those whose carrying amounts are reasonable approximations of fair values:

	Carrying Value				Fair Value
	2017		2016		2017		2016
	(in million pesos)
Noncurrent Financial Assets
Investment in debt securities and other long-term investments		150		374		151		377
Advances and other noncurrent assets		13,855		9,152		13,695		7,743
Total		14,005		9,526		13,846		8,120
Noncurrent Financial Liabilities
Interest-bearing financial liabilities:
Long-term debt		157,654		151,759		150,918		146,654
Customers’ deposits		2,443		2,431		1,700		1,879
Deferred credits and other noncurrent liabilities		5,680		13,720		5,093		12,457
Total		165,777		167,910		157,711		160,990

Below are the list of our consolidated financial assets and liabilities carried at fair value that are classified using a fair value hierarchy as required for our complete sets of consolidated financial statements as at December 31, 2017 and 2016. This classification provides a reasonable basis to illustrate the nature and extent of risks associated with those financial statements.

	2017						2016
	Level 1⁽¹⁾		Level 2⁽²⁾		Total		Level 1⁽¹⁾		Level 2⁽²⁾		Total
	(in million pesos)
Noncurrent Financial Assets
Available-for-sale financial investments: Listed equity securities		12,977		—		12,977		10,173		—		10,173
Derivative financial assets – net of current portion		—		215		215		—		499		499
Current Financial Assets
Short-term investments		—		—		—		—		2		2
Current portion of derivative financial assets		—		171		171		—		242		242
Total		12,977		386		13,363		10,173		743		10,916
Noncurrent Financial Liabilities
Derivative financial liabilities		—		8		8		—		2		2
Current Financial Liabilities
Derivative financial liabilities		—		141		141		—		225		225
Total		—		149		149		—		227		227

⁽¹⁾

Fair values determined using observable market inputs that reflect quoted prices in active markets for identical assets or liabilities.

⁽²⁾

Fair values determined using inputs other than quoted market prices that are either directly or indirectly observable for the assets or liabilities.

As at December 31, 2017 and 2016, we have no financial instruments measured at fair values using inputs that are not based on observable market data (Level 3). As at December 31, 2017 and 2016, there were no transfers into and out of Level 3 fair value measurements.

As at December 31, 2017 and 2016, there were no transfers between Level 1 and Level 2 fair value measurements.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value:

Long-term financial assets and liabilities:

Fair value is based on the following:

Type	Fair Value Assumptions	Fair Value Hierarchy
Noncurrent portion of advances and other noncurrent assets	Estimated fair value is based on the discounted values of future cash flows using the applicable zero coupon rates plus counterparties’ credit spread.	Level 3
Fixed Rate Loans: U.S. dollar notes	Quoted market price.	Level 1
Investment in debt securities	Fair values were determined using quoted prices. For non-quoted securities, fair values were determined using discounted cash flow based on market observable rates.	Level 1 Level 3
Other loans in all other currencies	Estimated fair value is based on the discounted value of future cash flows using the applicable Commercial Interest Reference Rate and PDST-R2 rates for similar types of loans plus PLDT’s credit spread.	Level 3
Variable Rate Loans	The carrying value approximates fair value because of recent and regular repricing based on market conditions.	Level 2

Derivative Financial Instruments:

Forward foreign exchange contracts, foreign currency swaps and interest rate swaps: The fair values were computed as the present value of estimated future cash flows using market U.S. dollar and Philippine peso interest rates as at valuation date.

The valuation techniques considered various inputs including the credit quality of counterparties.

Available-for-sale financial investments: Fair values of available-for-sale financial investments, which consist of listed shares, were determined using quoted prices. For investments where there is no active market and fair value cannot be determined, investments are carried at cost less any accumulated impairment losses.

Due to the short-term nature of the transactions, the fair value of cash and cash equivalents, short-term investments, trade and other receivables, accounts payable, accrued expenses and other current liabilities and dividends payable approximate their carrying values as at the end of the reporting period.

Derivative Financial Instruments

Our derivative financial instruments are accounted for as either cash flow hedges or transactions not designated as hedges. Cash flow hedges refer to those transactions that hedge our exposure to variability in cash flows attributable to a particular risk associated with a recognized financial asset or liability and exposures arising from forecast transactions. Changes in the fair value of these instruments representing effective hedges are recognized directly in other comprehensive income until the hedged item is recognized in our consolidated income statement. For transactions that are not designated as hedges, any gains or losses arising from the changes in fair value are recognized directly to income for the period.

As at December 31, 2017 and 2016, we have taken into account the counterparties’ credit risks (for derivative assets) and our own non-performance risk (for derivative liabilities) and have included a credit or debit valuation adjustment, as appropriate, by assessing the maximum credit exposure and taking into account market-based inputs which considers the risk of default occurring and corresponding losses once the default event occurs. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

The table below sets out the information about our consolidated derivative financial instruments as at December 31, 2017 and 2016:

											2017					2016
	Original Notional Amount		Trade Date	Underlying Transaction in U.S. Dollar	Termination Date	Weighted Average Hedge Cost			Weighted Average Foreign Exchange Rate in Php		Notional		Net Mark-to-market Gains (Losses)			Notional		Net Mark-to-market Gains (Losses)
	(in millions)			(in millions)					(in millions)
Transactions not designated as hedges:
PLDT
Long-term currency swaps	US$262		2001 and 2002	300 Notes 2017	March 6, 2017		3.42	%		49.85	US$—		Php—			US$202		Php–
Forward foreign Exchange contracts		158	Various dates in 2015 and 2016	U.S. dollar liabilities	Various dates in 2016		—			48.50		—		—			—		—
		34	Various dates in 2017	U.S. dollar liabilities	Various dates in 2017		—			50.18		—		—			—		—
		27	Various dates in 2017	U.S. dollar liabilities	January 2018		—			50.57		27		(15	)		—		—
		29	Various dates in November and December 2017	U.S. dollar liabilities	February 2018		—			50.95		29		(24	)		—		—
		2	Various dates in 2018	U.S. dollar liabilities	February 2018		—			49.84		—		—			—		—
Smart
Forward foreign exchange contracts		107	Various dates in 2015 and 2016	U.S. dollar liabilities	Various dates in 2016		—			46.96		—		—			—		—
		91	Various dates in 2016 and 2017	U.S. dollar liabilities	Various dates in 2017		—			49.54		—		—			48		50
		46	Various dates in 2017	U.S. dollar liabilities	Various dates in 2018		—			51.22		46		(49	)		—		—
		4	Various dates in January 2018	U.S. dollar liabilities	Various dates in 2018		—			50.68		—		—			—		—
Foreign exchange options	5^(a)		August 10, 2016	U.S. dollar liabilities	November 14, 2016		—			46.82		—		—			—		—
										46.90		—		—			—		—
										47.98		—		—			—		—
	59^(b)		Various dates in 2016 and 2017	U.S. dollar liabilities	Various dates in 2017		—			49.60		—		—		11		4
										50.30		—		—			—		—
										51.24		—		—			—		—
	3^(c)		Various dates in 2017	U.S. dollar liabilities	Various dates in 2018		—			50.70		3		(2	)		—		—
										51.67		—		—			—		—
										52.53		—		—			—		—
	1^(d)		January 19, 2018	U.S. dollar liabilities	July 19, 2018		—			50.45		—		—			—		—
										51.30		—		—			—		—
										52.30		—		—			—		—
DMPI
Interest rate swaps		54	October 7, 2008	59 loan facility	March 31, 2017		3.88	%		—		—		—			3		(2	)
		47	October 7, 2008	51 loan facility	June 30, 2017		3.97	%		—		—		—			3		(3	)
													(Php90		)			Php 49
Transactions designated a hedges:
PLDT
Interest rate swaps^(e)		30	January 23, 2015	150 term loan	March 7, 2017		2.11	%		—	US$–		Php–			US$8		Php–
		240	Various dates in 2013 and 2015	300 term loan	January 16, 2018		2.17	%		—		33		2			100		9
		100	August 2014	100 PNB	August 11, 2020		3.46	%		—		97		5			98		(50	)
		50	September 2014	50 Metrobank	September 2, 2020		3.47	%		—		49		—			49		(29	)
		150	April and June 2015	200 term loan	February 25, 2022		2.70	%		—		150		26			150		(34	)
Long-term currency swaps^(f)		140	October 2015 to June 2016	300 term loan	January 16, 2018		2.20	%		46.67		31		88			94		230
		4	January 2017	100 PNB	August 11, 2020		1.01	%		49.79		3		2			—		—
		6	April and June 2017	200 Bank of Tokyo	August 26, 2019		1.63	%		49.51		6		—			—		—
		2	January 2018	200 Bank of Tokyo	August 26, 2019		1.59	%		49.86		—		—			—		—
		6	February 2018	200 Bank of Tokyo	February 26, 2020		1.82	%		51.27		—		—			—		—
Smart
Interest rate swaps^(g)		45	May 8, 2013	60 Bank of Tokyo	June 6, 2016		1.53	%		—		—		—			—		—
		38	May 9, 2013	50 FEC	August 19, 2016		1.43	%		—		—		—			—		—
		44	May 16, 2013	50 Bank of Tokyo	May 30, 2017		1.77	%		—		—		—			6		1
		110	Various dates in 2013 and 2014	120 term loan	June 20, 2018		2.22	%		—		15		3			45		9
		85	Various dates in 2014 and 2015	100 Bank of Tokyo	March 7, 2019		2.23	%		—		29		8			49		6
		50	October 2, 2014	50 Mizuho	May 14, 2019		2.58	%		—		17		4			28		—
		200	Various dates in 2015	200 Mizuho	March 4, 2020		2.10	%		—		111		51			156		39
		30	February 2016	100 Mizuho	December 7, 2021		2.03	%		—		24		23			30		22
Long-term currency swaps^(h)		100	Various dates in 2015	200 Mizuho	March 5, 2018		2.21	%		46.66		20		58			60		155
		45	Various dates in 2016	100 Mizuho	December 7, 2018		1.93	%		46.55		18		58			36		107
		11	Various dates in 2017	80 CBC	May 31, 2018		1.28	%		49.66		4		1			—		—
		8	Various dates in 2017	2015 Mizuho US$100 term loan	December 7, 2020		1.60	%		50.60		8		(2	)		—		—
		4	Various dates in 2018	2015 Mizuho US$100 term loan	December 7, 2020		1.62	%		51.89		—		—			—		—
		10	Various dates in 2018	2015 Mizuho US$200 term loan	March 4, 2020		1.96	%		51.77		—		—			—		—
														327					465
													Php 237					Php 514

^(a)

If the Philippine peso to U.S. dollar spot exchange rate on the maturity date settles between Php46.90 to Php47.98, Smart will purchase the U.S. dollar for Php46.90. However, if on maturity, the exchange rate settles above Php47.98, Smart will purchase the U.S. dollar for Php46.90 plus the excess above Php47.98, and if the exchange rate is lower than Php46.90, Smart will purchase the U.S. dollar at the prevailing Philippine peso to U.S. dollar spot exchange rate, subject to a floor of Php46.82.

^(b)

If the Philippine peso to U.S. dollar spot exchange rate on the maturity date settles between Php50.30 to Php51.24, Smart will purchase the U.S. dollar for Php50.30. However, if on maturity, the exchange rate settles above Php51.24, Smart will purchase the U.S. dollar for Php50.30 plus the excess above Php51.24, and if the exchange rate is lower than Php50.30, Smart will purchase the U.S. dollar at the prevailing Philippine peso to U.S. dollar spot exchange rate, subject to a floor of Php49.60.

^(c)

If the Philippine peso to U.S. dollar spot exchange rate on the maturity date settles between Php51.67 to Php52.53, Smart will purchase the U.S. dollar for Php51.67. However, if on maturity, the exchange rate settles above Php52.53, Smart will purchase the U.S. dollar for Php51.67 plus the excess above Php52.53, and if the exchange rate is lower than Php51.670, Smart will purchase the U.S. dollar at the prevailing Philippine peso to U.S. dollar spot exchange rate, subject to a floor of Php50.70.

^(d)

If the Philippine peso to U.S. dollar spot exchange rate on the maturity date settles between Php51.30 to Php52.30, Smart will purchase the U.S. dollar for Php51.30. However, if on maturity, the exchange rate settles above Php52.30, Smart will purchase the U.S. dollar for Php51.30 plus the excess above Php52.30, and if the exchange rate is lower than Php51.30, Smart will purchase the U.S. dollar at the prevailing Philippine peso to U.S. dollar spot exchange rate, subject to a floor of Php50.45.

^(e)

PLDT’s interest rate swap agreements outstanding as at December 31, 2017 and 2016 were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. The mark-to-market gains amounting to Php44 million and losses amounting to Php81 million were recognized in our consolidated statements of other comprehensive income as at December 31, 2017 and 2016, respectively. Interest accrual on the interest rate swaps amounting to Php11 million and Php23 million were recorded as at December 31, 2017 and 2016, respectively. There were no ineffective portion in the fair value recognized in our consolidated income statements for the years ended December 31, 2017 and 2016.

^(f)

PLDT’s long-term principal only-currency swap agreements entered into in 2015 to 2017 were designated as cash flow hedges, wherein effective portion of the movements in the fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. The mark-to-market gains amounting to Php108 million and Php275 million were recognized in our consolidated statements of other comprehensive income as at December 31, 2017 and 2016, respectively. Hedge cost accrual on the long-term principal only-currency swaps amounting to Php18 million and Php45 million were recognized as at December 31, 2017 and 2016, respectively. The amounts recognized as other comprehensive income are transferred to profit or loss when the hedged loan is revalued for changes in the foreign exchange rate. The ineffective portion of the movements in the fair value amounting to Php3 million and Php8 million were recognized in our consolidated income statements for the years ended December 31, 2017 and 2016, respectively.

^(g)

Smart’s interest rate swap agreements outstanding as at December 31, 2017 and 2016 were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. The mark-to-market gains amounting to Php85 million and Php79 million were recognized in our consolidated statements of other comprehensive income as at December 31, 2017 and 2016, respectively. Reduction on interest arising from the interest rate swaps amounting to Php4 million and addition on interest arising from the interest rate swaps amounting to Php2 million as at December 31, 2017 and 2016, respectively. There were no ineffective portion in the fair value recognized in our consolidated income statements for the years ended December 31, 2017 and 2016.

^(h)

Smart’s long-term principal only-currency swap agreements outstanding as at December 31, 2017 and 2016 were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. The mark-to-market gains amounting to Php124 million and Php284 million were recognized in our consolidated statements of other comprehensive income as at December 31, 2017 and 2016, respectively. Hedge cost accrual on the long-term principal only-currency swaps amounting to Php9 million and Php22 million were recognized as at December 31, 2017 and 2016, respectively. The amounts recognized as other comprehensive income are transferred to profit or loss when the hedged loan is revalued for changes in the foreign exchange rate. The ineffective portions of the movements in the fair value amounting to Php4 million and Php9 million was recognized in our consolidated income statements for the years ended December 31, 2017 and 2016, respectively.

	2017			2016
	(in million pesos)
Presented as:
Noncurrent assets		215			499
Current assets		171			242
Noncurrent liabilities		(8	)		(2	)
Current liabilities		(141	)		(225	)
Net assets		237			514

Movements of our consolidated mark-to-market gains for the years ended December 31, 2017 and 2016 are summarized as follows:

	2017			2016
	(in million pesos)
Net mark-to-market gains (losses) at beginning of the year		514			(871	)
Gains on derivative financial instruments (Note 4)		724			1,539
Effective portion recognized in the profit or loss for the cash flow hedges		(55	)		(371	)
Net fair value gains (losses) on cash flow hedges charged to other comprehensive income		(411	)		76
Settlements, interest expense and others		(535	)		141
Net mark-to-market gains at end of the year		237			514

Our consolidated analysis of gains on derivative financial instruments for the years ended December 31, 2017, 2016 and 2015 are as follows:

	2017			2016			2015
	(in million pesos)
Gains on derivative financial instruments		724			1,539			781
Hedge costs		(191	)		(543	)		(361	)
Net gains on derivative financial instruments (Note 5)		533			996			420

Financial Risk Management Objectives and Policies

The main risks arising from our financial instruments are liquidity risk, foreign currency exchange risk, interest rate risk and credit risk. The importance of managing those risks has significantly increased in light of the considerable change and volatility in both the Philippine and international financial markets. Our Board of Directors reviews and approves policies for managing each of these risks. Our policies for managing these risks are summarized below. We also monitor the market price risk arising from all financial instruments.

Liquidity Risk

Our exposure to liquidity risk refers to the risk that our financial requirements, working capital requirements and planned capital expenditures are not met.

We manage our liquidity profile to be able to finance our operations and capital expenditures, service our maturing debts and meet our other financial obligations. To cover our financing requirements, we use internally generated funds and proceeds from debt and equity issues and sales of certain assets.

As part of our liquidity risk management program, we regularly evaluate our projected and actual cash flows, including our loan maturity profiles, and continuously assess conditions in the financial markets for opportunities to pursue fund-raising initiatives. These activities may include bank loans, export credit agency-guaranteed facilities, debt capital and equity market issues.

Any excess funds are primarily invested in short-term and principal-protected bank products that provide flexibility of withdrawing the funds anytime. We also allocate a portion of our cash in longer tenor investments such as fixed income securities issued or guaranteed by the Republic of the Philippines, and Philippine banks and corporates and managed. We regularly evaluate available financial products and monitor market conditions for opportunities to enhance yields at acceptable risk levels. Our investments are also subject to certain restrictions contained in our debt covenants. Our funding arrangements are designed to keep an appropriate balance between equity and debt and to provide financing flexibility while enhancing our businesses.

Our cash position remains sufficient to support our planned capital expenditure requirements and service our debt and financing obligations; however, we may be required to finance a portion of our future capital expenditures from external financing sources. We have cash and cash equivalents, and short-term investments amounting to Php32,905 million and Php1,074 million, respectively, as at December 31, 2017, which we can use to meet our short-term liquidity needs. See Note 16 – Cash and Cash Equivalents.

The following table discloses a summary of maturity profile of our financial assets based on our consolidated undiscounted claims outstanding as at December 31, 2017 and 2016:

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in million pesos)
December 31, 2017
Cash equivalents		26,554		26,554		—		—		—
Loans and receivables:		70,337		56,260		11,175		2,739		163
Advances and other noncurrent assets		20,901		6,824		11,175		2,739		163
Short-term investments		1,074		1,074		—		—		—
Investment in debt securities and other long-term investments		100		100		—		—		—
Retail subscribers		17,961		17,961		—		—		—
Corporate subscribers		9,641		9,641		—		—		—
Foreign administrations		6,517		6,517		—		—		—
Domestic carriers		457		457		—		—		—
Dealers, agents and others		13,686		13,686		—		—		—
HTM investments:		150		—		150		—		—
Investment in debt securities and other long-term investments		150		—		150		—		—
Available-for-sale financial investments		15,165		—		—		—		15,165
Total		112,206		82,814		11,325		2,739		15,328
December 31, 2016
Cash equivalents		32,338		32,338		—		—		—
Loans and receivables:		63,586		54,000		4,951		4,483		152
Advances and other noncurrent assets		17,278		7,916		4,727		4,483		152
Short-term investments		2,736		2,736		—		—		—
Investment in debt securities and other long-term investments		348		124		224		—		—
Retail subscribers		20,290		20,290		—		—		—
Corporate subscribers		9,333		9,333		—		—		—
Foreign administrations		5,819		5,819		—		—		—
Domestic carriers		354		354		—		—		—
Dealers, agents and others		7,428		7,428		—		—		—
HTM investments:		352		202		—		150		—
Investment in debt securities and other long-term investments		352		202		—		150		—
Financial instruments at FVPL:		2		2		—		—		—
Short-term investments		2		2		—		—		—
Available-for-sale financial investments		12,189		—		1,000		—		11,189
Total		108,467		86,542		5,951		4,633		11,341

The following table discloses a summary of maturity profile of our financial liabilities based on our consolidated contractual undiscounted obligations outstanding as at December 31, 2017 and 2016:

	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in million pesos)
December 31, 2017
Debt⁽¹⁾:		213,597		3,285		70,552		48,958		90,802
Principal		173,136		3,251		51,254		37,925		80,706
Interest		40,461		34		19,298		11,033		10,096
Lease obligations:		20,666		11,871		3,851		2,266		2,678
Operating lease		20,666		11,871		3,851		2,266		2,678
Other obligations:		128,729		120,556		5,907		264		2,002
Derivative financial liabilities⁽²⁾:		111		85		26		—		—
Forward foreign exchange contracts		56		56		—		—		—
Long-term currency swap		35		27		8		—		—
Interest rate swap		18		—		18		—		—
Long-term foreign currency options		2		2		—		—		—
Various trade and other obligations:		128,618		120,471		5,881		264		2,002
Suppliers and contractors		59,776		54,196		5,339		241		—
Utilities and related expenses		44,007		43,984		22		1		—
Liability from redemption of preferred shares		7,870		7,870		—		—		—
Employee benefits		6,573		6,573		—		—		—
Customers’ deposits		2,443		—		419		22		2,002
Carriers and other customers		2,083		2,083		—		—		—
Dividends		1,575		1,575		—		—		—
Others		4,291		4,190		101		—		—
Total contractual obligations		362,992		135,712		80,310		51,488		95,482
December 31, 2016
Debt⁽¹⁾:		223,130		21,883		64,751		51,414		85,082
Principal		185,663		21,138		46,931		40,886		76,708
Interest		37,467		745		17,820		10,528		8,374
Lease obligations:		18,456		10,734		3,581		1,972		2,169
Operating lease		18,456		10,734		3,581		1,972		2,169
Other obligations:		134,057		117,717		1,793		12,593		1,954
Derivative financial liabilities⁽²⁾:		247		106		141		—		—
Interest rate swap		147		6		141		—		—
Long-term currency swap		100		100		—		—		—
Various trade and other obligations:		133,810		117,611		1,652		12,593		1,954
Suppliers and contractors		60,494		46,820		1,113		12,561		—
Utilities and related expenses		40,166		40,118		48		—		—
Liability from redemption of preferred shares		7,883		7,883		—		—		—
Employee benefits		6,191		6,191		—		—		—
Customers’ deposits		2,431		—		445		32		1,954
Carriers and other customers		2,422		2,422		—		—		—
Dividends		1,544		1,544		—		—		—
Others		12,679		12,633		46		—		—
Total contractual obligations		375,643		150,334		70,125		65,979		89,205

⁽¹⁾

Consists of long-term debt, including current portion; gross of unamortized debt discount and debt issuance costs.

⁽²⁾

Gross liabilities before any offsetting application.

Debt

See Note 21 – Interest-bearing Financial Liabilities – Long-term Debt for a detailed discussion of our debt.

Operating Lease Obligations

The PLDT Group has various lease contracts for periods ranging from one to ten years covering certain offices, warehouses, cell sites telecommunications equipment locations and various office equipment. These lease contracts are subject to certain escalation clauses.

Our consolidated future minimum lease commitments payable with non-cancellable operating leases as at December 31, 2017 and 2016 are as follows:

	2017		2016
	(in million pesos)
Within one year		11,945		10,911
After one year but not more than five years		6,043		5,376
More than five years		2,678		2,169
Total		20,666		18,456

Finance Lease Obligations

See Note 21 – Interest-bearing Financial Liabilities – Obligations under Finance Leases for the detailed discussion of our long-term finance lease obligations.

Other Obligations – Various Trade and Other Obligations

PLDT Group has various obligations to suppliers for the acquisition of phone and network equipment, contractors for services rendered on various projects, foreign administrations and domestic carriers for the access charges, shareholders for unpaid dividends distributions, employees for benefits and other related obligations, and various business and operational related agreements. Total obligations under these various agreements amounted to approximately Php128,618 million and Php133,810 million as at December 31, 2017 and 2016, respectively. See Note 23 – Accounts Payable and Note 23 – Accrued Expenses and Other Current Liabilities.

Commercial Commitments

Our outstanding consolidated commercial commitments, in the form of letters of credit, amounted to Php88 million and Php6,788 million as at December 31, 2017 and 2016, respectively. These commitments will expire within one year. The commercial commitment in 2016 includes standby letters of credit issued in relation with PLDT’s acquisition of VTI, Bow Arken and Brightshare. See Note 10 – Investments in Associates and Joint Ventures – Investments of PLDT in VTI, Bow Arken and Brightshare.

Collateral

We have not made any pledges as collateral with respect to our financial liabilities as at December 31, 2017 and 2016.

Foreign Currency Exchange Risk

Foreign currency exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The revaluation of our foreign currency-denominated financial assets and liabilities as a result of the appreciation or depreciation of the Philippine peso is recognized as foreign exchange gains or losses as at the end of the reporting period. The extent of foreign exchange gains or losses is largely dependent on the amount of foreign currency debt. While a certain percentage of our revenues are either linked to or denominated in U.S. dollars, a substantial portion of our capital expenditures, a portion of our indebtedness and related interest expense and a portion of our operating expenses are denominated in foreign currencies, mostly in U.S. dollars. As such, a strengthening or weakening of the Philippine peso against the U.S. dollar will decrease or increase in Philippine peso terms both the principal amount of our foreign currency-denominated debts and the related interest expense, our foreign currency-denominated capital expenditures and operating expenses as well as our U.S. dollar-linked and U.S. dollar-denominated revenues. In addition, many of our financial ratios and other financial tests are affected by the movements in the Philippine peso to U.S. dollar exchange rate.

To manage our foreign exchange risks and to stabilize our cash flows in order to improve investment and cash flow planning, we enter into forward foreign exchange contracts, currency swap contracts, currency option contracts and other hedging products aimed at reducing and/or managing the adverse impact of changes in foreign exchange rates on our operating results and cash flows. We use forward foreign exchange purchase contracts, currency swap contracts and currency option contracts to manage the foreign currency risks associated with our foreign currency-denominated loans. We accounted for these instruments as either cash flow hedges, wherein changes in the fair value are recognized in our consolidated other comprehensive income until the hedged transaction affects our consolidated income statement or transactions not designated as hedges, wherein changes in the fair value are recognized directly as income or expense for the period.

The following table shows our consolidated foreign currency-denominated monetary financial assets and liabilities and their Philippine peso equivalents as at December 31, 2017 and 2016:

	2017				2016
	U.S. Dollar		Php⁽¹⁾		U.S. Dollar		Php⁽²⁾
	(in millions)
Noncurrent Financial Assets
Investment in debt securities and other long term investments		—		1		7		348
Derivative financial assets – net of current portion		4		215		10		499
Advances and other noncurrent assets – net of current portion		—		2		—		18
Total noncurrent financial assets		4		218		17		865
Current Financial Assets
Cash and cash equivalents		440		21,988		419		20,847
Short-term investments		2		75		55		2,720
Trade and other receivables – net		218		10,893		158		7,853
Current portion of derivative financial assets		3		171		5		242
Current portion of investment in debt securities and other long-term investments		2		100		—		—
Current portion of advances and other noncurrent assets		—		9		—		8
Total current financial assets		665		33,236		637		31,670
Total Financial Assets		669		33,454		654		32,535
Noncurrent Financial Liabilities
Interest-bearing financial liabilities – net of current portion		446		22,285		680		33,831
Derivative financial liabilities – net of current portion		—		8		—		2
Other noncurrent liabilities		—		11		—		5
Total noncurrent financial liabilities		446		22,304		680		33,838
Current Financial Liabilities
Accounts payable		233		11,670		191		9,477
Accrued expenses and other current liabilities		166		8,314		171		8,513
Current portion of interest-bearing financial liabilities		259		12,922		496		24,671
Current portion of derivative financial liabilities		3		141		5		225
Total current financial liabilities		661		33,047		863		42,886
Total Financial Liabilities		1,107		55,351		1,543		76,724

⁽¹⁾

The exchange rate used to convert the U.S. dollar amounts into Philippine peso was Php49.96 to US$1.00, the Philippine peso-U.S. dollar exchange rate as quoted through the Philippine Dealing System as at December 31, 2017.

⁽²⁾

The exchange rate used to convert the U.S. dollar amounts into Philippine peso was Php49.77 to US$1.00, the Philippine peso-U.S. dollar exchange rate as quoted through the Philippine Dealing System as at December 31, 2016.

As at March 26, 2017, the Philippine peso-U.S. dollar exchange rate was Php52.29 to US$1.00. Using this exchange rate, our consolidated net foreign currency-denominated financial liabilities would have increased in Philippine peso terms by Php1,021 million as at December 31, 2017.

Approximately 20% and 31% of our total consolidated debts (net of consolidated debt discount) were denominated in U.S. dollars as at December 31, 2017 and 2016, respectively. Our consolidated foreign currency-denominated debt decreased to Php35,032 million as at December 31, 2017 from Php58,192 million as at December 31, 2016. See Note 21 – Interest-bearing Financial Liabilities. The aggregate notional amount of our consolidated outstanding long-term principal only-currency swap contracts were US$92 million and US$392 million as at December 31, 2017 and 2016, respectively. Consequently, the unhedged portion of our consolidated debt amounts was approximately 16% (or 8%, net of our consolidated U.S. dollar cash balances allocated for debt) and 19% (or 8%, net of our consolidated U.S. dollar cash balances allocated for debt) as at December 31, 2017 and 2016, respectively.

Approximately, 23% of our consolidated revenues were denominated in U.S. dollars and/or were linked to U.S. dollars for each of the years ended December 31, 2017 and 2016. Approximately, 8% of our consolidated expenses were denominated in U.S. dollars and/or linked to the U.S. dollar for the year ended December 31, 2017 as compared with approximately 9% for the year ended December 31, 2016. In this respect, the higher weighted average exchange rate of the Philippine peso against the U.S. dollar increased our revenues and expenses, and consequently, affects our cash flow from operations in Philippine peso terms. In view of the anticipated continued decline in dollar-denominated/dollar-linked revenues, which provide a natural hedge against our foreign currency exposure, we are progressively refinancing our dollar-denominated debts in Philippine pesos.

The Philippine peso depreciated by 0.38% against the U.S. dollar to Php49.96 to US$1.00 as at December 31, 2017 from Php49.77 to US$1.00 as at December 31, 2016. As a result of our consolidated foreign exchange movements, as well as the amount of our consolidated outstanding net foreign currency financial assets and liabilities, we recognized net consolidated foreign exchange losses of Php411 million, Php2,785 million and Php3,036 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Management conducted a survey among our banks to determine the outlook of the Philippine peso-U.S. dollar exchange rate until December 31, 2018. Our outlook is that the Philippine peso-U.S. dollar exchange rate may weaken/strengthen by 5.09% as compared to the exchange rate of Php49.96 to US$1.00 as at December 31, 2017. If the Philippine peso-U.S. dollar exchange rate had weakened/strengthened by 5.09% as at December 31, 2017, with all other variables held constant, profit after tax for the year ended December 31, 2017 would have been approximately Php692 million lower/higher and our consolidated stockholders’ equity as at December 31, 2017 would have been approximately Php612 million lower/higher, mainly as a result of consolidated foreign exchange gains and losses on conversion of U.S. dollar-denominated net assets/liabilities and mark-to-market valuation of derivative financial instruments.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates.

Our exposure to the risk of changes in market interest rates relates primarily to our long-term debt obligations with floating interest rates.

Our policy is to manage interest cost through a mix of fixed and variable rate debts. We evaluate the fixed to floating ratio of our loans in line with movements of relevant interest rates in the financial markets. Based on our assessment, new financing will be priced either on a fixed or floating rate basis. We enter into interest rate swap agreements in order to manage our exposure to interest rate fluctuations. We make use of hedging instruments and structures solely for reducing or managing financial risk associated with our liabilities and not for trading purposes.

The following tables set out the carrying amounts, by maturity, of our financial instruments that are expected to have exposure on interest rate risk as at December 31, 2017 and 2016. Financial instruments that are not subject to interest rate risk were not included in the table.

As at December 31, 2017

	In U.S. Dollars																		Fair Value
	Below 1 year		1-2 years		2-3 years		3-5 years		Over 5 years		Total		In Php		Discount/ Debt Issuance Cost In Php		Carrying Value In Php		In U.S. Dollar		In Php
															(in millions)
Assets:
Investment in Debt Securities and Other Long-term Investments
U.S. Dollar		2		—		—		—		—		2		100		—		100		2		100
Interest rate	3.5000%			—		—		—		—		—		—		—		—		—		—
Philippine Peso		—		—	3			—		—		3		150		—		150		3		151
Interest rate		—		—	4.8371%			—		—		—		—		—		—		—		—
Cash in Bank
U.S. Dollar	29			—		—		—		—		29		1,465		—		1,465		29		1,465
Interest rate	0.0100% to 0.2500%			—		—		—		—		—		—		—		—		—		—
Philippine Peso	89			—		—		—		—		89		4,468		—		4,468		89		4,468
Interest rate	0.05000% to 1.2500%			—		—		—		—		—		—		—		—		—		—
Other Currencies		—		—		—		—		—		—		9		—		9		—		9
Interest rate	0.1000% to 0.5000%			—		—		—		—		—		—		—		—		—		—
Temporary Cash Investments
U.S. Dollar		402		—		—		—		—		402		20,063		—		20,063		402		20,063
Interest rate	0.2500% to 2.1000%			—		—		—		—		—		—		—		—		—		—
Philippine Peso		130		—		—		—		—		130		6,491		—		6,491		130		6,491
Interest rate	0.1250% to 4.3250%			—		—		—		—		—		—		—		—		—		—
Short-term Investments
U.S. Dollar		22		—		—		—		—		22		1,074		—		1,074		22		1,074
Interest rate	2.1000%			—		—		—		—		—		—		—		—		—		—
Philippine Peso		—		—		—		—		—		—		—		—		—		—		—
Interest rate		—		—		—		—		—		—		—		—		—		—		—
		674		—		3		—		—		677		33,820		—		33,820		677		33,821
Liabilities:
Long-term Debt
Fixed Rate
U.S. Dollar Fixed Loans		5		37		8		11		—		61		3,050		6		3,044	62			3,104
Interest rate	1.4100%		1.4100% to 2.8850%		2.8850%		2.8850%			—		—		—		—		—		—		—
Philippine Peso		—		333		81		618		1,565		2,597		129,733		335		129,398		2,450		122,418
Interest rate		—	3.9000% to 6.4044%		3.9000% to 6.4044%		3.9000% to 6.4044%		3.9000% to 6.4044%			—		—		—		—		—		—
Variable Rate
U.S. Dollar		60		266		203		65		50		644		32,158	170			31,988	644			32,158
Interest rate	1.2000% to 1.6000% over LIBOR		USLIBOR + 0.7900% to 1.4500%		USLIBOR + 0.7900% to 1.4500%		USLIBOR + 0.7900% to 1.4500%		USLIBOR + 1.0500%			—		—		—		—		—		—
Philippine Peso		—		3		95		66		—		164		8,195		14		8,181	164			8,195
Interest rate		—	1.000% over PDST-R2		1.000% over PDST-R2		1.000% over PDST-R2			—		—		—		—		—		—		—
		65		639		387		760		1,615		3,466		173,136		525		172,611		3,320		165,875

As at December 31, 2016

	In U.S. Dollars																					Fair Value
	Below 1 year			1-2 years		2-3 years		3-5 years			Over 5 years			Total		In Php		Discount/ Debt Issuance Cost In Php		Carrying Value In Php		In U.S. Dollar		In Php
																		(in millions)
Assets:
Investment in Debt Securities and Other Long-term Investments
U.S. Dollar		3			4		—		—			—			7		348		—		348		7		350
Interest rate	4.0000%			3.5000% to 4.0000%			—		—			—			—		—		—		—		—		—
Philippine Peso		4			—		—		3			—			7		352		—		352		7		353
Interest rate	4.2180% to 4.2500%				—		—		4.8400	%		—			—		—		—		—		—		—
Cash in Bank
U.S. Dollar		17			—		—		—			—			17		850		—		850		17		850
Interest rate	0.0100% to 0.5000%				—		—		—			—			—		—		—		—		—		—
Philippine Peso		73			—		—		—			—			73		3,652		—		3,652		73		3,652
Interest rate	0.0010% to 1.6250%				—		—		—			—			—		—		—		—		—		—
Other Currencies		1			—		—		—			—			1		22		—		22		1		22
Interest rate	0.0100% to 0.5000%				—		—		—			—			—		—		—		—		—		—
Temporary Cash Investments
U.S. Dollar		366			—		—		—			—			366		18,239		—		18,239		366		18,239
Interest rate	0.2500% to 4.7500%				—		—		—			—			—		—		—		—		—		—
Philippine Peso		283			—		—		—			—			283		14,099		—		14,099		283		14,099
Interest rate	0.1250% to 5.000%				—		—		—			—			—		—		—		—		—		—
Short-term Investments
U.S. Dollar		55			—		—		—			—			55		2,738		—		2,738		55		2,738
Interest rate	1.6500% to 4.0000%				—		—		—			—			—		—		—		—		—		—


		802			4		—		3			—			809		40,300		—		40,300		809		40,303
Liabilities:
Long-term Debt
Fixed Rate
U.S. Dollar Notes		228			—		—		—			—			228		11,366		4		11,362		233		11,606
Interest rate		8.3500	%		—		—		—			—			—		—		—		—		—		—
U.S. Dollar Fixed Loans		5			42		9		15			4			75		3,726		20		3,706		77		3,813
Interest rate		1.9000	%	1.4100% to 2.8850%		1.4100% to 2. 8850%			2.8850	%		2.8850	%		—		—		—		—		—		—
Philippine Peso		153			59		287		405			1,485			2,389		118,881		303		118,578		2,267		112,818
Interest rate	5.2854% to 5.5808%			3.9000% to 6.2600%		3.9000% to 6.2600%		3.9000% to 6.2600%			3.9000% to 6.2600%				—		—		—		—		—		—
Variable Rate
U.S. Dollar		39			440		100		241			52			872		43,410		286		43,124		872		43,410
Interest rate	0.3000% to 1.6000% over LIBOR			0.7900% to 1.6000% over LIBOR		0.7900% to 1.4500% over LIBOR		0.7900% to 1.4500% over LIBOR			0.7900% to 1.0500% over LIBOR				—		—		—		—		—		—
Philippine Peso		—			3		2		161			—			166		8,280		18		8,262		166		8,280
Interest rate		—		BSP overnight rate to 1.0000% over PDST-R2		BSP overnight rate to 1.0000% over PDST-R2		BSP overnight rate to 1.0000% over PDST-R2				—			—		—		—		—		—		—
		425			544		398		822			1,541			3,730		185,663		631		185,032		3,615		179,927

Fixed rate financial instruments are subject to fair value interest rate risk while floating rate financial instruments are subject to cash flow interest rate risk.

Repricing of floating rate financial instruments is mostly done on intervals of three months or six months. Interest on fixed rate financial instruments is fixed until maturity of the particular instrument.

Approximately 23% and 28% of our consolidated debts were variable rate debts as at December 31, 2017 and 2016, respectively. Our consolidated variable rate debt decreased to Php40,353 million as at December 31, 2017 from Php51,690 million as at December 31, 2016. Considering the aggregate notional amount of our consolidated outstanding long-term interest rate swap contracts of US$525 million and US$724 million as at December 31, 2017 and 2016, respectively, approximately 92% each of our consolidated debts were fixed as at December 31, 2017 and 2016, respectively.

Management conducted a survey among our banks to determine the outlook of the U.S. dollar and Philippine peso interest rates until December 31, 2018. Our outlook is that the U.S. dollar and Philippine peso interest rates may move 65 basis points, or bps, and 55 bps higher/lower, respectively, as compared to levels as at December 31, 2017. If U.S. dollar interest rates had been 65 bps higher/lower as compared to market levels as at December 31, 2017, with all other variables held constant, profit after tax for the year 2017 and our consolidated stockholders’ equity as at year end 2017 would have been approximately Php4 million and Php20 million, respectively, lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings and loss/gain on derivative transactions. If Philippine peso interest rates had been 55 bps higher/lower as compared to market levels as at December 31, 2017, with all other variables held constant, profit after tax for the year 2017 and our consolidated stockholders’ equity as at year end 2017 would have been approximately Php15 million and Php17 million, respectively, lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings and loss/gain on derivative transactions.

Credit Risk

Credit risk is the risk that we will incur a loss arising from our customers, clients or counterparties that fail to discharge their contracted obligations. We manage and control credit risk by setting limits on the amount of risk we are willing to accept for individual counterparties and by monitoring exposures in relation to such limits.

We trade only with recognized and creditworthy third parties. It is our policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an on-going basis to reduce our exposure to bad debts.

We established a credit quality review process to provide regular identification of changes in the creditworthiness of counterparties. Counterparty limits are established and reviewed periodically based on latest available financial data on our counterparties’ credit ratings, capitalization, asset quality and liquidity. Our credit quality review process allows us to assess the potential loss as a result of the risks to which we are exposed and allow us to take corrective actions.

The table below shows the maximum exposure to credit risk for the components of our consolidated statements of financial position, including derivative financial instruments as at December 31, 2017 and 2016:

	2017
	Gross Maximum Exposure		Collateral and Other Credit Enhancements^*		Net Maximum Exposure
	(in million pesos)
Cash and cash equivalents		32,905		235		32,670
Loans and receivables:
Advances and other noncurrent assets		20,679		—		20,679
Short-term investments		1,074		—		1,074
Investment in debt securities and other long-term investments		100		—		100
Retail subscribers		9,183		48		9,135
Corporate subscribers		6,337		220		6,117
Foreign administrations		5,579		—		5,579
Domestic carriers		382		—		382
Dealers, agents and others		12,280		1		12,279
HTM investments:
Investment in debt securities and other long-term investments		150		—		150
Available-for-sale financial investments		15,165		—		15,165
Derivatives used for hedging:
Long-term currency swap		240		—		240
Interest rate swap		146		—		146
Total		104,220		504		103,716

Includes bank insurance, security deposits and customer deposits. We have no collateral held as at December 31, 2017.

	2016
	Gross Maximum Exposure		Collateral and Other Credit Enhancements^*		Net Maximum Exposure
	(in million pesos)
Cash and cash equivalents		38,722		270		38,452
Loans and receivables:
Advances and other noncurrent assets		17,068		—		17,068
Short-term investments		2,736		—		2,736
Investment in debt securities and other long-term investments		348		—		348
Retail subscribers		7,702		46		7,656
Corporate subscribers		5,506		188		5,318
Foreign administrations		5,191		—		5,191
Domestic carriers		220		—		220
Dealers, agents and others		5,817		1		5,816
HTM investments:
Investment in debt securities and other long-term investments		352		—		352
Financial instruments at FVPL:
Forward foreign exchange contracts		54		—		54
Short-term currency swaps		12		—		12
Short-term investments		2		—		2
Available-for-sale financial investments		12,189		—		12,189
Derivatives used for hedging:
Long-term currency swap		559		—		559
Interest rate swap		116		—		116
Total		96,594		505		96,089

Includes bank insurance, security deposits and customer deposits. We have no collateral held as at December 31, 2016.

The table below provides information regarding the credit quality by class of our financial assets according to our credit ratings of counterparties as at December 31, 2017 and 2016:

			Neither past due nor impaired				Past due but
	Total		Class A⁽¹⁾		Class B⁽²⁾		not impaired		Impaired
	(in million pesos)
December 31, 2017
Cash and cash equivalents		32,905		32,705		200		—		—
Loans and receivables:		70,337		34,939		9,647		11,028		14,723
Advances and other noncurrent assets		20,901		19,202		1,474		3		222
Short-term investments		1,074		1,074		—		—		—
Investment in debt securities and other long-term investments		100		100		—		—		—
Retail subscribers		17,961		2,984		4,919		1,280		8,778
Corporate subscribers		9,641		2,035		2,233		2,069		3,304
Foreign administrations		6,517		838		872		3,869		938
Domestic carriers		457		76		73		233		75
Dealers, agents and others		13,686		8,630		76		3,574		1,406
HTM investments:		150		150		—		—		—
Investment in debt securities and other long-term investments		150		150		—		—		—
Available-for-sale financial investments		15,165		15,079		86		—		—
Derivatives used for hedging:		386		386		—		—		—
Long-term currency swap		240		240		—		—		—
Interest rate swaps		146		146		—		—		—
Total		118,943		83,259		9,933		11,028		14,723
December 31, 2016
Cash and cash equivalents		38,722		36,902		1,820		—		—
Loans and receivables:		63,586		26,762		8,180		9,646		18,998
Advances and other noncurrent assets		17,278		15,312		1,751		5		210
Short-term investments		2,736		2,736		—		—		—
Investment in debt securities and other long-term investments		348		348		—		—		—
Retail subscribers		20,290		2,770		3,639		1,293		12,588
Corporate subscribers		9,333		888		1,202		3,416		3,827
Foreign administrations		5,819		910		1,382		2,899		628
Domestic carriers		354		103		56		61		134
Dealers, agents and others		7,428		3,695		150		1,972		1,611
HTM investments:		352		352		—		—		—
Investment in debt securities and other long-term investments		352		352		—		—		—
Financial instruments at FVPL(3):		68		68		—		—		—
Forward foreign exchange contracts		54		54		—		—		—
Short-term currency swaps		12		12		—		—		—
Short-term investments		2		2		—		—		—
Available-for-sale financial investments		12,189		10,197		1,992		—		—
Derivatives used for hedging:		675		675		—		—		—
Long-term currency swap		559		559		—		—		—
Interest rate swaps		116		116		—		—		—
Total		115,592		74,956		11,992		9,646		18,998

⁽¹⁾

This includes low risk and good paying customer accounts with no history of account treatment for a defined period and no overdue accounts as at report date; and deposits or placements to counterparties with good credit rating or bank standing financial review.

⁽²⁾

This includes medium risk and average paying customer accounts with no overdue accounts as at report date, and new customer accounts for which sufficient credit history has not been established; and deposits or placements to counterparties not classified as Class A.

The aging analysis of past due but not impaired class of financial assets as at December 31, 2017 and 2016 are as follows:

					Past due but not impaired
	Total		Neither past due nor impaired		1-60 days		61-90 days		Over 91 days		Impaired
	(in million pesos)
December 31, 2017
Cash and cash equivalents		32,905		32,905
Loans and receivables:		70,337		44,586		3,261		703		7,064		14,723
Advances and other noncurrent assets		20,901		20,676		—		—		3		222
Short-term investments		1,074		1,074		—		—		—		—
Investment in debt securities and other long-term investments		100		100		—		—		—		—
Retail subscribers		17,961		7,903		927		20		333		8,778
Corporate subscribers		9,641		4,268		724		267		1,078		3,304
Foreign administrations		6,517		1,710		646		217		3,006		938
Domestic carriers		457		149		84		53		96		75
Dealers, agents and others		13,686		8,706		880		146		2,548		1,406
HTM investments:		150		150		—		—		—		—
Investment in debt securities and other long-term investments		150		150		—		—		—		—
Available-for-sale financial investments		15,165		15,165		—		—		—		—
Derivatives used for hedging:		386		386		—		—		—		—
Long-term currency swap		240		240		—		—		—		—
Interest rate swaps		146		146		—		—		—		—
Total		118,943		93,192		3,261		703		7,064		14,723
December 31, 2016
Cash and cash equivalents		38,722		38,722		—		—		—		—
Loans and receivables:		63,586		34,942		4,095		602		4,949		18,998
Advances and other noncurrent assets		17,278		17,063		—		—		5		210
Short-term investments		2,736		2,736		—		—		—		—
Investment in debt securities and other long-term investments		348		348		—		—		—		—
Retail subscribers		20,290		6,409		1,106		41		146		12,588
Corporate subscribers		9,333		2,090		1,333		353		1,730		3,827
Foreign administrations		5,819		2,292		730		156		2,013		628
Domestic carriers		354		159		48		2		11		134
Dealers, agents and others		7,428		3,845		878		50		1,044		1,611
HTM investments:		352		352		—		—		—		—
Investment in debt securities and other long-term investments		352		352		—		—		—		—
Financial instruments at FVPL:		68		68		—		—		—		—
Forward foreign exchange contracts		54		54		—		—		—		—
Short-term currency swaps		12		12		—		—		—		—
Short-term investments		2		2		—		—		—		—
Available-for-sale financial investments		12,189		12,189		—		—		—		—
Derivatives used for hedging:		675		675		—		—		—		—
Long-term currency swap		559		559		—		—		—		—
Interest rate swaps		116		116		—		—		—		—
Total		115,592		86,948		4,095		602		4,949		18,998

Impairment Assessments

The main consideration for the impairment assessment include whether any payments of principal or interest are overdue by more than 90 days or whether there are any known difficulties in the cash flows of counterparties, credit rating downgrades, or infringement of the original terms of the contract. Our impairment assessments are classified into two areas: individually assessed allowance and collectively assessed allowances.

Individually assessed allowance

We determine the allowance appropriate for each individually significant loan or advance on an individual basis. Items considered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improve performance once a financial difficulty has arisen, projected receipts and the expected dividend payout should bankruptcy ensue, the availability of other financial support, the realizable value of collateral, if any, and the timing of the expected cash flows. We also recognize an impairment for accounts specifically identified to be doubtful of collection when there is information on financial incapacity after considering the other contractual obligations between us and the subscriber. The impairment losses are evaluated at each reporting date, unless unforeseen circumstances require more careful attention.

Collectively assessed allowances

Allowances are assessed collectively for losses on loans and advances that are not individually significant and for individually significant loans and advances where there is no objective evidence of individual impairment. Allowances are evaluated at each reporting date with each portfolio receiving a separate review.

The collective assessment takes account of impairment that is likely to be present in the portfolio even though there is no objective evidence of the impairment in an individual assessment. Impairment losses are estimated by taking into consideration the following information: historical losses on the portfolio, current economic conditions, the approximate delay between the time a loss is likely to have been incurred and the time it is identified as requiring an individually assessed impairment allowance, and expected receipts and recoveries once impaired. The impairment allowance is then reviewed by credit management to ensure alignment with our policy.

Capital Management Risk

We aim to achieve an optimal capital structure in pursuit of our business objectives which include maintaining healthy capital ratios and strong credit ratings, and maximizing shareholder value.

In recent years, our cash flow from operations has allowed us to substantially reduce debts and, in 2005, resume payment of dividends on common shares. Since 2005, our strong cash flow has enabled us to make investments in new areas and pay higher dividends.

Our approach to capital management focuses on balancing the allocation of cash and the incurrence of debt as we seek new investment opportunities for new businesses and growth areas. On August 5, 2014, the PLDT Board of Directors approved an amendment to our dividend policy, increasing the dividend payout rate to 75% from 70% of our core EPS as regular dividends, although we amended our dividend policy to reduce the regular dividend payout to 60% of core EPS in 2016. In declaring dividends, we take into consideration the interest of our shareholders, as well as our working capital, capital expenditures and debt servicing requirements. The retention of earnings may be necessary to meet the funding requirements of our business expansion and development programs.

However, in view of our elevated capital expenditures to build out a robust, superior network to suppor the continued growth of data traffic, plans to invest in new adjacent businesses that will complement the current business and provide future sources of profits and dividends, and management of our cash and gearing levels, the PLDT Board of Directors approved on August 2, 2016, the amendment of our dividend policy, reducing the regular dividend payout to 60% core EPS. As part of the dividend policy, in the event no investment opportunities arise, we may consider the option of returning additional cash to our shareholders in the form of special dividends or share buybacks. Philippine corporate regulations prescribe, however, that we can only pay out dividends or make capital distribution up to the amount of our unrestricted retained earnings.

Some of our debt instruments contain covenants that impose maximum leverage ratios. In addition, our credit ratings from the international credit ratings agencies are based on our ability to remain within certain leverage ratios.

No changes were made in our objectives, policies or processes for managing capital during the years ended December 31, 2017, 2016 and 2015.