You must read the following befo - Singapore Exchange

IMPORTANT NOTICE NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES.

Important: You must read the following before continuing. The following applies to the Offering Circular following this page (the “Offering Circular”), and you are therefore advised to read this carefully before reading, accessing or making any other use of this Offering Circular. In accessing the Offering Circular, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from the Company as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF NOTES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE NOTES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION, AND THE NOTES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS.

THIS OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORIZED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE SECURITIES DESCRIBED THEREIN.

Confirmation of the Representation: In order to be eligible to view this Offering Circular or make an investment decision with respect to the notes, investors must not be located in the United States. This Offering Circular is being sent at your request and, by accepting the electronic mail and accessing this Offering Circular, you shall be deemed to have represented that the electronic mail address that you gave and to which this electronic mail has been delivered is not located in the United States and that you consent to delivery of such Offering Circular by electronic transmission.

You are reminded that this Offering Circular has been delivered to you on the basis that you are a person into whose possession this Offering Circular may be lawfully delivered in accordance with the laws of jurisdiction in which you are located and you may not, nor are you authorized to, deliver this Offering Circular to any other person.

The materials relating to any offering of notes to which this Offering Circular relates do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that such offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction, such offering shall be deemed to be made by the underwriters or such affiliate on behalf of the Issuer (as defined in the Offering Circular) in such jurisdiction.

This Offering Circular has been sent to you in electronic format. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of the Issuer, the Joint Bookrunners, the Trustee and the Agents (each as defined in the Offering Circular) nor any person who controls the Issuer, a Joint Bookrunner, the Trustee or an Agent or any director, officer, employee or agent of any of the Issuer, the Joint Bookrunners, the Trustee, the Agents or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between this Offering Circular distributed to you in electronic format and the hard copy version available to you on request from the Joint Bookrunners.

You are responsible for protecting against viruses and other destructive items. Your use of this electronic mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature.

Offering Circular dated July 23, 2020

CONFIDENTIAL

MEGAWORLD CORPORATION (incorporated with limited liability in the Republic of the Philippines)

U.S.$350,000,000 4.125% SENIOR UNSECURED NOTES DUE 2027

ISSUE PRICE: 98.506%

Megaworld Corporation (the “Issuer”, the “Company” or “Megaworld”) proposes to issue U.S.$350 million 4.125% senior unsecured notes due 2027 (the “Notes”). The Notes will constitute direct, unsubordinated, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves, and shall at all times rank at least equally with all other present and future unsecured and unsubordinated obligations of the Issuer.

The Notes will bear interest from and including July 30, 2020 at the rate of 4.125% per annum. Unless previously redeemed or purchased and cancelled, the Notes will mature at their principal amount on July 30, 2027 (the “Maturity Date”). Interest on each series of Notes shall be payable in equal instalments semi-annually in arrears on January 30 and July 30 each year (each, an “Interest Payment Date”) commencing on January 30, 2021. Payments on the Notes will be made without deduction for or on account of taxes imposed or levied by the Philippines to the extent described in “Terms and Conditions of the Notes—Taxation and Gross-up.” At any time prior to the Par Call Date, the Issuer may on any one or more occasions redeem all or a part of the Notes, by giving notice as provided in the Conditions (which notice shall be irrevocable), at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus the Applicable Premium (as defined in the Conditions) as of, and accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Noteholders on the relevant record date to receive interest due on the relevant Interest Payment Date. The Notes may also be redeemed (in whole or in part) at any time and from time to time on or after the date that is three months prior to the Maturity Date (the “Par Call Date”) at the option of the Issuer at the Redemption Price (as defined in the Conditions). Upon the occurrence of certain events constituting a Change of Control Triggering Event (as defined herein), the holders may require the Issuer to purchase the Notes at a price equal to 101% of their principal amount plus unpaid and accrued interest. The Issuer may redeem all but not some of the Notes at the principal amount plus accrued interest upon a change in tax law. For a more detailed description of the Notes, see “Terms and Conditions of the Notes”.

Investing in the Notes involves certain risks. See “Risk Factors” beginning on page 14.

The Notes are being offered only outside the United States in offshore transactions in compliance with Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). The Notes have not been, and will not be, registered under the Securities Act or the securities laws of any other jurisdiction. Unless they are so registered, the Notes may be offered only in transactions that are exempt from or not subject to registration under the Securities Act or the securities laws of any other jurisdiction. For further details, see “Subscription and Sale.”

Approval in-principle has been obtained from the SGX-ST for the listing and quotation of the Notes on the Singapore Exchange Securities Trading Limited (the “SGX-ST”). The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions or reports contained in this Offering Circular. Admission of the Notes to the Official List of the SGX-ST and quotation of the Notes on the Official List of the SGX-ST is not to be taken as an indication of the merits of the Notes, the Issuer or its subsidiaries. Investors are advised to read and understand the contents of this Offering Circular before investing. If in doubt, investors should consult their advisers.

The Notes will be evidenced by a global certificate (the “Global Certificate”) in registered form, which will be registered in the name of a nominee of, and deposited with a common depositary for, Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, S.A. (“Clearstream, Luxembourg”). Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg and their respective accountholders. Except in the limited circumstances set out herein, definitive certificates for the Notes will not be issued in exchange for beneficial interests in the Global Certificate. See “The Global Certificate.” It is expected that delivery of the Global Certificate will be made on or about July 30, 2020.

The denomination of the Notes shall be U.S.$200,000 each and integral multiples of U.S.$1,000 in excess thereof.

THE NOTES BEING OFFERED OR SOLD HEREIN HAVE NOT BEEN REGISTERED WITH THE PHILIPPINE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES REGULATION CODE OF THE PHILIPPINES (“SRC”). ANY FUTURE OFFER OR SALE OF THE SECURITIES IN THE PHILIPPINES IS SUBJECT TO REGISTRATION REQUIREMENTS UNDER THE SECURITIES REGULATION CODE OF THE PHILIPPINES UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION.

This Offering Circular is not a prospectus for the purpose of Regulation (EU) 2017/1129.

Joint Global Coordinators, Joint Lead Managers and Joint Bookrunners (in alphabetical order)

CITIGROUP HSBC Joint Bookrunners (in alphabetical order)

Credit Suisse J.P. Morgan

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IMPORTANT NOTICE

In this Offering Circular, references to “Megaworld”, “the Issuer” or “the Company” are references to Megaworld Corporation and its consolidated subsidiaries, associates and/or joint ventures, as the context requires.

The Company has prepared this Offering Circular solely for use in connection with the proposed offering of Notes described herein. The Company accepts responsibility for the information contained in this Offering Circular. To the best of the Company’s knowledge and belief (having taken all reasonable care to ensure that such is the case) the information contained in this Offering Circular is in accordance with the facts and does not materially misstate or omit anything likely to affect the import of such information.

No person has been or is authorized to give any information or to make any representation concerning the Company or the Notes other than as contained herein or any other information supplied in connection with the Notes and, if given or made by any other person, such information or representation should not be relied upon as having been authorized by the Company. Citigroup Global Markets Limited (“Citigroup”) and The Hongkong and Shanghai Banking Corporation Limited (“HSBC” and together with Citigroup, the “Joint Global Coordinators”), as joint global coordinators, joint lead managers and joint bookrunners, Credit Suisse (Singapore) Limited (“CS”) and J.P. Morgan Securities plc (“JPM” and together with CS and the Joint Global Coordinators, the “Joint Bookrunners”), as joint bookrunners, The Hongkong and Shanghai Banking Corporation Limited in its capacity as trustee (the “Trustee”) or the Agents (as defined in the Terms and Conditions of the Notes (the “Conditions”)).

The Company has prepared this Offering Circular for use in connection with the offer and sale of Notes exempt from the registration requirements under the U.S. Securities Act of 1933, as amended (the “Securities Act”) solely for the purpose of enabling a prospective investor to consider whether to purchase the Notes. This Offering Circular does not constitute an offer to any person in the United States or in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes may be restricted by law in certain jurisdictions. None of the Company, the Joint Bookrunners, the Trustee, or the Agents represents that this Offering Circular may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering.

None of the Joint Bookrunners, the Trustee or the Agents has separately verified the information contained herein. In this Offering Circular, no representation, warranty or undertaking, express or implied, is made or given by the Joint Bookrunners, the Trustee or the Agents or their respective affiliates or legal advisers as to the accuracy, completeness or sufficiency of the information contained in this Offering Circular, and nothing contained in this Offering Circular is, or shall be relied upon as, a promise, representation or warranty by the Joint Bookrunners, the Trustee or the Agents or their respective affiliates or legal advisers, and no responsibility or liability is accepted by the Joint Bookrunners, the Trustee or the Agents or their respective affiliates or legal advisers as to the accuracy or completeness of the information contained in this Offering Circular. Neither the delivery of this Offering Circular nor any offering, sale or delivery made in connection with the issue of the Notes shall, under any circumstances, constitute a representation that there has been no change or development reasonably likely to involve a change in the affairs of the Issuer or any of them since the date hereof or create any implication that the information contained herein is correct as at any date subsequent to the date hereof. Neither this Offering Circular nor any other information supplied in connection with the Notes is intended to provide the basis of any credit or other evaluation or should be considered as a recommendation by either the Company, the Joint Bookrunners, the Trustee or the Agents or their respective affiliates or legal advisers that any recipient of this Offering Circular or any other information supplied in connection with the Notes should purchase the Notes. Prospective investors should not construe the contents of this Offering Circular as investment, legal or tax advice and should consult with their own counsel, accountant and other advisors as to legal, tax, business, financial and related aspects of receiving the Notes. Neither this Offering Circular nor any other information supplied in connection with the Notes constitutes an offer or an invitation by or on behalf of the Company, the Joint Bookrunners, the Trustee or the Agents to any person to subscribe for or to purchase any Notes.

Investors may not reproduce or distribute this Offering Circular in whole or in part, and investors may not disclose any of the contents of this Offering Circular or use any information herein for any purpose other than considering an investment in the Notes. Each investor of the Notes must comply with all applicable laws and regulations in force in each jurisdiction in which it purchases, offers or sells such Notes or possesses this Offering Circular and must obtain any consent, approval or permission required by it for the purchase, offer or sale by it of such Notes

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under the laws and regulations in force in any jurisdictions to which it is subject or in which it makes such purchases, offers or sales, and none of the Issuer, the Joint Bookrunners, the Trustee or the Agents shall have any responsibility therefor.

To the fullest extent permitted by law, none of the Joint Bookrunners, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, agents or advisors accepts any responsibility for the contents of this Offering Circular. Each of the Joint Bookrunner, the Trustee and the Agents or any of their respective affiliates, directors, officers, employees, agents or advisors accordingly disclaims all and any liability, whether arising in tort or contract or otherwise, which it might otherwise have in respect of this Offering Circular or any such statement. None of the Joint Bookrunner, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, agents or advisors undertakes to review the financial condition or affairs of the Company during the life of the arrangements contemplated by this Offering Circular or to advise any investor or potential investor in the Notes of any information coming to the attention of the Joint Bookrunner, the Trustee or the Agents.

Persons into whose possession this Offering Circular or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Offering Circular and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer or sale of Notes in the United States, the European Economic Area (“EEA”), the United Kingdom (“UK”), Japan, Hong Kong, Singapore and the Philippines, see “Subscription and Sale”. If a jurisdiction requires that the offering be made by a licensed broker or dealer and any of the Joint Bookrunners or any affiliate of the Joint Bookrunners is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by such Joint Bookrunner or such affiliate on behalf of the Issuer in such jurisdiction.

Prospective investors should not construe the contents of this Offering Circular as investment, legal or tax advice and should consult with their own counsel, accountant and other advisors as to legal, tax, business, financial and related aspects of receiving the Notes.

Listing of the Notes on the SGX-ST is not to be taken as an indication of the merits of the Company or the Notes. In making an investment decision, prospective investors must rely on their own examination of the Issuer and the terms of the Notes, including, without limitation, the merits and risks involved. See “Risk Factors” for a discussion of certain factors to be considered in connection with an investment in the Notes. None of the Company, the Joint Bookrunners, the Trustee or the Agents is making any representation to any prospective investor regarding the legality of an investment in the Notes by such investor under any legal investment or similar laws or regulations. The offering of the Notes is being made on the basis of this Offering Circular. Any decision to invest in the Notes must be based on the information contained in this Offering Circular. Each purchaser of the Notes must comply with all applicable laws and regulations in force in each jurisdiction in which it purchases, offers or sells such Notes or possesses or distributes this Offering Circular and must obtain any consent, approval or permission required by it for the purchase, offer or sale by it of such Notes under the laws and regulations in force in any jurisdictions to which it is subject or in which it makes such purchases, offers or sales, and none of the Issuer, the Joint Bookrunners, the Trustee or the Agents shall have any responsibility therefor.

Each person receiving this Offering Circular is advised to read and understand the contents of this Offering Circular before investing in the Notes. If in doubt, such person should consult his or her advisors. None of the Company or the Joint Bookrunners have authorized, nor do they authorize the making of any offer of the Notes through any financial intermediary, other than offers made by the Joint Bookrunners which constitute the final placement of the Notes contemplated in this Offering Circular.

MIFID II PRODUCT GOVERNANCE / PROFESSIONAL INVESTORS AND ECPS ONLY TARGET MARKET — Solely for the purposes of a manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in Directive 2014/65/EU (as amended, “MiFID II”); and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into consideration the manufacturer’s target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer’s target market assessment) and determining appropriate distribution channels.

NOTIFICATION UNDER SECTION 309B OF THE SECURITIES AND FUTURES ACT (CHAPTER 289) OF SINGAPORE (THE “SFA”): The Notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the ”CMP Regulations

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2018”)) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

THE NOTES BEING OFFERED OR SOLD HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE PHILIPPINE SECURITIES AND EXCHANGE COMMISSION (THE “PHILIPPINE SEC”) UNDER THE SECURITIES REGULATION CODE OF THE PHILIPPINES (THE “SRC”). ANY FUTURE OFFER OR SALE OF THE NOTES IS SUBJECT TO THE REGISTRATION REQUIREMENTS UNDER THE SRC UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION.

None of the Company, the Joint Bookrunners, the Trustee, and the Agents makes any representation to any investor in the Notes regarding the legality of its investment under any applicable laws. Any investor in the Notes should be able to bear the economic risk of an investment in the Notes for an indefinite period of time.

The Company reserves the right to withdraw this offering of the Notes at any time. The Company and the Joint Bookrunners also reserve the right to reject any offer to purchase the Notes in whole or in part for any reason and to allocate to any prospective investor less than the full amount of Notes sought by such investor.

The Notes have not been approved or disapproved by the U.S. Securities and Exchange Commission, any state securities commission in the United States or any other United States, Philippine or other regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the Notes or the accuracy or adequacy of this Offering Circular. Any representation to the contrary is a criminal offense in the United States.

The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and other applicable state, Philippine or other securities laws pursuant to registration thereunder or exemption therefrom. See “Subscription and Sale.” Prospective investors should thus be aware that they may be required to bear the financial risks of this investment for an indefinite period of time.

Investors are advised to read and understand the contents of this Offering Circular before investing. Investors agree to the foregoing by accepting delivery of this Offering Circular.

IN CONNECTION WITH THE ISSUE OF THE NOTES, CITIGROUP GLOBAL MARKETS LIMITED AS A STABILIZING MANAGER (THE “STABILIZING MANAGER”) (OR PERSONS ACTING ON BEHALF OF THE STABILIZING MANAGER) MAY, TO THE EXTENT PERMITTED BY APPLICABLE LAWS AND DIRECTIVES, OVER-ALLOT THE NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE STABILIZING MANAGER (OR PERSONS ACTING ON BEHALF OF THE STABILIZING MANAGER) WILL UNDERTAKE STABILIZATION ACTION. ANY STABILIZATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE NOTES IS MADE AND SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME AND MUST BE BROUGHT TO AN END AFTER A LIMITED PERIOD.

CERTAIN DEFINITIONS

In this Offering Circular, references to the “Philippines” are to the Republic of the Philippines and to the “United States” or “U.S.” are to the United States of America, its territories and possessions, any State of the United States and the District of Columbia. References to “₱” or to “Philippine Peso” are to the lawful currency of the Republic of the Philippines and references to “U.S.$” and “U.S. dollars” are to the lawful currency of the United States of America. References to the “BSP” are to the Bangko Sentral ng Pilipinas, the central bank of the Philippines. The Company publishes its financial statements in Philippine Pesos. References to “Government” or “Philippine Government” are to the government of the Philippines, including all branches, agencies, bodies and instrumentalities.

This Offering Circular contains translations of certain amounts into U.S. Dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the Philippine Peso amounts represent such U.S. dollar amounts or could be, or could have been, converted into U.S. dollars at the rates indicated or at all. Unless otherwise indicated, all translations from Philippine Pesos to U.S. dollars have

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been made at a rate of U.S.$1.00 = ₱51.04, being the rate for that date for the conversion of U.S. dollars with Pesos under the Bangko Sentral ng Pilipinas (“BSP”) Daily Reference Exchange Rate Bulletin. Such translations should not be construed as representations that the Peso or U.S. dollar amounts referred to could have been, or could be, converted into U.S. dollars or Pesos, as the case may be, at that or any other rate, or at all. On July 21, 2020, the rate quoted on the BSP Daily Reference Rate Exchange Bulletin was U.S.$1.00 = ₱49.42.

PRESENTATION OF FINANCIAL INFORMATION

The Company’s consolidated financial statements as at December 31, 2019 and 2018 and for the three years ended December 31, 2019, 2018 and 2017, and the unaudited interim consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 included in this Offering Circular have been prepared in accordance with the Philippine Financial Reporting Standards (“PFRS”).

The financial information included in this Offering Circular has been derived from the consolidated financial statements of the Company. Unless otherwise indicated, the description of the business activities of the Company in this Offering Circular is presented on a consolidated basis.

Figures in this Offering Circular have been subject to rounding adjustments. Accordingly, figures shown in the same item of information may vary, and figures which are totals may not be an arithmetic aggregate of their components.

NON-PFRS FINANCIAL INFORMATION

EBITDA (commonly understood as earnings before income tax, depreciation and amortisation), as presented in this Offering Circular is presented to provide a better understanding of the Issuer’s consolidated operating results. Except as specifically provided, EBITDA ratios and related computations involving net earnings and equity figures were computed using the consolidated figures of the Issuer. EBITDA is not a measure of financial performance under generally accepted accounting standards, including PFRS, and investors should not consider EBITDA in isolation or as an alternative to operating income or net income as an indicator of the Issuer’s operating performance or to cash flow from operating, investing and financing activities as a measure of liquidity, or any other measures of performance under PFRS or U.S. GAAP. Because there are various EBITDA calculation methods, the Issuer’s presentation of EBITDA may not be comparable to similarly titled measures used by other companies.

INDUSTRY AND MARKET DATA

Market data and certain industry forecasts and other data used in this Offering Circular were obtained or derived from internal surveys, market research, governmental data, publicly available information and/or industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information are not guaranteed and have not been independently verified by the Company, the Joint Bookrunners, the Trustee or the Agents. Similarly, internal surveys, industry forecasts and market research, while believed to be reliable, have not been independently verified, and none of the Company, the Joint Bookrunners, the Trustee or the Agents make any representation or warranty, express or implied, as to the accuracy or completeness of such information. In addition, such information may not be consistent with other information compiled within or outside the Philippines.

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FORWARD-LOOKING STATEMENTS

This Offering Circular contains forward-looking statements and other information that involves risks, uncertainties and assumptions. The Company has based these forward-looking statements on our current beliefs, expectations and intentions as to facts, actions and events that will or may occur in the future. Such statements are generally identified by forward-looking words such as “believe,” “plan,” “anticipate,” “continue,” “estimate,” “expect,” “may,” “will” or other similar words.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. The Company chosen these assumptions or bases in good faith. These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond the Company’s control. In addition, these forward-looking statements reflect the Company’s current views with respect to future events and are not a guarantee of future performance. Actual results may differ materially from information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the risk factors set forth in the section “Risk Factors.” When considering forward-looking statements, investors should keep in mind the description of risks and other cautionary statements in this Offering Circular.

All of the forward-looking statements made herein and elsewhere are qualified in their entirety by the risk factors discussed in “Risk Factors”. These risk factors and statements describe circumstances that could cause actual results to differ materially from those contained in any forward-looking statement in this Offering Circular. Should one or more of such risks and uncertainties materialize, or should any underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated in the applicable forward-looking statements.

Investors should also keep in mind that any forward-looking statement made in this Offering Circular or elsewhere speaks only as of the date on which it was made. New risks and uncertainties come up from time to time, and it is impossible for to predict these events or how they may affect the Company.

The Company, the Joint Bookrunners, the Trustee and the Agents have no duty to, and do not intend to, update or revise the statements in this Offering Circular after the date of this Offering Circular to conform those statements to actual results, or to publicly release any revisions to any forward-looking statements to reflect events or circumstances, or to reflect that the Company became aware of any such events or circumstances, that occur after the date of this Offering Circular, subject to compliance with all applicable laws. In light of these risks and uncertainties, investors should keep in mind that actual results may differ materially from any forward-looking statement made in this report or elsewhere.

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ENFORCEABILITY OF FOREIGN JUDGMENTS

The Company is organized under the laws of the Philippines. All or a substantial portion of its assets are located in the Philippines. The Company has consented to service of process in England. It may be difficult for investors to effect service of process outside of the Philippines upon the Company. Moreover, it may be difficult for investors to enforce judgments against the Company outside the Philippines in any actions pertaining to the Notes. In addition, substantially all of the directors and the officers of the Company are residents of the Philippines, and all or a substantial portion of the assets of such persons are or may be located in the Philippines. As a result, it may be difficult for investors to effect service of process upon such persons, or to enforce against them judgments obtained in courts or arbitral tribunals outside the Philippines predicated upon the laws of jurisdictions other than the Philippines.

The Philippines is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments but is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Moreover, the Philippines enacted Republic Act No. 9285, otherwise known as the Alternative Dispute Resolution Act of 2004, to facilitate the enforcement of arbitral awards in the Philippines. Judgments obtained against the Company in any foreign court may be recognized and enforced by the courts of the Philippines in an independent action brought in accordance with the relevant procedures set forth in the Rules of Court of the Philippines to enforce such judgment. However, such foreign judgment or final order may be rejected in the following instances: such judgment was obtained by collusion or fraud, the foreign court rendering such judgment did not have jurisdiction, such order or judgment is contrary to good customs, public order, or public policy of the Philippines, the Company did not have notice of the proceedings before the foreign court or such judgment was based upon a clear mistake of law or fact.

CONTENTS

Page SUMMARY ........................................................................................................................................................... 1 SUMMARY FINANCIAL INFORMATION AND OTHER DATA ................................................................ 6 SUMMARY OF THE OFFERING ................................................................................................................... 10 RISK FACTORS ................................................................................................................................................ 14 TERMS AND CONDITIONS OF THE NOTES ............................................................................................. 33 THE GLOBAL CERTIFICATE ....................................................................................................................... 58 USE OF PROCEEDS ......................................................................................................................................... 60 EXCHANGE RATE INFORMATION ............................................................................................................ 61 CAPITALIZATION AND INDEBTEDNESS .................................................................................................. 62 SELECTED FINANCIAL INFORMATION AND OTHER DATA .............................................................. 63 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS ......................... 67 BUSINESS ........................................................................................................................................................... 72 REGULATION AND ENVIRONMENTAL MATTERS ............................................................................... 97 MANAGEMENT .............................................................................................................................................. 104 PRINCIPAL SHAREHOLDERS .................................................................................................................... 110 RELATED PARTY TRANSACTIONS .......................................................................................................... 112 DESCRIPTION OF MATERIAL INDEBTEDNESS ................................................................................... 113 TAXATION ....................................................................................................................................................... 114 FOREIGN EXCHANGE AND FOREIGN INVESTMENT REGULATIONS .......................................... 117 CLEARANCE AND SETTLEMENT OF THE NOTES ............................................................................... 118 SUBSCRIPTION AND SALE ......................................................................................................................... 120 LEGAL MATTERS ......................................................................................................................................... 124 INDEPENDENT AUDITORS ......................................................................................................................... 125 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS .................................................................... F-1

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SUMMARY

OVERVIEW

Megaworld Corporation is one of the leading property developers in the Philippines and is primarily engaged in the development of large scale mixed-use planned communities, or community townships, that comprise residential, commercial and office developments and integrate leisure, entertainment and educational/training components. As of June 30, 2020, the Company had 26 masterplanned integrated urban townships, integrated lifestyle communities and lifestyle estates across the country covering approximately 4,284 hectares and featuring a real estate portfolio of residential condominium units, subdivision lots and townhouses as well as over 1.3 million square meters of gross leasable office space and over 453,000 square meters of gross leasable mall and retail space. As of the same date, the Company owns or has development rights to around 4,300 hectares of land throughout the Philippines.

Throughout its history, the Company has been recognized by numerous institutions and prestigious international awards organizations for its property and real estate development capabilities, good corporate governance, corporate and social responsibility initiatives, and other achievements. The Company ended 2019 as one of the most awarded real estate Company in the Philippines, amassing a total of 133 awards for the year, including awards for being named “Best Employer” at the Philippines Best Employer Brand Awards 2019 and cited as one of the “Dream Companies to Work For,” by Asia’s Best Employer Brand Awards.

The Company’s common shares were listed on The Philippine Stock Exchange (“PSE”) in 1994 (under listing code “MEG”) and as of June 30, 2020, the Company had a market capitalization of ₱98 billion.

The Company has three primary business segments: (i) real estate sales of residential developments (“Real Estate Business”); (ii) leasing of office space and retail space (“Rental Business”); and (iii) management and operation of hotels (“Hotel Operations”). In addition, the Company reports all other non-core revenue generating activities not falling under these three primary business segments under “Others.”

Real Estate Business. The Real Estate Business derives revenues from the sale of residential condominium units, subdivision lots and townhouses and is operated primarily through Megaworld Corporation and the following major subsidiaries: Global-Estate Resorts Inc. (publicly listed on the PSE under listing code “GERI”), Empire East Land Holdings, Inc. (publicly listed on the PSE under listing code “ELI”), and Suntrust Properties, Inc.. The Company’s Megaworld branded developments are primarily township-focused, Global-Estate Resorts Inc. is tourism focused, while developments under Empire East Land Holdings, Inc. target middle-income customers and Suntrust Properties, Inc. is geared towards the economically conscious. For the year ended December 31, 2019 the Real Estate Business contributed 63.3% of consolidated revenues or ₱42,604.0 million (U.S.$834.7 million) and 63.7% of consolidated revenues or ₱9,610.3 million (U.S.$188.3 million) for the three months ended March 31, 2020.

Rental Business. The operations of the Rental Business are divided into “Megaworld Premier Offices” (for the lease of office space) and “Megaworld Lifestyle Malls” (for the lease of retail space). For the year ended December 31, 2019, the Company’s leasing operations accounted for 25.0% of the Company’s consolidated revenues, or ₱16,814.1 million (U.S.$329.4 million) and 28.1% of consolidated revenues or ₱4,233.5 million (U.S.$82.9 million) for the three months ended March 31, 2020.

Hotel Operations. The Company’s Hotel Operations consists of three major homegrown brands, namely Savoy, Belmont and Richmonde, in addition hotel operations are conducted under Twin Lakes Hotel, Hotel Lucky Chinatown and Fairways and Bluewater, that are strategically located to service the needs of business travelers and tourists. For the year ended December 31, 2019, the Company’s hotel operations accounted for 3.8% of the Company’s consolidated revenues, or ₱2,543.8 million (U.S.$49.8 million) and 3.7% of consolidated revenues or ₱550.9 million (U.S.$10.8 million) for the three months ended March 31, 2020.

The contribution of each business segment to the Company’s total revenues and income is set out below for the periods indicated.

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For the year ended December 31, For the three months

ended March 31,

2017 2018 2019 2020 Sales % Sales % Sales % Sales % (in ₱

millions) (in ₱

millions) (in ₱

millions) (in U.S.$ millions)

(in ₱ millions)

(in U.S.$ millions)

Real Estate Business ......... 34,115.1 68.1 38,035.5 66.2 42,604.0 834.7 63.3 9,610.3 188.3 63.7 Rental Business ................ 11,830.0 23.6 14,264.9 24.8 16,814.1 329.4 25.0 4,233.5 82.9 28.1 Hotel Operations ............... 1,336.0 2.7 1,519.4 2.6 2,543.8 49.8 3.8 550.9 10.8 3.7 Others(1) ............................ 2,834.1 5.6 3,607.3 6.4 5,350.9 104.8 7.9 686.3 13.4 4.5

Total ................................. 50,115.0 100.0 57,427.2 100.0 67,312.7 1,318.8 100.0 15,081.0 295.5 100.0 Notes:

(1) Other income comprises interest income, property management, commission and construction income, equity share in net earnings (losses) of associates and other income.

(2) Translations from Pesos to U.S. dollars are for convenience only and have been made at a rate of U.S.$1.00=₱51.04, the BSP Rate quoted in the BSP’s Daily Reference Exchange Rate Bulletin on March 31, 2020.

The Company’s consolidated net profit for the year ended December 31, 2019 was ₱19,296.0 million (U.S.$378.1 million) compared to ₱15,833.1 million for the year ended December 31, 2018 and ₱13,707.0 million for the year ended December 31, 2017.

Foreign sales contributed approximately 25%, 24% and 23% to the Company’s consolidated sales and revenues for the years ended December 31, 2019, 2018 and 2017, respectively. The table below set forth the percentage of sales broken down by major markets:

Market 2017 2018 2019 North America 26% 23% 31%

Europe 18% 18% 20% Asia 55% 57% 48%

Middle East 1% 2% 1% Total 100% 100% 100%

RECENT DEVELOPMENTS

The outbreak of COVID-19, which was declared a global pandemic by organizations such as the World Health Organization, in the first quarter of 2020, has severely affected and continues to seriously affect the global economy. In a move to contain the COVID-19 outbreak, on March 16, 2020, Presidential Proclamation No. 929 was issued, declaring a State of Calamity throughout the Philippines for a period of six months from March 17, 2020 and imposed an enhanced community quarantine (“ECQ”) throughout the island of Luzon until April 12, 2020. On May 1, 2020, the Government further extended the ECQ over, among others, certain portions of Luzon, including Metro Manila, until May 15, 2020, while easing restrictions in other parts of the country. For example, majority of the province of Cebu (including areas of Mactan but excluding Cebu City) transitioned from ECQ to GCQ on May 20, 2020. On May 28, 2020, the Government placed Metro Manila under general community quarantine (“GCQ”), allowing for the partial reopening of certain businesses and public transportation while continuing to limit general movements. These measures have caused disruption to businesses and economic activities, and their impacts on businesses continue to evolve.

During the quarter, the Group and other businesses have been significantly exposed to the risks brought about by the outbreak of the new coronavirus disease, COVID-19. Governmental efforts being implemented to control the spread of the virus include travel bans, quarantines, social distancing and suspension of non-essential services. Work stoppage on construction sites and slowdown on the supply chain lead to delays on the targeted completion and turnover of projects. Community quarantine also requires temporary adjustment of mall operating hours and reduced foot traffic. Likewise, travel restrictions have resulted into a reduction in hotel occupancies. The Company plans to continue to conduct its business while placing paramount consideration on the health and welfare of its employees, customers, and other stakeholder and has implemented measures to mitigate the transmission of COVID-19, such as by adjusting operating hours, making hand sanitizers available within its properties, increasing the frequency of disinfection of facilities, limiting face-to-face meetings, requiring temperature checks for employees and customers, and implementing health protocols for employees. The Group has also activated

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business continuity plans, both at the corporate level and business operations level, and conducted scenario planning and analysis to activate contingency plans. While management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate the risks associated with COVID-19, the ultimate impact of the pandemic is highly uncertain and subject to change. The Company continuously monitors the impact of COVID-19 to its business segments and stakeholders.

Impact of COVID-19 Outbreak on the Company’s Operations and Measures the Company has Taken

The Company’s results of operations have been impacted by the COVID-19 pandemic and the ensuing governmental measures. During the ECQ period covering mid-March up to mid-May, all of the Company’s operations were temporarily halted except for the office segment and portions of the malls catering to essential activities, which remained operational. Rental income for the first quarter of 2020, which has grown by double digits over the past few years, increased by just 8% year-on-year to ₱4.2 billion as the resilience of the office segment mitigated the impact of weakening mall rentals. Meanwhile, hotel revenues decreased by 4% to ₱550.9 million in the first quarter from ₱574.5 million during the same period last year as check-ins, particularly from international guests, dropped because of the international travel restrictions. Residential sales, however, grew by 1% to ₱9.6 billion during the three months ended March 31, 2020 from ₱9.5 billion as the Taal Volcano eruption during the start of the year impacted sales of CALABARZON projects and early challenges in the supply chain due to coronavirus-related restrictions resulted to the delays in project construction.

With cash preservation as a main objective, the Company has decided to reduce its overall capital expenditures spending for the year 2020 to ₱36 billion from ₱60 billion, as it plans to finish only its ongoing projects. The Company believes that it has the lowest financial gearing among the major listed property companies, providing it more flexibility in terms of leveraging once business activity improves.

Impact on Real Estate Business

Construction activities were suspended during the ECQ period and have slowly resumed on May 16, 2020 in selected areas. The Company has put on hold new project launches for 2020 as work stoppage on-site could result in project completion risk. In order to limit face to face engagements, the Company plans to maximize digital platforms to sell real estate projects. Moving forward, the Company plans to strengthen its value proposition through the implementation of iTownship initiatives. The iTownships project aims to make every home in Megaworld’s townships a smart home –with smart locks and the seamless application of the Internet of Things, in which devices inside the homes are interconnected and can be remotely controlled. This initiative gained additional impetus with the onset of the COVID-19 pandemic as the introduction of new health and safety protocols centered on the need for social distancing highlighted the need to automate and improve digital connectivity. In addition, the Company has noted a shift in market demand to lot sales and vacation homes instead of buying vertical developments within the metropolitan areas.

Impact on Megaworld Premier Offices

BPO offices remained operational even during the ECQ and social distancing measures are implemented at these sites to protect personnel. The ECQ also resulted in the temporary closure of POGO operations, but with no rental holiday. In line with the relevant Government regulations and directives, the Company offered deferment of monthly rent without penalty until the end of the year and continues to work closely with tenants to determine and address their needs. With the shift to GCQ, office activities have increased as more employees go back to work, albeit constrained by the lack of public transport. To date, the Company has not registered any significant number of leases being terminated.

Impact on Megaworld Lifestyle Malls

The various community quarantine measures resulted in the temporary mall closures with the exception of essential establishments, resulting in a decline in foot traffic. During the ECQ, approximately 70% of total leased out GLA unable to operate and as of June 15, 2020, approximately 50% of malls have resumed operations. As of July 15, 2020, 65% of retail partners in Megaworld Lifestyle Malls have reopened. The Company has implemented enhanced health, safety and sanitation protocols and in coordination with tenants provide customers with cashless and contact-less options for their purchases with designated pick up counters and drive thru stations. The Company plans to continue developing new contactless channels to reach out to customers.

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Impact on Megaworld Hotels

Occupancy dropped significantly due to travel restrictions and cancellation of bookings and MICE activities due to the COVID-19 pandemic and most hotels have limited operations with in-city hotels utilized as lodging for BPOs and returning OFWs. The Company is launching E-Concierge, a mobile application that allows contactless interaction between guests and hotel staff from check-in to check-out, including virtual ordering of food from various food and beverage outlets inside the hotels. The Company is preparing new service packages for customers to increase hotel reservations.

Expected Trends for the Second Quarter of 2020

The Company expects its performance in the second quarter of 2020 to remain profitable, albeit weaker than the first quarter, as the months of April and May encompassed the height of the lockdown. The operations of Megaworld Lifestyle Malls were limited to supporting tenants with essential services, while only the in-city hotels of Megaworld Hotels were operating to cater to BPO employees and repatriated Filipinos. Construction activity was hampered by the quarantine, affecting project completion. But the Company continued to generate reservation sales, albeit weaker year-on-year. On the other hand, the performance of Megaworld Premier Offices has proved the office segment remained resilient as most of its BPO tenants continued operations. The Company, however, believes that while further opening of the economy in the second half of 2020 will allow its various businesses to recover, the Company expects these current trends to continue beyond the second quarter of 2020.

STRENGTHS

• Leading real estate player with established market position and strong brand recognition.

• High quality and diversified portfolio provides stability to income generation.

• Defensive and recurring income portfolio provides resilience amid economic uncertainty.

• High earnings visibility supported by substantial land bank and proven execution track record.

• Leading real estate player with an established market position and strong brand recognition.

• Experienced management team with robust corporate governance policies.

• Conservative balance sheet supported by diversified funding sources and prudent financial management.

STRATEGIES

The Company’s objective is to increase its profitability and maintain its leading position as a major property developer in the Philippines, specifically in the middle-income residential condominium market and the market for BPO-related office developments. The Company intends to achieve its objective through the following principal strategies:

• Maximize earnings through integrated community township developments.

• Capitalize on brand and reputation.

• Build on synergies across the Megaworld group and the larger Alliance Global Group, Inc. group of companies.

• Maintain a strong financial position.

• Sustain a diversified development portfolio.

• Capitalize on growing opportunities in tourism development.

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CORPORATE INFORMATION

The Issuer is incorporated under the laws of the Philippines. It maintains its principal executive offices at 30th Floor Alliance Global Tower, 36th Street Cor. 11th Avenue, Uptown Bonifacio, Taguig City, Philippines. The telephone number at that address is +63-2-8894-6300.

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SUMMARY FINANCIAL INFORMATION AND OTHER DATA

The summary historical consolidated statements of financial position data as at December 31, 2018, and 2019 and summary historical consolidated statements of comprehensive income and statement of cash flow data for the years ended December 31, 2017, 2018, and 2019 set forth below have been derived from, and should be read in conjunction with, the audited consolidated financial statements and, including the notes thereto, included elsewhere in this Offering Circular. Punongbayan & Araullo, a member firm of Grant Thornton, has audited the consolidated financial statements in accordance with PFRS. The summary historical consolidated unaudited interim statement of financial position data as at March 31, 2020 and summary historical consolidated unaudited interim income statement and statement of cash flow data for the three months ended March 31, 2019 and 2020 have been derived from, and should be read in conjunction with, the unaudited interim consolidated financial statements. Potential investors should read the following data together with the more detailed information contained in the consolidated financial statements and the related notes included elsewhere in this Offering Circular. The following data is qualified in its entirety by reference to all of that information.

Translations from Philippine Pesos to U.S. dollars for the convenience of the reader have been made at the BSP Rate on March 31, 2020 of ₱51.04 to U.S.$1.00.

CONSOLIDATED STATEMENT OF INCOME DATA

For the year ended December 31, For the three months ended March 31,

2017 2018 2019 2019 2020

(Audited) (Unaudited)

(in millions)

₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$

REVENUES AND INCOME

Real estate sales ............. 34,115.1 38,035.5 42,604.0 834.7 9,474.2 9,610.3 188.3

Rental income ................ 11,830.0 14,264.9 16,814.1 329.4 3,925.5 4,233.5 82.9 Hotel operations ............. 1,336.0 1,519.4 2,543.8 49.8 574.5 550.9 10.8 Equity share in net

earnings (losses) of associates .................... 118.8 92.3 (58.8) (1.2) 23.0 3.4 0.1

Interest and other income – net ............... 2,715.2 3,515.0 5,409.7 106.0 908.9 682.9 13.4

50,115.0 57,427.2 67,312.7 1,318.8 14,906.1 15,081.0 295.5

COSTS AND EXPENSES

Cost of real estate sales ............................ 18,041.1 20,521.2 23,379.8 458.1 5,107.1 5,264.2 103.1

Hotel operations ............. 755.8 820.8 1,381.2 27.1 327.8 332.1 6.5 Operating expenses ........ 9,688.2 11,245.0 13,912.5 272.6 2,927.8 3,568.7 69.9 Interest and other

charges – net ............... 3,862.3 3,296.3 3,261.6 63.9 1,018.5 722.9 14.2 Tax expense ................... 4,063.5 5,544.4 6,081.7 119.2 1,408.6 1,392.3 27.3

36,410.8 41,427.7 48,016.7 940.8 10,789.8 11,280.1 221.0 PROFIT FOR THE

YEAR BEFORE PRE-ACQUISITION INCOME ...................... 13,704.3 15,999.5 19,296.0 378.1 4,116.3 3,800.9 74.5

PRE-ACQUISITION

LOSS (INCOME) OF SUBSIDIARIES ........... 2.7 (166.5) – – – – –

NET PROFIT FOR THE YEAR ............................ ₱13,707.0 ₱15,833.1 ₱19,296.0 U.S.$378.1 ₱4,116.3 ₱3,800.9 U.S.$74.5

Net profit attributable to:

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2017 2018 2019 2019 2020


(in millions)

₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$ Company’s

shareholders................ 13,145.6 15,208.1 17,931.4 351.3 3,836.3 3,507.0 68.7 Non-controlling

interests ...................... 561.4 624.9 1,364.6 26.7 280.0 293.9 5.8

₱13,707.0 ₱15,833.1 ₱19,296.0 U.S.$378.1 ₱4,116.3 ₱3,800.9 U.S.$74.5 Earnings Per Share:

Basic .............................. ₱0.413 ₱0.469 ₱0.546 U.S.$0.0 ₱0.121 ₱0.110 U.S.$0.0

Diluted ........................... ₱0.411 ₱0.467 ₱0.543 U.S.$0.0 ₱0.120 ₱0.110 U.S.$0.0

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at December 31, As at March 31, 2018 2019 2020 (Audited) (Unaudited) (in millions)

₱ ₱ U.S.$ ₱ U.S.$ CURRENT ASSETS

Cash and cash equivalents ...................... 17,543.1 23,104.9 452.7 25,727.2 504.1 Trade and other receivables – net ........... 27,655.2 33,012.0 646.8 33,426.8 654.9 Contract assets ....................................... 11,131.9 10,857.2 212.7 11,149.2 218.4 Inventories ............................................. 100,662.6 102,845.4 2,015.0 103,987.2 2,037.4 Advances to contractors and suppliers ... 8,949.7 12,269.5 240.4 12,358.5 242.1 Prepayments and other current assets ..... 9,204.9 8,417.2 164.9 8,858.7 173.6

Total Current Assets ........................... 175,147.4 190,506.2 3,732.5 195,507.5 3,830.5 NON-CURRENT ASSETS

Trade and other receivables – net ........... 7,258.6 11,797.4 231.1 12,516.0 245.2 Contract assets ....................................... 11,095.4 7,785.8 152.5 8,018.3 157.1 Advances to contractors and suppliers ... 2,821.5 3,044.3 59.6 4,043.3 79.2 Advances to landowners and joint

operators ............................................. 6,910.2 7,058.9 138.3 7,099.8 139.1 Financial assets at fair value through

other comprehensive income .............. 4,474.9 4,498.2 88.1 3,966.3 77.7 Investments in associates – net............... 1,996.9 3,511.5 68.8 3,514.9 68.9 Investment properties – net .................... 103,122.1 110,890.9 2,172.6 112,711.5 2,208.3 Property and equipment – net ................ 6,170.1 6,702.3 131.3 6,794.3 133.1 Deferred tax assets ................................. 284.9 308.8 6.1 309.0 6.1 Other non-current assets – net ................ 3,008.7 3,528.8 69.1 3,636.9 71.3

Total Non-current Assets .................... 147,143.3 159,126.9 3,117.7 162,610.2 3,185.9 TOTAL ASSETS ..................................... ₱322,290.7 ₱349,633.1 U.S.$6,850.2 ₱358,117.7 U.S.$7,016.4 CURRENT LIABILITIES

Interest-bearing loans and borrowings ... 12,019.7 14,502.5 284.1 13,897.9 272.3 Trade and other payables ....................... 15,027.1 19,306.8 378.3 19,975.2 391.4 Contract liabilities .................................. 2,663.1 1,703.9 33.4 1,879.4 36.8 Customers’ deposits ............................... 9,286.2 10,716.8 210.0 10,616.8 208.0 Redeemable preferred shares ................. 251.6 251.6 4.9 251.6 4.9 Advances from associates and other

related parties ..................................... 2,885.5 2,914.9 57.1 2,787.3 54.6 Income tax payable ................................ 207.2 257.8 5.1 213.4 4.2 Other current liabilities .......................... 5,063.8 7,890.2 154.6 9,009.2 176.5

Total Current Liabilities ..................... 47,404.2 57,544.5 1,127.4 58,630.9 1,148.7 NON-CURRENT LIABILITIES

Interest-bearing loans and borrowings ... 38,620.9 36,753.9 720.1 40,257.0 788.7 Bonds payable ........................................ 25,102.0 24,623.9 482.4 24,702.6 484.0 Contract liabilities .................................. 2,705.6 3,509.6 68.8 3,478.8 68.2 Customers’ deposits ............................... 2,523.1 3,083.1 60.4 2,528.2 49.5

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₱ ₱ U.S.$ ₱ U.S.$ Redeemable preferred shares ................. 754.8 503.2 9.9 503.2 9.9 Deferred tax liabilities – net ................... 8,951.2 10,729.3 210.2 11,324.2 221.9 Retirement benefit obligation ................. 828.5 1,249.6 24.5 1,275.7 25.0 Other non-current liabilities ................... 6,660.0 6,770.5 132.7 7,457.9 146.1

Total Non-current Liabilities .............. 86,146.1 87,223.0 1,708.9 91,527.7 1,793.3 Total Liabilities ₱133,550.2 ₱144,767.6 U.S.$2,836.4 ₱150,158.7 U.S.$2,942.0

EQUITY

Total equity attributable to the Company’s shareholders .................... 163,854.9 178,464.1 3,496.6 181,352.8 3,553.1

Non-controlling interests ........................ 24,885.5 26,401.4 517.3 26,606.2 521.3 Total Equity ........................................ 188,740.4 204,865.5 4,013.8 207,959.0 4,074.4

TOTAL LIABILITIES AND EQUITY.. ₱322,290.7 ₱349,633.1 U.S.$ 6,850.2 ₱ 358,117.7 U.S.$ 7,016.4

Notes:

(1) Cash and cash equivalents consist of cash on hand and in banks and short-term investments.

(2) Other non-current assets include goodwill, guarantee and other deposits, deferred commission, leasehold rights and other items.

(3) Other current liabilities include deferred rent, commission payable, advances from customers, subscription payable and other items.

(4) Other non-current include deferred rent, retention payable, lease liabilities and other items.

CONSOLIDATED STATEMENT OF CASH FLOWS DATA

For the year ended December 31,

For the three months ended March 31,

2017 2018 2019 2019 2020 (Audited) (Unaudited) (in millions)

₱ ₱ ₱ U.S.$

(unaudited) ₱ ₱ U.S.$ CASH FLOWS FROM

OPERATING ACTIVITIES Net cash flows from operating

activities .................................... 6,153.9 13,926.7 23,381.9 458.1 5,277.7 2,825.4 55.4 CASH FLOWS USED IN

INVESTING ACTIVITIES Net cash flows used in investing

activities .................................... (15,568.3) (16,679.0) (11,315.9) (221.7) (2,799.1) (1,754.0) (34.4) CASH FLOWS FROM (USED

IN) FINANCING ACTIVITIES Net cash flows from (used in)

financing activities .................... 8,472.3 3,626.4 (6,504.3) (127.4) (3,753.1) 1,550.9 30.4 Net increase (decrease) in cash

and cash equivalents ................... (942.1) 874.1 5,561.8 109.0 (1,274.4) 2,622.4 51.4 Beginning Balance of Cash and

Cash Equivalents of Acquired Subsidiaries ................................. 976.6 238.9 – –

Cash and cash equivalents at beginning of the year ................. ₱16,395.7 ₱16,430.1 ₱17,543.1 U.S.$343.7 ₱17,543.1 ₱23,104.9 U.S.$452.7

Cash and cash equivalents at end of the year .................................... ₱16,430.1 ₱17,543.1 ₱23,104.9 U.S.$452.7 ₱16,268.7 ₱25,727.2 U.S.$504.1

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KEY PERFORMANCE INDICATORS

The Company’s key performance indicators are presented below:

For the years ended December 31,


2017 2018 2019 2019 2020 Current Ratio(1) ............... 3.25:1 3.69:1 3.31:1 3.67:1 3.33:1 Debt to Equity Ratio(2) .... 0.46:1 0.40:1 0.37:1 0.38:1 0.38:1 Return on Assets(3).......... 5.14% 5.22% 5.74% 4.57% 3.96% Return on Equity(4) ......... 9.79% 9.97% 10.48% 8.97% 7.80% EBITDA(5) ...................... 21,156 24,957 29,609 6,579 6,348 EBITDA Margin(6) ......... 42.22% 43.46% 43.99% 44.14% 42.10%

Notes:

(1) Current Assets/Current Liabilities

(2) Interest Bearing Loans and Borrowings and Bonds Payable / Equity

(3) Annualized Net Profit / Average Total Assets

(4) Annualized Net Profit / Average Equity (computed using figures attributable only to parent company shareholders)

(5) EBITDA is calculated as net income before interest, taxes, depreciation and amortization.

The table below sets forth the reconciliation of EBITDA to net income for the periods indicated. For the year ended

December 31, For the three months ended

March 31, 2017 2018 2019 2019 2020 EBITDA RECONCILIATION Net Income ............................................................. 13,707 15,833 19,296 4,116 3,801 Add:

Income tax ......................................................... 4,063 5,544 6,082 1,409 1,392 Interest Expense ................................................ 1,555 1,310 1,513 442 398 Depreciation and amortization ........................... 1,831 2,269 2,719 612 757

EBITDA ................................................................. 21,156 24,957 29,609 6,579 6,348

(6) EBITDA margin is calculated as EBITDA divided by total revenues.

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SUMMARY OF THE OFFERING

The following is a summary of the terms of the offering of the Notes and is qualified in its entirety by the remainder of this Offering Circular. For a more complete description of the terms of the Notes, see “Terms and Conditions of Notes”, and “The Global Certificate”. Terms defined in “Terms and Conditions of the Notes” and “The Global Certificate” shall have the same meanings in this summary. Some of the terms described below are subject to important limitations and exceptions.

Issuer ........................................................ Megaworld Corporation

Legal Entity Identifier ............................. 254900P57OOZ5AY5C521

Joint Global Coordinators, Joint Lead Managers and Joint Bookrunners .....

Citigroup Global Markets Limited and The Hongkong and Shanghai Banking Corporation Limited

Joint Bookrunners ................................... Credit Suisse (Singapore) Limited and J.P. Morgan Securities plc

Issue .......................................................... U.S.$350 million in aggregate principal amount of 4.125% senior unsecured notes due 2027

Issue Price ................................................ 98.506% of the principal amount of the Notes.

Issue Date ................................................. July 30, 2020

Maturity Date .......................................... Unless previously purchased and cancelled or redeemed, the Notes will be redeemed on July 30, 2027 at 100% of their principal amount in U.S. dollars plus any accrued and unpaid interest.

Interest ...................................................... The Notes will bear interest from and including July 30, 2020 at the rate of 4.125% per annum payable in equal instalments semi-annually in arrears on January 30 and July 30 each year up to, and excluding the Maturity Date, with the first interest payment to be made on January 30, 2021.

Status of the Notes ................................... The Notes constitute the direct, unconditional, unsecured and unsubordinated obligations of the Issuer and will at all times rank pari passu in right of payment with all other present and future unconditional, unsubordinated and unsecured obligations of the Issuer, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.

Form and Denomination ......................... The Notes will be issued in registered form in the denomination of U.S.$200,000 each and integral multiples of U.S.$1,000 in excess thereof.

The Notes will be represented on issue by a global certificate (the “Global Certificate”) which will be registered in the name of a nominee of, and deposited with, a common depositary for Euroclear and Clearstream, Luxembourg on or about the Issue Date. For so long as the Notes are represented by the Global Certificate, the purchase, sale and transfer of the Notes may only be effected through records maintained by Euroclear and Clearstream, Luxembourg and their respective accountholders. The Global Certificate will be exchangeable for definitive Notes in the limited circumstances set out in it. See “The Global Certificate.”

Use of Proceeds ........................................ The proceeds from the issuance of the Notes will be used for general corporate purposes, which include, among others,

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financing capital expenditure, land banking and refinancing of loans.

Negative Pledge ........................................ So long as any Note remains outstanding (as defined in the Trust Deed), (a) the Issuer will not, and the Issuer will ensure that none of its Material Subsidiaries (as defined below) will, create or permit to subsist any mortgage, lien, pledge, charge, security interest, encumbrance or claim of any kind or nature, whatsoever, upon the whole or any part of the property, assets or revenues, present or future, of the Issuer or any Material Subsidiary, respectively, to secure any Relevant Indebtedness (as defined below) or to secure any guarantee of or indemnity in respect of, any Relevant Indebtedness unless, at the same time or prior thereto, the Issuer’s obligations under the Notes and the Trust Deed (i) are secured equally and rateably therewith, or (ii) have the benefit of such other security, guarantee, indemnity or other arrangement as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders. See “Terms and Conditions of the Notes – Negative Pledge”.

Events of Default ..................................... Events of Default under the Notes will include, among others, non-payment of any principal or interest due in respect of the Notes or any of them and, in the case of interest, the default continues for a period of 14 days, each as described in Condition 10 of the Terms and Conditions. For a description of events that would permit acceleration of repayment of principal and interest on the Notes, see “Terms and Conditions of the Notes—Events of Default”.

Taxation; Payment of Additional Amounts ..............................................

All payments in respect of the Notes by or on behalf of the Issuer will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by or on behalf of the Relevant Jurisdiction (as defined in the Terms and Conditions), unless the withholding or deduction of the Taxes is required by law. Subject to certain exceptions, in the event that the Issuer makes a deduction or withholding required by law, the Issuer or shall pay such additional amount (“Additional Amounts”) as will result in receipt by the Noteholders of such amounts as would have been received by them had no such withholding or deduction been required. See Condition 7.1 of the Terms and Conditions.

Redemption due to a Gross-up Event .... The Notes may be redeemed at the option of the Issuer, in whole but not in part, at any time at 100% of the principal amount of the Notes plus any accrued but unpaid interest, if the Issuer satisfies the Trustee immediately before the giving of such notice that (a) on the occasion of the next payment due under the Notes, the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 5.2 as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction (as defined in the Terms and Conditions) or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the Issue Date; and (b) such obligation cannot be avoided by the Issuer taking reasonable measures available to it; and (c) where any Additional Amounts due in accordance with Condition 7 are a consequence of any change in laws or treaties of the Republic of the Philippines after the Issue Date, the rate of withholding or deduction required by such

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law or treaty is in excess of 20% See Condition 5.2 of the Terms and Conditions.

Redemption due to a Change of Control .................................................

Following the occurrence of a Change of Control Triggering Event (as defined in the Terms and Conditions), the holder of each Note will have the right at such holder’s option, to require the Issuer to redeem all, but not part, of that holder’s Notes on the Change of Control Triggering Event Put Date (as defined in the Terms and Conditions) at 101% of their principal amount thereof plus any accrued but unpaid interest. See Condition 5.3 of the Terms and Conditions.

Make-whole redemption ......................... At any time prior to the Par Call Date (as defined below), the Issuer may on any one or more occasions redeem all or a part of the Notes, on the giving of not less than 30 and not more than 60 calendar days’ irrevocable notice of redemption to the Noteholders in accordance with Condition 13.1, at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, the date of redemption, subject to the rights of Noteholders on the relevant record date (as defined in Condition 6.1) to receive interest due on the relevant Interest Payment Date. Neither the Trustee nor any of the Agents shall be responsible for verifying or calculating the Applicable Premium.

Call Option at Par ................................... At any time and from time to time on or after April 30, 2027 (the date that is three months prior to the maturity of the Notes, the “Par Call Date”), the Issuer or the Guarantor, may at its option redeem all or a part of the Notes at the Redemption Price, on the giving of not less than 30 and not more than 60 calendar days’ irrevocable notice of redemption to the Noteholders in accordance with Condition 13.1 and to the Trustee and the Principal Paying Agent in writing.

Further Issues .......................................... The Issuer may, from time to time, without the consent of the holders of the Notes, create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest) so as to form a single series with the Notes. See “Terms and Conditions of the Notes — Further Issues.”

Trust Deed ................................................ The Notes will be constituted by a Trust Deed to be dated on or about July 30, 2020 made between the Issuer and the Trustee.

Listing and Trading ................................. Approval in-principle has been obtained from the SGX-ST for the listing and quotation of the Notes on the Official List of the SGX-ST. The Notes will be traded on the SGX-ST in a minimum board lot size of U.S.$200,000 for so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require.

So long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer shall appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption, in the event that the Global Certificate representing the Notes is exchanged for definitive certificates. In addition, an announcement of such exchange shall be made by or on behalf of the Issuer through the SGX-ST and such announcement will include all material

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information with respect to the delivery of the definitive certificates, including details of the paying agent in Singapore.

Clearing Systems ..................................... Euroclear and Clearstream, Luxembourg

ISIN ........................................................... XS2209978639

Common Code ......................................... 220997863

Governing Law ........................................ The Notes and any non-contractual obligations arising out of or in connection with the Notes will be governed by and construed in accordance with English law.

Selling Restrictions .................................. The Notes have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States. The Notes are being offered and sold outside of the United States in reliance on Regulation S under the Securities Act (“Regulation S”). The Notes may be sold in other jurisdictions (including the European Economic Area, the United Kingdom, Hong Kong, Singapore and the Philippines) only in compliance with applicable laws and regulations. See “Subscription and Sale”.

Trustee ...................................................... The Hongkong and Shanghai Banking Corporation Limited

Registrar, Principal Paying Agent and Transfer Agent .................................... The Hongkong and Shanghai Banking Corporation Limited

Risk Factors ............................................. For a discussion of certain risk factors that should be considered in evaluating an investment in the Notes, see “Risk Factors”.

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RISK FACTORS

An investment in the Notes involves a number of risks. Prospective investors should carefully consider the risks and uncertainties described below, in addition to the other information contained in this Offering Circular, including the Company’s audited consolidated financial statements and notes relating thereto included in this Offering Circular, before making any investment decision relating to the Notes.

This section entitled “Risk Factors” does not purport to disclose all of the risks and other significant aspects of investing in these notes. The occurrence of any of the events discussed below and any additional risks and uncertainties not currently known to the Company or that are currently considered immaterial could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects and prospective investors may lose all or part of their investment.

RISKS RELATING TO THE ISSUER

Substantially all of the Issuer’s business activities are conducted in the Philippines and all of its assets are located in the Philippines, which exposes the Issuer to risks associated with the Philippines, including the performance of the Philippine economy.

Historically, the Issuer has derived substantially all of its revenues and operating profits from sales of its real estate products in the Philippines, and its business is highly dependent on the state of the Philippine economy. Demand for, and prevailing prices of, developed land, house and lot units are directly related to the strength of the Philippine economy (including overall growth levels and interest rates), the overall levels of business activity in the Philippines and the amount of remittances received from overseas Filipino workers (“OFW”). As a result of the Asian financial crisis that began in 1997, the Philippine economy generally, and the Philippine property market specifically, went through a sharp downturn in the late 1990s. This downturn was further exacerbated during 2000 to 2001 by the political crisis resulting from the impeachment proceedings against, and the subsequent resignation of, former President Joseph Estrada. The global financial downturn also resulted in a general slowdown of the global economy in 2008 and 2009, which had a negative effect on the property market as Philippine property sales declined. More recently, the outbreak of COVID-19, which was declared a global pandemic by the World Health Organization, in the first quarter of 2020, has severely affected and continues to seriously affect the global economy.

There is no assurance that there will not be a recurrence of an economic slowdown in the Philippines.

Factors that may adversely affect the Philippine economy include:

• decreases in business, industrial, manufacturing or financial activity in the Philippines or in the global markets;

• scarcity of credit or other financing, resulting in lower demand for products and services provided by companies in the Philippines or in the global market;

• exchange rate fluctuations;

• increase in trade barriers and tariffs;

• a prolonged period of inflation or increase in interest rates;

• changes in the Government’s taxation policies;

• the emergence of COVID-19, the re-emergence of Severe Acute Respiratory Syndrome, (commonly known as SARS), avian influenza (commonly known as the bird flu) H1N1 influenza (commonly known as swine flu) or the emergence of another similar disease in the Philippines or in other countries in Southeast Asia;

• natural disasters, including typhoons, earthquakes, fires, floods and similar events;

• political instability, terrorism or military conflict in the Philippines, other countries in the region or globally; and

• other regulatory, political or economic developments in or affecting the Philippines.

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There is also a degree of uncertainty regarding the economic and political situation in the Philippines. Any deterioration in economic conditions in the Philippines as a result of these or other factors could have a material adverse impact on the Philippine housing and property markets resulting in, among others, lower demand and values for real estate and increased difficulties on the part of tenants in meeting their lease and other financial obligations, which in turn would likely have a material adverse impact on the Issuer’s business, financial condition, results of operations and prospects. See “Risks Related to the Philippines.”

The Issuer’s business may be materially and adversely affected by the COVID-19 pandemic and other adverse public health developments.

The outbreak of COVID-19, which was declared a global pandemic by organizations such as the World Health Organization, in the first quarter of 2020, has severely affected and continues to seriously affect the global economy. Governments and health authorities around the world have imposed sweeping measures designed to contain the pandemic, including, among others, travel restrictions, border closures, curfews, quarantines, cancellations of gatherings and events and closures of universities, schools, restaurants, stores and other business. The economic repercussions of the pandemic and the efforts around the world to contain it have been severe, and include reduced global trade, lower industrial production, broad reductions in general consumption and economic activity and major disruptions to international travel and global air traffic.

In a move to contain the COVID-19 outbreak, on March 16, 2020, Presidential Proclamation No. 929 was issued, declaring a state of calamity throughout the Philippines for a period of six months from March 17, 2020 and imposed an enhanced community quarantine (“ECQ”) throughout the island of Luzon until April 12, 2020. On March 24, 2020, Republic Act No. 11469, otherwise known as the “Bayanihan to Heal as One Act”, was signed into law, declaring a state of national emergency over the entire country, and authorizing the President of the Philippines to exercise certain powers necessary to address the COVID-19 pandemic. On April 7, 2020, the Office of the President of the Philippines released a memorandum extending the ECQ over the entire Luzon island until April 30, 2020. On May 1, 2020, the Government further extended the ECQ over, among others, certain portions of Luzon, including Metro Manila, until May 15, 2020, while easing restrictions in other parts of the country. On May 11, 2020, the Inter-Agency Task Force of Emerging Infectious Disease (“IATF”) placed high-risk local government units under modified ECQ (“MECQ”) from May 16, 2020 until May 31, 2020, where certain industries were allowed to operate under strict compliance with minimum safety standards and protocols. On May 27, 2020, the IATF reclassified the community quarantine level various provinces, highly urbanized cities and independent component cities depending on the risk-level. For example, on May 28, 2020, the Government placed Metro Manila under general community quarantine (“GCQ”), allowing for the partial reopening of certain businesses and public transportation while continuing to limit general movements. Majority of the province of Cebu (including areas of Mactan but excluding Cebu City) have also shifted from ECQ to GCQ. These measures have caused disruption to businesses and economic activities, and their impacts on businesses continue to evolve.

The Philippine Government expects the country’s gross domestic product to fall by 2% to 3.4% due to the economic effects of the outbreak, and the resulting domestic shutdowns, reduced tourism, disrupted trade and manufacturing and financial market spillovers. On May 7, 2020, the National Economic Development Authority reported that the Philippine economy had slowed down for the first time in 22 years, contracting 0.2% in the first quarter of 2020, from a 5.6% growth rate in the first quarter of 2019.

The outbreak of the COVID-19 and other adverse public health developments, such as the outbreak of avian influenza, severe acute respiratory syndrome, or SARS, Zika virus and Ebola virus could materially and adversely affect the Issuer’s business, financial condition and results of operations. These may include, temporary closures of the Issuer’s premises, hospitalization or quarantine of its employees, delay or suspension of supplies from its suppliers and supply chain generally, disruptions or suspension of its operational and construction activities and labor shortage due to restrictions on its employees’ ability to travel. For example, as a result of the COVID-19 outbreak, revenues from the Issuer’s mall and hotel operations for the first quarter of 2020 declined by 4% versus the same period last year. Moreover, as a result of the quarantine measures implemented by the Government, the Issuer’s malls were forced to close, resulting in a significant decline in footfall, particularly those located within Metro Manila. The Issuer has provided rent concessions and waived rental charges of its tenants and retail partners for a certain period, particularly to those who are unable to operate due to quarantine measures, in addition to the concessions that the Issuer is required to provide pursuant to the Bayanihan Act, such as rent payment deferrals. As of the date of this Offering Circular, the Issuer’s mall leasing activities has shifted to rental fees based on percentage of sales instead of fixed rent and percentage of sales rental fee arrangements.

As of the date of this Offering Circular, the Issuer has incurred additional expenses by adopting certain measures to prevent further transmission of COVID-19 such as making hand sanitizers available within its properties,

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increasing the frequency of disinfection of facilities and providing its employees with personal protective equipment, among others. There is no certainty that such measures will be sufficient or that the Issuer will not be required to incur additional expense to address the effect of COVID-19 on its operations.

In addition, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets. It is possible that the continued spread of COVID-19 could cause a global economic slowdown or recession. The impacts of the outbreak of COVID-19 on the global economy and financial markets generally and on the Issuer’s results of operations are highly uncertain. Furthermore, there can also be no assurance that the policies and controls for outbreak prevention and disease recurrence introduced by governments, will be successful in preventing disease outbreaks or recurrences or that any actual or suspected outbreak of COVID-19 or other contagious disease affecting the Philippines or elsewhere will not occur. There can also be no assurance that any future outbreak of contagious diseases will not have a material adverse effect on the Issuer’s business, financial condition, and results of operations.

The Issuer operates in an intensely competitive industry, which could limit the Issuer’s ability to maintain or increase its market share and maintain profitability.

The Issuer’s real estate operations are subject to intense competition, and some competitors may have substantially greater financial and other resources than the Issuer, which may allow them to undertake more aggressive marketing and to react more quickly and effectively to changes in the markets and in consumer preferences. In addition, the entry of new competitors into the real estate industry could reduce the Issuer’s sales and profit margins. In the real estate development industry, the Issuer competes against a number of residential and commercial developers and real estate services companies, including Ayala Land, Inc. (“ALI”) for the Issuer’s projects in the Fort Bonifacio area of Metro Manila, and Robinsons Land Corporation, SM Prime Holdings, Inc. and ALI for the Issuer’s retail and office leasing activities. The Issuer competes for the acquisition of prime land, resources for development and prospective purchasers and tenants. For example, the city governments of Quezon City, Pasay City and Manila are offering land for the development of business districts, particularly to the developers targeting the BPO industry and that may have projects which compete with the Issuer’s current development projects. Increased competition from other real estate developers and real estate services companies may adversely affect the Issuer’s ability to acquire and sell properties or attract and retain tenants.

The Philippine property market is cyclical.

The Issuer expects to derive a substantial portion of its revenue in the future from its current portfolio of township development projects. Accordingly, it is heavily dependent on the state of the Philippine property market. The Philippine property market has in the past been cyclical and property values have been affected by the supply of and demand for comparable properties, the rate of economic growth in the Philippines and political and social developments.

Since the second half of 2008, the global financial markets have experienced, and may continue to experience, significant dislocations, which originated from the liquidity disruptions in the United States and the European Union credit and sub-prime residential mortgage markets. These disruptions and other events, such as rising government deficits and debt levels, the sovereign credit ratings downgrades and ensuing public deficit and debt reduction measures of the United States and certain member states of the European Union, the risk of a partial collapse of the Eurozone, slower rates of growth in the Chinese economy and increasing level of debt in China, and the outbreak of COVID-19 pandemic have had and continue to have a significant adverse effect on the global financial markets. In particular, the COVID-19 pandemic may cause increasing concerns over the prospects of the Philippine property market, which may materially and adversely affect the demand for properties and property prices in the country. Given the uncertainties as to the development of the pandemic, it will be difficult to predict the extent to which this will continue to impact property development, sales, leasing and hotel operations and the Issuer.

Demand for new residential projects in the Philippines has also fluctuated in the past as a result of prevailing economic conditions in both the Philippines and in other countries, such as the United States (including overall growth levels and interest rates), the strength of overseas markets (as a substantial portion of demand comes from OFWs and expatriate Filipinos), the political and security situation in the Philippines and other related factors. For example, the global financial crisis in 2008 and 2009 resulted in a generally negative effect on real estate property prices globally, including the Philippines. The Issuer expects this general cyclical trend to continue, which means that the Issuer’s results of operations may fluctuate from period to period in accordance with fluctuations in the Philippine economy, the Philippine property market and the global property market in general. There can be no assurance that such variances will not have a material adverse effect on the business, financial

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condition or results of operations of the Issuer. The Issuer is subject to significant competition in connection with the acquisition of land for development projects.

The Issuer is subject to significant competition in connection with the acquisition of land for development projects.

The Issuer’s future growth and development are dependent, in part, on its ability to acquire or enter into agreements to develop additional tracts of land suitable for development projects. As the Issuer and its competitors attempt to locate sites for development, the Issuer may experience difficulty in locating parcels of suitable size in locations and at prices acceptable to the Issuer.

The Issuer is exposed to geographic portfolio concentration risks.

Properties located in the commercial areas of the Philippines account for a substantial portion of the appraised value of the Issuer’s assets. The Issuer’s current projects are primarily located within or at relatively short distances from the traditional main business districts, particularly in Metro Manila. Due to the concentration of the Issuer’s property portfolio, a decrease in property values in Metro Manila would have a material adverse effect on the business and results of operations of the Issuer.

A domestic asset price bubble could adversely affect the Issuer’s business.

One of the risks inherent in any real estate property market is the possibility of an asset price bubble. An asset price bubble occurs when there is a gross imbalance between the supply and demand in the property market, causing an unusual increase in asset prices. The rapid upsurge in asset prices might result into an eventual decline in prices as markets recalibrate. In the Philippines, the growth of the real estate sector is mainly driven by low interest rates, robust remittances from OFWs, and the fast growing BPO sector which is vulnerable to global economic changes.

The Issuer believes that the Philippine property sector is adequately protected against a domestic asset price bubble burst. The country has a very young demographic profile benefitting from rising disposable income. It likewise has one of the fastest growing emerging economies, registering Gross Domestic Product growth rates of 6.7% in 2017, 6.2% in 2018 and 5.9% in 2019 and the growth in the property sector is largely supported by infrastructure investments from both the public and private sectors and strong macroeconomic fundamentals.

There can be no assurance however, that the Philippines will achieve strong economic fundamentals in the future. Changes in the conditions of the Philippine economy could materially and adversely affect the Issuer’s business, financial condition and results of operations.

The Issuer faces certain risks related to the cancellation of sales involving its residential projects and in certain circumstances the Issuer’s revenue may be overstated due to cancelled sales.

As a developer and seller of residential real estate, the Issuer’s business, financial condition and results of operations could be adversely affected in the event a material number of its residential sales are cancelled. The Issuer is subject to Republic Act No. 6552 (the “Maceda Law”), which applies to all transactions or contracts involving the sale or financing of real estate through instalment payments, including residential condominium units (but excluding industrial and commercial lots). Under the Maceda Law, buyers who have paid at least two years of instalments are granted a grace period of one month for every year of paid instalments to cure any payment default. If the contract is cancelled, the buyer is entitled to receive a refund of at least 50% of the total payments made by the buyer, with an additional 5% per annum in cases where at least five years of instalments have been paid (but with the total not to exceed 90% of the total payments). Buyers who have paid less than two years of instalments and who default on instalment payments are given a 60-day grace period to pay all unpaid instalments before the sale can be cancelled, but without right of refund. See “Regulatory and Environmental Matters — Real estate sales on instalments.” “While the Issuer historically has not experienced a material number of cancellations to which the Maceda Law has applied, there can be no assurance that it will not experience a material number of cancellations in the future, particularly during slowdowns or downturns in the Philippine economy, periods when interest rates are high or similar situations. In the event the Issuer does experience a material number of cancellations, it may not have enough funds on hand to pay the necessary cash refunds to buyers or it may have to incur indebtedness in order to pay such cash refunds. In addition, particularly during an economic slowdown or downturn, there can be no assurance that the Issuer would be able to re-sell the same property or re-sell it at an acceptable price. Any of the foregoing events would have a material adverse effect on the Issuer’s business, financial condition and results of operations. In spite of the COVID-19 pandemic, the Issuer has not experienced

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a material number of cancellations beyond the historical rate of cancellations. However, there can be no assurance that the Issuer will not suffer from substantial cancellations and that such cancellations will not have a material adverse effect on its financial condition and results of operations.

The Issuer operates in a regulated environment and its businesses are affected by the development and application of regulations in the Philippines.

The Issuer operates its businesses in a regulated environment. Presidential Decree No. 957, as amended, (“PD 957”) and Republic Act No. 4726 or the Condominium Act (“RA 4726”) are the principal statutes which regulate the development and sale of real property as part of a condominium project or subdivision. Presidential Decree No. 957 and RA 4726 cover subdivision projects for residential, commercial, industrial or recreational purposes and condominium projects for residential or commercial purposes. The Department of Human Settlements and Urban Development (“DHSUD”) is the administrative agency of the Government of the Philippines which, together with local government units, enforces these statutes and has jurisdiction to regulate the real estate trade and business.

Regulations applicable to the Issuer’s operations include standards regarding the suitability of the site, road access, necessary community facilities, open spaces, water supply, sewage disposal systems, electricity supply, lot sizes, the length of the housing blocks and house construction. All subdivision plans are required to be filed with and approved by the local government unit with jurisdiction over the area where the project is located, while condominium project plans are required to be filed with and approved by the DHSUD. Approval of such plans is conditioned on, among other things, completion of the acquisition of the project site and the developer’s financial, technical and administrative capabilities. Alterations of approved plans that affect significant areas of the project, such as infrastructure and public facilities, also require the prior approval of the relevant government unit and the DHSUD. There can be no assurance that the Issuer, its subsidiaries or associates or partners will be able to obtain governmental approvals for its projects or that when given, such approvals will not be revoked.

In addition, owners or dealers of real estate projects are required to obtain licenses to sell before making sales or other disposition of lots or real estate projects. Project permits and any license to sell may be suspended, cancelled or revoked by the DHSUD by itself or upon complaint from an interested party and there can be no assurance that the Issuer, its subsidiaries, associates or partners will in all circumstances, receive the requisite approvals, permits or licenses or that such permits, approvals or licenses will not be cancelled or suspended.

Continued compliance with, and any changes in, safety and environmental laws and regulations may adversely affect the Issuer’s results of operations and financial condition.

The operations of the Issuer’s business are subject to a broad range of safety and environmental laws and regulations. These laws and regulations impose controls on the storage, handling, discharge and disposal of waste, and other aspects of the operations of each of the Issuer’s business. The Issuer has incurred, and expects to continue to incur, operating costs to comply with such laws and regulations. In addition, the Issuer has made and expects to continue to make capital expenditures on an ongoing basis to comply with safety, health and environmental laws and regulations. The discharge of hazardous substances or other pollutants into the air, soil or water that do not comply with relevant health regulations may cause the Issuer to be liable to third parties, the Government or to the local government units with jurisdiction over the areas where the Issuer’s facilities and real estate developments are located. The Issuer may be required to incur costs to remedy the damage caused by such action or pay fines or other penalties for non-compliance.

Safety, health and environmental laws and regulations in the Philippines have been increasingly stringent and it is possible that these laws and regulations will become significantly more stringent in the future. The adoption of new safety, health and environmental laws and regulations, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments in the future may require additional capital expenditures or the incurrence of additional operating expenses in order to comply with such laws and to maintain current operations.

Furthermore, if the measures implemented by the Issuer to comply with these new laws and regulations are not deemed sufficient by the Government, compliance costs may significantly exceed current estimates. If the Issuer fails to meet safety, health and environmental requirements, it may also be subject to administrative, civil and criminal proceedings initiated by the Government, as well as civil proceedings initiated by environmental groups and other individuals, which could result in substantial fines and penalties against the Issuer, as well as orders that could limit or halt its operations.

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The Issuer cannot predict what safety, health and environmental legislation or regulations will be amended or enacted in the future, how existing or future laws or regulations will be enforced, administered or interpreted, or the amount of future expenditures that may be required to comply with these environmental laws or regulations or to respond to environmental claims. There can be no assurance that the Issuer will not become involved in future litigation or other proceedings or be held responsible in any such future litigation or proceedings relating to safety, health and environmental matters in the future, the costs of which could be material. The introduction or inconsistent application of, or changes in, laws and regulations applicable to the Issuer’s business could have a material adverse effect on the Issuer, its financial condition and results of operations. See “Regulatory and Environmental Matters”.

The Issuer may experience difficulty in managing its expected growth.

The Issuer expects that its operations will continue to grow over the long term as the Philippine real estate market continues to mature. Successful management of this rapid growth in the overall Philippine real estate developments market depends upon, among other things:

• favourable economic conditions and regulatory environment;

• the continued acquisition of land for additional projects of the Issuer;

• construction and completion of the Issuer’s projects in a timely and cost-efficient manner;

• the ability to continue to attract purchasers to; and

• the availability of sufficient levels of cash flow or necessary financing to support the development of new projects.

The Issuer may not be able to implement an effective growth strategy in the future to keep pace with the continued development it expects in the Philippine real estate market, and the Issuer may not be able to complete existing or build additional projects. Any failure by the Issuer to take advantage of the opportunities presented by a growing market may have a material adverse effect on its financial condition and results of operations. In addition, if the Issuer is unable to successfully manage the potential difficulties associated with growing its operations or developing additional projects, it may not be able to maintain operating efficiencies. The Issuer may not be able to meet its internal financial target and debt limit to meet financial objectives. If it is not able to continue to capture scale efficiencies, successfully manage personnel and hiring, improve its systems, continue its cost discipline strategies and grow its project portfolio, the Issuer may not be able to achieve or maintain its growth or profitability goals.

Natural or other catastrophes, including severe weather conditions, may materially disrupt the Issuer’s operations and result in losses not covered by its insurance.

The Philippines has experienced a number of major natural catastrophes over the years, including typhoons, floods, droughts, volcanic eruptions and earthquakes. There can be no assurance that the occurrence of such natural catastrophes will not materially disrupt the Issuer’s operations. These factors, which are not within the Issuer’s control, could potentially have significant effects on the Issuer’s housing and land development projects. In particular, damage to the Issuer’s structures resulting from such natural catastrophes could also give rise to claims against the Issuer from third parties or from customers for physical injuries or loss of property. For example, the Taal Volcano eruption in January 2020 affected the Issuer’s Twin Lakes township, which experienced a 24% decline in real estate sales as compared in the previous year. However, during the quarter the township accounted for only 3% of the Issuer’s consolidated real estate sales.

Further, although the Issuer carries insurance for certain catastrophic events, of types (such as business interruption insurance), in amounts and with deductibles that the Issuer believes are in line with general industry practices in the Philippines, there are losses for which the Issuer cannot obtain insurance at a reasonable cost or at all. Should an uninsured loss or a loss in excess of insured limits occur with respect to a particular development project, for instance, the Issuer could lose all or a portion of the capital invested for such project, as well as the anticipated future turnover, while remaining liable for any project costs or other financial obligations relative to such development. Any material uninsured loss could materially and adversely affect the Issuer’s business, financial condition and results of operations. See “Risks Related to the Philippines.”

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The Issuer faces risks relating to its real estate development projects, including risks relating to project cost and completion.

The real estate development business involves significant risks, including the risk of obtaining required Government approvals and permits which may take substantially more time and resources than anticipated.

Construction of projects also may not be completed on schedule and within budget or at all. Real estate development projects require substantial capital expenditures prior to and during the construction period for, among other things, land acquisition and construction. The construction of property projects may take a year or longer before generating positive net cash flow through sales or pre-sales. As a result, the Issuer’s cash flows and results of operations may be significantly affected by its project development schedules and any changes to those schedules. In addition, the time and costs involved in completing the development and construction of residential projects can be adversely affected by many factors, including shortages of materials, equipment and labour, adverse weather conditions, peso depreciation, natural disasters, labour disputes with contractors and subcontractors, accidents, changes in laws or in Government priorities and other unforeseen problems or circumstances. Where land to be used for a project is occupied by tenants and/or squatters, the Issuer may have to incur additional costs to remove such occupants and, if required by law, to provide relocation facilities for them. Any of these factors could result in project delays, cost overruns, or the termination or imposition of penalties under certain of the Issuer’s joint development agreements and financing agreements, all of which could negatively affect the Issuer’s operating margins. This could also result in sales and resulting profits from a particular development not being recognised in the year in which it was originally expected to be recognised, which could adversely affect the Issuer’s results of operations for that year.

The Issuer is exposed to risks that it will be unable to lease its properties in a timely manner or collect rent at profitable rates or at all.

The Issuer is subject to risk incidental to the ownership and operation of office and related retail properties including, among other things, competition for tenants, changes in market rents, inability to renew leases or re-let space as existing leases expire, inability to collect rent from tenants due to bankruptcy or insolvency of tenants or otherwise, increased operating costs and the need to renovate, repair and re-let space periodically and to pay the associated costs. In particular, the Issuer relies on the growth of the BPO business as a continued source of revenue from its rental properties. If the BPO business does not grow as the Issuer expects or if the Issuer is not able to continue to attract BPO-based tenants, it may not be able to lease its office space or as a consequence, its retail space, in a timely manner or otherwise at satisfactory rents, which could have a material adverse effect on the Issuer’s operations and financial condition. For example, in order to help the Issuer’s tenants cope with the impact of the COVID-19 pandemic, rental fees were waived for mall tenants for the months covered by the ECQ lockdown measures. Since then, mall leasing activities have shifted to rental fees based on a percentage of sales instead of fixed rent and percentage of sales rental fee arrangements. In line with the relevant Government regulations and directives, the Issuer also provided rent payment deferrals to several mall and office tenants. Although, the Issuer does not anticipate any challenges in collecting any rent due before the end of the year, there can be no guarantee that the Issuer will not face challenges collecting rental fees in the future.

Increased inflation, fluctuations in interest rates, changes in Government borrowing patterns and Government regulations could have a material adverse effect on the Issuer’s and its customers’ ability to obtain financing.

Interest rates, and factors that affect interest rates, such as the Issuer’s fiscal policy, could have a material adverse effect on the Issuer and on demand for its products. For example:

• Higher interest rates make it more expensive for the Issuer to borrow funds to finance ongoing projects or to obtain financing for new projects.

• Because the Issuer believes that a substantial portion of its customers procure financing to fund their property purchases, higher interest rates make financing, and therefore purchases of real estate, more expensive, which could adversely affect demand for the Issuer’s residential projects.

• If the Government significantly increases its borrowing levels in the domestic currency market or imposes new regulations that reduce the limit allowed on the exposure of banks to the real estate sector, this could increase the interest rates charged by banks and other financial institutions and also effectively reduce the amount of bank financing available to both prospective property purchasers and real estate developers, including the Issuer.

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• The Issuer’s access to capital and its cost of financing are also affected by restrictions, such as single borrower limits, imposed by the BSP on bank lending. If the Issuer were to reach the single borrower limit with respect to any bank, the Issuer may have difficulty obtaining financing with reasonable rates of interest from other banks.

• Increased inflation in the Philippines could result in an increase in the cost of raw materials, which the Issuer may not be able to pass on to its customers as increased prices.

• A further expansion in the budget deficit of the Government could also result in an increase in interest rates and inflation, which could in turn have a material effect on the ability of the Issuer to obtain financing at attractive terms, and on the ability of its customers to similarly obtain financing.

The occurrence of any of the foregoing events, or any combination of them, or of any similar events could have a material adverse effect on the Issuer’s business, financial condition and results of operations.

The Issuer’s reputation will be adversely affected if projects are not completed on time or if projects do not meet customers’ requirements.

The Issuer has an established reputation and brand name in the real estate development business.

If any of the Issuer’s projects experience construction or infrastructure failures, design flaws, significant project delays, quality control issues, natural calamities such as floods or otherwise, this could have a negative effect on the Issuer’s reputation and make it more difficult to attract new customers to its other housing and land development projects. For example, the Issuer is currently developing its projects in Mactan, Cebu and Iloilo province, respectively, two areas in which the Issuer historically did not have any developments. If the Issuer encounters specific development issues, such as project delays or local government issues with respect to its new projects in these areas, its business reputation may be negatively affected.

Any negative effect on the Issuer’s reputation or its brand could also affect the Issuer’s ability to pre-sell its residential development projects. This would impair the Issuer’s ability to reduce its capital investment requirements. The Issuer cannot provide any assurance that such events will not occur in a manner that would adversely affect its results of operations or financial condition.

Dependence on independent contractors and suppliers of construction materials may impact the Issuer’s ability to complete projects on time, within budget and according to certain quality standards.

The Issuer relies on independent contractors to provide various services, including land clearing and infrastructure development, various construction projects and building and property fitting-out works. The Issuer selects independent contractors principally by conducting tenders and taking into consideration factors such as the contractors’ experience, its financial and construction resources, any previous relationship with the Issuer, its reputation for quality and its track record.

There can be no assurance that the Issuer will be able to find or engage an independent contractor for any particular project or find a contractor that is willing to undertake a particular project within the Issuer’s budget, which could result in cost increases or project delays. Further, although the Issuer’s personnel actively supervise the work of such independent contractors, there can be no assurance that the services rendered by any of its independent contractors will always be satisfactory or meet the Issuer’s requirements for quality. Contractors may also experience financial or other difficulties. Any of these factors could delay the completion or increase the cost of certain development projects and could have a material adverse effect on the Issuer’s business, financial condition and results of operations.

The interests of joint development partners for the Issuer’s development projects may differ from the Issuer’s and they may take actions that adversely affect the Issuer.

The Issuer obtains a significant portion of its land bank through joint development agreements with landowners, as part of its overall land acquisition strategy and intends to continue to do so.

Under the terms of its joint development agreements, the Issuer takes responsibility for project development costs and project sales activities, while its joint venture partner typically supplies the project land. A joint venture involves special risks where the venture partner may have economic or business interests or goals inconsistent with or different from those of the Issuer’s. The development partner may also take actions contrary to the Issuer’s

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instructions or requests, or in direct opposition to the Issuer’s policies or objectives with respect to the real estate investments, or the development partner may not meet its obligations under the joint development arrangement. Disputes between the Issuer and its joint development partners could arise which could have an effect on the Issuer’s investment in the project.

Construction defects and other building-related claims may be asserted against the Issuer, and the Issuer may be subject to liability for such claims.

Philippine law provides that property developers, such as the Issuer, warrant the structural integrity of structures that were designed or built by them for a period of 15 years from the date of completion of the structures. The Issuer may also be held responsible for hidden (that is, latent or non-observable) defects in a structure sold by it when such hidden defects render the structures unfit for the use for which it was intended or when its fitness for such use is diminished to the extent that the buyer would not have acquired it or would have paid a lower price had the buyer been aware of the hidden defect. This warranty may be enforced within six months from the delivery of the house to the buyer. In addition, Republic Act No. 6541, as amended, or the National Building Code of the Philippines (the “Building Code”), which governs, among others, the design and construction of buildings, sets certain requirements and standards that must be complied with by the Issuer. The Issuer or its officials may be held liable for administrative fines or criminal penalties in case of any violation of the Building Code.

There can be no assurance that the Issuer will not be held liable for damages, the cost of repairs, and/or the expense of litigation surrounding possible claims or that claims will not arise out of uninsurable events, such as landslides or earthquakes, or circumstances not covered by the Issuer’s insurance and not subject to effective indemnification agreements with the Issuer’s contractors.

Neither can there be any assurance that the contractors hired by the Issuer will be able to either correct any such defects or indemnify the Issuer for costs incurred by the Issuer to correct such defects. In the event a substantial number of claims arising from structural or construction defects arise, this could have a material adverse effect on the Issuer’s reputation and on its business, financial condition and results of operations.

Developments in technology could materially disrupt the Issuer’s operations and affect the commercial and retail developments of the Company.

Changes in technology could materially disrupt the Issuer’s operations and affect the commercial and retail developments of the Issuer. For example, customers’ increased use of e-commerce platform may reduce foot traffic at the Issuer’s malls. The Issuer has a number of initiatives that utilize technological solutions such as the iTownships or the E-Concierge mobile application. Implementing, maintaining and upgrading technology solutions and supports may require significant investment and there can be no guarantee that the Issuer will be successful in meeting and serving changing consumer demands. Additionally, these technological and digital platforms may be damaged or interrupted by power loss, technological failures, user errors, other forms of sabotage or other force majeure. Although the Issuer believes it is adequately protected against identified potential risks and that there are sufficient control processes in place, failure by the Issuer to maintain and keep pace with technology could have a negative effect on the Issuer’s business and results of operations.

The Issuer depends on its trademarks and proprietary rights and any failure to protect such intellectual property rights could have a material adverse effect on its ability to market certain products and its results of operations

The Issuer owns or has pending applications for the registration of, intellectual property rights for various trademarks associated with its projects and corporate names and logos to operate its business. Protection of these intellectual property rights is important to maintaining the distinctive corporate and market identities of the Issuer. If third parties use counterfeit versions or otherwise look confusingly similar to the Issuer trademarks, customers and clients may mistake its projects with those, which could negatively affect the brand image and sales of the Issuer. There is no assurance that third parties will not challenge, invalidate or circumvent any existing or future trademarks issued to, or licensed by, the Issuer and its subsidiaries. There is also no assurance that the Issuer will be able to successfully protect its proprietary rights and any failure to protect such proprietary rights could harm its competitive position, which could materially and adversely affect the business, financial condition, results of operations, prospects and reputation of the Issuer.

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The Issuer may be unable to retain key personnel and attract and retain skilled professionals, such as management, sales staff, architects and engineers.

Any loss of key personnel, the inability to replace such personnel and failure to train and retain replacement personnel could materially and adversely affect the ability of the Issuer to provide products and services to its customers. In addition, the Issuer has relied and will continue to rely significantly on the continued individual and collective contributions of its senior management team. If any key personnel, including senior management, are unable or unwilling to continue in their present positions, the Issuer may not be able to replace them easily, and its business may be significantly disrupted.

The Issuer’s ability to plan, design and execute current and future projects depends on its ability to attract, train, motivate and retain highly skilled personnel, particularly architects, engineers and project managers. The Issuer believes that there is significant demand for such personnel not only from its competitors but also from companies outside the Philippines, particularly companies operating in the Middle East. Any inability on the part of Issuer to hire and, more importantly, retain qualified personnel could impair its ability to undertake project design, planning and execution activities in-house and could require the Issuer to incur additional costs by having to engage third parties to perform these activities.

Any deterioration in the Issuer’s employee relations could materially and adversely affect the Issuer’s operations.

The Issuer’s success depends partially on its ability to maintain a productive workforce. Any strikes, work stoppages, work slowdowns, grievances, complaints or claims of unfair practices or other deterioration in the Issuer’s employee relations could have a material and adverse effect on the Issuer’s financial condition and results of operations.

The Issuer may be involved in legal and other proceedings from time to time.

The Issuer may, from time to time, be involved in disputes with various parties in the operations of its businesses, including contractual disputes, as well as disputes relating to construction, property development and investigations by regulatory enforcement proceedings. Regardless of the outcome, these disputes and investigations may lead to legal or other proceedings and may result in substantial costs and the diversion of resources and management’s attention. In addition, the Issuer may also have disagreements with regulatory bodies in the course of operations, which may subject the Issuer to administrative proceedings and unfavourable decisions that may result in penalties or other liabilities. Any of these outcomes could materially and adversely affect the Issuer’s business, financial condition and results of operations.

The Issuer enters into transactions with related parties.

In the ordinary course of business, the Issuer transacts with its related parties, such as its subsidiaries and certain of its associated companies, and joint ventures. These transactions have principally consisted of advances, loans, bank deposits, reimbursement of expenses, lease, purchase and sale of real estate and other properties and services, guarantees, construction contracts and development, management, marketing and administrative service agreements. Under Section 50 of the National Internal Revenue Code, in the case of two or more businesses owned or controlled directly or indirectly by the same interests, the BIR Commissioner is authorised to distribute, apportion, or allocate gross income or deductions between or among such businesses upon determination of the necessity to prevent evasion of taxes or to clearly reflect the income of any such business. There can be no assurance that the BIR may confirm these transactions as arm’s length on the basis of the Transfer Pricing Regulations and there can be no assurance that any transfer pricing adjustments by the BIR will not have a material adverse effect on the Issuer’s business, financial condition or results of operations.

Alliance Global Group, Inc. is the single largest shareholder of the Issuer whose interests may not be the same as those of other shareholders and the Noteholders

Alliance Global Group, Inc. is the single largest shareholder of the Issuer and can exert influence over the policies, management and affairs of the Issuer. The interests of Alliance Global Group, Inc. may differ from those of the Noteholders or of other shareholders of the Issuer, which may, as a result, adversely affect the interests of the Noteholders. There can be no assurance that any conflicts of interest between the other shareholders of the Issuer and Alliance Global Group, Inc. will be resolved in favour of the Noteholders or that Alliance Global Group, Inc. would not cause the Issuer to take action in manner which might conflict with the interests of Noteholders.

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Certain financial information of the Issuer contained in this Offering Circular has not been audited

The Issuer’s unaudited, interim condensed consolidated financial statements as of March 31, 2020, and for the three-month periods ended March 31, 2020 and 2019 included in this Offering Circular have not been audited in accordance with Philippine Standards on Auditing.

RISKS RELATING TO THE PHILIPPINES

Political and social instability.

The Philippines has, from time to time, experienced political and military instability, including acts of political violence. In the last decade, there has been political instability in the Philippines, including extra-judicial killings, alleged electoral fraud, impeachment proceedings against two former presidents, two chief justices of the Supreme Court of the Philippines, and public and military protests arising from alleged misconduct by the previous and current administrations. In addition, a number of officials of the Philippine Government are currently under investigation or have been indicted on corruption charges stemming from allegations of misuse of public funds, extortion, bribery or usurpation of authority.

In addition, the Philippine has also been subject to a number of terrorist attacks and the Armed Forces of the Philippines has been in conflict with groups which have been identified as being responsible for kidnapping and terrorist activities in the Philippines. In addition, bombings have taken place in the Philippines, mainly in cities in the southern part of the country. For example, in May 2017, the city of Marawi in Lanao del Sur, Mindanao, was assaulted by the Maute Group, terrorists who were inspired by pledged allegiance to the Islamic State of Iraq and Syria. Due to the clash between the Philippine Government forces and the terrorists and the risk of the armed conflict spilling over to other parts of Mindanao, martial law was declared in the entire island of Mindanao, Philippines. In October 2017, the city was declared liberated from the terrorists. Despite this, the Philippine Congress extended the imposition of martial law in Mindanao until the end of 2019, citing persistent threats of terrorism and rebellion. The martial law in Mindanao was lifted on January 1, 2020, however Mindanao remains under a state of emergency as a measure against potential terror threats and communist insurgency and to maintain peace and order in the region. An increase in the frequency, severity or geographic reach of these terrorist acts could destabilize the Philippines, and adversely affect the country’s economy. These armed conflict and terror attacks could lead to further injuries or deaths by civilians and members of the military, which could destabilize parts of the country and adversely affect the country’s economy. In addition, the Philippine legislature recently passed the Anti-Terrorism Act of 2020, which has drawn criticism from, and sparked protests by, various sectors because of its controversial provisions on warrantless arrests and its broad definition of terrorist acts, which may be used to target government critics. The said bill will pass into law upon approval by, or within 30 days of receipt upon inaction of, President Rodrigo Duterte.

There can be no assurance that the political environment in the Philippines will be stable or that the current or any future government will adopt economic policies that are conducive to sustained economic growth or which do not materially and adversely impact the current regulatory environment for the telecommunications and other companies. An unstable political or social environment in the Philippines could negatively affect the general economic conditions and business environment in the Philippines which, in turn, could have a materially and adverse impact on the Company’s business, financial position and financial performance.

Territorial disputes.

The Philippines, China and several Southeast Asian nations have been engaged in a series of long-standing territorial disputes arising from competing and overlapping claims over certain islands and features in the West Philippine Sea. China claims historic rights to nearly all of the West Philippine Sea based on its so-called “nine-dash line” and in recent years dramatically expanded its military presence in the sea which has raised tension in the region among the claimant countries. In 2013, the Philippines became the first claimant country to file a case before the Permanent Court of Arbitration, the internal arbitration tribunal based at the Hague, Netherlands to legally challenge claims of China in the West Philippine Sea and to resolve the dispute under the principles of international law as provided for under the United Nations Convention on the Law of the Sea. In July 2016, the Permanent Court of Arbitration rendered a decision stating that the Philippines has exclusive sovereign rights over the West Philippine Sea (in the South China Sea) and that the “nine-dash line” claim of China is invalid. The Philippine Government, under the Duterte administration, has taken action to de-escalate tensions concerning the territorial dispute with China.

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There is no guarantee that the territorial dispute between the Philippines and other countries, including China, would end or that any existing tension will not escalate further, as China has taken steps to exercise control over the disputed territory. Should these territorial disputes continue or escalate further, the Philippines and its economy may be disrupted and the Company’s operations could be adversely affected as a result. In particular, further disputes between the Philippines and China may lead both countries to impose trade restrictions on the other’s imports. Any such impact from these disputes could adversely affect the Philippine economy, and materially and adversely affect the Company’s business, financial position and financial performance.

If foreign exchange controls were to be imposed, the Company’s ability to meet its foreign currency payment obligations could be adversely affected.

In general, Philippine residents may freely dispose of their foreign exchange receipts and foreign exchange may be freely sold and purchased outside the Philippine banking system. However, the Monetary Board of the BSP has statutory authority, with the approval of the President of the Philippines, during a foreign exchange crisis or in times of national emergency, to:

• suspend temporarily or restrict sales of foreign exchange;

• require licensing of foreign exchange transactions; or

• require the delivery of foreign exchange to the BSP or its designee banks for the issuance and guarantee of foreign currency-denominated borrowings.

The Philippine Government has, in the past, instituted restrictions on the conversion of the Philippine peso into foreign currencies and the use of foreign exchange received by Philippine companies to pay foreign currency-denominated obligations.

There can be no assurance that foreign exchange controls will not be imposed in the future. If imposed, these restrictions could materially and adversely affect the Company’s ability to obtain foreign currency to service its foreign currency obligations.

The credit ratings of the Philippines may restrict the access to capital of Philippine companies, including the Company.

Historically, the Philippines’ sovereign debt has been rated non-investment grade by international credit rating agencies. In 2019, the Philippines’ long-term foreign currency-denominated debt was upgraded by S&P Global (“S&P”), to BBB+ with stable outlook, while Fitch Ratings (“Fitch”), and Moody’s Investors Service (“Moody’s”), affirmed the Philippines’ long-term foreign currency-denominated debt to the investment-grade rating of BBB and Baa2, respectively, with a stable outlook. On February 28, 2020, Fitch revised its rating of Philippines long-term foreign currency-denominated debt to BBB, with a positive outlook, following its expectation that sound macroeconomic management will continue to support high growth rates with stable inflation while ongoing tax reforms were expected to improve fiscal finances. On May 7, 2020, Fitch affirmed its rating of Philippines long-term foreign currency-denominated debt to BBB, but revised the outlook to stable, to reflect the deterioration in the Philippines’ near-term macroeconomic and fiscal outlook as a result of the impact of the COVID-19 pandemic and domestic lockdown to contain the spread of the virus. In May 2020, S&P and Moody’s affirmed its rating of BBB+ and Baa2, with stable outlook, respectively, for the Philippines’ long-term foreign currency-denominated debt.

The Philippine Government’s credit ratings directly affect companies domiciled in the Philippines as international credit rating agencies issue credit ratings by reference to that of the sovereign. No assurance can be given that Fitch, Moody’s, S&P, or any other international credit rating agency will not downgrade the credit ratings of the Philippine Government in the future and, therefore, Philippine companies, including the Company. Any such downgrade could have a material adverse impact on the liquidity in the Philippine financial markets, the ability of the Philippine Government and Philippine companies, including the Company, to raise additional financing, and the interest rates and other commercial terms at which such additional financing is available.

RISKS RELATING TO THE NOTES

The Notes are unsecured obligations.

The Notes are unsecured obligations of the Issuer. The conditions of the Notes restrict the Issuer and its Material Subsidiaries (as defined in the Terms and Conditions) from creating security over their respective properties,

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assets or revenues to secure any Relevant Indebtedness (as defined in the Terms and Conditions). However, there is no restriction on the Issuer or the Material Subsidiaries granting security to secure obligations other than Relevant Indebtedness. To the extent such security was granted, the obligations secured thereby would rank ahead of the Notes. To the extent that assets are held by other subsidiaries of the Issuer, those assets would only be available to meet claims of Noteholders after the satisfaction of all liabilities of such subsidiaries and the return of any surplus assets as equity to the holding company of the subsidiary. There is no restriction on the liabilities that may be incurred by subsidiaries of the Issuer.

The repayment of the Notes may also be adversely affected if:

• the Issuer enters into bankruptcy, liquidation, reorganisation or other winding-up proceedings;

• there is default in payment under the Issuer’s future secured indebtedness or other unsecured indebtedness; or

• an acceleration event materialises under any of the Issuer’s contracted indebtedness.

If any of these events were to occur, the Issuer’s assets may not be sufficient to pay amounts due on the Notes.

The Notes may not be a suitable investment for all investors.

Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

• have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular;

• have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;

• have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor’s currency;

• understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant financial markets; and

• be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

A potential investor should not invest in the Notes unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of such Notes and the impact this investment will have on the potential investor’s overall investment portfolio.

In addition, the investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent: (a) the Notes constitute legal investments for it; (b) the Notes can be used as collateral for various types of borrowing; and (c) other restrictions apply to any purchase or pledge of any Notes by the investor. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules and regulations.

The priority of debt evidenced by a public instrument.

Under Philippine law, in the event of liquidation of a company, unsecured debt of the company (including guarantees of debt) which is evidenced by a public instrument as provided in Article 2244(14) of the Civil Code of the Philippines will rank ahead of unsecured debt of the company which is not so evidenced. Under Philippine law, a debt becomes evidenced by a public instrument when it has been acknowledged before a notary or any person authorised to administer oaths in the Philippines.

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The imposition of exchange controls could result in an investor not receiving payments on the Notes.

The Government has, in the past, instituted restrictions on the conversion of Philippine pesos into foreign currency and the use of foreign exchange received by Philippine residents to pay foreign currency denominated obligations. The Monetary Board of the BSP, with the approval of the President of the Philippines, has statutory authority, during a foreign exchange crisis or in times of national emergency, to suspend temporarily or restrict sales of foreign exchange, require licensing of foreign exchange transactions or require delivery of foreign exchange to the BSP or its designee. The Issuer is not aware of any pending proposals by the Government regarding such restrictions. Although the Government has from time to time made public pronouncements of a policy not to impose restrictions on foreign exchange, there can be no assurance that the Government will maintain such policy or will not impose economic or regulatory controls that may restrict free access to foreign currency. Any such restriction imposed in the future could adversely affect the ability of investors to repatriate foreign currency upon receipt of any payments from the Issuer.

The Notes may have limited liquidity and a trading market may not develop.

The Notes will constitute a new issue of securities for which there is no existing market. Approval in-principle has been obtained from the SGX-ST for the listing and quotation of the Notes. The offer and sale of the Notes is not conditioned on obtaining a listing of the Notes on the SGX-ST or any other exchange. Although the Joint Bookrunners have advised the Issuer that they currently intend to make a market for the Notes, they are not obligated to do so, and any market-making activity with respect to the Notes, if commenced, may be discontinued at any time without notice in their sole discretion.

No assurance can be given as to the liquidity of, or the development and continuation of an active trading market for, the Notes. If an active trading market for the Notes does not develop or is not maintained, the market price and liquidity of the Notes may be adversely affected. If such a market were to develop, the Notes could trade at prices that may be higher or lower than the price at which the Notes are issued depending on many factors, including:

• prevailing interest rates;

• our results of operations and financial condition;

• political and economic developments in and affecting the Philippines;

• the market conditions for similar securities; and

• the financial condition and stability of the Philippine financial sector.

The Issuer may not be able to redeem the Notes upon maturity.

The Issuer is required under the Terms and Conditions to redeem the Notes upon maturity. The source of funds for any such redemption by the Issuer would be the Issuer’s available cash or third-party financing. However, the Issuer may not have sufficient available funds upon maturity. A failure to redeem the outstanding Notes when due could constitute an Event of Default (as defined in the Terms and Conditions) under the Notes. Such Event of Default may, in turn, constitute an event of default under other indebtedness, any of which could cause related debt to be accelerated after any applicable notice or grace periods. If other debt of the Issuer were to be accelerated, the Issuer may not have sufficient funds to satisfy their respective obligations, resulting in the Issuer being unable to redeem the Notes.

The Terms and Conditions will contain provisions which may permit their modification without the consent of all investors and which will confer significant discretions on the Trustee which may be exercised without the consent of the Noteholders and without regard to the individual interests of particular Noteholders.

The Terms and Conditions will contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions will permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.

The Terms and Conditions will also provide that the Trustee may, without the consent of Noteholders, (i) agree to any modification (except as mentioned in the Trust Deed) of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of Notes or determine, without any such consent as aforesaid, that any

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Event of Default or Potential Event of Default shall not be treated as such if, in any such case, in the opinion of the Trustee, the interests of the Noteholders will not be materially prejudiced thereby; or (ii) agree to any modification which, in its opinion, is of a formal, minor or technical nature or to correct a manifest error or is made to comply with mandatory provisions of law.

The Notes may be subject to withholding taxes in circumstances where the Issuer is not obliged to make gross up payments, and this would result in holders receiving less distributions than expected and could significantly adversely affect their return on the Notes.

The U.S. Foreign Account Tax Compliance Act (or “FATCA”) imposes a new reporting regime and, potentially, a 30% withholding tax with respect to (i) certain payments from sources within the United States, (ii) “foreign passthru payments” made to certain non-U.S. financial institutions that do not comply with this new reporting regime, and (iii) payments to certain investors that do not provide identification information with respect to interests issued by a participating non-U.S. financial institution. Whilst the Notes are in global form and held within the clearing systems, in all but the most remote circumstances, it is not expected that FATCA will affect the amount of any payment received by the clearing systems. However, FATCA may affect payments made to custodians or intermediaries in the subsequent payment chain leading to the ultimate investor if any such custodian or intermediary generally is unable to receive payments free of FATCA withholding. It also may affect payment to any ultimate investor that is a financial institution that is not entitled to receive payments free of withholding under FATCA, or an ultimate investor that fails to provide its broker (or other custodian or intermediary from which it receives payment) with any information, forms, other documentation or consents that may be necessary for the payments to be made free of FATCA withholding. Investors should choose the custodians or intermediaries with care (to ensure each is compliant with FATCA or other laws or agreements related to FATCA) and provide each custodian or intermediary with any information, forms, other documentation or consents that may be necessary for such custodian or intermediary to make a payment free of FATCA withholding. The Issuer’s obligations under the Notes are discharged once it has paid the common depositary or common safekeeper for the clearing systems and the Issuer has therefore no responsibility for any amount thereafter transmitted through the clearing systems and custodians or intermediaries.

The Issuer has not registered the Notes with the BSP.

The Issuer has not registered the Notes with the BSP and, accordingly, the Issuer will not be able to purchase U.S. dollars from the Philippine banking system for the purpose of funding payments under the Notes. The Issuer believes that it will be able to obtain sufficient U.S. dollars to meet its obligations under the Notes from sources outside the Philippine banking system.

The transfer of Notes is restricted which may adversely affect their liquidity and the price at which they may be sold.

The Notes have not been registered under, and the Issuer is not obligated to register the Notes under, the Securities Act or the securities laws of any other jurisdiction and, unless so registered, the Notes may not be offered or sold except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act and any other applicable laws. See “Subscription and Sale”. The Issuer has not agreed to or otherwise undertaken to register the Notes (including by way of an exchange offer), and the Issuer has no intention of doing so.

The Notes may be redeemed at the Issuer’s option upon the occurrence of certain events.

The Notes will be redeemable at the option of the Issuer, in whole but not in part, at their principal amount together with accrued but unpaid interest in the circumstances set out in “Terms and Conditions of the Notes – Redemption and Purchase”. The date on which the Issuer elects to redeem the Notes may not accord with the preference of individual Noteholders. This may be disadvantageous to the Noteholders in light of market conditions or the individual circumstances of the holder of the Notes. In addition, an investor may not be able to reinvest the redemption proceeds in comparable notes at an effective interest rate at the same level as that of the Notes.

The Issuer may raise other capital which affects the price of the Notes.

The Issuer may from time to time and without prior consultation of the holders of the Notes create and issue further Notes (see “Terms and Conditions of the Notes —Further Issues”). Furthermore, the Issuer may raise additional capital through the issue of other securities or other means. Under the terms of the Notes, there is no restriction, contractual or otherwise, on the amount of Notes which the Issuer may further issue or securities or

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other liabilities which the Issuer may issue or incur and which rank senior to, or pari passu with, the Notes. The issue of any further Notes or such securities or the incurrence of any such other liabilities may reduce the amount (if any) recoverable by holders of the Notes on a winding-up of the Issuer, and may also have an adverse impact on the trading price of the Notes or the ability of holders to sell them.

The Trustee may request the Noteholders to provide an indemnity or security or prefunding to its satisfaction.

In certain circumstances, including without limitation the giving of notice to the Issuer pursuant to Condition 9 of the Terms and Conditions and the taking of enforcement and other steps and action pursuant to Condition 12 of the Terms and Conditions, the Trustee may (at its sole discretion) request Noteholders to provide an indemnity and/or security and/or pre-funding to its satisfaction before it takes actions on behalf of Noteholders. The Trustee shall not be obliged to take any such actions if not first indemnified and/or secured and/or prefunded to its satisfaction. Negotiating and agreeing to an indemnity or security or pre-funding can be a lengthy process and may impact on when such actions can be taken. The Trustee may not be able to take actions, notwithstanding the provision of an indemnity and/or security and/or pre-funding to it, in breach of the terms of the Trust Deed constituting the Notes and in such circumstances, or where there is uncertainty or dispute as to the applicable laws or regulations, to the extent permitted by the agreements and the applicable laws and regulations, it will be for the Noteholders to take such actions directly.

A holder of a significant portion of the Notes may be able to significantly influence matters which require to be voted on by the Noteholders. Additionally, this may reduce the liquidity of the Notes in the secondary trading market.

Any holder of a significant portion of the Notes may be able to significantly influence matters which require to be voted on by the Noteholders. Additionally, the interests of these substantial investors may be different from the interests of the other holders of the Notes and the significant portion of the Notes to be held by them may reduce the liquidity of the Noteholders in the secondary trading market.

Certain Noteholders may be exposed to currency conversion risks due to the Notes being denominated in U.S. dollars.

Payments to Noteholders will be made in U.S. dollars. If an investor’s financial activities are principally denominated in a currency other than U.S. dollars, it will be subject to certain currency conversion risks. These risks include (i) the risk that exchange rates may significantly change (including changes due to the devaluation of the U.S. dollar or revaluation of the investor’s currency); and (ii) the risk that authorities with jurisdiction over the investor’s currency may impose or modify exchange controls which could adversely affect any applicable exchange rate. In recent years, exchange rates between certain currencies have been volatile and such exchange rate volatility with a variety of currencies may continue in the future. Any appreciation of an investor’s currency relative to the U.S. dollar would decrease the investor’s currency-equivalent value of the amounts payable in respect of the Notes and the investor’s currency equivalent market value of the Notes. In addition, exchange controls could adversely affect the availability of a specified foreign currency at the time of payments of amounts on a Note. As a result, investors may receive less payment than expected, or no payment at all.

Developments in other markets may adversely affect the market price of the Notes.

The market price of the Notes may be adversely affected by declines in the international financial markets and world economic conditions. The market for the Notes is, to varying degrees, influenced by economic and market conditions in other markets, especially those in Asia. Although economic conditions are different in each country, investors’ reactions to developments in one country can affect the securities markets and the securities of issuers in other countries, including the Philippines. Since the sub-prime mortgage crisis in 2008 and, more recently, the trade war between the United States and China and the outbreak of COVID-19, the international financial markets have experienced significant volatility. If similar developments occur in the international financial markets in the future, the market price of the Notes could be adversely affected.

The Issuer will follow the applicable corporate disclosure standards for debt securities listed on the SGX-ST, and such standards may be different from those applicable to debt securities listed in certain other countries.

The Issuer will be subject to reporting obligations in respect of the Notes to be listed on the SGX-ST. The disclosure standards imposed by the SGX-ST may be different than those imposed by securities exchanges in

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other countries or regions. As a result, the level of information that is available may not correspond to what investors in the Notes may be accustomed to.

Changes of law.

The Terms and Conditions of the Notes are governed by English law. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the issue date of the Notes. The Issuer must also comply with various legal requirements including requirements imposed by securities corporate laws in the Philippines. Should any of those laws change over time, the legal requirements to which we may be subject could differ materially from current requirements.

The Notes will initially be represented by a Global Certificate and holders of a beneficial interest in the Global Certificate must rely on the procedures of the relevant Clearing System(s).

The Notes will initially be represented by a Global Certificate. Such Global Certificate will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg (each of Euroclear and Clearstream, Luxembourg, a “Clearing System”). Except in the limited circumstances described in the Global Certificate, investors will not be entitled to receive definitive certificates. The relevant Clearing System(s) will maintain records of the beneficial interests in the Global Certificate. While the Notes are represented by the Global Certificate, investors will be able to trade their beneficial interests only through the Clearing Systems.

While the Notes are represented by the Global Certificate, the Issuer will discharge its payment obligations under the Notes by making payments to Euroclear and Clearstream, Luxembourg for distribution to their respective accountholders. A holder of a beneficial interest in the Global Certificate must rely on the procedures of the relevant Clearing System to receive payments under the Notes. The Issuer does not have any responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Certificate.

Holders of beneficial interests in the Global Certificate will not have a direct right to vote in respect of the Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant Clearing System to appoint appropriate proxies. Similarly, holders of beneficial interests in the Global Certificate will not have a direct right thereunder to take enforcement action against the Issuer in the event of a default under the Notes but will have to rely upon their rights under the Trust Deed in relation to the Notes.

A definitive Certificate which has a principal amount that is not an integral multiple of the minimum specified denomination may be illiquid and difficult to trade.

In relation to any Note which has a principal amount consisting of a minimum specified denomination plus a higher integral multiple of another smaller amount, it is possible that the Notes may be traded in amounts in excess of the minimum specified denomination that are not integral multiples of such minimum specified denomination. In such a case, a Noteholder who, as a result of trading such amounts, holds a principal amount of less than the minimum specified denomination, will not receive a definitive Certificate in respect of such holding (should definitive Certificates be printed) and would need to purchase a principal amount of Notes such that it holds an amount equal to one or more specified denominations. If definitive Notes are issued, holders should be aware that a definitive Certificate which has a principal amount that is not an integral multiple of the minimum specified denomination may be illiquid and difficult to trade.

The Issuer is subject to certain covenants pursuant to the Trust Deed that may limit the Issuer’s ability to finance its future operations and capital needs and to pursue business opportunities and activities.

The Trust Deed will, among other things, restrict the ability of the Issuer and, in some cases, certain of the Issuer’s subsidiaries to:

• incur or guarantee additional indebtedness;

• create or incur certain liens;

• sell capital stock in certain of the Issuer’s subsidiaries;

• create or permit to exist any restrictions on the payment of dividends to the Issuer by certain of the Issuer’s subsidiaries; and

• consolidate or merge with other entities.

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In addition, certain of the Issuer’s other financing agreements may provide for restrictions and limitations on the Issuer’s ability to pay dividends or make other distributions on the occurrence of certain events. All of these limitations are subject to significant exceptions and qualifications. See “Terms and Conditions of the Notes”. These covenants and other restrictions and limitations may limit the Issuer’s ability to finance its future operations and capital needs and its ability to pursue business opportunities and activities that may be in the Issuer’s interest.

Under the Conditions, in certain circumstances, subsidiaries of the Issuer would be permitted to incur non-recourse debt, which would be structurally senior to the Notes

The covenant relating to the incurrence of indebtedness contained in the Conditions restricts the Issuer and certain of the Issuer’s subsidiaries from incurring indebtedness if, after giving effect to the incurrence of such indebtedness and the application of the proceeds therefrom, the Issuer’s Net Debt to Total Equity ratio would exceed 3.0 to 1.0. Pursuant to the Conditions, the calculation of Net Debt does not include Non-Recourse Debt, each as defined in the Terms and Conditions. Any such Non-Recourse Debt would be structurally senior to the Notes.

The Issuer may not have the ability to raise the funds necessary to finance an offer to repurchase Notes upon the occurrence of certain events constituting a change of control as required by the Trust Deed.

Noteholders may require the Issuer, subject to certain conditions, to redeem their Notes in whole but not in part upon the occurrence of a Change of Control Triggering Event (as described in Condition 5.3 of the Conditions). If such an event were to occur, no assurance can be given that the Issuer would have sufficient funds available at such time to pay the purchase price of the outstanding Notes and the Issuer may not be able to arrange financing to redeem the Notes in time, or on acceptable terms, or at all. The ability to redeem the Notes in such event may also be limited by the terms of other debt instruments. Failure to repay, repurchase or redeem tendered Notes by the Issuer would constitute an event of default under the Notes, which may also constitute a default under the terms of other indebtedness of the Issuer and its subsidiaries.

The Issuer will follow the applicable corporate disclosure standards for debt securities listed on the SGX-ST, and such standards may be different from those applicable to debt securities listed in certain other countries.

The Issuer will be subject to reporting obligations in respect of the Notes to be listed on the SGX-ST. The disclosure standards imposed by the SGX-ST may be different than those imposed by securities exchanges in other countries or regions. As a result, the level of information that is available may not correspond to what investors in the Notes may be accustomed to.

Noteholders are required to rely on the procedures of the relevant clearing system and its participants while the Notes are held in global form through the relevant clearing system.

The Notes will be represented on issue by one or more Global Certificate s that may be deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in each Global Certificate , investors will not be entitled to receive Notes in definitive form. Each of Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants will maintain records of the beneficial interests in each Global Certificate held through it. While the Notes are represented by a Global Certificate , investors will be able to trade their beneficial interests only through the relevant clearing systems and their respective participants.

While the Notes are represented by Global Certificate s, the Issuer will discharge its payment obligation under the Notes by making payments through the relevant clearing systems. A holder of a beneficial interest in a Global Certificate must rely on the procedures of the relevant clearing system and its participants to receive payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in any Global Certificate .

Holders of beneficial interests in a Global Certificate will not have a direct right to vote in respect of the Notes so represented. Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant clearing system and its participants to appoint appropriate proxies.

If definitive Notes are issued, holders should be aware that definitive Notes that have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.

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The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.

The Notes may be redeemed at the Issuer’s option upon the occurrence of certain events.

The Notes are redeemable at the option of the Issuer, in whole or in part, on at the redemption price set out in “Terms and Conditions of the Notes—Redemption and Purchase—Make-whole redemption,” together with all other outstanding amounts due under the Notes accrued to the date fixed for redemption. Further, the Issuer has the right to redeem the Notes at any time at 100% of the principal amount of the notes plus any accrued but unpaid interest upon the occurrence of certain changes in Philippine tax law requiring the payment of Additional Amounts (as defined in the Conditions).

The date on which the Issuer elects to redeem the Notes may not accord with the preference of individual Noteholders. This may be disadvantageous to the Noteholders in light of market conditions or the individual circumstances of the holder of the Notes. In addition, an investor may not be able to reinvest the redemption proceeds in comparable notes at an effective interest rate at the same level as that of the Notes.

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TERMS AND CONDITIONS OF THE NOTES

The following (other than any words in italics), subject to alteration, are the terms and conditions of the Notes which will be endorsed on the Certificates issued in respect of the Notes.

The U.S.$350,000,000 aggregate principal amount of 4.125% notes due 2027 (the “Notes”, which expression, unless the context otherwise requires, includes any further Notes issued pursuant to Condition 9 and consolidated and forming a single series with the Notes) of Megaworld Corporation (the “Issuer”) are constituted by a Trust Deed dated July 30, 2020 (as amended, restated, replaced or supplemented from time to time, the “Trust Deed”) made between the Issuer and The Hongkong and Shanghai Banking Corporation Limited (the “Trustee”, which expression includes its successor(s)) as trustee for the holders of the Notes (the “Noteholders”)).

The statements in these terms and conditions of the Notes (the “Conditions”) include summaries of, and are subject to, the detailed provisions of the Trust Deed and the agency agreement dated July 30, 2020 (as amended, restated, replaced or supplemented from time to time, the “Agency Agreement”) made between the Issuer and The Hongkong and Shanghai Banking Corporation Limited as initial principal paying agent and registrar (in such capacities, the “Principal Paying Agent” and the “Registrar”, which expression includes any successor thereto), the other agents specified therein (together with the Principal Paying Agent, the “Agents”) and the Trustee. Copies of the Trust Deed and the Agency Agreement are available for inspection upon prior written request and satisfactory proof of holding during normal business hours by the Noteholders at the specified offices of the Agents. The Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of all the provisions of the Trust Deed and are deemed to have notice of all of the provisions of the Agency Agreement applicable to them.

1. FORM, DENOMINATION AND TITLE

1.1 Form and denomination

The Notes are issued in registered form in amounts of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof (the “Principal Amount”). A certificate (each a “Certificate”) will be issued to each Noteholder in respect of its registered holding of Notes. Each Certificate will be numbered serially with an identifying number which will be recorded on the relevant Certificate and in the register of Noteholders which the Issuer will procure to be kept by the Registrar.

Upon issue, the Notes will be evidenced by a global note certificate (the “Global Certificate”) substantially in the form scheduled to the Trust Deed. The Global Certificate will be registered in the name of a nominee for, and deposited with, a common depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”). The Notes are not issuable in bearer form.

1.2 Title

Title to the Notes passes only by registration in the register of Noteholders. The person in whose name a Note is registered in the register of Noteholders will (except as otherwise required by law) be treated as the absolute owner of that Note for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest or any writing on, or the theft or loss of, the Certificate issued in respect of it) and no person will be liable for so treating the holder. In these Conditions, “Noteholder” and (in relation to a Note) “Holder” mean the person in whose name a Note is registered in the register of Noteholders.

For a description of the procedures for transferring title to book-entry interests in the Notes, see “Clearance and Settlement of the Notes”.

1.3 Transfers

Subject to Condition 1.6, a Note may be transferred by depositing the Certificate issued in respect of that Note, with the form of transfer on the back duly completed and signed, at the specified office of the Registrar or the Transfer Agents (as defined in the Trust Deed), together with such evidence as the Registrar or (as the case may be) such Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals who have executed the form of transfer. No transfer of a Note will be valid until and unless entered on the register of Noteholders.

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Transfers of interests in the Notes evidenced by the Global Certificate will be effected in accordance with the rules of the relevant clearing system. For a description of certain restrictions on transfers of interests in the Notes, see “Subscription and Sale”.

1.4 Delivery of new Certificates

Each new Certificate to be issued upon transfer of Notes will, within five business days of receipt by the Registrar or the relevant Agent of the duly completed form of transfer endorsed on the relevant Certificate, be mailed by uninsured mail at the risk of the Holder entitled to the Note to the address specified in the form of transfer. For the purposes of this Condition 1.4, “business day” shall mean a day on which banks are open for business in the city in which the specified office of the Registrar or Agent with whom a Certificate is deposited in connection with a transfer is located.

Except in the limited circumstances described herein (see “The Global Certificate”), owners of interests in the Notes will not be entitled to receive physical delivery of Certificates. Issues of Certificates upon transfer of Notes are subject to compliance by the transferor and transferee with the certification procedures described above and in the Agency Agreement.

Where some but not all of the Notes in respect of which a Certificate is issued are to be transferred, a new Certificate in respect of the Notes not so transferred will, within five business days of receipt by the Registrar or the relevant Agent of the original Certificate, be mailed by uninsured mail at the risk of the Holder of the Notes not so transferred to the address of such Holder appearing on the register of Noteholders or as specified in the form of transfer.

1.5 Formalities free of charge

Registration of transfer of Notes will be effected without charge by or on behalf of the Issuer, the Registrar or any Agent but upon payment (or the giving of such indemnity as the Issuer, the Registrar or any Agent may require) in respect of any tax or other governmental charges which may be imposed in relation to such transfer.

1.6 Closed Periods

No Noteholder may require the transfer of a Note to be registered during the period of 15 days ending on the due date for any payment of principal, premium (if any) or interest on that Note.

1.7 Regulations

All transfers of Notes and entries on the register of Noteholders will be made subject to the detailed regulations concerning transfer of Notes scheduled to the Trust Deed. The regulations may be changed by the Issuer with the prior written approval of the Registrar and the Trustee. A copy of the current regulations will be mailed (free of charge to the Noteholder and at the Issuer’s expense) by the Registrar to any Noteholder who requests one.

2. STATUS

2.1 Status of the Notes

The Notes constitute the direct, unconditional, unsecured (subject to Condition 3.1) and unsubordinated obligations of the Issuer and will at all times rank pari passu in right of payment with all other present and future unconditional, unsubordinated and unsecured obligations of the Issuer, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.

3. COVENANTS

3.1 Negative Pledge

So long as any Note remains outstanding (as defined in the Trust Deed), the Issuer will not, and will ensure that none of its Material Subsidiaries (as defined below) will, create or permit to subsist any Lien upon the whole or any part of the property, assets or revenues, present or future, of the Issuer or any Material Subsidiary, respectively, to secure any Relevant Indebtedness (as defined below) or to secure any guarantee of or indemnity in respect of, any Relevant Indebtedness unless, at the same time or prior

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thereto, the Issuer’s obligations under the Notes and the Trust Deed (a) are secured equally and rateably therewith, or (b) have the benefit of such other security, guarantee, indemnity or other arrangement as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders.

3.2 Limitation on Indebtedness

(a) The Issuer will not, and will procure that no Material Subsidiary will, Incur any Indebtedness (including Acquired Indebtedness) if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom on a pro forma basis, the ratio of Net Debt to Total Equity would exceed 3.0 to 1.0.

(b) Notwithstanding the foregoing, the Issuer and any Material Subsidiary may Incur each and all of the following:

(i) Indebtedness under the Notes;

(ii) Indebtedness outstanding on the Issue Date;

(iii) Indebtedness (“Permitted Refinancing Indebtedness”) issued in exchange for, or the net proceeds of which are used to refinance, refund, renew, redeem, replace, defease or discharge (collectively, “refinance”, and “refinancing”, “refinances” and “refinanced” shall have correlative meanings), then outstanding Indebtedness Incurred under Conditions 3.2(a) or 3.2(b)(i), (ii) or (iii), and any refinancings thereof; in each case in an amount not to exceed the amount so refinanced (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to refinance the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes shall only be Permitted Refinancing Indebtedness if (x) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes, or (y) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes;

(iv) Indebtedness pursuant to Hedging Obligations entered into in the ordinary course of business and not for speculative purposes and designed to protect the Issuer or any Material Subsidiary from fluctuations in interest rates, currencies or the price of commodities and not for speculation;

(v) Indebtedness Incurred by the Issuer or any Material Subsidiary for the purpose of financing or refinancing (x) all or any part of the purchase price of assets, real or personal property (including the lease purchase price of land use rights) or equipment to be used or useful in the ordinary course of business by the Issuer or a Material Subsidiary, including any such purchase through the acquisition of Capital Stock of any Person that owns such asset, real or personal property or equipment which will, upon such acquisition, become a Material Subsidiary or (y) all or any part of the purchase price or the cost of development, construction or improvement of assets, real or personal property (including the lease purchase price of land use rights) or equipment to be used in the ordinary course of business by the Issuer or such Material Subsidiary; provided, however, that in each case (A) the aggregate principal amount of such Indebtedness shall not exceed such purchase price or cost, (B) such Indebtedness shall be Incurred no later than 180 days after the acquisition of such asset, property or equipment or completion of such development, construction or improvement, and (C) on the date of the Incurrence of such Indebtedness and after giving effect thereto, the aggregate principal amount outstanding of all such Indebtedness permitted by this Condition 3.2(b)(v) (together with the aggregate principal amount outstanding of the refinancings of all such Indebtedness Incurred under this Condition 3.2(b)(v), but excluding any Contractor Guarantee Incurred under

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this Condition 3.2(b)(v) to the extent the amount of such Contractor Guarantee is otherwise reflected in such aggregate principal amount) does not exceed an amount equal to 15.0% of Total Assets;

(vi) Subordinated Indebtedness of the Issuer or any Material Subsidiary owed to any of its Affiliates (excluding Subsidiaries), provided that such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding: (x) does not provide for cash payments of interest thereon at any time during the period beginning on the Issue Date and ending on the Stated Maturity of the Notes; or (y) provides for cash payments of interest thereon only to the extent that, as of the date of the first such proposed cash interest payment, the outstanding principal amount of such Indebtedness, including any accrued pay-in-kind, discount or similar interest thereon, could be Incurred under Condition 3.2(a);

(vii) Guarantees of Indebtedness of the Issuer or any Material Subsidiary to the extent that the Guaranteed Indebtedness was permitted to be incurred by another provision of this Condition 3.2;

(viii) Indebtedness with a maturity of one year or less used by the Issuer or any Material Subsidiary for working capital; provided that the aggregate principal amount of Indebtedness permitted by this Condition 3.2(b)(viii) at any time outstanding does not exceed U.S.$50 million (or the Dollar Equivalent thereof) in the aggregate;

(ix) Indebtedness in respect of workers’ compensation claims, self-insurance obligations, performance, surety and similar bonds, bankers acceptances, completion guarantees and similar obligations, and reimbursement obligations with respect thereto, in the ordinary course of business;

(x) Indebtedness constituting reimbursement obligations with respect to letters of credit, trade guarantees, bank guarantees or similar obligations issued in the ordinary course of business to the extent that such letters of credit or guarantees are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the thirtieth Business Day following receipt by the Issuer or any Material Subsidiary of a demand for reimbursement;

(xi) Indebtedness arising from agreements of the Issuer or any Material Subsidiary providing for customary indemnification, adjustment of purchase price or similar obligations, in each case, Incurred in connection with the disposition of any business, or assets, or Capital Stock of a Subsidiary; provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Issuer or any Material Subsidiary in connection with such disposition;

(xii) Indebtedness arising from the honouring by a bank or other financial institution of a cheque, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is repaid in full or otherwise extinguished within five Business Days of Incurrence;

(xiii) Indebtedness of any Person outstanding on the date on which such Person becomes a Material Subsidiary of the Issuer or is merged, consolidated, amalgamated or otherwise combined with (including pursuant to any acquisition of assets and assumption of related liabilities) the Issuer or any Material Subsidiary (other than Indebtedness Incurred to provide all or any portion of the funds used to consummate the transaction or series of related transactions pursuant to which such Person became a Material Subsidiary of the Issuer or was otherwise acquired by the Issuer or any Material Subsidiary); provided, however, with respect to this Condition 3.2(b)(xiii), that at the time of the acquisition or other transaction pursuant to which such Indebtedness was deemed to be Incurred, the Issuer would have been able to Incur at least U.S.$1.00 of additional Indebtedness in compliance with Condition 3.2(a) after giving pro forma effect to the incurrence of such Indebtedness pursuant to this Condition 3.2(b)(xiii) or

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(ii) Net Debt to Total Equity would not be more than it was immediately prior to giving pro forma effect to the Incurrence of such Indebtedness pursuant to this Condition 3.2(b)(xiii);

(xiv) Indebtedness of the Issuer or any Material Subsidiary owed to the Issuer or any Subsidiary; provided that (A) (i) any event or circumstance which results in any Subsidiary owed any Indebtedness pursuant to this Condition 3.2(b)(xiv) ceasing to be a Subsidiary or (ii) any subsequent transfer of such Indebtedness to a Person other than the Issuer or any Subsidiary shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this Condition 3.2(b)(xiv) and (B) if the Issuer is the obligor of such Indebtedness, such Indebtedness must be unsecured and expressly be subordinated in right of payment to the Notes; (xv) Indebtedness not otherwise permitted by this Condition 3.2 in an aggregate principal amount outstanding at any time (together with refinancings thereof) not to exceed U.S.$30 million (or the Dollar Equivalent thereof); and

(xvi) Indebtedness Incurred in a Qualified Receivables Transaction; provided that the aggregate principal amount of Indebtedness permitted by this Condition 3.2(b)(xvi) at any time outstanding does not exceed 2.0% of Total Assets.

(c) For the purposes of determining any particular amount of Indebtedness under this Condition 3.2, Guarantees of Indebtedness or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included.

(d) The Issuer will not Incur any Indebtedness if such Indebtedness is contractually subordinated in right of payment to any other Indebtedness of the Issuer, unless such Indebtedness is contractually subordinated in right of payment to the Notes, on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Issuer solely by virtue of being unsecured or by virtue of being secured on a junior priority basis.

(e) Notwithstanding any other provision of this Condition 3.2, the maximum amount of Indebtedness that may be Incurred pursuant to this Condition 3.2 will not be deemed to be exceeded with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rate of currencies. With respect to any U.S. dollar-denominated restriction on the Incurrence of Indebtedness, the U.S. dollar equivalent principal amount (or accreted value, as applicable) of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is Incurred to refinance other Indebtedness denominated in a foreign currency, and refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date thereof, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount (or accreted value, as applicable) of such Indebtedness does not exceed the principal amount (or accreted value, as applicable) of such Indebtedness being refinanced.

(f) For purposes of determining compliance with this Condition 3.2, if an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, including under Condition 3.2(a) or 3.2(b), the Issuer, in its sole discretion, will classify, and from time to time may reclassify, such item of Indebtedness.

(g) The accrual of interest, the accretion or amortisation of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of Preferred Stock or perpetual securities or other similar instruments as Indebtedness due to a change in accounting principles, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock, will not be deemed to be an Incurrence of Indebtedness.

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3.3 Limitation on Dividend and Other Restrictions Affecting Material Subsidiaries

Subject to laws of general application in relation to the payment of dividends, the Issuer will not, and will not permit any Material Subsidiaries to, create or otherwise cause or permit to exist any restrictions on dividend payments by Material Subsidiaries to the Issuer.

The foregoing does not apply to restrictions on dividend payments:

(a) existing in agreements as in effect on the Issue Date (including the Trust Deed and these Conditions) and in any amendments, restatements, modifications, supplements, extensions, refinancings, refundings, renewals or replacements of any of the foregoing agreements; provided that such restrictions in any such amendment, restatement, modification, supplement, extension, refinancing, refunding, renewal or replacement, taken as a whole, are not materially more restrictive, with respect to such dividend restriction, than those restrictions that are then in effect and that are being amended, restated, modified, supplemented, extended, refinanced, refunded, renewed or replaced;

(b) existing under or by virtue of Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

(c) existing under or by virtue of the Notes;

(d) that otherwise would be prohibited by the provision described in this Condition 3.3 if they arise, or are agreed to in the ordinary course of business, and that (A) restrict in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease or license or (B) exist by virtue of any Lien on, or agreement to transfer, option or similar right with respect to any property or assets of the Issuer or any Material Subsidiary not otherwise prohibited by the Trust Deed or these Conditions;

(e) existing under or by reason of applicable law, rule, regulation, or order;

(f) existing under any instrument with respect to any Person (including any Subsidiary) or the property or assets of such Person at the time such Person becomes or is merged with or into a Material Subsidiary or at the time any property or assets of any Person are acquired by any Material Subsidiary, existing at the time of such acquisition and in each case not incurred in contemplation thereof, and any extensions, refinancings, renewals or replacements thereof; provided that such restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no less favourable in any material respect to the Noteholders than those restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

(g) existing with respect to a Material Subsidiary, and imposed pursuant to an agreement that has been entered into for the sale or other disposition of such Material Subsidiary, or of all or substantially all of the property and assets of such Material Subsidiary;

(h) contained in credit agreements, financing agreements, trust deeds, indentures or other agreements or instruments relating to Indebtedness Incurred by Material Subsidiaries subsequent to the Issue Date and not in violation of Condition 3.2, and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements, if the restrictions are customary for a financing of that type or the restrictions in any such amendment, restatement, modification, renewal, supplement, refunding, replacement or refinancing are not materially more restrictive, taken as a whole, than those then in effect and that are being amended, restated, modified, renewed, supplemented, refunded, replaced or refinanced;

(i) existing in (x) purchase money obligations for property acquired in the ordinary course of business and (y) Capitalized Lease Obligations permitted under these Conditions;

(j) contained in the terms and conditions of, or any document constituting, any Preferred Stock, perpetual securities or similar capital instruments issued by the Issuer or any of the Material Subsidiaries; and

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(k) existing in customary provisions in joint venture agreements, shareholder agreements and other similar agreements not prohibited by these Conditions, to the extent such restrictions relate to the activities or assets of a Material Subsidiary that is party to such joint venture, shareholder or similar agreement and if the restrictions are customary for an agreement of that type.

3.4 Limitation on Consolidation, Merger and Sale of Assets

So long as any Note remains outstanding, the Issuer shall not (i) consolidate with, or merge with or into, another Person, or permit any Person to merge with it, or (ii) sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Subsidiaries’ properties and assets (calculated in its entirety) (each of (i) and (ii), a “Merger”) unless:

(a) the Issuer shall be the continuing Person, or the continuing Person shall expressly assume all obligations of the Issuer under the Notes and the Trust Deed;

(b) immediately after giving effect to such Merger on a pro forma basis, no Event of Default shall have occurred and be continuing or would result therefrom; and

(c) no Rating Decline shall have occurred if the Notes are rated by at least one Rating Agency.

3.5 Limitation on Guarantees by Material Subsidiaries

The Issuer will not permit any Material Subsidiary, directly or indirectly, to Guarantee any Indebtedness of the Issuer, unless: (a) such Material Subsidiary simultaneously executes and delivers a supplemental trust deed to the Trust Deed providing for a Subsidiary Guarantee of payments in respect of the Notes by such Material Subsidiary on an equal and ratable basis with such Guarantee and up to the maximum amount of such Guarantee for so long as such Guarantee remains effective; and (b) such Material Subsidiary waives and will not in any manner whatsoever claim, or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Issuer as a result of any payment by such Material Subsidiary under such Guarantee until the Notes have been paid in full.

3.6 Limitation on Sales of Capital Stock in Material Subsidiaries

So long as any of the Notes remains outstanding, the Issuer will not sell or otherwise dispose, directly or indirectly, any of the Capital Stock in, any of its Material Subsidiaries, except:

(a) to the Issuer or a Subsidiary; or

(b) in any case where the consideration to be received therefore is at least equal to the Fair Market Value of such Capital Stock,

3.7 Listing of the Notes and Issuer

(a) The Issuer shall make such filings, registrations or qualifications and take all other necessary action and will use its best efforts to obtain such consents, approvals and authorizations, if any, and satisfy all conditions that the SGX-ST may impose on listing of the Notes and shall use its best efforts to obtain such listing by no later than August 3, 2020 and maintain such listing.

(b) The Issuer shall use its best efforts to maintain the listing of all its Common Stock on the Philippine Stock Exchange, Inc. or another internationally recognised stock exchange.

3.8 Provision of Financial Statements and Reports

(a) The Issuer will furnish to the Trustee and, upon request, any Noteholder:

(i) as soon as they are available, but in any event within 120 calendar days after the end of the Financial Year of the Issuer, copies of its financial statements (on a consolidated basis) in respect of such Financial Year (including at least a statement of income, statement of financial position and statement of cash flows) audited by a member firm of an internationally recognised firm of independent accountants; and

(ii) as soon as they are available, but in any event within 60 calendar days after the end of each quarterly period (other than the final period of a Financial Year) of the Issuer,

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copies of its unaudited financial statements (on a consolidated basis) in respect of such quarterly period or (in the case of the second quarter of each Financial Year) the relevant semi-annual period (including at least a statement of income, statement of financial position and statement of cash flows).

(b) In addition, the Issuer will provide to the Trustee (1) within 120 calendar days after the end of each Financial Year, an Officer Certificate (X) stating the ratio of Net Debt to Total Equity (as of the end of such Financial Year) and showing in reasonable detail the calculation of such ratio, and (Y) setting out a list of Material Subsidiaries as of the end of such Financial Year, including in details of any acquisition and/or disposals thereof, as well as details of any Subsidiary which became or ceased to be a Material Subsidiary during such Financial Year; and (2) as soon as possible and in any event within 30 calendar days after the Issuer becomes aware or should reasonably become aware of the occurrence of a Potential Event of Default, an Officer Certificate setting forth the details of the Potential Event of Default, and the action which the Issuer proposes to take with respect thereto.

3.9 Suspension of Certain Covenants

If on any date following the Issue Date, the Notes have a rating of Investment Grade from at least two of the Rating Agencies and no Potential Event of Default or Event of Default has occurred and is continuing (a “Suspension Event”), then, beginning on that day and continuing until such time, if any, at which the Notes cease to have a rating of Investment Grade from at least two of the Rating Agencies, the following Conditions will be suspended and will no longer apply:

(a) Condition 3.2 (Limitation on Indebtedness);

(b) Condition 3.3 (Limitation on Dividend and Other Payment Restrictions Affecting Material Subsidiaries); and

(c) Condition 3.5 (Limitation on Guarantees by Material Subsidiaries).

(d) Condition 3.6 (Limitation on Sales of Capital Stock by Material Subsidiaries); and

(e) Condition 3.7 (Listing of the Notes and Issuer)

Such covenants will be reinstated and apply according to their terms as of and from the first day on which a Suspension Event ceases to be in effect. Such covenants will not, however, be of any effect with regard to actions of the Issuer or any Material Subsidiary properly taken in compliance with the Conditions during the continuance of the Suspension Event. Indebtedness outstanding on the date of any such reinstatement shall be deemed to have been Incurred under Condition 3.2(b)(ii).

3.10 Interpretation

For the purpose of these Conditions:

“Acquired Indebtedness” means Indebtedness of a Person existing at the time such Person becomes a Material Subsidiary or Indebtedness of a Material Subsidiary assumed in connection with the acquisition of assets from such Person by such Material Subsidiary and not Incurred in connection with, or in contemplation of, the Person merging with or into or becoming a Material Subsidiary or such acquisition.

“Affiliate” means, with respect to any Person, any other Person (a) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person, or (b) who is a director or officer of such Person or any Subsidiary of such Person or of any Person referred to in clause (a) of this definition. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Board Resolution” means any resolution of the board of directors of the Issuer taking an action which it is authorized to take and adopted at a meeting duly called and held at which a quorum of disinterested members (if so required) was present and acting throughout or adopted by written resolution executed by every member of the board of directors of the Issuer.

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“Capital Stock” means, with respect to any Person, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Issue Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock, but excluding (a) any debt security convertible or exchangeable into such equity and (b) any perpetual capital securities, subordinated capital securities or other similar instruments (or portions thereof) that are classified as equity under PFRS.

“Capitalised Lease” means, with respect to any Person, any lease of any property (whether real, personal or mixed) which would have been required to be capitalised on the balance sheet of such Person under PAS 17, as of December 31, 2018, the accounting standard for leases prior to PFRS 16.

“Capitalised Lease Obligations” means the capitalised amount of any rental obligations under a Capitalised Lease, and the Stated Maturity thereof will be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of penalty.

“Change of Control” means the occurrence of any of the following events (i) the Permitted Holders collectively ceasing to control or hold beneficial ownership of at least 30% of the voting power of the outstanding Voting Stock of the Issuer, (ii) the Permitted Holders in aggregate ceasing to be the largest beneficial owners (measured in terms of voting power) of the outstanding Voting Stock of the Issuer; or (iii) the Issuer consolidates with or merges into or sells or transfers substantially all of its assets to any other Person, unless the consolidation, merger, sale or transfer will not result in the other Person or Persons acquiring control over the Issuer.

“Change of Control Triggering Event” means (i) the occurrence of both a Change of Control and a Rating Decline if the Notes are rated by at least one Rating Agency or (ii) the occurrence of a Change of Control if the Notes are not rated.

“Commodities Agreement” means any forward, option or futures contract or other similar agreement or arrangement designed to protect against fluctuations in the price of fuel, electricity or other commodities or raw materials.

“Common Stock” means, with respect to any Person, any and all shares, interests, rights to purchase, warrants, options or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock or ordinary shares, whether or not outstanding on the Issue Date, and include, without limitation, all series and classes of such common stock or ordinary shares.

“Contractor Guarantee” means a guarantee by the Issuer or any Material Subsidiary of Indebtedness of any contractor, builder or other similar Person engaged by the Issuer or such Material Subsidiary in connection with the development, construction or improvement of real or personal property or equipment by the Issuer or any Material Subsidiary in the ordinary course of business, which Indebtedness was Incurred by such contractor, builder or other similar Person to finance the cost of such development, construction or improvement.

“Currency Agreement” means any foreign exchange forward contract, currency swap agreement, currency option or other similar agreement or arrangement designed to protect against fluctuations in foreign exchange rates.

“Disqualified Stock” means any class or series of Capital Stock of any Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise is (a) required to be redeemed prior to the Stated Maturity of the Notes, (b) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Notes or (c) convertible into or exchangeable for Capital Stock referred to in clause (a) or (b) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that (i) any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of a “change of control” occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the “change of control” provisions applicable to such Capital Stock are no more favourable to the holders of such Capital Stock than the provisions contained in Condition 5.3 and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior

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to the repurchase of the Notes as are required to be repurchased pursuant to Condition 5.3; and (ii) any class or series of debt securities or Preferred Stock convertible or exchangeable into Common Stock, the terms of which allow for a cash payment in lieu of Common Stock upon conversion or exchange if the issue or distribution of Common Stock to the holder thereof will cause such Person to violate foreign ownership regulations applicable in the Republic of the Philippines from time to time shall not constitute Disqualified Stock provided that any such cash payments are made with the proceeds of the sale of Equity Interests of such Person to an unaffiliated Person.

“Dollar Equivalent” means, with respect to any monetary amount in a currency other than U.S. dollars, at any time for the determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the reference exchange rate for the purchase of U.S. dollars with the applicable foreign currency as quoted by Bangko Sentral ng Pilipinas on the date of determination.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Extraordinary Resolution” has the meaning given to it in the Trust Deed.

“Fair Market Value” means the price that would be paid in an arm’s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the board of directors of the Issuer, whose determination shall be conclusive if evidenced by a Board Resolution.

“Financial Year” means a financial year of the Issuer, for the time being ending on December 31.

“Fitch” means Fitch Ratings Ltd. or any successor to the rating agency business thereof.

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (b) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term Guarantee used as a verb has a corresponding meaning.

“Hedging Obligation” of any Person means the obligations of such Person pursuant to any Currency Agreement, Interest Rate Agreement or Commodities Agreement.

“Incur” means, with respect to any Indebtedness or Capital Stock, to incur, create, issue, assume, guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness or Capital Stock; provided that the accretion of original issue discount shall not be considered an Incurrence of Indebtedness. The terms “Incurrence”, “Incurred” and “Incurring” have meanings correlative with the foregoing. Notwithstanding the foregoing, existing Indebtedness of a Subsidiary which becomes a Material Subsidiary in accordance with these Conditions solely by reason of exceeding the thresholds for gross revenue or total assets set out in the first paragraph of the definition of “Material Subsidiary” shall not be deemed “Incurred” or an “Incurrence”.

“Indebtedness” of a Person means any indebtedness for or in respect of:

(a) moneys borrowed;

(b) any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

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(d) the issue of Disqualified Stock valued at the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any;

(e) any Hedging Obligation;

(f) any counter-indemnity obligation in respect of a Guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(g) the amount of any liability of a Person in respect of any Guarantee or indemnity for any of the items referred to in paragraphs (a) to (g) above, of other Persons,

if and to the extent any of the preceding items would appear as a liability on the balance sheet of the specified Person prepared in accordance with PFRS or the equivalent relevant local accounting standard, and so that where the amount of Indebtedness is required to be calculated, no amount shall be taken into account more than once in the same calculation and, where the amount is to be calculated on a consolidated basis in respect of a corporate group, monies borrowed or raised, or other indebtedness, as between members of such group shall be excluded.

Notwithstanding the foregoing, “Indebtedness” shall not include (i) any capital commitments, purchase commitments or similar obligations Incurred in connection with the acquisition, development, construction or improvement of real or personal property (including land use rights); provided that such obligation is not reflected on the statement of financial position of the Issuer (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the statement of financial position will not be deemed to be reflected on such statement of financial position), (ii) for the avoidance of doubt, trade payables, accrued expenses and tax payable; and (iii) lease liabilities that would have been classified as “operating leases” under PAS 17, as of December 31, 2018, the accounting standard for leases prior to PFRS 16.

For the purposes of determining the amount of Indebtedness, (i) the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortised portion of the original issue discount of such Indebtedness at such time as determined in conformity with PFRS; and (ii) money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to pre-fund the payment of the interest on such Indebtedness shall be deemed not to be “Indebtedness” so long as such money is held to secure the payment of such interest.

“Interest Rate Agreement” means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement designed to protect against fluctuations in interest rates.

“Investment Grade” means a rating of “AAA”, “AA”, “A” or “BBB”, as modified by a “+” or “-” indication, or an equivalent rating representing one of the four highest rating categories, by S&P, or a rating of “Aaa”, or “Aa”, “A” or “Baa”, as modified by a “1”, “2” or “3” indication, or an equivalent rating representing one of the four highest rating categories, by Moody’s, or a rating of “AAA”, “AA”, “A” or “BBB”, as modified by a “+” or “-” indication, or an equivalent rating representing one of the four highest rating categories of Fitch; and the equivalent ratings of any internationally recognised rating agency or agencies, as the case may be, which shall have been designated by the Issuer as having been substituted for any of S&P, Moody’s or Fitch, as the case may be.

“Issue Date” means the date on which the Notes are originally issued under the Trust Deed.

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other preferential arrangement of any kind in respect of such property or asset, including, without limitation, any preference or priority under Article 2244(14) of the Civil Code of the Philippines, as the same may be amended from time to time, and the right of a vendor, lessor, or similar party under any conditional sales agreement, capital lease or other title retention agreement relating to such property or asset, and any other right of or arrangement with any creditor to have its claims satisfied out of any property or assets, or the proceeds therefrom, prior to any general creditor of the owner thereof.

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“Material Subsidiary” means:

(a) any Subsidiary of the Issuer whose gross revenues (consolidated in the case of a Subsidiary which has Subsidiaries) or whose total assets (consolidated in the case of a Subsidiary which itself has Subsidiaries) represent, in each case, at least 10% of the consolidated gross revenues or, as the case may be, consolidated total assets, of the Issuer and its Subsidiaries taken as a whole, all as calculated, respectively, by reference to the then latest available consolidated audited balance sheet and profit and loss accounts of the Issuer and its consolidated Subsidiaries, provided that:

(i) in the case of a corporation or other business entity becoming a Subsidiary after the end of the financial period to which the latest consolidated audited accounts of the Issuer relate, the reference to the then latest consolidated audited accounts of the Issuer for the purposes of the calculation above shall, until consolidated audited accounts of the Issuer for the financial period in which the relevant corporation or other business entity becomes a Subsidiary are available, be deemed to be a reference to the then latest consolidated audited accounts of the Issuer adjusted to consolidate the latest audited accounts (consolidated in the case of a Subsidiary which itself has Subsidiaries) of such Subsidiary;

(ii) if at any relevant time in relation to the Issuer or any Subsidiary which itself has Subsidiaries no consolidated accounts are prepared and audited, gross revenues or gross assets of the Issuer and any such Subsidiary shall be determined on the basis of pro forma consolidated accounts prepared for this purpose by the Issuer for the purposes of preparing a certificate thereon to the Trustee;

(iii) if at any relevant time in relation to any Subsidiary, no accounts are audited, its gross revenues or gross assets (consolidated, if appropriate) shall be determined on the basis of pro forma accounts (consolidated, if appropriate) of the relevant Subsidiary prepared for this purpose by the Issuer for the purposes of preparing a certificate thereon to the Trustee; and

(iv) if the accounts of any Subsidiary (not being a Subsidiary referred to in proviso (i) above) are not consolidated with those of the Issuer, then the determination of whether or not such Subsidiary is a Material Subsidiary shall be based on a pro forma consolidation of such Subsidiary’s accounts (consolidated, in each case, if appropriate) with the consolidated accounts (determined on the basis of the foregoing) of the Issuer; or

(b) any Subsidiary to which is transferred the whole or substantially the whole of the assets and undertaking of a Subsidiary which immediately prior to such transfer was a Material Subsidiary, whereupon (i) in the case of a transfer by a Material Subsidiary, the transferor Material Subsidiary shall immediately cease to be a Material Subsidiary and (ii) the transferee Subsidiary shall immediately become a Material Subsidiary, provided that on or after the date on which the relevant financial statements for the financial period current at the date of such transfer are published, whether such transferor Subsidiary or such transferee Subsidiary is or is not a Material Subsidiary shall be determined pursuant to the provisions of the subparagraphs above.

For the avoidance of doubt, (i) a Person will cease to be a Material Subsidiary if and at such time such Person ceases to be a Subsidiary, and (ii) if a Material Subsidiary ceases to be a Subsidiary, determination of the remaining Material Subsidiaries shall be made upon the availability of the annual consolidated audited balance sheet and profit and loss accounts of the Issuer and its consolidated Subsidiaries after such Material Subsidiary ceases to become a Subsidiary. A certificate prepared by an authorised representative of the Issuer stating that in his or her opinion, a Subsidiary is or is not, or was or was not, a Material Subsidiary shall, in the absence of manifest error, be conclusive and binding on all parties.

“Moody’s” means Moody’s Investors Service and its affiliates or any successor to the rating agency business thereof.

“Net Debt” means the aggregate (without duplication) of all Indebtedness (other than Non-Recourse Debt) less cash and cash equivalents of the Issuer and its Subsidiaries, which appears on a consolidated

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balance sheet of the Issuer and its Subsidiaries as of the end of the most recent fiscal quarter for which internal financial statements are available, prepared in accordance with PFRS.

“Non-Recourse Debt” means any Indebtedness of a Subsidiary in respect of which the Issuer has not provided a Guarantee and for which the Issuer is not otherwise liable. For the avoidance of doubt, to the extent the Issuer has provided a Guarantee or is liable for Indebtedness of a Subsidiary up to a certain specified limit, any Indebtedness in excess of such limit shall be Non-Recourse Debt.

“Officer Certificate” means a certificate signed by one Authorised Signatory of the Issuer.

“Permitted Holder” means:

(a) Mr. Andrew L. Tan;

(b) any Affiliate of Mr. Andrew L. Tan; and

(c) any Person both the Capital Stock and the Voting Stock of which (or in the case of a trust, the beneficial interests in which) are more than 50.0% owned in aggregate by the Persons specified in clauses (a) and (b) above.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organisation or government or any agency or political subdivision thereof.

“PFRS” means Philippine Accounting Standards and Philippine Financial Reporting Standards. All ratios and computations contained or referred to in these Conditions and the Trust Deed shall be computed in conformity with PFRS either as in effect on the date hereof or from time to time as determined by the Issuer applied on a consistent basis (except, for the avoidance of doubt, “Capitalised Lease” shall be computed in accordance with the definition thereof in these Conditions).

“Potential Event of Default” means any event that is, or after notice or passage of time or both would be, an Event of Default.

“Preferred Stock” as applied to the Capital Stock of any Person means Capital Stock of any class or classes that by its term is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, or as to redemption, over any other class of Capital Stock of such Person.

“Qualified Receivables” means the right of the Issuer or any Material Subsidiary to receive scheduled instalment payments from purchasers of residential or commercial properties sold by the Issuer or such Material Subsidiary on secured loans provided by the Issuer or such Material Subsidiary in the ordinary course of business to such purchasers to fund the purchase price of such properties.

“Qualified Receivables Transaction” means a transaction or series of transactions entered into by the Issuer or any Material Subsidiary pursuant to which the Issuer or such Material Subsidiary sells or otherwise transfers to a domestic bank or financial institution in the Republic of the Philippines Qualified Receivables; where the gross cash proceeds from such sale or transfer are at least 85.0% of the aggregate principal amount of the Qualified Receivables sold or transferred.

“Rating Agencies” means each of (a) S&P, (b) Moody’s and (c) Fitch; provided that if S&P, Moody’s or Fitch shall not make a rating of the Notes publicly available, one or more internationally recognised statistical rating organisations, as the case may be, as the Issuer may select, which will be substituted for any of S&P, Moody’s or Fitch, as the case may be.

“Rating Category” means (1) with respect to S&P, any of the following categories: “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories); (2) with respect to Moody’s, any of the following categories: “Aaa,” “Aa,” “A,” “Baa,” “Ba,” “B,” “Caa,” Ca,” “C” and “D” (or equivalent successor categories); (3) with respect to Fitch, any of the following categories: “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories); and (4) the equivalent of any such category of S&P, Moody’s or Fitch used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (“+” and “-” for S&P; “1,” “2,” and “3” for Moody’s; “+” and “-” for Fitch; or the equivalent gradations for another Rating Agency)

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shall be taken into account (e.g., with respect to S&P, a decline in a rating from “BB+” to “BB,” as well as from “BB-” to “B+,” will constitute a decrease of one gradation).

“Rating Date” means (1) in connection with a Change of Control Triggering Event, that date which is 90 days prior to the earlier of (x) a Change of Control and (y) a public notice of the occurrence of a Change of Control or of the intention by the Company or any other Person or Persons to effect a Change of Control or (2) in connection with actions contemplated under Condition 3.4, that date which is 90 days prior to the earlier of (x) the occurrence of any such actions as set forth therein and (y) a public notice of the occurrence of any such actions.

Rating Decline” means (1) in connection with a Change of Control Triggering Event, the occurrence on, or within six months after the date of public notice of the occurrence of a Change of Control or the intention by the Company or any other Person or Persons to effect a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of any of the events listed below, or (2) in connection with actions contemplated under Condition 3.4, the notification by any of the Rating Agencies that such proposed actions will result in any of the events listed below:

(a) if the Notes are rated by all three of the Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by any two of the three Rating Agencies shall be below Investment Grade;

(b) if the Notes are rated by any two, but not all three, of the three Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by any of such two Rating Agencies shall be below Investment Grade;

(c) if the Notes are rated by one, and only one, of the three Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by such Rating Agency shall be below Investment Grade; or

(d) if the Notes are rated by three or less than three Rating Agencies and are rated below Investment Grade by all such Rating Agencies on the Rating Date, the rating of the Notes by any Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories).

“Relevant Indebtedness” means any present or future indebtedness in the form of, or represented by, debentures, loan stock, bonds, notes or other similar securities (a) which are, or are issued with the intention that they should be, and are capable of being, quoted, listed, ordinarily dealt in or traded on any stock exchange or over the counter or any other securities market (whether or not initially distributed by way of private placement) and (b) denominated in a currency other than the Philippine peso.

“S&P” means Standard & Poor’s Rating Services, a division of S&P Global Inc. or any successor to the rating agency business thereof.

“Stated Maturity” means, (a) with respect to any Indebtedness, the date specified in such Indebtedness as the fixed date on which the final instalment of principal of such Indebtedness is due and payable as set forth in the documentation governing such Indebtedness and (b) with respect to any scheduled instalment of principal of or interest on any Indebtedness, the date specified as the fixed date on which such instalment is due and payable as set forth in the documentation governing such Indebtedness.

“Subordinated Indebtedness” means any Indebtedness of the Issuer which is contractually subordinated or junior in right of payment to the Notes, pursuant to a written agreement to such effect.

“Subsidiary” means, with respect to any Person, any corporation, association or other business entity:

(a) of which more than 50.0% of the voting power of the outstanding Voting Stock is owned or controlled, directly or indirectly, by such Person and one or more other Subsidiaries of such Person; or

(b) of which 50.0% or less of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person and in each case which is “controlled” and consolidated by such Person in accordance with PFRS.

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“Total Assets” means, at any date, the aggregate (without duplication) total current assets and total non-current assets of the Issuer and its Subsidiaries, which appears on a consolidated balance sheet of the Issuer and its Subsidiaries as of the end of the most recent fiscal quarter for which internal financial statements are available, prepared in accordance with PFRS.

“Total Equity” means the aggregate (without duplication) stockholder’s equity of the Issuer and its Subsidiaries, which appears on a consolidated balance sheet of the Issuer and its Subsidiaries as of the end of the most recent fiscal quarter for which internal financial statements are available, prepared in accordance with PFRS.

“Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

“Winding-Up” means, with respect to any Person, a final and effective order or resolution for the bankruptcy, winding up, liquidation, receivership, insolvency or similar proceedings in respect of such Person.

4. INTEREST

4.1 Interest Rate and Interest Payment Dates

The Notes bear interest from and including July 30, 2020 at the rate of 4.125% per annum, payable in equal instalments semi-annually in arrears on January 30 and July 30 of each year (each an “Interest Payment Date”) commencing on January 30, 2021.

4.2 Interest Accrual

Each Note will cease to bear interest from and including its due date for redemption unless, upon due presentation, payment of the principal in respect of the Note is improperly withheld or refused or unless default is otherwise made in respect of payment, in which event interest shall continue to accrue as provided in the Trust Deed.

4.3 Calculation of Broken Interest

When any interest is required to be calculated in respect of a period of less than a full six months, it shall be calculated on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed on the basis of a month of 30 days.

5. REDEMPTION AND PURCHASE

5.1 Redemption

Unless previously redeemed or repurchased and cancelled as provided in these Conditions, the Notes will be redeemed at their principal amount on July 30, 2027.

For purposes of these Conditions, “Business Day” means a day (other than a Saturday or Sunday) on which commercial banks are open for business in Hong Kong, Singapore, New York and Makati City, Philippines.

5.2 Early redemption due to a Gross-up Event

(a) If a Gross-up Event occurs, the Issuer may redeem the Notes (in whole but not in part) at 100% of the principal amount of the Notes plus any accrued but unpaid interest (the “Redemption Price”), on the giving of not less than 30 and not more than 60 calendar days’ irrevocable notice of redemption to the Noteholders in accordance with Condition 13.1.

(b) No such notice of redemption may be given earlier than 45 calendar days prior to the earliest calendar day on which the Issuer would be for the first time obliged to pay the Additional Amounts in question on payments due in respect of the Notes.

(c) Prior to the giving of any such notice of redemption, the Issuer will deliver or procure that there is delivered to the Trustee:

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(i) an Officer’s Certificate stating that the Issuer is entitled to effect such redemption and setting out a statement of facts showing that the conditions to the exercise of the right of the Issuer to redeem have been satisfied and that the obligation to pay Additional Amounts cannot be avoided by the Issuer taking reasonable measures available to it; and

(ii) an opinion of an independent legal or tax adviser of recognised standing to the effect that the Issuer has or will become obliged to pay Additional Amounts as a result of a Gross-up Event,

and the Trustee shall be entitled to accept the above certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent set out above, in which event it shall be conclusive and binding on the Noteholders.

(d) For purposes of these Conditions:

(i) “Authorised Signatory” means any person who (a) is an authorised signatory of the Issuer designated by the board of directors of the Issuer and as certified by the corporate secretary of the Issuer or (b) has been notified by the Issuer in writing to the Trustee (such notice being signed by two Directors of the Issuer) as being duly authorised to sign documents and to do other acts and things on behalf of the Issuer for the purposes of these presents; and

(ii) “Gross-up Event” means that as a result of any change in, or amendment to, the laws or treaties (or any rules or regulations thereunder) of the Relevant Jurisdiction, or any change in or amendment to any official interpretation or application of those laws, treaties or rules or regulations, which change or amendment becomes effective on or after the Issue Date the Issuer has or will become obliged to pay Additional Amounts with respect to a deduction or withholding at a rate higher than that applicable on the Issue Date; provided that (in either case) the payment obligation cannot be avoided by the Issuer taking reasonable measures available to it; provided further that where any Additional Amounts due in accordance with Condition 7 are in consequence of any change in the laws or treaties of the Republic of the Philippines after the Issue Date, a Gross-up Event shall have occurred only if the rate of withholding or deduction required by such law or treaty is in excess of 20%

(e) The Trustee and the Agents shall not be required to take any steps to ascertain whether a Gross-up Event has occurred and shall not be responsible or liable to the Noteholders, the Issuer or any other person for any loss arising from any failure to do so.

5.3 Early redemption due to a Change of Control Triggering Event

(a) Following the occurrence of a Change of Control Triggering Event, each Noteholder will have the right (“Change of Control Triggering Event Put Right”) at such Noteholder’s option, to require the Issuer to redeem in whole but not in part such Noteholder’s Notes on the Change of Control Triggering Event Put Date at 101% of the principal amount of the Notes plus any accrued but unpaid interest. To exercise such right, the Holder of the relevant Note must complete, sign and deposit at the specified office of any paying agent a duly completed and signed notice of redemption, in the form for the time being current, obtainable from the specified office of any paying agent (“Change of Control Triggering Event Put Exercise Notice”) together with the Certificate evidencing the Notes to be redeemed by not later than 30 days following a Change of Control Triggering Event, or, if later, 30 days following the date upon which notice thereof is given to Noteholders by the Issuer in accordance with Condition 13. The “Change of Control Triggering Event Put Date” shall be the fourteenth day after the expiry of such period of 30 days as referred to above.

(b) A Change of Control Triggering Event Put Exercise Notice, once delivered, shall be irrevocable and may not be withdrawn without the Issuer’s consent and the Issuer shall redeem the Notes which form the subject of the Change of Control Triggering Event Put Exercise Notices delivered as aforesaid on the Change of Control Triggering Event Put Date.

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(c) Neither the Trustee nor any Agent shall be required to take any steps to ascertain whether a Change of Control Triggering Event or any event which could lead to the occurrence of a Change of Control Triggering Event has occurred and will not be responsible or liable to Noteholders or any other person for any loss arising from any failure by any of them to do so.

(d) Not later than seven days after becoming aware of a Change of Control Triggering Event, the Issuer shall procure that notice regarding the Change of Control Triggering Event shall be delivered to the Trustee in writing and to the Noteholders (in accordance with Condition 13) stating:

(i) the Change of Control Triggering Event Put Date;

(ii) the date of such Change of Control Triggering Event and, briefly, the events causing such Change of Control Triggering Event;

(iii) the date by which the Change of Control Triggering Event Put Exercise Notice must be given;

(iv) the redemption amount and the method by which such amount will be paid;

(v) the names and addresses of all paying agents;

(vi) the procedures that Noteholders must follow and the requirements that Noteholders must satisfy in order to exercise the Change of Control Triggering Event Put Right; and

(vii) that a Change of Control Triggering Event Put Exercise Notice, once validly given, may not be withdrawn.

(e) Upon the exercise of any Change of Control Triggering Event Put Right, payment of the applicable redemption amount shall be conditional upon delivery of the Noteholder’s Certificate (together with any necessary endorsements) to any paying agent on any business day together with the delivery of any other document(s) required by these Conditions, and will be made promptly following the later of the date set for redemption and the time of delivery of such Certificate.

5.4 Purchase of Notes

The Issuer or any Subsidiary of the Issuer may, in compliance with applicable laws, purchase Notes in any manner and at any price. Such acquired Notes may be surrendered for cancellation or held or resold. The Notes so purchased, while held by or on behalf of the Issuer or any such Subsidiary, shall not entitle the holders thereof to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 10 and 15.1.

5.5 Make-whole redemption

At any time prior to the Par Call Date, the Issuer may on any one or more occasions redeem all or a part of the Notes, on the giving of not less than 30 and not more than 60 calendar days’ irrevocable notice of redemption to the Noteholders in accordance with Condition 13.1, at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, the date of redemption, subject to the rights of Noteholders on the relevant record date (as defined in Condition 6.1) to receive interest due on the relevant Interest Payment Date. Neither the Trustee nor any of the Agents shall be responsible for verifying or calculating the Applicable Premium.

“Applicable Premium” means, with respect to any Note on any redemption date, the greater of: (a) 1.0% of the principal amount of the Note; and (b) the excess of: (I) the present value at such redemption date of (i) the redemption price of the Note at maturity, plus (ii) all required interest payments due on the Note through maturity, (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (II) the principal amount of the Note.

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“Treasury Rate” means, as of any redemption date, the yield to maturity as of such redemption date of U.S. Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days (but not more than five Business Days) prior to the redemption date (or, if such statistical release is not so published or available, any publicly available source of similar market date selected by the Issuer in good faith)) most nearly equal to the period from the redemption date to maturity; provided, however, that if the period from the redemption date to maturity is less than one year, the weekly average yield on actually traded U.S. Treasury securities adjusted to a constant maturity of one year will be used.

5.6 Call Option at Par

At any time and from time to time on or after April 30, 2027 (the date that is three months prior to the maturity of the Notes, the “Par Call Date”), the Issuer or the Guarantor, may at its option redeem all or a part of the Notes at the Redemption Price, on the giving of not less than 30 and not more than 60 calendar days’ irrevocable notice of redemption to the Noteholders in accordance with Condition 13.1 and to the Trustee and the Principal Paying Agent in writing.

6. PAYMENTS

6.1 Payments in respect of Notes

Payment of principal, premium (if any) and interest will be made by transfer to the registered account of the Noteholder. Payments of principal and premium (if any) and payments of interest due otherwise than on an Interest Payment Date will only be made against surrender of the relevant Certificate at the specified office of any of the Agents. Interest on Notes due on an Interest Payment Date will be paid to the Holder shown on the register of Noteholders at the close of business on the date being the fifteenth day before the relevant Interest Payment Date (the “Record Date”).

For the purposes of this Condition 6, a Noteholder’s “registered account” means the U.S. Dollar account maintained by or on behalf of it with a bank that processes payments in U.S. Dollars, details of which appear on the register of Noteholders at the close of business, in the case of principal and premium (if any) and interest due otherwise than on an Interest Payment Date, on the second Payment Business Day (as defined in Condition 6.4) before the due date for payment and, in the case of interest due on an Interest Payment Date, on the relevant Record Date.

So long as the Global Certificate is held on behalf of Euroclear, Clearstream, Luxembourg or any other clearing system, each payment in respect of the Global Certificate will be made to the person shown as the Noteholder in the register at the close of business of the relevant clearing system on the Clearing System Business Day before the due date for such payments, where “Clearing System Business Day” means a weekday (Monday to Friday, inclusive) except 25 December and 1 January.

6.2 Payments subject to Applicable Laws

Payments in respect of principal, premium (if any) and interest on Notes are subject in all cases to (i) any fiscal or other laws and regulations applicable in the place of payment, but without prejudice to the provisions of Condition 8 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or (without prejudice to the provisions of Condition 7) any law implementing an intergovernmental approach thereto.

6.3 No commissions

No commissions or expenses shall be charged to the Noteholders in respect of any payments made in accordance with this Condition 6.

6.4 Payment on Business Days

Where payment is to be made by transfer to a registered account, payment instructions (for value the due date or, if that is not a Payment Business Day (as defined below), for value the first following day which is a Payment Business Day) will be initiated on the Payment Business Day preceding the due date for payment or, in the case of a payment of principal and premium (if any) or a payment of interest due

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otherwise than on an Interest Payment Date, if later, on the Payment Business Day on which the relevant Certificate is surrendered at the specified office of an Agent.

Noteholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due if the due date is not a Payment Business Day or if the Noteholder is late in surrendering its Certificate (if required to do so).

In these Conditions, “Payment Business Day” means a day (other than a Saturday or Sunday) on which commercial banks are open for business in New York City, Hong Kong, Singapore and Makati and, in the case of presentation of a Certificate, in the place in which the Certificate is presented.

6.5 Partial Payments

If the amount of principal, premium (if any) or interest which is due on the Notes is not paid in full, the Registrar will annotate the register of Noteholders with a record of the amount of principal, premium (if any) or interest in fact paid.

6.6 Agents

The Issuer reserves the right, subject to the prior written approval of the Trustee, at any time to vary or terminate the appointment of any Agent and to appoint additional or other agents provided that:

(a) there will at all times be a Principal Paying Agent;

(b) so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, if the Notes are issued in definitive form, there will be at all times be a Paying Agent in Singapore unless the Issuer obtains an exemption from the SGX-ST; and

(c) there will at all times be a Registrar.

Notice of any termination or appointment and of any changes in specified offices will be given to the Noteholders promptly by the Issuer in accordance with Condition 13.1.

7. TAXATION AND GROSS-UP

7.1 Payment without withholding

All payments in respect of the Notes by or on behalf of the Issuer will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by or on behalf of the Relevant Jurisdiction, unless the withholding or deduction of the Taxes is required by law. If the Issuer makes a deduction or withholding required by law, the Issuer shall pay such additional amount (“Additional Amounts”) as will result in receipt by the Noteholders of such amounts as would have been received by them had no such withholding or deduction been required; except that no Additional Amounts will be payable in relation to any payment in respect of any Note:

(a) presented for payment (if applicable) by or on behalf of a Noteholder who is liable to the Taxes in respect of such Note by reason of their having some connection with any Relevant Jurisdiction other than the mere holding of the Note;

(b) presented for payment (if applicable) more than 30 days after the Relevant Date (as defined in Condition 7.2) except to the extent that a Holder of such Note would have been entitled to such Additional Amounts on presenting the same for payment on the last day of the period of 30 days assuming, whether or not such is in fact the case, that day to have been a Payment Business Day (as defined in Condition 6.4); or

(c) where such withholding or deduction would not have been so imposed but for the failure by the Holder of such Note, after written request made to that Holder at least 30 days before any such withholding or deduction would be payable, by the Issuer, the Trustee or the Paying Agent, as applicable, to comply with any identification, information, documentation or other similar reporting requirement concerning its nationality, residence or connection with the Relevant Jurisdiction, which is required or imposed by statute, regulation or published administrative

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interpretation of general application of the Relevant Jurisdiction as a precondition to reduction or exemption from such withholding or deduction.

7.2 Interpretation

In these Conditions:

(a) “Relevant Date” means the date on which the payment first becomes due but, if the full amount of the moneys payable has not been received by the Principal Paying Agent, the Trustee or the Registrar, as the case may be, on or before such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect has been duly given to the Noteholders by the Issuer in accordance with Condition 13.1; and

(b) “Relevant Jurisdiction” means the Republic of the Philippines or any political subdivision or any authority thereof or therein having power to tax, or if any substitution or other corporate action results in either the Issuer (as the case may be) being incorporated in any other jurisdiction, that other jurisdiction or any political subdivision or any authority thereof or therein having power to tax.

7.3 Additional Amounts, principal and interest

Any reference in these Conditions to any amounts in respect of the Notes will be deemed also to refer to any Additional Amounts which may be payable under this Condition 7 or under any undertakings given in addition to, or in substitution for, this Condition 7.3 pursuant to the Trust Deed. Unless the context otherwise requires, any reference in these Conditions to “principal” includes any instalment amount or redemption amount and any other amounts in the nature of principal payable pursuant to these Conditions and “interest” includes any amounts in the nature of interest payable pursuant to these Conditions.

Neither the Trustee nor any Agent shall be responsible for paying any tax, duty, charges, withholding or other payment referred to in this Condition 7 or for determining whether such amounts are payable or the amount thereof, and none of them shall be responsible or liable for any failure by the Issuer, any Noteholder or any third party to pay such tax, duty, charges, withholding or other payment in any jurisdiction or to provide any notice or information to the Trustee or any Agent that would permit, enable or facilitate the payment of any principal, premium (if any), interest or other amount under or in respect of the Notes without deduction or withholding for or on account of any tax, duty, charge, withholding or other payment imposed by or in any jurisdiction.

8. PRESCRIPTION

Notes will become void unless presented for payment within periods of 10 years (in the case of principal) and five years (in the case of interest) from the Relevant Date in respect of the Notes subject to the provisions of Condition 6.

9. FURTHER ISSUES

The Issuer is at liberty from time to time without the consent of the Noteholders to create and issue further Notes or bonds either (a) ranking pari passu in all respects (or in all respects save for the first payment of interest thereon) and so that the same will be consolidated and form a single series with the Notes or (b) upon such terms as to ranking, interest, conversion, redemption and otherwise as the Issuer may determine at the time of the issue. Any further Notes which are to form a single series with the Notes will be constituted by a deed supplemental to the Trust Deed.

10. EVENTS OF DEFAULT

10.1 The Trustee at its sole discretion may, and if so requested in writing by the holders of not less than 25% in Principal Amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (subject in either case to being indemnified and/or secured and/or pre-funded by the holders to its satisfaction), give notice in writing to the Issuer that the Notes are, and they shall accordingly thereby become, immediately due and repayable at the Redemption Price if any of the following events (each an “Event of Default”) occurs and is continuing:

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(a) Non-payment of interest: default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of fourteen (14) calendar days;

(b) Non-payment of principal: default in the payment of the principal or premium, if any, of any Note when the same becomes due and payable at maturity or otherwise or a failure to redeem or purchase Notes when required pursuant to the Trust Deed or the Notes;

(c) Breach of other obligations: the Issuer defaults in the performance or observance of any other covenants or agreements in the Trust Deed, the Notes, the Agency Agreement and the default (i) is, in the opinion of the Trustee, incapable of remedy or (ii) being a default which is capable of remedy and continues for 30 calendar days after the date on which written notice of such default is given to the Issuer by the Trustee or given to the Issuer and the Trustee by Noteholders of at least 25% in Principal Amount of the Notes then outstanding hereunder;

(d) Change of Control: the failure by the Issuer to purchase tendered Notes in the manner described in Condition 5.3;

(e) Cross-acceleration: there occurs with respect to any Indebtedness of the Issuer or any Material Subsidiary having an outstanding principal amount of U.S.$30 million (or its Dollar Equivalent) or more in the aggregate for all such Indebtedness of all such Persons, whether such Indebtedness now exists or shall hereafter be created, an event of default (including a payment default) that has caused the holders thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity;

(f) Unsatisfied judgment: any final judgment or order from which no further appeal or judicial review is permissible for the payment of money shall be rendered against the Issuer or any Material Subsidiary in an amount in excess of U.S.$30 million (or its Dollar Equivalent) individually or in the aggregate for all such final judgments or orders against the Issuer or such Material Subsidiary (treating any deductibles, self-insurance or retention as not so covered) and shall not be discharged, and there shall have been any period of 60 consecutive days following entry of the final judgment or order in excess of U.S.$30 million (or its Dollar Equivalent) individually or in the aggregate during which a stay of enforcement of such final judgment or order, irrespective of reason, shall not be in effect;

(g) Insolvency and Rescheduling:

(i) if the Issuer or any Material Subsidiary ceases or threatens to cease to carry on all or a substantial part of its business, except as otherwise permitted by Condition 3.4;

(ii) any order is made by any competent court or other authority or a resolution passes for the dissolution or Winding-Up of the Issuer or any Material Subsidiary, or for the appointment of a liquidator, curator in bankruptcy, or receiver of the Issuer or of all or substantially all of its assets;

(iii) if the Issuer or any Material Subsidiary is generally unable to honor its obligations as they fall due;

(iv) if the Issuer or any Material Subsidiary commences negotiations with one or more of its creditors with a view to the general readjustment or rescheduling of its Indebtedness, or the Issuer or any Material Subsidiary proposes or makes an assignment for the benefit of, or enters into any general assignment or an arrangement or composition with, its creditors; or

(v) if the Issuer or any Material Subsidiary files a petition for a suspension of payments or for bankruptcy or is declared bankrupt or becomes subject to any other regulation having similar effect;

(h) Enforcement Proceedings: a distress, attachment, execution or other legal process is levied, enforced or sued out on or against any material part of the property, assets or revenues of the Issuer or any Material Subsidiary and is not discharged or within 60 days of having been so levied, enforced or sued;

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(i) Analogous Events: any event occurs in respect of the Issuer or any Material Subsidiary which under the laws of any relevant jurisdiction has a similar or analogous effect to any of those events mentioned in paragraphs (g) and (h) above;

(j) Moratorium or Expropriation: a moratorium is agreed or declared in respect of any Indebtedness of the Issuer or any governmental authority shall take any action to condemn, seize, nationalize , or appropriate all or a substantial part of the assets of the Issuer or any Material Subsidiary, or any of the Capital Stock of the Issuer or any Material Subsidiary, or shall take any action that prevents or will prevent the Issuer from performing its payment obligations under these Conditions, the Trust Deed or the Notes, or the Issuer or any Material Subsidiary shall be prevented from exercising normal control over all or a substantial part of its property;

(k) Illegality: it is or will become unlawful for the Issuer to perform or comply with any one or more of its obligations under any of the Notes or the Trust Deed; or

(l) Repudiation: the Issuer repudiates the Trust Deed, the Agency Agreement or the Notes or does or causes or permits to be done any act or thing evidencing an intention to repudiate such agreement.

If an Event of Default specified in paragraph (g) of this Condition 10.1 occurs, the principal of, premium on, if any, and accrued interest (and any Additional Amounts thereon) on all the Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Noteholders.

Each of the Trustee and the Agents need not do anything to ascertain whether any Event of Default or Potential Event of Default has occurred or is continuing and will not be responsible to the Holder or any person for any loss arising from any failure by it to do so, and unless and until the Trustee or the Agents have received notice in writing to the contrary, the Trustee and the Agents may assume that no such event has occurred and that the Issuer is performing all its respective obligations under the Trust Deed and the Notes.

The Issuer has undertaken in the Trust Deed that, so long as any Note remains outstanding, annually and also within 14 days after any request by the Trustee, it will send to the Trustee an Officer’s Certificate to the effect that as at a date not more than five days prior to the date of the certificate no Event of Default Potential or Event of Default has occurred.

11. ENFORCEMENT

The Trustee may at any time, at its absolute discretion and without notice, take such proceedings against the Issuer as it may think fit to enforce the provisions of the Trust Deed and the Notes, but it shall not be bound to take any such proceedings or any other action in relation to the Trust Deed or the Notes unless (a) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at least 25% in principal amount of the Notes then outstanding, and (b) it shall have been indemnified, secured and/or pre-funded to its satisfaction against all actions, proceedings, claims and demands to which it may be or become liable and all costs, charges, damages, expenses (including but not limited to legal fees) and liabilities which may be incurred.

Neither the Trustee nor any Agent shall be required to take any steps to ascertain whether any Event of Default or Potential Event of Default has occurred and none of them shall be responsible or liable to the Noteholders, the Issuer or any other person for any loss arising from any failure to do so.

No Noteholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing.

12. REPLACEMENT OF CERTIFICATES

Should any Certificate be lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Registrar, subject to all applicable laws and stock exchange requirements, upon payment by the claimant of the expenses incurred in connection with the replacement and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Certificates must be surrendered before replacements will be issued.

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13. NOTICES

13.1 Notices to Noteholders

All notices to the Noteholders will be valid if mailed to them at their respective addresses in the register of Noteholders maintained by the Registrar and, so long as the Notes are listed on a stock exchange and the rules of that exchange so require, published in a daily newspaper of general circulation in the place or places required by the rules of that stock exchange. Any notice shall be deemed to have been given on the seventh day after being so mailed or on the date of publication or, if so published more than once or on different dates, on the date of the first publication.

Until such time as any individual Certificates are issued and so long as the Global Certificate is held in its entirety on behalf of Euroclear and Clearstream any notice to the Noteholders shall be validly given by the delivery of the relevant notice to Euroclear and Clearstream for communication by the relevant clearing system to entitled accountholders in substitution for notification as required by the Conditions and shall be deemed to have been given on the date of delivery to such clearing system.

13.2 Notices from Noteholders

Notices to be given by any Noteholder must be in writing and given by lodging the same, together with any Certificate in respect of such Note or Notes, with the Registrar or, if the Notes are held in a clearing system, may be given through the clearing system in accordance with its standard rules and procedures.

14. SUBSTITUTION OR MODIFICATION TO REMEDY GROSS-UP EVENT

The Trustee may, without the consent of the Noteholders, agree with the Issuer to:

(a) the substitution in place of the Issuer (or of any previous substitute under this Condition 14) as the principal debtor under the Notes and the Trust Deed by the any of its Subsidiaries; or

(b) the modification of these Conditions to the extent reasonably necessary,

in order to remedy a pending or existing Gross-up Event, provided that:

(i) in the case of a substitution of an entity other than the Issuer, the Notes remaining unconditionally and irrevocably guaranteed by the Issuer in a manner which would give the Noteholders a status in a Winding-Up of the Issuer which is akin to the status Noteholders would have at that time in respect of a Winding-Up of the substituted entity; and

(ii) compliance with certain other conditions set out in the Trust Deed.

15. MEETINGS OF NOTEHOLDERS, MODIFICATION, WAIVER, AUTHORISATION AND DETERMINATION

15.1 Meetings of Noteholders

The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the modification or abrogation by Extraordinary Resolution of any of these Conditions or any of the provisions of the Trust Deed. The quorum at any meeting for passing an Extraordinary Resolution will be one or more persons present holding or representing more than 50% in principal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons present whatever the principal amount of the Notes held or represented by him or them, except that, at any meeting the business of which includes any of the following matters:

(a) reduction or cancellation of the amount payable or, where applicable, modification, except where such modification is in the opinion of the Trustee bound to result in an increase, of the method of calculating the amount payable or modification of the date of payment or, where applicable, of the method of calculating the date of payment in respect of any principal, premium (if any) or interest in respect of the Notes;

(b) alteration of the currency in which payments under the Notes are to be made;

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(c) alteration of the majority required to pass an Extraordinary Resolution;

(d) substitution of any entity for the Issuer (provided that no such approval is required for such a substitution in accordance with the Trust Deed) or any previous substitute as principal debtor; or

(e) alteration of the quorum required to pass an Extraordinary Resolution,

the necessary quorum for passing an Extraordinary Resolution will be one or more persons present holding or representing not less than two-thirds, or at any adjourned such meeting not less than one-third, of the aggregate principal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders will be binding on all Noteholders, whether or not they are present at the meeting.

15.2 Modification, Waiver, Authorisation and Determination

The Trustee may (but shall not be obliged to), without the consent of the Noteholders, agree to any modification of these Conditions or the Trust Deed which is proper to make if, in the opinion of the Trustee, such modification will not be materially prejudicial to the interests of Noteholders and to any modification of the Notes or the Trust Deed which is of a formal, minor or technical nature or is to correct a manifest error. In addition, the Trustee may (but shall not be obliged to), without the consent of the Noteholders, authorise or waive any proposed breach or breach of the Notes or the Trust Deed if, in the opinion of the Trustee, the interests of the Noteholders will not be materially prejudiced thereby.

15.3 Trustee to have Regard to Interests of Noteholders as a Class

In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation, determination or substitution), the Trustee must have regard to the general interests of the Noteholders as a class but must not have regard to any interests arising from circumstances particular to individual Noteholders (whatever their number) and, in particular but without limitation, must not have regard to the consequences of any such exercise for individual Noteholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee will not be entitled to require, nor will any Noteholder be entitled to claim, from the Issuer the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders except to the extent already provided for in Condition 7 and/or any undertaking given in addition to, or in substitution for, Condition 7 pursuant to the Trust Deed.

15.4 Notification to the Noteholders

Any modification, waiver, authorisation, determination or substitution agreed to by the Trustee will be binding on the Noteholders and, unless the Trustee agrees otherwise, any modification or substitution will be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 13.1.

16. INDEMNIFICATION OF THE TRUSTEE AND ITS CONTRACTING WITH THE ISSUER

16.1 Indemnification of the Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified and/or secured and/or pre-funded to its satisfaction in priority to the claims of the Noteholders. The Trust Deed provides that when determining whether an indemnity or any security or prefunding is satisfactory to it, the Trustee shall be entitled (i) to evaluate its risk in any given circumstance by considering the worst-case scenario and (ii) to require that any indemnity or security given to it by the Noteholders or any of them be given on a joint and several basis and be supported by evidence satisfactory to it as to the financial standing and an opinion as to the capacity, power and authority of each counterparty and/or the validity and effectiveness of the security.

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16.2 Directions from Noteholders

Whenever the Trustee is required or entitled by the terms of this Trust Deed, the Agency Agreement or the Conditions to exercise any discretion or power, take any action, make any decision or give any direction, the Trustee is entitled, prior to exercising any such discretion or power, taking any such action, making any such decision, or giving any such direction, to seek directions from the Noteholders by way of an Extraordinary Resolution, and the Trustee is not responsible for any loss or liability incurred by any person as a result of any delay in it exercising such discretion or power, taking such action, making such decision or giving such direction where the Trustee is seeking such directions or in the event that the instructions sought are not provided by the Noteholders

16.3 Trustee Contracting with the Issuer

The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (a) to enter into business transactions with the Issuer and/or any of the Issuer’s Subsidiaries and to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the Issuer and/or any of the Issuer’s Subsidiaries, (b) to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences for, the Noteholders, and (c) to retain and not be liable to account for any profit made or any other amount or benefit received thereby or in connection therewith.

17. GOVERNING LAW AND SUBMISSION TO JURISDICTION

17.1 Governing law

The Trust Deed, the Agency Agreement, the Notes and any non-contractual obligations arising out or in connection with the Trust Deed, the Agency Agreement and the Notes, are governed by English law, and shall be construed in accordance with, English law.

17.2 Jurisdiction of English courts

(a) The Issuer has, in the Trust Deed, irrevocably agreed for the benefit of the Trustee and the Noteholders that the courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Trust Deed or the Notes (including any dispute relating to any non-contractual obligations arising out of or in connection with the Trust Deed or the Notes) and has accordingly submitted to the exclusive jurisdiction of the English courts.

(b) The Issuer has, in the Trust Deed, waived any objection to the courts of England on the grounds that they are an inconvenient or inappropriate forum. The Trustee or the Noteholders may take any suit, action or proceeding (referred to as “Proceedings”) arising out of, or in connection with the Trust Deed or the Notes respectively (including any Proceedings relating to any non-contractual obligations arising out of or in connection with the Trust Deed or the Notes respectively) against the Issuer in any other court of competent jurisdiction and concurrent Proceedings in any number of jurisdictions.

17.3 Appointment of process agent

The Issuer has , in the Trust Deed, irrevocably and unconditionally appointed Cogency Global (UK) Limited at the latter’s registered office for the time being as its agent for service of process in England in respect of any Proceedings arising out of, or in connection with, the Trust Deed or the Notes and has undertaken that if such agent ceases so to act it will appoint such other person as the Trustee may approve as its agent for that purpose.

18. RIGHTS OF THIRD PARTIES

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of the Trust Deed, the Agency Agreement or the Notes, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

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THE GLOBAL CERTIFICATE

The Global Certificate contains the following provisions which apply to the Notes in respect of which they are issued while they are represented by the Global Certificate, some of which modify the effect of the Terms and Conditions of the Notes. Terms defined in the Terms and Conditions of the Notes have the same meaning in paragraphs 1 to 7 below.

ACCOUNTHOLDERS

For so long as all of the Notes are represented by the Global Certificate and the Global Certificate is held on behalf of a clearing system, each person (other than another clearing system) who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg (as the case may be) as the holder of a particular aggregate principal amount of such Notes (each an “Accountholder”) (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg (as the case may be) as to the aggregate principal amount of such Notes standing to the account of any person shall, in the absence of manifest error, be conclusive and binding for all purposes) shall be treated as the holder of such aggregate principal amount of such Notes (and the expression “Noteholders” and references to “holding of Notes” and to a “holder of Notes” shall be construed accordingly) for all purposes other than with respect to payments on such Notes, the right to which shall be vested, as against the Issuer and the Trustee, solely in the nominee for the relevant clearing system (the “Relevant Nominee”) in accordance with and subject to the terms of the Global Certificate. Each Accountholder must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for its share of each payment made to the Relevant Nominee.

CANCELLATION

Cancellation of any Notes following its redemption or purchase by the Issuer will be effected by reduction in the aggregate principal amount of the Notes in the register of Noteholders and by the annotation of the appropriate schedule to the Global Certificate.

PAYMENTS

Payments of principal and interest in respect of Notes represented by the Global Certificate will be made upon presentation or, if no further payment falls to be made in respect of the Notes, against presentation and surrender of the Global Certificate to or to the order of the Registrar or such other Agent as shall have been notified to the holder of the Global Certificate for such purpose.

Each payment will be made to or to the order of, the person whose name is entered on the Register at the close of business on the Clearing System Business Day immediately prior to the date for payment, where “Clearing System Business Day” means a day on which Euroclear and Clearstream, Luxembourg are open for business.

Distributions of amounts with respect to book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the Registrar, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and procedures.

A record of each payment made will be endorsed on the appropriate schedule to the Global Certificate by or on behalf of the Registrar and shall be prima facie evidence that payment has been made.

NOTICES

So long as all the Notes are represented by the Global Certificate and the Global Certificate is held on behalf of a clearing system, notices to Noteholders may be given by delivery of the relevant notice to that clearing system for communication by it to entitled Accountholders in substitution for notification as required by the Conditions. For so long as the Notes are listed on the SGX-ST, notices shall also be published in the manner required by the rules and regulations of the SGX-ST.

So long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer shall appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption, in the event that the Global Certificate representing the Notes is exchanged for definitive certificates. In addition, an announcement of such exchange shall be made by or on behalf of the Issuer through the SGX-ST and such announcement will include all material information with respect to the delivery of the definitive certificates, including details of the paying agent in Singapore.

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REGISTRATION OF TITLE

Registration of title to Notes in a name other than that of the Relevant Nominee will not be permitted unless Euroclear or Clearstream, Luxembourg, as appropriate, notifies the Issuer that it is unwilling or unable to continue as a clearing system in connection with the Global Certificate, and in each case a successor clearing system approved by the Trustee is not appointed by the Issuer within 90 days after receiving such notice from Euroclear or Clearstream, Luxembourg. In these circumstances title to a Note may be transferred into the names of holders notified by the Relevant Nominee in accordance with the Conditions, except that Certificates in respect of Notes so transferred may not be available until 21 days after the request for transfer is duly made.

TRANSFERS

Transfers of book-entry interests in the Notes will be effected through the records of Euroclear, Clearstream, Luxembourg and their respective participants in accordance with the rules and procedures of Euroclear, Clearstream, Luxembourg and their respective direct and indirect participants, as more fully described under “Clearance and Settlement”. No Noteholder may require the transfer of a Note to be registered during the period from the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are open for business) on the date before the relevant due date for any payment of principal or interest on the Notes.

RECORD DATE

Interest on the Notes due on an Interest Payment Date will be paid to the holder shown on the register of Noteholders at the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are open for business) before the relevant due date (the “record date”).

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USE OF PROCEEDS

The proceeds from the issuance of the Notes of approximately U.S.$344.8 million (without the deduction of commissions or expenses) will be used for general corporate purposes, which include, among others, financing capital expenditure, land banking and refinancing of loans.

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EXCHANGE RATE INFORMATION

The following table sets forth certain information concerning the exchange rate between the Peso and the U.S. dollar for the periods and dates indicated, expressed in Pesos per U.S.$1.00 based on the BSP Daily Reference Exchange Rate Bulletin:

Peso/U.S. dollar exchange rate Year Period end Average(1) High(2) Low(3) 2015 ......................................................................... 47.12 45.50 47.44 44.05 2016 ......................................................................... 49.77 47.47 49.98 45.92 2017 ......................................................................... 49.96 50.40 51.80 49.40 2018 ......................................................................... 52.56 52.69 54.35 49.77 2019 ......................................................................... 50.80 51.79 52.89 50.49 2020

January ................................................................. 50.86 50.84 51.16 50.51 February ............................................................... 50.90 50.74 51.05 50.49 March ................................................................... 50.78 50.90 51.32 50.51 April ..................................................................... 50.44 50.72 50.91 50.44 May ...................................................................... 50.59 50.56 50.79 50.28 June ...................................................................... 49.85 50.10 50.59 49.85 July (up to July 21)............................................... 49.42 49.55 49.81 49.41

Notes:

(1) Weighted average for the period ended.

(2) Highest daily closing exchange rate for the period.

(3) Lowest daily closing exchange rate for the period.

On July 21, 2020, the daily rate quoted on the BSP Daily Reference Exchange Rate Bulletin was U.S.$1.00 = ₱49.42.

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CAPITALIZATION AND INDEBTEDNESS

The following table sets forth, in accordance with PAS 34, Interim Financial Reporting, the Company’s capitalization as at March 31, 2020 and as adjusted to give effect to the issuance of the Notes. This table should be read in conjunction with the Company’s unaudited interim consolidated financial statements and the notes thereto, included elsewhere in this Offering Circular.

As at March 31, 2020

Actual As Adjusted (Unaudited) (in millions) ₱ U.S.$ ₱ U.S.$ Current Liabilities

Interest-bearing loans and other borrowings . 13,897.9 272.3 13,897.9 272.3

Non-current liabilities

Interest-bearing loans and other borrowings .. 40,257.0 788.7 40,257.0 788.7 Bonds Payable ............................................... 24,702.6 484.0 24,702.6 484.0 Notes to be issued(1) ....................................... – – 17,864.0 350.0

Total Indebtedness ......................................... 78,857.5 1,545.0 96,721.5 1,895.0

Equity

Total equity attributable to parent company’s shareholders .................................................. 181,352.8 3,553.1 181,352.8 3,553.1 Non-controlling interest ................................ 26,606.2 521.3 26,606.2 521.3

Total Equity ..................................................... 207,959.0 4,074.4 207,959.0 4,074.4

Total Capitalization......................................... 286,816.5 5,619.4 304,680.5 5,969.4 Note:

(1) This amount excludes offering discount, underwriting, management and selling commissions and other estimated transaction expenses relating to the issuance of the Notes.

Other than as described above, there has been no material change in the capitalization of the Company since March 31, 2020.

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SELECTED FINANCIAL INFORMATION AND OTHER DATA

The selected historical consolidated statements of financial position data as at December 31, 2018, and 2019 and summary historical consolidated statements of comprehensive income and statement of cash flow data for the years ended December 31, 2017, 2018, and 2019 set forth below have been derived from, and should be read in conjunction with, the audited consolidated financial statements and, including the notes thereto, included elsewhere in this Offering Circular. Punongbayan & Araullo, a member firm of Grant Thornton, has audited the consolidated financial statements in accordance with PFRS. The selected historical consolidated unaudited interim statement of financial position data as at March 31, 2020 and selected historical consolidated unaudited interim income statement and statement of cash flow data for the three months ended March 31, 2019 and 2020 have been derived from, and should be read in conjunction with, the unaudited interim consolidated financial statements. Potential investors should read the following data together with the more detailed information contained in the consolidated financial statements and the related notes included elsewhere in this Offering Circular. The following data is qualified in its entirety by reference to all of that information.

Translations from Philippine Pesos to U.S. dollars for the convenience of the reader have been made at the BSP Rate on March 31, 2020 of ₱51.04 to U.S.$1.00.

CONSOLIDATED STATEMENT OF INCOME DATA


2017 2018 2019 2019 2020


(in millions)

₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$

REVENUES AND INCOME

Real estate sales ............. 34,115.1 38,035.5 42,604.0 834.7 9,474.2 9,610.3 188.3

Rental income ................ 11,830.0 14,264.9 16,814.1 329.4 3,925.5 4,233.5 82.9 Hotel operations ............. 1,336.0 1,519.4 2,543.8 49.8 574.5 550.9 10.8 Equity share in net

earnings (losses) of associates .................... 118.8 92.3 (58.8) (1.2) 23.0 3.4 0.1

Interest and other income – net ............... 2,715.2 3,515.0 5,409.7 106.0 908.9 682.9 13.4

50,115.0 57,427.2 67,312.7 1,318.8 14,906.1 15,081.0 295.5

COSTS AND EXPENSES

Cost of real estate sales ............................ 18,041.1 20,521.2 23,379.8 458.1 5,107.1 5,264.2 103.1

Hotel operations ............. 755.8 820.8 1,381.2 27.1 327.8 332.1 6.5 Operating expenses ........ 9,688.2 11,245.0 13,912.5 272.6 2,927.8 3,568.7 69.9 Interest and other

charges – net ............... 3,862.3 3,296.3 3,261.6 63.9 1,018.5 722.9 14.2 Tax expense ................... 4,063.5 5,544.4 6,081.7 119.2 1,408.6 1,392.3 27.3

36,410.8 41,427.7 48,016.7 940.8 10,789.8 11,280.1 221.0 PROFIT FOR THE

YEAR BEFORE PRE-ACQUISITION INCOME ...................... 13,704.3 15,999.5 19,296.0 378.1 4,116.3 3,800.9 74.5

PRE-ACQUISITION

LOSS (INCOME) OF SUBSIDIARIES ........... 2.7 (166.5) – – – – –

NET PROFIT FOR THE YEAR ............................ ₱13,707.0 ₱15,833.1 ₱19,296.0 U.S.$378.1 ₱4,116.3 ₱3,800.9 U.S.$74.5


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2017 2018 2019 2019 2020


(in millions)

₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$ Company’s

shareholders................ 13,145.6 15,208.1 17,931.4 351.3 3,836.3 3,507.0 68.7 Non-controlling

interests ...................... 561.4 624.9 1,364.6 26.7 280.0 293.9 5.8

₱13,707.0 ₱15,833.1 ₱19,296.0 U.S.$378.1 ₱4,116.3 ₱3,800.9 U.S.$74.5 Earnings Per Share:

Basic .............................. ₱0.413 ₱0.469 ₱0.546 U.S.$0.0 ₱0.121 ₱0.110 U.S.$0.0

Diluted ........................... ₱0.411 ₱0.467 ₱0.543 U.S.$0.0 ₱0.120 ₱0.110 U.S.$0.0



₱ ₱ U.S.$ ₱ U.S.$ CURRENT ASSETS

Cash and cash equivalents ...................... 17,543.1 23,104.9 452.7 25,727.2 504.1 Trade and other receivables – net ........... 27,655.2 33,012.0 646.8 33,426.8 654.9 Contract assets ....................................... 11,131.9 10,857.2 212.7 11,149.2 218.4 Inventories ............................................. 100,662.6 102,845.4 2,015.0 103,987.2 2,037.4 Advances to contractors and suppliers ... 8,949.7 12,269.5 240.4 12,358.5 242.1 Prepayments and other current assets ..... 9,204.9 8,417.2 164.9 8,858.7 173.6

Total Current Assets ........................... 175,147.4 190,506.2 3,732.5 195,507.5 3,830.5 NON-CURRENT ASSETS

Trade and other receivables – net ........... 7,258.6 11,797.4 231.1 12,516.0 245.2 Contract assets ....................................... 11,095.4 7,785.8 152.5 8,018.3 157.1 Advances to contractors and suppliers ... 2,821.5 3,044.3 59.6 4,043.3 79.2 Advances to landowners and joint

operators ............................................. 6,910.2 7,058.9 138.3 7,099.8 139.1 Financial assets at fair value through

other comprehensive income .............. 4,474.9 4,498.2 88.1 3,966.3 77.7 Investments in associates – net............... 1,996.9 3,511.5 68.8 3,514.9 68.9 Investment properties – net .................... 103,122.1 110,890.9 2,172.6 112,711.5 2,208.3 Property and equipment – net ................ 6,170.1 6,702.3 131.3 6,794.3 133.1 Deferred tax assets ................................. 284.9 308.8 6.1 309.0 6.1 Other non-current assets – net ................ 3,008.7 3,528.8 69.1 3,636.9 71.3

Total Non-current Assets .................... 147,143.3 159,126.9 3,117.7 162,610.2 3,185.9 TOTAL ASSETS ..................................... ₱322,290.7 ₱349,633.1 U.S.$6,850.2 ₱358,117.7 U.S.$7,016.4 CURRENT LIABILITIES

Interest-bearing loans and borrowings ... 12,019.7 14,502.5 284.1 13,897.9 272.3 Trade and other payables ....................... 15,027.1 19,306.8 378.3 19,975.2 391.4 Contract liabilities .................................. 2,663.1 1,703.9 33.4 1,879.4 36.8 Customers’ deposits ............................... 9,286.2 10,716.8 210.0 10,616.8 208.0 Redeemable preferred shares ................. 251.6 251.6 4.9 251.6 4.9 Advances from associates and other

related parties ..................................... 2,885.5 2,914.9 57.1 2,787.3 54.6 Income tax payable ................................ 207.2 257.8 5.1 213.4 4.2 Other current liabilities .......................... 5,063.8 7,890.2 154.6 9,009.2 176.5

Total Current Liabilities ..................... 47,404.2 57,544.5 1,127.4 58,630.9 1,148.7 NON-CURRENT LIABILITIES

Interest-bearing loans and borrowings ... 38,620.9 36,753.9 720.1 40,257.0 788.7 Bonds payable ........................................ 25,102.0 24,623.9 482.4 24,702.6 484.0 Contract liabilities .................................. 2,705.6 3,509.6 68.8 3,478.8 68.2 Customers’ deposits ............................... 2,523.1 3,083.1 60.4 2,528.2 49.5

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₱ ₱ U.S.$ ₱ U.S.$ Redeemable preferred shares ................. 754.8 503.2 9.9 503.2 9.9 Deferred tax liabilities – net ................... 8,951.2 10,729.3 210.2 11,324.2 221.9 Retirement benefit obligation ................. 828.5 1,249.6 24.5 1,275.7 25.0 Other non-current liabilities ................... 6,660.0 6,770.5 132.7 7,457.9 146.1

Total Non-current Liabilities .............. 86,146.1 87,223.0 1,708.9 91,527.7 1,793.3 Total Liabilities ₱133,550.2 ₱144,767.6 U.S.$2,836.4 ₱150,158.7 U.S.$2,942.0

EQUITY

Total equity attributable to the Company’s shareholders .................... 163,854.9 178,464.1 3,496.6 181,352.8 3,553.1

Non-controlling interests ........................ 24,885.5 26,401.4 517.3 26,606.2 521.3 Total Equity ........................................ 188,740.4 204,865.5 4,013.8 207,959.0 4,074.4

TOTAL LIABILITIES AND EQUITY.. ₱322,290.7 ₱349,633.1 U.S.$ 6,850.2 ₱ 358,117.7 U.S.$ 7,016.4

Notes:

(1) Cash and cash equivalents consist of cash on hand and in banks and short-term investments.

(2) Other non-current assets include goodwill, guarantee and other deposits, deferred commission, leasehold rights and other items.

(3) Other current liabilities include deferred rent, commission payable, advances from customers, subscription payable and other items.

(4) Other non-current include deferred rent, retention payable, lease liabilities and other items.

CONSOLIDATED STATEMENT OF CASH FLOWS DATA

For the year ended December 31,


2017 2018 2019 2019 2020 (Audited) (Unaudited) (in millions)

₱ ₱ ₱ U.S.$

(unaudited) ₱ ₱ U.S.$ CASH FLOWS FROM

OPERATING ACTIVITIES Net cash flows from operating

activities .................................... 6,153.9 13,926.7 23,381.9 458.1 5,277.7 2,825.4 55.4 CASH FLOWS USED IN

INVESTING ACTIVITIES Net cash flows used in investing

activities .................................... (15,568.3) (16,679.0) (11,315.9) (221.7) (2,799.1) (1,754.0) (34.4) CASH FLOWS FROM (USED

IN) FINANCING ACTIVITIES Net cash flows from (used in)

financing activities .................... 8,472.3 3,626.4 (6,504.3) (127.4) (3,753.1) 1,550.9 30.4 Net increase (decrease) in cash

and cash equivalents ................... (942.1) 874.1 5,561.8 109.0 (1,274.4) 2,622.4 51.4 Beginning Balance of Cash and

Cash Equivalents of Acquired Subsidiaries ................................. 976.6 238.9 – –

Cash and cash equivalents at beginning of the year ................. ₱16,395.7 ₱16,430.1 ₱17,543.1 U.S.$343.7 ₱17,543.1 ₱23,104.9 U.S.$452.7

Cash and cash equivalents at end of the year .................................... ₱16,430.1 ₱17,543.1 ₱23,104.9 U.S.$452.7 ₱16,268.7 ₱25,727.2 U.S.$504.1

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KEY PERFORMANCE INDICATORS

The Company’s key performance indicators are presented below:

For the years ended December 31,


2017 2018 2019 2019 2020 Current Ratio(1) ............... 3.25:1 3.69:1 3.31:1 3.67:1 3.33:1 Debt to Equity Ratio(2) .... 0.46:1 0.40:1 0.37:1 0.38:1 0.38:1 Return on Assets(3).......... 5.14% 5.22% 5.74% 4.57% 3.96% Return on Equity(4) ......... 9.79% 9.97% 10.48% 8.97% 7.80% EBITDA(5) ...................... 21,156 24,957 29,609 6,579 6,348 EBITDA Margin(6) ......... 42.22% 43.46% 43.99% 44.14% 42.10%

Notes:

(1) Current Assets/Current Liabilities

(2) Interest Bearing Loans and Borrowings and Bonds Payable / Equity

(3) Annualized Net Profit / Average Total Assets

(4) Annualized Net Profit / Average Equity (computed using figures attributable only to parent company shareholders)

(5) EBITDA is calculated as net income before interest, taxes, depreciation and amortization.

The table below sets forth the reconciliation of EBITDA to net income for the periods indicated. For the year ended

December 31, For the three months ended

March 31, 2017 2018 2019 2019 2020 EBITDA RECONCILIATION Net Income ............................................................. 13,707 15,833 19,296 4,116 3,801 Add:

Income tax ......................................................... 4,063 5,544 6,082 1,409 1,392 Interest Expense ................................................ 1,555 1,310 1,513 442 398 Depreciation and amortization ........................... 1,831 2,269 2,719 612 757

EBITDA ................................................................. 21,156 24,957 29,609 6,579 6,348

(6) EBITDA margin is calculated as EBITDA divided by total revenues.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the section entitled “Selected Financial Information and Other Data” and the Company’s audited consolidated financial statements as of and for the years ended December 31, 2017, 2018 and 2019 and its unaudited condensed consolidated financial statements as of, and for the three months ended March 31, 2020 (with comparative figures for the three months ended March 31, 2019), including the notes thereto, included elsewhere in this Offering Circular. All necessary adjustments to present fairly the results of operations of the Company have been made. Certain information and footnote disclosure normally included in the audited consolidated financial statements prepared in accordance with the Philippine Financial Reporting Standards have been omitted.

Translations from Philippine Pesos to U.S. dollars for the convenience of the reader have been made at the BSP Daily Reference Rate on March 31, 2020 of ₱51.04 to U.S.$1.00.

DESCRIPTION OF SELECTED INCOME STATEMENT ITEMS

Revenues and Income

Revenues and income comprise revenue from sale of real properties, rental income and hotel operations. Revenue is recognized only when (or as) the Company satisfies a performance obligation by transferring control of the promised goods or services to a customer. The transfer of control can occur over time or at a point in time.

Real estate sales

The Company develops real properties such as developed land, house and lot, and condominium units. The Company often enters into contracts to sell real properties as they are being developed. The significant judgment used in determining the timing of satisfaction of the Company’s performance obligation with respect to its contracts to sell real properties is disclosed in Note 3.1(b) to the audited financial statements included elsewhere in this Offering Circular. Sales cancellations are accounted for on the year of forfeiture. Any gain or loss on cancellation is charged to profit or loss.

Rental income

The Company also develops and leases out office buildings and lifestyle malls and other commercial centers. The Company leases out its office buildings mostly to BPOs and traditional companies. Its lifestyle malls, on the other hand, are leased out to mall tenants, consisting mostly of food and beverage concepts, supermarkets, and other essential and non-essential retail stores. Lease income from its office and retail developments is recognized as profit or loss on a straight-line basis over the lease term.

Hotel Operations

The Company also enters into transactions involving hotel accommodations, food and beverage operations, and other incidental activities. Revenues are recognized over time during the occupancy of hotel guest and ends when the scheduled hotel room accommodation has lapsed (i.e., the related room services have been rendered). As applicable, invoices for hotel accommodations are due upon receipt by the customer.

Costs and Expenses

The Company’s costs and expenses are comprised of costs related to the sale of its real estate developments; cost from its hotel operations; operating expenses which includes salaries, depreciation and amortization, commission, taxes and licenses, advertising and promotions, professional fees and outside services, utilities and supplies and other operating expenses; finance and other charges that includes finance cost, impairment and other losses, foreign currency losses and other charges; and income tax expense.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Revenues and Income

The Company’s consolidated revenues slightly increased by 1.2 % or ₱174.9 million, from ₱14,906.1 million for the three months ended March 31, 2019 to ₱15,081.0 million (U.S.$ 295.5 million) for the three months ended

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March 31, 2020. The muted growth in sales resulted from the effect of the Taal volcano eruption as well as the early challenges in the supply chain due to coronavirus-related restrictions, and limited mall and hotel operations during the quarantine period.

Real estate sales

Real estate sales increased by 1.4% or ₱136.1 million, from ₱9,474.2 million for the three months ended March 31, 2019 to ₱9,610.3 million (U.S.$188.3 million) for the three months ended March 31, 2020. The muted growth in sales mainly resulted from lower sales bookings and the impact of the Taal volcano eruption.

Rental income

Rental income increased by 7.9% or ₱308.0 million, from ₱3,925.5 million for the three months period ended March 31, 2019 to ₱4,233.5 million (U.S.$82.9 million) for the three months ended March 31, 2020. The net increase mainly resulted from the increase in occupancy of its Megaworld Premier Offices. On the other hand, growth in rental income was offset by lower rents from the Megaworld Lifestyle Malls, which were affected by the slowdown in foot traffic due to the COVID-19 lockdown.

Hotel operations

Income from hotel operations decreased by 4.1% or ₱23.5 million, from ₱574.5 million for the three months period ended March 31, 2019 to ₱550.9 million (U.S.$10.8 million) for the three months ended March 31, 2020. The net decrease mainly resulted from the lower occupancy level due to travel restrictions implemented by the government.

Interest and other income – net

Interest and other income – net decreased by 24.9% or ₱226.0 million, from ₱908.9 million for the three months period ended March 31, 2019 to ₱682.9 million (U.S.$13.4 million) for the three months ended March 31, 2020. The net decrease mainly resulted from the non-recurring gain recognized in the first quarter of 2019 amounting to ₱188.5 million.

Cost and Expenses

Total costs and expenses amounted to ₱11,280.1 million (U.S.$221.0 million) for the three months ended March 31, 2020, an increase of 4.5% from ₱10,789.8 million for the three months ended March 31, 2019, primarily due to the increasing operating expenses during the period.

Cost of real estate sales

Cost of real estate sales increased by 3.1% or ₱157.1 million, from ₱5,107.1 million for the three months period ended March 31, 2019 to ₱5,264.2 million (U.S.$103.1 million) for the three months ended March 31, 2020. The net increase mainly resulted from the change in more sales generated from the vertical projects as compared to the horizontal projects.

Cost of hotel operations

Cost of hotel operations increased by 1.3% or ₱4.2 million, from ₱327.8 million for the three months period ended March 31, 2019 to ₱332.1 million (U.S.$6.5 million) for the three months ended March 31, 2020. The slight increase mainly resulted from the incremental costs incurred by our newly opened Megaworld Hotels.

Operating expenses

Operating expenses increased by 21.9% or ₱640.8 million, from ₱2,927.8 million for the three months period ended March 31, 2019 to ₱3,568.7 million (U.S.$69.9 million) for the three months ended March 31, 2020. The increase mainly resulted from higher depreciation because of the additional office and mall space in 2019 and commission expenses.

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Interest and other charges – net

Interest and other charges – net decreased by 29.0% or ₱295.6 million, from ₱1,018.5 million for the three months period ended March 31, 2019 to ₱722.9 million (U.S.$14.2 million) for the three months ended March 31, 2020. The net decrease was primarily due to higher loss on cancellation and other miscellaneous charges recognized in 2019.

Net Profit

As a result of the foregoing, net profit decreased by 7.7% or ₱315.4 million, from ₱4,116.3 million for the three months period ended March 31, 2019 to ₱3,800.9 million (U.S.$74.5 million) for the three months period ended March 31, 2020.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Revenues and Income

The Company’s consolidated revenues 17.2% increased by or ₱9,885.50 million, from ₱57,427.2 million for the year ended December 31, 2018 to ₱67,312.7 million (U.S.$ 1,318.8 million) for the year ended December 31, 2019. The increase mainly resulted from increased real estate sales, rental income and hotel operations.

Real estate sales

Real estate sales increased by 12.0% or ₱4,568.5 million, from ₱38,035.5 million in the year ended December 31, 2018 to ₱42,604.0 million (U.S.$834.7 million) in the year ended December 31, 2019. The net increase mainly resulted from higher sales recognized for the period.

Rental income

Rental income increased by 17.9% or ₱2,549.2 million, from ₱14,264.9 million in the year ended December 31, 2018 to ₱16,814.1 million (U.S.$329.4 million) in the year ended December 31, 2019. The net increase mainly resulted from the following: (i) aggressive expansion of the Company’s leasing portfolio; (ii) escalation of rental rates; and (iii) high demand for office space from BPO Companies.

Hotel operations

Income from hotel operations increased by 67.4% or ₱1,024.4 million, from ₱1,519.4 million in the year ended December 31, 2018 to ₱2,543.8 million (U.S.$49.8 million) in the year ended December 31, 2019. The net increase mainly resulted from increased hotel occupancy rates and the opening of new hotels.


Interest and other income – net increased by 53.9% or ₱1,894.7 million, from ₱3,515.0 million in the year ended December 31, 2018 to ₱5,409.7 million (U.S.$106.0 million) in the year ended December 31, 2019. The net increase was primarily due to higher interest and other income recognized during the year ended December 31, 2019.

Cost and Expenses

Total costs and expenses amounted to ₱48,016.7 million (U.S.$940.8 million) for the year ended December 31, 2019, an increase of 15.9% from ₱41,427.7 million for the year ended December 31, 2018, primarily due to increased cost of real estate sales, hotel operations and operating expenses.


Cost of real estate sales increased by 13.9% or ₱2,858.6 million, from ₱20,521.2 million in the year ended December 31, 2018 to ₱23,379.8 million (U.S.$458.1 million) in the year ended December 31, 2019. The net increase was due to the increase in real estate sales.

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Cost of hotel operations increased by 68.3% or ₱560.4 million, from ₱820.8 million in the year ended December 31, 2018 to ₱1,381.2 million (U.S.$27.1 million) in the year ended December 31, 2019. The net increase represents direct cost attributable to the hotel operations / incremental costs incurred by newly-opened hotels.

Operating expenses

Operating expenses increased by 23.7% or ₱2,667.5 million, from ₱11,245.0 million in the year ended December 31, 2018 to ₱13,912.5 million (U.S.$272.6 million) in the year ended December 31, 2019. The increase was due to increase in other administrative and corporate overhead expenses.

Net Profit

As a result of the foregoing, net profit increased by 21.9% or ₱3,462.9 million, from ₱15,833.1 million for the year ended December 31, 2019 to ₱19,296.0 million (U.S.$378.1 million) for the year ended December 31, 2020.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Revenues and Income

The Company’s consolidated revenues increased by 14.6% or ₱7,312.20 million, from ₱50,115.0 million for the year ended December 31, 2017 to ₱57,427.2 million for the year ended December 31, 2018. The increase mainly resulted from increased real estate sales, rental income and hotel operations.

Real estate sales

Real estate sales increased by 11.5% or ₱3,920.4 million, from ₱34,115.1 million in the year ended December 31, 2017 to ₱38,035.5 million (in the year ended December 31, 2018. The net increase mainly resulted from higher sales recognized for the period and contribution of a new subsidiary, Suntrust Properties, Inc.

Rental income

Rental income increased by 20.6% or ₱2,434.9 million, from ₱11,830.0 million in the year ended December 31, 2017 to ₱14,264.9 million in the year ended December 31, 2018. The net increase mainly resulted from the following: (i) aggressive expansion of the Company’s leasing portfolio; (ii) escalation of rental rates; and (iii) high demand for office space from BPO Companies.

Hotel operations

Income from hotel operations increased by 13.7% or ₱183.4 million, from ₱1,336.0 million in the year ended December 31, 2017 to ₱1,519.4 million in the year ended December 31, 2018. The net increase mainly resulted from increased hotel occupancy rates and the opening of new hotels.


Interest and other income – net increased by 29.5% or ₱799.8 million, from ₱2,715.2 million in the year ended December 31, 2017 to ₱3,515.0 million in the year ended December 31, 2018. The net increase was primarily due to higher interest income.

Cost and Expenses

Total costs and expenses amounted to ₱41,427.7 million for the year ended December 31, 2018, an increase of 13.8% or ₱5,016.9 from ₱36,410.8 million for the year ended December 31, 2017, primarily due to increased cost of real estate sales, hotel operations and operating expenses.


Cost of real estate sales increased by 13.8% or ₱2,480.1 million, from ₱18,041.1 million in the year ended December 31, 2017 to ₱20,521.2 million in the year ended December 31, 2018. The net increase was due to the increase in real estate sales.

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Cost of hotel operations increased by 8.6% or ₱65.0 million, from ₱755.8 million in the year ended December 31, 2017 to ₱820.8 million in the year ended December 31, 2018. The net increase represents direct costs attributable to hotel operations / was attributable to the incremental costs incurred by newly-opened hotels.

Operating expenses

Operating expenses increased by 16.0% or ₱1,556.8 million, from ₱9,688.2 million in the year ended December 31, 2017 to ₱11,245.0 million in the year ended December 31, 2018. The increase was due to increase in other administrative and corporate overhead expenses.

Net Profit

As a result of the foregoing, net profit increased by 15.5% or ₱2,126.1 million, from ₱13,707.0 million for the year ended December 31, 2017 to ₱15,833.1 for the year ended December 31, 2018.

SIGNIFICANT ACCOUNTING POLICIES

For a discussion of the significant accounting policies and significant accounting judgments, estimates and assumptions of the Company please see Notes 2 and 3 of the audited consolidated financial statements and Notes 2 and 3 of the unaudited interim condensed consolidated financial statements included in this Offering Circular.

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BUSINESS

OVERVIEW

Megaworld Corporation is one of the leading property developers in the Philippines and is primarily engaged in the development of large scale mixed-use planned communities, or community townships, that comprise residential, commercial and office developments and integrate leisure, entertainment and educational/training components. As of June 30, 2020, the Company had 26 masterplanned integrated urban townships, integrated lifestyle communities and lifestyle estates across the country covering approximately 4,284 hectares and featuring a real estate portfolio of residential condominium units, subdivision lots and townhouses as well as over 1.3 million square meters of gross leasable office space and over 453,000 square meters of gross leasable mall and retail space. As of the same date, the Company owns or has development rights to around 4,300 hectares of land throughout the Philippines.

Throughout its history, the Company has been recognized by numerous institutions and prestigious international awards organizations for its property and real estate development capabilities, good corporate governance, corporate and social responsibility initiatives, and other achievements. The Company ended 2019 as one of the most awarded real estate Company in the Philippines, amassing a total of 133 awards for the year, including awards for being named “Best Employer” at the Philippines Best Employer Brand Awards 2019 and cited as one of the “Dream Companies to Work For,” by Asia’s Best Employer Brand Awards.

The Company’s common shares were listed on The Philippine Stock Exchange (“PSE”) in 1994 (under listing code “MEG”) and as of June 30, 2020, the Company had a market capitalization of ₱98 billion.

The Company has three primary business segments: (i) real estate sales of residential developments (“Real Estate Business”); (ii) leasing of office space and retail space (“Rental Business”); and (iii) management and operation of hotels (“Hotel Operations”). In addition, the Company reports all other non-core revenue generating activities not falling under these three primary business segments under “Others.”

Real Estate Business. The Real Estate Business derives revenues from the sale of residential condominium units, subdivision lots and townhouses and is operated primarily through Megaworld Corporation and the following major subsidiaries: Global-Estate Resorts Inc. (publicly listed on the PSE under listing code “GERI”), Empire East Land Holdings, Inc. (publicly listed on the PSE under listing code “ELI”), and Suntrust Properties, Inc.. The Company’s Megaworld branded developments are primarily township-focused, Global-Estate Resorts Inc. is tourism focused, while developments under Empire East Land Holdings, Inc. target middle-income customers and Suntrust Properties, Inc. is geared towards the economically conscious. For the year ended December 31, 2019 the Real Estate Business contributed 63.3% of consolidated revenues or ₱42,604.0 million (U.S.$834.7 million) and 63.7% of consolidated revenues or ₱9,610.3 million (U.S.$188.3 million) for the three months ended March 31, 2020.

Rental Business. The operations of the Rental Business are divided into “Megaworld Premier Offices” (for the lease of office space) and “Megaworld Lifestyle Malls” (for the lease of retail space). For the year ended December 31, 2019, the Company’s leasing operations accounted for 25.0% of the Company’s consolidated revenues, or ₱16,814.1 million (U.S.$329.4 million) and 28.1% of consolidated revenues or ₱4,233.5 million (U.S.$82.9 million) for the three months ended March 31, 2020.

Hotel Operations. The Company’s Hotel Operations consists of three major homegrown brands, namely Savoy, Belmont and Richmonde, in addition hotel operations are conducted under Twin Lakes Hotel, Hotel Lucky Chinatown and Fairways and Bluewater, that are strategically located to service the needs of business travelers and tourists. For the year ended December 31, 2019, the Company’s hotel operations accounted for 3.8% of the Company’s consolidated revenues, or ₱2,543.8 million (U.S.$49.8 million) and 3.7% of consolidated revenues or ₱550.9 million (U.S.$10.8 million) for the three months ended March 31, 2020.

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The contribution of each business segment to the Company’s total revenues and income is set out below for the periods indicated.

For the year ended December 31, For the three months

ended March 31,

2017 2018 2019 2020 Sales % Sales % Sales % Sales % (in ₱

millions) (in ₱

millions) (in ₱

millions) (in U.S.$ millions)

(in ₱ millions)

(in U.S.$ millions)

Real Estate Business ......... 34,115.1 68.1 38,035.5 66.2 42,604.0 834.7 63.3 9,610.3 188.3 63.7 Rental Business ................ 11,830.0 23.6 14,264.9 24.8 16,814.1 329.4 25.0 4,233.5 82.9 28.1 Hotel Operations ............... 1,336.0 2.7 1,519.4 2.6 2,543.8 49.8 3.8 550.9 10.8 3.7 Others(1) ............................ 2,834.1 5.6 3,607.3 6.4 5,350.9 104.8 7.9 686.3 13.4 4.5

Total ................................. 50,115.0 100.0 57,427.2 100.0 67,312.7 1,318.8 100.0 15,081.0 295.5 100.0 Notes:

(1) Other income comprises interest income, property management, commission and construction income, equity share in net earnings (losses) of associates and other income.

(2) Translations from Pesos to U.S. dollars are for convenience only and have been made at a rate of U.S.$1.00=₱51.04, the BSP Rate quoted in the BSP’s Daily Reference Exchange Rate Bulletin on March 31, 2020.

The Company’s consolidated net profit for the year ended December 31, 2019 was ₱19,296.0 million (U.S.$378.1 million) compared to ₱15,833.1 million for the year ended December 31, 2018 and ₱13,707.0 million for the year ended December 31, 2017.

Foreign sales contributed approximately 25%, 24% and 23% to the Company’s consolidated sales and revenues for the years ended December 31, 2019, 2018 and 2017, respectively. The table below set forth the percentage of sales broken down by major markets:

Market 2017 2018 2019 North America 26% 23% 31%

Europe 18% 18% 20% Asia 55% 57% 48%

Middle East 1% 2% 1% Total 100% 100% 100%

RECENT DEVELOPMENTS

The outbreak of COVID-19, which was declared a global pandemic by organizations such as the World Health Organization, in the first quarter of 2020, has severely affected and continues to seriously affect the global economy. In a move to contain the COVID-19 outbreak, on March 16, 2020, Presidential Proclamation No. 929 was issued, declaring a State of Calamity throughout the Philippines for a period of six months from March 17, 2020 and imposed an enhanced community quarantine (“ECQ”) throughout the island of Luzon until April 12, 2020. On May 1, 2020, the Government further extended the ECQ over, among others, certain portions of Luzon, including Metro Manila, until May 15, 2020, while easing restrictions in other parts of the country. For example, majority of the province of Cebu (including areas of Mactan but excluding Cebu City) transitioned from ECQ to GCQ on May 20, 2020. On May 28, 2020, the Government placed Metro Manila under general community quarantine (“GCQ”), allowing for the partial reopening of certain businesses and public transportation while continuing to limit general movements. These measures have caused disruption to businesses and economic activities, and their impacts on businesses continue to evolve.

During the quarter, the Group and other businesses have been significantly exposed to the risks brought about by the outbreak of the new coronavirus disease, COVID-19. Governmental efforts being implemented to control the spread of the virus include travel bans, quarantines, social distancing and suspension of non-essential services. Work stoppage on construction sites and slowdown on the supply chain lead to delays on the targeted completion and turnover of projects. Community quarantine also requires temporary adjustment of mall operating hours and reduced foot traffic. Likewise, travel restrictions have resulted into a reduction in hotel occupancies. The Company plans to continue to conduct its business while placing paramount consideration on the health and welfare of its employees, customers, and other stakeholder and has implemented measures to mitigate the transmission of

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COVID-19, such as by adjusting operating hours, making hand sanitizers available within its properties, increasing the frequency of disinfection of facilities, limiting face-to-face meetings, requiring temperature checks for employees and customers, and implementing health protocols for employees. The Group has also activated business continuity plans, both at the corporate level and business operations level, and conducted scenario planning and analysis to activate contingency plans. While management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate the risks associated with COVID-19, the ultimate impact of the pandemic is highly uncertain and subject to change. The Company continuously monitors the impact of COVID-19 to its business segments and stakeholders.

Impact of COVID-19 Outbreak on the Company’s Operations and Measures the Company has Taken

The Company’s results of operations have been impacted by the COVID-19 pandemic and the ensuing governmental measures. During the ECQ period covering mid-March up to mid-May, all of the Company’s operations were temporarily halted except for the office segment and portions of the malls catering to essential activities, which remained operational. Rental income for the first quarter of 2020, which has grown by double digits over the past few years, increased by just 8% year-on-year to ₱4.2 billion as the resilience of the office segment mitigated the impact of weakening mall rentals. Meanwhile, hotel revenues decreased by 4% to ₱550.9 million in the first quarter from ₱574.5 million during the same period last year as check-ins, particularly from international guests, dropped because of the international travel restrictions. Residential sales, however, grew by 1% to ₱9.6 billion during the three months ended March 31, 2020 from ₱9.5 billion as the Taal Volcano eruption during the start of the year impacted sales of CALABARZON projects and early challenges in the supply chain due to coronavirus-related restrictions resulted to the delays in project construction.

With cash preservation as a main objective, the Company has decided to reduce its overall capital expenditures spending for the year 2020 to ₱36 billion from ₱60 billion, as it plans to finish only its ongoing projects. The Company believes that it has the lowest financial gearing among the major listed property companies, providing it more flexibility in terms of leveraging once business activity improves.

Impact on Real Estate Business

Construction activities were suspended during the ECQ period and have slowly resumed on May 16, 2020 in selected areas. The Company has put on hold new project launches for 2020 as work stoppage on-site could result in project completion risk. In order to limit face to face engagements, the Company plans to maximize digital platforms to sell real estate projects. Moving forward, the Company plans to strengthen its value proposition through the implementation of iTownship initiatives. The iTownships project aims to make every home in Megaworld’s townships a smart home –with smart locks and the seamless application of the Internet of Things, in which devices inside the homes are interconnected and can be remotely controlled. This initiative gained additional impetus with the onset of the COVID-19 pandemic as the introduction of new health and safety protocols centered on the need for social distancing highlighted the need to automate and improve digital connectivity. In addition, the Company has noted a shift in market demand to lot sales and vacation homes instead of buying vertical developments within the metropolitan areas.

Impact on Megaworld Premier Offices

BPO offices remained operational even during the ECQ and social distancing measures are implemented at these sites to protect personnel. The ECQ also resulted in the temporary closure of POGO operations, but with no rental holiday. In line with the relevant Government regulations and directives, the Company offered deferment of monthly rent without penalty until the end of the year and continues to work closely with tenants to determine and address their needs. With the shift to GCQ, office activities have increased as more employees go back to work, albeit constrained by the lack of public transport. To date, the Company has not registered any significant number of leases being terminated.

Impact on Megaworld Lifestyle Malls

The various community quarantine measures resulted in the temporary mall closures with the exception of essential establishments, resulting in a decline in foot traffic. During the ECQ, approximately 70% of total leased out GLA unable to operate and as of June 15, 2020, approximately 50% of malls have resumed operations. As of July 15, 2020, 65% of retail partners in Megaworld Lifestyle Malls have reopened. The Company has implemented enhanced health, safety and sanitation protocols and in coordination with tenants provide customers with cashless and contact-less options for their purchases with designated pick up counters and drive thru stations. The Company plans to continue developing new contactless channels to reach out to customers.

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Impact on Megaworld Hotels

Occupancy dropped significantly due to travel restrictions and cancellation of bookings and MICE activities due to the COVID-19 pandemic and most hotels have limited operations with in-city hotels utilized as lodging for BPOs and returning OFWs. The Company is launching E-Concierge, a mobile application that allows contactless interaction between guests and hotel staff from check-in to check-out, including virtual ordering of food from various food and beverage outlets inside the hotels. The Company is preparing new service packages for customers to increase hotel reservations.

Expected Trends for the Second Quarter of 2020

The Company expects its performance in the second quarter of 2020 to remain profitable, albeit weaker than the first quarter, as the months of April and May encompassed the height of the lockdown. The operations of Megaworld Lifestyle Malls were limited to supporting tenants with essential services, while only the in-city hotels of Megaworld Hotels were operating to cater to BPO employees and repatriated Filipinos. Construction activity was hampered by the quarantine, affecting project completion. But the Company continued to generate reservation sales, albeit weaker year-on-year. On the other hand, the performance of Megaworld Premier Offices has proved the office segment remained resilient as most of its BPO tenants continued operations. The Company, however, believes that while further opening of the economy in the second half of 2020 will allow its various businesses to recover, the Company expects these current trends to continue beyond the second quarter of 2020.

STRENGTHS AND STRATEGIES

Strengths

The Company believes that it has the following competitive strengths:

Leading real estate player with established market position and strong brand recognition.

The Company believes it has an established record as a market innovator and has been able to anticipate market trends ahead of its competitors in the Philippine property development industry. While the Company initially focused on the high-end residential property market, the Company was among the first in the Philippines to identify the growing demand for mixed-use community township developments, particularly for middle-income purchasers, and pioneered in the “live-work-play-learn” concept based community townships which, at the time they were developed, were among the first projects of their kind in the Philippines. In 1996, the Company was also the first Philippine property company to develop an international sales network targeting overseas Filipinos for residential sales. In addition, the Company was also among the first developers in the Philippines to introduce flexible design options and payment plans, targeting residential sales to the significant overseas Filipino market.

In the office leasing sector, the Company believes that it is currently the largest developer and owner of BPO office buildings in the Philippines. Moreover, the Company has been a leader in developing office space with infrastructure and services capable of supporting IT and BPO businesses. For example, the Eastwood City Cyberpark development was the first of its kind to obtain registration as a PEZA-designated economic zone for IT and BPO companies. In 2005, the Company introduced development plans for the first major mass transit-oriented residential community in the Philippines, with inter-connections to mass transit systems and a land transportation hub in the Cubao, Quezon City business district. The Company believes that its identification of areas of growth in the property market was instrumental to its continued financial success during the Asian financial crisis and through various stages of the Philippines’ economic development, particularly during periods when most sectors of the property market contracted. The Company’s ability to anticipate market trends and understand the needs of real estate consumers, coupled with its strong financial position, continue to assist it in its efforts to accurately predict trends in market demand, levels of supply and to plan and design its property developments accordingly. As a result and since its incorporation in 1989, Megaworld has launched more than 722 residential buildings, 70 premier offices, 24 lifestyle malls and commercial centers and 11 hotel brands including condotels as of December 31, 2019. The Company’s long and proven track record of on-time project delivery will continue to attract and maintain a high quality tenant profile.

The Company’s track record and established market position has made it one of the most recognized brands in the industry both within and outside the Philippines and has been awarded one of the “Top Developers in the Philippines” by BCI Asia Awards from 2014 to 2019, “The Philippines Best Developer” in 2018 by both International Finance and Euromoney, “Best Developer of the Year” from 2016 to 2018 by Property Guru Philippine Property Awards and is now a “Hall of Famer” for its seven “Outstanding Developer of the Year”

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awards from the Fédération Internationale des Administrateurs de Bien-Conselis Immobiliers (The International Real Estate Federation or FIABCI).

High quality and diversified portfolio provides stability to income generation.

The Company’s diversified property portfolio, located in over 30 cities and municipalities nationwide across four asset classes, provides stability to income. For the year ended December 31, 2019, the contribution of each of the Real Estate Business, Rental Business and Hotel Operations to total revenues and income was 63.3%, 25.0% (of which 15.6% was attributable to office rentals and 9.4% to mall rentals) and 3.8%, respectively. As a result, the Company enjoys a high level of earnings visibility from strong reservation sales at its residential projects, while the commercial and office components of its mixed-use developments provide a stable recurring income base. Moreover, its diverse project portfolio is designed to limit earnings volatility from potential property market fluctuations and allow it to enjoy growth upside. In addition, the Company’s community township portfolio includes a stable revenue base of long term leases from major international BPO tenants as well as retail tenants. As of December 31, 2019, Megaworld Premier Offices leased office space to over 130 tenants, with BPOs accounting for 72% of tenants, followed by traditional businesses at 15% and Philippine offshore gaming operators (POGOs) accounting for 13%. As of the December 31, 2019, Megaworld Lifestyle Malls had over 4,000 retail partners, with food beverage outlets accounting for 40% of tenants, followed by retail establishments at 25%, services at 20% and anchor tenants at 15%.

Defensive and recurring income portfolio provides resilience amid economic uncertainty.

The Company believes that it is the largest office space provider in the Philippines, with a healthy weighted average lease expiry of 3.2 years as of December 31, 2019 and a strong retail mall network of 24 lifestyle malls and commercial centers nationwide as of the same date. Moreover, the proximity of BPO tenants to retail and entertainment properties within its community townships allows the Company to benefit from the complementary revenue stream from its retail and commercial leases and the Company has seen a rental revenue CAGR of 18% from 2015 to 2019.

High earnings visibility supported by substantial land bank and proven execution track record.

As of March 31, 2020, the Company either owns or has development rights to over 4,300 hectares of land located primarily in strategic locations in the Philippines. The Company is focused on developing integrated townships, leveraging existing expertise and on potential synergies with the various businesses of Alliance Global Group, Inc. Where the Company does not own or lease the land, it has entered into joint development agreements with the land owners to develop their land in exchange for a percentage of the revenue from sales or leases of the completed units, which in turn de-risks the land acquisition process for the Company. Joint development agreements are a cost-effective way for the Company to acquire land development rights across major provinces and regions at a fixed cost. Although the Company continues to consider strategic land banking either through additional joint development agreements or property purchases, the Company believes that its current land bank is capable of sustaining the development of its current portfolio of projects for at least the next 10 to 15 years.

The Company has developed unique execution capabilities, which have provided it with key competitive advantages. These include the ability to secure land at competitive prices, implementing effective quality and cost controls to maintain margins, adopting differentiated selling strategies to de-risk development and strong after-market service to enhance the customer experience.

In addition, the Company’s track record of execution supported by a strong residential marketing network has allowed residential developments to become self-funding. For the years 2016 to 2019, residential sales increased at a CAGR of 11.9%. The Company maintains an in-house marketing and sales division staffed by a trained group of property consultants who sell residential properties exclusively for the Company. All property consultants undergo intensive training prior to embarking on any sales activity and the Company provides on-the-job skills enhancement programs for its marketing and sales professionals to further develop their skills. There are also strong incentive structures in place for the sales force, with an aligned compensation structure. In 1997, the Company was the first Philippine property company to create an international marketing and sales division specifically targeted at overseas Filipinos, and sales to this group have increased each succeeding year. The Company’s international marketing and sales division is comprised of over 10 offices worldwide. The Company’s innovative payment schemes also cater to different customer needs. The Company’s extensive residential marketing network enhances the Company’s brand recognition and its ability to pre-sell residential units.

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Leading real estate player with an established market position and strong brand recognition.

Since its incorporation in 1989, the Company, together with its associates, has completed a number of high-quality residential condominium projects, townhouse projects, office projects and leisure and commercial developments throughout Metro Manila. As a result, the Company has developed a strong brand name and reputation as one of the Philippines’ leading property developers capable of delivering high-quality developments. The Company enjoys a high-quality tenant profile with a historical track record of on time project delivery. The Company has been named by Superbrands, an independent organisation which identifies and recognises the most highly acclaimed brands throughout the world, as one of the Philippines’ top brands. The Company has also received ISO 9001:2015 series certification, which covers all aspects of the Company’s operations, including its planning, design, project management and customer service operations, for quality control and systems management. As with other property developers in the Philippines, the Company finances a portion of project development costs through pre-sales of units. Since pre-selling is an industry practice, buyers place great importance on the track record and reputation of developers to reduce the completion risk relating to their properties. As a result, the Company believes that its reputation as a reliable property developer with a 100% project completion rate (since its inception in 1989), is particularly important in the Philippines to both attract and maintain quality buyers, tenants and joint development partners alike.

Experienced management team with robust corporate governance policies.

The Company has an experienced, highly qualified and dedicated management team with a proven ability to execute the Company’s diverse business plans having a combined average of over 20 years of relevant experience. Its Chairman, Dr. Andrew Tan, has over 33 years of experience in real estate and other businesses. Further, the Company’s management has consistently executed complementary business plans among the Company’s associates. For example, a number of the Company’s developments house restaurants owned and operated by one of its associates. The Company believes that the residential, BPO office, retail and hospitality components within its mixed-use township developments benefit from the market experience and knowledge that its key members of management possess and the business relationships they have developed in the various industries in which they are involved. In addition, the Company has implemented, developed and maintained robust corporate governance policies in line with global best practices providing for sound internal controls, transparency and accountability to shareholders.

Conservative balance sheet supported by diversified funding sources and prudent financial management.

The Company believes it is currently in sound financial condition with a debt to equity ratio of 38% as of March 31, 2020. The Company benefits from strong access to capital markets and diversified sources of funding including equity capital markets, bank debt and both U.S. dollar and Philippine peso-denominated bond issuances and will continue to explore other means to enhance recycling of capital, such as through establishing a real estate investment trust (REIT) in the future. The Company was listed on the PSE in 1994 at ₱4.80 per share and is included in the PSE Composite Index and the Philippine Property Index. In 2011, the Company issued seven-year term bonds due 2018 totalling U.S.$200 million at a coupon rate of 6.75% p. a. In 2013, the Company issued ten-year term bonds due 2023 totalling U.S.$250 million at a coupon rate of 4.25% p.a. In 2017, the Company issued an offer of up to ₱12 billion seven-year term bonds due 2024 inclusive of a ₱4 billion oversubscription at a coupon rate of 5.35% p. a. In 2018, the Company refinanced its currently maturing bond with a U.S.$200 million perpetual securities at a coupon rate of 5.375% p.a. and a first step-up date in 2023. As at March 31, 2020, the Company has raised a cumulative capital of ₱26 billion (U.S.$509 million) from equity capital markets and ₱47 billion (U.S.$921 million) from debt capital markets. As at March 31, 2020 and 2019, the Company has unused credit facilities amounting to ₱5 billion (U.S.$98 million).

Strong cash flows from its residential sales combined with the stable recurring income from its rental portfolio have allowed the Company to keep conservative gearing levels while maintaining its growth momentum. Its financial strength strong support from key financial institutions in the Philippines such as BDO, Metrobank, RCBC, DBP and UnionBank, enhances its ability to invest in new projects while continuing to develop existing projects. In addition, the Company adheres to certain financial policies, including an internal target of maintaining a net debt to equity ratio below 0.5x and a dividend payout ratio of 20% of the previous year’s net income as well as implementing certain liquidity and liability management policies such as hedging U.S.-dollar denominated borrowings, closely monitoring cash flows to fulfill existing obligations and maintaining an unencumbered asset base. In addition and after carefully evaluating the impact of the COVID-19 pandemic, the Company has reduced its capital expenditure budget from ₱60 billion to ₱36 billion for the year 2020.

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Strategies

The Company’s objective is to increase its profitability and maintain its leading position as a major property developer in the Philippines, specifically in the middle-income residential condominium market and the market for BPO-related office developments. The Company intends to achieve its objective through the following principal strategies:

Maximize earnings through integrated community township developments.

The Company intends to maximize earnings by developing integrated residential, business and retail property communities as it introduces Eastwood City as the Company’s pioneer township development. This allows the Company to capitalise on the “live-work-play-learn” concept, which has become popular in the Philippines. The Company’s position as a leader in crafting and delivering community township developments has strengthened over the years and continues to be its key strategy in bringing new projects to the market and entering into new joint venture developments. This concept was then replicated to Forbes Town, McKinley Hill and Newport City in 2002 to 2005. In 2011, the Company increased its property portfolio through the acquisition of rights to develop the Uptown Bonifacio and McKinley West properties. Also, in the same year, the Company launched The Mactan Newtown, expanding the township development concept in the Visayas. In 2014, all the real estate interests of Alliance Global Group, Inc. was consolidated into the Company. The consolidation aggregated the Company’s township properties by virtue of Global Estate Resorts, Inc.’s developments in Boracay Newcoast, Southwoods City, Twin Lakes, and Alabang West. During the same year, the Company also launched Arcovia City, Suntrust Ecotown, Iloilo Business Park, and Davao Park District. In 2015, the Company launched The Upper East, Northill Gateway, Capital Town Pampanga, Westside City, and Sta. Barbara Heights through Global Estate Resorts, Inc. In 2016, the Company launched two more townships namely Maple Grove and Eastland Heights. Through Global-Estate Resorts Inc., the Company introduced The Hamptons Caliraya in 2018. Empire East Land Holdings, Inc.’s first township development named Highland City was launched in 2019. During the same year, the Company broadened its reach with the addition of Arden Botanical Estate and Lucky Chinatown to the portfolio. The Company will seek opportunities to develop land in prime locations to further enhance its real estate portfolio and targets to bring its township count to 30 in the next few years.

Capitalize on brand and reputation.

The Company believes that its strong brand name and reputation are key to its continued success and will continue to build on them. Since pre-selling is an industry practice in the Philippines, buyers place great importance on the track record and reputation of developers to reduce the completion risk relating to their properties. The Company intends to continue using its brand name and reputation to attract purchasers, tenants and joint development partners. The Company continues to enhance its reputation by employing and training a dedicated marketing staff and extensive sales network for its residential sales businesses. In addition, the Company is strategically involved in the aftersales market for the properties it develops by providing building management and other aftersales services such as interior design services.

Build on synergies across the Megaworld group and the larger Alliance Global Group, Inc. group of companies.

The Company intends to continue to evaluate potential projects, particularly with respect to opportunities among the Company itself and its various subsidiaries and affiliates, in order to maximise cost efficiencies, resources and other opportunities to derive synergies across the Megaworld group and the larger Alliance Global Group, Inc. group of companies.

Maintain a strong financial position.

The Company intends to maintain its strong financial position by controlling costs and maintaining its debts at manageable levels, as well as continuing to grow its recurring income base. The Company is able to control funding requirements for development costs by generating a significant portion of its project financing from pre-sales of residential units. By securing post-dated checks and providing a variety of financing options to buyers, the Company limits its cash outlays prior to obtaining project funds. The Company also controls development costs by entering into joint development agreements with landowners, which is a cost-effective means of obtaining rights to develop land as initial costs are fixed and future payments are a fixed percentage of revenue from sales and leasing activity. With respect to its recurring income base, the Company intends to maximize opportunities for further build-out of its leasing portfolio and targets a combined office and commercial and mall leasable portfolio of 1.9 million square meters by the end of 2020.

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Sustain a diversified development portfolio.

An important part of the Company’s long-term business strategy is to continue to maintain a diversified earnings base. As the Company’s community townships include a mix of BPO offices, retail, middle-income residential, educational/training facilities, leisure and entertainment properties within close proximity to each other, the Company is able to capitalise on the complementary nature of such properties. In addition, the community township developments enable the Company to generate profits from selling residential projects as well as invest in office and retail assets retained by the Company to generate recurring income and long-term capital gains. The Company intends to continue to pursue revenue and geographical diversification as it develops community townships with the “live-work-play-learn” concept in various stages and in strategic locations both within and outside Metro Manila. The Company also intends to continue pursuing innovative product lines that may complement its existing developments, while maintaining a well-diversified earnings base.

Capitalize on growing opportunities in tourism development.

The Company has further developed and diversified its real estate business to include integrated tourism development projects through its subsidiary, Global-Estate Resorts, Inc. Due to growth in the number of tourist visits to the Philippines and the Company’s real estate development expertise, the Company believes it is well-positioned to capitalise on opportunities in this growing sector. The Company is also actively exploring and evaluating possible joint venture opportunities with an affiliate which focuses on tourism-related property developments. HISTORY AND CORPORATE STRUCTURE

The Company was founded by Andrew Tan and incorporated under Philippine law on August 24, 1989 under the name of Megaworld Properties & Holdings, Inc. The Company was primarily organized to engage in real estate development, leasing and marketing. In 1994, the Company spun off Empire East Land Holdings, Inc. which focused on the middle-income market. On August 19, 1999, the Company changed its name to Megaworld Corporation to coincide with the Company’s conversion from a purely real estate company into a holding company, although the Company continues to focus on its core competence in real estate development. The Company’s common stock was first listed on the PSE on June 15, 1994.

From 1989 to 1996, the Company garnered a reputation for building high-end residential condominiums and office buildings on a standalone basis throughout Metro Manila. In 1996, the Company shifted its focus to developing master-planned, mixed-use, integrated townships through Eastwood City. The development also signaled the Company’s focus on providing office spaces to the then starting BPO industry in the Philippines. In 1999, Eastwood City became the first Information Technology park in the Philippines to be designated a Philippine Economic Zone Authority (“PEZA”) special economic zone.

In 2017, the Company received 73 awards from both local and international award-giving bodies. The Company received three best developer awards, three executive awards, 37 project awards, nine corporate awards, 11 CSR awards and 10 communication awards. Dr. Andrew L. Tan received the hall of fame award as Property Man of the Year at the Property and Real Estate Awards and was awarded the Special Achievement Award at the Asia Pacific Entrepreneurship Awards. In 2018, the Company received a total of 100 awards including over 40 awards from prestigious international award-giving organizations. The Company ended 2019 as one of the most awarded real estate company in the Philippines, amassing a total of 133 awards – the most number of recognitions it received in its entire 30-year history. This includes over 57 awards from prestigious international award-giving organizations.

Since its incorporation in 1989 and in pursuit of its vision to uplift lives, impact society and help shape the Philippines, the Company and its affiliates have launched more than 722 residential buildings, 70 premier offices, 24 lifestyle malls and commercial centers and 11 hotel brands including condotels as of June 30, 2020. Towards fulfilling its vision, the Company pioneers in concepts that promote integrated lifestyles through its “live-work-play-learn” concept townships, advocates responsible stewardship of the environment, delivers long-term value for employers and shareholders, and spurs economic growth nationwide. The Company’s pursuit of its vision and mission are supported by its core values of integrity, creativity and innovation, excellence, and love for the Company.

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The following are some of the major residential and office projects completed by the Company:

Residential Projects

Quezon City Makati City Corinthian Hills Greenbelt Chancellor Eastwood Le Grand 1-3 Greenbelt Excelsior Eastwood Park Residences Greenbelt Hamilton 1 & 2 Eastwood Parkview 1 & 2 Greenbelt Madison El Jardin del Presidente Greenbelt Parkplace Golf Hills Terraces Greenbelt Radissons Golfhill Gardens One Central Grand Eastwood Palazzo One Lafayette Square Kentwood Heights Paseo Heights Manhattan Heights – Tower A to D Paseo Parkview Suites 1 & 2 Manhattan Parkview 1-3 Salcedo SkySuites Manhattan Parkview Garden The Manhattan Square Manhattan Parkway 1-3 The Salcedo Park 1 & 2 Manhattan Plaza Tower 1 Three Central Narra Heights Two Central Olympic Heights 1-3 Two Lafayette Square One Central Park One Eastwood Avenue 1 One Orchard Road 1-3 The Eastwood Lafayette 1-3 The Eastwood Excelsior Taguig City Pasay City 115 Upper McKinley 150 Newport Boulevard 8 Forbestown Road 101 Newport Boulevard Forbeswood Heights 81 Newport Boulevard Forbeswood Parklane 1 & 2 Belmont Luxury Hotel McKinley Hill Garden Villas Palmtree Villas 1 & 2 Mckinley West Subdivision Savoy Hotel Morgan Suites Executive Residences The Parkside Villas One Uptown Residence The Residential Resort St. Moritz Private Estate 1 & 2 Stamford Executive Residences The Bellagio 1-3 The Venice Luxury Residences – Domenico The Venice Luxury Residences – Alessandro The Venice Luxury Residences – Bellini The Venice Luxury Residences – Carusso The Venice Luxury Residences – Emanuele The Venice Luxury Residences – Fiorenzo The Woodridge 1 & 2 Tuscany Private Estate Uptown Ritz Residence Viceroy 1-4 Lapu-Lapu City Parañaque City 8 Newtown Boulevard Brentwood Heights One Pacific Residence Sherwood Heights One Manchester Place 1 & 2 Savoy Hotel Mactan Newtown

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Mandaluyong City Manila 8 Wack-Wack Road City Place Binondo A & B Wack-Wack Heights Marina Square Suites Noble Place San Juan City Iloilo City Greenhills Heights Iloilo Boutique Hotel One Beverly Place One Madison Place 1 – 3

Office and Retail Projects

Lapu Lapu City Iloilo City Mactan AlFresco Festive Walk Mall One World Center Festive Walk Mall Annex Tower One Plaza Magellan Festive Walk Parade 2B Two World Center Festive Walk Office Pacific World Tower One Global Center The Newtown School of Excellence One Techno Place Richmonde Hotel Three Techno Place Two Global Center Two Techno Place Taguig City Quezon City 8 Campus Place 1800 Eastwood Avenue Commerce and Industry Plaza 1880 Eastwood Avenue Eight West Campus Citibank Square Emperador Steel Parking Building Cybermall Five West Campus CyberOne Forbes Town Center Eastwood City Walk 1 & 2 Mckinley West Steel Deck Parking Eastwood Global Plaza Corporate Tower One Campus Place Eastwood Mall One West Campus Global One Science Hub IBM Plaza Six West Campus ICITE Southeast Asian Campus Techno Plaza 1 & 2 Ten West Campus The Venice Piazza Three West Campus Three World Square Two West Campus Two World Square Uptown Parade Uptown Place Mall Uptown Place Towers Venice Corporate Center Venice Grand Canal Mall World Commerce Place 1-3 Makati City Manila 331 Building Landbank Plaza Paseo Center Lucky Chinatown Mall Petron Megaplaza The World Center Pasig City Pasay City Richmonde Plaza 81 Newport Square

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Arcovia Parade Retail 1 & 2 Belmont Luxury Hotel Davao city Davao Finance Center

The Company’s simplified corporate structure presenting its material subsidiaries as of March 31, 2020 is set out below.

BUSINESS

The Company is one of the leading property developers in the Philippines and is primarily engaged in the development of large scale mixed-use planned communities, or townships, that integrate residential, commercial, leisure and entertainment components. Founded in 1989, the Company initially established a reputation for building high-quality residential condominiums and commercial properties located in convenient urban locations, with access to offices and to leisure and entertainment centres in Metro Manila. Beginning in 1996, in response to demand for the lifestyle convenience of having quality residences in close proximity to office and leisure facilities, the Company began to focus on the development of mixed-use communities, primarily for the middle-income market, by commencing the development of its Eastwood City project. In addition, the Company engages in other property-related activities such as project design, construction oversight and property management.

Real Estate Business

The Real Estate Business derives revenues from the sale of residential condominium units, subdivision lots and townhouses and is driven primarily by the Megaworld brand. Its major subsidiaries, Global-Estate Resorts Inc., Empire East Land Holdings, Inc., and Suntrust Properties, Inc. also contribute significantly to the whole portfolio of the Company’s real estate developments. Having these major brands allows the Company to cover all segments of the market both in terms of price and location.

The Company remains focused on the sale sales of high-rise condominium developments, but has also engaged in the sale of residential land lots following its acquisition of Global-Estate Resorts Inc. in 2014. Most of its existing residential developments are located in its mature townships such as Eastwood City, Forbes Town, Newport City, McKinley Hill, Southwoods City, and Alabang West. Most of its on-going developments are located in townships that are currently less developed, such as Uptown Bonifacio, McKinley West, Iloilo Business Park and The Mactan Newtown. The Company also has several stand-alone developments in areas such as Makati, Manila, and Quezon City in order to take advantage of the niche markets in such areas.

Rental Business

The Rental Business consists of leasing of office space and retail space.

The Company’s office leasing business, Megaworld Premier Officers, relies heavily on the BPO industry, which is identified as one of the key drivers of the Philippine economy. The Company’s office developments are located across the three main regions of the country namely Luzon, Visayas, and Mindanao. Its office portfolio is mostly

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in Metro Manila, particularly in Eastwood City and McKinley Hill where major BPO players are present and anchored. The next wave of the Company’s office build out is in Uptown Bonifacio and McKinley West, both in Taguig City, Metro Manila, which is becoming the location of choice for traditional and BPO companies. The Company also has office developments in Cebu, Iloilo, and Davao, major cities in the Visayas and Mindanao regions where BPO companies have been expanding recently.

The Company’s retail leasing business, Megaworld Lifestyles Malls, is focused on malls that cater to needs and lifestyles of the respective captive markets of each of its townships. Its retail developments are greatly diversified in term of location, being present even in townships that are in early stages of completion. Such developments are utilised by the Company to promote new townships. More mature townships such as Eastwood City, Forbes Town Center, Newport City, and McKinley Hill have full-fledged malls that cater to already established markets. Most of the Company’s retail tenants are food and beverage concepts which benefit heavily from the residential and office components of townships.

Hotel Operations Business

The Company’s Hotel Operations Business, Megaworld Hotels, consists of three major homegrown brands: Savoy, Belmont and Richmonde as well as the brands Twin Lakes Hotel, Hotel Lucky Chinatown and Fairways and Bluewater, which have strategically located properties to service to the needs of both business travelers and tourists.

The Company’s hotels offer world-class amenities, Filipino warmth and hospitality and Megaworld Hotels’ signature brand of service, which sets them apart from other hotel developers and operators in the country. In addition, the Company’s resort hotels provide guests to be close to nature, but not away from modern conveniences. Meanwhile, the Company’s in-city hotels provide the convenience and accessibility that business and leisure travelers look for in an urban setting.

Current Property Development Projects

The Company’s current development projects are mostly mixed-use township developments that typically have residential, office, and commercial components. These projects are located in key areas throughout the Philippines. The objective of each of the mixed-use developments is to provide an integrated community with high quality “live-work-play-learn” amenities within close proximity to each other. For each development, the Company’s real estate strategy is to lease all office and commercial properties and sell all residential units. Where the Company is not able to sell 100% of its residential units, upon completion of the residential project, it rents these unsold units on a lease-to-own basis or pursuant to a lease with an option to buy. The location of each of the Company’s township developments, together with their respective sizes in hectares, is set out in the following map and each project is described below.

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Note: Figures in circles represent the size of the development in hectares.

Eastwood City

Eastwood City is the first township to implement the Company’s “live-work-play-learn” concept. Its 18.50-hectare community property in Libis, Quezon City has 19 completed luxury condominium towers, 10 first-class corporate office buildings, and a modern IT park. The planning of Eastwood City adopts an integrated approach to urban planning, with an emphasis on the development of the Eastwood City Cyberpark to provide offices with infrastructure such as high-speed telecommunications and 24-hour power supply that support BPO and other technology-driven businesses. The township provides education/training, restaurants, leisure and retail facilities and residences. It is currently home to more than 25,000 residents and 55,000 workers. Eastwood city is also home to the four-level Eastwood Mall — a shopping and dining destination which has been declared the “Best Shopping Center” by the Philippine Retailers Association. Eastwood City has three malls and around 500 commercial and retail shops.

Forbes Town

Forbes Town is located in a 5-hectare land in Bonifacio Global City, Taguig, Metro Manila adjacent to the Manila Golf Club, Manila Golf and Country Club, the Forbes Park residential subdivision and Dasmariñas Village. Forbes Town has 12 residential towers which house more than 3,500 residential units. Upon completion, Forbes Town is expected to consist of residential, retail and entertainment properties. The focal point of activity in the township is Forbes Town Road, a retail strip with 37 restaurants and shops that cater to the diverse needs of the residents of the community’s three Bellagio towers, six towers of Forbeswood Heights, two towers of Forbeswood Parklane, and the 53-storey Eight Forbes Town Road. This is connected to another Fort Bonifacio landmark, Burgos Circle, a leisure spot with residential condominiums and a small park. These commercial centers along with each of the condominiums’ convenient location and top- notch resort-style amenities form a lifestyle of absolute leisure.

McKinley Hill

McKinley Hill is a community township located on approximately 50 hectares of land in Fort Bonifacio, Taguig City, Metro Manila. McKinley Hill consists of office, residential, retail, educational, entertainment and recreational centers. The residential zone consists of subdivision lots for low-density single-detached homes,

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clusters of low-rise residential garden villas and residential condominiums. The office properties will include the McKinley Hill Cyberpark which is a PEZA-designated IT special economic zone. Tenants of the office properties will largely comprise of software developers, data encoding and conversion centers, call centers, system integrations, IT and computer system support. The leisure and entertainment zone will consist of bars, restaurants, specialty shops, cinemas and sports complex. Three international schools, the Chinese International School, the Korean International School and Enderun College, a hotel management institution affiliated with Les Roches of Switzerland, comprise the “learn” component of the township. McKinley Hill is also home to the British Embassy and the Korean Embassy.

Newport City

Newport City is a community township located on 25 hectares of land at the Villamor Air Base, Pasay City, Metro Manila, across from the NAIA Terminal 3 and adjacent to the Villamor golf course. It will be targeted towards tenants and buyers who consider proximity to the NAIA Terminal 3 an advantage. The residential zone consists of eight to nine-storey medium-rise buildings. The corporate zone comprised of office buildings. The Company expects to establish a PEZA special economic zone cyberpark at Newport City. The leisure and entertainment zone consist of bars, restaurants, retail and tourist oriented shops, which are designed to complement the office and residential buildings in the community township. Newport City is home to Resorts World Manila, which is a leisure and entertainment complex comprising gaming facilities, restaurants, hotels and shopping outlets. The hotel zone comprises the Marriott Hotel, Maxims Hotel, Holiday Inn Express Hotel, Hilton Hotel Manila and Sheraton Manila managed by Travellers International Hotel Group, Inc. and Megaworld Hotels’ Belmont Hotel Manila and Savoy Hotel Manila.

McKinley West

The Company is developing McKinley West on a 34.5-hectare portion of the JUSMAG property in Fort Bonifacio which is directly beside Forbes Park and Manila Polo Club and across McKinley Hill in Taguig, Metro Manila. The development of McKinley West is another joint venture undertaking with BCDA. McKinley West will have rows of luxury residential estates, some of which will have their own swimming pools and other amenities. The upscale residential enclave will be supplemented by a modern business district of sustainable office buildings, an international school, and a commercial center. These will all be complemented by open spaces and greenery. Ingress and egress points of the estate are conveniently located along Lawton Avenue which connects Fort Bonifacio to Pasay City and Makati City.

The Mactan Newtown

The Company’s first township venture outside Luzon, Mactan Newtown is a mixed-use development on a 30-hectare property near Shangri-La’s Mactan Resort and Spa in Mactan, Cebu. Mactan Newtown combines high-end office towers, luxury condominiums, leisure amenities, retail shops, a school, and upscale hotels. It will also have its own exclusive, world-class beach club at the township’s beachfront, and sports facilities at the 11-hectare beachfront property formerly known as Portofino Beach. It is also near the Mactan-Cebu International Airport, making the township ideal for residence, business or leisure. The first phase of the project is expected, on completion, to comprise high-tech BPO offices, retail centers, luxury condominiums, leisure facilities and beach resort frontage. The Mactan Newtown is approximately 10 minutes away from the Mactan-Cebu International Airport, the Philippines’ second largest airport. Soon to rise are 5 hotels, two of which are at the beachfront.

Uptown Bonifacio

Uptown Bonifacio is an approximately 15.4-hectare property in Fort Bonifacio in Taguig, Metro Manila. Modeled after the most progressive cities around the world – Paris, London, Milan, New York and Tokyo, Uptown Bonifacio is comprised of a residential portion in the northern part of Fort Bonifacio, and a portion for mixed-use, comprising office and retail space. It is well placed to cater to the fast -paced lives of today’s young professionals and growing families. Set in the heart of Fort Bonifacio, the township will be close to several of the new central business district’s (“CBD”) popular landmarks, such as Forbes Town, Burgos Circle, the Mind Museum, Bonifacio High Street, and The Fort Strip. First class health care and education will never be far with St. Luke’s Medical Center and the institutional zone mere footsteps away. Within the township is a complete community of its own: live luxuriously in the residences of Uptown Bonifacio; work in the top grade office sites; and play at its very own high-end commercial center, Uptown Place Mall. The township is easily accessible via Kalayaan Avenue, C-5 Road and EDSA.

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Boracay Newcoast

Boracay Newcoast is a 150-hectare mixed-use leisure and resort development. It is envisioned to be the next world-class tourism destination in the paradise island. Soon to rise in the tropical tourism development are luxury and boutique hotels, commercial and retail district, upscale villas, and an exclusive residential village. Among the first residential towers to rise is Oceanway Residences, a cluster of mid-rise condominiums offering amazing views of the Sibuyan Sea, Mt. Luho, the island’s highest peak, as well as the Fairways & Bluewater Golf Course. Aside from Oceanway Residences, among the upcoming projects here include four hotels and an Ibiza-inspired commercial and retail strip, all the more making it the most anticipated destination in Boracay.

Twin Lakes

Twin Lakes is a 1,200-hectare mixed-use leisure and resort community that raises the bar of living in Tagaytay. The tourism estate features the best of Europe at the first residential cluster called The Vineyard Residences, which is composed of three mid-rise condominium towers named after famous grape varieties: Shiraz, Merlot, and Chardonnay. Twin Lakes also has a unique mixed-use community development called The Vineyard, which spans 177-hectare of natural landscape that offers the perfect view of the famous Taal Volcano, along with a view of the man-made lake within the estate. The Vineyard will have its own sports club and spa, wedding venue, and the 10-hectare vineyard that will produce real grapes that can be processed, stored, and aged in its very own chateau. The township will also have commercial and retail hubs (The Village and Lakeshore Town Center), a university park, as well as a nature park. Other developments in Twin Lakes include a retirement community, wellness center, hotel and chateau, among others. With these developments, one can enjoy both the natural and man-made wonders at Twin Lakes.

Iloilo Business Park

Iloilo Business Park is a mixed-planned community in a 72-hectare property in Mandurriao, Iloilo. When completed, it will be a mixed-use business, tourism, commercial and residential hub with a residential community, BPO office buildings, hotels, a convention center, retail centers and a lifestyle center, all at the heart of Iloilo, a new growth center in the Visayas. The entire Iloilo Business Park development was registered as a special economic zone with the Government, which allows it to benefit from a tax holiday period as well as other incentives for investors. It also features The Street of Festive Walk, a 1.1-kilometer retail strip inspired by outlet shops in America and envisioned to be the longest shop-and-dine street outside of Metro Manila. Iloilo Business Park has launched 5 residential condominium developments to date – One Madison Place Luxury Residence, Lafayette Park Square, The Palladium, the tallest building in the region at 22 storeys high, Saint Dominique and Saint Honore. With Iloilo Business Park, the Company aims to transform Western Visayas into the next central district in the region.

Suntrust Ecotown

Sitting on a 350-hectare land in Tanza, Cavite, the Suntrust Ecotown will be the Company’s first mixed-use development with an industrial park, also a first in the country. The industrial park is the country’s first to be accredited by PEZA with lifestyle amenities. It is also positioned to be the major hub for world-class light to medium export-oriented industries, residential, commercial, and institutional establishments in the south. At Suntrust Ecotown, 111 hectares will be allotted for the industrial park, another 40 hectares is dedicated for the expansion of the industrial park and the integration of lifestyle amenities such as a hotel, commercial and retail hubs, driving range, mini golf course, putting greens, swimming pool, jogging path, basketball and badminton courts, and open parks, and another 200 hectares of future development that may include residential and other recreational facilities.

Davao Park District

Davao Park District is the Company’s first township development in Mindanao, specifically on an 11-hectare property along S.P. Dakudao Loop in Lanang, Davao City which used to be the Lanang Golf and Country Club. The township is envisioned to be Mindanao’s new central business district, by being a center for BPO and other corporate entities over the next seven years. Also located in Davao Park District are the themed residential condominiums that will be built by Suntrust Properties, Inc., a wholly-owned subsidiary of the Company. The township will also have a lifestyle mall, commercial and retail strips, open parks, a lagoon, and a school. The first office tower to rise is the iconic 15-storey Davao Finance Center, which was completed in 2018. The first tower in One Lakeshore Drive, a 4-tower condominium cluster, started selling in 2014.

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Southwoods City

Southwoods City is the largest and only fully-integrated township with a golf course located in the south of Metro Manila. The 561-hectare property is a mixed-use development that features the Jack Nicklaus-designed Manila Southwoods Golf and Country Club, a central business district, a mall, schools, a church, and a medical facility among others. It maintains its suburban feel while being conveniently accessible via the South Luzon Expressway. Within Southwoods City is Pahara, a 26-hectare residential village consisting of over 600 lots, each having a spectacular view of the golf course and the Laguna de Bay. Pahara, which is a Bengali term for hills, was named due to its landscape and terrain. This residential village has a Mediterranean-inspired architectural theme with green open spaces and its own clubhouse, swimming pool, function halls, children’s playground, an outdoor circuit gym, and parks.

Alabang West

Alabang West is a 62-hectare township located at the heart of Alabang’s leisure, business and commercial district. It delivers the glitz and glamor of Beverly Hills by offering high-end shopping boutiques and world-class amenities, all in a posh neighborhood. It is easily accessible to and from Metro Manila via the South Luzon Expressway and the Daang Hari Exit. Alabang West has a 1.3-kilometer commercial and retail row inspired by Hollywood’s famous Rodeo Drive and an exclusive Alabang West Village that features over 700 residential lots. The village will have a clubhouse with badminton and basketball courts, function rooms, game room, a fitness center, and an infinity pool.

ArcoVia City

Envisioned as an environment-friendly community, the 12.4-hectare ArcoVia City is located along the C-5 Road in Pasig City. A main “green” feature of the township is the approximately 1,000 trees that will be planted around the development. This greening feature will help provide an outdoor thermal comfort for the future residents, workers, tenants and visitors of the township. Sustainable buildings registered under Leadership in Energy and Environmental Design (LEED) are the standard of office developments in this township, with the first two to rise designed by world-renowned architectural firm Skidmore, Owings & Merrill. Other green features of ArcoVia City are a rainwater catchment facility, a network of bicycle lanes, and wide tree-lined sidewalks. Aside from office towers, the township will have residential condominiums, a lifestyle mall, retail and commercial strips, and open parks.

The Upper East

The Upper East sits on a 34-hectare property in Bacolod City, Negros Occidental and is bound by Burgos Avenue on the north, Lopez Jaena Street on the west, the Circumferential Road on the east, and is just across the New Government Center. Modeled after New York City’s Upper East Side district, its prime location is geared to be Bacolod’s own version of an upscale lifestyle district where residential condominiums, malls and commercial centers, BPO office towers, tourism and leisure facilities as well as recreational parks and open spaces are integrated to create an exciting Live-Work-Play township, which the company pioneered in the Philippines.

Northill Gateway

Northill Gateway will rise in the northern part of Bacolod, where the famous Sugar Road was built. Sitting on a 53-hectare property along the new Circumferential Road on the boundaries of Talisay City and Bacolod City, it has direct access to the new Bacolod-Silay Airport. It will rise in an area that has a direct link to The Upper East via the Circumferential Road. Northill Gateway is envisioned to be a refreshing lifestyle district that will house upscale residential villages, mixed-use office and retail developments, leisure and recreational amenities as well as institutional facilities. The Company is constructing a ‘commercial town center’ on the Bacolod side of the rising Northill Gateway township occupying around 7.5 hectares, the Northill Town Center will be a sprawling horizontal commercial development composed mostly of stand-alone two-storey structures of retail shops and dining establishments, surrounded by landscaped parks and open spaces. The town center, which will be accessible along the Bacolod-Silay Airport Access Road, will also have a central plaza, an events venue, ‘pasalubong’ centers featuring local Negrense delicacies, a supermarket, and wellness and sports facilities.

Sta. Barbara Heights

Sta. Barbara Heights is a 173-hectare mixed-use development has 34 hectares allocated for residential lots, which offer a backdrop of a nearby natural lake and rolling hills in Sta. Barbara, Iloilo. The township is adjacent to the historic Santa Barbara Church and Convent and the Iloilo Golf Course and Country Club, the oldest golf course

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in Asia. Sta. Barbara Heights will have a direct access to the road leading to the Iloilo International Airport via the Iloilo International Avenue, a six-lane “spine” highway featuring rows of mixed-use and commercial buildings, retail shops, restaurants, boutique hotels and institutional facilities. Half of the entire development is allocated for the Sta. Barbara Heights Residential Estates, a residential village with three phases offering around 1,000 lots. The village will feature a five-hectare Village Center with amenities that include a 260-meter swimming pool, tennis and basketball courts, children’s park and picnic ground overlooking a lake beside the Iloilo Golf and Country Club.

The Capital Town

The Capital Town is 35.6-hectare prime property beside the provincial capital of the City of San Fernando, Pampanga, 21st integrated urban township by the Company set to become the newest Central Business District of the North. It is situated at the heart of San Fernando, Pampanga, where Pampanga Sugar Development Company (PASUDECO) used to operate.

Its existence then became a catalyst for the exponential growth of the city. Backed by PASUDECO’s rich history, culture and heritage, the development of Capital Town will be at the forefront of business and progress as the area enters new phase of growth in moving forward while preserving its values.

Westside City

Westside City will be the second site of Resorts World Manila in the Philippines. The 31-hectare leisure and entertainment township at the booming Entertainment City in Parañaque will also have international hotels, a luxury mall, and residential condominiums. The launch of Westside City marked the Company’s 20th integrated urban township, the most by any developer in the country. The township will also be home to the Company’s upscale residential condominiums, a luxury mall as well as international hotel brands such as The Westin Hotel of the Starwood Asia Pacific Hotels & Resorts Group, Hotel Okura Manila of the Okura Hotels & Resorts, the Genting Grand and Crockfords Tower of the Genting Group, and Kingsford Hotel. These hotels will have a total of around 1,500 rooms. Part of the Company’s vision for Westside City is to become the “Broadway of Asia” as the township highlights facilities for the performing arts. It will be home to the Philippines’ first Grand Opera House that has a total capacity of approximately 3,000 persons.

Maple Grove

Maple Grove is a 140-hectare property in General Trias, Cavite. This vast property will be developed into another world-class mixed-use development, where relaxation and nature perfectly blend with the urban lifestyle. Just 45 minutes away from Makati and other Metro Manila CBDs via Coastal Road and Cavitex, Maple Grove is at the entry point of the booming industrial and residential center of the Cavite-Batangas corridor. The Company is allocating ₱10-billion in the next 10 years to develop Maple Grove. The township will have an eclectic mix of residential, retail, office and institutional components.

Eastland Heights

Through its subsidiary, Global-Estate Resorts Inc., the Company is building Eastland Heights, an ‘integrated lifestyle community’ in Antipolo, Rizal on an expansive 640 hectares of land along Marcos Highway with some areas overlooking Metro Manila’s panoramic skyline. The vast property has its own iconic 36-hole golf course and country club, which will occupy around 20% of the entire development. It is also known for its rolling terrains on the foot of the scenic Sierra Madre Mountain Range. The Company is spending ₱5-billion to develop Eastland Heights in the next five to seven years. Aside from the golf course, the community will have residential, commercial and retail, and institutional components such as a school.

The Hamptons Caliraya

The Hamptons Caliraya is located in Lumban-Cavinti, Laguna, surrounding Lake Caliraya, The Hamptons Caliraya is a 300-hectare development set to feature a lakeside residential villages and villas, a town center, two 18-hole golf courses and clubhouse, and a Marina Club that offers a wide range of water sports activities such as boating, jet ski and kayaking, as well as a shophouse district and resort hotel district.

Highland City

Together with its subsidiary, Empire East Land Holdings, Inc., the Company is set to masterplan this 24-hectare property located at the convergence of Pasig City and Cainta, Rizal. This master-planned township, envisioned to

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be the first-ever “elevated city” in the Philippines, will be integrated with a lifestyle mall, retail arcades, mixed-use towers, a church, an expansive green park, and an exclusive sports club—raising the standards of urban living in the east side of Metro Manila.

Arden Botanical Estate

The Company, along with its subsidiary Global-Estate Resorts Inc., is jointly developing a 251-hectare property located at the boundary of Trece Martires and the municipality of Tanza in Cavite. Surrounded by natural rivers, the Arden Botanical Estate will have several residential and leisure villages, commercial areas, sports and adventure parks, and a mixed-use district. The expansive development, which will be curated to engage and stimulate the senses, will be highlighted by flower gardens and green parks.

Lucky Chinatown

Located at the heart of Binondo, the world’s oldest Chinatown, Lucky Chinatown is strategically located near Manila’s historic and cultural sites such as Intramuros, Manila City Hall and the National Museum. This 5-hectare property will have residential condominium projects, lifestyle mall, hotel, and a museum that perfectly blends history and modernity.

CONSTRUCTION ACTIVITIES

The Company has its own architectural and engineering teams and engages independent groups to carry out the design of its high-profile development projects. The Company has a team of project managers who work closely with outside contractors in supervising the construction phase of each project. The Company has also established relationships with Philippine and international architectural firms.

The Company also has a broad base of construction contractors and suppliers and is not dependent on any one contractor or supplier.

PRE-SALES AND CUSTOMER FINANCING

The Company conducts pre-sales of its property units prior to project completion and often, prior to construction. The Company’s pre-selling process provides buyers with a variety of payment schemes, with down-payment plans ranging from 50% to no money down. A typical payment scheme includes progressive payments over the period in advance of property construction, including a balloon payment to coincide with buyers’ expected cash flows. The Company collects post-dated checks to cover the entire purchase price based on an amortization schedule. Transfer of title to the property occurs only once all payments have been received. The payment structures are designed to appeal to middle-income buyers.

The Company provides a significant amount of in-house financing to qualified buyers. The Company has established processes and procedures designed to screen buyers applying for in-house financing to ensure that they are employed and/or are financially capable of paying their monthly amortizations. Procedures include conducting background and credit checks on prospective buyers using national credit databases and, where feasible, conducting physical verification of a prospective buyer’s claims regarding residence and properties owned.

MARKETING AND SALES

The Company maintains an in-house marketing and sales division for each of its projects. The marketing and sales division is staffed by a trained group of property consultants who exclusively market the Company’s projects. All property consultants are trained prior to selling and the Company also provides a skills enhancement program intended to further develop the sales and marketing staff into high-caliber marketing professionals. Property consultants are required to meet the criteria set by the Company. The Company also works with outside agents who compete directly with the Company’s in-house personnel.

The Company also employs marketing services staff whose job is to provide auxiliary services required by the marketing division for its sales and promotional activities. The group is also responsible for monitoring the latest developments in the economy and the real estate property markets as well as conducting market research studies for the marketing division.

In addition, the Company has an international marketing division based in Manila who oversees a global network of sales offices which market the projects of the Company and its affiliates to overseas Filipino professionals and retirees throughout Asia, Europe, North America, the Middle East and Australia. The Company enters into

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marketing agreements with various brokers based in the different overseas markets, which will then market the Company’s projects overseas through their respective marketing networks.

PROPERTY MANAGEMENT AND AFTER-SALES SERVICES

The Company remains involved in the properties it develops and sells through its property management group, which provides property management and after-sales services. Services include building maintenance and interior design services. The property management group is a resource for the Company to obtain feedback from its purchasers and rental tenants in order to provide solutions to their property needs, maintain the property and develop long-term relationships with its tenants and purchasers. The property management group contributes to enhancing the Company’s brand and reputation in the after-sales market.

Tenants and Leases

The Company typically sells all of its residential property developments and maintains ownership of its commercial developments, renting retail and office space to tenants.

The Company primarily sells its residential properties directly to end-users and is not dependent on any single purchaser or group of purchasers. Where the Company is not able to sell 100% of its residential units, upon completion of the residential project, it rents these unsold units on a lease-to-own basis or pursuant to a lease with an option to buy.

The Company uses the services of international brokerage firms such as Santos-Knight Frank, Jones Lang LaSalle, CB Richard Ellis, and Colliers International to locate tenants such as IT companies and other multinational companies. The Company also coordinates with government agencies to participate in activities such as trade missions to increase referrals to companies seeking to outsource business to the Philippines. The Company also maintains relationships with its existing tenants and their affiliated companies who may consult the Company when considering expansion options. The Company has an in-house leasing team to assist existing clients who are interested in expanding or relocating to another company site. The Company also maintains and continually seeks to improve its ongoing media communications campaigns to highlight the competitive advantages of its properties to prospective tenants.

The Company’s office and commercial leases are generally for terms of three to five years and typically require three months of security deposits and three months of advance rent. For land leases and office tenants, which require development of a specific building structure, the Company generally enters into long-term leases of 10 to 15 years.

The lease payments the Company receives from its retail tenants are based on a participation in the turnover of the tenants’ businesses. Rents are typically based upon a turnover component of 3% to 5% of tenant sales, net of taxes and service charges in addition to a minimum rent charge. In light of the COVID-19 pandemic, the rental rates are currently based only on a turnover component of 3% to 5% of tenant sales. Kiosk retailers are charged a flat rent fee and theatres are co-owned with the Company. Due to COVID-19, mall leasing activities have shifted to rental fees based on a percentage of sales instead of fixed rent and percentage of sales rental fee arrangements. The Company’s tenants are generally charged a monthly management fee assessed per square meter, which covers building maintenance expenses. Tenants are also required to pay their own utility charges. The Company regularly monitors the performance of the tenants in its retail properties. The Company may elect not to renew the leases of retail tenants whose performance is lagging in order to improve its rental income. The Company’s lease agreements typically have no pre-termination options for tenants, subject to penalties as agreed upon in the contracts.

COMPETITION

The Company competes with other property investment, development, leasing and property holding companies to attract purchasers as well as tenants for its properties in Metro Manila. The principal bases of competition in the real estate development business are location, product, price, financing, execution, completion, quality of construction, brand and service. The Company believes it has several competitive advantages in each of these categories due to the prime locations of its properties, innovative projects, a reputation for high quality designs, affordable pre-sales financing, after-sales service and a consistent track record of completion. Total Assets of the Group for the year ended 31 December 2019 is ₱349.6 billion while Net Profit for the same year is ₱19.3 billion.

The Company attributes its strong residential sales to two main factors – the popularity of its live-work-play communities in Metro Manila and the Company’s proven track record of delivering more than 374 buildings to its customers over the last two decades.

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With respect to community township developments, the Company considers Ayala Land, Inc. (“ALI”) to potentially be its only significant competitor. ALI is present in Fort Bonifacio, which is where the Company’s Forbes Town Center, McKinley Hill, McKinley West and Uptown Bonifacio properties are located.

With respect to its office and retail leasing business, the Company believes that it has many competitors in the industry such as Robinsons Land Corporation (“RLC”), ALI and SM Prime Holdings, Inc. (“SMPHI”).

With respect to high-end and middle income land and condominium sales, ALI claims to compete for buyers primarily on the basis of reputation, reliability, price, quality and location. With respect to its office rental properties, ALI claims to compete for tenants primarily based on the quality and location of the relevant building, reputation of the building’s owner, quality of support services provided by the property manager, and rental and other charges. According to its publicly available disclosures, the Total Assets of ALI and subsidiaries for the period ended 31 December 2019 is ₱713.9 billion while their Net Income for the same period is ₱37.5 billion.

RLC believes that its strength is in its mixed-use, retail, commercial and residential developments. For its commercial center business, RLC claims to compete on the basis of its flexibility in developing malls with different sizes. For its residential business, RLC claims to compete in terms of industry-specific technological know-how, capital, reputation and sales and distribution network. According to its publicly available disclosures, Total Assets of RLC and subsidiaries as of the period ended 31 December 2019 is ₱189.65 billion while their Net Income for the same period is ₱8.69 billion.

SMPHI believes that it has certain significant competitive advantages which include the very good location of its malls, proven successful tenant mix and selection criteria and the presence of SM stores as anchor tenants. According to its publicly available disclosures, Total Assets of SMPHI and subsidiaries as of the period ended 31 December 2019 is ₱667.27 billion while their Net Income for the same period ₱38.78 billion.

INTELLECTUAL PROPERTY

In the Philippines, certificates of registration of trademarks filed with the Philippine Intellectual Property Office prior to the effective date of the Philippine Intellectual Property Code in 1998 are generally effective for a period of 20 years from the date of the certificate, while those filed after the Philippine Intellectual Property Code became effective are generally effective for a shorter period of 10 years, unless terminated earlier.

The Company owns the registered trademark over its name and logo which was renewed in March 2015 and is valid until March 2025. While important, the Company does not believe that its operations or its subsidiaries’ operations depend on its trademarks or any patent, license franchise, concession or royalty agreement. As of the date of this Offering Circular, the Company also has 65 registered trademarks over the names of its development projects.

INSURANCE

The Company maintains business interruption insurance for its properties to cover damages from fires, floods, riots, strikes, malicious damage, typhoons, earthquakes and terrorism for each of the buildings that it owns and leases to tenants. The insurance is provided by reputable companies with customary deductibles and limits. The insurance policy periods are valid for one year terms and renewable annually. For projects being developed, contractors are required to maintain insurance for risks associated with construction work. For completed projects, the condominium association for each development obtains comprehensive general liability, personal accident and machinery breakdown insurance for the premises. It is not customary in the Philippines to maintain, and the Company does not maintain, title insurance with respect to its properties.

EMPLOYEES

As of March 31, 2020, the Company had 1,052 employees. The Company intends to hire additional employees if the present workforce becomes inadequate to handle the Company’s operations.

The table below shows the breakdown of employees as of March 31, 2020:

Type No. Senior Management 39 Middle Management 336 Staff 677 Total 1,052

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The Company has no collective bargaining agreements with employees and no organized labor organizations in the Company. The Company complies with the minimum compensation and benefits standards pursuant to Philippine law. The Company provides for estimated retirement benefits in compliance with Philippine retirement law. The Company has not experienced any disruptive labor disputes, strikes or threats of strikes and the Company believes that its relationship with its employees in general is satisfactory

The Company upholds professional and personal advancement of its employees through Megaworld Learning Academy (“MLA”). MLA offers a slew of leadership and training workshops that are facilitated by the Company’s “Learning Ambassadors”, who are all experts in their own fields, or third party consultants. Various programs have been specially designed to enable its employees to upgrade their skills and perform at optimum levels. It endeavors the progress of the Company’s workforce by offering training and workshops covering career, management and leadership development.

CORPORATE SOCIAL RESPONSIBILITY

Megaworld Foundation (the “Foundation”), is the corporate social responsibility (“CSR”) arm of real estate developer Megaworld, is involved in several CSR Initiatives. Dedicated in alleviating people from poverty through education, the Foundation has also reached out to the less fortunate by tending to their health, domestic, and environmental needs. Aside from positively impacting the society, these efforts also inspire 3,000 Megaworld employees as they read the company’s online newsletter, browse through the Foundation’s social media page, and personally take part in the volunteerism activities.

The following are some of the CSR initiatives taken by Megaworld:

• At the height of the ECQ, the Company, through Alliance Global Group, Inc., has contributed ₱110 million to Project Ugnayan of the Philippine Disaster Resilience Foundation and another ₱66 million in donations to various LGUs and other organizations that support pandemic frontliners as well as poor communities affected by the crisis. The Company also donated ₱60 million to the Philippine Red Cross for the purchase of four brand new sets of COVID-19 test laboratories in Metro Manila. The real estate group also donated more than ₱10 million worth of meals, groceries, personal protective equipment (PPE) supplies, and transport services to various hospitals, security checkpoint frontliners, LGUs, and partner organizations around the country.

• In addition to enhanced safety protocols and sanitation efforts within its townships, the Company has also installed state-of-the-art disinfecting equipment in its facilities and even partnered with medical institutions, various pharmaceutical and personal care brands, and tech companies as part of its intensified efforts to protect its stakeholders during these challenging times.

• In 2019, the Company continued its activities of youth education and support for charitable causes. It increased its target to provide scholarship program to 1,000 scholars. Aside from offering scholarships, the Foundation supports advocacies for women, children and the youth, the elderly, and the differently-abled, as well as campaigns geared toward health care, eco-conservation, and calamity assistance. Several of its undertakings are also held with the help of likeminded partner institutions.

• In 2018, the Foundation introduced its support, which is relentlessly being carried out to date, to the United Nations Sustainable Development Goals (UN SDGs). The aim is to showcase its cumulative efforts through the years as aligned to the UN SDGs and how it brings about the Foundation’s impact to the community at large.

LEGAL PROCEEDINGS

As of the date of this Offering Circular, neither the Company nor any of its subsidiaries, associates or joint development partners or any of its or their properties is involved in or the subject of any legal proceedings which would have a material adverse effect on the business or financial position of the Company or any of its subsidiaries, its associates or joint ventures or any of its or their properties.

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LAND BANK AND PROPERTIES

As of March 31, 2020, the Company has a land bank of over 4,300 hectares, 72.5% of which is located in Calabarzon (a region in southern Luzon comprising the provinces of Batangas, Cavite, Laguna, Quezon and Rizal), 12.7% in Central Visayas, with the rest located in Metro Manila and other high growth areas in the country.

Set out below are all of the properties currently owned or leased by the Company.

Type Location

Owned/ Leased/ Limitations on Ownership

A. Condominium Units and Subdivision Lots Under Development Eastwood Global Plaza Luxury Residence

Eastwood, Quezon City Owned

One Eastwood Avenue 2 Eastwood, Quezon City Owned San Antonio Residences East & West

Gil Puyat Ave., Makati City Owned

The Ellis Salcedo Village, Makati City Owned Vion Tower Pasong Tamo corner Edsa, Makati City Joint Venture Belmont Hotel Iloilo Iloilo Business Park, Iloilo City Owned Lafayette Park Square Iloilo Business Park, Iloilo City Owned Saint Dominique Iloilo Business Park, Iloilo City Owned Saint Honore Iloilo Business Park, Iloilo City Owned The Palladium Iloilo Business Park, Iloilo City Owned Belmont Hotel Mactan Newtown Mactan Newtown, Cebu Owned La Victoria Global Residences Mactan Newtown, Cebu Owned Forbes Hill Northill Gateway, Bacolod Joint Venture One Regis The Upper East, Bacolod City Owned Two Regis The Upper East, Bacolod City Owned Manhattan Plaza Tower 2 Manhattan Garden City, Quezon City Joint Venture The Florence (1-3) McKinley Hill, Fort Bonifacio, Taguig City Owned St. Mark Residences McKinley Hill, Fort Bonifacio, Taguig City Owned Park McKinley West McKinley West, Fort Bonifacio, Taguig City Joint Venture The Albany Luxury Residences – Kingsley

McKinley West, Fort Bonifacio, Taguig City Joint Venture

The Albany Luxury Residences – Yorkshire

McKinley West, Fort Bonifacio, Taguig City Joint Venture

Uptown Arts Uptown Bonifacio, Fort Bonifacio, Taguig City Joint Venture Uptown Parksuites Residence Uptown Bonifacio, Fort Bonifacio, Taguig City Joint Venture 18 Avenue de Triomphe Arcovia City, Pasig City Owned Arcovia Palazzo – Altea Arcovia City, Pasig City Owned Arcovia Palazzo – Benissa Arcovia City, Pasig City Owned Arcovia Palazzo - Cantabria Arcovia City, Pasig City Owned Maple Grove Commercial District General Trias, Cavite Joint Venture The Verdin at Maple Grove General Trias, Cavite Owned Arden Botanical Village Trece Martires City, Cavite Joint Venture Kingsquare Residence Sta. Cruz, Manila Owned B. Condominium Units in Completed Projects Brentwood Heights Multinational Village, Parañaque City Owned Sherwood Heights Multinational Village, Parañaque City Owned 8 Wack Wack Road Wack Wack Road, Mandaluyong City Owned Wack Wack Heights Lee St., Mandaluyong City Owned Golf Hills Terraces Old Balara, Quezon City Joint Venture Golfhill Gardens Old Balara, Quezon City Owned Kentwood Heights Cubao, Quezon City Owned Narra Heights Cubao, Quezon City Owned El Jardin Del Presidente 1 & 2 Sgt. Esguerra Ave., Quezon City Owned Eastwood Le Grand 1-3 Eastwood, Quezon City Owned Eastwood Parkview 1 & 2 Eastwood, Quezon City Owned Grand Eastwood Palazzo Eastwood, Quezon City Owned

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Type Location


One Central Park Eastwood, Quezon City Owned One Orchard Road 1-3 Eastwood, Quezon City Owned The Eastwood Excelsior Eastwood, Quezon City Owned The Eastwood Lafayette 1-3 Eastwood, Quezon City Owned One Eastwood Avenue 1 Eastwood, Quezon City Owned Manhattan Parkway 1-3 Manhattan Garden City, Quezon City Joint Venture Manhattan Parkview 1-3 Manhattan Garden City, Quezon City Joint Venture Manhattan Parkview Garden Manhattan Garden City, Quezon City Joint Venture Manhattan Heights Tower A Manhattan Garden City, Quezon City Joint Venture Manhattan Heights Tower B Manhattan Garden City, Quezon City Joint Venture Manhattan Heights Tower C Manhattan Garden City, Quezon City Joint Venture Manhattan Heights Tower D Manhattan Garden City, Quezon City Joint Venture Manhattan Plaza Tower 1 Manhattan Garden City, Quezon City Joint Venture Marina Square Suites Pedro Gil, Manila Owned Cityplace Binondo A & B Binondo, Manila Owned Noble Place Binondo, Manila Joint Venture One Lafayette Square Makati City Owned Two Lafayette Square Makati City Owned Greenbelt Madison Legaspi Village, Makati City Owned Greenbelt Chancellor Rada St., Legaspi Village, Makati City Owned Greenbelt Parkplace Palanca St., Legaspi Village, Makati City Owned Greenbelt Radisson Aguirre St., Legaspi Village, Makati City Owned Greenbelt Excelsior Palanca St., Legaspi Village, Makati City Joint Venture Greenbelt Hamilton 1 & 2 Legaspi St., Legaspi Village, Makati City Owned Paseo Parkview Suites 1 & 2 Valero St. Salcedo Village, Makati City Owned Paseo Heights Salcedo Village, Makati City Owned One Central Sen. Gil Puyat Ave., Makati City Owned Two Central Valero St., Makati City Owned Three Central Valero St., Makati City Owned The Manhattan Square Valero St., Makati City Joint Venture Salcedo Skysuites Sen. Gil Puyat Ave., Makati City Owned 8 Forbestown Road Forbestown Center, Fort Bonifacio, Taguig City Joint Venture The Bellagio 1-3 Forbestown Center, Fort Bonifacio, Taguig City Joint Venture Forbeswood Heights Forbestown Center, Fort Bonifacio, Taguig City Joint Venture Forbeswood Parklane 1 & 2 Forbestown Center, Fort Bonifacio, Taguig City Joint Venture 115 Upper McKinley McKinley Hill, Fort Bonifacio, Taguig City Joint Venture McKinley Hill Garden Villas McKinley Hill, Fort Bonifacio, Taguig City Joint Venture Tuscany Private Estate McKinley Hill, Fort Bonifacio, Taguig City Joint Venture Morgan Suites Executive Residences

McKinley Hill, Fort Bonifacio, Taguig City Owned

Stamford Executive Residences McKinley Hill, Fort Bonifacio, Taguig City Owned The Venice Luxury Residences – Alessandro


The Venice Luxury Residences – Bellini


The Venice Luxury Residences – Carusso


The Venice Luxury Residences – Domenico


The Venice Luxury Residences – Emanuele


The Venice Luxury Residences – Fiorenzo


Viceroy 1-4 McKinley Hill, Fort Bonifacio, Taguig City Owned McKinley West Subdivision McKinley West, Taguig City Joint Venture St. Moritz Private Estate 1 & 2 McKinley West, Taguig City Joint Venture One Uptown Residence Uptown Bonifacio, Taguig City Joint Venture

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Type Location


Uptown Ritz Residence Uptown Bonifacio, Taguig City Joint Venture 101 Newport Boulevard Newport, Pasay City Joint Venture 150 Newport Boulevard Newport, Pasay City Joint Venture 81 Newport Boulevard Newport, Pasay City Joint Venture Palm Tree Villas 1 & 2 Newport, Pasay City Joint Venture The Parkside Villas Newport, Pasay City Joint Venture The Residential Resort at Newport

Newport, Pasay City Joint Venture

Belmont Luxury Hotel Newport, Pasay City Joint Venture Savoy Hotel Newport, Pasay City Joint Venture Greenhills Heights Pinaglabanan San Juan Joint Venture One Beverly Place Greenhills, San Juan Joint Venture 8 Newtown Boulevard Mactan Newtown, Cebu Owned One Pacific Residence Mactan Newtown, Cebu Owned One Manchester Place 1 & 2 Mactan Newtown, Cebu Owned Savoy Hotel Mactan Newtown Mactan Newtown, Cebu Owned One Madison Place 1 - 3 Iloilo Busines Park, Iloilo City Owned Iloilo Boutique Hotel Iloilo Busines Park, Iloilo City Owned C. Rental Properties Arcovia Parade Retail 1 & 2 Arcovia City, Pasig City Owned City Place Retail Mall Binondo, Manila Owned Hotel Lucky Chinatown Binondo, Manila Owned Lucky Chinatown Mall Binondo, Manila Owned 1800 Eastwood Avenue Eastwood, Quezon City Owned 1880 Eastwood Avenue Eastwood, Quezon City Owned Cyber Mall Eastwood, Quezon City Owned Cyber One Units Eastwood, Quezon City Owned Eastwood Citywalk Eastwood, Quezon City Owned Eastwood Mall Eastwood, Quezon City Owned Eastwood Richmonde Hotel Eastwood, Quezon City Owned E-Commerce Plaza Eastwood, Quezon City Owned Global One Eastwood, Quezon City Owned IBM Plaza Eastwood, Quezon City Owned ICITE Eastwood, Quezon City Owned Techno Plaza 1 Eastwood, Quezon City Owned Techno Plaza 2 Units Eastwood, Quezon City Joint Venture Eastwood Global Plaza Corporate Center

Eastwood, Quezon City Owned

Corinthian Hills Retail Temple Drive, Quezon City Owned The World Center Gil Puyat Ave., Makati City Owned Paseo Center Paseo Center, Makati City Owned 331 Building Sen. Gil Puyat Ave., Makati City Owned One Beverly Place Retail Greenhills, San Juan Owned Festive Walk Mall Iloilo Business Park, Iloilo City Owned Festive Walk Mall Annex Iloilo Business Park, Iloilo City Owned Festive Walk Parade 2B Iloilo Business Park, Iloilo City Owned Festive Walk Office Tower Iloilo Business Park, Iloilo City Owned One Global Center Iloilo Business Park, Iloilo City Owned One Techno Place Iloilo Business Park, Iloilo City Owned Richmonde Hotel Iloilo & Richmonde Tower

Iloilo Business Park, Iloilo City Owned

Two Global Center Iloilo Business Park, Iloilo City Owned Three Techno Place Iloilo Business Park, Iloilo City Owned Two Techno Place Iloilo Business Park, Iloilo City Owned California Garden Square Retail Libertad cor Calbayog, Mandaluyong City Owned The Richmonde Hotel Ortigas, Mandaluyong City Owned

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Type Location


8 Newtown Boulevard Mactan Newtown, Cebu Owned Mactan Alfresco Mactan Newtown, Cebu Owned One World Center Mactan Newtown, Cebu Owned Tower One Plaza Magellan Mactan Newtown, Cebu Owned Two World Center Mactan Newtown, Cebu Owned Pacific World Tower Mactan Newtown, Cebu Owned The Newtown School of Excellence

Mactan Newtown, Cebu Owned

Burgos Circle Forbestown Center, Fort Bonifacio, Taguig City Joint Venture 8 Campus Place McKinley Hill, Fort Bonifacio, Taguig City Ground Lease 8 Upper McKinley McKinley Hill, Fort Bonifacio, Taguig City Owned Commerce and Industry Plaza McKinley Hill, Fort Bonifacio, Taguig City Ground Lease Emperador Steel Parking Building

McKinley Hill, Fort Bonifacio, Taguig City Ground Lease

McKinley Hill (Phase 3) Lots McKinley Hill, Fort Bonifacio, Taguig City Ground Lease McKinley Parking Building McKinley Hill, Fort Bonifacio, Taguig City Owned One Campus Place McKinley Hill, Fort Bonifacio, Taguig City Ground Lease One World Square McKinley Hill, Fort Bonifacio, Taguig City Owned Science Hub Towers McKinley Hill, Fort Bonifacio, Taguig City Ground Lease Southeast Asian Campus McKinley Hill, Fort Bonifacio, Taguig City Ground Lease The Venice Canal Mall McKinley Hill, Fort Bonifacio, Taguig City Ground Lease The Venice Piazza McKinley Hill, Fort Bonifacio, Taguig City Ground Lease Three World Square McKinley Hill, Fort Bonifacio, Taguig City Owned Tuscany Retail McKinley Hill, Fort Bonifacio, Taguig City Joint Venture Two World Square McKinley Hill, Fort Bonifacio, Taguig City Owned Venice Corporate Center McKinley Hill, Fort Bonifacio, Taguig City Ground Lease Woodridge Residences McKinley Hill, Fort Bonifacio, Taguig City Joint Venture Five West Campus McKinley West, Taguig City Joint Venture One West Campus McKinley West, Taguig City Joint Venture Ten West Campus McKinley West, Taguig City Joint Venture Three West Campus McKinley West, Taguig City Joint Venture Two West Campus McKinley West, Taguig City Joint Venture Six West Campus McKinley West, Taguig City Joint Venture Eight West Campus McKinley West, Taguig City Joint Venture Mckinley West Steel Deck Parking

McKinley West, Taguig City Joint Venture

Uptown Parade Uptown Bonifacio, Taguig City Joint Venture Uptown Place Mall Uptown Bonifacio, Taguig City Joint Venture Uptown Place Towers Uptown Bonifacio, Taguig City Joint Venture World Commerce Place 1-3 Uptown Bonifacio, Taguig City Joint Venture 81 Newport Square Newport City, Pasay City Joint Venture Belmont Luxury Hotel Newport City, Pasay City Joint Venture Davao Finance Center Davao Park District, Davao City Owned

The Company’s principal corporate headquarters are located on the 30th Floor, Alliance Global Tower in Uptown Bonifacio, Taguig City. The Company owns the building that it occupies.

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REGULATION AND ENVIRONMENTAL MATTERS

REAL ESTATE LAWS AND REGULATIONS

General

PD 957, RA 4726 and Batas Pambansa Blg. 220 (“BP 220”) are the principal statutes which regulate the development and sale of real property as part of a condominium project or subdivision. PD 957, RA 4726 and BP 220 cover subdivision projects for residential, commercial, industrial and recreational purposes, and condominium projects for residential or commercial purposes. On February 14, 2019, Republic Act No. 11201, otherwise known as “Department of Human Settlements and Urban Development Act” was signed into law by the President. Consequently, the Implementing Rules and Regulations of the Act was approved on 19 July 2019. The Housing and Urban Development Coordinating Council (“HUDCC”) and the HLURB were consolidated to create the Department of Human Settlements and Urban Development (“DHSUD”).

Simultaneously, the DHSUD was reconstituted into the Human Settlement Adjudication Commission (“HSAC”). The functions of the HUDCC and the planning and regulatory functions of DHSUD were transferred to and consolidated in the DHSUD, while the HSAC shall assume and continue to perform the adjudication functions of DHSUD. Now, DHSUD is the administrative agency of the Government which, together with local government units (“LGUs”), enforces these decrees and has jurisdiction to regulate the real estate trade and business.

All subdivision and condominium plans for residential, commercial, industrial and other development projects are required to be filed with the DHSUD and the pertinent LGU of the area in which the project is situated. Approval of such plans is conditional on, among other things, the developer’s financial, technical and administrative capabilities. Alterations of approved plans which affect significant areas of the project, such as infrastructure and public facilities, also require prior approval of the relevant government body or agency.

The development of subdivision and condominium projects can commence only after the relevant government body has issued the development permit.

The issuance of a development permit is dependent on, among others (i) compliance with required project standards and technical requirements which may differ depending on the nature of the project, and (ii) issuance of the barangay clearance, the DHSUD locational clearance, Department of Environment and Natural Resources (“DENR”) permits, and Department of Agrarian Reform (“DAR”) conversion or exemption orders as discussed below.

Further, all subdivision plans and condominium project plans are required to be filed with and approved by the DHSUD. Approval of such plans is conditional on, among other things, the developer’s financial, technical and administrative capabilities. Alterations of approved plans which affect significant areas of the project, such as infrastructure and public facilities, also require the prior approval of the DHSUD and the written conformity or consent of the duly organized homeowners’ association, or in the absence of the latter, by the majority of the lot buyers in the subdivision. Owners of, or dealers in, real estate projects are required to obtain licenses to sell before making sales or other dispositions of lots or real estate projects. Dealers, brokers and salesmen are also required to register with the DHSUD.

Project permits and licenses to sell may be suspended, cancelled or revoked by the DHSUD, by itself or upon a verified complaint from an interested party, for reasons such as involvement in fraudulent transactions, misrepresentation about the subdivision project or condominium project in any literature which has been distributed to prospective buyer, insolvency or violation of any of the provisions of P.D. 957. A license or permit to sell may only be suspended, cancelled or revoked after a notice to the developer has been served and all parties have been given an opportunity to be heard in compliance with the HSAC’s rules of procedure and other applicable laws.

Subdivision or condominium units may be sold or offered for sale only after a license to sell has been issued by the DHSUD. The license to sell may be issued only against a performance bond posted to guarantee the completion of the construction and maintenance of the roads, gutters, drainage, sewerage, water system, lighting systems, and full development of the subdivision or condominium project and compliance by the owner or dealer with the applicable laws and regulations.

Real estate dealers, brokers and salesmen are also required to register with the DHSUD before they can sell lots or units in a registered subdivision or condominium project. On June 29, 2009, Republic Act No. 9646 or the Real Estate Service Act of the Philippines (“RA 9646”) was signed into law. RA 9646 strictly regulates the practice of

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real estate brokers by requiring licensure examinations and attendance in continuing professional education programs.

Subdivision Projects

There are essentially two different types of residential subdivision developments, which are distinguished by different development standards issued by the DHSUD. The first type of subdivision, aimed at low-cost housing, must comply with BP 220, a Philippine statute regulating the development and sale of real property as part of a condominium project or subdivision, which allows for a higher density of building and relaxes some construction standards. Other subdivisions must comply with P.D. 957, which sets out standards for lower density developments. Both types of development must comply with standards regarding the suitability of the site, road access, necessary community facilities, open spaces, water supply, the sewage disposal system, electrical supply, lot sizes, the length of the housing blocks and house construction.

Under current regulations, a developer of a subdivision with an area of one hectare or more and covered by P.D. 957 is required to reserve at least 30% of the gross land area of such subdivision, which shall be non-saleable, for open space for common uses, which include roads and recreational facilities. In low-density subdivisions (20 family lots and below per gross hectare), a developer is required to reserve at least 3.5% of the gross project area for such open spaces.

Republic Act No. 7279 further requires developers of proposed subdivision projects to develop an area for socialised housing equivalent to at least 15% of the total subdivision area or total subdivision project cost, or total subdivision project cost and at least 5% of condominium area or project cost, at the option of the developer, within the same city or municipality, whenever feasible, and in accordance with the standards set by the DHSUD and other existing laws. To comply with this requirement, the developers may choose to develop for socialized housing an area equal to 15% of the total area of the main subdivision project or allocate and invest an amount equal to 15% of the main subdivision total project cost, which shall include the cost of the land and its development as well as the cost of housing structures therein, in development of a new settlement through purchase of socialized housing bonds, participation in a community mortgage programme, the undertaking of joint-venture projects and the building of a large socialized housing project to build a credit balance.

Under the current Investment Priorities Plan issued by the Board of Investments, mass housing projects are eligible for government incentives subject to certain policies and guidelines.

Condominium Projects

RA 4726, also known as the Condominium Act, regulates the development and sale of condominium projects. RA 4726 requires the annotation of the master deed on the title of the land on which the condominium project shall be located. The master deed contains, among other things, the description of the land, buildings, common areas and facilities of the condominium project.

A condominium project may be managed by a condominium corporation, an association, a board of governors or a management agent, depending on what is provided in the declaration of restriction of the condominium project. However, whenever the common areas are held by a condominium corporation, such corporation shall constitute the management body of the project.

Real Estate Sales and Installments

RA 6552, or the Maceda Law, was promulgated to protect real estate buyers on instalment basis. The Maceda Law applies to all transactions or contracts involving the sale or financing of real estate through installment payments, including residential condominium units. Under the Maceda Law, buyers who have paid at least two years of installments are granted a grace period of one month for every year of paid installments to cure any payment default. If the contract is cancelled, the buyer is entitled to receive a refund of at least 50% of the total payments made by the buyer, with an additional 5% per annum in cases where at least five years of installments have been paid (but with the total not to exceed 90% of the total payments). Buyers who have paid less than two years of installments and who default on installment payments are given a 60-day grace period to pay all unpaid installments before the sale can be cancelled, but without right of refund. RA 6552 covers the business of the Company as it applies to all transactions or contracts involving the sale or financing of real estate through instalment payments.

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Shopping Malls

Shopping malls are regulated by the local government unit of the city or municipality where the shopping mall is located. Shopping mall operators must secure a mayor’s permit or municipal license before operating. Shopping mall operators must also comply with the provisions of Republic Act No. 9514 or the Fire Code, and other applicable local ordinances. Shopping malls that have restaurants and other food establishments as tenants must obtain a sanitary permit from the Department of Health. Shopping malls that discharge commercial wastewater must apply for a wastewater discharge permit from the DENR.

As a tourism-related establishment, shopping malls may obtain accreditation from the Department of Tourism (“DOT”). A shopping mall can only be accredited upon conformity with the minimum physical, staff and service requirements promulgated by the DOT.

Zoning and Land Use

Under the agrarian reform law currently in effect in the Philippines and the regulations issued thereunder by the DAR, land classified for agricultural purposes as of or after 15 June 1988, cannot be converted to non-agricultural use without the prior approval of DAR.

Land use may be also limited by zoning ordinances enacted by LGUs. Once enacted, land use may be restricted in accordance with a comprehensive land use plan approved by the relevant LGU. Lands may be classified under zoning ordinances as commercial, industrial, residential or agricultural. While a procedure for change of allowed land use is available, this process may be lengthy and cumbersome.

Special Economic Zone

Special Economic Zones (“Ecozones”) are selected areas with highly developed or which have the potential to be developed into agro-industrial, industrial tourist/recreational, commercial, banking, investment, and financial centers.

PEZA, created under Republic Act No. 7916 (“RA 7916”), is a Government agency that operates, administers and manages designated PEZA special economic zones around the country. These PEZA Ecozones, which are generally created by proclamation of the President of the Philippines, are areas earmarked by the Government for development into balanced agricultural, industrial, commercial, and tourist/recreational regions.

An Ecozone may contain any or all of the following: industrial estates, export processing zones, free trade zones, and tourist/recreational centers. There are several activities eligible for PEZA registration and incentives including, but not limited to, IT services, Tourism and Retirement activities. PEZA registered enterprises locating in an Ecozone are generally entitled to fiscal and non-fiscal incentives such as income tax holidays and duty free importation of equipment, machinery and raw materials.

Tenants of properties located in Ecozones may register with PEZA to avail themselves of certain benefits under Republic Act No. 7916 and its Implementing Rules and Regulations, such as income tax holidays or a preferential rate of 5% with respect to gross income taxation, thereby making tenancy in such properties potentially more attractive.

Enterprises offering IT services (such as call centers, and business process outsourcing using electronic commerce) are entitled to fiscal and non-fiscal incentives if they are PEZA-registered locators in a PEZA-registered IT Park, IT Building, or Ecozone. An IT Park is an area which has been developed into a complex capable of providing infrastructures and other support facilities required by IT enterprises, as well as amenities required by professionals and workers involved in IT enterprises, or easy access to such amenities. An IT Building is an edifice, a portion or the whole of which, provides such infrastructure, facilities and amenities.

PEZA requirements for the registration of an IT Park or IT Building differ depending on whether it is located in Metro Manila. Metro Manila is the area that covers the 16 cities of Manila, Caloocan, Las Pinas, Makati, Mandaluyong, Marikina, Muntinlupa, Paranaque, Pasay, Pasig, Quezon, Valenzuela, Malabon, Navotas, San Juan and Taguig and the municipality of Pateros. These PEZA requirements include clearances or certifications issued by the city or municipal legislative council, the DAR, the National Water Resources Board, and the DENR.

Tourism activities involve the establishment and operation of PEZA registered Tourism Ecozones (“PEZA TEZs”). These are areas which have been developed into an integrated resort complex which carries tourist facilities and activities. PEZA TEZ developers and locator enterprises are generally entitled to fiscal and non-

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fiscal incentives. However, on 13 November 2012, PEZA Board Resolution No. 12-610 withdrew particular fiscal incentives from developers and locator enterprises of TEZs in Metro Manila, Cebu City, Mactan Island, and Boracay Island. The same Board Resolution also denied the establishment of new TEZs in the four areas. The withdrawal of these incentives have been circularised by the Bureau of Internal Revenue through Revenue Memorandum Circular No. 23-2013 issued on 22 February 2013.

PEZA rules for the registration of a TEZ require, among others, an endorsement from the DOT, conversion or exemption orders from the DAR, and clearances, certifications, and endorsements from Department of Agriculture (“DA”), DHSUD, Environmental Management Bureau-DENR (“EMB-DENR”), NWRB, and the concerned LGUs.

Retirement activities involve the establishment and operation of areas capable of providing retirement infrastructure and other support facilities such as accommodation facilities, health and wellness facilities, sports, recreation centers, and lifestyle facilities, cultural facilities, theme parks, and other amenities required by foreign retirees. Retirement Ecozone developers/operators and retirement Ecozone facilities enterprises are entitled to fiscal and non-fiscal incentives.

EO 1037 created the Philippine Retirement Authority (“PRA”), a government owned and controlled corporation under the office of the Bureau of Investments (“BOI”). It is mandated to attract foreign nationals and former Filipino citizens to invest, reside, and retire in the Philippines to accelerate the socio-economic development of the country and contribute to the foreign currency reserve of the economy PEZA rules for registration of retirement Ecozones and facilities enterprises require, among others, the endorsement from the PRA, and clearances and certifications from the DAR, DA, DHSUD, EMB-DENR, NWRB DENR, and the concerned LGUs.

Another government agency which is tasked to administer certain Ecozones is the Tourism Infrastructure and Enterprise Zone Authority (“TIEZA”). The TIEZA is an attached agency to the DOT tasked to designate, regulate, and supervise its own TEZs as well as develop, manage and supervise tourism infrastructure projects in the Philippines. Tourism enterprises are facilities, services, and attractions primarily engaged in tourism to attract visitors. TEZ Operators and Tourism Enterprises registered with the TIEZA may be granted fiscal and non-fiscal incentives. Activities eligible for registration with the TIEZA include, among others, accommodation establishments such as hotels, resorts, apartelles, tourist inns, motels, pension houses, and home stay operators, tourist estate management services, restaurants, shops, and department stores.

TIEZA rules for the registration of a TEZ will depend on the nature of the business and the type of business organisation of the applicant. TIEZA registration requirements include, among others, certifications and endorsements from the DAR, the National Historical Institute, DENR, and DOH.

Tax and Other Incentives

“Tourism Ecozone Developer/Operator” refers to the owner and/or operator of a Tourism Development Zone/Tourism Estate seeking registration with PEZA and the required Presidential Proclamation of the Tourism Development Zone/Tourism Estate as a Tourism Ecozone for the availment of incentives provided under RA 7916. “Tourism Development Zone/Tourism Estate” refers to a tract of land with defined boundaries, suitable for development into an integrated resort complex, with prescribed carrying capacities of tourist facilities and activities, such as, but not limited to, sports and recreation centers, accommodations, convention and cultural facilities, food and beverage outlets, commercial establishments and other special interest and attraction activities/establishments, and provided with roads, water supply facilities, power distribution facilities, drainage and sewage systems and other necessary infrastructure and public utilities. A Tourism Development Zone/Tourism Estate must be under unified and continuous management, and can either be a component of an ecozone or the whole ecozone itself. “Tourism Ecozone” refers to a Tourism Development Zone/Tourism Estate which has been granted special economic zone status, through PEZA registration and issuance of the required Presidential Proclamation, with its metes and bounds delineated by the Proclamation pursuant to RA 7916. Pursuant to Board Resolution No. 00-411 dated 29 December 2000, in order to be entitled to PEZA incentives, a new Tourism Economic Zone must have an area of at least 25 hectares except for single locator economic zones which shall be covered by specific guidelines issued by PEZA.

“Retirement Ecozone Developer/Operator” refers to a business entity duly endorsed by the PRA and registered with PEZA to develop, operate and maintain a Retirement Ecozone Park/Center and provide the required infrastructure facilities and as may be required for retirement economic zone. PEZA-registered Retirement Economic Zones shall be located in priority areas endorsed by the PRA and must be at least 4 hectares. Retirement Ecozone refers to an estate which is highly developed or which has the potential to be developed into a Retirement

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Ecozone Park/Center whose metes and bounds are fixed or delimited by Presidential Proclamation. The retirement economic zone shall be planned and designed in accordance with the accreditation standards of the PRA to have support facilities and services required by the retirement industry. An “IT Park” or “IT Building” is an area or a building (the whole or a part of which) has been developed to provide infrastructure and other support facilities required by an IT Enterprise.

The PEZA Board, through its Board Resolution No. 12-610 dated 13 November 2012, withdrew (i) the 5% Gross Income Tax incentive to developers of Tourism Economic Zones in Metro Manila, Cebu City, Mactan Island and Boracay Island; and (ii) the income tax holiday (ITH) incentive and 5% GIT given to locator enterprises of Tourism Enterprise Zones in the aforesaid 4 areas. Tourism enterprise locators in these 4 areas continue to enjoy tax and duty-free importation and zero-VAT rating on local purchase of capital equipment. PEZA TEZ developers/operators. The new policy does not have retroactive effect and therefore, existing PEZA TEZ developers and operators and tourism enterprises located in TEZ in the 4 aforesaid areas shall not be covered by the new PEZA policy. Existing and future PEZA TEZ developers and tourism enterprise locators outside the 4 areas shall continue to be entitled to four (4) years ITH, as may be provided in and in accordance with the provisions of the IPP, and tax and duty-free importation of capital equipment required for the technical viability and operation of the registered activities of the enterprises. Upon expiry of the ITH period, PEZA-registered Tourism Ecozone locators are entitled to the 5% GIT incentive, provided, however, that they have the option to forego their ITH incentive entitlement and immediately avail of the 5% tax GIT incentive upon start of their commercial operations.

All PEZA-registered Tourism Developers/Operators and Locator Enterprises must conform with the development guidelines and operating standards of the Department of Tourism, land use and zoning regulations, as well as the policies and guidelines of other concerned government agencies, provided that in the case of Ecotourism Projects, endorsement from the National Ecotourism Steering Committee shall also be secured prior to PEZA registration.

PEZA-registered Tourism Ecozone Developers/Operators and Locators are entitled to the following non-fiscal incentives: (a) employment of foreign national, as provided under RA 7916; (b) Special Investor’s Resident Visa, as provided under Executive Order No. 63; and (c) Incentives under the Build-Operate-Transfer Law, as may be applicable, subject to prescribed guidelines.

Pursuant to Board Resolution No. 00-411 dated 29 December 2000, the PEZA Board withdrew the fiscal incentives granted to developers/operators of IT Parks and Buildings in Metro Manila except for those IT Parks in Metro Manila already covered by Presidential Proclamations and/or approved by the PEZA Board prior to the PEZA Board approval of Board Resolution No. 00-411, including facilities-providers in such IT Parks (including Eastwood City Cyberpark) which shall continue to enjoy fiscal incentives. Effective 17 February 2011, developers and operators of new IT Parks and Centers in Cebu City shall no longer be entitled to the 5% Gross Income Tax incentive. IT Parks and IT Enterprises not covered by this PEZA Board Resolution shall continue to enjoy fiscal and non-fiscal incentives (including ITH) for 4 years for non-pioneer projects, 6 years for pioneer projects and 3 years for expansion projects. Upon the expiry of the ITH period, IT Enterprises are entitled to the 5% GIT.

Retirement Economic Zone Developer/Operator of a proposed or partially developed Retirement Ecozone Park/Center shall be entitled to pay a special 5% tax on gross income, in lieu of all national and local taxes, except real property tax on land and shall be entitled to the following non-fiscal incentives: (a) Employment of foreign national; and (b) Special Investor’s Resident Visa, as provided under Executive Order No. 63.

The Company routinely secures the required governmental approvals for its projects during the planning and construction and marketing stages of project development. The Company is not aware of any pending legislation or governmental regulation that is expected to materially affect its business. The Company believes that it has obtained the required government approvals relevant for each project at its current state of development.

There are initiatives by Philippine lawmakers to revise the National Internal Revenue Code of 1997 (the “Tax Code”) through separate bills filed in the Senate and House of Representatives. These proposals comprise the second package of initiatives to amend certain provisions of the Tax Code as part of the Government’s Tax Reform Acceleration and Inclusion Program. These proposals have yet to be finalised and there is no certainty that these initiatives will pass into law or what such law may ultimately contain. Included among those proposals is the rationalisation of fiscal incentives such that only those that are performance-based, time-bound, targeted and transparent will be granted to investors and inclusion of a sunset-provision of a maximum of five (5) years for existing tax incentives.

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ENVIRONMENTAL LAWS

Development projects that are classified by law as environmentally critical or projects within statutorily defined environmentally critical areas are required to obtain an Environmental Compliance Certificate (“ECC”) prior to commencement. The DENR through its regional offices or through the Environmental Management Bureau (“EMB”), determines whether a project is environmentally critical or located in an environmentally critical area. As a requisite for the issuance of an ECC, an environmentally critical project is required to submit an Environmental Impact Statement (“EIS”) to the EMB while a project in an environmentally critical area is generally required to submit an Initial Environmental Examination (“IEE”) to the proper DENR regional office. In case of an environmentally critical project within an environmentally critical area, an EIS is required. The construction of major roads and bridges are considered environmentally critical projects for which EISs and ECCs are mandated.

The EIS refers to both the document and the study of a project’s environmental impact, including a discussion of the direct and indirect consequences to human welfare and ecological as well as environmental integrity. The IEE refers to the document and the study describing the environmental impact, including mitigation and enhancement measures, for projects in environmentally critical areas.

While the EIS or an IEE may vary from project to project, as a minimum, it contains all relevant information regarding the projects’ environmental effects. The entire process of organisation, administration and assessment of the effects of any project on the quality of the physical, biological and socio-economic environment as well as the design of appropriate preventive, mitigating and enhancement measures is known as the EIS System. The EIS System successfully culminates in the issuance of an ECC. The issuance of an ECC is a Government certification, indicating that the proposed project or undertaking will not cause a significant negative environmental impact; that the proponent has complied with all the requirements of the EIS System and that the proponent is committed to implement its approved Environmental Management Plan in the EIS or, if an IEE was required, that it shall comply with the mitigation measures provided therein.

Project proponents that prepare an EIS are required to establish an Environmental Guarantee Fund (“EGF”) when the ECC is issued to projects determined by the DENR to pose a significant public risk to life, health, property and the environment or where the project requires rehabilitation or restoration. The EGF is intended to answer for damages caused by such a project as well as any rehabilitation and restoration measures. Project proponents that prepare an EIS are mandated to include a commitment to establish an Environmental Monitoring Fund (“EMF”) when an ECC is eventually issued. The EMF shall be used to support the activities of a multi-partite monitoring team which will be organised to monitor compliance with the ECC and applicable laws, rules and regulations.

Aside from the EIS and IEE, engineering, geological and geo-hazard assessment are also required for ECC applications covering subdivisions, housing and other development and infrastructure projects.

All development projects, installations and activities that discharge liquid waste into and pose a threat to the environment of the Laguna de Bay Region are also required to obtain a discharge permit from the Laguna Lake Development Authority.

The Company incurs expenses for the purposes of complying with environmental laws that consist primarily of payments for Government regulatory fees. Such fees are standard in the industry and are minimal.

PROPERTY REGISTRATION AND NATIONALITY RESTRICTIONS

The Philippines has adopted a Torrens System of land registration which conclusively confirms land ownership which is binding on all persons, including the Government. Once registered, title to registered land becomes indefeasible after one year from the date of entry of the decree of registration registered lands cannot be lost through adverse possession or prescription. Presidential Decree No. 1529, as amended, codified the laws relative to land registration and is based on the generally accepted principles underlying the Torrens System.

After proper surveying, application, publication and service of notice and hearing, unregistered land may be brought under the system by virtue of judicial or administrative proceedings. In a judicial proceeding, the Regional Trial Court within whose jurisdiction the land is situated confirms title to the land. Persons opposing the registration may appeal the judgment to the Court of Appeals within 15 days from receiving the notice of judgment. After the lapse of the period of appeal, the Register of Deeds may issue an Original Certificate of Title. The decree of registration may be annulled on the ground of actual fraud within one year from the date of entry of the decree of registration. Similarly, in an administrative proceeding, the land is granted to the applicant by the DENR by issuance of a patent and the patent becomes the basis for issuance of the Original Certificate of Title by the Register

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of Deeds. All land patents such as homestead, sales and free patents, must be registered with the appropriate registry of deeds since the conveyance of the title to the land covered thereby takes effect only upon such registration.

Any subsequent transfer of encumbrance of the land must be registered in the system in order to bind third persons. Subsequent registration and a new Transfer Certificate of Title in the name of the transferee will be granted upon presentation of certain documents and payment of fees and taxes.

All documents evidencing conveyances of subdivision and condominium units should also be registered with the Register of Deeds. Title to the subdivision or condominium unit must be delivered to the purchaser upon full payment of the purchase price. Any mortgage existing thereon must be released within six months from the delivery of title. To evidence ownership of condominium units, a Condominium Certificate of Title is issued by the Register of Deeds.

The Philippine Constitution limits ownership of land in the Philippines to Filipino citizens or to corporations the outstanding capital stock of which is at least 60% owned by Philippine Nationals. Philippine National, as defined under the Foreign Investment Act, means a citizen of the Philippines, or a domestic partnership or association wholly-owned by citizens of the Philippines, or a corporation organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and the entitlement to vote is owned and held by citizens of the Philippines, or a corporation organized abroad and registered to do business in the Philippines under the Philippine Corporation Code, of which 100% of the capital stock outstanding and the entitlement to vote is wholly-owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least 60% of the fund will accrue to the benefit of Philippine nationals. While the Philippine Constitution prescribes nationality restrictions on land ownership, there is generally no prohibition against foreigners owning building and other permanent structures. However, with respect to condominium developments, the foreign ownership of units in such developments is limited to 40%.

PROPERTY TAXATION

Real property taxes are payable annually based on the property’s assessed value. The assessed value of property and improvements vary depending on the location, use and the nature of the property. Land is ordinarily assessed at 20% to 50% of its fair market value; buildings may be assessed at up to 80% of their fair market value; and machinery may be assessed at 40% to 80% of its fair market value. Real property taxes may not exceed 2% of the assessed value in municipalities and cities within Metro Manila or in other chartered cities and 1% in all other areas. An additional special education fund tax of 1% of the assessed value of the property is also levied annually.

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MANAGEMENT

The overall management and supervision of Company is undertaken by its Board. The executive officers and management team cooperate with the Board by preparing appropriate information and documents concerning the Company’s business operations, financial condition and results of operations for its review.

BOARD OF DIRECTORS

Currently, the Board consists of thirteen members. The table below sets forth the members of the Board as at the date of March 31, 2020.

Name Age Citizenship Position Andrew L. Tan .................................... 70 Filipino Director, Chairman and President /CEO Katherine L. Tan .................................. 68 Filipino Director Kingson U. Sian .................................. 58 Filipino Director and Executive Director Enrique Santos L. Sy ........................... 70 Filipino Director Jesus B. Varela .................................... 63 Filipino Independent Director Cresencio P. Aquino* .......................... 66 Filipino Independent Director Roberto S. Guevara 68 Filipino Independent Director

*Cresencio P. Aquino was elected as Independent Director on 15 February 2018 to replace Gerardo C. Garcia (deceased).

MANAGEMENT / EXECUTIVE OFFICERS

The following table sets forth the members of the Company’s senior leadership and other executive officers as of March 31, 2020:

Name Age Citizenship Position Lourdes T. Gutierrez-Alfonso ............. 56 Filipino Chief Operating Officer, Kevin Andrew L. Tan .......................... 40 Filipino Executive Vice President and Chief

Strategy Officer, Francisco C. Canuto ............................ 62 Filipino Senior Vice President, Chief Financial

Officer, Treasurer, Compliance Office, Corporate Information Officer and Chief Audit Executive

Noli D. Hernandez ............................... 49 Filipino Executive Vice President for Sales and Marketing

Giovanni C. Ng .................................... 45 Filipino Senior Vice President and Finance Director

Philipps C. Cando ................................ 61 Filipino Senior Vice President for Operations Maria Victoria M. Acosta .................... 58 Filipino Senior Vice President for International

Marketing and Leasing Division Maria Carla T. Uykim ......................... 43 Filipino Head of Corporate Advisory and

Compliance Rafael Antonio S. Perez ...................... 51 Filipino Head of Human Resources & Corporate

Administration Division Graham M. Coates ............................... 55 British Head of Megaworld Lifestyle Malls Kimberly Hazel A. Sta. Maria ............. 39 Filipino Assistant Vice President for Corporate

Communications and Advertising Carmen C. Fernando ............................ 62 Filipino Managing Director for Prestige Hotels

& Resorts, Inc. Cheryll B. Sereno ................................ 40 Filipino Chief Risk Officer Anna Michelle T. Llovido ................... 41 Filipino Corporate Secretary Rolando D. Siatela ............................... 59 Filipino Assistant Corporate Secretary

Certain information with respect to the Company’s senior leadership and other executive officers is set out below:

Mr. Andrew L. Tan is the founder of the Company and has served as its Chairman and President since its incorporation in 1989. He pioneered the live-work-play-learn model in real estate development through the Company’s integrated township communities, fueling the growth of the business process outsourcing (BPO) industry. He embarked on the development of integrated tourism estates through publicly-listed Alliance Global Group, Inc. and Global-Estate Resorts, Inc., which he both chairs, while continuing to focus on consumer-friendly

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food and beverage and quick service restaurants. Mr. Tan serves as Chairman of the Board of Empire East Land Holdings, Inc., a publicly-listed subsidiary of the Company, and Suntrust Properties, Inc., a subsidiary engaged in the development and marketing of affordable housing projects. He also serves in the boards of other Megaworld subsidiaries including Eastwood Cyber One Corporation, Megaworld Land, Inc., Megaworld Central Properties Inc., Megaworld Bacolod Properties, Inc., Mactan Oceanview Properties and Holdings, Inc., Megaworld Newport Property Holdings, Inc. and Richmonde Hotel Group International Limited. He is also the Chairman of Emperador Inc., a public-listed company which owns Emperador Distillers, Inc., the leading brandy manufacturer and distributor in the Philippines. Mr. Tan is Chairman of Megaworld Foundation, the Company’s corporate social responsibility arm, which primarily focuses on the promotion of education through scholarship programs for financially handicapped but deserving students, and supports causes that promote poverty alleviation, people empowerment, social justice, good governance and environmental conservation. He is a director of Travellers International Hotel Group, Inc., a publicly-listed company, which owns Resorts World Manila, and the food and beverage companies, Emperador Distillers, Inc. Alliance Global Brands, Inc. and Golden Arches Development Corporation.

Ms. Katherine L. Tan has served as Director of the Company since 1989. She is concurrently a Director and Treasurer of publicly-listed Alliance Global Group, Inc. and Emperador Inc. She has extensive experience in the food and beverage industry and is currently Director and Corporate Secretary of The Bar Beverage, Inc. and Director and President of Andresons Global, Inc., Raffles & Company, Inc., The Andresons Group, Inc. and Choice Gourmet Banquet, Inc. She is also a Director and Treasurer of Alliance Global Brands, Inc. and Emperador Distillers, Inc.

Mr. Kingson U. Sian has served as Director of the Company since April 13, 2007. He joined the Megaworld Group in September 1995 as Senior Vice President and is currently Executive Director of the Company. He is concurrently Director, President and Chief Operating Officer of publicly-listed Alliance Global Group, Inc. and Travellers International Hotel Group, Inc. He is the Chairman and President of Prestige Hotels & Resorts, Inc. and Luxury Global Hotels and Leisure, Inc., the Senior Vice President of Megaworld Land, Inc. and the President of Eastwood Cyber One Corporation. Mr. Sian was formerly a Vice President of FPB Asia Ltd/First Pacific Bank in Hong Kong from 1990 to 1995. Prior to that, he was connected with Citicorp Real Estate, Inc. in the United States from 1988 to 1990. Mr. Sian graduated from the University of the Philippines with the degree of Bachelor of Science in Business Economics. He obtained his Master’s Degree in Business Administration for Finance and Business Policy from the University of Chicago.

Mr. Enrique Santos L. Sy has served as Director of the Company since July 2009. He was formerly a Vice President for the Corporate Communications & Advertising Division of the Company until his retirement in March 2011. He is concurrently a Director of publicly-listed Empire East Land Holdings, Inc. and a Director of Eastin Holdings, Inc. and First Oceanic Property Management Inc. He is also a Director and the Corporate Secretary of Asia Finest Cuisine, Inc. and Soho Café & Restaurant Group, Inc. and Corporate Secretary of Empire East Communities, Inc. Mr. Sy previously worked as Advertising Manager of Consolidated Distillers of the Far East, Inc., Creative Director of AdCentrum Advertising, Inc., Copy Chief of Admakers, Inc. and Peace Advertising Corporation, and Creative Associate of Adformatix, Inc. Mr. Sy graduated with honors from the Ateneo de Manila University with the degree of Bachelor of Arts in Communication Arts.

Mr. Jesus B. Varela has served as Director of the Company since June 2016. He concurrently serves as independent director in the boards of publicly-listed, Global-Estate Resorts, Inc. and Travellers International Hotel Group, Inc. He is also the Chairman of the Philippine Chamber of Commerce and Industry, GS1 Philippines (Barcode of the Philippine), and New Lights Technologies, Inc. He is the President and CEO of the Advancement of Workers’ Awareness Regarding Employment (AWARE) Foundation, Inc., and President of Foundation for Crime Prevention, Philippine Greek Business Council and Philippine Peru Business Council. He is also the Director General of the International Chamber of Commerce Philippines (ICC-Philippine), Receiver of J-Phil Marine Shipping Inc., and Member of the Committee for Accreditation of Cargo Surveying Companies. Mr. Varela has more than twenty years of experience in the fields of marketing, human resources, international labor affairs, agriculture, and commerce, among others. He has done executive work with the Department of Agriculture, National Food Authority Council, Philippine Genetics, Inc., National Irrigation Administration, Philippine Planters Products, National Agri- Business Corporation, Agriculture Anti-Smuggling Task Force, and Nautical Highway Board. He served as Labor Attaché to Kobe, Japan, to the Commonwealth of Northern Marianas Island, and to Athens. Mr. Varela obtained his bachelor’s degree in Economics from Ateneo De Manila University. He attended training courses in Labor Administration and Policy Formulation under the International Labor Organization/ARPLA program, the Corporate Planning Course at the Center for Research Communication, Foreign Exchange Training by Metro Bank and Forex Club of the Philippines, Systems Analysis by the

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Presidential Management Staff, Asian Productivity Seminar and other in-house seminars conducted by the Department of Labor and the Development Academy of the Philippines.

Atty. Cresencio P. Aquino is currently the Managing Partner of The Law Firm of CP Aquino & Partners. He concurrently serves as independent director in the boards of publicly-listed, Global-Estate Resorts, Inc. and Empire East Land Holdings, Inc. He is a graduate of the San Sebastian College Manila with degrees in Bachelor of Arts and Bachelor of Laws. Atty. Aquino has extensive experience in both the public and private sectors as Director of Clark Development Corporation from 2012 to 2016., Independent Director of Suntrust Home Developers, Inc. from 2009 to 2012, Corporate Legal Counsel of MBF Card and One Card Corporation from June 1998 to May 2004, Special Assistant and Chief Legal Counsel of the Government Service Insurance System from September 1992 to June 1998, Director of the Meat Packaging Corporation of the Philippines from September 1992 to June 1998, Personnel and Administrative Manager, Corporate Secretary and Chief Legal Counsel of ComSavings Bank from September 1992 to June 1998, and Executive Director of the Department of Interior and Local Government (“DILG”) from 1988 to 1992, and concurrently Ex-Officio Commissioner of the DILG with the Housing and Land Use Regulatory Board also for the same period. Atty. Aquino He was formerly an Associate Professor with the San Sebastian College. Atty. Aquino has been a member of the Integrated Bar of the Philippines since 1978 and is also a member of the Capitol Bar Association, Knights of Columbus, and the Lawyers League of the Philippines.

Mr. Roberto S. Guevara has been an Independent Director of the Company since June 20, 2001. He is Chairman of the Board of Directors of Seed Capital Ventures, Inc. He serves on the board of other companies, such as G & S Transport Corporation, a licensee of Avis Car Rentals, Guevent Industrial Development Corporation, and Investment and Capital Corporation of the Philippines, and as Independent Director of First Centro, Inc., Honeycomb Builder and Kalahi Realty, Inc. Mr. Guevara graduated from San Beda College in 1974, and received graduate degree from the Asian Institute of Management and a post graduate course at the Institute for Management Development (IMD), in Lausanne, Switzerland.

Ms. Lourdes T. Gutierrez-Alfonso joined the Company in 1990. She is the Company’s Chief Operating Officer and is a member of the Company’s Management Executive Committee. Ms. Gutierrez has extensive experience in real estate and a strong background in finance and marketing. A certified public accountant by profession, she previously held the position of Senior Executive Vice President for Finance and Administration in the Company. Ms. Gutierrez is Chairman of the property management company, First Oceanic Property Management, Inc. She serves as director in numerous affiliate companies including publicly-listed Global-Estate Resorts, Inc. and Suntrust Properties, Inc., Twin Lakes Corporation, Mactan Oceanview Properties and Holdings, Inc., Megaworld Resort Estates, Inc., Oceantown Properties, Inc., Megaworld Bacolod Properties, Inc., Eastwood Cyber One Corporation, Davao Park District Holdings, Inc., Megaworld Cebu Properties, Inc. and Prestige Hotels & Resorts, Inc. She is currently the Chairman of Belmont Newport Luxury Hotels, Inc., Megaworld Global-Estate, Inc., Savoy Hotel Manila, Inc. and Southwoods Mall, Inc. She is also a trustee and a Corporate Secretary of Megaworld Foundation, Inc.

Mr. Kevin Andrew L. Tan holds the rank of Executive Vice President and Chief Strategy Officer of the Company. He previously held the position of Senior Vice President for Commercial Division which markets and operates the Megaworld Lifestyle Malls including Eastwood Mall and The Clubhouse at Corinthian Hills in Quezon City, Venice Piazza at McKinley Hill and Burgos Circle at Forbestown Center, both in Fort Bonifacio, California Garden Square in Mandaluyong City, Newport Mall at Resorts World Manila in Pasay City, Lucky Chinatown Mall in Binondo, Manila and Uptown Mall in Bonifacio Global City. He is the Chief Executive Officer and Vice Chairman of public-listed company, Alliance Global Group, Inc. He is also the concurrently a Director of publicly-listed companies, Empire East Land Holdings, Inc., Emperador Inc. and Global-Estate Resorts, Inc. and of Eastwood Cyber One Corporation, Uptown Cinemas, Inc., Megaworld Central Properties Inc., Twin Lakes Corporation, Megaworld Land, Inc., Townsquare Development, Inc., Emperador Distillers, Inc., Alliance Global Brands, Inc., Anglo Watsons Glass, Inc., Yorkshire Holdings, Inc., The Bar Beverage, Inc., Emperador Brandy, Inc., and New Town Land Partners, Inc. He is also a trustee and a Treasurer of Megaworld Foundation, Inc. He has over 11 years of experience in retail leasing, marketing and operations. Mr. Tan obtained his bachelor’s degree in Business Administration major in Management from the University of Asia and the Pacific.

Mr. Francisco C. Canuto joined the Company in 1995. He is a Certified Public Accountant and currently holds the rank of Senior Vice President and Treasurer of the Company and is Senior Assistant to the Chairman. He is a member of the Company’s Management Executive Committee. He holds a bachelor’s degree in Commerce major in Accounting and a Master’s Degree in Business Administration. He is concurrently Director of Megaworld Global-Estate, Inc. and Eastwood Property Holdings, Inc., Director and Corporate Secretary of Megaworld Central Properties, Inc. and Director and Treasurer of Megaworld Cebu Properties, Inc., Twin Lakes Corporation, Oceantown Properties, Inc., Megaworld Resort Estates, Inc., Megaworld Land, Inc., Megaworld-Daewoo

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Corporation, Eastwood Cyber One Corporation, Asia’s Finest Hotels & Resort, Inc., and Prestige Hotels & Resorts, Inc. He serves as a Director and President of Arcovia Properties, Inc., Megaworld Cayman Islands, Inc., Lucky Chinatown Cinemas, Inc., Festive Walk Cinemas, Inc., Southwoods Cinemas, Inc., McKinley Cinemas, Inc., Uptown Cinemas, Inc. and Gilmore Property Marketing Associates, Inc. He is also the President of Megaworld Foundation, Inc. Before joining the Company, he worked as Audit Manager of SGV & Company and Controller of Federal Express Corporation.

Mr. Noli D. Hernandez joined the Company in February 1994 as a property consultant. He is currently an Executive Vice President for Sales and Marketing. Mr. Hernandez rose from the ranks in the Company, starting out as a property consultant then becoming Sales Manager, Assistant Vice President, Senior Assistant Vice President, Vice President and Senior Vice President for Marketing. Mr. Hernandez graduated from the University of the Philippines with a degree of Bachelor of Science in Political Science. He serves as Director and President of Megaworld Cebu Properties, Inc. and President of the Newtown School of Excellence in the Mactan Newtown development of the Company.

Mr. Giovanni C. Ng is a Senior Vice President and Finance Director of the Company. He serves as director in Eastwood Property Holdings, Inc., Oceantown Properties, Inc., Empire East Communities, Inc., Gilmore Property Marketing Associates, Inc., First Centro, Inc., Valle Verde Properties, Inc., Lucky Chinatown Cinemas, Inc., McKinley Cinemas, Inc., Uptown Cinemas, Inc., Mactan Oceanview Properties and Holdings, Inc. and New Town Land Partners, Inc. He also serves as Treasurer of publicly-listed Empire East Land Holdings, Inc. and Adams Properties, Inc. and Townsquare Development, Inc. He is also a Director and Corporate Secretary of Megaworld Land, Inc. Previously, he worked as Analyst Associate in Keppel IVI Investments. Mr. Ng obtained his bachelor’s degree in Quantitative Economics from the University of Asia and the Pacific, graduating summa cum laude in 1995.

Mr. Philipps C. Cando is a licensed civil engineer who has over 28 years of experience in project development and construction management. Mr. Cando joined the Company in 1994 as a construction manager and eventually rose to become head of the Company’s project management team. Prior to joining Megaworld, Mr. Cando was employed for over 12 years in construction design and consultancy firms, Arenas-Tugade Associates and Massive Design Group. During his more than 15 years with the Company, Mr. Cando was responsible for the construction management of over thirty-three (33) project developments of the Company including residential and office condominium projects, hotel, mall and retail complexes as well as large scale mixed-use developments such as McKinley Hill and Eastwood City. He now heads the Company’s Operations Division and responsible for the construction development of large scale developments to include, Newport City, Forbes Town Center at Global City, Manhattan Garden City at Araneta Center, Cityplace at Binondo and Bonifacio Uptown. Mr. Cando serves as Director and President of Oceantown Properties, Inc.

Ms. Maria Victoria M. Acosta is Senior Vice President for International Marketing. She joined the Company in September 1999. Prior to her appointment, she had twenty years of marketing experience in real estate and consumer products with other companies. Ms. Acosta was Executive Vice President and Chief Operating Officer of Empire East Land Holdings, Inc. from 1997 to 1998 and was Executive Director for Marketing from 1996 to 1997. Earlier, she also served as Senior Vice President and General Manager of Raffles & Co., Inc. She is concurrently Director and Corporate Secretary of Eastwood Property Holdings, Inc. and Corporate Secretary of Gilmore Property Marketing Associates, Inc.

Ms. Maria Carla T. Uykim is the head of the Corporate Advisory and Compliance of Megaworld Corporation and a member of the Management Executive Committee. She is primarily responsible for the special projects group which handles the negotiation and documentation of the Company’s various land acquisitions, joint venture agreements and other corporate transactions. She also heads the property registration group, which is in charge of the registration of the Company’s real estate projects, including the deeds of restriction, and issuance of the certificates of title for the individual units or lots and the intellectual property group, which handles the registration, protection and enforcement of the Company’s trademarks. She is concurrently the Corporate Secretary of San Vicente Coast, Inc., Northwin Properties, Inc. and Maple Grove Land, Inc. and a Director and Corporate Secretary of Luxury Global Malls, Inc. She joined the Company in April 2007 as a Senior Manager of the Corporate Management Department and handled buyer’s concerns, including documentation of sales transactions, labor and human resources issues, and the registration and protection of intellectual property. Prior to joining the Company, Atty. Uykim was an Associate at Andres Marcelo Padernal Guerrero and Paras law offices from August 2005 to April 2007, where she specialized in labor and corporate law, and at ACCRA Law from February 2003 to January 2004, where she practiced immigration law. She also served as Chief of Staff of Congresswoman Remedios L. Petilla from July 2004 until June 2005. Atty. Uykim obtained her Juris Doctor Degree from the Ateneo De Manila

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School of Law and is a graduate of the double degree program of De La Salle University, with a Bachelor of Arts in Psychology and a Bachelor of Science in Marketing Management.

Mr. Rafael Antonio S. Perez joined the Company in June 2008 as head of the Human Resources Division. He is currently the Vice President for Human Resources & Corporate Administration Division. He is concurrently the President and Managing Director of Global One Integrated Business Services, Inc. and Luxury Global Malls, Inc. Mr. Perez graduated Cum Laude from the Philippine Normal University with the degree of Bachelor of Arts in Psychology.

Mr. Graham M. Coates, a British national, has an extensive international management experience in numerous culturally diverse locations such as Asia (twenty years), Europe (eight years) and the United States (four years). He joined the company in January 2019. Throughout his career, he has demonstrated a record of sustained profitable growth, building world-class organizations and driving change for global, multinational and family owned corporations and entrepreneurial companies worldwide. Graham is skilled in P&L, Operations, Merchandising, Marketing, Customer Development, Business Development and Logistics. He brings with him a wealth of experience that cuts through many retail formats and cross functions. He has the unique advantage of being familiar with all retail formats, together with a solid perspective of mall and landlord operations.

Mr. Coates is the President of the Coates Charity Foundation, a non-profit organization set up several years ago to support Christian missionaries, students, fellow church members and others in need. He is the Vice President and board member of HAND Philippines, an offshoot of HAND International, a Christian humanitarian aid organization that uses its resources and efforts on helping the rehabilitation needs of the natural disaster-stricken areas in the Philippines, an example being Typhoon Yolanda victims.

Ms. Kimberly Hazel A. Sta. Maria holds the rank of Assistant Vice President and heads the Corporate Communication and Advertising Division of the Company. She joined the Company in 2002 as Head Writer and is responsible for the creative conceptualization and production of advertising and marketing campaigns and materials for the Company’s projects. Ms. Sta. Maria is a cum laude graduate of the University of the Philippines Manila and holds a bachelor’s degree in Organizational Communication.

Ms. Carmen C. Fernando is Managing Director for Prestige Hotels & Resorts, Inc., which operates the Richmonde Hotel brand of the Company. She has held the position since July 1999. She joined in 1997 as Director of Finance for Megaworld Land, Inc. and was responsible for pre-operating activities for Richmonde Hotel Ortigas. In January 1999 she became the Financial Controller for Prestige Hotels & Resort, Inc. Prior to this, she was employed with Mandarin Oriental Manila as Financial Controller and with Sycip, Goress, Velayo & Co. as a Staff Auditor III. Ms. Fernando obtained her bachelor’s degree in Commerce major in Accounting from the University of Santo Tomas and she obtained her master’s degree in Business Administration from the University of the Philippines. Ms. Fernando is a Certified Public Accountant and a member of the Philippine Institute of Certified Public Accountants.

Ms. Cheryll B. Sereno is the Chief Risk Officer. She joined the Company in November 2017 and currently heads the Opportunity and Risk Management department. Her responsibilities include identification and assessment of business risks and ensuring that the Company continuously develop risk management strategies that are aligned with its corporate goals and objectives. Prior to joining the Company, Ms. Sereno worked in the field of external audit, finance and has extensive experience handling Enterprise Risk Management and Business Continuity Management for the real estate industry. She graduated from Ateneo de Naga University with the degree of Bachelor of Science in Accountancy. Ms. Sereno is a Certified Public Accountant and a Certified Business Continuity Professional.

Ms. Anna Michelle T. Llovido is the Corporate Secretary of the Company and has held this position since August 2014. She concurrently serves as Corporate Secretary of Emperador Inc. and as Senior Corporate Legal Counsel of Emperador Distillers, Inc. She is an experienced in-house counsel with 14 years of practice in mergers and acquisitions, financing, regulatory compliance, transactional contracts negotiation, data privacy, litigation, labor and intellectual property law. Prior to her employment in Emperador Distillers, Inc., Ms. Llovido was a Manager at Reeves & Associates International Corporation and was charged with the management of its Philippine representative office. She also served as Legal Counsel to Transnational Diversified Group, Inc. from May 2008 to September 2009 where she serviced the legal requirements of over 30 companies engaged in total logistics, ship management, air and travel services, and information and communications technology. She was an Associate Lawyer at Tantoco Villanueva De Guzman & Llamas law offices from April 2006 to April 2008. Ms. Llovido obtained her bachelor’s degrees in Laws in 2004 and Hotel and Restaurant Management in 1999 from the University of Santo Tomas.

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Ms. Rolando D. Siatela serves as Assistant Corporate Secretary of the Company. He is also an Assistant Vice President of the Company. He concurrently serves in publicly-listed Suntrust Home Developers, Inc. as Corporate Secretary and Corporate Information Officer, and in Alliance Global Group, Inc., Emperador Inc., Suntrust Properties, Inc. and Global-Estate Resorts, Inc. as Assistant Corporate Secretary. He is a member of the board of Asia Finest Cuisine, Inc. Prior to joining Megaworld Corporation, he was employed as Administrative and Personnel Officer with Batarasa Consolidated, Inc.

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PRINCIPAL SHAREHOLDERS

The following table sets forth the twenty largest shareholders of the Company as of March 31, 2020.

Number of Name of Shareholder Shares Held Percentage of Ownership

Alliance Global Group, Inc. . . . . . . . . . . . . . . . . . . . . . 14,090,219,058

36.90% New Town Land Partners, Inc. . . . . . . . . . 5,668,530,324 14.84% PCD Nominee Corporation (Non-Filipino). . . . . . . . . . 5,602,672,367 14.67%

PCD Nominee Corporation (Filipino) . . . . . . . . . . . . . 5,114,577,044

13.39%

First Centro, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873,012,500

2.29%

Richmonde Hotel Group International Limited . . . . . . 420,000,000

1.10%

Megaworld Cebu Properties, Inc. . . . . . . . . . . . . . . . . . 143,000,000

0.37% Andrew L. Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000,000 0.25%

The Andresons Group, Inc. . . . . . . . . . . . . . . . . . . . . . 89,760,000

0.24% Simon Lee Sui Hee . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,845,200 0.02% OCBC Securities Phils., Inc. Fao: Santiago J. Tanchan, Jr. ………………………………………… 7,371,000

0.02%

Luisa Co Li . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,525,697

0.01%

Evangeline Abdullah . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,400,000

0.01%

Jasper Karl Tanchan Ong . . . . . . . . . . . . . . . . . . . . . . . 5,370,300

0.01% Winston Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,180,760 0.01% Luis U. Ang &/Or Teresa W. Ang . . . . . . . . . . . . . . . . 4,000,000 0.01% Luis Ang &/Or Lisa Ang . . . . . . . . . . . . . . . . . . . . . . . 3,785,532 0.01% Lucio W. Yan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,780,000 0.01% Alberto Mendozas &/or Jeanie C. Mendoza . . . . . . . . . 2,587,454 0.01% Luis U. Ang &/or Teresa W. Ang . . . . . . . . . . . . . . . . . 2,529,345 0.01%

Number of Preferred Name of Shareholder Shares Held Percentage of Ownership

Alliance Global Group, Inc. . . . . . . . . . . . . . . . . . . . . . 6,000,000,000

15.71% Security ownership of Management as of March 31, 2020

Amount & nature of Percent Title of Class Name of Beneficial Owner beneficial ownership* Citizenship of Class

Common . . . . . . . . Andrew L. Tan (Director) 95,000,000 Filipino 0.24877% 1,891,632(1) 0.00495%

20,090,219,058(2)

52.6096%

5,668,530,324(3)

14.8440% Common Cresencio P. Aquino 1 Filipino 0.00% Common . . . . . . . . Kingson U. Sian (Director) 1 Filipino 0.00%

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Amount & nature of Percent Title of Class Name of Beneficial Owner beneficial ownership* Citizenship of Class

612,500(4) Common . . . . . . . . Katherine L. Tan (Director) 1,891,632 Filipino 0.00495% 95,000,000(5) Common . . . . . . . . Jesus B. Varela (Director) 1 Filipino 0.00% Common . . . . . . . . Roberto S. Guevara (Director) 1 Filipino 0.00% Common . . . . . . . . Enrique Santos L. Sy (Director) 80,553 Filipino 0.00021%

Common . . . . . . . . Lourdes T. Gutierrez-Alfonso 806,271 Filipino 0.00025

% 167,973(6) 0.00097% Common . . . . . . . . Francisco C. Canuto 369,054 Filipino 0.00097% Common Philipps C. Cando 0 Filipino 0.00% Common . . . . . . . . Giovanni C. Ng 0 Filipino 0.00% Common . . . . . . . . Maria Victoria M. Acosta 0 Filipino 0.00% Common . . . . . . . . Noli D. Hernandez 0 Filipino 0.00% Common . . . . . . . . Kevin Andrew L. Tan 367,205(7) Filipino 0.00096% Common . . . . . . . . Maria Carla T. Uykim 0 Filipino 0.00% Common Graham M Coates 0 British 0.00% Common . . . . . . . . Rafael Antonio S. Perez 0 Filipino 0.00% Common . . . . . . . . Kimberly Hazel A. Sta. Maria 0 Filipino 0.00% Common . . . . . . . . Carmen C. Fernando 0 Filipino 0.00% Common Cheryll B Sereno 0 Filipino 0.00% Common . . . . . . . . Anna Michelle T. Llovido 0 Filipino 0.00% Common . . . . . . . . Rolando D. Siatela 0 Filipino 0.00% 99,584,689 (direct) 0.25519% Notes:

(1) Indirect ownership; shares beneficially owned by spouse Katherine L. Tan.

(2) Indirect ownership; shares held by Alliance Global Group, Inc., which normally authorises Andrew L. Tan, in his capacity as Chairman of the Company, or in his absence the Chairman of the meeting, to vote AGIs common shares in the Company.

(3) Indirect ownership; shares held by NTLPI which normally authorises Andrew L. Tan, in his capacity as Chairman of the Company, or in his absence the Chairman of the meeting, to vote NTLPIs common shares in the Company.

(4) Shares are lodged with PCD Nominee Corporation.

(5) Indirect ownership; shares beneficially owned by spouse Andrew L. Tan.



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RELATED PARTY TRANSACTIONS

The Issuer and its subsidiaries, in their ordinary course of business, engage in transactions with its affiliates. The Issuer’s policy with respect to related party transactions is to ensure that these transactions are entered into on terms comparable to those available from unrelated third parties.

Transactions with related parties include investments in and advances granted to or obtained from subsidiaries, associates and other related parties. Other related parties include joint venture partners and investees which investments are accounted for at cost and other entities which are owned and managed by investors/owners of the Issuer. Advances granted to joint venture partners are in the nature of cash advances made to landowners under agreements covering the development of parcels of land, which are to be used for pre-development expenses such as relocation of existing occupants. Repayment of these advances shall be made upon completion of the project development either in the form of the developed lots corresponding to the landowner’s share in saleable lots or in the form of cash to be derived from sales of the landowner’s share in the saleable lots and residential and condominium units. The commitment for cash advances under the agreements has been fully granted by the Issuer.

Advances granted to and obtained from subsidiaries, associates and other related parties are for purposes of working capital requirements.

Other related party transactions include collections from sales of land made in prior years to an associate company on an instalment basis; as part of the transaction, the associate entered into a management agreement with the Issuer, whereby the Issuer provides overall administration services in relation to the property.

In addition, the Issuer avails itself of the marketing services of Eastwood Property and Holdings, Inc. (“EPHI”), a wholly-owned subsidiary of Empire East, Megaworld Newport Property Holdings, Inc. (“MNPHI”), Megaworld Resort Estate, Inc. (“MREI”) and Megaworld Land, Inc. (“MLI”), which acts as a manager and leasing agent for the commercial properties of the Issuer. As consideration for said marketing services, the Issuer pays commission based on contracted terms. Commission expenses charged by EPHI and MLI are based on prevailing market rates.

Other than those disclosed in the Issuer’s financial statements, the Issuer has not entered into any other related party transactions.

For further details on the Issuer’s related party transactions, see note 27 to the Issuer’s audited consolidated financial statements and note 8 to the interim condensed consolidated financial statements found elsewhere in this Offering Circular.

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DESCRIPTION OF MATERIAL INDEBTEDNESS

As of March 31, 2020, the Company’s outstanding long-term borrowings amounted to ₱78.9 billion, 27% of which was denominated in U.S. dollars. All of the Company’s consolidated loans are unsecured.

The Company also has arrangements with various banks and financial institutions to meet short-term working capital requirements. As of March 31, 2020, 0.09% of the Company’s borrowings represent short-term borrowings.

The following table describes the Company’s long-term indebtedness (consolidated) as of March 31, 2020:

Description of Indebtedness Borrower Lender Maturity

Outstanding Amount as of March 31, 2020

(in ₱ millions)

Long-Term Debt Loan Megaworld Corporation BDO Unibank 31-Mar-2022 3,750.0 Loan Megaworld Corporation BDO Unibank 4-Dec-2020 937.5 Loan Megaworld Corporation BDO Unibank 17-Dec-2021 3,500.0 Loan Megaworld Corporation BDO Unibank 4-Dec-2024 5,000.0 Loan Megaworld Corporation RCBC 4-Aug-2021 1,153.8 Loan Megaworld Corporation RCBC 25-Nov-2022 2,307.7 Loan Megaworld Corporation Unionbank of the Philippines 31-Aug-2021 1,000.0 Loan Megaworld Corporation Metrobank 25-Nov-2021 2,187.5 Loan Megaworld Corporation Metrobank 9-Dec-2022 3,469.7 Loan Megaworld Corporation Metrobank 30-Jul-2021 5,000.0 Loan Megaworld Corporation Metrobank 23-Sep-2024 4,881.6 Loan Megaworld Corporation DBP 3-Dec-2023 5,000.0 Loan Megaworld Corporation DBP 20-Mar-2025 5,000.0 Local Bonds Megaworld Corporation - 28-Mar-2024 12,000.0 Dollar Bonds Megaworld Corporation - 12-Apr-2023 12,760.8 Perpetual Bonds Megaworld Corporation - - 10,387.0 Loan Global-Estate Resorts, Inc. Unionbank of the Philippines 30-Jun-2020 115.4 Loan Global-Estate Resorts, Inc. BDO Unibank 4-Jun-2021 625.0 Loan Global-Estate Resorts, Inc. BDO Unibank 25-Jun-2024 2,000.0 Loan Global-Estate Resorts, Inc. RCBC Corporation 11-Dec-2022 1,375.0 Loan Twin Lakes Corporation BDO Unibank 22-Aug-2024 1,000.0 Loan Empire-East Land Holdings, Inc. BDO Unibank 23-Feb-2021 400.0 Loan Empire-East Land Holdings, Inc. BDO Unibank 30-Sep-2022 916.7 Loan Suntrust Properties, Inc. BDO Unibank 18-Sep-2020 250.0 Loan Suntrust Properties, Inc. BDO Unibank 14-Dec-2021 700.0 Loan Suntrust Properties, Inc. BDO Unibank 27-Jun-2025 2,200.0 Loan La Fuerza, Inc. BDO Unibank 4-Dec-2020 93.7 Loan Suntrust Properties, Inc. Asia United Bank Various 1,160.0 Loan Suntrust Properties, Inc. China Bank Savings Various 76.2 Loan Suntrust Properties, Inc. BDO Unibank Various 55.7 Loan Suntrust Properties, Inc. Maybank Philippines, Inc. Various 71.5 Loan Suntrust Properties, Inc. Bank of the Philippine Islands Various 17.1 TOTAL LONG-TERM BORROWINGS 89,391.9

Less: Issue costs* (366.7) Long Term Borrowings 89,025.2 Add: Short Term Borrowings 70.2 Total Long and Short-term Borrowings 89,095.4

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TAXATION

The statements herein regarding taxation are based on the laws in force as at the date of this Offering Circular and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The information provided below does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, own or dispose of the Notes. In particular, the information does not consider any specific facts or circumstances that may apply to a particular purchaser. Neither these statements nor any other statements in this Offering Circular are to be regarded as advice on the tax position of any Noteholder, or of any person acquiring, selling or otherwise dealing with the Notes or on any tax implication arising from the acquisition, sale or other dealings in respect of the Notes. The statements do not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in notes or commodities) may be subject to special rules.

Prospective investors of the Notes are advised to consult their own tax advisers concerning the overall tax consequences of their purchase, ownership and disposition of the Notes, including the effect of any state or local taxes, under the tax laws applicable in the Philippines and each country of which they are residents.

PHILIPPINE TAXATION

The following is a general description of certain Philippine tax aspects of the Notes. It is based on Republic Act No. 8424, otherwise known as the “National Internal Revenue Code of 1997” (the “Philippine Tax Code”), as amended by Republic Act No. 10963, otherwise known as the TRAIN, the regulations promulgated thereunder and judicial and ruling authorities in force as at the date of this Offering Circular, all of which are subject to changes occurring after such date, which changes could be made on a retroactive basis.

Under the Philippine Tax Code, the types of taxpayers may be resident citizens, non-resident citizens, resident aliens, non-resident aliens doing business in the Philippines, non-resident aliens not doing business in the Philippines, resident foreign corporation, or non-resident foreign corporations. As used in this section, the term “resident citizen” is an individual who is both a citizen and a resident of the Philippines; a “non-resident citizen” is an individual who is a citizen but not a resident of the Philippines; a “resident alien” refers to an individual whose residence is within the Philippines and who is not a citizen thereof; a “non-resident alien” shall mean an individual whose residence is not within the Philippines and who is not a citizen of the Philippines. A non-resident alien who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during any calendar year is considered a “non-resident alien engaged in trade or business in the Philippines”; otherwise, such non-resident alien who is actually within the Philippines for an aggregate period of 180 days or less during any calendar year is considered a “non-resident alien not engaged in trade or business in the Philippines”. A “domestic corporation” is a corporation created or organised under Philippine laws. A “resident foreign corporation” is a foreign corporation engaged in trade or business in the Philippines and a “non-resident foreign corporation” is a foreign corporation not engaged in trade or business within the Philippines.

Of the different classes of taxpayers under the Tax Code, only (1) resident citizens and (2) domestic corporations are subject to Philippine tax in respect of all sources of income whether these are derived from within or outside the Philippines. The rest of the aforementioned classes of taxpayers (“Philippine sourced Taxpayers”) are subject to Philippine tax only if the relevant source of income is derived from within the Philippines (“Philippine-sourced income”).

Documentary Stamp Taxes

Under Republic Act No. 10963, which amended certain provisions of the Tax Code, a documentary stamp tax is imposed upon every original issue of debt instruments such as bonds and notes, at the rate of P1.50 on each P200, or fractional part thereof, of the face value of such debt instruments. The documentary stamp tax is collectible wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources, the property is situated in the Philippines, or where the object of the contract is located or used in the Philippines.

The issuance of the Notes in the initial offering, whether to residents or non-residents, will be subject to Philippine documentary stamp tax, which shall be for the account of the Company. No documentary stamp tax is imposed on a subsequent sale or disposition of the Notes.

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Interest on the Notes

Under the Philippine Tax Code, interest derived from bonds or other interest-bearing obligations of Philippine residents is considered Philippine-sourced income. Accordingly, interest payments by the Company under the Notes will be subject to withholding tax in the Philippines.

Generally, under the Philippine Tax Code, interest on the Notes received by the holder who is a citizen or resident alien, or which is a domestic corporation or resident foreign corporation, will be subject to the 20% final withholding tax imposed on interest or yield from deposit substitute instruments, except interest income received by a depository bank under the expanded foreign currency deposit system which shall be subject to a 10% final withholding tax.

Interest on the Notes received by the holder who is a non-resident alien engaged in business in the Philippines will be subject to a 20% final withholding tax while that received by the holder which is a non-resident alien not engaged in business in the Philippines will be subject to a 25% final withholding tax. Interest on the Notes received by a holder which is a non-resident foreign corporation will be subject to the 20% final withholding tax imposed on foreign loans. “Foreign loans” are loan contracts including all debt items, whether in kind or in cash, which are payable in foreign currency, entered into by a Philippine resident, corporate or otherwise, with a non-resident. Thus, with respect to the holder which is a non-resident foreign corporation, the Notes will be considered “foreign loans.” The tax withheld constitutes a final settlement of Philippine tax liability with respect to such interest.

The foregoing tax rates are without prejudice to applicable preferential tax rates under tax treaties in force between the Philippines and the country of domicile of the non-resident holder. Most tax treaties to which the Philippines is a party generally provide for a reduced tax rate of 15 % in cases where the interest arises in the Philippines and is paid to a resident of the other contracting state. In addition, some treaties provide that the withholding tax rate may be reduced to 10 % in cases where the interest arises in respect of a public issue of bonded indebtedness. However, most tax treaties also provide that reduced withholding tax rates shall not apply if the recipient of the interest, who is a resident of the other contracting state, carries on business in the Philippines through a permanent establishment and the holding of the relevant interest-bearing interest is effectively connected with such permanent establishment.

The Philippine tax authorities have prescribed certain procedures for availment of tax treaty relief on interest under Revenue Memorandum Order No. 8-2017. The preferential treaty rates for interest shall be applied and used outright by the withholding agent/income payer upon submission of the Certificate of Residence for Tax Treaty Relief (CORTT) Form by the non-resident before interest is credited. The CORTT Form is made up of two parts: Part I states the information of the income recipient/beneficial owner and the certification from the competent tax authority or authorized tax office of country of residence. Part II includes the information of the withholding agent/income payor, details of income payment and the affixture of signatures by both the non-resident income recipient/beneficial owner and the income payor.

The withholding agent/income payor shall submit an original copy of the duly accomplished CORTT Form within thirty (30) days after the remittance of the withholding tax to the BIR. In the case of staggered payment of interest, the withholding agent shall submit an updated Part II of the CORTT Form within 30 days after payment of withholding taxes.

The BIR will no longer issue a ruling for the said CORTT Form submissions but the compliance check and post reporting validation on withholding tax obligations and confirmation of appropriateness of availment of treaty benefits shall be part of BIR’s regular audit investigations.

For claims of tax exemption, BIR Revenue Memorandum Circular No. 8-2014 mandates the Company, as a withholding agent, to require from individuals and entities claiming tax exemption a copy of a valid, current, and subsisting tax exemption certificate or ruling before payment of the related income. The tax exemption certificate or ruling must explicitly recognize the tax exemption, as well as the corresponding exemption from withholding tax. Failure on the part of the taxpayer to present the said tax exemption certificate of ruling shall subject him to the payment of the appropriate withholding taxes due on the transaction.

If the Company withheld taxes, or withheld the regular rate of tax imposed pursuant to the Philippine Tax Code on interest, the concerned bondholder may file a claim for a refund from the Philippine taxing authorities on the basis of a tax exemption or applicable tax treaty. However, because the refund process in the Philippines could be cumbersome, requiring the filing of an administrative claim and the possible filing of a judicial appeal, it may be impractical to pursue such a refund.

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Sale or other Disposition of the Notes

A holder of a Note will recognise a gain or loss upon the sale or other disposition (including a redemption at maturity) of the Notes in an amount equal to the difference between the amount realised from such disposition and such holder’s basis in the Notes.

Under the Philippine Tax Code, any gain realised from the sale, exchange or retirement of bonds, debentures and other certificates of indebtedness with an original maturity date of more than five years (as measured from the date of the issuance of such bonds, debentures or other certificate of indebtedness) will not be subject to income tax. As the Notes have a maturity of more than five years from the date of issuance, any gains realised by any resident or non-resident holder from the sale of the Notes effected within or outside the Philippines will not be subject to Philippine income tax.

Value-Added Tax

The transfer of the Notes in the Philippines by dealers in securities will be subject to value-added tax at the rate of 12% on the gross income they derive from the sale or exchange of the Notes.

Estate and Gift Taxes

The Notes will be considered as intangible personal property situated in the Philippines and will form part of the gross estate of any individual holder. As such, the transfer of the Notes upon the death of an individual holder to his heirs by way of succession, whether such an individual was a citizen of the Philippines or an alien, regardless of residence, will be subject to Philippine estate tax at a uniform rate of 6%.

Individual and corporate registered holders, whether or not citizens or residents of the Philippines, who transfer the Notes by way of gift or donation will be liable for Philippine donor’s tax on such transfers at a uniform rate of 6%% based on the value of the total gift in excess of ₱250,000 made during a calendar year, regardless of the relation of the donor to the donee.

Estate and gift taxes will not be collected in respect of intangible personal property such as the Notes (i) if the deceased at the time of death, or the donor at the time of donation, was a citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of any character in respect of intangible personal property of citizens of the Philippines not residing in that foreign country, or (ii) if the laws of the foreign country of which the deceased or the donor was a citizen and resident at the time of his death or donation allow a similar exemption from transfer or death taxes of every character or description in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country.

Taxation Outside the Philippines

The tax treatment of a non-resident holder of any of the Notes by jurisdictions outside the Philippines will vary depending on the tax laws applicable to such holder by reason of domicile or business activities, and may vary depending on the holder’s situation. Each holder of any of the Notes should consult its own tax adviser as to the particular tax consequences on such holder acquiring, owning, and disposing of the Notes, including the applicability and effect of any state, local and national laws.

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FOREIGN EXCHANGE AND FOREIGN INVESTMENT REGULATIONS

FOREIGN EXCHANGE REGULATIONS

Philippine foreign exchange rules and regulations of the BSP have been liberalized since 1992. Under present regulations, as a general rule, foreign exchange may be freely sold and purchased outside the Philippine banking system. If foreign currency obligations of Philippine borrowers (or guarantors) are to be serviced with foreign exchange purchased from the Philippine banking system, the borrower (or guarantor) must notify the BSP within one month of signing the loan agreement and must registered with the BSP within a month from the drawdown date (for short-term loans) or six months from the utilization of proceeds (for medium- and long-term loans). BSP’s rules generally limit access to the purchase of foreign currency sourced from the Philippine banking system to fund payment obligations offshore to only those private sector foreign currency loans that had been previously approved by or registered with, the BSP, as required under the Manual on Foreign Exchange Transactions (“MORFTXT”). However, certain private sector loans do not require prior BSP approval or subsequent registration before their payment may be serviced using foreign exchange purchased from within the Philippine banking system, such as foreign currency loans of resident borrowers from banks operating in the Philippines that are not publicly-guaranteed and are reported by the creditor bank to the BSP.

Outside of Philippine banks, there are other sources of foreign currency. These include non-Philippine banks and individuals and other non-bank entities licensed to engage in the business of buying and selling foreign currency. The amount of foreign currencies such entities may sell is subject to thresholds as may be prescribed by the BSP. Further, these other sources of foreign currency outside the Philippine banking system may be subject to greater exchange rate volatility and liquidity constraints. In addition to the foregoing, foreign currency receipts, acquisitions or earnings received by Philippine companies from non-trade sources and/or exports may be used freely for any purpose. Such proceeds may be freely traded within and freely remitted outside the Philippines, without being subject to these foreign exchange restrictions imposed by the BSP.

REGISTRATION OF FOREIGN LOANS AND FOREIGN INVESTMENTS

Registration with the BSP for the issuance of offshore borrowings is not required for the legal validity and enforceability of such obligations. The registration process takes time and involves costs for the applicant. Further, current BSP regulations provide that outstanding foreign loans may be refinanced by private sector foreign loans, provided that the obligations to be refinanced are duly registered (for those requiring registration) with, or reported (for those requiring mere reporting) to, the BSP, pursuant to Sections 24.1 to 24.3 of the MORFTXT. The benefit of registration with the BSP is that it would, assuming the BSP determines the applicant to be eligible for such registration under certain criteria, allow a borrower or guarantor to access the Philippine banking system to obtain foreign currency, such as U.S. dollars to service such debt obligations. Otherwise, the payment currency must be obtained from other sources as described above. See “Risk Factors — Risks Relating to the Notes — The Issuer has not registered the Notes with the BSP.”

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CLEARANCE AND SETTLEMENT OF THE NOTES

The information set out below is subject to any change in or reinterpretation of the rules, regulations and procedures of Euroclear and Clearstream, Luxembourg (together, the “Clearing Systems”) currently in effect. The information in this section concerning the Clearing Systems has been obtained from sources that the Issuer believes to be reliable, but none of the Issuer nor any Joint Bookrunner takes any responsibility for the accuracy of this section. Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System. None of the Issuer or any other party to the Agency Agreement will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Notes held through the facilities of any Clearing System or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Custodial and depositary links have been established with Euroclear and Clearstream, Luxembourg to facilitate the initial issue of the Notes and transfers of the Notes associated with secondary market trading.

THE CLEARING SYSTEMS

Euroclear and Clearstream, Luxembourg

Euroclear and Clearstream, Luxembourg each hold securities for participating organizations and facilitates the clearance and settlement of securities transactions between their respective participants through electronic book- entry of changes in the accounts of their participants. Euroclear and Clearstream, Luxembourg provide their respective participants with, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg participants are financial institutions throughout the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to Euroclear or Clearstream, Luxembourg is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream, Luxembourg participant, either directly or indirectly.

Distributions of principal with respect to book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the Principal Paying Agent, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and procedures.

Registration and Form

Book-entry interests in the Notes held through Euroclear and Clearstream, Luxembourg will be evidenced by the Global Certificate, registered in the name of nominee of the common depositary of Euroclear and Clearstream, Luxembourg. The Global Certificate will be held by a common depositary for Euroclear and Clearstream, Luxembourg. Beneficial ownership in Notes will be held through financial institutions as direct and indirect participants in Euroclear and Clearstream, Luxembourg.

The aggregate holdings of book-entry interests in the Notes in Euroclear and Clearstream, Luxembourg will be reflected in the book-entry accounts of each such institution. Euroclear and Clearstream, Luxembourg, as the case may be, and every other intermediate holders in the chain to the beneficial owner of book-entry interests in the Notes, will be responsible for establishing and maintaining accounts for their participants and customers having interests in the book-entry interest in the Notes. The Registrar will be responsible for maintaining a record of the aggregate holdings of Notes registered in the name of a common nominee for Euroclear and Clearstream, Luxembourg and/or if individual Certificates are issued in the limited circumstances described under “The Global Certificate — Registration of Title”, holders of Notes represented by those individual Certificates. The Principal Paying Agent will be responsible for ensuring that payments received by it from the Issuer for holders of interests in the Notes holding through Euroclear and Clearstream, Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case may be.

The Issuer will not impose any fees in respect to the Notes; however, holders of book-entry interest in the Notes may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear and Clearstream, Luxembourg.

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CLEARANCE AND SETTLEMENT PROCEDURES

Initial Settlement

Upon their original issue, the Notes will be in global form represented by the Global Certificate. Interests in the Notes will be in uncertificated book-entry form. Purchasers electing to hold book-entry interests in the Notes through Euroclear and Clearstream, Luxembourg accounts will follow the settlement procedures applicable to conventional eurobonds. Book-entry interests in the Notes will be credited to Euroclear and Clearstream, Luxembourg participants’ securities clearance accounts on the business day following the Closing Date against payment (for value the Closing Date).

Secondary Market Trading

Secondary market sales of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg to purchasers of book-entry interests in the Notes through Euroclear or Clearstream, Luxembourg will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream, Luxembourg and will be settled using the procedures applicable to conventional participants.

GENERAL

Although the foregoing sets out the procedures of Euroclear and Clearstream, Luxembourg in order to facilitate the transfers of interests in the Notes among participants of Euroclear and Clearstream, Luxembourg, none of Euroclear and Clearstream, Luxembourg is under any obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time.

Neither of the Issuer nor any of its agents will have any responsibility for the performance by Euroclear or Clearstream, Luxembourg or their respective participants of their respective obligations under the rules and procedures governing their operations.

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SUBSCRIPTION AND SALE

The Issuer has entered into a subscription agreement with the Joint Bookrunners dated July 23, 2020 (the “Subscription Agreement”), pursuant to which and subject to certain conditions contained therein, the Issuer agreed to sell to the Joint Bookrunners, and the Joint Bookrunners agreed to severally but not jointly subscribe and pay for, or to procure subscribers to subscribe and pay for, the aggregate principal amount of the Notes. The Joint Global Coordinators have entered into certain arrangements with the domestic lead managers in connection with the sale of the Notes in the Philippines for which the domestic lead managers will receive customary fees.

The Subscription Agreement provides that the Issuer will indemnify the Joint Bookrunners against certain liabilities in connection with the offer and sale of the Notes. The Subscription Agreement provides that the obligations of the Joint Bookrunners are subject to certain conditions precedent, and entitles the Joint Bookrunners to terminate it in certain circumstances prior to payment being made to the Issuer.

The Managers and their affiliates are full service financial institutions engaged in various activities which may include securities trading, commercial and investment banking, financial advice, investment management, principal investment, hedging, financing and brokerage activities. The Joint Bookrunners and certain affiliates may have performed, and may in the future perform, certain investment banking and advisory services for the Issuer or its affiliates from time to time for which they have received customary fees and expenses and may, from time to time, engage in transactions with and perform services for the Issuer or its affiliates in the ordinary course of their business. Certain affiliates of the Joint Bookrunners have entered into, and the Joint Bookrunners and their affiliates may from time to time enter into, tenancies, leases and/or rental arrangements or other similar arrangements with the Issuer or its affiliates on an arm’s length basis in the ordinary course of the Issuer’s and its affiliates’ business.

The Joint Bookrunners or certain affiliates may purchase the Notes and be allocated the Notes for asset management or proprietary purposes but not with a view to distribution. The Issuer or the Joint Bookrunners expect to pay commissions to certain third parties (including, without limitation, commission or rebate to private banks). Anchor investors may subscribe to a substantial portion of the aggregate principal amount of the Notes.

The Joint Bookrunners or their respective affiliates may purchase the Notes for its or their own account and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to the Notes or other securities of the Issuer or the Issuer’s subsidiaries or associates at the same time as the offer and sale of the Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of the Notes to which this Offering Circular relates (notwithstanding that such selected counterparties may also be purchasers of the Notes). A portion of the Notes may be allocated to the Joint Bookrunners or their respective affiliates for the purpose of facilitating market making activities.

OFFERING AND SELLING RESTRICTIONS

The distribution of this Offering Circular or any offering material and the offering, sale or delivery of the Notes is restricted by law in certain jurisdictions. Therefore, persons who may come into possession of this Offering Circular or any offering material are advised to consult with their own legal advisers as to what restrictions may be applicable to them and to observe such restrictions. This Offering Circular may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorised. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Joint Bookrunners or any affiliate of Joint Bookrunners is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that Joint Bookrunner or its affiliate on behalf of the Issuer in such jurisdiction.

United States

The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Each Joint Bookrunner has represented and warranted that it has not offered or sold, and has agreed that it will not offer or sell, any Notes constituting part of its allotment within the United States except in accordance with Rule 903 of Regulation S under the Securities Act. Accordingly, neither it nor its affiliates or any persons acting on its or their behalf have engaged or will engage in any directed selling efforts with respect to the Notes. Each Joint Bookrunner has represented that it has not entered and has agreed that it will not enter into any contractual arrangement with any distributor (as that term is defined in Regulation S) with

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respect to the distribution or delivery of the Notes, except with its affiliates or with the prior written consent of the Issuer.

Terms used in this paragraph have the meanings given to them by Regulation S.

Prohibition of Sales to EEA and UK Retail Investors

Each Joint Bookrunner has represented, warranted and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Securities to any retail investor in the European Economic Area or in the United Kingdom. For the purposes of this provision:

(a) the expression “retail investor” means a person who is one (or more) of the following:

(i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or

(ii) a customer within the meaning of Directive (EU) 2016/97 (the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or

(iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended, the “Prospectus Regulation”); and

(b) the expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the Securities to be offered so as to enable an investor to decide to purchase or subscribe for the Securities.

Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Securities or otherwise making them available to retail investors in the European Economic Area or in the United Kingdom has been prepared and therefore offering or selling the Securities or otherwise making them available to any retail investor in the European Economic Area or in the United Kingdom may be unlawful under the PRIIPS Regulation.

United Kingdom

Each Joint Bookrunner has represented, warranted and agreed that:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and

(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

Hong Kong

Each Joint Bookrunner has represented, warranted and agreed that:

(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (i) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) and any rules made under the SFO; or (ii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong (the “C(WUMP)O”) or which do not constitute an offer to the public within the meaning of the C(WUMP)O; and

(b) it has not issued or had in its possession for the purposes of issue and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under

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the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under the SFO.

Singapore

Each Joint Bookrunner has acknowledged that this Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Joint Bookrunner has represented, warranted and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Offering Circular or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:

(a) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(b) where no consideration is or will be given for the transfer;

(c) where the transfer is by operation of law;

(d) as specified in Section 276(7) of the SFA; or

(e) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.

Any reference to the SFA is a reference to the Securities and Futures Act, Chapter 289 of Singapore and a reference to any term as defined in the SFA or any provision in the SFA is a reference to that term or provision as modified or amended from time to time including by such of its subsidiary legislation as may be applicable at the relevant time.

Singapore SFA Product Classification: In connection with Section 309B(1)(c) of the Securities and Futures Act (Chapter 289) of Singapore (the “SFA”) and the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the “CMP Regulations 2018”), the Issuer has determined, and hereby notifies all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes are ‘prescribed capital markets products’ (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

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Philippines

THE NOTES BEING OFFERED OR SOLD HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE PHILIPPINE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES REGULATION CODE OF THE PHILIPPINES AND ITS IMPLEMENTING RULES AND REGULATIONS (THE “SRC”). ANY FUTURE OFFER OR SALE OF THE NOTES WITHIN THE PHILIPPINES IS SUBJECT TO THE REGISTRATION REQUIREMENTS UNDER THE SRC UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE SRC.

Any offer or sale of the Notes within the Philippines is subject to registration unless such offer or sale is made under circumstances in which the Notes qualify as exempt securities or pursuant to an exempt transaction under the SRC.

The offer or sale of the Notes in the Philippines to persons who are “qualified buyers” pursuant to Section 10.1(l) of the SRC is exempt from registration. Each of the Joint Bookrunners has represented, warranted and agreed that it has not and will not sell or offer for sale or distribution any Notes in the Philippines except to “qualified buyers” pursuant to Section 10.1(1) of the SRC.

The Issuer has not obtained any confirmation of exemption from the Philippine SEC in respect of any offer or sale of the Notes within the Philippines.

No securities sold under exempt transactions shall be offered for sale or sold to the public without prior registration under the SRC unless such offer or sale qualifies as an exempt transaction under the SRC. Notwithstanding that a particular class of securities issued under the SRC is exempt from registration, the conduct by any person in the purchase, sale, distribution, settlement and other post-trade activities involving such securities, shall comply with the provisions of the SRC.

General

No action has been or will be taken in any jurisdiction by the Issuer, or any Joint Bookrunner that would, or is intended to, permit a public offering of the Notes, or possession or distribution of this Offering Circular or any other offering or publicity material relating to the Notes, in any country or jurisdiction where action for that purpose is required.

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LEGAL MATTERS

Certain legal matters as to English law will be passed upon for the Issuer by Latham & Watkins LLP. Certain legal matters as to Philippine law will be passed upon for the Joint Bookrunners by Picazo Buyco Tan Fider & Santos. Certain legal matters as to English law will be passed upon for the Joint Bookrunners by Milbank LLP.

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INDEPENDENT AUDITORS

Punongbayan & Araullo, a member firm of Grant Thornton International Ltd., independent auditors, audited the Company’s consolidated financial statements as at December 31, 2019, 2018, and 2017 and for each of the years then ended, and reviewed the Company’s unaudited interim consolidated financial statements as at March 31, 2020 and for the three months ended March 31, 2020 and 2019. A review is substantially less in scope than an audit conducted in accordance with Philippine Standards on Auditing. Consequently, it does not enable them to obtain assurance that they would become aware of all significant matters that might be identified in an audit. Accordingly, they do not express an audit opinion on the unaudited interim consolidated financial statements. The financial information included in this Offering Circular has been prepared under PFRS. Punongbayan & Araullo has agreed to the inclusion of its report in this Offering Circular.

F-1

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Interim Condensed Consolidated Financial Statements of the Company as at March 31, 2020 (unaudited) and December 31, 2019 (audited) and for the three months ended March 31, 2020 and 2019 (unaudited)

Report on Review of Interim Condensed Consolidated Financial Statements ................................... F-2

Interim Condensed Consolidated Statements of Financial Position as at March 31, 2020 and December 31, 2019 ...................................................................................................................... F-4

Interim Condensed Consolidated Statements of Income for the three months ended March 31, 2020 and 2019 ......................................................................................................................................

F-6

Interim Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019 ............................................................................................................

F-7

Interim Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2020 and 2019 ............................................................................................................

F-8

Interim Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 .............................................................................................................................

F-9

Selected Explanatory Notes to Interim Condensed Consolidated Financial Statements .................... F-10

Consolidated Financial Statements of the Company as at December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017

Report of Independent Auditors ......................................................................................................... F-25

Consolidated Statements of Financial Position as at December 31, 2019 and 2018 ........................... F-31

Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017 .......... F-33

Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017 ...................................................................................................................................

F-34

Consolidated Statements of Changes in Equity for the years ended December 31, 2019, 2018 and 2017 .........................................................................................................................................

F-35

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 .... F-38

Notes to Consolidated Financial Statements ...................................................................................... F-40

Punongbayan & AraulloPunongbayan & AraulloPunongbayan & AraulloPunongbayan & Araullo

20th Floor, Tower 1

The Enterprise Center

6766 Ayala Avenue

1200 Makati City

Philippines

T +63 2 988 22 88

Certified Public AccountantsCertified Public AccountantsCertified Public AccountantsCertified Public Accountants grantthornton.com.phgrantthornton.com.phgrantthornton.com.phgrantthornton.com.ph

Punongbayan & Araullo (P&A) is the Philippine member firm of Grant Thornton International Ltd (GTIL).

Offices in Cavite, Cebu, Davao

BOA/ PRC Cert of Reg. No. 0002

SEC Accreditation No. 0002-FR-5

Report on Review of Interim Condensed

Consolidated Financial Statements

The Board of Directors and Stockholders

Megaworld Corporation and Subsidiaries

(A Subsidiary of Alliance Global Group, Inc.)

30th Floor, Alliance Global Tower

36th Street cor. 11th Avenue

Uptown Bonifacio, Taguig City

Introduction We have reviewed the interim condensed consolidated statement of financial position of

Megaworld Corporation and Subsidiaries (the Group) as at March 31, 2020 and the related

interim condensed consolidated statements of income, interim condensed consolidated

statements of comprehensive income, interim condensed consolidated statements of changes in

equity and interim condensed consolidated statements of cash flows for the three months ended

March 31, 2020 and 2019, and a summary of selected explanatory notes.

Management’s Responsibility for the Interim Condensed Consolidated Financial

Statements

Management is responsible for the preparation and fair presentation of these interim condensed

consolidated financial statements in accordance with Philippine Accounting Standard (PAS) 34,

Interim Financial Reporting, and for such internal control as management determines is

necessary to enable the preparation of interim condensed consolidated financial statements that

are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on these interim condensed consolidated financial

statements based on our review.

F-2

- 2 -

Certified Public AccountantsCertified Public AccountantsCertified Public AccountantsCertified Public Accountants


Scope of Review

We conducted our review in accordance with Philippine Standard on Review Engagements 2410,

“Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A

review of interim financial information consists of making inquiries, primarily of persons

responsible for financial and accounting matters, and applying analytical and other review

procedures. A review is substantially less in scope than an audit conducted in accordance with

Philippine Standards on Auditing and consequently does not enable us to obtain assurance that

we would become aware of all significant matters that might be identified in an audit. Accordingly,

we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the

accompanying interim condensed consolidated financial statements do not present fairly, in all

material respects, the interim condensed consolidated financial position of the Group as at

March 31, 2020 and its interim condensed consolidated financial performance and its interim

condensed consolidated cash flows for the three months ended March 31, 2020 and 2019 in

accordance with PAS 34.

Emphasis of Matter

We draw attention to Note 16 to the interim condensed consolidated financial statements, which

describes the likely negative impact of the business disruption as a result of the coronavirus

outbreak to the Group’s financial condition and performance after the end of the interim reporting

period. Our opinion is not modified with respect to this matter.

Other Matter

We have previously audited the Group’s consolidated financial statements for the year ended

December 31, 2019, including the consolidated statement of financial position, which is

presented herein for comparative purposes, on which we have rendered our report thereon dated

April 6, 2020.

PUNONGBAYAN & ARAULLO

By: Renan A. Piamonte Partner

CPA Reg. No. 0107805

TIN 221-843-037

PTR No. 8116553, January 2, 2020, Makati City

SEC Group A Accreditation

Partner - No. 107805-SEC (until Dec. 31, 2023)

Firm - No. 0002-FR-5 (until Mar. 26, 2021)

BIR AN 08-002511-037-2019 (until Sept. 4, 2022)

Firm’s BOA/PRC Cert. of Reg. No. 0002 (until Jul. 24, 2021)

July 17, 2020

F-3

March 31, 2020 December 31, 2019

Notes (Unaudited) (Audited)

A S S E T S

CURRENT ASSETS

Cash and cash equivalents 25,727,243,797 P 23,104,875,672 P

Trade and other receivables - net 33,426,804,800 33,011,950,292

Contract assets 7 11,149,154,012 10,857,180,128

Inventories 103,987,172,636 102,845,390,540

Advances to contractors and suppliers 12,358,453,483 12,269,532,205

Prepayments and other current assets 8,858,667,604 8,417,232,219

Total Current Assets 195,507,496,332 190,506,161,056

NON-CURRENT ASSETS

Trade and other receivables - net 12,515,955,505 11,797,389,071

Contract assets 7 8,018,309,124 7,785,824,559

Advances to contractors and suppliers 4,043,332,922 3,044,295,238

Advances to landowners and joint operators 7,099,770,020 7,058,884,461

Financial assets at fair value through

other comprehensive income 8 3,966,257,595 4,498,219,487

Investments in associates - net 3,514,886,522 3,511,501,836

Investment properties - net 5 112,711,532,228 110,890,939,193

Property and equipment - net 6 6,794,264,863 6,702,251,003

Deferred tax assets 309,002,189 308,797,093

Other non-current assets - net 3,636,852,399 3,528,811,747

Total Non-current Assets 162,610,163,367 159,126,913,688

TOTAL ASSETS 358,117,659,699 P 349,633,074,744 P

MEGAWORLD CORPORATION AND SUBSIDIARIES


INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

MARCH 31, 2020

(With Corresponding Figures as of December 31, 2019)

(Amounts in Philippine Pesos)

F-4


Note (Unaudited) (Audited)

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Interest-bearing loans and borrowings 13,897,881,158 P 14,502,531,496 P

Trade and other payables 19,975,242,641 19,306,782,624

Contract liabilities 7 1,879,406,535 1,703,947,321

Customers’ deposits 10,616,813,298 10,716,803,253

Redeemable preferred shares 251,597,580 251,597,580

Advances from associates and

other related parties 2,787,343,539 2,914,882,801

Income tax payable 213,408,509 257,776,843

Other current liabilities 9,009,223,420 7,890,196,049

Total Current Liabilities 58,630,916,680 57,544,517,967

NON-CURRENT LIABILITIES

Interest-bearing loans and borrowings 40,257,008,598 36,753,944,493

Bonds payable 24,702,637,562 24,623,883,690


Customers’ deposits 2,528,206,691 3,083,064,985

Redeemable preferred shares 503,195,160 503,195,160

Deferred tax liabilities - net 11,324,186,286 10,729,268,825

Retirement benefit obligation 1,275,734,331 1,249,574,818

Other non-current liabilities 7,457,929,442 6,770,494,579

Total Non-current Liabilities 91,527,740,052 87,223,034,272

Total Liabilities 150,158,656,732 144,767,552,239

EQUITY

Total equity attributable to

the Company’s shareholders 181,352,758,236 178,464,085,321

Non-controlling interests 26,606,244,731 26,401,437,184

Total Equity 207,959,002,967 204,865,522,505

TOTAL LIABILITIES AND EQUITY 358,117,659,699 P 349,633,074,744 P

See Selected Explanatory Notes to Interim Condensed Consolidated Financial Statements.

- 2 -

F-5

Notes 2020 2019

REVENUES AND INCOME

Real estate sales 7 9,610,307,325 P 9,474,232,590 P

Rental income 4,233,483,074 3,925,468,711

Hotel operations 7 550,940,490 574,463,413

Equity share in net earnings of associates 3,384,686 23,048,202

Interest and other income - net 682,912,373 908,897,392

15,081,027,948 14,906,110,308

COSTS AND EXPENSES

Cost of real estate sales 5,264,221,602 5,107,098,250

Hotel operations 332,059,348 327,811,986

Operating expenses 5, 6 3,568,656,810 2,927,813,655

Interest and other charges - net 722,916,558 1,018,494,263

Tax expense 1,392,289,153 1,408,609,787

11,280,143,471 10,789,827,941

NET PROFIT FOR THE PERIOD 3,800,884,477 P 4,116,282,367 P


Company’s shareholders 3,506,984,921 P 3,836,307,059 P

Non-controlling interests 293,899,556 279,975,308

3,800,884,477 P 4,116,282,367 P

Earnings Per Share: 11

Basic 0.110 P 0.121 P

Diluted 0.110 P 0.120 P


FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019


(UNAUDITED)



INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME

F-6

2020 2019

NET PROFIT FOR THE PERIOD 3,800,884,477 P 4,116,282,367 P

OTHER COMPREHENSIVE INCOME (LOSS)

Items that will not be reclassified

subsequently to consolidated profit or loss

Fair value gains (losses) on financial assets at fair value

through other comprehesive income 542,466,026 )( 451,440,975

Items that will be reclassified

subsequently to consolidated profit or loss

Unrealized losses on cash flow hedge 39,701,660 )( 99,621,042 )(

Exchange difference on translating

foreign operations 8,596,660 45,356,629

31,105,000 )( 54,264,413 )(

Total Other Comprehensive Income (Loss) 573,571,026 )( 397,176,562

TOTAL COMPREHENSIVE INCOME

FOR THE PERIOD 3,227,313,451 P 4,513,458,929 P

Total comprehensive income attributable to:

Company’s shareholders 3,029,690,949 P 4,233,483,621 P

Non-controlling interests 197,622,502 279,975,308

3,227,313,451 P 4,513,458,929 P


(UNAUDITED)



INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



F-7

Capital Stock Additional Treasury Shares ̶ Translation Revaluation Perpetual Non-controlling

(Note 9) Paid-in Capital At Cost Reserves Reserves Securities Retained Earnings Total Interest Total Equity

Balance at January 1, 2020 32,430,865,872 P 16,658,941,725 P 633,270,575 )( P 382,828,958 )( P 3,118,410,981 )( P 10,237,898,577 P 123,270,889,661 P 178,464,085,321 P 26,401,437,184 P 204,865,522,505 P

Transactions with owners:

Additions - - - - - - - - 7,185,045 7,185,045

Share-based employee compensation - - - - - - 4,450,564 4,450,564 - 4,450,564

Exercise of stock options - 1,902,621 - - - - - 1,902,621 - 1,902,621

Acquisition of treasury shares - - 147,371,219 )( - - - - 147,371,219 )( - 147,371,219 )(

- 1,902,621 147,371,219 )( - - - 4,450,564 141,018,034 )( 7,185,045 133,832,989 )(

Total comprehensive income for the period:

Net profit - - - - - - 3,506,984,921 3,506,984,921 293,899,556 3,800,884,477

Fair value losses on financial assets at fair value

through other comprehensive income - - - - 446,188,972 )( - - 446,188,972 )( 96,277,054 )( 542,466,026 )(

Fair value change on cash flow hedge - - - - 39,701,660 )( - - 39,701,660 )( - 39,701,660 )(

Exchange difference on translating foreign operations,

net of tax - - - 8,596,660 - - - 8,596,660 - 8,596,660

- - - 8,596,660 485,890,632 )( - 3,506,984,921 3,029,690,949 197,622,502 3,227,313,451

Balance at March 31, 2020 32,430,865,872 P 16,660,844,346 P 780,641,794 )( P 374,232,298 )( P 3,604,301,613 )( P 10,237,898,577 P 126,782,325,146 P 181,352,758,236 P 26,606,244,731 P 207,959,002,967 P

Balance at January 1, 2019 32,430,865,872 P 16,657,990,413 P 633,721,630 )( P 380,437,530 )( P 2,705,274,744 )( P 10,237,898,577 P 108,258,345,132 P 163,865,666,090 P 24,885,529,107 P 188,751,195,197 P


Deductions - - - - - - - - 58,997,481 )( 58,997,481 )(


Other reserves arising from consolidation - - - - 358,588,121 )( - - 358,588,121 )( - 358,588,121 )(

- - - - 358,588,121 )( - 5,465,811 353,122,310 )( 58,997,481 )( 412,119,791 )(

Total comprehensive income for the period:

Net profit - - - - - - 3,836,307,059 3,836,307,059 279,975,308 4,116,282,367

Fair value gains on financial assets at fair value

through other comprehensive income - - - - 451,440,975 - - 451,440,975 - 451,440,975



net of tax - - - 45,356,629 - - - 45,356,629 - 45,356,629

- - - 45,356,629 351,819,933 - 3,836,307,059 4,233,483,621 279,975,308 4,513,458,929

Balance at March 31, 2019 32,430,865,872 P 16,657,990,413 P 633,721,630 )( P 335,080,901 )( P 2,712,042,932 )( P 10,237,898,577 P 112,100,118,002 P 167,746,027,401 P 25,106,506,934 P 192,852,534,335 P


Attributable to the Company’s Shareholders

(UNAUDITED)



INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



F-8

Notes 2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 5,193,173,630 P 5,524,892,154 P

Adjustments for:

Depreciation and amortization 5, 6 756,922,076 611,833,359

Interest income 503,869,160 )( 472,842,782 )(

Interest expense 398,295,540 442,315,406

Unrealized foreign currency losses - net 74,845,762 14,461,598

Employee share options 5,482,242 5,689,050

Equity share in net earnings of associates 3,384,686 )( 23,048,202 )(

Dividend income 2,061,115 )( -

Gain on sale of investment in an associate - 188,514,452 )(

Operating profit before working capital changes 5,919,404,289 5,914,786,131

Increase in trade and other receivables 1,225,780,763 )( 1,460,920,114 )(

Decrease (increase) in contract assets 524,458,449 )( 1,377,668,511

Decrease (increase) in inventories 955,246,149 )( 128,808,713

Increase in advances to contractors and suppliers 1,087,958,961 )( 1,835,627,089 )(

Increase in prepayments and other current assets 477,112,549 )( 129,222,480 )(

Increase in advances to landowners and

joint operators 40,885,559 )( 215,032,910 )(

Increase in trade and other payables 653,340,403 2,927,677,310

Increase (decrease) in contract liabilities 144,693,474 61,315,726 )(

Decrease in customers’ deposits 654,848,250 )( 682,890,635 )(

Increase in other liabilities 1,884,238,935 158,052,250

Cash generated from operations 3,635,386,421 6,121,983,961

Cash paid for income taxes 809,952,241 )( 844,286,004 )(

Net Cash From Operating Activities 2,825,434,180 5,277,697,957

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to:

Investment properties 5 1,936,700,828 )( 2,358,348,095 )(

Property and equipment 6 246,428,132 )( 53,702,474 )(

Interest received 456,147,774 363,742,534

Increase in other non-current assets 119,975,222 )( 437,280,990 )(

Advances to associates and other related parties:

Collected 90,881,356 -

Granted - 313,474,616 )(

Dividends received 2,061,115 -

Net Cash Used in Investing Activities 1,754,013,937 )( 2,799,063,641 )(

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from availments of long and short-term liabilities 5,500,000,000 -

Repayments of long and short-term liabilities 2,649,324,982 )( 2,492,807,962 )(

Interest paid 1,021,779,503 )( 1,098,598,538 )(

Payments for acquisition of treasury shares 148,273,330 )( -

Repayments of advances from associates and other related parties 127,539,262 )( 161,644,000 )(

Payments of lease liabilities 3,908,095 )( -

Proceeds from exercise of stock rights 1,773,054 -

Net Cash From (Used) Financing Activities 1,550,947,882 3,753,050,500 )(

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS 2,622,368,125 1,274,416,184 )(

CASH AND CASH EQUIVALENTS

AT BEGINNING OF THE PERIOD 23,104,875,672 17,543,095,320


AT END OF THE PERIOD 25,727,243,797 P 16,268,679,136 P


MEGAWORLD CORPORATION AND SUBSIDIARIES(A Subsidiary of Alliance Global Group, Inc.)

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019

(Amounts in Philippine Pesos)(UNAUDITED)

F-9



SELECTED EXPLANATORY NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020 AND 2019

(With Comparative Audited Figures as of December 31, 2019)

(UNAUDITED)


1. CORPORATE INFORMATION

Megaworld Corporation (the Company) was incorporated in the Philippines on

August 24, 1989, primarily to engage in the development of large scale, mixed-use planned communities or townships that integrate residential, commercial, leisure and entertainment components. The Company is presently engaged in property-related activities such as project design, construction and property management. The Company’s real estate portfolio includes residential condominium units, subdivision lots and townhouses, condominium-hotel projects as well as office projects and retail spaces.

All of the Company’s common shares are listed at the Philippine Stock Exchange.

The Company’s registered office address, which is also its principal place of business, is located at 30th Floor, Alliance Global Tower, 36th Street cor. 11th Avenue, Uptown Bonifacio, Taguig City.

Alliance Global Group, Inc. (AGI or the Parent Company), also a publicly listed company in the Philippines, is the ultimate parent company of Megaworld Corporation and its subsidiaries (the Group). AGI is a holding company and is presently engaged in food and beverage, real estate development, quick-service restaurant, tourism-entertainment and gaming businesses. AGI’s registered office, which is also its primary place of business, is located at the 7th Floor, 1880 Eastwood Avenue, Eastwood City CyberPark, 188 E. Rodriguez, Jr. Avenue, Bagumbayan, Quezon City.

The Company holds ownership interests in the following subsidiaries and associates:

Effective Percentage of Ownership

Subsidiaries March 2020 December 2019

Subsidiaries:

Prestige Hotels and Resorts, Inc. (PHRI) 100% 100%

Richmonde Hotel Group International Ltd. (RHGI) 100% 100%

Eastwood Cyber One Corporation (ECOC) 100% 100%

Megaworld Cebu Properties, Inc. (MCP) 100% 100%

Megaworld Newport Property

Holdings, Inc. (MNPHI) 100% 100%

Oceantown Properties, Inc. (OPI) 100% 100%

Luxury Global Hotels and Leisure, Inc. (LGHLI) 100% 100%

F-10

- 2 -

Explanatory Effective Percentage of Ownership

Subsidiaries Notes March 2020 December 2019

Subsidiaries:

Arcovia Properties, Inc. (API) 100% 100%

Mactan Oceanview Properties

and Holdings, Inc. (MOPHI) (a) 100% 100%

Megaworld Cayman Islands, Inc. (MCII) (a) 100% 100%

Piedmont Property Ventures, Inc. (PPVI) (a) 100% 100%

Stonehaven Land, Inc. (SLI) (a) 100% 100%

Streamwood Property, Inc. (SP) (a) 100% 100%

Global One Integrated Business Services, Inc. (GOIBSI) 100% 100%

Luxury Global Malls, Inc. (LGMI) 100% 100%

Davao Park District Holdings, Inc. (DPDHI) 100% 100%

Belmont Newport Luxury Hotels, Inc. (BNLHI) 100% 100%

Global One Hotel Group, Inc. (GOHGI) 100% 100%

Landmark Seaside Properties, Inc. (LSPI) 100% 100%

San Vicente Coast, Inc. (SVCI) (a) 100% 100%

Hotel Lucky Chinatown, Inc. (HLCI) 100% 100%

Savoy Hotel Manila, Inc. (SHMI) 100% 100%

Savoy Hotel Mactan, Inc. (SHM) 100% 100%

Megaworld Bacolod Properties, Inc. (MBPI) 91.55% 91.55%

Megaworld Central Properties, Inc. (MCPI) (b) 76.55% 76.55%

Megaworld Capital Town, Inc. (MCTI) 76.28% 76.28%

Soho Café and Restaurant Group, Inc. (SCRGI) 75% 75%

La Fuerza, Inc. (LFI) 66.67% 66.67%

Megaworld-Daewoo Corporation (MDC) 60% 60%

Northwin Properties, Inc. (NWPI) (a) 60% 60%

Gilmore Property Marketing Associates, Inc. (GPMAI) (a, c) 52.14% 52.14%

Manila Bayshore Property Holdings, Inc. (MBPHI) 68.03% 68.03%

Megaworld Globus Asia, Inc. (MGAI) 50% 50%

Integrated Town Management Corporation (ITMC) 50% 50%

Maple Grove Land, Inc. (MGLI) (a) 50% 50%

Megaworld Land, Inc. (MLI) 100% 100%

City Walk Building Administration, Inc. (CBAI) (d) 100% 100%

Forbestown Commercial Center

Administration, Inc. (FCCAI) (d) 100% 100%

Paseo Center Building

Administration, Inc. (PCBAI) (d) 100% 100%

Uptown Commercial Center

Administration, Inc. (UCCAI) (d) 100% 100%

Iloilo Center Mall Administration, Inc. (ICMAI) (d) 100% 100%

Newtown Commercial Center

Administration, Inc. (NCCAI) (d) 100% 100%

Valley Peaks Property Management, Inc. (VPPMI) (d) 100% 100%

San Lorenzo Place Commercial Center

Administration, Inc. (SLPCCAI) (d) 100% 100%

Southwoods Lifestyle Mall Management, Inc. (SLMMI) (d) 100% 100%

Suntrust Properties, Inc. (SPI) 100% 100%

Suntrust Ecotown Developers, Inc. (SEDI) 100% 100%

Governor’s Hills Science School, Inc. (GHSSI) 100% 100%

Sunrays Property Management, Inc. (SPMI) 100% 100%

Suntrust One Shanata, Inc. (SOSI) (a) 100% 100%

Suntrust Two Shanata, Inc. (STSI) (a) 100% 100%

Stateland, Inc. (STLI) 96.87% 96.87%

F-11

- 3 -


Subsidiaries Notes March 2020 December 2019

Subsidiaries:

Global-Estate Resorts, Inc. (GERI) 82.32% 82.32%

Elite Communities Property Services, Inc. (ECPSI) 82.32% 82.32%

Southwoods Mall, Inc. (SMI) 91.09% 91.09%

Megaworld Global-Estate, Inc. (MGEI) 89.39% 89.39%

Twin Lakes Corporation (TLC) 90.99% 90.99%

Twin Lakes Hotel, Inc. (TLHI) 90.99% 90.99%

Fil-Estate Properties, Inc. (FEPI) 82.32% 82.32%

Aklan Holdings, Inc. (AHI) (a) 82.32% 82.32%

Blu Sky Airways, Inc. (BSAI) (a) 82.32% 82.32%

Fil-Estate Subic Development Corp. (FESDC) (a) 82.32% 82.32%

Fil-Power Construction Equipment

Leasing Corp. (FPCELC) (a) 82.32% 82.32%

Golden Sun Airways, Inc. (GSAI) (a) 82.32% 82.32%

La Compaña De Sta. Barbara, Inc. (LCSBI) 82.32% 82.32%

MCX Corporation (MCX) (a) 82.32% 82.32%

Pioneer L-5 Realty Corp. (PLRC) (a) 82.32% 82.32%

Prime Airways, Inc. (PAI) (a) 82.32% 82.32%

Sto. Domingo Place Development

Corp. (SDPDC) 82.32% 82.32%

Fil-Power Concrete Blocks Corp. (FPCBC) (a) 82.32% 82.32%

Fil-Estate Industrial Park, Inc. (FEIPI) (a) 65.03% 65.03%

Sherwood Hills Development, Inc. (SHD) 45.28% 45.28%

Fil-Estate Golf and Development, Inc. (FEGDI) 82.32% 82.32%

Golforce, Inc. (Golforce) 82.32% 82.32%

Southwoods Ecocentrum Corp. (SWEC) 49.39% 49.39%

Philippine Aquatic Leisure Corp. (PALC) (a) 49.39% 49.39%

Fil-Estate Urban Development Corp. (FEUDC) 82.32% 82.32%

Novo Sierra Holdings Corp. (NSHC) (a) 82.32% 82.32%

Global Homes and Communities, Inc. (GHCI) (a) 82.32% 82.32%

Savoy Hotel Boracay, Inc. (SHBI) 82.32% 82.32%

Belmont Hotel Boracay, Inc. (BHBI) 82.32% 82.32%

Oceanfront Properties, Inc. (OFPI) 41.13% 41.13%

Empire East Land Holdings, Inc. (EELHI) 81.73% 81.73%

Eastwood Property Holdings, Inc. (EPHI) 81.73% 81.73%

Valle Verde Properties, Inc. (VVPI) (a) 81.73% 81.73%

Sherman Oak Holdings, Inc. (SOHI) (a) 81.73% 81.73%

Empire East Communities, Inc. (EECI) (a) 81.73% 81.73%

20th Century Nylon Shirt, Inc. (CNSI) (a) 81.73% 81.73%

Laguna BelAir School, Inc. (LBASI) 59.67% 59.67%

Sonoma Premier Land, Inc. (SPLI) (a) 49.04% 49.04%

Pacific Coast Mega City, Inc. (PCMI) (e) 32.69% 32.69% Megaworld Resort Estates, Inc. (MREI) 51% 51%

Townsquare Development, Inc. (TDI) 30.60% 30.60%

Golden Panda-ATI Realty

Corporation (GPARC) 30.60% 30.60%

Associates:

Bonifacio West Development Corporation (BWDC) 46.11% 46.11%

Palm Tree Holdings and Development

Corporation (PTHDC) (a) 40% 40%

Suntrust Home Developers, Inc. (SHDI) (f) 34% 34%

First Oceanic Property Management, Inc. (FOPMI) (g) 8.16% 8.16%

Citylink Coach Services, Inc. (CCSI) (g) 8.16% 8.16%

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Associates March 2020 December 2019

Associates:

GERI

Fil-Estate Network, Inc. (FENI) 16.46% 16.46%

Fil-Estate Sales, Inc. (FESI) 16.46% 16.46%

Fil-Estate Realty and Sales Associates, Inc.

(FERSAI) 16.46% 16.46%

Fil-Estate Realty Corp. (FERC) 16.46% 16.46%

Nasugbu Properties, Inc. (NPI) 11.52% 11.52%

Explanatory Notes:

(a) These are entities which have not yet started commercial operations as at March 31, 2020.

(b) As at March 31, 2020, the Company owns 76.55% of MCPI consisting of 51% direct ownership, 18.97% indirect

ownership through EELHI and 6.58% indirect ownership through MREI.

(c) As at March 31, 2020, the Company’s ownership in GPMAI is at 52.14%, which consists of 38.72% and 13.42%

indirect ownership from EELHI and MREI, respectively.

(d) These were incorporated to engage in operation, maintenance, and administration of various malls and commercial

centers. These companies became subsidiaries of the Company through MLI, their immediate parent company.

(e) PCMI is considered as an associate of the Company since 2015. The Company obtained de facto control over PCMI

in 2018 by aligning their key executives and Boards of Directors (BODs). The acquisition was accounted for under

the pooling-of-interest method of accounting; hence, no goodwill nor gain on acquisition was recognized. In January

2019, EELHI acquired additional shares of PCMI, increasing the effective ownership interest of the Company to

32.69%.

(f) In 2019, the Company and TDI disposed certain number of shares over SHDI. In addition, the Company and a third

party investor subscribed to the increase in capitalization over SHDI, the latter became the controlling shareholder.

The foregoing transactions decreased the Company’s effective ownership over SHDI to 34%.

(g) In 2019 as a result of the Company’s dilution of ownership interest over SHDI, the effective ownership of the

Company over FOPMI and CCSI was also diluted to 8.16%.

Except for MCII and RHGI, all the subsidiaries and associates were incorporated and have their principal place of business in the Philippines. MCII was incorporated and has principal place of business in the Cayman Islands while RHGI was incorporated and has principal place of business in the British Virgin Islands.

The Company and its subsidiaries, except for entities which have not yet started commercial operations as at March 31, 2020, are presently engaged in the real estate business, hotel, condominium-hotel operations, construction, restaurant operations, business process outsourcing, educational facilities provider, property management operations and marketing services. There were no discontinued operations among the Group’s operating subsidiaries and associates for the three months ended March 31, 2020 and 2019. There are no significant restrictions on the Company’s ability to access or use the assets and settle the liabilities of the Group.

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EELHI, GERI, and SHDI are publicly-listed companies in the Philippines. The interim condensed consolidated financial statements (unaudited) of the Group as of

and for the three months ended March 31, 2020 (including the comparative financial information as of December 31, 2019 and for the three months ended March 31, 2019) were authorized for issue by the Company’s BOD on July 17, 2020.

2. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in the preparation of these interim condensed consolidated financial statements are consistent with those applied in the audited consolidated financial statements as of and for the year ended December 31, 2019 except for the application of amendments to standards that became effective on January 1, 2020 (see Note 2.2).

2.1 Basis of Preparation of Interim Condensed Consolidated Financial Statements These interim condensed consolidated financial statements for the three months ended

March 31, 2020 and 2019 have been prepared in accordance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. They do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the audited consolidated financial statements of the Group as at and for the year ended December 31, 2019.

The preparation of interim condensed consolidated financial statements in accordance with Philippine Financial Reporting Standards (PFRS) requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. These interim condensed consolidated financial statements are presented in Philippine peso, the functional and presentation currency of the Group, and all values represent absolute amounts except when otherwise indicated. 2.2 Adoption of New and Amended PFRS

(a) Effective in 2020 that are Relevant to the Group

In 2020, the Group adopted for the first time the following amendments, and revisions to existing standards that are relevant to the Group and effective for financial statements with annual periods beginning on or after January 1, 2020:

PAS 1 and PAS 8 : Presentation of Financial Statements, and

(Amendments) Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material

Conceptual Framework : Revised Conceptual Framework for for Financial Reporting Financial Reporting

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(i) PAS 1 (Amendments), Presentation of Financial Statements, and PAS 8 (Amendments), Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material (effective from January 1, 2020). The amendments provide a clearer definition of ‘material’ in PAS 1 by including the concept of ‘obscuring’ material information with immaterial information as part of the new definition, and clarifying the assessment threshold (i.e., misstatement of information is material if it could reasonably be expected to influence decisions made by primary users, which consider the characteristic of those users as well as the entity’s own circumstances). The definition of material in PAS 8 has been accordingly replaced by reference to the new definition in PAS 1. In addition, amendment has also been made in other standards that contain definition of material or refer to the term ‘material’ to ensure consistency. The application of these amendments has no impact on the Group’s interim condensed consolidated financial statements.

(ii) Revised Conceptual Framework for Financial Reporting (effective from January 1,

2020). The revised conceptual framework will be used in standard-setting decisions with immediate effect. Key changes include (a) increasing the prominence of stewardship in the objective of financial reporting, (b) reinstating prudence as a component of neutrality, (c) defining a reporting entity, which may be a legal entity, or a portion of an entity, (d) revising the definitions of an asset and a liability, (e) removing the probability threshold for recognition and adding guidance on derecognition, (f) adding guidance on different measurement basis, and, (g) stating that profit or loss is the primary performance indicator and that, in principle, income and expenses in other comprehensive income should be recycled where this enhances the relevance or faithful representation of the financial statements.

Management has assessed that this has no impact on the Group’s interim condensed consolidated financial statements.

(b) Effective Subsequent to 2020 but are not Adopted Early

PFRS 10 (Amendments), Consolidated Financial Statements, and PAS 28 (Amendments), Investments in Associates and Joint Ventures – Sale or Contribution of Assets Between an Investor and its Associates or Joint Venture (effective date deferred indefinitely). The amendments to PFRS 10 require full recognition in the investor’s financial statements of gains or losses arising on the sale or contribution of assets that constitute a business as defined in PFRS 3, Business Combinations, between an investor and its associate or joint venture. Accordingly, the partial recognition of gains or losses (i.e., to the extent of the unrelated investor’s interests in an associate or joint venture) only applies to those sale of contribution of assets that do not constitute a business. Corresponding amendments have been made to PAS 28 to reflect these changes. In addition, PAS 28 has been amended to clarify that when determining whether assets that are sold or contributed constitute a business, an entity shall consider whether the sale or contribution of those assets is part of multiple arrangements that should be accounted for as a single transaction.

Management is currently assessing the impact of these amendments on the Group’s interim condensed consolidated financial statements and it will conduct a comprehensive study of the potential impact of these standards prior to their mandatory adoption date to assess the impact of all changes.

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3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS In preparing the interim condensed consolidated financial statements, management undertakes a number of judgments, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgments, estimates and assumptions made by management, and will seldom equal the estimated results. The judgments, estimates and assumptions applied in the interim condensed consolidated financial statements, including the key sources of estimation uncertainty, were the same as those applied in the Group’s last annual financial statements as at and for the year ended December 31, 2019.

The Group performed its annual impairment test of goodwill and other intangible assets with indefinite useful life at year end and when circumstances indicate the carrying value may be impaired. The Group’s impairment test for goodwill arising from business combination and other intangible assets is based on value-in-use calculations. The Group considers the relationship between the market capitalization of the subsidiaries and its net book value, among other factors, when reviewing for indicators of impairment. The Group’s management assessed that for the three months ended March 31, 2020 and as at December 31, 2019, goodwill arising from business combination and other intangible assets with indefinite useful life are not impaired.

4. SEGMENT INFORMATION 4.1 Business Segments

The Group’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Group is engaged in the development of residential and office units including urban centers integrating office, residential and commercial components. The Real Estate segment pertains to the development and sale of residential and office developments. The Rental segment includes leasing of office and commercial spaces. The Hotel Operations segment relates to the management of hotel business operations. The Corporate and Others segment includes business process outsourcing, educational, facilities provider, maintenance and property management operations, marketing services, general and corporate income and expense items. The Group generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. 4.2 Segment Assets and Liabilities

Segment assets are allocated based on their physical location and use or direct association with a specific segment and they include all operating assets used by a segment and consist principally of operating cash and cash equivalents, receivables, real estate inventories, property and equipment, and investment properties, net of allowances and provisions. Similar to segment assets, segment liabilities are also allocated based on their use or direct association with a specific segment. Segment liabilities include all operating liabilities and consist principally of accounts, wages, taxes currently payable and accrued liabilities.

4.3 Intersegment Transactions

Segment revenues, expenses and performance include sales and purchases between business segments. Such sales and purchases are eliminated in consolidation.

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4.4 Analysis of Segment Information

The following tables present revenue and profit information regarding industry segments for the three months ended March 31, 2020 and 2019 and certain asset and liability information regarding segments as at March 31, 2020 and 2019.

March 31, 2020 (Unaudited)

Hotel Corporate Real Estate Rental Operations and Others Elimination Consolidated

TOTAL REVENUES Sales to external customers P 9,610,307,325 P 4,233,483,074 P 550,940,490 P 112,005,516 P - P 14,506,736,405 Interest income 401,717,068 165,861,098 1,039,524 228,052 - 568,845,742

Intersegment sales - 102,657,768 - 592,872,999 ( 695,530,767) - Total revenues 10,012,024,393 4,502,001,940 551,980,014 705,106,567 ( 695,530,767) 15,075,582,147

RESULTS

Cost of sales and operating expense excluding depreciation and amortization 7,249,105,867 575,869,309 435,646,541 793,894,709 ( 646,500,742) 8,408,015,684 Interest expense 349,082,983 118,728,224 - 10,213,028 - 478,024,235 Depreciation and amortization 85,798,195 607,047,676 30,063,335 34,012,870 - 756,922,076 7,683,987,045 1,301,645,209 465,709,876 838,120,607 ( 646,500,742) 9,642,961,995 Segment results P 2,328,037,348 P 3,200,356,731 P 86,270,138 (P 133,014,040) (P 49,030,025) P 5,432,620,152

Other income 2,061,115 Other expenses ( 244,892,323) Equity in net earnings of associates 3,384,686 Tax expense ( 1,392,289,153 )

Net profit P 3,800,884,477

ASSETS AND LIABILITIES Segment assets P 231,450,033,945 P106,159,555,500 P 5,206,895,454 P 7,875,157,068 P - P 350,691,641,967 Investments in and advances to associates and other related parties - net - - - 7,426,017,732 - 7,426,017,732

Total assets P 231,450,033,945 P106,159,555,500 P 5,206,895,454 P 15,301,174,800 P - P 358,117,659,699

Segment liabilities P 108,302,082,559 P 35,165,763,318 P 1,160,971,616 P 5,529,839,239 P - P 150,158,656,732


Hotel Corporate Real Estate Rental Operations and Others Elimination Consolidated

TOTAL REVENUES Sales to external customers P 9,474,232,590 P 3,925,468,711 P 574,463,413 P 204,221,876 P - P 14,178,386,590 Interest income 368,714,646 145,785,941 1,228,414 432,063 - 516,161,064

Intersegment sales - 117,827,086 - 596,873,591 ( 714,700,677) - Total revenues 9,842,947,236 4,189,081,738 575,691,827 801,527,530 ( 714,700,677) 14,694,547,654

RESULTS

Cost of sales and operating expense excluding depreciation and amortization 6,673,486,387 522,911,009 433,866,637 781,885,413 ( 697,937,122) 7,714,212,324 Interest expense 422,323,770 122,419,484 - 7,527,355 - 552,270,609 Depreciation and amortization 74,836,768 484,914,529 22,582,137 29,499,926 - 611,833,359 7,170,646,925 1,130,245,022 456,448,774 818,912,694 ( 697,937,122) 8,878,316,292 Segment results P 2,672,300,311 P 3,058,836,716 P 119,243,053 (P 17,385,164)(P 16,763,555) 5,816,231,362

Other income 188,514,451 Other expenses ( 502,901,861) Equity in net earnings of associates 23,048,202 Tax expense ( 1,408,609,787)

Net profit P 4,116,282,367

ASSETS AND LIABILITIES Segment assets P 213,521,848,842 P 97,245,055,035 P 4,176,824,260 P 6,848,879,025 P - P 321,792,607,162 Investments in and advances to associates and other related parties - net - - - 4,800,663,553 - 4,800,663,553

Total assets P 213,521,848,842 P 97,245,055,035 P 4,176,824,260 P 11,649,542,578 P - P 326,593,270,715

Segment liabilities P 96,317,330,839 P 30,954,131,543 P 750,755,575 P 5,718,518,422 P - P 133,740,736,379

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5. INVESTMENT PROPERTIES The reconciliation of the carrying amounts of investment properties is shown below.

March 31 December 31, 2020 2019 2019 (Unaudited) (Unaudited) (Audited)

Balance at beginning of period P 110,890,939,193 P 103,122,073,532 P 103,122,073,532 Additions 2,402,204,413 2,832,964,148 10,390,591,440 Transfers to property and equipment - - ( 400,488,452 ) Disposals - - ( 1,343,051 ) Depreciation and amortization ( 581,611,378) ( 484,914,529 ) ( 2,219,894,276 ) Net carrying amount P 112,711,532,228 P 105,470,123,151 P 110,890,939,193

6. PROPERTY AND EQUIPMENT

The reconciliation of the carrying amounts of property and equipment is shown below.

March 31 December 31, 2020 2019 2019 (Unaudited) (Unaudited) (Audited)

Balance at beginning of period P 6,702,251,003 P 6,170,052,573 P 6,569,198,534 Additions 246,428,132 53,702,474 544,999,333 Transfers from investment properties - - 400,488,452 Derecognition - - ( 319,136,009 ) Disposals - - ( 1,525,011 ) Depreciation and amortization ( 154,414,272) ( 122,252,617 ) ( 491,774,296 ) Net carrying amount P 6,794,264,863 P 6,101,502,430 P 6,702,251,003

7. REVENUES 7.1 Disaggregation of Revenues The Company derives revenues from sale of real properties and hotel operations. An analysis

of the Company’s major sources of revenues is presented below.

Segments

Hotel

Real Estate Operations Total


Types of products or services:

Residential units P 8,293,694,431 P - P 8,293,694,431

Residential lot 972,945,954 - 972,945,954

Commercial lot 343,666,940 - 343,666,940

Room accommodation - 394,568,672 394,568,672

Food and beverages - 136,586,064 136,586,064

Other hotel services - 19,785,754 19,785,754

P 9,610,307,325 P 550,940,490 P 10,161,247,815

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Segments

Hotel



Types of products or services:


Residential lot 1,433,924,322 - 1,433,924,322

Commercial lot 149,750,128 - 149,750,128

Industrial lot 147,894,856 - 147,894,856




P 9,474,232,590 P 574,463,413 P 10,048,696,003

7.2 Contract Accounts The significant changes in the contract assets and contract liabilities balances as of March 31, 2020 and December 31, 2019 are as follows:


(Unaudited) (Audited) Contract Contract Contract Contract

Assets Liabilities Assets Liabilities

Balance at beginning of the period P18,643,004,687 P 5,213,555,043 P22,227,279,687 P 5,368,667,295

Transfers from contract assets

recognized at the beginning of

year to accounts receivables ( 2,084,055,237 ) - ( 13,872,777,770 ) -

Increase due to satisfaction of

performance obligation over time

net of cash collection 2,608,513,686 - 10,288,502,770 -

Revenue recognized that was

included in contract liability at

the beginning of the period - ( 1,017,596,682) - ( 2,124,864,709 )

Increase due to cash received

in excess of performance to date - 1,162,290,156 - 1,969,752,457

Balance at end of the period P19,167,463,136 P5,358,248,517 P18,643,004,687 P 5,213,555,043

8. RELATED PARTY TRANSACTIONS

The Group’s related parties include the Parent Company, associates, the Group’s key management and other related parties under common ownership as described below.

The summary of the Group’s transactions with its related parties for the periods ended March 31, 2020 and 2019 and the related outstanding balances as of March 31, 2020 and December 31, 2019 is presented below and in the succeeding page.

Amount of Transaction Outstanding Balance

March 31, March 31, March 31, December 31,

2020 2019 2020 2019

Related Party Category (Unaudited) (Unaudited) (Unaudited) (Audited)

Parent Company:

Investments in equity securities ( P 573,768,000 ) P 522,276,000 P 855,748,000 P 1,429,516,000

Advances granted - - 930,000,000 930,000,000

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Amount of Transaction Outstanding Balance

March 31, March 31, March 31, December 31,

2020 2019 2020 2019

Related Party Category (Unaudited) (Unaudited) (Unaudited) (Audited)

Associates:

Advances granted (collected) P 3,356,388 ( P 8,248,773) P 1,100,416,888 P 1,097,060,500

Advances availed (paid) ( 2,740,537) 99,854,808 ( 177,512,517) ( 180,253,054)

Rendering of services - - 396,574 399,286

Subscription payable - - ( 1,114,665,008) ( 1,114,665,008)

Related Parties Under

Common Ownership:

Reimbursement of construction costs - - 3,056,180,769 3,056,180,769

Rendering of services 43,544,114 29,441,369 15,089,616 53,600,123

Advances granted (collected) ( 94,237,744) 180,272,401 1,880,714,322 1,974,952,066

Advances paid ( 124,798,725) ( 261,498,808 ) ( 2,609,831,022) ( 2,734,629,747)

Dividend income 2,061,115 - - -

Investments in equity securities 46,239,207 802,847,333 3,076,231,362 3,029,992,155

Sale of investment properties - - 23,562,500 23,562,500

The Group’s outstanding receivables from and payables to related parties arising from the above transactions are unsecured, noninterest-bearing and payable on demand. Management has assessed that these outstanding receivables are fully recoverable; hence, no impairment was recognized in both periods presented. None of the companies under the Group is a joint venture. The Company is not subject to joint control and none of its related parties exercise significant influence over it.

9. CAPITAL STOCK Shares authorized and issued are summarized below.

Shares Amount For the year For the year For the three months ended ended For the three months ended ended March 31, December 31, March 31, December 31, 2020 2019 2019 2020 2019 2019 Preferred shares Series “A”- P0.01 par value Authorized 6,000,000,000 6,000,000,000 6,000,000,000 P 60,000,000 P 60,000,000 P 60,000,000 Issued and outstanding 6,000,000,000 6,000,000,000 6,000,000,000 P 60,000,000 P 60,000,000 P 60,000,000 Common shares – P1 par value Authorized 40,140,000,000 40,140,000,000 40,140,000,000 P 40,140,000,000 P 40,140,000,000 P 40,140,000,000 Issued 32,370,865,872 32,370,865,872 32,370,865,872 P 32,370,865,872 P 32,370,865,872 P 32,370,865,872 Treasury shares: Balance at beginning of year ( 130,920,000 ) ( 131,420,000 ) ( 131,420,000 ) ( 118,104,398) ( 118,555,453 ) ( 118,555,453 ) Acquisitions during the year ( 53,612,000 ) - - ( 148,273,330) - - Issuances during the year 1,000,000 - 500,000 902,111 - 451,055 Balance at end of year ( 183,532,000 ) ( 131,420,000 ) ( 130,920,000 ) ( 265,475,617) ( 118,555,453 ) ( 118,104,398 ) Issued and outstanding 32,187,333,872 32,239,445,872 32,239,945,872 P 32,105,390,255 P 32,252,310,419 P 32,252,761,474 Total issued and outstanding shares P 32,165,390,255 P 32,312,310,419 P 31,312,761,474

10. CASH DIVIDENDS

On July 21, 2019, the BOD approved the declaration of cash dividends of P0.07 per share and P0.01 per share payable on July 31, 2019 to common and preferred stockholders, respectively, on record as of July 5, 2019. There was no similar transaction for the three months ended March 31, 2020.

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11. EARNINGS PER SHARE Earnings per share amounts were computed as follows: March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) Basic: Net profit attributable to Company’s shareholders P 3,506,984,921 P 3,836,307,059 Computed dividends on cumulative preferred shares series “A” ( 149,180 ) ( 147,945 ) Profit attributable to the Company’s common shareholders 3,506,835,741 3,836,159,114 Divided by the weighted average number of outstanding common shares 31,796,379,539 31,819,445,872 P 0.110 P 0.121 Diluted: Net profit attributable to owners of the parent company P 3,506,835,741 P 3,836,159,114 Divided by the weighted average number of outstanding common shares and potentially dilutive shares 31,911,499,093 31,982,179,831 P 0.110 P 0.120 12. COMMITMENTS AND CONTINGENCIES

In the normal course of operations, the Group is committed to complete its real estate development. By doing so, it earmarks an annual capital expenditure budget for projects under construction. The net commitment for construction expenditures is shown below.

March 31, 2020 December 31, 2019 (Unaudited) (Audited) Total commitment for construction expenditures P 33,268,029,905 P 33,268,029,905 Total expenditures incurred ( 23,714,755,865 ) ( 22,896,502,186 ) Net commitment P 9,553,274,040 P 10,371,527,719

There are commitments, guarantees and contingent liabilities that arise in the normal course of operations of the Group which are not reflected in the accompanying interim consolidated financial statements. The management of the Group is of the opinion, that losses, if any, from these items will not have any material effect on its consolidated financial statements. In addition, there are no material off-balance sheet transactions, arrangements, obligations and other relationships of the Group with unconsolidated entities or other persons created during the reporting period.

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13. SEASONAL FLUCTUATIONS

There were no seasonal aspects that had a material effect on the financial condition or results of operations of the Group.

14. RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group has various financial instruments such as cash and cash equivalents, financial assets at fair value through other comprehensive income (FVOCI), interest-bearing loans and borrowings, bonds payable, trade receivables and payables which arise directly from the Group’s business operations. The financial liabilities were issued to raise funds for the Group’s capital expenditures. Exposure to currency, interest rate, credit, liquidity and equity risk arise in the ordinary course of the Group’s business activities. The main objective of the Group’s risk management is to identify, monitor, and minimize those risks and to provide cost with a degree of certainty. The Group does not actively engage in the trading of financial assets for speculative purposes. 14.1 Foreign Currency Sensitivity

Most of the Group’s transactions are carried out in Philippine peso, its functional currency. Exposures to currency exchange rates arise mainly from the Group’s U.S. dollar-denominated cash and cash equivalents, interest-bearing loans and bonds payable which have been used to fund new projects and for general corporate purposes. Relative to the Group’s loan denominated in U.S. dollar, the Company has designated its cross currency swaps as hedging instruments to hedge the risk in changes in its cash flows as an effect of changes in foreign currency exchange rates. Exposures to foreign exchange rates vary during the period depending on the volume of overseas transactions and mainly affect consolidated profit or loss of the Group. There are no material exposures on foreign exchange rate that affect the Group’s consolidated other comprehensive income. 14.2 Interest Rate Sensitivity The Group’s interest risk management policy is to minimize interest rate cash flow risk exposures to changes in interest rates. The Group maintains a debt portfolio unit of both fixed and floating interest rates. Most long-term borrowings are subject to fixed interest rate while other financial assets are subject to variable interest rates. The Group manages its interest risk by leveraging the fixed interest rate debt obligations over the floating interest rate debt obligations in its debt portfolio. 14.3 Credit Risk The Group’s credit risk is attributable to trade receivables, rental receivables and other financial assets. The Group maintains defined credit policies and continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporate this information into its credit risk controls. Where available at a reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties. In addition, for a significant proportion of sales, advance payments are received to mitigate credit risk.

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14.4 Liquidity Risk The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash outflows due in a day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week, as well as on the basis of a rolling 30-day projection. Long-term needs for a nine-month and a one-year period are identified monthly. The Group maintains cash to meet its liquidity requirements for up to 60-day periods. Excess cash are invested in time deposits or short-term marketable securities. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets. 14.5 Other Price Risk Sensitivity

The Group’s market price risk arises from its financial assets at FVOCI carried at fair value. It manages its risk arising from changes in market price by monitoring the changes in the market price of the investments. The investments in listed equity securities are considered long-term strategic investments. In accordance with the Group’s policies, no specific hedging activities are undertaken in relation to these investments. The investments are continuously monitored and voting rights arising from these equity instruments are utilized in the Group’s favor.

15. CATEGORIES AND FAIR VALUES OF FINANCIAL ASSETS AND

LIABILITIES

15.1 Carrying Amounts and Fair Values by Category

The carrying amounts and fair values of the categories of financial assets and liabilities presented in the consolidated statements of financial position are shown below.

March 31, 2020 (Unaudited) December 31, 2019 (Audited) Carrying Values Fair Values Carrying Values Fair Values Financial Assets At amortized costs: Cash and cash equivalents P 25,727,243,797 P 25,727,243,797 P 23,104,875,672 P 23,104,875,672 Trade and other receivables – net 45,942,760,305 47,104,850,338 44,809,339,363 45,290,907,850 Guarantee and other deposits 926,742,958 926,742,958 1,007,434,782 1,007,434,782 P 72,596,747,060 P 73,758,837,093 P 68,921,649,817 P 69,403,218,304 Financial assets at FVOCI – Equity securities P 3,966,257,595 P 3,966,257,595 P 4,498,219,487 P 4,498,219,487 Financial Liabilities At amortized cost: Interest-bearing loans and borrowings P 54,154,889,756 P 52,582,845,815 P 51,256,475,989 P 50,192,028,027 Bonds payable 24,702,637,562 23,796,123,896 24,623,883,690 23,667,412,590 Redeemable preferred shares 754,792,740 754,792,740 754,792,740 754,792,740 Trade and other payables 18,220,697,606 18,220,697,606 17,584,893,153 17,584,893,153 Advances from associates and

other related parties 2,787,343,539 2,787,343,539 2,914,882,801 2,914,882,801 Lease liabilities 649,680,013 649,680,013 653,588,108 653,588,108 Subscription payable 1,114,665,008 1,114,665,008 1,114,665,008 1,114,665,008 Other liabilities 4,661,117,136 4,661,117,136 3,727,360,098 3,727,360,098 P 107,045,823,360 P104,567,265,753 P 102,630,541,587 P 100,609,622,525 Financial liabilities at FVTPL – Derivative liabilities P 234,380,050 P 234,380,050 P 242,417,137 P 242,417,137

F-23

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15.2 Fair Value Hierarchy The Group uses the following hierarchy level in determining the fair values that will be disclosed for its financial instruments. a) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that

an entity can access at the measurement date; b) Level 2: inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and,

c) Level 3: inputs for the asset or liability that are not based on observable market data

(unobservable inputs).

The level within which the asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement. Except for P30.63 million financial assets at FVOCI categorized in Level 3, all other financial assets at FVOCI are categorized in Level 1. For assets and liabilities that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

16. OTHER MATTER During the quarter, the Group and other businesses have been significantly exposed to the risks brought about by the outbreak of the new coronavirus disease, COVID-19. Governmental efforts being implemented to control the spread of the virus include travel bans, quarantines, social distancing and suspension of non-essential services. Work stoppage on construction sites and slowdown on the supply chain lead to delays on the targeted completion and turnover of projects. Community quarantine also requires temporary adjustment of mall operating hours and reduced foot traffic. Likewise, travel restrictions have resulted into a reduction in hotel occupancies. The Group conducts its business while placing paramount consideration on the health and welfare of its employees, customers, and other stakeholders. The Group has implemented measures to mitigate the transmission of COVID-19, such as by adjusting operating hours, making hand sanitizers available within its properties, increasing the frequency of disinfection of facilities, limiting face-to-face meetings, requiring temperature checks for employees and customers, and implementing health protocols for employees. The Group has also activated business continuity plans, both at the corporate level and business operations level, and conducted scenario planning and analysis to activate contingency plans. While management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate the risks associated with COVID-19, the ultimate impact of the pandemic is highly uncertain and subject to change. The Group continuously monitors the impact of COVID-19 to its business segments and stakeholders.

F-24

Certified Public Accountants


Offices in Cavite, Cebu, Davao

BOA/ PRC Cert of Reg. No. 0002

SEC Accreditation No. 0002-FR-5

grantthornton.com.phgrantthornton.com.phgrantthornton.com.phgrantthornton.com.ph

Punongbayan &Punongbayan &Punongbayan &Punongbayan & AraulloAraulloAraulloAraullo

20th Floor, Tower 1

The Enterprise Center

6766 Ayala Avenue

1200 Makati City

Philippines

T +63 2 988 22 88

Report of Independent Auditors

The Board of Directors and Stockholders Megaworld Corporation and Subsidiaries (A Subsidiary of Alliance Global Group, Inc.) 30th Floor, Alliance Global Tower 36th Street cor. 11th Avenue Uptown Bonifacio, Taguig City

Opinion

We have audited the consolidated financial statements of Megaworld Corporation and Subsidiaries (the Group), which comprise the consolidated statements of financial position as at December 31, 2019 and 2018, and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the three years in the period ended and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for each of the three years in the period ended December 31, 2019 in accordance with Philippine Financial Reporting Standards (PFRS).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSA). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the ethical requirements that are relevant to our audits of the consolidated financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

F-25

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Punongbayan & Araullo is the Philippine member firm of Grant Thornton International Ltd (GTIL).

Emphasis of a Matter – Subsequent Events Relating to COVID 19 Outbreak

We draw attention to Note 37 to the consolidated financial statements, which describes the likely negative impact of the business disruption as a result of the corona virus outbreak to the Group’s financial condition and performance after the end of the reporting period. Our opinion is not modified with respect to this matter. Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

(a) Revenue Recognition on Real Estate Sales and Determination of Related Costs

Description of the Matter

The Group’s revenue recognition process, policies and procedures on real estate sales are significant to our audit because these involve the application of significant judgment and estimation. In addition, real estate sales and costs of real estate sales amounted to P42.6 billion or 63.3% of consolidated Revenues and Income and P23.4 billion or 48.7% of consolidated Cost and Expenses, respectively, for the year ended December 31, 2019. Areas affected by revenue recognition, which requires significant judgments and estimates, include determining when a contract will qualify for revenue recognition, measuring the progress of the development of real estate projects which defines the amount of revenue to be recognized and determining the amount of actual costs incurred as cost of real estate sales. These areas were significant to our audit as an error in application of judgments and estimates could cause a material misstatement in the consolidated financial statements.

The Group’s policy for revenue recognition on real estate sales are more fully described in Note 2 to the consolidated financial statements. The significant judgments applied and estimates used by management related to revenue recognition are more fully described in Note 3 to the consolidated financial statements. The breakdown of real estate sales and costs of real estate sales are also disclosed in Notes 20 and 21, respectively, to the consolidated financial statements.

How the Matter was Addressed in the Audit

We obtained an understanding of the revenue recognition policy regarding real estate sales transactions and the related significant business processes of the Group.

Our procedures in testing the appropriateness and proper application of the Group’s revenue recognition policy and process include tests of information technology (IT) general controls over the automated system which generated the data used as basis for adjustments. We also performed tests of mathematical accuracy and completeness of supporting contract summary, examination of supporting documents of a sample of agreements, and performing overall analytical review of actual results.

F-26

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In addressing the risks of material misstatements in revenue recognition, we have performed inspection of sample agreements for compliance with a set of criteria for revenue recognition and test of controls over contract approval. We have also tested the reasonableness of management’s judgment in determining the probability of collection of the consideration in a contract which involves a historical analysis of customer payment pattern and behaviour.

Relative to the Group’s measurement of progress towards complete satisfaction of performance obligation using the input method, we have tested the progress reported for the year in reference to the actual costs incurred relative to the total budgeted project development costs. Our procedure include test of controls over recognition and allocation of costs per project and direct examination of supporting documents. We have also performed physical inspection of selected projects under development to assess if the completion based on costs is not inconsistent with the physical completion of the project. In testing the reasonableness of budgetary estimates, we have ascertained the qualification of projects engineers who prepared the budgets and reviewed the actual performance of completed projects with reference of their budgeted costs.

In relation to cost of real estate sales, we obtained an understanding of the Group’s cost accumulation process and performed tests of the relevant controls including ITGC. On a sampling basis, we traced costs accumulated to supporting documents such as invoices and accomplishment reports from the contractors and official receipts.

(a) Consolidation Process

Description of the Matter

The Group’s consolidated financial statements comprise the financial statements of Megaworld Corporation and its subsidiaries, as enumerated in Note 1 to the consolidated financial statements, after the elimination of material intercompany transactions. The Group’s consolidation process is significant to our audit because of the complexity of the process. It involves identifying and eliminating voluminous intercompany transactions to properly reflect realization of profits and measurement of controlling and non-controlling interests.

The Group’s policy on consolidation process is more fully described in Note 2 to the consolidated financial statements. How the Matter was Addressed in the Audit

We obtained understanding of the Group structure and its consolidation process including the procedures for identifying intercompany transactions and reconciling intercompany balances. We tested significant consolidation adjustments which include elimination of intercompany revenues, expenses and investments, reversal of unrealized fair value adjustments on intercompany investments, and recognition of equity transactions to measure non-controlling interest.

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Other Information

Management is responsible for the other information. The other information comprises the information included in the Group’s Securities and Exchange Commission (SEC) Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report for the year ended December 31, 2019, but does not include the consolidated financial statements and our auditors’ report thereon. The SEC Form 20-IS, SEC Form 17-A and Annual Report for the year ended December 31, 2019 are expected to be made available to us after the date of this auditors’ report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audits of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits, or otherwise appears to be materially misstated.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

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

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with PSA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

F-28

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As part of an audit in accordance with PSA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, related safeguards.

F-29

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audits resulting in this independent auditors’ report is Renan A. Piamonte.

PUNONGBAYAN & ARAULLO

By: Renan A. Piamonte Partner CPA Reg. No. 0107805 TIN 221-843-037 PTR No. 8116553, January 2, 2020, Makati City SEC Group A Accreditation Partner - No. 107805-SEC (until Dec. 31, 2023) Firm - No. 0002-FR-5 (until Mar. 26, 2021) BIR AN 08-002511-037-2019 (until Sept. 4, 2022) Firm’s BOA/PRC Cert. of Reg. No. 0002 (until Jul. 24, 2021)

April 6, 2020

F-30

2018

(As Restated –

Notes 2019 See Notes 1 and 2)

A S S E T S

CURRENT ASSETS

Cash and cash equivalents 5 23,104,875,672 P 17,543,095,320 P

Trade and other receivables - net 6 33,011,950,292 27,655,190,137

Contract assets 20 10,857,180,128 11,131,863,695

Inventories 7 102,845,390,540 100,662,575,544

Advances to contractors and suppliers 2 12,269,532,205 8,949,748,055

Prepayments and other current assets 8 8,417,232,219 9,204,913,382

Total Current Assets 190,506,161,056 175,147,386,133

NON-CURRENT ASSETS

Trade and other receivables - net 6 11,797,389,071 7,258,618,747

Contract assets 20 7,785,824,559 11,095,415,992

Advances to contractors and suppliers 2 3,044,295,238 2,821,521,059

Advances to landowners and joint operators 10 7,058,884,461 6,910,177,902

Financial assets at fair value through

other comprehensive income 9 4,498,219,487 4,474,947,699

Investments in associates - net 11 3,511,501,836 1,996,876,322

Investment properties - net 12 110,890,939,193 103,122,073,532

Property and equipment - net 13 6,702,251,003 6,170,052,573

Deferred tax assets 26 308,797,093 284,888,412

Other non-current assets - net 14 3,528,811,747 3,008,708,543

Total Non-current Assets 159,126,913,688 147,143,280,781

TOTAL ASSETS 349,633,074,744 P 322,290,666,914 P





DECEMBER 31, 2019 AND 2018

F-31

2018

(As Restated –

Notes 2019 See Note 2)

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Interest-bearing loans and borrowings 15 14,502,531,496 P 12,019,703,268 P

Trade and other payables 17 19,306,782,624 15,027,120,371


Customers’ deposits 2 10,716,803,253 9,286,219,447

Redeemable preferred shares 18 251,597,580 251,597,580

Advances from associates and

other related parties 27 2,914,882,801 2,885,463,118

Income tax payable 257,776,843 207,162,344

Other current liabilities 19 7,890,196,049 5,063,817,214

Total Current Liabilities 57,544,517,967 47,404,188,338

NON-CURRENT LIABILITIES

Interest-bearing loans and borrowings 15 36,753,944,493 38,620,908,482

Bonds payable 16 24,623,883,690 25,102,042,365


Customers’ deposits 2, 27 3,083,064,985 2,523,066,928

Redeemable preferred shares 18 503,195,160 754,792,740

Deferred tax liabilities - net 26 10,729,268,825 8,951,152,565

Retirement benefit obligation 25 1,249,574,818 828,488,892

Other non-current liabilities 19 6,770,494,579 6,660,043,772

Total Non-current Liabilities 87,223,034,272 86,146,058,043

Total Liabilities 144,767,552,239 133,550,246,381

EQUITY 28

Total equity attributable to

the Company’s shareholders 178,464,085,321 163,854,891,426

Non-controlling interests 26,401,437,184 24,885,529,107

Total Equity 204,865,522,505 188,740,420,533

TOTAL LIABILITIES AND EQUITY 349,633,074,744 P 322,290,666,914 P

See Notes to Consolidated Financial Statements.

- 2 -

F-32

2018

(As Restated –

Notes 2019 See Notes 1 and 2) 2017

REVENUES AND INCOME

Real estate sales 20 42,603,984,572 P 38,035,548,060 P 34,115,066,390 P

Rental income 12 16,814,091,846 14,264,916,931 11,829,993,113

Hotel operations 2 2,543,769,508 1,519,423,405 1,335,958,802

Equity share in net earnings (losses) of associates 11 58,832,233 )( 92,307,592 118,829,303

Interest and other income - net 23 5,409,726,260 3,515,014,728 2,715,195,436

67,312,739,953 57,427,210,716 50,115,043,044

COSTS AND EXPENSES

Cost of real estate sales 21 23,379,819,000 20,521,249,555 18,041,090,460

Hotel operations 1,381,156,765 820,752,636 755,756,983

Operating expenses 22 13,912,479,751 11,244,991,807 9,688,197,677

Interest and other charges - net 24 3,261,597,997 3,296,326,497 3,862,275,019

Tax expense 26 6,081,657,290 5,544,362,408 4,063,450,162

48,016,710,803 41,427,682,903 36,410,770,301

PROFIT FOR THE YEAR

BEFORE PRE-ACQUISITION INCOME 19,296,029,150 15,999,527,813 13,704,272,743

PRE-ACQUISITION LOSS (INCOME)

OF SUBSIDIARIES 1 - 166,475,960 )( 2,715,950

NET PROFIT FOR THE YEAR 19,296,029,150 P 15,833,051,853 P 13,706,988,693 P


Company’s shareholders 17,931,417,072 P 15,208,138,139 P 13,145,556,720 P

Non-controlling interests 1,364,612,078 624,913,714 561,431,973

19,296,029,150 P 15,833,051,853 P 13,706,988,693 P

Earnings Per Share: 29

Basic 0.546 P 0.469 P 0.413 P

Diluted 0.543 P 0.467 P 0.411 P




CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017


F-33

2018

(As Restated –


NET PROFIT FOR THE YEAR 19,296,029,150 P 15,833,051,853 P 13,706,988,693 P

OTHER COMPREHENSIVE INCOME (LOSS)

Items that will not be reclassified

subsequently to consolidated profit or loss:

Actuarial gains (losses) on retirement

benefit obligation 25 350,479,591 )( 313,543,907 76,638,960

Fair value gains on financial assets at fair value

through other comprehesive income 9 23,271,788 121,702,362 -

Share in other comprehensive income (loss)

of associates 11 11,417,059 )( 13,452,063 33,916,495

Tax income (expense) 25, 26 105,143,877 92,059,473 )( 22,991,688 )(

233,480,985 )( 356,638,859 87,563,767

Items that will be reclassified

subsequently to consolidated profit or loss:

Unrealized losses (gains) on cash flow hedge 30 293,369,328 )( 230,806,189 45,942,879 )(

Exchange difference on translating

foreign operations 2 3,326,261 )( 2,384,743 1,363,917

Realized fair value loss on impairment of

investment in available-for-sale securities 9 - - 1,516,864,986

Fair value gains (losses) on available-for-sale securities 9 - - 751,345,581

Fair value losses (gains) on disposal of available-for-sale

securities reclassified to profit or loss 23, 24 - - 1,502,090

Tax income (expense) 26 934,833 716,975 )( 409,175 )(

295,760,756 )( 232,473,957 2,224,724,520

Total Other Comprehensive Income (Loss) 529,241,741 )( 589,112,816 2,312,288,287

TOTAL COMPREHENSIVE INCOME

FOR THE YEAR 18,766,787,409 P 16,422,164,669 P 16,019,276,980 P

Total comprehensive income attributable to:

Company’s shareholders 17,422,846,318 P 15,815,614,416 P 15,380,733,122 P

Non-controlling interests 1,343,941,091 606,550,253 638,543,858

18,766,787,409 P 16,422,164,669 P 16,019,276,980 P




CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



F-34

Additional Treasury Shares - Translation Revaluation Perpetual

Capital Stock Paid-in Capital At Cost Reserves Reserves Securities Retained Earnings

(See Note 28) (See Note 28) (See Note 28) (See Note 2) (See Notes 9, 11 and 25) (See Note 28) (See Notes 1, 2 and 28) Total (See Note 2) Total Equity

Balance at January 1, 2019

As previously reported 32,430,865,872 16,657,990,413 (633,721,630) (380,437,530) (2,705,274,744) 10,237,898,577 108,247,570,468 163,854,891,426 24,885,529,107 188,740,420,533

Effect of adoption of PFRS 16 - - - - - - 5,272,255 5,272,255 7,369,290 12,641,545

As restated 32,430,865,872 16,657,990,413 633,721,630 )( 380,437,530 )( 2,705,274,744 )( 10,237,898,577 108,252,842,723 163,860,163,681 24,892,898,397 188,753,062,078


Exercise of stock options - 951,312 451,055 - - - 515,840 )( 886,527 - 886,527


Cash dividends - - - - - - 2,379,182,809 )( 2,379,182,809 )( 68,013,915 )( 2,447,196,724 )(

Share-based employee compensation

of a subsidiary - - - - - - - - 892,953 892,953

Distribution to holders of perpetual securities - - - - - - 562,913,000 )( 562,913,000 )( - 562,913,000 )(

Acquisition of a new subsidiary with

non-controlling interest - - - - - - - - 231,718,658 231,718,658

Recycling due to disposal and dilution - - - - - - 11,417,059 11,417,059 - 11,417,059

Other reserves arising from consolidation - - - - 93,043,089 - - 93,043,089 - 93,043,089

- 951,312 451,055 - 93,043,089 - 2,913,370,134 )( 2,818,924,678 )( 164,597,696 2,654,326,982 )(

Total comprehensive income for the year:

Net profit - - - - - - 17,931,417,072 17,931,417,072 1,364,612,078 19,296,029,150

Actuarial gain on retirement benefit obligation,

net of tax - - - - 229,602,805 )( - - 229,602,805 )( 15,732,909 )( 245,335,714 )(


through other comprehensive income - - - - 28,209,867 - - 28,209,867 4,938,079 )( 23,271,788


Share in other comprehensive income of associates - - - - 11,417,059 )( - - 11,417,059 )( - 11,417,059 )(


net of tax - - - 2,391,428 )( - - - 2,391,428 )( - 2,391,428 )(

- - - 2,391,428 )( 506,179,326 )( - 17,931,417,072 17,422,846,318 1,343,941,091 18,766,787,409

Balance at December 31, 2019 32,430,865,872 P 16,658,941,725 P 633,270,575 )( P 382,828,958 )( P 3,118,410,981 )( P 10,237,898,577 P 123,270,889,661 P 178,464,085,321 P 26,401,437,184 P 204,865,522,505 P



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



Attributable to the Company’s Shareholders Non-controlling

Interest

F-35



(See Note 28) (See Note 28) (See Note 28) (See Note 2) (See Notes 9, 11 and 25) (See Note 28) (See Notes 2 and 28) Total (See Note 2) Total Equity

Balance at January 1, 2018

As previously reported 32,430,865,872 P 16,657,990,413 P 633,721,630 )( P 382,105,298 )( P 898,501,087 )( P - 93,933,935,086 P 141,108,463,356 P 22,591,607,181 P 163,700,070,537 P

Effect of adoption of PFRS 9 - - - - 1,457,710,646 )( - 1,354,850,340 102,860,306 )( 1,983,312 )( 104,843,618 )(

As restated 32,430,865,872 16,657,990,413 633,721,630 )( 382,105,298 )( 2,356,211,733 )( - 95,288,785,426 141,005,603,050 22,589,623,869 163,595,226,919


Issuance of shares of stock - - - - - - - - 1,000,000 1,000,000

Issuance of perpetual securities - - - - - 10,237,898,577 - 10,237,898,577 - 10,237,898,577


Cash dividends - - - - - - 1,982,208,812 )( 1,982,208,812 )( 20,094,507 )( 2,002,303,319 )(


of a subsidiary - - - - - - - - 3,307,158 3,307,158

Distribution to holders of perpetual securities - - - - - - 290,336,000 )( 290,336,000 )( - 290,336,000 )(


non-controlling interest - - - - - - - - 2,045,521,389 2,045,521,389

Changes in ownership interest in subsidiaries

that do not result in a loss of control - - - - 568,910,177 )( - - 568,910,177 )( 340,379,055 )( 909,289,232 )(

Other reserves arising from consolidation - - - - 385,961,343 )( - - 385,961,343 )( - 385,961,343 )(

- - - - 954,871,520 )( 10,237,898,577 2,249,353,097 )( 7,033,673,960 1,689,354,985 8,723,028,945


Net profit - - - - - - 15,208,138,139 15,208,138,139 624,913,714 15,833,051,853


net of tax - - - - 155,489,051 - - 155,489,051 65,995,383 221,484,434


through other comprehensive income - - - - 206,061,206 - - 206,061,206 84,358,844 )( 121,702,362

Fair value change on cash flow hedge - - - - 230,806,189 - - 230,806,189 - 230,806,189

Share in other comprehensive income of associates - - - - 13,452,063 - - 13,452,063 - 13,452,063


net of tax - - - 1,667,768 - - - 1,667,768 - 1,667,768

- - - 1,667,768 605,808,509 - 15,208,138,139 15,815,614,416 606,550,253 16,422,164,669

Balance at December 31, 2018 32,430,865,872 P 16,657,990,413 P 633,721,630 )( P 380,437,530 )( P 2,705,274,744 )( P 10,237,898,577 P 108,247,570,468 P 163,854,891,426 P 24,885,529,107 P 188,740,420,533 P

- 2 -


Non-controlling Interest

P

F-36



(See Note 28) (See Note 28) (See Note 28) (See Note 2) (See Notes 9, 11 and 25) (See Note 28) (See Note 28) Total (See Note 2) Total Equity

Balance at January 1, 2017 32,430,865,872 P 16,657,990,413 P 633,721,630 )( P 383,060,040 )( P 3,132,722,747 )( P - 82,498,074,638 P 127,437,426,506 P 18,149,000,542 P 145,586,427,048 P


Issuance of shares of stock - - - - - - - - 150,000,000 150,000,000


Cash dividends - - - - - - 1,722,155,799 )( 1,722,155,799 )( 12,226,103 )( 1,734,381,902 )(


of a subsidiary - - - - - - - - 10,039,313 10,039,313


non-controlling interest - - - - - - - - 3,466,426,140 3,466,426,140

Changes in ownership interest in subsidiaries

that do not result in a loss of control - - - - - - - - 189,823,431 189,823,431

- - - - - - 1,709,696,272 )( 1,709,696,272 )( 3,804,062,781 2,094,366,509


Net profit - - - - - - 13,145,556,720 13,145,556,720 561,431,973 13,706,988,693


net of tax - - - - 42,787,943 - - 42,787,943 10,859,329 53,647,272

Fair value losses on available-for-sale securities - - - - 685,093,025 - - 685,093,025 66,252,556 751,345,581

Realized fair value loss on disposal of available-for-sale securities - - - - 1,502,090 - - 1,502,090 - 1,502,090

Realized fair value loss on impairment of available-for-sale securities - - - - 1,516,864,986 - - 1,516,864,986 - 1,516,864,986


Share in other comprehensive income of associates - - - - 33,916,495 - - 33,916,495 - 33,916,495


net of tax - - - 954,742 - - - 954,742 - 954,742

- - - 954,742 2,234,221,660 - 13,145,556,720 15,380,733,122 638,543,858 16,019,276,980

Balance at December 31, 2017 32,430,865,872 P 16,657,990,413 P 633,721,630 )( P 382,105,298 )( P 898,501,087 )( P - 93,933,935,086 P 141,108,463,356 P 22,591,607,181 P 163,700,070,537 P

- 3 -


Non-controlling Interest


P

P

F-37

2018(As Restated –


CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 25,377,686,440 P 21,377,414,261 P 17,770,438,855 P

Adjustments for:

Depreciation and amortization 12, 13, 14 2,718,633,789 2,268,838,880 1,830,763,458

Interest income 23 1,631,604,213 )( 1,431,964,282 )( 1,278,769,124 )(

Interest expense 24 1,512,905,580 1,310,255,912 1,555,078,550

Unrealized foreign currency losses (gains) - net 493,907,863 )( 1,139,460,601 52,528,443

Gain on finance lease 13 350,218,385 )( - -

Gain on sale and dilution of investment in an associate 23 340,809,382 )( - 113,069,227 )(

Equity share in net losses (earnings) of associates 11 58,832,233 92,307,595 )( 118,829,303 )(

Gain on sale of investment property 45,781,949 )( - -

Employee share options 25 18,717,409 26,498,873 22,498,840

Dividend income 23, 27 8,464,814 )( 21,195,681 )( 27,018,574 )(

Loss on sale of property and equipment 279,902 - -

Impairment loss on available-for-sale securities 9 - - 1,516,864,986

Operating profit before working capital changes 26,816,268,747 24,577,000,969 21,210,486,904

Increase in trade and other receivables 7,300,973,342 )( 1,741,511,946 )( 6,822,373,583 )(

Decrease (increase) in contract assets 3,584,275,000 5,871,792,742 )( 2,430,699,999

Increase in inventories 1,395,055,726 )( 7,866,421,573 )( 6,004,323,574 )(

Increase in advances to contractors and suppliers 3,542,558,329 )( 1,232,993,107 )( 2,026,634,204 )(

Increase in prepayments and other current assets 244,367,564 )( 1,004,567,211 )( 1,158,622,445 )(

Decrease in advances to landowners and

joint operators 148,706,559 )( 921,285,309 )( 255,044,624 )(

Increase in trade and other payables 5,373,481,027 5,865,173,339 3,346,195,497

Increase (decrease) in contract liabilities 155,112,252 )( 396,021,988 1,333,221,951

Increase (decrease) in customers’ deposits 1,990,581,863 2,894,752,757 3,714,183,346 )(

Increase in other liabilities 2,051,184,398 1,673,294,869 538,311,003

Cash generated from operations 27,029,017,263 16,767,672,034 8,877,733,578

Cash paid for income taxes 3,647,117,078 )( 2,840,943,167 )( 2,723,846,893 )(

Net Cash From Operating Activities 23,381,900,185 13,926,728,867 6,153,886,685

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to:

Investment properties 12 10,390,591,440 )( 14,280,652,674 )( 14,555,908,612 )(

Property and equipment 13 350,116,842 )( 653,939,892 )( 431,846,440 )(

Advances to associates and other related parties: 27

Granted 1,500,167,429 )( 500,635,698 )( 189,449,520 )(

Collected 129,918,481 255,926,431 165,564,111

Acquisition and subscription of shares of stock of

new subsidiaries and associates 1,350,050,000 )( 3,097,081,431 )( 2,068,977,236 )(

Interest received 1,296,340,364 1,411,000,154 1,022,351,679

Proceeds from sale of investments in an associate

and subsidiaries 11 1,017,844,908 - 297,454,675

Increase in other non-current assets 202,306,675 )( 36,271,411 )( 75,519,218 )(

Proceeds from sale of investment property 12 23,562,500 187,391,998 20,519,223

Dividends received 8,464,814 21,195,681 27,018,574

Proceeds from sale of property and equipment 13 1,245,112 13,045,014 11,899,989

Proceeds from issuance of capital stock of subsidiary - 1,000,000 150,000,000

Proceeds from sale of available-for-sale securities 9 - - 65,990,227

Acquisition of available-for-sale securities 9 - - 7,412,400 )(

Net Cash Used in Investing Activities 11,315,856,207 )( 16,679,021,828 )( 15,568,314,948 )(

Balance carried forward 12,066,043,978 P 2,752,292,961 )( P 9,414,428,263 )( P


(A Subsidiary of Alliance Global Group, Inc.)CONSOLIDATED STATEMENTS OF CASH FLOWS



F-38

2018

(As Restated –


Balance brought forward 12,066,043,978 P 2,752,292,961 )( P 9,414,428,263 )( P

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from availments of long and short-term liabilities 15, 36 12,500,000,000 18,350,000,000 7,900,000,000

Repayments of long and short-term liabilities 11,537,252,522 )( 8,530,019,684 )( 6,152,002,030 )(

Cash dividends declared and paid 28 2,379,182,809 )( 1,912,208,812 )( 1,722,155,799 )(

Interest paid 4,209,271,308 )( 3,886,040,313 )( 3,693,371,740 )(

Distribution to holders of perpetual securities 28 562,913,000 )( 290,336,000 )( -

Redemption of preferred shares 18 251,597,580 )( 251,597,580 )( -

Cash dividends declared and paid to non-controlling interest 68,013,915 )( 20,094,507 )( 12,226,103 )(

Advances from associates and other related parties: 27, 36

Obtained 32,361,651 366,705,230 229,092,519

Paid 2,941,968 )( 12,339,277 )( 20,826,593 )(

Payments of lease liabilities 19, 36 26,338,703 )( - -

Proceeds from exercise of stock rights 28 886,528 - -

Repayments of bonds payable 16 - 10,425,600,000 )( -

Issuance of bonds payable 16 - 10,237,898,577 11,943,791,282

Net Cash From (Used) Financing Activities 6,504,263,626 )( 3,626,367,634 8,472,301,536

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS 5,561,780,352 874,074,673 942,126,727 )(

BEGINNING BALANCE OF CASH AND CASH

EQUIVALENTS OF ACQUIRED SUBSIDIARIES - 238,884,182 976,599,736


AT BEGINNING OF YEAR 17,543,095,320 16,430,136,465 16,395,663,456


AT END OF YEAR 23,104,875,672 P 17,543,095,320 P 16,430,136,465 P

Supplemental Information on Non-cash Investing and Financing Activities:


- 2 -

1) In the normal course of business, the Group enters into non-cash transactions such as exchanges or purchases on account of real estate and other assets. Other non-cash transactions include transfers of property between Inventories, Property and Equipment, and Investment Properties. These non-cash activities are not reflected in the consolidated statements of cash flows (see Notes 7, 12 and 13).

2) In 2019, the Group recognized right-of-use assets and lease liabilities amounting to P594.03 million and P662.78 million, respectively (see Notes 13 and 19).

F-39

MEGAWORLD CORPORATION AND SUBSIDIARIES (A Subsidiary of Alliance Global Group, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2019, 2018 AND 2017

(Amounts in Philippine Pesos) 1. CORPORATE INFORMATION

Megaworld Corporation (the Company) was incorporated in the Philippines on

August 24, 1989, primarily to engage in the development of large scale, mixed-use planned communities or townships that integrate residential, commercial, leisure and entertainment components. The Company is presently engaged in property-related activities such as project design, construction and property management. The Company’s real estate portfolio includes residential condominium units, subdivision lots and townhouses, condominium-hotel projects as well as office projects and retail spaces.

All of the Company’s common shares are listed at the Philippine Stock Exchange (PSE).

On June 27, 2017, the Philippine Securities and Exchange Commission (SEC) approved the change in the Company’s registered office and principal place of business from 28th Floor, The World Centre, Sen. Gil Puyat Avenue, Makati City to 30th Floor, Alliance Global Tower, 36th Street cor. 11th Avenue, Uptown Bonifacio, Taguig City. The related approval from the Bureau of Internal Revenue (BIR) was obtained on July 17, 2017.

Alliance Global Group, Inc. (AGI or the Parent Company), also a publicly listed company in the Philippines, is the ultimate parent company of Megaworld Corporation and its subsidiaries (the Group). AGI is a holding company and is presently engaged in food and beverage, real estate development, quick-service restaurant, tourism-entertainment and gaming businesses. AGI’s registered office, which is also its primary place of business, is located at the 7th Floor, 1880 Eastwood Avenue, Eastwood City CyberPark, 188 E. Rodriguez, Jr. Avenue, Bagumbayan, Quezon City.

1.1 Composition of the Group

As at December 31, the Company holds ownership interests in the following subsidiaries and associates:


Subsidiaries 2019 2018 2017

Subsidiaries:

Prestige Hotels and Resorts, Inc. (PHRI) 100% 100% 100%

Richmonde Hotel Group International Ltd. (RHGI) 100% 100% 100%

Eastwood Cyber One Corporation (ECOC) 100% 100% 100%

Megaworld Cebu Properties, Inc. (MCP) 100% 100% 100%

Megaworld Newport Property

Holdings, Inc. (MNPHI) 100% 100% 100%

Oceantown Properties, Inc. (OPI) 100% 100% 100%

Luxury Global Hotels and Leisure, Inc. (LGHLI) 100% 100% 100%

F-40

- 2 -


Subsidiaries Notes 2019 2018 2017

Subsidiaries:

Arcovia Properties, Inc. (API) 100% 100% 100%

Mactan Oceanview Properties

and Holdings, Inc. (MOPHI) (a) 100% 100% 100%

Megaworld Cayman Islands, Inc. (MCII) (a) 100% 100% 100%

Piedmont Property Ventures, Inc. (PPVI) (a) 100% 100% 100%

Stonehaven Land, Inc. (SLI) (a) 100% 100% 100%

Streamwood Property, Inc. (SP) (a) 100% 100% 100%

Global One Integrated Business Services, Inc. (GOIBSI) 100% 100% 100%

Luxury Global Malls, Inc. (LGMI) 100% 100% 100%

Davao Park District Holdings, Inc. (DPDHI) 100% 100% 100%

Belmont Newport Luxury Hotels, Inc. (BNLHI) 100% 100% 100%

Global One Hotel Group, Inc. (GOHGI) 100% 100% 100%

Landmark Seaside Properties, Inc. (LSPI) (b) 100% 100% 100%

San Vicente Coast, Inc. (SVCI) (a, b) 100% 100% 100%

Hotel Lucky Chinatown, Inc. (HLCI) (o) 100% 100% -

Savoy Hotel Manila, Inc. (SHMI) (o) 100% 100% -

Savoy Hotel Mactan, Inc. (SHM) (o) 100% 100% -

Megaworld Bacolod Properties, Inc. (MBPI) 91.55% 91.55% 91.55%

Megaworld Central Properties, Inc. (MCPI) (c) 76.55% 76.55% 76.55%

Megaworld Capital Town, Inc. (MCTI) (g) 76.28% 76.28% 76.28%

Soho Café and Restaurant Group, Inc. (SCRGI) (b) 75% 75% 75%

La Fuerza, Inc. (LFI) 66.67% 66.67% 66.67%

Megaworld-Daewoo Corporation (MDC) 60% 60% 60%

Northwin Properties, Inc. (NWPI) (a, g) 60% 60% 60%

Gilmore Property Marketing Associates, Inc. (GPMAI) (a, d) 52.14% 52.14% 52.14%

Manila Bayshore Property Holdings, Inc. (MBPHI) (e) 68.03% 68.03% 50.92%

Megaworld Globus Asia, Inc. (MGAI) 50% 50% 50%

Integrated Town Management Corporation (ITMC) 50% 50% 50%

Maple Grove Land, Inc. (MGLI) (a, b) 50% 50% 50%

Megaworld Land, Inc. (MLI) 100% 100% 100%

City Walk Building Administration, Inc. (CBAI) (f) 100% 100% 100%

Forbestown Commercial Center

Administration, Inc. (FCCAI) (f) 100% 100% 100%

Paseo Center Building

Administration, Inc. (PCBAI) (f) 100% 100% 100%

Uptown Commercial Center

Administration, Inc. (UCCAI) (f) 100% 100% 100%

Iloilo Center Mall Administration, Inc. (ICMAI) (f) 100% 100% 100%

Newtown Commercial Center

Administration, Inc. (NCCAI) (f) 100% 100% 100%

Valley Peaks Property Management, Inc. (VPPMI) (f) 100% 100% 100%

San Lorenzo Place Commercial Center

Administration, Inc. (SLPCCAI) (f, g) 100% 100% 100%

Southwoods Lifestyle Mall Management, Inc. (SLMMI) 100% 100% -

Suntrust Properties, Inc. (SPI) 100% 100% 100%

Suntrust Ecotown Developers, Inc. (SEDI) 100% 100% 100%

Governor’s Hills Science School, Inc. (GHSSI) 100% 100% 100%

Sunrays Property Management, Inc. (SPMI) 100% 100% 100%

Suntrust One Shanata, Inc. (SOSI) (a) 100% 100% 100%

Suntrust Two Shanata, Inc. (STSI) (a) 100% 100% 100%

Stateland, Inc. (STLI) (p) 96.87% 96.87% -

F-41

- 3 -


Subsidiaries/Associates Notes 2019 2018 2017

Subsidiaries:

Global-Estate Resorts, Inc. (GERI) (h) 82.32% 82.32% 82.32%

Elite Communities Property Services, Inc. (ECPSI) (q) 82.32% 82.32% -

Southwoods Mall, Inc. (SMI) (i) 91.09% 91.09% 91.09%

Megaworld Global-Estate, Inc. (MGEI) (j) 89.39% 89.39% 89.39%

Twin Lakes Corporation (TLC) (j) 90.99% 90.99% 83.37%

Twin Lakes Hotel, Inc. (TLHI) (q) 90.99% 90.99% -

Fil-Estate Properties, Inc. (FEPI) (j) 82.32% 82.32% 82.32%

Aklan Holdings, Inc. (AHI) (a, j) 82.32% 82.32% 82.32%

Blu Sky Airways, Inc. (BSAI) (a, j) 82.32% 82.32% 82.32%

Fil-Estate Subic Development Corp. (FESDC) (a, j) 82.32% 82.32% 82.32%

Fil-Power Construction Equipment

Leasing Corp. (FPCELC) (a, j) 82.32% 82.32% 82.32%

Golden Sun Airways, Inc. (GSAI) (a, j) 82.32% 82.32% 82.32%

La Compaña De Sta. Barbara, Inc. (LCSBI) (j) 82.32% 82.32% 82.32%

MCX Corporation (MCX) (a, j) 82.32% 82.32% 82.32%

Pioneer L-5 Realty Corp. (PLRC) (a, j) 82.32% 82.32% 82.32%

Prime Airways, Inc. (PAI) (a, j) 82.32% 82.32% 82.32%

Sto. Domingo Place Development

Corp. (SDPDC) (j) 82.32% 82.32% 82.32%

Fil-Power Concrete Blocks Corp. (FPCBC) (a, j) 82.32% 82.32% 82.32%

Fil-Estate Industrial Park, Inc. (FEIPI) (a, j) 65.03% 65.03% 65.03%

Sherwood Hills Development, Inc. (SHD) (j) 45.28% 45.28% 45.28%

Fil-Estate Golf and Development, Inc. (FEGDI) (j) 82.32% 82.32% 82.32%

Golforce, Inc. (Golforce) (j) 82.32% 82.32% 82.32%

Southwoods Ecocentrum Corp. (SWEC) (j) 49.39% 49.39% 49.39%

Philippine Aquatic Leisure Corp. (PALC) (a, j) 49.39% 49.39% 49.39%

Fil-Estate Urban Development Corp. (FEUDC) (j) 82.32% 82.32% 82.32%

Novo Sierra Holdings Corp. (NSHC) (a, j) 82.32% 82.32% 82.32%

Global Homes and Communities, Inc. (GHCI) (a, j) 82.32% 82.32% 82.32%

Savoy Hotel Boracay, Inc. (SHBI) (j) 82.32% - -

Belmont Hotel Boracay, Inc. (BHBI) (j) 82.32% - -

Oceanfront Properties, Inc. (OFPI) (j) 41.13% 41.13% 41.13%

Empire East Land Holdings, Inc. (EELHI) 81.73% 81.73% 81.73%

Eastwood Property Holdings, Inc. (EPHI) 81.73% 81.73% 81.73%

Valle Verde Properties, Inc. (VVPI) (a) 81.73% 81.73% 81.73%

Sherman Oak Holdings, Inc. (SOHI) (a) 81.73% 81.73% 81.73%

Empire East Communities, Inc. (EECI) (a) 81.73% 81.73% 81.73%

20th Century Nylon Shirt, Inc. (CNSI) (a) 81.73% 81.73% 81.73%

Laguna BelAir School, Inc. (LBASI) 59.67% 59.67% 59.67%

Sonoma Premier Land, Inc. (SPLI) (a) 49.04% 49.04% 49.04%

Pacific Coast Mega City, Inc. (PCMI) (r) 32.69% 16.35% - Megaworld Resort Estates, Inc. (MREI) 51% 51% 51%

Townsquare Development, Inc. (TDI) 30.60% 30.60% 30.60%

Golden Panda-ATI Realty

Corporation (GPARC) 30.60% 30.60% 30.60%

Associates:

Bonifacio West Development Corporation (BWDC) 46.11% 46.11% 46.11%

Palm Tree Holdings and Development

Corporation (PTHDC) (a) 40% 40% 40%

Suntrust Home Developers, Inc. (SHDI) (k) 34% 45.67% 45.67%

First Oceanic Property Management, Inc. (FOPMI) (m) 8.16% 45.67% 45.67%

Citylink Coach Services, Inc. (CCSI) (m) 8.16% 45.67% 45.67%

F-42

- 4 -


Associates Notes 2019 2018 2017

Associates:

GERI

Fil-Estate Network, Inc. (FENI) (n) 16.46% 16.46% 16.46%

Fil-Estate Sales, Inc. (FESI) (n) 16.46% 16.46% 16.46%

Fil-Estate Realty and Sales Associates, Inc.

(FERSAI) (n) 16.46% 16.46% 16.46%

Fil-Estate Realty Corp. (FERC) (n) 16.46% 16.46% 16.46%

Nasugbu Properties, Inc. (NPI) (n) 11.52% 11.52% 11.52%

Boracay Newcoast Hotel Group, Inc. (BNHGI) (l) - 12.35% 12.35%

EELHI PCMI (r) - - 16.35%

Explanatory Notes:

(a) These are entities which have not yet started commercial operations as at December 31, 2019.

(b) SVCI and MGLI were incorporated in 2016 and are engaged in the same line of business as the Company. Meanwhile,

SPI and SCRGI were existing entities that were separately acquired in 2016 and were accounted for as business

acquisitions. LSPI is engaged in the same line of business as the Company, while SCRGI is engaged in restaurant

operations.

(c) As at December 31, 2019, the Company owns 76.55% of MCPI consisting of 51% direct ownership, 18.97% indirect

ownership through EELHI and 6.58% indirect ownership through MREI.

(d) As at December 31, 2019, the Company’s ownership in GPMAI is at 52.14%, which consists of 38.72% and 13.42%

indirect ownership from EELHI and MREI, respectively.

(e) In 2018, the Company subscribed to additional shares of MBPHI amounting to P1.7 million increasing its effective

ownership to 68.03%, which consists of 67.43% and 0.60% indirect ownership from TIHGI.

(f) These were incorporated to engage in operation, maintenance, and administration of various malls and commercial

centers. These companies became subsidiaries of the Company through MLI, their immediate parent company.

(g) New subsidiaries in 2017. MCTI, SLPCCAI and NWPI are existing entities that are separately acquired in 2017 and

are accounted for as business acquisitions. MCTI and NWPI are engaged in the same line of business as the Company,

while SLPCCAI is engaged in operation, maintenance, and administration of various malls and commercial centers.

(h) In 2016, the Company acquired additional shares of GERI from the PSE, increasing its ownership interest to 82.32%.

(i) SMI is a subsidiary of GERI acquired in 2014 which is engaged in real estate business. In 2016, both the Company

and GERI subscribed to additional common shares of SMI resulting to 49.59% and 50.41% direct ownership

interest, respectively.

(j) Subsidiaries of GERI. As a result of the additional investments in GERI in 2016, the Company’s indirect ownership

interest over these subsidiaries increased in proportion to the increase in effective interest over GERI. Effective

ownership interest over MGEI and TLC increased to 89.39% and 83.37%, respectively. In 2018, the Company

acquired shares of TLC increasing its effective ownership to 90.99%, which consists of 49% direct ownership and

41.99% indirect ownership from GERI. SHBI and BHBI were incorporated in 2019 and are both engaged in hotel

operations.

(k) In 2019, the Company and TDI bought additional shares and disposed shares of SHDI [see Note 11(a)]. In addition,

the Company and a third party investor subscribed to the increase in capitalization over SHDI, the latter became the

controlling shareholder. The foregoing transactions decreased the Company’s effective ownership over SHDI to 34%.

(l) In 2019, 2017 and 2016, FEPI sold 15% direct ownership interest each year in BNHGI to a third party. The effective

ownership interest of the Company gradually decreases from 12.35% in 2018 and 2017 to nil in 2019.

(m) In 2019 as a result of the Company’s dilution of ownership interest over SHDI, the effective ownership of the

Company over FOPMI and CCSI was also diluted to 8.16%.

(n) Associates of GERI. As a result of the additional investments in GERI in 2016, the Company’s indirect ownership

interest over these associates increased in proportion to the increase in effective interest over GERI.

(o) HLCI, SHMI, and SHM were incorporated in 2018 and are engaged in hotel operations.

(p) In 2018, SPI and the Company acquired shares of STLI resulting into 96.87% effective ownership over STLI

consisting of 17.40% direct ownership and 79.47% indirect ownership through SPI.

(q) In 2018, GERI acquired shares of ECPSI, and TLHI through TLC resulting into 82.32% and 90.99% effective

ownership over ECPSI and TLHI, respectively.

F-43

- 5 -

(r) PCMI is considered as an associate of the Company since 2015. The Company obtained de facto control over PCMI

in 2018 by aligning their key executives and Boards of Directors (BODs). The acquisition was accounted for under

the pooling-of-interest method of accounting; hence, no goodwill nor gain on acquisition was recognized. In January

2019, EELHI acquired additional shares of PCMI, increasing the Company’s effective ownership interest to 32.69%.

Except for MCII and RHGI, all the subsidiaries and associates were incorporated and have their principal place of business in the Philippines. MCII was incorporated and has principal place of business in the Cayman Islands while RHGI was incorporated and has principal place of business in the British Virgin Islands.

The Company and its subsidiaries, except for entities which have not yet started commercial operations as at December 31, 2019, are presently engaged in the real estate business, hotel, condominium-hotel operations, construction, restaurant operations, business process outsourcing, educational facilities provider, property management operations and marketing services. There are no significant restrictions on the Company’s ability to access or use the assets and settle the liabilities of the Group.

EELHI, GERI, and SHDI are publicly-listed companies in the Philippines.

1.2 Business Acquisitions

In June 2018, the Company and SPI acquired 17.40% and 79.47%, respectively, of the common shares of STLI with the intention of further expanding the Group’s developments in CALABARZON area as STLI has existing properties in Cavite and Laguna. In 2018, STLI has recognized revenues and net profit amounting to P800.23 million and P293.73 million, respectively. Of these amounts, revenues and net profit of P744.06 million and P258.65 million, respectively, were recognized since the acquisition date. As of December 31, 2018, the accounting for acquisition of STLI is not yet complete. The fair values of assets acquired and liabilities assumed presented in the 2018 financial statements was only provisionally determined pending the finalization of necessary market valuations. As allowed under PFRS 3, Business Combinations, the Group determined the final fair values of identifiable assets and liabilities within 12 months from the acquisition date. In 2019, management completed the assessment of the fair values of STLI’s net assets and determined adjustments resulting in P246.9 million decrease in its net assets valuation. The adjustments to the provisionary amounts likewise resulted in a goodwill amounting to P94.9 million and deferred tax asset of P141.2 million. The goodwill comprises the fair value of expected synergies arising from the acquisition, which mainly pertain to real estate development expertise of the Group and the strategic location of real properties for development provided by STLI. The 2018 consolidated statement of financial position, consolidated statement of income, and consolidated statement of comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows were restated to reflect the final fair value measurement of the net assets of STLI (see Note 2.1).

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The provisional and final fair values of assets acquired and liabilities assumed from STLI as at the date of acquisition is presented below. Final Provisional fair value fair value Fair value of assets acquired: Cash P 236,699,638 P 236,699,638 Trade and other receivables 574,564,471 574,564,471 Contract asset 445,665,960 445,665,960 Inventories 1,600,380,340 1,847,272,303 Deferred tax asset 141,225,062 - Other assets 130,889,842 130,889,842 3,129,425,313 3,235,092,214 Fair value of liabilities assumed ( 1,376,876,569) ( 1,376,876,569 )

Fair value of consideration transferred ( 1,951,674,900 ) ( 1,951,674,900 ) Non-controlling interest ( P 62,242,041) ( P 62,242,041 ) Pre-acquisition income 166,475,960 166,475,960 Goodwill (gain) on acquisition 94,892,237 ( 10,774,664 )

Acquired trade and other receivables mainly pertains to trade receivables from real estate sales. There were no contingent consideration arising from the foregoing transaction. Also, acquisition related-costs were deemed immaterial on this transaction.

PCMI became a subsidiary on December 31, 2018 when the Group obtained de facto control upon the latter gaining power to govern over the financial and operating policies of the former. The acquisition was accounted for as pooling-of-interest method of accounting as PCMI was acquired from related parties under common control. Transfers of assets between commonly-controlled entities are accounted for under historical cost accounting; hence, the assets and liabilities reflected in the consolidated financial statements are at carrying values and no adjustments are made to reflect fair values or recognized any new assets or liabilities, at the date of the combination that otherwise would have been done under the acquisition method. No restatements are made to the financial information in the consolidated financial statements for periods prior to the business combination as allowed under Philippine Interpretations Committee (PIC) Question & Answer (Q&A) No. 2012-01, PFRS 3.2 – Application of Pooling-of-Interest Method for Business Combination of Entities under Common Control in Consolidated Financial Statements; hence, the profit and loss of PCMI is included in the consolidated financial statements for the full year, irrespective of when the combination took place. Aggregate financial information, at historical cost, of PCMI as at acquisition date is presented below. Total assets acquired P 2,429,036,789

Total liabilities assumed ( 8,447,960)

Net assets acquired P 2,420,588,829

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In January 2019, the Group acquired additional shares of PCMI representing additional 20% direct ownership. The effective ownership of the Group over PCMI after the transaction is 32.69%. 1.3 Subsidiaries with Material Non-controlling Interest

The subsidiaries with material non-controlling interest (NCI) are shown below (in thousands).

Proportion of Ownership Subsidiary’s Consolidated Interest and Voting Profit Allocated Accumulated Rights Held by NCI to NCI Equity of NCI December 31, December 31, Name 2019 2018 2019 2018 2019 2018 GERI 17.68% 17.68% P 117,431 P 94,608 P 6,580,032 P 6,470,758 EELHI 18.27% 18.27% 114,360 76,121 11,367,843 11,265,321 MBPHI 32.57% 32.57% 547,545 157,214 2,967,678 2,420,144 LFI 33.33% 33.33% 66,592 26,440 1,224,967 1,158,375

The summarized financial information of GERI, EELHI, MBPHI, and LFI before intragroup eliminations is shown below.

Other Comprehensive Assets Liabilities Equity Revenues Net Profit Income (Loss)

December 31, 2019 GERI P 49,860,886,882 P 16,621,403,811 P 33,239,483,071 P 8,794,368,103 P 2,155,883,113 ( P 34,972,164 )

EELHI 44,841,434,078 16,237,588,147 28,603,845,931 5,217,399,507 615,684,185 39,793,736 MBPHI 15,135,535,633 7,712,068,573 7,423,467,060 9,655,915,233 1,620,868,233 -

LFI 1,395,352,186 654,871,498 740,480,688 536,611,068 200,651,846 ( 2,483,182 )

December 31, 2018 GERI P 46,030,031,167 P 14,870,123,288 P 31,159,907,879 P 7,521,509,127 P 1,724,287,054 P 20,955,985

EELHI 42,223,424,162 14,528,339,025 27,695,085,137 4,501,243,774 535,151,850 234,490,290 MBPHI 11,502,368,649 6,631,708,012 4,870,660,637 3,247,698,783 479,953,842 -

LFI 1,319,424,260 776,657,072 542,767,188 306,460,571 83,477,418 ( 3,476,767 )

Net Cash from (Used in) Operating Investing Financing Activities Activities Activities 2019 GERI P 657,521,604 ( P 344,933,491) P 537,583,173 EELHI ( 447,213,978) 2,378,163 ( 580,455,232) MBPHI ( 545,095,966) 42,174,405 871,674,056 LFI 212,520,618 46,309,192 ( 138,160,779) 2018 GERI P 811,287,625 ( P 1,204,207,306) ( P 999,066,094) EELHI ( 311,504,915) ( 92,665,687) 937,988,195 MBPHI ( 336,414,339) 2,681,853 871,674,056 LFI 234,118,112 ( 98,090,235) ( 138,160,779)

In 2019 and 2018, GERI, EELHI, MBPHI, and LFI have not declared nor paid any dividends.

1.4 Approval of the Consolidated Financial Statements

The consolidated financial statements of the Group as at and for the year ended December 31, 2019 (including the comparative consolidated financial statements as at December 31, 2018 and for the years ended December 31, 2018 and 2017) were authorized for issue by the Company’s Board of Directors (BOD) on April 6, 2020.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies that have been used in the preparation of these financial statements are summarized below and in the succeeding pages. The policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of Preparation of Consolidated Financial Statements

(a) Statement of Compliance with Philippine Financial Reporting Standards

The consolidated financial statements of the Group have been prepared in accordance with Philippine Financial Reporting Standards (PFRS). PFRS are adopted by the Financial Reporting Standards Council (FRSC), from the pronouncements issued by the International Accounting Standards Board, and approved by the Philippine Board of Accountancy.

The consolidated financial statements have been prepared using the measurement bases specified by PFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies that follow.

(b) Presentation of Consolidated Financial Statements

The consolidated financial statements are presented in accordance with Philippine Accounting Standard (PAS) 1, Presentation of Financial Statements. The Group presents a consolidated statement of comprehensive income separate from the consolidated statement of income.

The Group presents a third consolidated statement of financial position as at the beginning of the preceding period when it applies an accounting policy retrospectively, or makes retrospective restatement or reclassification of items that has a material effect on the information in the statement of financial position at the beginning of the preceding period. The related notes to the third statement of financial position are not required to be disclosed. In 2019, the Group reclassified advances to associates and other related parties, previously presented as part of Investments in and Advances to Associates and Other Related Parties account, to be included as part of Trade and Other Receivables – Net under Current Assets section while the Advances from Associates and Other Related Parties account was reclassified from Non-current Liabilities to Current Liabilities section in the 2018 consolidated statement of financial position. Such reclassifications were made as management believes that the presentation will provide more reliable and relevant information to users of the financial statements. Accordingly, the Group restated its 2018 consolidated statement of financial position in accordance with PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. The reclassification has no material impact on the Group’s 2018 consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows; hence, consolidated statement of financial position as at January 1, 2018 was not presented. Also in 2019, management completed the assessment of the fair values of STLI’s net assets (see Note 1.2). The 2018 consolidated statement of financial position, consolidated statement of income, consolidated statement of comprehensive income were restated to reflect the final fair value measurement of the net assets of STLI.

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The effects of the restatements on the consolidated statement of financial position as of December 31, 2018 are summarized as follows:

As previously Reclassification/ Reported Restatement As Restated Changes in Assets and Liabilities Current Assets Trade and other receivables – net P 25,023,426,519 P 2,631,763,618 P 27,655,190,137 Inventories 100,909,467,507 ( 246,891,963 ) 100,662,575,544 Non-current Assets Investments in and advances to associates and other related parties – net 4,628,639,940 ( 4,628,639,940 ) - Investments in associates – net - 2,631,763,618 1,996,876,322 Deferred tax assets – net 143,663,350 141,225,062 284,888,412 Other non-current assets – net 2,919,651,868 89,056,675 3,008,708,543 Current Liabilities Advances from associates and other related parties - 2,885,463,118 ( 2,885,463,118 ) Non-current Liabilities Advances from associates and other related parties ( 2,885,463,118 ) 2,885,463,118 - Retirement benefit obligation 834,324,454 ( 5,835,562 ) 828,488,892 Change in Equity Retained earnings P 108,258,345,132 (P 10,774,664 ) P 108,247,570,468 *

*Excluding the effect of adoption of PFRS 16 [see Note 2.2(a)(iv)].

The effect of the restatement on the consolidated statement of income for the year ended December 31, 2018 is shown below.

As previously Reclassification/ Reported Restatement As Restated

Interest and other income – net P 3,525,789,392 (P 10,774,664 ) P 3,515,014,728

The effects of the restatement on the consolidated statement of cash flows for the year ended December 31, 2018 is shown below.


Profit before tax P 21,388,188,925 (P 10,774,664 ) P 21,377,414,261 Changes in cash flows from operating activities – Increase in inventories ( 8,113,313,536) 246,891,963 ( 7,866,421,573 ) Balance carried forward P 236,117,299

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Balance brought forward P 236,117,299 Changes in cash flows from investing activities – Acquisition and subscription of shares of stock of new subsidiaries and associates ( P 2,860,964,132) ( 236,117,299) (P 3,097,081,431 ) Net effect of changes on cash flows P -

(c) Functional and Presentation Currency

These consolidated financial statements are presented in Philippine Peso, the Group’s presentation and functional currency, and all values represent absolute amounts except when otherwise indicated.

Items included in the consolidated financial statements of the Group are measured using the Company’s functional currency. Functional currency is the currency of the primary economic environment in which the Company operates.

2.2 Adoption of New and Amended PFRS

(a) Effective in 2019 that are Relevant to the Group The Group adopted for the first time the following new standard, amendments, interpretation, and annual improvements to PFRS, which are mandatorily effective for consolidated financial statements beginning on or after January 1, 2019:

PAS 19 (Amendments) : Employee Benefits – Plan Amendment, Curtailment or Settlement PAS 28 (Amendments) : Investment in Associates and Joint Ventures – Long-term Interests in Associates and Joint Ventures PFRS 9 (Amendments) : Financial Instruments – Prepayment Features with Negative Compensation PFRS 16 : Leases International Financial

Reporting Interpretations Committee (IFRIC) 23 : Uncertainty over Income Tax Treatments

Annual Improvements to PFRS (2015-2017 Cycle) PAS 12 (Amendments) : Income Taxes – Tax Consequences of Dividends PFRS 23 (Amendments) : Borrowing Costs – Eligibility for Capitalization PFRS 3 and PFRS 11 : Business Combination and Joint Arrangements –

(Amendments) Remeasurement of Previously Held Interests in a Joint Operation

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Discussed below and in the succeeding pages are the relevant information about these pronouncements.

(i) PAS 19 (Amendments), Employee Benefits – Plan Amendment, Curtailment or Settlement. The amendments clarify that past service cost and gain or loss on settlement is calculated by measuring the net defined benefit liability or asset using updated actuarial assumptions and comparing the benefits offered and plan assets before and after the plan amendment, curtailment or settlement but ignoring the effect of the asset ceiling that may arise when the defined benefit plan is in a surplus position. Further, the amendments now require that if an entity remeasures its net defined benefit liability or asset after a plan amendment, curtailment or settlement, it should also use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after the change to the plan. The application of these amendments has no impact on the Group’s consolidated financial statements.

(ii) PAS 28 (Amendments), Investment in Associates – Long-term Interest in Associates and Joint Venture. The amendments clarify that the scope exclusion in PFRS 9 applies only to ownership interests accounted for using the equity method. Thus, the amendments further clarify that long-term interests in an associate or joint venture – to which the equity method is not applied – must be accounted for under PFRS 9, which shall also include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. The application of these amendments has no impact on the Group’s consolidated financial statements as the Group applies the equity method in its investments in associates.

(iii) PFRS 9 (Amendments), Financial Instruments – Prepayment Features with Negative Compensation. The amendments clarify that prepayment features with negative compensation attached to financial assets may still qualify under the “solely payments of principal and interests” (SPPI) test. As such, the financial assets containing prepayment features with negative compensation may still be classified at amortized cost or at fair value through other comprehensive income (FVOCI). The application of these amendments has no impact on the Group’s consolidated financial statements as the Group has no financial instruments with negative compensation.

(iv) PFRS 16, Leases. The new standard replaced PAS 17, Leases, and its related

interpretation IFRIC 4, Determining Whether an Arrangement Contains a Lease, Standard Interpretations Committee (SIC) 15, Operating Leases – Incentives, and SIC 27, Evaluating the Substance of Transactions Involving the Legal Form of a Lease. For lessees, it requires an entity to account for leases “on-balance sheet” by recognizing a “right-of-use” asset and lease liability arising from contract that is, or contains, a lease.

For lessors, the definitions of the type of lease (i.e., finance and operating leases) and the supporting indicators of a finance lease are substantially the same with the provisions under PAS 17. In addition, basic accounting mechanics are also similar but with some different or more explicit guidance related to variable payments, sub-leases, lease modifications, the treatment of initial direct costs and lessor disclosures.

The Group has adopted PFRS 16 using the modified retrospective approach as allowed under the transitional provisions of the standard. The adoption of the standard has resulted in adjustments to the amounts recognized in the financial statements as at January 1, 2019, with the cumulative effect recognized in equity as an adjustment to the opening balance of Retained Earnings as of January 1, 2019. Accordingly, comparative information was not restated with respect to this adoption.

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The new accounting policies of the Group as a lessee are disclosed in Note 2.17(a), while the accounting policies of the Group as a lessor, as described in Note 2.17(b), were not significantly affected. The following are the relevant information arising from the Company’s adoption of PFRS 16 and how the related accounts are measured and presented on the Company’s financial statements as at January 1, 2019.

(a) For contracts in place at the date of initial application, the Group has elected to

apply the definition of a lease from PAS 17 and IFRIC 4 and has not applied PFRS 16 to arrangements that were previously not identified as leases under PAS 17 and IFRIC 4.

(b) The Group recognized lease liabilities in relation to leases which had previously

been classified as operating leases under PAS 17. These liabilities were measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate as of January 1, 2019. The Group’s weighted average incremental borrowing rates applied to the lease liabilities on January 1, 2019 ranges from 7.85% to 15% for peso denominated leases, and 4.82% for US dollar denominated leases.

(c) The Group has elected not to include initial direct costs in the measurement of

right-of-use assets at the date of initial application. The Group also elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid lease payments and estimated cost to restore the leased asset that existed as at January 1, 2019.

(d) For those leases previously classified as finance leases, the Group recognized the

related right-of-use asset and lease liability at the date of initial application at the same amounts as the carrying amount of the capitalized asset and finance lease obligation under PAS 17 immediately before transition.

(e) The Group has also used the following practical expedients, apart from those

already mentioned above, as permitted by the standard:

reliance on its historical assessments on whether leases are onerous as an alternative to performing an impairment review on right-of-use assets. As at January 1, 2019, the Group has no onerous contracts; and,

use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

Relative to the adoption of PFRS 16 in the Philippines, the FRSC also approved the issuance of the following PIC Q&As:

(f) PIC Q&A No. 2019-09, Accounting for Prepaid Rent or Rent Liability Arising from Straight-lining under PAS 17, Leases, on Transition to PFRS 16 and the Related Deferred Tax Effects, clarifies the accounting treatment for any existing prepaid rent or rent liability in transition from PAS 17 to PFRS 16 using the modified retrospective approach and the related deferred tax effects;

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(g) PIC Q&A 2019-11, Determining the Current Portion of an Amortizing Loan/Lease Liability, clarifies the proper classification/presentation between current and non-current portion of amortizing loan/lease liability in the statement of financial position; and,

(h) PIC Q&A 2019-12, Determining the Lease Term under PFRS 16, Leases, clarifies the

lease term upon consideration of an option to either extend or terminate the lease. The following table shows the effects of the adoption of PFRS 16 in the carrying amounts and presentation of certain accounts in the statement of financial position as at January 1, 2019.

Carrying Carrying Amount Amount (PAS 17) (PFRS 16) December 31, January 1, Notes 2018 Remeasurement 2019 Assets: Property and equipment – net 13 P 6,170,052,573 P 399,145,961 P 6,569,198,534 Deferred tax assets – net 284,888,412 ( 2,103,735 ) 282,784,677 Liabilities: Other liabilities: Current 19 ( 5,063,817,214 ) ( 122,421,709 ) ( 5,186,238,923 ) Non-current 19 ( 6,660,043,772 ) ( 345,480,241 ) ( 7,005,524,013 ) Trade and other payables ( 15,027,120,371) 83,501,269 ( 14,943,619,102 ) Impact on net assets ( P 12,641,545 )

The reconciliation of the opening lease liabilities recognized at January 1, 2019 and the total operating lease commitments determined under PAS 17 at December 31, 2018 is as follows:

Note

Operating lease commitments, December 31, 2018 (PAS 17) 31.1 P 1,333,353,936 Recognition exemptions: Leases with remaining term of less than 12 months ( 240,973,409) Operating lease liabilities before discounting 1,092,380,527 Discount using incremental borrowing rate ( 624,478,577)

Lease liabilities, January 1, 2019 (PFRS 16) P 467,901,950

(v) IFRIC 23, Uncertainty over Income Tax Treatments. This interpretation provides

clarification on the determination of taxable profit, tax bases, unused tax losses, unused tax credits, and tax rates when there is uncertainty over income tax treatments. The core principle of the interpretation requires the Group to consider the probability of the tax treatment being accepted by the taxation authority. When it is probable that the tax treatment will be accepted, the determination of the taxable profit, tax bases, unused tax losses, unused tax credits, and tax rates shall be on the basis of the accepted tax treatment. Otherwise, the Group has to use the most likely amount or the expected value, depending on the surrounding circumstances, in determining the tax accounts identified immediately above. The application of this interpretation has no material impact on the Group’s consolidated financial statements.

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(vi) Annual Improvements to PFRS 2015-2017 Cycle. Among the improvements, the following amendments, which are effective from January 1, 2019, are relevant to the Group but had no material effect on the Group’s financial statements as the related amendments merely clarify existing requirements:

PAS 12 (Amendments), Income Taxes – Tax Consequences of Dividends. The amendments clarify that an entity should recognize the income tax consequence of dividend payments in profit or loss, other comprehensive income or equity according to where the entity originally recognized the transactions that generated the distributable profits.

PAS 23 (Amendments), Borrowing Costs – Eligibility for Capitalization. The amendments clarify that if any specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or sale, such borrowing is treated as part of the entity’s general borrowings when calculating the capitalization rate.

PFRS 3 (Amendments), Business Combinations, and PFRS 11 (Amendments), Joint Arrangements – Remeasurement of Previously Held Interests in a Joint Operation. The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.

(b) Effective Subsequent to 2019 but not Adopted Early

There are amendments to existing standards effective for annual periods subsequent to 2019, which are adopted by the FRSC. Management will adopt the following relevant pronouncements in accordance with their transitional provisions; and, unless otherwise stated, none of these are expected to have significant impact on the Group’s financial statements:

(i) PAS 1 (Amendments), Presentation of Financial Statements and PAS 8 (Amendments), Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material (effective from January 1, 2020). The amendments provide a clearer definition of ‘material’ in PAS 1 by including the concept of ‘obscuring’ material information with immaterial information as part of the new definition, and clarifying the assessment threshold (i.e., misstatement of information is material if it could reasonably be expected to influence decisions made by primary users, which consider the characteristic of those users as well as the entity’s own circumstances). The definition of material in PAS 8 has been accordingly replaced by reference to the new definition in PAS 1. In addition, amendment has also been made in other Standards that contain definition of material or refer to the term ‘material’ to ensure consistency.

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(ii) Revised Conceptual Framework for Financial Reporting (effective from January 1, 2020). The revised conceptual framework will be used in standard-setting decisions with immediate effect. Key changes include (a) increasing the prominence of stewardship in the objective of financial reporting, (b) reinstating prudence as a component of neutrality, (c) defining a reporting entity, which may be a legal entity, or a portion of an entity, (d) revising the definitions of an asset and a liability, (e) removing the probability threshold for recognition and adding guidance on derecognition, (f) adding guidance on different measurement basis, and, (g) stating that profit or loss is the primary performance indicator and that, in principle, income and expenses in other comprehensive income should be recycled where this enhances the relevance or faithful representation of the financial statements.

No changes will be made to any of the current accounting standards. However,

entities that rely on the framework in determining their accounting policies for transactions, events or conditions that are not otherwise dealt with under the accounting standards will need to apply the revised framework from January 1, 2020. These entities will need to consider whether their accounting policies are still appropriate under the revised framework.

(iii) PFRS 10 (Amendments), Consolidated Financial Statements, and PAS 28

(Amendments), Investments in Associates and Joint Ventures – Sale or Contribution of Assets Between an Investor and its Associates or Joint Venture (effective date deferred indefinitely). The amendments to PFRS 10 require full recognition in the investor’s financial statements of gains or losses arising on the sale or contribution of assets that constitute a business as defined in PFRS 3, Business Combinations, between an investor and its associate or joint venture. Accordingly, the partial recognition of gains or losses (i.e., to the extent of the unrelated investor’s interests in an associate or joint venture) only applies to those sale or contribution of assets that do not constitute a business. Corresponding amendments have been made to PAS 28 to reflect these changes. In addition, PAS 28 has been amended to clarify that when determining whether assets that are sold or contributed constitute a business, an entity shall consider whether the sale or contribution of those assets is part of multiple arrangements that should be accounted for as a single transaction.

(c) SEC Memorandum Circular (MC) No. 04-2020, Deferment of the Implementation of IFRIC Agenda Decision on Over Time Transfer of Constructed Goods (PAS 23) for Real Estate Industry (IFRIC Agenda Decision).

The IFRIC concluded that any inventory (work-in-progress) for unsold units under construction that the entity recognizes is not a qualifying asset, as the asset is ready for its intended sale in its current condition - i.e., the developer intends to sell the partially constructed units as soon as it finds suitable customers and, on signing a contract with a customer, will transfer control of any work-in-progress relating to that unit to the customer. Accordingly, no borrowing costs can be capitalized on such unsold real estate inventories.

In relation to the above issues, the SEC, in its Memorandum Circular No. 04-2020,

provided for the relief to the Real Estate Industry by deferring the implementation of the IFRIC Agenda Decision until December 31, 2020. Effective January 1, 2021, real estate companies in the Philippines shall adopt the IFRIC interpretations and any subsequent amendments thereto retrospectively or as the SEC will later prescribe. However, a real estate company may opt not to avail of the relief provided and instead comply in full with the requirements of the IFRIC interpretations.

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The Group opted to avail the relief provided by the SEC to defer the implementation of the IFRIC Agenda Decision until December 31, 2020. The Group’s accounting policies with respect to capitalization of borrowing costs on real estate inventories under construction are disclosed in Notes 2.7 and 2.21.

Had the Group elected not to defer the IFRIC Agenda Decision, it would have the following impact in the financial statements: (a) interest expense would have been higher; (b) cost of real estate inventories would have been lower; (c) total comprehensive income would have been lower; (d) retained earnings would have been lower; and, (e) the carrying amount of real estate inventories would have been lower.

(d) SEC MC No.14 Series of 2018 and MC No. 3 Series of 2019

The SEC issued MC No. 14 in 2018 and MC No. 3 in 2019 which provided relief by deferral of the application on the following items for three years until calendar year ending December 31, 2020:

Concept of the significant financing component in the contract to sell; PFRS 15 requires that in determining the transaction price, an entity shall adjust the promised amount of consideration for the effects of the time value of money if the timing of payments agreed to by the parties to the contract (either explicitly or implicitly) provides the customer or the entity with a significant benefit of financing the transfer of goods or services to the customer. In those circumstances, the contract contains a significant financing component.

Treatment of land and uninstalled materials in the determination of POC (PIC Q&A No. 2018-12-E); Uninstalled materials delivered on-site but not yet installed such as steels and rebars, elevators and escalators, which are yet to be installed or attached to the main structure are excluded in the assessment of measurement of progress. Land shall also be excluded in the assessment.

Accounting for common usage service area charges (PIC Q&A No. 2018-12-H); and, According to the consensus of the PIC Q&A No. 2018-12-H, the following should be considered by the role of a real estate developer in providing goods or services:

a) Electricity usage – Agent b) Water usage – Agent c) Air-conditioning charges – Principal d) Common use service area (CUSA) charges and administrative and handling

fees – Principal

Accounting for cancellation of real estate sales (PIC Q&A No. 2018-14).

According to the consensus of the PIC Q&A No. 2018-14, repossessed inventory may initially be recognized at either costs or fair value plus repossession costs. Either approaches should be applied consistently.

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The Group elected to defer the adoption of the accounting for the significant financing component in a contract to sell under PIC Q&A 2018-12 in accordance with MC No. 14 series of 2018 and the measurement of repossessed inventory at fair value under PIC Q&A 2018-14 in accordance MC No. 3 series of 2019. Had the Group elected not to defer the above specific provisions, it would have the following impact in the consolidated financial statements:

There would have been a significant financing component when there is a difference between the POC of the real estate project and the right to the consideration based on the payment schedule stated in the contract. The Group would have recognized an interest income when the POC of the real estate project is greater than the right to the consideration and interest expense when lesser. Both interest income and expense are calculated using the effective interest rate method. This will impact the retained earnings as at January 1, 2018 and real estate sales in 2018.

There would have been an increase in the retained earnings balance as at January 1, 2018 and net profit in 2018 as a result of the gain from repossession. This is because repossessed inventory would have been recorded at either fair value plus repossession costs or fair value less repossession costs. The Group currently records repossessed inventory at its carrying amount and recognize in profit or loss the difference between the carrying amount of the repossessed inventory and receivable.

2.3 Basis of Consolidation The Group’s consolidated financial statements comprise the accounts of the Company, and its subsidiaries as enumerated in Note 1, after the elimination of material intercompany transactions. All intercompany assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities under the Group, are eliminated in full on consolidation. Unrealized profits and losses from intercompany transactions that are recognized in assets are also eliminated in full. In addition, the shares of the Company held by the subsidiaries are recognized as treasury shares and these are presented as deduction in the consolidated statement of changes in equity. Any changes in the market values of such shares as recognized separately by the subsidiaries are likewise eliminated in full. The financial statements of subsidiaries are prepared for the same reporting period as the Company’s, using consistent accounting principles. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

The Company accounts for its investments in subsidiaries, associates, interests in jointly-controlled operations, and non-controlling interests as follows:

(a) Investments in Subsidiaries

Subsidiaries are entities (including structured entities) over which the Company has control. The Company controls an entity when: it has the power over the entity; it is exposed, or has rights to, variable returns from its involvement with the entity; and, has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date the Company obtains control.

The Company reassesses whether or not it controls an entity if facts and circumstances indicate that there are changes to one or more of the three elements of controls indicated above. Accordingly, entities are deconsolidated from the date that control ceases.

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The acquisition method is applied to account for acquired subsidiaries. This requires recognizing and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group, if any. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred and subsequent change in the fair value of contingent consideration is recognized directly in profit or loss.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any existing equity interest in the acquiree over the acquisition-date fair value of the identifiable net assets acquired is recognized as goodwill. If the consideration transferred is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly as gain in profit or loss (see Note 2.13).

(b) Investments in Associates

Associates are those entities over which the Group is able to exert significant influence but not control and which are neither subsidiaries nor interests in a joint venture. Investments in associates are initially recognized at cost and subsequently accounted for in the consolidated financial statements using the equity method. Acquired investment in associate is subject to the purchase method. The purchase method involves the recognition of the acquiree’s identifiable assets and liabilities, including contingent liabilities, regardless of whether they were recorded in the financial statements prior to acquisition. Goodwill represents the excess of acquisition cost over the fair value of the Group’s share of the identifiable net assets of the acquiree at the date of acquisition. Any goodwill or fair value adjustment attributable to the Group’s share in the associate is included in the amount recognized as investment in an associate.

All subsequent changes to the ownership interest in the equity of the associates are recognized in the Group’s carrying amount of the investments. Changes resulting from the profit or loss generated by the associates are credited or charged against the Equity Share in Net Earnings of Associates account in the consolidated statement of income.

Impairment loss is provided when there is objective evidence that the investment in an associate will not be recovered (see Note 2.18).

Changes resulting from other comprehensive income of the associates or items recognized directly in the associates’ equity are recognized in other comprehensive income or equity of the Group, as applicable. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports profit, the investor resumes recognizing its share of those profits only after its share of the profits exceeds the accumulated share of losses that has previously not been recognized.

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Distributions received from the associates are accounted for as a reduction of the carrying value of the investment.

Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the assets transferred. Accounting policies of associates are changed when necessary to ensure consistency with the policies adopted by the Group.

(c) Interests in Jointly-controlled Operations

For interests in jointly-controlled operations, the Group recognizes in its consolidated financial statements the assets that it controls, the liabilities and the expenses that it incurs and its share in the income from the sale of goods or services by the joint venture. The amounts of these related accounts are presented as part of the regular asset and liability accounts and income and expense accounts of the Group.

No adjustment or other consolidation procedures are required for the assets, liabilities, income and expenses of the joint operation that are recognized in the separate financial statements of the joint operators.

(d) Transactions with Non-controlling Interests

The Group’s transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transaction with the owners of the Group in their capacity as owners. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of the net assets of the subsidiary is recognized in equity. Disposals of equity investments to non-controlling interests result in gains and losses for the Group that are recognized in equity.

When the Company ceases to have control over a subsidiary, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amount previously recognized in other comprehensive income in respect of that entity are accounted for as if the Company had directly disposed of the related assets or liabilities. This means that amounts previously recognized in other comprehensive income are reclassified to profit or loss. The Company holds interests in various subsidiaries and associates as presented in Notes 1.1 and 11.

2.4 Foreign Currency Transactions and Translation

(a) Transactions and Balances

Except for MCII and RHGI which use the United States (U.S.) dollar as their functional currency, the accounting records of the Company and its subsidiaries are maintained in Philippine Peso. Foreign currency transactions during the year are translated into the functional currency at exchange rates which approximate those prevailing on transaction dates.

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Foreign currency gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized under Interest and Other Income or Charges – net in the consolidated statement of income.

(b) Translation of Financial Statements of Foreign Subsidiaries

The operating results and financial position of MCII and RHGI, which are measured using the U.S. dollar, their functional currency, are translated to Philippine Peso, the Company’s functional currency, as follows:

(i) Assets and liabilities for each statement of financial position presented are translated at

the closing rate at the end reporting period;

(ii) Income and expenses for each profit or loss account are translated at the annual average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and,

(iii) All resulting exchange differences are recognized as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in MCII and RHGI are recognized under Exchange Difference on Translating Foreign Operations account in the consolidated statement of comprehensive income. As these entities are wholly owned subsidiaries, the translation adjustments are fully allocated to the Company’s shareholders. When a foreign operation is partially disposed of or sold, such exchange differences are recognized in the consolidated statement of comprehensive income as part of gains or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

The translation of the consolidated financial statements into Philippine Peso should not be construed as a representation that the U.S. dollar amounts could be converted into Philippine Peso amounts at the translation rates or at any other rates of exchange.

2.5 Financial Assets Financial assets are recognized when the Group becomes a party to the contractual terms of the financial instruments. For purposes of classifying financial assets, an instrument is considered as an equity instrument if it is non-derivative and meets the definition of equity for the issuer in accordance with the criteria of PAS 32, Financial Instruments: Presentation. All other non-derivative financial instruments are treated as debt instruments.

(a) Classification, Measurement and Reclassification of Financial Assets The classification and measurement of financial assets is driven by the entity’s business

model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are categorized into the following categories: financial assets at amortized cost, financial assets at fair value through profit or loss and financial assets at FVOCI.

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(i) Financial Assets at Amortized Cost Financial assets are measured at amortized cost if both of the following conditions are met:

the asset is held within the Group’s business model whose objective is to hold financial assets in order to collect contractual cash flows (“hold to collect”); and,

the contractual terms of the instrument give rise, on specified dates, to cash flows that are SPPI on the principal amount outstanding.

Except for trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with PFRS 15, all financial assets meeting these criteria are measured initially at fair value plus transaction costs. These are subsequently measured at amortized cost using the effective interest method, less any impairment in value.

The Group’s financial assets at amortized cost are presented in the consolidated statement of financial position as Cash and Cash Equivalents, Trade and Other Receivables, Guarantee and other deposits (presented as part of Other Non-current Assets). For purposes of cash flows reporting and presentation, cash and cash equivalents comprise accounts with original maturities of three months or less, including cash. These generally include cash on hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of the financial assets except for those that are subsequently identified as credit-impaired. For credit-impaired financial assets at amortized cost, the effective interest rate is applied to the net carrying amount of the financial assets (after deduction of the loss allowance). The interest earned is recognized in the consolidated statements of income as part of Interest and Other Income – net.

(ii) Financial Assets at Fair Value Through Other Comprehensive Income

The Group accounts for financial assets at FVOCI if the assets meet the following conditions:

they are held under a business model whose objective is to hold to collect the associated cash flows and sell (“hold to collect and sell”); and,

the contractual terms of the financial assets give rise to cash flows that are SPPI on the principal amount outstanding.

At initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to designate equity investments as at FVOCI; however, such designation is not permitted if the equity investment is held by the Group for trading or as mandatorily required to be classified as FVTPL or if it is a contingent consideration recognized arising from a business combination. Accordingly, the Company has designated equity instruments as at FVOCI.

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Financial assets at FVOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value, with no deduction for any disposal costs. Gains and losses arising from changes in fair value, including the foreign exchange component, are recognized in other comprehensive income, net of any effects arising from income taxes, and are reported as part of Revaluation Reserves account in equity. When the asset is disposed of, the cumulative gain or loss previously recognized in the Revaluation Reserves account is not reclassified to profit or loss but is reclassified directly to Retained Earnings account, except for those debt securities classified as FVOCI wherein cumulative fair value gains or losses are recycled to profit or loss. Interest income is calculated by applying the effective interest rate to the gross carrying amount of the financial assets except for those that are subsequently identified as credit-impaired. For credit-impaired financial assets, the effective interest rate is applied to the net carrying amount of the financial assets (after deduction of the loss allowance). The interest earned is recognized in the consolidated statements of income as part of Interest and Other Income – net.

Any dividends earned on holding equity instruments are recognized in the consolidated statements of income as part of Interest and Other Income – net, when the Group’s right to receive dividends is established, it is probable that the economic benefits associated with the dividend will flow to the Group, and, the amount of the dividend can be measured reliably, unless the dividends clearly represent recovery of a part of the cost of the investment.

(iii) Financial Assets at Fair Value Through Profit or Loss Financial assets that are held within a different business model other than “hold to collect” or “hold to collect and sell” are categorized at FVTPL. Further, irrespective of business model, financial assets whose contractual cash flows are not SPPI are accounted for at FVTPL. Also, equity securities are classified as financial assets at FVTPL, unless the Company designates an equity investment that is not held for trading as at FVOCI at initial recognition. The Group’s financial assets at FVTPL include derivatives with positive fair value and are presented in the consolidated statement of financial position as part of Prepayments and Other Current Assets.

Financial assets at FVTPL are initially measured at fair value. Subsequently, they are measured at fair value with gains or losses recognized in profit or loss as part of Interest and Other Income – net in the consolidated statements of income unless the Group has elected to apply hedge accounting by designating the derivative as hedging instrument in an eligible hedging relationship in which some or all gains and losses may be recognized in other comprehensive income and included under Revaluation Reserves in the statements of changes in equity.

The Group can only reclassify financial assets if the objective of its business model for managing those financial assets changes. Accordingly, the Group is required to reclassify financial assets: (i) from amortized cost to FVTPL, if the objective of the business model changes so that the amortized cost criteria are no longer met; and, (ii) from FVTPL to amortized cost, if the objective of the business model changes so that the amortized cost criteria start to be met and the characteristic of the instrument’s contractual cash flows meet the amortized cost criteria.

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A change in the objective of the Group’s business model will take effect only at the beginning of the next reporting period following the change in the business model.

(b) Impairment of Financial Assets

The Group assesses its ECL on a forward-looking basis associated with its financial assets carried at amortized cost and debt instruments measured at FVOCI. The measurement of ECL involves consideration of broader range of information that is available without undue cost or effort at the reporting date about past events, current conditions, and reasonable and supportable forecasts of future economic conditions (i.e., forward-looking information) that may affect the collectability of the future cash flows of the financial assets. Measurement of the ECL is determined by a probability-weighted estimate of credit losses over the expected life of the financial instruments evaluated based on a range of possible outcome.

The Group applies the simplified approach in measuring ECL, which uses a lifetime expected loss allowance for all trade and other receivables and contract assets including those which contain significant financing component. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial assets. The Group also assesses impairment of trade receivables on a collective basis as they possess shared credit risk characteristics, and have been grouped based on the days past due [see Note 32.3(b)]. The Group applies a general approach specifically, in relation to advances to related parties. The maximum period over which ECL should be measured is the longest contractual period where an entity is exposed to credit risk. In the case of these receivables from related parties, which are repayable on demand, the contractual period is the very short period needed to transfer the cash once demanded. Management determines possible impairment based on the sufficiency of the related parties’ highly liquid assets in order to repay the Group’s receivables if demanded at the reporting date taking into consideration the historical defaults of the related parties. If the Group cannot immediately collect its receivables, management considers the expected manner of recovery to measure ECL. If the recovery strategies indicate that the outstanding balance of advances to related parties can be collected, the ECL is limited to the effect of discounting the amount due over the period until cash is realized.

For other financial assets at amortized cost, ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For cash and cash equivalents, the Group applies the low credit risk simplification. The probability of default and loss given defaults are publicly available and are considered to be low credit risk investments. It is the Group’s policy to measure ECLs on such instruments on a 12-month basis. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL.

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The key elements used in the calculation of ECL are as follows:

Probability of default – It is an estimate of likelihood of a counterparty defaulting at its financial obligation over a given time horizon, either over the next 12 months or the remaining lifetime of the obligation.

Loss given default – It is an estimate of loss arising in case where a default occurs at a given time. It is based on the difference between the contractual cash flows of a financial instrument due from a counterparty and those that the Group would expect to receive, including the realization of any collateral or effect of any credit enhancement.

Exposure at default – It represents the gross carrying amount of the financial instruments in the event of default which pertains to its amortized cost.

The Group recognizes an impairment loss in profit or loss for all financial instruments subjected to impairment assessment with a corresponding adjustment to their carrying amount through a loss allowance account, except for debt instruments measured at FVOCI, for which the loss allowance is recognizes in other comprehensive income and accumulated in Revaluation Reserves account, and does not reduce the carrying amount of the financial asset in the statement of financial position.

(c) Derecognition of Financial Assets The financial assets (or where applicable, a part of a financial asset or part of a group of financial assets) are derecognized when the contractual rights to receive cash flows from the financial instruments expire, or when the financial assets and all substantial risks and rewards of ownership have been transferred to another party. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

2.6 Derivative Financial Instruments and Hedge Accounting

The Group occasionally uses derivative financial instruments to manage its risks associated with foreign currency and interest rates. Derivatives are recognized initially at fair value and are subsequently remeasured at fair value. Such derivatives are carried as assets when the net fair value is positive and as liabilities when the net fair value is negative.

The Group uses hedge accounting when it assigns hedging relationships between a hedging instrument, usually a derivative financial instrument, and a hedged item. The hedging relationship must meet several strict conditions with respect to documentation, probability of occurrence of the hedged transaction and hedge effectiveness to qualify for hedge accounting. The hedging relationship must be expected to be highly effective over the period for which it is designated as cash flow hedge. Changes in fair value of derivatives designated as hedging instruments in cash flow hedges are recognized in other comprehensive income and included under Revaluation Reserves in equity to the extent that the hedge is effective. Any ineffectiveness in the hedge relationship is recognized immediately in profit or loss.

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If the hedged future cash flows are no longer expected, the amount that has been accumulated in Revaluation Reserves shall be immediately reclassified to profit or loss.

2.7 Inventories Cost of inventories includes acquisition costs of raw land intended for future development, including other costs and expenses incurred to effect the transfer of the property to the Company; related property development costs; and borrowing costs on certain loans incurred during the development of the real estate properties are also capitalized by the Group (see Note 2.21). All costs relating to the real estate property sold are recognized as expense as the work to which they relate is performed. Costs of inventories are assigned using specific identification of their individual costs. These properties and projects are valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to complete and the estimated costs necessary to make the sale. The Group recognizes the effect of revisions in the total project cost estimates in the year in which these changes become known. Any impairment loss from a real estate project is charged to operations during the period in which the loss is determined.

Repossessed property arising from sales cancellation is recognized at cost. The difference between the carrying amount of the receivable or Contract Asset to be derecognized and the cost of the repossessed property is recognized in the consolidated statement of income. 2.8 Prepayments and Other Assets

Prepayments and other assets pertain to other resources controlled by the Group as a result of past events. They are recognized in the consolidated financial statements when it is probable that the future economic benefits will flow to the Group and the asset has a cost or value that can be measured reliably. Advances to contractors and suppliers pertain to advance payments made by the Group, which are subsequently amortized as the performance obligation is performed.

Other recognized assets of similar nature, where future economic benefits are expected to flow to the Group beyond one year after the end of the reporting period or in the normal operating cycle of the business, if longer, are classified as non-current assets.

2.9 Property and Equipment

Property and equipment, including land, are carried at acquisition or construction cost less subsequent depreciation and/or amortization for property and equipment, and any impairment losses. As no finite useful life for land can be determined, related carrying amounts are not depreciated.

The cost of an asset comprises its purchase price and directly attributable costs of bringing the asset to working condition for its intended use. Expenditures for additions, major improvements and renewals are capitalized while expenditures for repairs and maintenance are charged to expenses as incurred.

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Depreciation and amortization are computed on the straight-line basis over the estimated useful lives of the assets. Amortization of office and improvements is recognized over the estimated useful lives of improvements or the term of the lease, whichever is shorter.

The depreciation and amortization periods for other property and equipment, based on the above policies, are as follows:

Buildings and improvements 5-25 years Office improvements 5-20 years Right-of-use asset 5-20 years

Transportation equipment 5 years Office furniture, fixtures and equipment 3-5 years

Fully depreciated and amortized assets are retained in the accounts until they are no longer in use and no further charge for depreciation and amortization is made in respect of these assets. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (see Note 2.18).

The residual values, estimated useful lives and method of depreciation and amortization of property and equipment are reviewed, and adjusted if appropriate, at the end of each reporting period.

An item of property and equipment, including the related accumulated depreciation, amortization and any impairment losses, is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated profit or loss in the year the item is derecognized. 2.10 Investment Properties

Investment properties include properties held for lease under operating lease agreements, properties intended to be held for lease, and properties held for currently undetermined use. These properties are carried at cost, net of accumulated depreciation and any impairment in value, except for land which is not subject to depreciation. The cost of an asset comprises its purchase price and directly attributable costs of bringing the asset to working condition for its intended use. Depreciation of investment properties, excluding land, is computed using the straight-line method over the estimated useful lives of the assets ranging from five to 25 years.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its recoverable amount (see Note 2.18).

The residual values, estimated useful lives and method of depreciation of investment properties, except for land, are reviewed and adjusted, if appropriate, at the end of each reporting period.

Transfers to, or from, investment properties shall be made when and only when there is a change in use or purpose for such property.

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Investment properties are derecognized upon disposal or when permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of investment properties are recognized in the consolidated statement of income in the year of retirement or disposal.

2.11 Financial Liabilities

Financial liabilities of the Group include interest-bearing loans and borrowings, bonds payable, trade and other payables (except tax-related liabilities), derivative liability, redeemable preferred shares, advances from associates and other related parties, commission payable, subscription payable and lease liabilities (presented as part of Other Current Liabilities and Other Non-current Liabilities in the consolidated statement of financial position).

Financial liabilities are recognized when the Group becomes a party to the contractual terms of the instrument. All interest-related charges, except for capitalized borrowing costs, are recognized as expense in profit or loss under the caption Interest and Other Charges – Net in the consolidated statement of income. Interest-bearing loans and borrowings, bonds payable and redeemable preferred shares are raised for support of long-term funding of operations. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to profit or loss, except for capitalized borrowing cost, on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent that these are not settled in the period in which they arise.

Preferred shares, which carry a mandatory coupon or are redeemable on specific date or at the option of the shareholder, are classified as financial liabilities and presented as a separate line item in the consolidated statement of financial position as Redeemable Preferred Shares. These shares are also issued for support of long-term funding.

Trade and other payables, advances from associates and other related parties, subscription payable, commission payable, and lease liabilities are initially recognized at their fair values and subsequently measured at amortized cost using effective interest method for maturities beyond one year, less settlement payments. The measurement for Lease Liabilities is disclosed in Note 2.17(a)(i). Dividend distributions to shareholders, if any, are recognized as financial liabilities when the dividends are approved by the BOD. The dividends on the redeemable preferred shares are recognized in the consolidated statement of income as interest expense on an amortized cost basis using the effective interest method.

Financial liabilities are classified as current liabilities if payment is due to be settled within one year or less after the reporting period (or in the normal operating cycle of the business, if longer), or the Group does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Otherwise, these are presented as non-current liabilities.

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Financial liabilities are derecognized from the consolidated statement of financial position only when the obligations are extinguished either through discharge, cancellation or expiration. The difference between the carrying amount of the financial liability derecognized and the consideration paid or payable is recognized in consolidated statement of income.

2.12 Offsetting Financial Instruments

Financial assets and financial liabilities are offset and the resulting net amount, considered as a single financial asset or financial liability, is reported in the consolidated statement of financial position when the Group currently has legally enforceable right to set-off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. The right of set-off must be available at the end of the reporting period, that is, it is not contingent on future event. It must also be enforceable in the normal course of business, in the event of default, and in the event of insolvency or bankruptcy; and, must be legally enforceable for both entity and all counterparties to the financial instruments.

2.13 Business Combination

(a) Accounting for Business Combination Using the Acquisition Method

Business acquisitions of entities not under common control of a principal stockholder are accounted for using the acquisition method of accounting.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Subsequent to initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed (see Note 2.18).

Negative goodwill, which is the excess of the Company’s interest in the fair value of net identifiable assets acquired over acquisition cost, is charged directly to profit or loss.

For the purpose of impairment testing, goodwill is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The cash-generating units or groups of cash-generating units are identified according to operating segment.

Gains and losses on the disposal of an interest in a subsidiary include the carrying amount of goodwill relating to it.

If the business combination is achieved in stages, the Company is required to remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in the consolidated profit or loss or other comprehensive income, as appropriate. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company is required to report in its financial statements provisional amounts for the items for which accounting is incomplete. The recognized provisional amounts may be adjusted during the measurement period as if the accounting for the business combination had been completed at the acquisition date. The measurement period ends as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. However, the measurement period shall not exceed one year from the acquisition date.

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Any contingent consideration to be transferred by the Company is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in accordance with PAS 37, Provisions, Contingent Liabilities and Contingent Assets, either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

(b) Accounting of Business Combination Using the Pooling-of-interests Method

Business combinations arising from transfers of interests in entities that are under the common control of the principal stockholder are accounted for under the pooling-of interests method. Transfers of assets between commonly-controlled entities are accounted for under historical cost accounting; hence, the assets and liabilities are reflected in the consolidated financial statements at carrying values and no adjustments are made to reflect fair values or recognize any new assets or liabilities, at the date of the combination that otherwise would have been done under the acquisition method. No restatements are made to the financial information in the consolidated financial statements for periods prior to the business combination as allowed under PIC Q&A No. 2012-01, PFRS 3.2 – Application of Pooling of Interest Method for Business Combination of Entities under Common Control in Consolidated Financial Statements; hence, the profit and loss of the acquiree is included in the consolidated financial statements for the full year, irrespective of when the combination took place. Also, no goodwill is recognized as a result of the business combination and any excess between the net assets of the acquiree and the consideration paid is accounted for as “equity reserves”, which will eventually be closed to additional paid-in capital. Also, any pre-acquisition income and expenses of a subsidiary are no longer included in the consolidated financial statements.

2.14 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s Strategic Steering Committee (SSC), its chief operating decision-maker. The SSC is responsible for allocating resources and assessing performance of the operating segments. In identifying its operating segments, management generally follows the Group’s products and service lines as disclosed in Note 4, which represent the main products and services provided by the Group. Each of these operating segments is managed separately as each of these products and service lines requires different technologies and other resources as well as marketing approaches. All inter-segment transfers are carried out at arm’s length prices.

The measurement policies the Group uses for segment reporting under PFRS 8, Operating Segments, are the same as those used in its consolidated financial statements, except that the following are not included in arriving at the operating profit of the operating segments:

• interest cost from post-employment benefit obligation; • equity in net earnings of associates, fair value gains, dividend income and foreign

currency gains/losses; • gain on sale of investments in associate.

In addition, corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment.

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2.15 Provisions and Contingencies

Provisions are recognized when present obligations will probably lead to an outflow of economic resources and they can be estimated reliably even if the timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the end of the reporting period, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. When time value of money is material, long-term provisions are discounted to their present values using a pretax rate that reflects market assessments and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognized in the consolidated financial statements. Similarly, probable inflows of economic benefits to the Group that do not yet meet the recognition criteria of an asset are considered contingent assets; hence, are not recognized in the consolidated financial statements. On the other hand, any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognized as a separate asset not exceeding the amount of the related provision.

2.16 Revenue and Expense Recognition

Revenue comprises revenue from sale of real properties, property management fees and hotel operations. To determine whether to recognize revenue from sale of real properties and hotel operations, the Group follows a five-step process: 1. Identifying the contract with a customer; 2. Identifying the performance obligation; 3. Determining the transaction price; 4. Allocating the transaction price to the performance obligations; and, 5. Recognizing revenue when/as performance obligations are satisfied. For Step 1 to be achieved, the following five gating criteria must be present: a. the parties to the contract have approved the contract either in writing, orally or in

accordance with other customary business practices; b. each party’s rights regarding the goods or services to be transferred or performed can be

identified; c. the payment terms for the goods or services to be transferred or performed can be

identified; d. the contract has commercial substance (i.e., the risk, timing or amount of the future cash

flows is expected to change as a result of the contract); and, e. collection of the consideration in exchange of the goods and services is probable.

Revenue is recognized only when (or as) the Group satisfies a performance obligation by transferring control of the promised goods or services to a customer. The transfer of control can occur over time or at a point in time.

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A performance obligation is satisfied at a point in time unless it meets one of the following criteria, in which case it is satisfied over time:

the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs;

the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; and,

the Company’s performance does not create an asset with an alternative use to the Company and the entity has an enforceable right to payment for performance completed to date.

The transaction price allocated to performance obligations satisfied at a point in time is recognized as revenue when control of the goods or services transfers to the customer. If the performance obligation is satisfied over time, the transaction price allocated to that performance obligation is recognized as revenue as the performance obligation is satisfied. The Group uses the practical expedient in PFRS 15 with respect to non-disclosure of the aggregate amount of the transaction price allocated to unsatisfied or partially satisfied performance obligations as of the end of the reporting period and the explanation of when such amount will be recognized.

The Group develops real properties such as developed land, house and lot, and condominium units. The Group often enters into contracts to sell real properties as they are being developed. The Group also enters into transactions involving hotel accommodations, food and beverage operations, and other incidental activities. The significant judgment used in determining the timing of satisfaction of the Group’s performance obligation with respect to its contracts to sell real properties is disclosed in Note 3.1(b). Sales cancellations are accounted for on the year of forfeiture. Any gain or loss on cancellation is charged to profit or loss.

(a) Real estate sales on pre-completed real estate properties – Revenue from real estate sales is recognized over time proportionate to the progress of the development. The Group measures its progress based on actual costs incurred relative to the total expected costs to be incurred in completing the development. Revenue recognized from real estate sales is presented as part of Real Estate Sales under the Revenues and Income section in the consolidated statement of comprehensive income.

(b) Real estate sales on completed real estate properties – Revenue from real estate sales is recognized

at point in time when the control over the real estate property is transferred to the buyer. Revenue recognized from real estate sales is presented as part of Real Estate Sales under the Revenues and Income section in the consolidated statement of comprehensive income.

For tax reporting purposes, a modified basis of computing the taxable income for the year based on collections from sales is used by the Company, GERI, EELHI, SPI, ECOC, MBPHI, SEDI, LFI, API, MGAI, MCTI and STLI.

(c) Sale of undeveloped land and golf and resort shares for sale – Revenues on sale of undeveloped land and golf and resort shares for sale are recognized at a point in time when the control over the undeveloped land and golf and resort shares have passed to the buyer and the amount of revenue can be measured reliably.

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(d) Hotel accommodation – Revenues are recognized over time during the occupancy of hotel guest and ends when the scheduled hotel room accommodation has lapsed (i.e., the related room services have been rendered). As applicable, invoices for hotel accommodations are due upon receipt by the customer.

(e) Food, beverage and others – Revenues are recognized at point in time upon delivery to and receipt of consumer goods by the customer. Invoice for consumer goods transferred are due upon receipt by the customer.

Incremental costs of obtaining a contract to sell real estate property to customers are recognized as an asset and are subsequently amortized over the duration of the contract on the same basis as revenue from such contract is recognized. Other costs and expenses are recognized in profit or loss upon utilization of services or receipt of goods or at the date they are incurred. Finance costs are reported on an accrual basis except capitalized borrowing costs (see Note 2.21).

Contract assets pertain to rights to consideration in exchange for goods or services that the Group has transferred to a customer that is conditioned on something other than passage of time. Under its contracts with customers, the Group will receive an unconditional right to payment for the total consideration upon the completion of the development of the property sold. Any rights to consideration recognized by the Group as it develops the property are presented as Contract Assets in the consolidated statement of financial position. Contract assets are subsequently tested for impairment in the same manner as the Group assesses impairment of its financial assets [see Note 2.5(b)]. Any consideration received by the Group in excess of the amount for which the Group is entitled is presented as Contract Liabilities in the consolidated statement of financial position. A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If the transaction does not yet qualify as contract revenue under PFRS 15, the deposit method is applied until all conditions for recording the sale are met. Pending the recognition of revenue on real estate sale, consideration received from buyers are presented under the Customers’ Deposits account in the liabilities section of the consolidated statement of financial position.

2.17 Leases

The Group accounts for its leases as follows:

(a) Group as Lessee

(i) Accounting for Leases in Accordance with PFRS 16 (2019)

For any new contracts entered into on or after January 1, 2019, the Group considers whether a contract is, or contains, a lease. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. To apply this definition, the Group assesses whether the contract meets three key evaluations which are whether:

the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group;

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the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and,

the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.

At lease commencement date, the Group recognizes a right-of-use asset and a lease liability in the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). Subsequently, the Group amortizes the right-of-use asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist (see Note 2.18).

On the other hand, the Group measures the lease liability at the present value of the lease payments unpaid at the commencement date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate. Lease payments include fixed payments (including in-substance fixed) less lease incentives receivable, if any, variable lease payments based on an index or rate, amounts expected to be payable under a residual value guarantee, and payments arising from options (either renewal or termination) reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognizing a right-of-use asset and lease liability, the payments in relation to these are recognized as an expense in profit or loss on a straight-line basis over the lease term. On the statement of financial position, right-of-use assets and lease liabilities have been presented as part of property, and equipment and other liabilities, respectively. (ii) Accounting for Leases in Accordance with PAS 17 (2018)

Leases which transfer to the Group substantially all risks and benefits incidental to ownership of the leased item are classified as finance leases and are recognized as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased property at the inception of the lease or, if lower, at the present value of minimum lease payments. Lease payments are apportioned between the finance costs and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance costs are recognized in profit or loss. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

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Leases which do not transfer to the Group substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments (net of any incentive received from the lessor) are recognized as expense in profit or loss on a straight-line basis over the lease term. Associated costs, such as repairs and maintenance and insurance, are expensed as incurred.

(b) Group as Lessor

Leases wherein the Group substantially transfers to the lessee all risks and benefits incidental to ownership of the leased item are classified as finance leases and are presented as receivable at an amount equal to the Company’s net investment in the lease. Finance income is recognized based on the pattern reflecting a constant periodic rate of return on the Company’s net investment outstanding in respect of the finance lease.

Leases which do not transfer to the lessee substantially all the risks and benefits of ownership of the asset, are classified as operating leases. Lease income from operating leases is recognized in profit or loss on a straight-line basis over the lease term.

The Group determines whether an arrangement is, or contains, a lease based on the substance of the arrangement. It makes an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific or identified asset or assets and the arrangement conveys a right to use the asset for a period of time in exchange for consideration.

2.18 Impairment of Non-financial Assets

The Group’s Investments in Associates, Goodwill and Leasehold rights (included as part of Other Non-current Assets), Investment Properties, Property and Equipment, and other non-financial assets are subject to impairment testing. Goodwill and intangible assets with an indefinite useful life or those not yet available for use are tested for impairment at least annually. All other individual assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, assets are tested for impairment either individually or at the cash-generating unit level.

Impairment loss is recognized in profit or loss for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount, which is the higher of its fair value less costs-to-sell and its value in use. In determining value in use, management estimates the expected future cash flows from each cash-generating unit and determines the suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect management’s assessment of respective risk profiles, such as market and asset-specific risk factors.

Except for goodwill and intangible assets with indefinite life, all assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist. An impairment loss is reversed if the asset’s or cash generating unit’s recoverable amount exceeds its carrying amount.

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2.19 Employee Benefits

The Group provides post-employment benefits to employees through a defined benefit plan, defined benefit contribution plans, and other employee benefits which are recognized as follows:

(a) Post-employment Defined Benefit Plan A defined benefit plan is a post-employment plan that defines an amount of post-employment benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary. The legal obligation for any benefits from this kind of post-employment plan remains with the Group, even if plan assets for funding the defined benefit plan have been acquired. Plan assets may include assets specifically designated to a long-term benefit fund, as well as qualifying insurance policies. The Group’s post-employment defined benefit pension plans covers all regular full-time employees. The pension plans are tax-qualified, noncontributory and administered by trustees.

The liability recognized in the consolidated statement of financial position for a defined benefit plan is the present value of the defined benefit obligation (DBO) at the end of the reporting period less the fair value of plan assets. The DBO is calculated annually by independent actuaries using the projected unit credit method. The present value of the DBO is determined by discounting the estimated future cash outflows for expected benefit payments using a discount rate derived from the interest rates of a zero coupon government bonds, that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related post-employment liability. The interest rates are based from the reference rates published by Bloomberg using its valuation technology, Bloomberg Valuation (BVAL). BVAL provide evaluated prices that are based on market observations from contributed sources.

Remeasurements, comprising of actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions and the return on plan assets (excluding amount included in net interest) are reflected immediately in the consolidated statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they arise. Net interest is calculated by applying the discount rate at the beginning of the period, unless there is a plan amendment, curtailment or settlement during the reporting period. The calculation also takes into account any changes in the net defined benefit liability or asset during the period as a result of contributions to the plan or benefit payments. Net interest is reported as part of Interest and Other Charges – net or Interest and Other Income – net in the consolidated statement of income.

Past-service costs are recognized immediately in consolidated profit or loss in the period of a plan amendment and curtailment.

(b) Post-employment Defined Contribution Plans A defined contribution plan is a post-employment plan under which the Group pays fixed contributions into an independent entity. The Group has no legal or constructive obligations to pay further contributions after payment of the fixed contribution. The contributions recognized in respect of defined contribution plans are expensed as they fall due. Liabilities or assets may be recognized if underpayment or prepayment has occurred and are included in current liabilities or current assets as they are normally of a short-term nature.

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(c) Termination Benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits at the earlier of when it can no longer withdraw the offer of such benefits and when it recognizes costs for a restructuring that is within the scope of PAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the reporting period are discounted to their present value.

(d) Compensated Absences

Compensated absences are recognized for the number of paid leave days (including holiday entitlement) remaining at the end of the reporting period. They are included in the Trade and Other Payables account in the consolidated statement of financial position at the undiscounted amount that the Group expects to pay as a result of the unused entitlement.

2.20 Share-based Employee Remuneration

The Group grants share options to qualified employees of the Group eligible under a share option plan. The services received in exchange for the grant, and the corresponding share options, are valued by reference to the fair value of the equity instruments granted at grant date. This fair value excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions), if any. The share-based remuneration is recognized as an expense in the consolidated profit or loss with a corresponding credit to retained earnings.

The expense is recognized during the vesting period based on the best available estimate of the number of share options expected to vest. The estimate is subsequently revised, if necessary, such that it equals the number that ultimately vests on vesting date. No subsequent adjustment is made to expense after vesting date, even if share options are ultimately not exercised.

Share options issued by a subsidiary is accounted for as non-controlling interests at fair value at the date of grant in the consolidated statement of changes in equity. However, during the period the option is outstanding, the non-controlling interest related to the option holder should not be attributed any profit or loss of the subsidiary until the option is exercised. Meanwhile, the related share option expense is recognized in full in profit or loss. Upon exercise of share option, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to capital stock with any excess being recorded as additional paid in capital (APIC).

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2.21 Borrowing Costs

For financial reporting purposes, borrowing costs are recognized as expenses in the period in which they are incurred, except to the extent that they are capitalized. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset (i.e., an asset that takes a substantial period of time to get ready for its intended use or sale) are capitalized as part of the cost of such asset. The capitalization of borrowing costs commences when expenditures for the asset are being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalization ceases when substantially all such activities are complete.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

For income tax purposes, interest and other borrowing costs are charged to expense when incurred.

2.22 Income Taxes Tax expense recognized in consolidated profit or loss comprises the sum of current tax and deferred tax not recognized in consolidated other comprehensive income or directly in equity, if any.

Current tax assets or liabilities comprise those claims from, or obligations to, fiscal authorities relating to the current or prior reporting period, that are uncollected or unpaid at the reporting period. They are calculated using the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognized as a component of tax expense in consolidated profit or loss.

Deferred tax is accounted for using the liability method on temporary differences at the end of the reporting period between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Under the liability method, with certain exceptions, deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences and the carry forward of unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deferred income tax asset can be utilized.

Unrecognized deferred tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profit will be available to allow such deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled provided such tax rates have been enacted or substantively enacted at the end of the reporting period. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

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Most changes in deferred tax assets or liabilities are recognized as a component of tax expense in consolidated profit or loss, except to the extent that it relates to items recognized in consolidated other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

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

2.23 Related Party Transactions and Relationships

Related party transactions are transfers of resources, services or obligations between the entities in the Group and their related parties, regardless whether a price is charged.

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties include: (a) individuals owning, directly or indirectly through one or more intermediaries, control or are controlled by, or under common control with the Group; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the Group that gives them significant influence over the Group and close members of the family of any such individual; and, (d) the Group’s funded post-employment plan.

In considering each possible related party relationship, attention is directed to the substance of the relationship and not merely on the legal form. Based on the requirement of SEC Memorandum Circular 2019-10, Rules of Material Related Party Transactions of Publicly-listed Companies, transactions amounting to 10% or more of the total consolidated assets based on its latest consolidated financial statements that were entered into with related parties are considered material.

All individual material related party transactions shall be approved by at least two-thirds (2/3) vote of the Company’s board of directors, with at least a majority of the independent directors voting to approve the material related party transactions. In case that a majority of the independent directors’ vote is not secured, the material related party transaction may be ratified by the vote of the stockholders representing at least two-thirds of the outstanding capital stock. For aggregate related party transactions within a 12-month period that breaches the materiality threshold of 10% of the Group’s consolidated total assets based on the latest consolidated financial statements, the same board approval would be required for the transactions that meet and exceeds the materiality threshold covering the same related party. 2.24 Equity Capital stock is determined using the nominal value of shares that have been issued. APIC includes any premiums received on the issuance of capital stock. Any transaction costs associated with the issuance of shares are deducted from APIC, net of any related income tax benefits. Treasury shares are stated at the cost of reacquiring such shares and are deducted from equity attributable to the Company’s equity holders until the shares are cancelled, reissued or disposed of. Also, this includes shares of the Company held by certain subsidiaries (see Note 2.3).

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Revaluation reserves consist of: (a) Accumulated actuarial gains and losses arising from remeasurements of retirement

benefit obligation, net of tax;

(b) Net fair value gains or losses recognized due to changes in fair values of financial assets recognized through other comprehensive income;

(c) Cumulative share in other comprehensive income of associates attributable to the

Group;

(d) The effective portion of gains and losses on hedging instruments in a cash flow hedge; and,

(e) Changes in ownership interest in subsidiaries that do not result in a loss of control.

Translation reserves represent the translation adjustments resulting from the translation of foreign-currency denominated financial statements of certain foreign subsidiaries into the Group’s functional and presentation currency.

Retained earnings represent all current and prior period results of operations and share-based employee remuneration as reported in the consolidated statement of income, reduced by the amounts of dividends declared.

2.25 Earnings Per Share Basic earnings per share (EPS) is computed by dividing consolidated net profit attributable to equity holders of the Company by the weighted average number of shares issued and outstanding, adjusted retroactively for any share dividend, share split and reverse share split during the current year, if any.

Diluted EPS is computed by adjusting the weighted average number of ordinary shares outstanding to assume conversion of potential dilutive common shares (see Note 29).

2.26 Events After the End of the Reporting Period

Any post-year-end event that provides additional information about the Group’s financial position at the end of the reporting period (adjusting event) is reflected in the consolidated financial statements. Post-year-end events that are not adjusting events, if any, are disclosed when material to the consolidated financial statements.

3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of Group’s consolidated financial statements in accordance with PFRS

requires management to make judgments and estimates that affect amounts reported in the consolidated financial statements and related notes. Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may ultimately vary from these estimates.

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3.1 Critical Management Judgments in Applying Accounting Policies

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimation, which have the most significant effect on the amounts recognized in the consolidated financial statements.

(a) Determination of Lease Term of Contracts with Renewal and Termination Options (2019) In determining the lease term, management considers all relevant factors and circumstances that create an economic incentive to exercise a renewal option or not exercise a termination option. Renewal options and/or periods after termination options are only included in the lease term if the lease is reasonably certain to be extended or not terminated. The lease term is reassessed if an option is actually exercised or not exercised or the Group becomes obliged to exercise or not exercise it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the Group. The Group determines whether any non-cancellable period or notice period in a lease would meet the definition of a contract and thus, would be included as part of the lease term. A contract would be considered to exist only when it creates rights and obligations that are enforceable. In assessing the enforceability of a contract, the Company considers whether the lessor can refuse to agree to a request from the Company to extend the lease. In contrast, a lessor’s right to terminate a lease is ignored when determining the lease term because, in that case, the lessee has an unconditional obligation to pay for the right to use the asset for the period of the lease, unless and until the lessor decides to terminate the lease.

(b) Evaluation of Timing of Satisfaction of Performance Obligations (i) Real Estate Sales

The Group exercises critical judgment in determining whether each performance obligation to develop properties promised in its contracts with customers is satisfied over time or at a point in time. In making this judgment, the Group considers the following:

any asset created or enhanced as the Group performs;

the ability of the customer to control such asset as it is being created or enhanced;

the timing of receipt and consumption of benefits by the customer; and,

the Group’s enforceable right for payment for performance completed to date.

The Group determines that its performance obligation for pre-completed real estate properties is satisfied over time, while completed real estate properties is satisfied at a point in time, since it does not have an alternative use of the specific property sold as it is precluded by its contract from redirecting the use of the property for a different purpose. Further, the Group has rights over payment for development completed to date as the Group can choose to complete the development and enforce its rights to full payment under its contracts even if the customer defaults on amortization payments.

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(ii) Hotel Operations

The Group determines that its revenue from hotel accommodations shall be recognized over time. In making its judgment, the Group considers the timing of receipt and consumption of benefits provided by the Group to the customers. The Group provides the services without the need of reperformance of other entities. This demonstrates that the customers simultaneously receive and consume the benefits of the Group’s rendering of hotel services as it performs.

(iii) Food and Beverages, and Others In determining the appropriate method to use in recognizing the Group’s revenues from food, beverage and other consumer goods, management assesses that revenue is recognized at a point in time when the control of the goods has passed to the customer, i.e. generally when the customer acknowledged delivery of goods. The service component of the restaurant operations is deemed as an insignificant cause on the timing of satisfaction of performance obligation since it is only passage of time until the customer receives and consumes all the benefits after delivery of the food and beverage items.

(iv) Forfeited Collections and Deposits The Group determines that its revenue from forfeited collections and deposits shall be recognized at point in time in the year the contract was cancelled.

(v) Property Management Services

The Group determines that its revenue from property management services shall be recognized over time. In making its judgment, the Company considers the timing of receipt and consumption of benefits provided by the Company to the customers. The Company applies the practical expedient to recognize revenue at the amount to which it has a right to invoice, which corresponds directly to the value to the customer of the entity’s performance completed to date i.e., generally when the customer has acknowledged the Company’s right to invoice.

(c) Estimation of Collection Threshold for Revenue Recognition The Group uses judgment in evaluating the probability of collection of contract price on real estate sales as a criterion for revenue recognition. The Group uses historical payment pattern of customers in establishing a percentage of collection threshold over which the Group determines that collection of total contract price is reasonably assured. In 2018, the Group reassessed the historical behavior of its customer and determined a new percentage of collection threshold in recognizing revenue, which resulted in an increase of P13.2 billion in revenues and corresponding cost of real property sold of P6.6 billion in 2018.

(d) Determination of ECL on Trade and Other Receivables

The Group uses a provision matrix to calculate ECL for trade and other receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., by geography, product type, customer type and rating, and coverage by letters of credit and other forms of credit insurance).

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The provision matrix is based on the Group’s historical observed default rates. The Group’s management intends to regularly calibrate (i.e., on an annual basis) the matrix to consider the historical credit loss experience with forward-looking information (i.e., forecast economic conditions). Details about the ECL on the Group’s trade and other receivables are disclosed in Notes 2.5(b) and 32.3.

(e) Distinction Among Investment Properties and Owner-occupied Properties

The Group determines whether a property should be classified as investment property or owner-occupied property. The Group applies judgment upon initial recognition of the asset based on intention and also when there is a change in use. In making its judgment, the Group considers whether the property generates cash flows largely independently of the other assets held by an entity. Owner-occupied properties generate cash flows that are attributable not only to property but also to other assets used in the production or supply process.

Some properties comprise a portion that is held to earn rental or for capital appreciation

and another portion that is held for use in the Group’s main line of business or for administrative purposes. If these portions can be sold separately (or leased out separately under finance lease), the Group accounts for the portions separately. If the portions cannot be sold separately, the property is accounted for as investment property only if an insignificant portion is held for use in the Group’s main line of business or for administrative purposes. Judgment is applied in determining whether ancillary services are so significant that a property does not qualify as investment property. The Group considers each property separately in making its judgment.

(f) Distinction Between Inventories and Investment Properties Inventories comprise properties that are held for sale in the ordinary course of business. Meanwhile, investment properties comprise of land and buildings which are not occupied substantially for use by, or in the operations of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation. The Group considers management’s intention over these assets in making its judgment.

(g) Distinction Between Investments in Financial Instruments and Inventories

Being a real estate developer, the Group determines how golf and resort shares shall be

accounted for. In determining whether these shares shall be accounted for as either inventories or investments in financial instruments, the Group considers its role in the development of the club and its intent for holding these shares. The Group classifies such shares as inventories when the Group acts as the developer and its intent is to sell a developed property together with the club share.

(h) Presentation of Perpetual Debt Securities The Group exercises judgment in classifying its Perpetual debt securities as financial liabilities or equity instruments. In making its judgment, the Company considers the terms of the securities including any restrictions on the Company’s ability to defer interest payments. Based on management’s assessment, the perpetual debt securities are classified as equity securities as the Company has the ability to defer payments of principal and interest indefinitely (see Note 28.7).

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(i) Distinction Between Asset Acquisition and Business Combinations

The Company acquires subsidiaries that own real estate properties. At the time of acquisition, the Company considers whether the acquisition represents acquisition of a business or asset. The Company accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property. More specifically, consideration is made with regard to the extent to which significant processes are acquired and, in particular, the extent of ancillary services provided by the Group (e.g., maintenance, cleaning, security, bookkeeping, hotel services, etc.). The significance of any process is judged with reference to the guidance in PAS 40 on ancillary services.

During the reporting periods, the Company gained control over various entities as

described in Note 1.1. Based on management’s assessment, such acquisitions are accounted for as business combinations.

(j) Distinction Between Operating and Finance Leases (as a Lessor)

The Group has entered into various lease agreements. Critical judgment was exercised by management to distinguish each lease agreement as either an operating or finance lease by looking at the transfer or retention of significant risk and rewards of ownership of the properties covered by the agreements. Failure to make the right judgment will result in either overstatement or understatement of assets and liabilities. Based on management assessment, the Group’s lease agreements, as lessor, are classified either operating or finance leases.

(k) Consolidation of Entities in which the Group Holds 50% or Less of Voting Rights Management considers that the Group has de facto control over investees even though it effectively holds less than 50% of the ordinary shares and voting rights in those companies. The Group considers its ability to exercise control over these entities through voting rights held by its subsidiaries or through interlocking directors (see Note 1.1).

(l) Significant Influence on Investees Even if the Group Holds Less than 20% of Voting Rights

The Group considers that it has significant influence over investees when it has board representation which allows them to participate in the financial and operating policy decisions but has no control or joint control of those policies (see Notes 1.1 and 11).

(m) Recognition of Provisions and Contingencies

Judgment is exercised by management to distinguish between provisions and contingencies. Accounting policies on recognition and disclosure of provision are discussed in Note 2.15 and disclosures on relevant provisions and contingencies are presented in Note 31.

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3.2 Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period: (a) Revenue Recognition for Performance Obligation Satisfied Over Time In determining the amount of revenue to be recognized for performance obligations satisfied over time, the Company measures progress on the basis of actual costs incurred relative to the total expected costs to complete such performance obligation. Specifically, the Company estimates the total development costs with reference to the project development plan and any agreement with customers. Management regularly monitors its estimates and apply changes as necessary. A significant change in estimated total development costs would result in a significant change in the amount of revenue recognized in the year of change.

(b) Estimation of Allowance for ECL

The measurement of the allowance for ECL on financial assets at amortized cost is an area that requires the use of significant assumptions about the future economic conditions and credit behavior (e.g., likelihood of customers defaulting and the resulting losses). Explanation of the inputs, assumptions and estimation used in measuring ECL is further detailed in Note 2.5(b).

(c) Determination of Net Realizable Value of Inventories

In determining the net realizable value of inventories, management takes into account the most reliable evidence available at the times the estimates are made. The future realization of the carrying amounts of real estate inventory is affected by price changes in the different market segments as well as the trends in the real estate industry. These are considered key sources of estimation uncertainty and may cause significant adjustments to the Inventories within the next reporting period. Considering the Group’s pricing policy, the net realizable values of inventories are higher than their related costs.

The carrying value of Inventories is disclosed in Note 7.

(d) Fair Value of Share Options The Group estimates the fair value of the share option by applying an option valuation model, taking into account the terms and conditions on which the share options were granted. The estimates and assumptions used are presented in Note 28.6 which include, among other things, the option’s time of expiration, applicable risk-free interest rate, expected dividend yield, volatility of the Company’s share price and fair value of the Company’s common shares. Changes in these factors can affect the fair value of share options at grant date.

The fair value of share options recognized as part of Salaries and employee benefits in 2019, 2018 and 2017 is presented in Note 25.2.

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(e) Fair Value Measurement of Investment Properties

Investment properties are measured using the cost model. The Group determines the fair value of properties earning rental income through discounted cash flows valuation technique. The Group uses assumptions that are mainly based on market conditions existing at each reporting period, such as: the receipt of contractual rentals; expected future market rentals; void periods; maintenance requirements; and appropriate discount rates. These valuations are regularly compared to actual market yield data and actual transactions by the Group and those reported by the market. The expected future market rentals are determined on the basis of current market rentals for similar properties in the same location and condition.

The Group determines the fair value of idle properties through appraisals by independent valuation specialists using market-based valuation approach where prices of comparable properties are adequate for specific market factors such as location and condition of the property. A significant change in these elements may affect prices and the value of the assets. The fair value of investment properties is disclosed in Notes 12 and 34.4.

(f) Estimation of Useful Lives of Investment Properties, and Property and Equipment

The Group estimates the useful lives of investment properties, and property and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of investment properties and property and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the assets. In addition, estimation of the useful lives of investment properties and property and equipment are based on collective assessment of industry practice, internal technical evaluation and experience with similar assets. An analysis of the movement of the carrying amount of Investment Properties and Property and Equipment is presented in Notes 12 and 13, respectively.

(g) Valuation of Financial Assets at Fair Value through Other Comprehensive Income

The Group carries certain financial assets at fair value, which requires the extensive use of accounting estimates and judgment. In cases when active market quotes are not available, fair value is determined by reference to the fair value of a comparable instrument adjusted for inputs internally developed by management to consider the differences in corporate profile and historical performance of the investee. The amount of changes in fair value would differ had the Group utilized different valuation methods and assumptions. Any change in fair value of these financial assets would affect consolidated profit and loss and equity.

The carrying amounts of financial asset at FVOCI and the amounts of fair value changes recognized during the years on those assets are disclosed in Note 9.

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(h) Determination of Appropriate Discount Rate in Measuring Lease Liabilities (2019) The Company measures its lease liabilities at present value of the lease payments that are not paid at the commencement date of the lease contract. The lease payments were discounted using a reasonable rate deemed by management equal to the Company’s incremental borrowing rate. In determining a reasonable discount rate, management considers the term of the leases, the underlying asset and the economic environment. Actual results, however, may vary due to changes in estimates brought about by changes in such factors.

(i) Determination of Realizable Amount of Deferred Tax Assets

The Group reviews its deferred tax assets at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Management assessed that the balance of deferred tax assets recognized as at December 31, 2019 and 2018 will be utilized in the succeeding years.

The carrying amount of the net deferred tax assets as at December 31, 2019 and 2018 is disclosed in Note 26.

(j) Impairment of Goodwill and Other Non-financial Assets

Goodwill is reviewed annually for impairment while other non-financial assets are tested whenever certain impairment indicators become evident. In assessing impairment, management estimates the recoverable amount of each asset or a cash-generating unit based on expected future cash flows and uses an interest rate to calculate the present value of those cash flows. Estimation uncertainties relates to assumptions about future operating results and the determination of suitable discount rate. Also, the Group’s policy on estimating the impairment of goodwill and other non-financial assets is discussed in detail in Note 2.18. Though management believes that the assumptions used in the estimation of fair values reflected in the consolidated financial statements are appropriate and reasonable, significant changes in these assumptions may materially affect the assessment of recoverable values and any resulting impairment loss could have a material adverse effect on the results of operations.

There were no impairment losses on the Group’s goodwill and other non-financial assets required to be recognized in 2019, 2018 and 2017 based on management’s assessment.

(k) Valuation of Retirement Obligation

The determination of the Group’s obligation and cost of post-employment defined benefit is dependent on the selection of certain assumptions used by independent actuaries in calculating such amounts. Those assumptions include, among others, discount rates and salary rate increase. A significant change in any of these actuarial assumptions may generally affect the recognized expense, other comprehensive income or losses and the carrying amount of the retirement benefit obligation in the next reporting period.

The amounts of retirement benefit obligation and expense and an analysis of the movements in the estimated present value of post-employment benefit, as well as the significant assumptions used in estimating such obligation are presented in Note 25.3.

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(l) Business Combinations On initial recognition, the assets and liabilities of the acquired business and the consideration paid for them are included in the consolidated financial statements at their acquisition date fair values. In measuring fair value, management uses estimates of future cash flows and discount rates. Any subsequent change in these estimates would affect the amount of goodwill if the change qualifies as a measurement period adjustment.

4. SEGMENT INFORMATION

4.1 Business Segments

The Group’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Group is engaged in the development of residential and office units including urban centers integrating office, residential and commercial components. The Real Estate segment pertains to the development and sale of residential and office developments. The Rental segment includes leasing of office and commercial spaces. The Hotel Operations segment relates to the management of hotel business operations. The Corporate and Others segment includes business process outsourcing, educational facilities provider, maintenance and property management operations, marketing services, general and corporate income and expense items. Segment accounting policies are the same as the policies described in Note 2.14. The Group generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices.

4.2 Segment Assets and Liabilities

Segment assets are allocated based on their physical location and use or direct association with a specific segment and they include all operating assets used by a segment and consist principally of operating cash and cash equivalents, receivables, real estate inventories, property and equipment, and investment properties, net of allowances and provisions. Similar to segment assets, segment liabilities are also allocated based on their use or direct association with a specific segment. Segment liabilities include all operating liabilities and consist principally of accounts, wages, taxes currently payable and accrued liabilities. Segment assets and segment liabilities do not include deferred taxes.

4.3 Intersegment Transactions

Segment revenues, expenses and performance include sales and purchases between business segments. Such sales and purchases are eliminated in consolidation.

4.4 Analysis of Segment Information

The tables presented in the succeeding pages present revenue and profit information regarding industry segments for the years ended December 31, 2019, 2018 and 2017 and certain asset and liability information regarding segments as at December 31, 2019 and 2018.

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2019 Hotel Corporate Real Estate Rental Operations and Others Elimination Consolidated

TOTAL REVENUES Sales to external customers P 42,603,984,572 P 16,814,091,846 P 2,543,769,508 P 1,889,033,843 P - P 63,850,879,769 Interest income 1,789,992,697 532,557,186 4,213,073 2,050,744 - 2,328,813,700

Intersegment sales - 497,191,017 - 2,773,501,898 ( 3,270,692,915 ) - Total revenues 44,393,977,269 17,843,840,049 2,547,982,581 4,664,586,485 ( 3,270,692,915) 66,179,693,469

RESULTS

Cost of sales and operating expense excluding depreciation and amortization 30,747,680,397 1,952,200,282 1,905,111,557 4,464,159,187 ( 3,114,329,696) 35,954,821,727 Interest expense 1,524,194,888 420,528,292 - 63,111,421 - 2,007,834,601 Depreciation and amortization 188,556,394 2,236,868,294 106,992,256 186,216,845 - 2,718,633,789 32,460,431,679 4,609,596,868 2,012,103,813 4,713,487,453 ( 3,114,329,696) 40,681,290,117 Segment results P 11,933,545,590 P13,234,243,181 P 535,878,768 (P 48,900,968) (P 156,363,219) P 25,498,403,352

Unallocated other income 1,191,878,718 Unallocated other expenses ( 1,253,763,397) Equity in net earnings of associates ( 58,832,233 ) Tax expense ( 6,081,657,290 )

Net profit P 19,296,029,150


Total assets P 226,831,920,357 P102,878,993,500 P 5,385,458,355 P14,536,702,532 P - P349,633,074,744

Segment liabilities P 102,921,026,112 P33,672,147,628 P 1,331,766,296 P 6,842,612,203 P - P 144,767,552,239

OTHER SEGMENT INFORMATION

Project and capital expenditures P 48,224,935,584

2018 (As Restated – see Note 1.2) Hotel Corporate Real Estate Rental Operations and Others Elimination Consolidated


Intersegment sales - 527,406,898 - 1,622,167,397 ( 2,149,574,295 ) - Total revenues 39,395,682,649 15,195,481,994 1,522,743,694 3,349,373,402 ( 2,149,574,295 ) 57,313,707,444

RESULTS

Cost of sales and operating expense excluding depreciation and amortization 26,695,579,531 1,781,183,995 1,094,982,921 3,266,235,678 ( 2,001,285,211) 30,836,696,914 Interest expense 1,236,920,202 335,147,742 - 67,395,261 - 1,639,463,205 Depreciation and amortization 197,835,315 1,839,888,284 81,151,659 149,943,617 - 2,268,818,875 28,130,335,048 3,956,220,021 1,176,134,580 3,483,574,556 ( 2,001,285,211) 34,744,978,994 Segment results P 11,265,347,601 P11,239,261,973 P 346,609,114 (P 134,201,154)(P 148,289,084) P 22,568,728,450

Unallocated other income 21,195,680 Unallocated other expenses ( 1,138,341,501 ) Equity in net earnings of associates 92,307,592 Tax expense ( 5,544,362,408 ) Preacquisition income

of a subsidiary ( 166,475,960) Net profit P 15,833,051,853

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2018 (As Restated – see Note 1.2) Hotel Corporate Real Estate Rental Operations and Others Elimination Consolidated






2017 Hotel Corporate Real Estate Rental Operations and Others Elimination Consolidated


Intersegment sales - 360,680,073 - 1,414,549,282 ( 1,775,229,355 ) - Total revenues 35,304,095,870 12,490,015,961 1,338,716,420 2,498,527,042 ( 1,775,229,355 ) 49,856,125,938

RESULTS Cost of sales and operating expense excluding depreciation and amortization 23,846,392,980 1,541,795,353 968,665,162 2,442,719,247 ( 1,659,228,359) 27,140,344,383 Interest expense 1,239,604,622 470,960,249 - 48,592,789 - 1,759,157,660 Depreciation and amortization 155,496,158 1,465,275,935 79,230,013 130,761,352 - 1,830,763,458 25,241,493,760 3,478,031,537 1,047,895,175 2,622,073,388 ( 1,659,228,359) 30,730,265,501 Segment results P 10,062,602,110 P 9,011,984,424 P 290,821,245 (P 123,546,346) (P 116,000,996) P 19,125,860,437

Unallocated other income 140,087,803

Unallocated other expenses ( 1,617,054,638) Equity in net earnings of associates 118,829,303

Tax expense ( 4,063,450,162 ) Preacquisition loss of a subsidiary 2,715,950 Net profit P 13,706,988,693






5. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include the following components as of December 31:

2019 2018 Cash on hand and in banks P 6,937,962,429 P 5,225,372,195

Short-term placements 16,166,913,243 12,317,723,125

P 23,104,875,672 P 17,543,095,320 Cash in banks generally earn interest based on daily bank deposit rates. Short-term placements are made for varying periods between 22 to 90 days and earn effective interest ranging from 1.00% to 4.88% in 2019 and 1.00% to 7.00% in 2018 (see Note 23).

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6. TRADE AND OTHER RECEIVABLES

This account is composed of the following: 2018 [As Restated – Notes 2019 see Note 2.1(b)] Current: Trade 15.2(d), 15.4(h), 27.1 P26,213,414,625 P 23,606,281,189 Allowance for impairment ( 718,476,454) ( 746,443,033) 25,494,938,171 22,859,838,156

Advances to associates

and other related parties 27.2 4,002,012,566 2,631,763,618 Others 13 3,514,999,555 2,163,588,363 33,011,950,292 27,655,190,137

Non-current: Trade 15.2(d), 15.4(h) 7,861,599,229 4,214,662,914 Allowance for impairment ( 12,224,936) ( 12,224,936 ) 7,849,374,293 4,202,437,978 Others 27.1, 13 3,948,014,778 3,056,180,769 11,797,389,071 7,258,618,747 P44,809,339,363 P 34,913,808,884 Trade receivables mainly pertain to real estate sales and rental transactions.

Other current receivables include accrued interest.

The installment period of sales contracts averages one to five years. Noninterest-bearing trade receivables with maturity of more than one year after the end of the reporting period are remeasured at amortized cost using the effective interest rate of similar financial instruments. Interest income recognized amounted to P697.21 million, P474.46 million and P214.66 million in 2019, 2018 and 2017, respectively. These amounts are presented as part of Interest income from trade receivables under Interest and Other Income – net account in the consolidated statements of income (see Note 23).

In 2019, due to the adoption of PFRS 16, one of the lease contract of GERI has qualified as a finance lease. As a result, the Group recognized finance lease receivable amounting to P669.3 million and gain on finance lease amounting to P350.2 million which is presented as Gain on finance lease under Interest and Other Income – net account in the 2019 statement of income (see Notes 23 and 31.1). Accordingly, the right-of-use asset amounting to P319.1 million was derecognized (see Note 13). The carrying amount of finance lease receivable as of December 31, 2019 is included as part of Others in the Trade and Other Receivables – net account under the Current assets section and Non-Current Assets section in the 2019 statement of financial position at P86.8 million and P586.0 million, respectively.

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All trade receivables are subject to credit risk exposure. However, the Group does not identify specific concentrations of credit risk with regard to trade receivables from real estate sales as the amounts recognized consist of a large number of receivables from various customers. The Group considers the market value of properties sold held as collateral in assessing the expected credit loss on trade receivables and contract assets from real estate sales (see Note 32.3). A reconciliation of the allowance for impairment losses on trade receivables at the beginning and end of 2019 and 2018 is shown below.

Current Non-current Total December 31, 2019: Balance at beginning of year P 746,443,033 P 12,224,936 P 758,667,969 Impairment reversal ( 27,966,579) - ( 27,966,579 ) Balance at end of year P 718,476,454 P 12,224,936 P 730,701,390 December 31, 2018: Balance at beginning of year P 555,340,843 P 12,224,936 P 567,565,779 Impairment losses 191,102,190 - 191,102,190 Balance at end of year P 746,443,033 P 12,224,936 P 758,667,969

Certain past due rent receivables presented as part of Trade receivables were found to be impaired using the provisional matrix as determined by management; hence, credit loss of P191.1 million was recognized in 2018 (see Note 24). An allowance of P120.9 million, pertaining to the aforementioned receivables, has been established at the beginning of 2018 as a result of the Group’s adoption of PFRS 9. In 2019, based on management’s reassessment, the Group reversed a portion of allowance for impairment amounting to P28.0 million. The resulting gain on reversal is presented as part of Miscellaneous – net under Interest and Other Income – net account in the 2019 statement of income (see Note 23).

7. INVENTORIES

The composition of this account as at December 31 is shown below.

2018 (As Restated – Note 2019 see Note 1.2)

Residential and condominium units 15.2 P 80,134,993,372 P 77,708,559,347 Property development costs 7,483,371,952 8,463,871,890 Raw land inventory 12,297,389,904 12,246,437,019 Golf and resort shares 2,929,635,312 2,243,707,288

P102,845,390,540 P100,662,575,544

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Residential and condominium units mainly pertain to the accumulated costs incurred in developing the Group’s horizontal and condominium projects and certain integrated-tourism projects.

Raw land inventory pertains to properties which the Group intends to develop into residential properties to be held for sale.

Property development costs pertain to accumulated costs incurred for properties undergoing development. The relative cost of a unit sold under development is charged to cost of sales in the same manner as revenue is recognized. The relative costs of units completed prior to sale are reclassified to Residential and condominium units for sale.

Golf and resort shares pertain to proprietary or membership shares (landowner resort shares and founders shares) that are of various types and costs. The cost of the landowner resort shares is based on the acquisition and development costs of the land and the project. The cost of the founders shares is based on the par value of the resort shares which is P100 per share. Certain residential and condominium units for sale are subject to negative pledge on certain loans obtained by the Group [see Note 15.2(d)].

8. PREPAYMENTS AND OTHER CURRENT ASSETS

The composition of this account is shown below.

Notes 2019 2018 Input VAT P 4,681,471,774 P 5,374,297,206 Creditable withholding taxes 1,210,186,078 1,144,599,436 Deferred commission 20 1,206,488,729 841,421,867 Prepaid rent and other prepayments 1,061,539,655 1,023,663,671 Deposits 62,155,524 192,940,895 Derivative asset 30 - 397,835,428 Others 195,390,459 230,154,879 P 8,417,232,219 P 9,204,913,382

Others include supplies and food and beverage inventories.

9. FINANCIAL ASSETS AT FVOCI

As of December 31, financial assets at FVOCI is composed of the following:

Note 2019 2018 Equity securities: Quoted 27.4 P 1,865,987,171 P 4,447,497,801 Unquoted 2,632,232,316 27,449,898

P 4,498,219,487 P 4,474,947,699

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The Group’s securities are investments from local entities.

The reconciliation of the carrying amount of financial assets at FVOCI is as follows:

2019 2018

Balance at beginning of year P 4,474,947,699 P 4,353,411,024 Fair value gains – net 23,271,788 121,702,361 Foreign currency losses – net - ( 165,686) Balance at end of year P 4,498,219,487 P 4,474,947,699

In 2018, equity securities significantly pertained to investments in publicly-listed holding and service companies with fair values determined directly by reference to published prices in the PSE. In 2019, one of the Group’s investments becomes unquoted as these were no longer publicly traded starting September of the same year.

In 2017, the Group recognized impairment loss amounting to P1.5 billion on equity securities above. The amount is presented as part of Impairment loss on financial assets under Interest and Other Charges – net account in the 2017 statement of income (see Note 24). In 2018, as a result of the Group’s adoption of PFRS 9, the P1.5 billion loss recognized within Retained Earnings was reclassified to Revaluation Reserves as of January 1, 2018. In 2017, the Company recognized fair value gains arising from investment securities amounting to P751.3 million. The fair value gains or losses arising from investment securities which comprised the movements in the carrying amounts and disposals of the accounts, are reported under Revaluation Reserves account under the equity section of the statements of financial position

Other information about the fair value measurement and disclosures related to the investments in financial assets are presented in Note 34.2. In 2019 and 2018, the Group received cash dividends from local companies amounting to P8.5 million and P21.2 million, respectively. The amount of dividends received is presented as part of Dividend income under Interest and Other Income – net account in the consolidated statements of income (see Note 23).

10. ADVANCES TO/FROM LANDOWNERS AND JOINT OPERATORS

10.1 Advances to Landowners and Joint Operators The Group enters into numerous joint arrangements for the joint development of various projects. These are treated as jointly-controlled operations. The joint arrangements stipulate that the Group’s co-operator shall contribute parcels of land while the Group shall be responsible for the planning, conceptualization, design, demolition of existing improvements, construction, financing and marketing of residential and condominium units to be constructed on the properties. In addition, there were no separate entities created by these joint arrangements. Costs incurred by the Group on these projects are recorded under the Inventories account in the consolidated statements of financial position (see Note 2.7).

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The Group also grants noninterest-bearing, secured cash advances to a number of landowners and joint ventures under agreements they entered into with the landowners covering the development of certain parcels of land. Under the terms of the arrangements, the Group, in addition to providing specified portion of total project development costs, also commits to advance mutually agreed-upon amounts to the landowners to be used for pre-development expenses such as the relocation of existing occupants. The total amount of advances made by the Group less repayments, is presented as part of the Advances to Landowners and Joint Operators account in the consolidated statements of financial position.

As at December 31, 2019 and 2018, management has assessed that the advances to joint ventures are fully recoverable. Further, there has been no outstanding commitment for cash advances under the joint agreements.

The net commitment for construction expenditures amounts to:

2019 2018

Total commitment for construction expenditures P 33,268,029,905 P 31,949,011,190 Total expenditures incurred ( 22,896,502,186) ( 22,122,879,520 )

Net commitment P 10,371,527,719 P 9,826,131,670

The Group’s interests in jointly-controlled operations and projects range from 57% to 90% both in 2019 and 2018. The listing of the Group’s jointly-controlled projects are as follows:

Company:

McKinley Hill

McKinley West

Newport City

Manhattan Garden City

Noble Place

Uptown Bonifacio

Northill Gateway

The Maple Grove

Vion Tower GERI

Alabang West

Caliraya Spring

Forest Hills

Kingsborough

Monte Cielo de Peñafrancia

Mountain Meadows

Pahara at Southwoods

Sta. Barbara Heights Phase 2 & 3

Holland Park

Sta. Barbara Heights Shophouse District

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EELHI:

Pioneer Woodlands

San Lorenzo Place

Various Metro Manila and Calabarzon Projects

SPI:

Capitol Plaza

Governor’s Hills

Mandara

Sta. Rosa Heights

Sta. Rosa Hills

Sentosa

Asmara

88 Gibraltar

One Lakeshore

Two Lakeshore

Riva Bella

Solana

Gentri Heights

Fountain Grove

Palm City

The Mist Residence

The aggregate amounts of the current assets, long-term assets, current liabilities, long-term liabilities as at December 31, 2019 and 2018, and income and expenses for each of the three years in the period ended December 31, 2019 related to the Group’s interests in joint arrangements are not presented or disclosed in the consolidated financial statements as the joint arrangements in which the Group is involved are not joint ventures (see Note 2.3). As at December 31, 2019 and 2018, the Group either has no other contingent liabilities with regard to these joint operations or has assessed that the probability of loss that may arise from contingent liabilities is remote. 10.2 Advances from Joint Operators This account represents the share of joint venture partners in the proceeds from the sale of certain projects in accordance with various joint arrangements entered into by the Group.

The advances from golf share partners and lot owners recognized in 2019 and 2018 amounted to P356.2 million and P395.4 million, net of deferred interest expense amounting to nil and P11.3 million, respectively, and is presented as part of Advances from Associates and Other Related Parties account in the consolidated statements of financial position (see Note 27.3). The amortization of deferred interest amounting to P11.3 million in 2018 and 2017 is presented as part of Interest expense under the Interest and Other Charges – net account in the 2018 and 2017 consolidated statements of income (see Note 24). No amortization was recognized in 2019 as the deferred interest was fully amortized in 2018.

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11. INVESTMENTS IN ASSOCIATES

11.1 Breakdown of Carrying Values

The details of investments in associates, accounted for using the equity method, are as follows:

2018 [As Restated – Note 2019 see Note 2.1(b)(i)]

Acquisition costs: SHDI P 2,619,800,008 P 1,089,666,735 NPI 734,396,528 734,396,528 BWDC 199,212,026 199,212,026 PTHDC 64,665,000 64,665,000 BNHGI - 109,216,973 3,618,073,562 2,197,157,262

Accumulated equity in

net losses: Balance at beginning of year ( 258,418,175) ( 305,826,514) Equity share in net earnings (losses) of associates for the year ( 58,832,233 ) 92,307,592 Write off - ( 44,899,253)

Balance at end of year ( 317,250,408) ( 258,418,175 )

Accumulated equity in other comprehensive income:

Balance at beginning of year 58,137,235 44,685,172 Share in other comprehensive income of associates ( 11,417,059) 13,452,063 Balance at end of year 46,720,176 58,137,235

Other changes in carrying amount: Effect of dilution in percentage ownership 23 152,294,930 - Recycling due to disposal and dilution 11,417,059 - Disposal during the year 246,517 -

163,958,506 - P 3,511,501,836 P 1,996,876,322

The shares of stock of SHDI are listed in the PSE. The fair values of all other investments in associates are not available as at December 31, 2019 and 2018. The related book values of the Group’s holdings in all of the associates exceed or approximate their carrying values; hence, management deemed that the recognition of impairment loss is not necessary except those associates discussed in Note 11.2. Equity share in Net Earnings (Losses) of Associates is presented in the consolidated statements of income while Share in Other Comprehensive Income of Associates is presented in the consolidated statements of comprehensive income.

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a. Investment in SHDI

In October 2019, the Company acquired additional 115 million shares of SHDI at market price during that time, totaling P100.1 million. Subsequently, the Group disposed a certain number of shares. In December 2019, the Company subscribed to additional 2,177 million shares from SHDI at P1.00 par value. The Company paid P1.25 billion out of the P2.20 billion additional subscribed capital. However, another investor subscribed to more new shares and, as a result, the Company’s effective ownership was diluted to 34% and dilution gain amounting to P152.3 million was recognized and presented under Interest and Other Income – Net in the 2019 consolidated statement of income (see Note 23). The unpaid portion is presented as Subscription payable under Other Current Liabilities account in the 2019 consolidated statement of financial position (see Note 19). b. Investment in BNHGI

In 2019 and 2017, FEPI sold 15% ownership interest over BNHGI for P297.5 million each year. Gain on sale of investment in an associate amounting to P188.5 million and P113.1 million was recognized in 2019 and 2017, respectively, and is presented under Interest and Other Income – net account in the consolidated statements of income (see Note 23). There was no similar transaction in 2018.

11.2 Summarized Financial Information

The aggregated amounts of assets, liabilities, revenues and net profit (loss) of the associates are as follows:

Current Non-current Current Non-current Assets Assets Liabilities Liabilities Revenues Net Profit (Loss)

2019: SHDI P 1,307,765,420 P 141,144,732 P 57,502,895 P - P 582,956,270 ( P 314,779,735 ) NPI 260,527,963 5,411,008,680 1,317,006,155 - 8,725 ( 726,177 ) BWDC 728,777,047 1,859,781,010 843,760,097 69,417,625 165,496,452 104,863,479 PTHDC 1,134,934,478 827,719 1,009,742,190 - 12,790 ( 461,651 ) P3,432,004,908 P 7,412,762,141 P 3,228,011,337 P 69,417,625 P 748,474,237 ( P 211,104,084) 2018: SHDI P 592,693,740 P 118,896,500 P 291,552,966 P 22,350,345 P 525,595,366 P 54,525,400 BNHGI 194,282,361 1,606,056,250 196,755,377 - - ( 135,712 ) NPI 261,236,740 5,411,008,680 1,317,006,155 - 9,713 ( 1,164,541 ) BWDC 640,491,253 1,765,162,063 849,196,587 69,895,835 241,487,576 150,106,389 PTHDC 1,134,914,573 1,039,949 1,009,472,864 - - ( 762,840 ) P 2,823,618,667 P 8,902,163,442 P 3,663,983,949 P 92,246,180 P 767,092,655 P 202,568,696

In addition, SHDI reported other comprehensive loss amounting to P9.23 million in 2019 and other comprehensive income of P24.10 million in 2018. In 2018, the Group written-off its investments to FERC, FENI, FESI and FERSAI. The carrying amount of the investments amounting to P44.9 million was recognized as impairment loss and is presented as part of Miscellaneous under Operating Expenses account in the 2018 consolidated statement of comprehensive income (see Note 22).

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12. INVESTMENT PROPERTIES

The gross carrying amounts and accumulated depreciation of investment properties at the beginning and end of 2019 and 2018 are shown below.

Land Buildings Total December 31, 2019 Cost P 26,838,600,559 P 96,457,689,526 P 123,296,290,085 Accumulated depreciation - ( 12,405,350,892 ) ( 12,405,350,892 ) Net carrying amount P 26,838,600,559 P 84,052,338,634 P 110,890,939,193 December 31, 2018 Cost P 26,538,840,239 P 86,768,689,909 P 113,307,530,148 Accumulated depreciation - ( 10,185,456,616 ) ( 10,185,456,616 ) Net carrying amount P 26,538,840,239 P 76,583,233,293 P 103,122,073,532 January 1, 2018 Cost P 26,168,336,418 P 77,822,279,268 P 103,990,615,686 Accumulated depreciation - ( 8,345,567,332 ) ( 8,345,567,332 ) Net carrying amount P 26,168,336,418 P 69,476,711,936 P 95,645,048,354

A reconciliation of the carrying amounts at the beginning and end of 2019, 2018 and 2017 of investment properties is shown below and in the succeeding page.

Land Buildings Total

Balance at January 1, 2019, net of accumulated depreciation P 26,538,840,239 P 76,583,233,293 P 103,122,073,532 Transfer to property and equipment - ( 400,488,452 ) ( 400,488,452 ) Additions 300,047,161 10,090,544,279 10,390,591,440 Disposals ( 286,841 ) ( 1,056,210 ) ( 1,343,051 ) Depreciation charges for the year - ( 2,219,894,276 ) ( 2,219,894,276 ) Balance at December 31, 2019, net of accumulated depreciation P 26,838,600,559 P 84,052,338,634 P110,890,939,193 Balance at January 1, 2018, net of accumulated depreciation P 26,168,336,418 P 69,476,711,936 P 95,645,048,354 Transfer to property and equipment - ( 780,689,687) ( 780,689,687 ) Additions 557,895,819 13,722,756,855 14,280,652,674 Disposals ( 187,391,998) ( 3,995,657,527) ( 4,183,049,525 ) Depreciation charges for the year - ( 1,839,888,284 ) ( 1,839,888,284 ) Balance at December 31, 2018, net of accumulated depreciation P 26,538,840,239 P 76,583,233,293 P103,122,073,532

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Land Buildings Total Balance at January 1, 2017, net of accumulated depreciation P 22,802,518,983 P 58,445,234,680 P 81,247,753,663 Additions 525,567,336 14,030,340,276 14,555,908,612 Transfer to property and equipment - ( 1,619,168,429 ) ( 1,619,168,429 ) Transfer from property and equipment - 85,581,344 85,581,344 Additions due to acquisition subsidiaries 2,860,769,322 - 2,860,769,322 Disposals ( 20,519,223) - ( 20,519,223 ) Depreciation charges for the year - ( 1,465,275,935 ) ( 1,465,275,935 ) Balance at December 31, 2017, net of accumulated depreciation P 26,168,336,418 P 69,476,711,936 P 95,645,048,354

Rental income earned from these properties amounted to P16.8 billion, P14.3 billion and P11.8 billion in 2019, 2018 and 2017, respectively, and is shown as Rental Income in the consolidated statements of income. The direct operating costs, exclusive of depreciation incurred by the Group relating to these investment properties amounted to P737.2 million in 2019, P657.0 million in 2018 and P563.6 million in 2017. On the other hand, the direct operating costs, which mostly pertain to real property taxes, of investment properties that did not generate rental income in 2019, 2018 and 2017 amounted to P34.7 million, P35.5 million and P23.3 million, respectively. The operating lease commitments of the Group as a lessor are fully disclosed in Note 31.1. In 2018, the Group transferred ownership over a building classified as investment property to a related party under common ownership (see Note 27.1).

In 2019 and 2018, changes were made on use of certain properties from being held for lease to being used for hotel operations. As a result, the Group occupied the property in the respective years of reclassification and the carrying amount of P0.4 billion and P0.8 billion, respectively, were reclassified from Investment Properties to Property and Equipment (see Note 13). In 2019, the Group sold certain land and building and improvements with a total carrying value of 1.3 million for a total consideration of P47.1 million. The related gain on disposal amounting to P45.8 million is presented as part of Interest and Other Income – net in the consolidated statement of income (see Note 23).

Depreciation of investment properties is presented as part of Depreciation and amortization under Operating Expenses account in the consolidated statements of income (see Note 22).

The fair market values of the properties that generated rental income in 2019 and 2018 are P424.4 billion and P336.2 billion as at December 31, 2019 and 2018, respectively, while the fair market value of idle land as of December 31, 2019 and 2018 is P50.9 billion and P45.8 billion, respectively. Other information about the fair value measurement and disclosures related to the investment properties are presented in Note 34.4.

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13. PROPERTY AND EQUIPMENT

The gross carrying amounts and accumulated depreciation and amortization of property and equipment at the beginning and end of 2019 and 2018 are shown below.

Office Furniture, Buildings & Fixtures and Office Transportation Right-of-use Improvements Equipment Improvements Equipment Land Assets Total December 31, 2019 Cost P 6,687,643,357 P 1,571,660,277 P 390,225,553 P 522,789,975 P 245,672,573 P 274,892,443 P 9,692,884,178 Accumulated depreciation and amortization ( 1,234,320,268 ) ( 1,049,205,240) ( 267,383,440) ( 422,750,209) - ( 16,974,018) ( 2,990,633,175)

Net carrying amount P5,453,323,089 P 522,455,037 P 122,842,113 P 100,039,766 P 245,672,573 P 257,918,425 P 6,702,251,003 December 31, 2018 Cost P 6,235,671,388 P 1,408,659,015 P 343,419,985 P 435,488,491 P 245,672,573 P - P 8,668,911,452 Accumulated depreciation and amortization ( 1,068,346,936 ) ( 871,062,860) ( 225,105,338) ( 334,343,745) - - ( 2,498,858,879)

Net carrying amount P 5,167,324,452 P 537,596,155 P 118,314,647 P 101,144,746 P 245,672,573 P - P 6,170,052,573

January 1, 2018 Cost P 5,397,702,892 P 917,102,206 P 297,279,668 P 389,569,548 P 245,672,573 P - P 7,247,326,887 Accumulated depreciation and amortization ( 894,458,860) ( 726,411,321) ( 194,589,056) ( 261,414,263) - - ( 2,076,873,500)

Net carrying amount P 4,503,244,032 P 190,690,885 P 102,690,612 P 128,155,285 P 245,672,573 P - P 5,170,453,387

A reconciliation of the carrying amounts at the beginning and end of 2019, 2018 and 2017, of property and equipment is shown below and in the succeeding page.

Office Furniture, Buildings & Fixtures and Office Transportation Right-of-use Improvements Equipment Improvements Equipment Land Assets Total Balance at January 1, 2019,

net of accumulated depreciation and amortization As previously reported P 5,167,324,452 P 537,596,155 P 118,314,647 P 101,144,746 P 245,672,573 P - P 6,170,052,573 Effect of PFRS 16 [see Note 2.2(a)(iv)] - - - - - 399,145,961 399,145,961 As restated P 5,167,324,452 P 537,596,155 P 118,314,647 P 101,144,746 P 245,672,573 P 399,145,961 P 6,569,198,534 Transfer from investment properties 400,488,452 - - - - - 400,488,452 Additions 51,483,517 163,734,664 46,805,568 88,093,093 - 194,882,491 544,999,333 Derecognition - - - - - ( 319,136,009 ) ( 319,136,009 ) Disposals - ( 733,402 ) - ( 791,609) - - ( 1,525,011 ) Depreciation charges for the year ( 165,973,332) ( 178,142,380 ) ( 42,278,102) ( 88,406,464) - ( 16,974,018) ( 491,774,296 ) Balance at December 31, 2019, net of accumulated depreciation P5,453,323,089 P 522,455,037 P 122,842,113 P 100,039,766 P 245,672,573 P 257,918,425 P 6,702,251,003 Balance at January 1, 2018,

net of accumulated depreciation P 4,503,244,032 P 190,690,885 P 102,690,612 P 128,155,285 P 245,672,573 P - P 5,170,453,387 Transfer from investment properties 779,754,000 - 935,687 - - - 780,689,687 Additions 58,214,496 441,153,167 45,204,630 54,892,007 599,464,300 Reclassifications - 54,717,213 - ( 241,621) - - 54,475,592 Disposals - ( 4,313,571) - ( 8,731,443) - - ( 13,045,014 ) Depreciation and amortization charges for the year ( 173,888,076) ( 144,651,539) ( 30,516,282) ( 72,929,482) - - ( 421,985,379 ) Balance at December 31, 2018, net of accumulated depreciation and amortization P 5,167,324,452 P 537,596,155 P 118,314,647 P 101,144,746 P 245,672,573 P - P 6,170,052,573

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Office Furniture, Buildings & Fixtures and Office Transportation Right-of-use Improvements Equipment Improvements Equipment Land Asset Total Balance at January 1, 2017,

net of accumulated depreciation and amortization P 2,986,186,864 P 175,454,856 P 32,947,432 P 135,203,620 P 240,394,192 P - P 3,570,186,965 Transfer from investment properties 1,619,168,429 - - - - - 1,619,168,429 Transfer to investment properties ( 85,581,344 ) ( 85,581,344 ) Additions 131,047,592 133,464,947 94,018,576 68,036,944 5,278,381 - 431,846,440 Additions due to acquisition of subsidiary - 5,255,192 - - - - 5,255,192 Disposals - ( 10,915,564) ( 90,747) 893,678) ( 11,899,989) Depreciation and amortization charges for the year ( 147,577,510) ( 112,568,546) ( 24,184,649) ( 74,191,601) - - ( 358,522,306 ) Balance at December 31, 2017, net of accumulated depreciation P 4,503,244,032 P 190,690,885 P 102,690,612 P 128,155,285 P 245,672,573 P - P 5,170,453,387

Depreciation and amortization of property and equipment is presented as part of Depreciation and amortization under Operating Expenses account in the consolidated statements of income (see Note 22).

The table below describes the nature of the Group’s leasing activities by type of right-of-use asset recognized in the statement of financial position. Number of Number of Number of Range of Average leases with leases with right-of-use remaining remaining extension termination assets leased term lease term options options Offices 3 2 – 14 years 8 years 3 1 Commercial lot 3 1 – 28 years 15 years 2 1

The breakdown of the Group’s right-of-use assets as at December 31, 2019 and the movements during the period are shown below.

Commercial Offices Lot Total Balance at beginning of year P 9,193,717 P 389,952,244 P 399,145,961 Additions 6,765,466 188,117,025 194,882,491 Derecognition - ( 319,136,009 ) ( 319,136,009 ) Depreciation and amortization ( 4,884,910 ) ( 12,089,108 ) ( 16,974,018 ) Balance at end of year P 11,074,273 P 246,844,152 P 257,918,425

The derecognition of right-of-use asset amounting to P319.1 million resulted from one of the lease contracts of GERI that has qualified as a finance lease (see Note 6). As of December 31, 2019 and 2018, the Group does not have any contractual commitments for acquisition of property and equipment.

None of the Group’s property and equipment are used as collateral for its interest-bearing loans and borrowings.

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14. OTHER NON-CURRENT ASSETS

This account consists of:

2018 (As Restated – Notes 2019 see Note 1.2)

Goodwill P 1,385,124,597 P1,385,124,597 Guarantee and other deposits 1,007,434,782 896,576,344 Deferred commission 20.3 906,925,987 301,179,774 Leasehold rights – net 104,478,252 111,443,468 Miscellaneous 124,848,129 314,384,360

P 3,528,811,747 P 3,008,708,543

Goodwill primarily relates to growth expectations arising from operational efficiencies that will be achieved by combining the resources, skills and expertise of the Company and its subsidiaries. Significant portion of the total goodwill is allocated to GERI, MLI and STLI amounting to P947.1 million, P255.1 million, and P94.9 million, respectively. The remaining P88.0 million is allocated to other subsidiaries.

Total goodwill as at January 1 and December 31, 2018 amounted to P1.3 billion. In 2019, management completed the assessment of the fair values of STLI’s net assets resulting to restatement of goodwill by P94.9 million in the 2018 consolidated statement of financial position (see Note 1.2).

The recoverable amounts of the cash generating units assigned to GERI, MLI and STLI are P49.1 billion, P872.4 million and P2.7 billion, respectively, at end of 2019 and P49.3 billion, P1.1 billion and P2.9 billion, respectively, at end of 2018. These were computed using cash flows projections covering a five-year period and extrapolating cash flows using a conservative steady growth rate for both GERI, MLI and STLI of 5.0%. The aggregate recoverable amounts of the cash generating units assigned to other subsidiaries is P169.2 million in 2019 and P165.2 million in 2018 while the average growth rate used in extrapolating cash flows covering five-year projections is 5.0%. The average discount rates applied in determining the present value of future cash flows is 9.1% in 2019 and 8.6% in 2018.

The discount rates and growth rates are the key assumptions used by management in determining the recoverable amount of the cash generating units. Based on management’s analysis, no impairment is required to be recognized on goodwill. Management has also determined that a reasonably possible change in these key assumptions would not cause the carrying value of the cash generating units to exceed their respective value in use.

Leasehold rights represent separately identifiable asset recognized from the acquisition of GPARC and is amortized over a period of 20 years. Leasehold rights amortization amounted to P7.0 million each in 2019, 2018 and 2017, and is presented as part of Depreciation and amortization under Operating Expenses account in the consolidated statements of income (see Note 22).

Goodwill is subject to annual impairment testing while leasehold rights is subject to testing whenever there is an indication of impairment. No impairment losses were recognized in 2019, 2018 and 2017 as the recoverable amounts of the intangible assets determined by management are higher than their carrying values.

Guarantee deposits mainly pertain to payments made for compliance with construction requirements in relation to the Group’s real estate projects.

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15. INTEREST-BEARING LOANS AND BORROWINGS

Interest-bearing Loans and Borrowings account represents the following loans of the Group as at December 31:

2019 2018

Company: Php-denominated P 31,410,369,626 P 33,778,427,887 U.S. Dollar-denominated 8,581,745,729 5,212,972,118 39,992,115,355 38,991,400,005 Subsidiaries - Php-denominated 11,264,360,634 11,649,211,745 P 51,256,475,989 P 50,640,611,750

The current portion of interest-bearing loans and borrowings as of December 31, 2019 and 2018 amounted to P14,502.5 million and P12,019.7 million, respectively, while the non-current portion amounted to P36,753.9 million and P38,620.9 million, respectively. The Group has complied with applicable loan covenants, including maintaining certain financial ratios, at the end of the reporting periods.

Finance costs arising from interest-bearing loans that are mainly and directly attributable to construction of the Group’s projects are capitalized as part of Inventories and Investment Properties accounts. The remaining interest costs are expensed outright. The total finance costs attributable to all the loans of the Group amounted to P2,967.8 million, P3,405.7 million and P2,037.5 million in 2019, 2018 and 2017, respectively. Of these amounts, portion charged as expense amounted to P709.7 million, P370.0 million and P232.8 million in 2019, 2018 and 2017, respectively, and are presented as part of Interest expense under Interest and Other Charges – net account in the consolidated statements of income (see Note 24). Interest capitalized in 2019, 2018 and 2017 amounted to P2,258.1 million, P3,035.7 million and P1,804.7 million, respectively. The outstanding interest payable as of December 31, 2019 and 2018 is presented as part of Accrued Interests under Trade and Other Payables account in the consolidated statements of financial position (see Note 17). Capitalization rate used in determining the amount of interest charges qualified for capitalization is 4.48%, 4.55% and 4.55% in 2019, 2018 and 2017, respectively.

15.1 Company

(a) U.S. Dollar, five-year loan due 2022 In December 2017, the Company obtained an unsecured long-term loan from a local bank amounting to U.S. $98.87 million. The loan is payable quarterly for a term of five years with a grace period of one year upon availment. The principal repayment on the loan shall commence in March 2019 and a floating interest is paid quarterly based on a 3-month London interbank offered rate (LIBOR) plus a certain spread. The Company entered into a cross-currency swap transaction to hedge the U.S. Dollar and interest rate exposure of the loan (see Note 30).

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(b) Philippine Peso, seven-year loan due 2022 In November 2015, the Company obtained an unsecured long-term loan from a local bank amounting to P5.0 billion. The loan is payable semi-annually for a term of seven years. The principal repayments on this loan commenced in November 2016 and interest is paid semi-annually based on a fixed 5.25% annual interest rate.

(c) Philippine Peso, seven-year loan due 2022

In March 2015, the Company signed a financing deal with a local bank in which the Company may avail of a P10.0 billion unsecured loan, divided equally into two tranches which the Company fully availed in 2015. The proceeds of the loan were used to fund the development of the Company’s various real estate projects and retire currently maturing obligations. The loan is payable quarterly for a term of seven years. The principal repayments on this loan commenced in June 2016 and interest is paid quarterly based on a fixed 5.63% annual interest rate.

(d) Philippine Peso, five-year loan due 2021

In November 2016, the Company obtained an unsecured long-term loan from a local bank amounting to P5.0 billion. The loan is payable quarterly for a term of five years with a grace period of one year upon availment. The principal repayment on the loan commenced in February 2018 and interest is paid quarterly based on a fixed 6.43% annual interest rate.

(e) Philippine Peso, five-year loan due 2021

In August 2016, the Company obtained an unsecured long-term loan from a local bank amounting to P2.0 billion. The loan is payable quarterly for a term of five years with a grace period of two years upon availment. The principal repayment on the loan commenced in November 2018 and interest is paid quarterly based on a fixed 5.26% annual interest rate.

(f) Philippine Peso, seven-year loan due 2021 In August 2014, the Company obtained an unsecured long-term loan from a local bank amounting to P5.0 billion. The loan is payable semi-annually for a term of seven years. The principal repayments on this loan commenced in August 2015 and interest is paid semi-annually based on a fixed 5.38% annual interest rate.

(g) Philippine Peso, five-year loan due 2020 In December 2015, the Company obtained an unsecured long-term loan from a local bank amounting to P5.0 billion. The loan is payable quarterly for a term of five years with a grace period of one year upon availment. The principal repayment on the loan commenced in March 2017 and interest is paid quarterly based on a fixed 5.04% annual interest rate.

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(h) Philippine Peso, five-year loan due 2023 In December 2018, the Company obtained an unsecured long-term loan from a local bank amounting to P5.0 billion. The loan is payable quarterly for a term of five years with a grace period of two years upon availment. The principal repayment of the loan shall commence in March 2021 and interest is paid quarterly based on a fixed 7.85% annual interest rate.

(i) Philippine Peso, three-year loan due 2021

In July 2018, the Company obtained an unsecured long-term loan from a local bank amounting to P5.0 billion. The principal of the loan is payable upon maturity and floating interest is payable quarterly commencing in October 2018, based on a 5-day average reference rate plus a certain spread.

(j) Philippine Peso, three-year loan due 2021

In December 2018, the Company obtained an unsecured long-term loan from a local bank amounting to P5.0 billion. The loan is payable quarterly for a term of three years with a grace period of six months upon availment. The principal repayment on the loan commenced in September 2019 and interest is paid quarterly based on a floating rate plus certain spread.

(k) U.S. Dollar, five-year loan due 2024 In September 2019, the Company obtained an unsecured long-term loan from a local bank amounting to U.S. $95.62 million. The loan is payable quarterly for a term of five years with a grace period of one year upon availment. The principal repayment on the loan shall commence in December 2020 and a floating interest is paid quarterly based on a 3-month London interbank offered rate (LIBOR) plus a certain spread. The Company entered into a cross-currency swap transaction to hedge the U.S. Dollar and interest rate exposure of the loan (see Note 30).

(l) Philippine Peso, five-year loan due 2024 In December 2019, the Company obtained an unsecured long-term loan from a local bank amounting to P5.0 billion. The loan is payable quarterly for a term of five years with a grace period of one year upon availment. The principal repayment on the loan shall commence in December 2020 and interest is paid quarterly based on the higher of 4.75% fixed rate and floating rate plus certain spread.

15.2 EELHI

(a) Philippine Peso, 58-day loan due on 2018 In December 2017, EELHI obtained an unsecured interest-bearing loan from a local bank amounting to P400.0 million. The loan was released in December 2017 and bears a fixed annual interest rate of 4.5% subject to repricing every 30 to 180 days as agreed by the parties. The proceeds of the loan were used to fund the development of EELHI’s various real estate projects. Principal of the loans is payable upon maturity and interest is payable monthly in arrears. In 2018, the Company paid in full the outstanding loan balance.

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(b) Philippine Peso, seven-year loan due 2022 In 2015, EELHI obtained a P2.0 billion loan from a local bank. The loan was released in three tranches from 2015 to 2016 and bears fixed interest of 5.4% for the first and second tranches, and floating rate ranging from 3.2% to 3.5% subject to quarterly re-pricing for the third tranche. The proceeds of the loan were used to fund the development of EELHI’s various real estate projects.

(c) Philippine Peso, unsecured three-year loan due in 2021

In 2018, EELHI obtained a bridge financing from a local bank. The loan was released in February 2018 and subject to floating rate of 4.5%. The proceeds of the loan were used to fund the development of the Company’s various real estate projects. The principal of the loan is payable upon maturity and interest is payable monthly in arrears.

(d) Philippine Peso, liability on assigned receivables In prior years, EELHI obtained loans from local banks by assigning certain trade receivables on a with recourse basis (see Note 6). The loans are secured by certain properties presented as part of Inventories account with total estimated carrying value of P28.5 million and P59.3 million as of December 31, 2019 and 2018, respectively (see Note 7). The loans bear fixed interest rates ranging from 7.0% to 9.0% and are being paid as the related receivables are collected.

15.3 LFI

(a) Philippine Peso, five-year loan due 2020 In December 2015, LFI obtained an unsecured interest-bearing loan from a local commercial bank amounting to P500.0 million. The loan is payable quarterly for a term of five years with a grace period of one year upon availment. The principal repayment on the loan commenced in March 2017 and interest is paid quarterly. The loan originally bears an annual interest of 5.0%, subject to quarterly repricing.

15.4 SPI

(a) Philippine Peso, five-year loan due in 2025 In 2018, SPI obtained an unsecured long-term loan from a local bank amounting to P2.2 billion. The principal amount is payable on a monthly basis after a grace period of three years from the date of availment. The loan bears 4.50% floating interest subject to repricing every 30 to 180 days and will mature in 2025. The proceeds of the loan were used to fund the acquisition of STLI in 2018.

(b) Philippine Peso, three-year loan due in 2021 In 2018, SPI obtained an unsecured long-term loan from a local bank amounting to P300.0 million. The principal amount is payable on a monthly basis after a grace period of two years from the date of availment. The loan bears 4.50% floating interest subject to repricing every 30 to 180 days and will mature in 2021.

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(c) Philippine Peso, five-year loan due in 2021 In 2017 and 2016, SPI obtained an unsecured long-term loan from a local bank amounting to P0.5 billion and P0.4 billion, respectively. The principal amount is payable on a monthly basis after a grace period of two years from the date of availment. The loan bears 3.50% floating interest subject to repricing every 30 to 180 days and will mature in 2021.

(d) Philippine Peso, five-year loan due in 2020

In 2015, SPI obtained an unsecured long-term loan from a local bank for a total amount of 1.5 billion. The loan is payable in monthly installments over five years with a grace period of two years from the initial drawdown date. The loan bears floating interest ranging from 3.15% to 5.15%, subject to repricing every 30 to 180 days. In 2016 and 2015, SPI made a drawdown amounting to P0.3 billion and P1.2 billion, respectively.

(e) Philippine Peso, five-year loan due in 2020

In 2015, SPI obtained an additional unsecured long-term loan from another local bank amounting to P200.0 million. Repayment of this loan is being made on a quarterly basis beginning 2017. The loan bears 5.25% floating interest subject to repricing every 30 to 180 days. In 2018, SPI pre-terminated the loan.

(f) Philippine Peso, six-month loan due in 2019 In 2018, SPI obtained an unsecured short-term loan from a local bank amounting to P100.0 million. The loan bears floating interest subject to monthly repricing. The principal amount is payable six months from the date of availment.

(g) Philippine Peso, various short-term loans In 2016 and 2015, SPI obtained various unsecured short-term loans from different local banks. The loans bear fixed and floating interest ranging from 5.50% to 5.75%. The outstanding balances of the loans as of December 31, 2019 and 2018 amount to P19.0 million and P25.3 million, respectively.

(h) Philippine Peso, liability on assigned receivables In 2015, SPI obtained various loans from a local bank through assignment of trade receivables (see Note 6). The loans bear floating interests ranging from 5.50% to 15.00%. The loans and interests are being paid as the receivables are collected. The outstanding balance pertaining to these loans as of December 31, 2019 and 2018 amounted to P1.3 billion and P0.9 billion, respectively.

15.5 GERI

(a) Philippine Peso, five-year loan due 2024 In 2019, the Company obtained an unsecured long-term loan from a local bank amounting to P2.0 billion, payable quarterly for a term of five years. The loan bears a floating interest rate and is payable quarterly in arrears.

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(b) Philippine Peso, five-year loan due 2022 In December 2017, GERI obtained an unsecured long-term loan from a local bank amounting to P2.0 billion. The loan is payable quarterly for a term of five years commencing on the beginning of the fifth quarter from the initial drawdown date. The loan bears a floating interest rate and is payable quarterly in arrears.

(c) Philippine Peso, five-year loan due 2021 In 2016, GERI obtained an unsecured long-term loan from a local bank amounting to P2.0 billion. The loan has a term of five years from the date of initial drawdown inclusive of a grace period of two years on principal repayment. The loan is payable in quarterly installments of P125.0 million commencing on the 9th quarter from the date of initial drawdown and balloon payment at the end of five years and bears fixed interest rate plus a certain spread subject to a floor rate of 3%.

(d) Philippine Peso, five-year loan due 2020

In 2015, GERI obtained an unsecured long-term loan from a local bank amounting to P1.5 billion. The loan has a term of five years from the date of initial drawdown, inclusive of a grace period on principal repayment of two years. The loan, which is payable quarterly commencing on the 9th quarter from the date of initial drawdown, bears fixed interest rate plus a certain spread subject to a floor rate of 5%.

(e) Philippine Peso, short-term loan

In 2018, SWEC renewed its credit line facility with a local bank amounting to P150.0 million, which shall be used for working capital purposes. In December 2018, the Company’s initial loan drawdown amounted to P50.0 million, payable within 180 days. This was extended for another 180 days in 2019. Upon expiration, SWEC paid the P12.0 million portion of the loan and extended the remaining P38.0 million for another 180 days.

(f) Philippine Peso, five-year loan due 2024 In August and November 2019, TLC obtained an unsecured and interest-bearing loans from a local commercial bank amounting to P300.0 million and P200.0 million, respectively, for funding requirements of the construction of a project. The loans bear floating interest rates and are payable in quarterly installments commencing in November 2020 until the loans are fully-settled.

16. BONDS PAYABLE

This account is composed of the following:

2019 2018

Philippine peso P 11,965,873,279 P 11,957,843,462 U.S. Dollar 12,658,010,411 13,144,198,903

P 24,623,883,690 P 25,102,042,365

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(a) Philippine Peso, seven-year bonds due 2024

On March 28, 2017, the Company issued seven-year term bonds totaling P12.0 billion. The bond carries a coupon rate of 5.35% payable semi-annually in arrears every March 28 and September 28. The bonds shall mature on March 28, 2024.

(b) U.S. Dollar, ten-year bonds due 2023

On April 17, 2013, the Company issued ten-year term bonds totaling U.S. $250 million. The bond carries a coupon rate of 4.25% per annum and interest is payable semi-annually in arrears every April 17 and October 17. The proceeds of the bond issuance are being used by the Company for general corporate purposes.

The Company has complied with bond covenants including maintaining certain financial ratios at the end of the reporting periods.

Total interest incurred on these bonds amounted to P1,201.8 million, P1,443.2 million and P1,751.5 million in 2019, 2018 and 2017, respectively. Of these amounts, portion charged as expense amounted to P717.4 million, P800.8 million and P1,266.1 million in 2019, 2018 and 2017, respectively, and are presented as part of Interest expense under Interest and Other Charges account in the statements of income (see Note 24). The outstanding interest payable as at December 31, 2019 and 2018 is presented as part of Accrued interest payable under Trade and Other Payables account in the consolidated statements of financial position (see Note 17). Unrealized foreign currency gains in relation to these foreign bonds are presented as part of Foreign currency gains – net under Interest and Other Income account in the consolidated statement of income (see Note 23). Interest capitalized amounted to P484.4 million and P642.4 million in 2019 and 2018, respectively. Capitalization rate used in determining the amount of interest charges qualified for capitalization is 4.05% in 2019 and 5.37% in 2018.

17. TRADE AND OTHER PAYABLES


Notes 2019 2018 Trade payables P11,853,778,273 P10,232,102,667 Retention payable 4,602,091,363 2,959,988,922 Accrued interest 15, 16 452,887,380 489,144,542 Miscellaneous 2,398,025,608 1,345,884,240

P19,306,782,624 P15,027,120,371

Trade payables mainly represent obligations to subcontractors and suppliers of construction materials for the Group’s projects.

Retention payable pertains to amounts withheld from payments made to contractors to ensure compliance and completion of contracted projects equivalent to 10% of every billing made by the contractor. Upon completion of the contracted projects, the amounts are returned to the contractors.

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Miscellaneous payable includes withholding taxes payable, accrual of salaries and wages, utilities and refund liability. Refund liability with carrying amount of P676.1 million and P217.6 million as of December 31, 2019 and 2018, respectively, pertains to amounts payable to customers due to sales cancellation in respect of installment sales contracts as covered by the Republic Act (R.A.) No. 6552, Realty Installment Buyer Protection Act, otherwise known as the Maceda Law.

18. REDEEMABLE PREFERRED SHARES

On September 4, 2012, TLC’s BOD approved the additional subscriptions to 1,258.0 million preferred shares out of TLC’s authorized capital stock as partial payment for certain parcels of land with total fair value of P1,338.2 million. The SEC approved the issuance through the exchange of certain parcels of land on April 17, 2013.

Generally non-voting, these preferred shares earn dividends at a fixed annual rate of 2.5% subject to the existence of TLC’s unrestricted retained earnings. The accrued dividends on these preferred shares amounting to P1.4 million and P1.9 million as at December 31, 2019 and 2018, respectively, are presented as part of Other payables under Other Non-current Liabilities account in the consolidated statements of financial position (see Note 19). The related interest expense recognized amounting to P22.7 million, P28.4 million, and P28.9 million in 2019, 2018 and 2017, respectively, is presented as part of Interest expense under the Interest and Other Charges – Net account in the consolidated statements of income (see Note 24). The preferred shares have a maturity of 10 years and shall be redeemed on every anniversary date beginning on the sixth anniversary date until expiration of the ten-year period. Only 1/5 of the aggregate face value of preferred shares may be redeemed per year during such redemption period, with all remaining shares to be redeemed on the 10th anniversary date.

The preferred shares are considered as financial liabilities. Accordingly, the redeemable preferred shares are recognized at fair value on the date of issuance. The par value of the redeemable preferred shares on the date of issuance approximate their fair value.

19. OTHER LIABILITIES


Notes 2019 2018

Current: Deferred rent P 3,055,770,143 P 2,579,065,223 Commission payable 1,700,760,516 1,165,040,058 Advances from customers 1,591,767,093 1,162,425,514 Subscription payable 11.1(a) 1,114,665,008 - Derivative liability 30 242,417,137 - Lease liabilities 2.1 110,624,459 - Other payables 74,191,693 157,286,419 7,890,196,049 5,063,817,214

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Notes 2019 2018

Non-current: Deferred rent - net 4,103,537,878 4,324,974,230

Retention payable 2,026,599,582 2,221,277,892 Lease liabilities 2.1 542,963,649 - Other payables 18 97,393,470 113,791,650 6,770,494,579 6,660,043,772

P 14,660,690,628 P11,723,860,986

Other current payables mainly pertain to due to condominium unit-holders arising from condo hotel operations. Deferred rental income refers to the rental payments advanced by the lessee at the inception of the lease which will be applied to the remaining payments at the end of the lease term.

Total cash outflows relating to lease liabilities for the year ended December 31, 2019 are as

follows:

Note Principal of lease liability P 26,338,703 Interest on lease liability 24 9,090,629

P 35,429,332

The undiscounted maturity analysis of lease liabilities as at December 31, 2019 is as follows:

Within Less than More than 1 year 5 years 5 years Total Lease payment P 149,699,644 P 250,541,462 P 899,315,917 P1,299,557,023

Finance charges ( 39,075,185) ( 153,948,881 ) ( 452,944,849 ) ( 645,968,915 )

Net present value P 110,624,459 P 96,592,581 P 446,371,068 P 653,588,108

The Company has elected not to recognize a lease liability for short-term leases. Payments made under such leases are expensed on a straight-line basis. The expenses relating to short term leases amounting to P241.0 million presented as Rent is part of Operating Expenses under Cost and Expenses in the 2019 statement of income (see Note 22).

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20. REVENUES

20.1 Disaggregation of Revenues The Company derives revenues from sale of real properties and hotel operations. An analysis

of the Company’s major sources of revenues is presented below.

Segments

Hotel


2019

Types of products or services


Commercial lot 1,135,140,901 - 1,135,140,901

Residential lot 3,438,496,828 - 3,438,496,828

Industrial lot 353,613,598 - 353,613,598

Room accommodation - 1,820,667,836 1,820,667,836



P 42,603,984,572 P 2,543,769,508 P 45,147,754,080

2018



Commercial lot 1,325,857,166 - 1,325,857,166

Residential lot 3,493,747,496 - 3,493,747,496

Industrial lot 218,487,048 - 218,487,048

Room accommodation - 1,031,882,621 1,031,882,621



P 38,035,548,060 P 1,519,423,405 P 39,554,971,465

2017



Commercial lot 557,199,833 - 557,199,833

Residential lot 3,067,849,048 - 3,067,849,048

Industrial lot 473,573,883 - 473,573,883




P 34,115,066,390 P 1,335,958,802 P 35,451,025,192

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20.2 Contract Accounts The significant changes in the contract assets and contract liabilities balances as of December 31 are as follows:

2019 2018

Contract Contract Contract Contract

Assets Liabilities Assets Liabilities

Balance at beginning of year P22,227,279,687 P5,368,667,295 P16,111,327,271 P 4,295,663,665

Transfers from contract assets

recognized at the beginning of

year to accounts receivables ( 13,872,777,770) - ( 2,399,983,277 ) -

Increase due to satisfaction of performance obligation over time

net of cash collection 10,288,502,770 - 8,070,269,733 -

Increase due to acquisition of

subsidiaries - 445,665,960 180,751,668

Revenue recognized that was

included in contract liability at

the beginning of year - ( 2,124,864,709) - ( 2,494,845,747)

Increase due to cash received

in excess of performance to date - 1,969,752,457 - 3,387,097,709

Balance at end of year P18,643,004,687 P5,213,555,043 P22,227,279,687 P 5,368,667,295

The outstanding balance of trade receivables arising from real estate sales and hotel

operations presented as part of Trade Receivables under Trade and Other Receivables

account in the consolidated statements of financial position, amounted to P28.8 billion and

P19.7 billion as of December 31, 2019 and 2018, respectively (see Note 6).

20.3 Direct Contract Costs The Company incurs sales commissions upon execution of contracts to sell real properties to customers. Incremental costs of commission incurred to obtain contracts are capitalized and presented as Deferred commission under Prepayments and Other Current Assets, and Other Non-current Asset accounts in the 2019 consolidated statements of financial position (see Notes 8 and 14). These are amortized over the expected construction period on the same basis as how the Company measures progress towards complete satisfaction of its performance obligation in its contracts. The total amount of amortization for 2019, 2018 and 2017 is presented as part of Commission under Operating Expenses (See Note 22).

The movement in balances of deferred commission in 2019 and 2018 is presented below.

2019 2018

Balance at beginning of year P 1,142,601,641 P 903,823,805 Additional capitalized cost 2,492,199,784 1,401,587,691 Reversal due to back out ( 23,324,369) ( 25,875,937 ) Amortization for the period ( 1,498,062,340) ( 1,136,933,918 ) Balance at end of year P 2,113,414,716 P 1,142,601,641

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20.4 Transaction Price Allocated to Unsatisfied Performance Obligations

The aggregate amount of transaction price allocated to partially or wholly unsatisfied

contracts amounted to P31.1 billion and P21.3 billion as of December 31, 2019 and 2018,

respectively, which the Group expects to recognize as follows:

Within a year P 16,005,879,940 P 13,929,628,018

More than one year to three years 11,284,401,763 6,287,109,681

More than three years to five years 3,774,194,420 1,016,292,043

P 31,064,476,123 P 21,233,029,742

21. COST OF REAL ESTATE SALES

The nature of the cost of real estate sales for the year ended December 31 are as follows:

2019 2018 2017

Contracted services P 17,531,181,959 P 16,702,676,925 P 15,505,014,182 Land cost 4,927,689,375 3,253,659,078 2,072,833,307 Borrowing cost 549,543,413 473,001,664 361,376,502 Other costs 371,404,253 91,911,888 101,866,469 P 23,379,819,000 P 20,521,249,555 P 18,041,090,460 22. OPERATING EXPENSES

Presented below are the details of this account. Notes 2019 2018 2017 Salaries and employee benefits 25.1 P 3,125,673,095 P 2,691,258,059 P 2,393,483,335 Depreciation and amortization 12, 13, 14 2,718,633,789 2,268,838,800 1,830,763,458 Commission 20.3 2,330,502,280 1,578,964,425 1,440,258,705 Advertising and promotions 1,202,536,624 1,040,076,651 857,146,867 Taxes and licenses 1,010,811,356 772,004,003 770,493,624 Utilities and supplies 735,437,981 680,234,229 502,572,269 Outside services 617,984,919 356,976,887 150,095,504 Professional fees 530,988,612 443,014,920 228,774,316 Association dues 373,994,646 299,226,072 273,129,904 Transportation 338,320,212 298,535,659 282,364,609 Rent 19 240,973,409 258,506,932 512,629,534 Miscellaneous 11.2 686,622,828 557,355,170 446,485,552 P 13,912,479,751 P 11,244,991,807 P 9,688,197,677

Miscellaneous operating expenses include repairs and maintenance, insurance expense, and training and development expense.

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23. INTEREST AND OTHER INCOME

Presented below are the details of this account. 2018 (As Restated –

Notes 2019 see Note 1.2) 2017 Interest income 5, 6 P 2,328,813,700 P 1,767,928,629 P 1,493,431,517 Property management, commission and construction income 1,679,042,730 1,575,136,864 990,622,510 Foreign currency gains – net 15, 16 492,386,136 - - Gain on finance lease 6 350,218,385 - - Gain on sale and dilution of investment in associates 11 340,809,382 - 113,069,227 Dividend income 9, 27.4 8,464,814 21,195,681 27,018,574 Miscellaneous – net 6 209,991,113 150,753,554 91,054,008 P 5,409,726,260 P 3,515,014,728 P 2,715,195,836

In 2017, FEPI sold portions of its investments in BNHGI resulting in a gain amounting to P113.1 million. Also in 2019, FEPI totally sold its remaining investments in BNHGI resulting in a gain amounting to P188.5 million (see Notes 1 and 11).

24. INTEREST AND OTHER CHARGES

Presented below are the details of this account.

Notes 2019 2018 2017 Interest expense 10.2 15, 16 18, 25 P 1,512,905,580 P 1,310,255,912 P 1,555,078,550 Other charges: Impairment and other losses 6, 9 943,762,442 292,875,567 1,855,742,804 Day one loss 6 494,929,021 329,207,293 204,079,110 Foreign currency losses – net 15, 16 - 1,083,313,778 56,808,206 Fair value losses on disposal of AFS securities reclassified to profit or loss 9 - - 1,502,090 Miscellaneous – net 310,000,954 280,673,947 189,064,259 P 3,261,597,997 P 3,296,326,497 P 3,862,275,019

Miscellaneous charges pertain to amortization of discounts on security deposits, bank charges and other related fees.

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25. EMPLOYEE BENEFITS

25.1 Salaries and Employee Benefits Expenses recognized for salaries and employee benefits are presented below.

Notes 2019 2018 2017 Short-term benefits P 3,009,473,912 P 2,551,504,089 P 2,227,550,484 Employee share option benefit 25.2, 28.6 18,717,409 26,498,871 22,498,840 Post-employment benefits 25.3 97,481,774 113,255,099 143,433,011 22 P 3,125,673,095 P 2,691,258,059 P 2,393,482,335

25.2 Employee Share Option Plan (ESOP)

The Group’s share option benefit expense includes the amounts recognized by the Company and GERI over the vesting period granted by them. As at December 31, 2019 and 2018, about 396.3 million and 383.3 million shares of GERI’s options have vested, respectively, but none of these have been exercised by any of the option holders. As at December 31, 2019, 2018, and 2017, 35.0 million, 25.0 million, and 20.0 million, respectively, of the Company’s shares options have vested.

Employee option benefits expense, included as part of Salaries and employee benefits under Operating Expenses account in the consolidated statements of income, amounted to P18.7 million, P26.5 million and P22.5 million in 2019, 2018 and 2017, respectively (see Notes 22 and 25.1).

25.3 Post-employment Defined Benefit Plan

(a) Characteristics of Defined Benefit Plan

The Group maintains a funded, tax-qualified, non-contributory post-employment benefit plan that is being administered by trustee banks. The post-employment plan covers all regular full-time employees. The normal retirement age is 60 with a minimum of five years of credited service. The post-employment defined benefit plan provides for retirement ranging from 60% to 200% of plan salary for every year of credited service, but shall not be less than the regulatory benefit under R.A. 7641, The Retirement Pay Law, or the applicable retirement law at the time of the member’s retirement.

(b) Explanation of Amounts Presented in the Financial Statements

Actuarial valuations are made annually to update the retirement benefit costs and the amount of contributions. All amounts presented in the succeeding pages are based on the actuarial valuation reports obtained from independent actuaries in 2019 and 2018.

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The amounts of retirement benefit obligation, presented as non-current liability in the consolidated statements of financial position, are as follows:

2019 2018

Present value of the obligation P 1,636,406,311 P 1,120,090,162 Fair value of plan assets ( 386,831,493) ( 291,601,270) Net defined benefit liability P 1,249,574,818 P 828,488,892

The movements in the present value of the retirement benefit obligation recognized in the books are as follows:

2019 2018

Balance at beginning of year P 1,120,090,162 P 1,279,144,673 Current service costs 97,481,774 113,255,099 Interest costs 83,243,965 70,707,432 Remeasurements –

Actuarial losses (gains) arising from changes in: Financial assumptions 362,928,641 ( 452,723,106 )

Experience adjustments ( 13,610,270) 245,614,988 Demographic assumptions - ( 115,906,743 )

Benefits paid from: Plan assets ( 13,727,961 ) ( 19,196,958 ) Booked reserves - ( 805,223 ) Balance at end of year P 1,636,406,311 P 1,120,090,162

The movements in the fair value of plan assets are presented below.

2019 2018

Balance at beginning of year P 291,601,270 P 237,699,936 Contributions paid 83,000,000 69,000,000 Interest income 20,132,544 14,403,899 Benefits paid ( 5,303,036 ) ( 19,196,958 ) Remeasurement of plan assets ( 1,438,065 ) ( 834,653 ) Loss on plan assets

(excluding amount included in net interest cost) ( 1,161,220 ) ( 9,470,954 )

Balance at end of year P 386,831,493 P 291,601,270

The plan assets are composed of cash and cash equivalents of P261.7 million and P176.0 million in 2019 and 2018, respectively, investment in equity securities of P1.70 million and P0.39 million in 2019 and 2018, respectively, and investment in debt securities of P123.4 million and P114.9 million in 2019 and 2018, respectively. Debt securities pertain to corporate and government securities while equity securities consist of investments in private corporation. The contributions to the retirement plan are made annually by the Group. The amount of contributions to the retirement plan is determined based on the expected benefit payments that the Group will incur within five years.

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Actual return on plan assets were P22.1 million, P4.1 million and P8.2 million in 2019, 2018 and 2017, respectively.

The components of amounts recognized in the consolidated income and consolidated other comprehensive income in respect of the post-employment defined benefit plan are as follows:

Notes 2019 2018 2017 Reported in consolidated statements of income: Current service costs 25.1 P 97,481,774 P 113,255,099 P 143,480,786 Net interest costs 24 63,111,421 56,303,533 48,592,789 P 160,593,195 P 169,558,632 P 192,073,575

Reported in consolidated statements of comprehensive income: Actuarial gains (losses) arising from changes in: Financial assumptions ( P362,928,641 ) P 452,723,106 P 104,144,514 Experience adjustments 13,610,270 ( 245,614,988 ) ( 24,727,812 ) Demographic assumptions - 115,906,743 -

Loss on plan assets (excluding amounts

included in net interest expense) ( 1,161,220 ) ( 9,470,954 ) ( 2,777,742 ) ( 350,479,591 ) 313,543,907 76,638,960 Tax expense (benefit) 26 105,143,877 ( 92,059,473 ) ( 22,991,688 )

( P 245,335,714 ) P 221,484,434 P 53,647,272

Current service costs are presented as part of Salaries and employee benefits under Operating Expenses account in the consolidated statements of income (see Notes 22 and 25.1). The net interest costs are included as part of Interest expense under Interest and Other Charges – net account in the consolidated statements of income (see Note 24).

Amounts recognized in consolidated other comprehensive income were included within items that will not be reclassified subsequently to consolidated profit or loss.

In determining the amounts of the retirement benefit obligation, the following significant actuarial assumptions were used:

2019 2018 2017

Discount rates 5.09% - 6.08% 5.70% - 8.88% 5.00% - 5.70% Expected rate of salary increases 5.00% - 10.00% 3.00% - 10.00% 5.00% - 10.00%

Assumptions regarding future mortality experience are based on published statistics and mortality tables. The average remaining working lives of an individual retiring at the age of 60 is 25 years for both males and females. These assumptions were developed by management with the assistance of independent actuaries. Discount factors are determined close to the end of each reporting period by reference to the interest rates of a zero coupon government bonds with terms to maturity approximating to the terms of the retirement benefit obligation. Other assumptions are based on current actuarial benchmarks and management’s historical experience.

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(c) Risks Associated with the Retirement Plan

The plan exposes the Group to actuarial risks such as investment risk, interest rate risk, longevity risk and salary risk.

(i) Investment and Interest Rate Risks

The present value of the DBO is calculated using a discount rate determined by reference to market yields of government bonds. Generally, a decrease in the interest rate of a reference government bonds will increase the plan obligation. However, this will be partially offset by an increase in the return on the plan’s investments in debt securities and if the return on plan asset falls below this rate, it will create a deficit in the plan. Currently, the plan has relatively balanced investment in cash and cash equivalents and debt securities. Due to the long-term nature of the plan obligation, a level of continuing debt investments is an appropriate element of the Group’s long-term strategy to manage the plan efficiently.

(ii) Longevity and Salary Risks

The present value of the DBO is calculated by reference to the best estimate of the mortality of the plan participants both during their employment and to their future salaries. Consequently, increases in the life expectancy and salary of the plan participants will result in an increase in the plan obligation.

(d) Other Information

The information on the sensitivity analysis for certain significant actuarial assumptions, the Group’s asset-liability matching strategies, and the timing and uncertainty of future cash flows related to the retirement plan are described below and in the succeeding page.

(i) Sensitivity Analysis The following table summarizes the effects of changes in the significant actuarial assumptions used in the determination of the DBO as at December 31, 2019 and 2018:

Impact on Retirement Benefit Obligation Change in Increase in Decrease in Assumption Assumption Assumption

December 31, 2019

Discount rate 0.50% ( P 123,215,515 ) P 139,952,872 Salary increase rate 1.00% 217,453,714 ( 182,885,761 )

December 31, 2018

Discount rate 0.50% ( P 83,252,984 ) P 73,263,588 Salary increase rate 1.00% 130,373,630 ( 96,644,568 )

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. This analysis may not be representative of the actual change in the DBO as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the DBO has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the DBO recognized in the consolidated statements of financial position.

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The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous years.

(ii) Asset-liability Matching Strategies

The Group, through its BOD, envisions that the investment positions shall be managed in accordance with its asset-liability matching strategies to achieve that long-term investments are in line with the obligations under the retirement scheme. This aims to match the plan assets to the retirement obligations by investing in debt securities and maintaining cash and cash equivalents that match the benefit payments as they fall due and in the appropriate currency. There has been no change in the Group’s strategies to manage its risks from previous periods.

(iii) Funding Arrangements and Expected Contributions

The Group’s objective is to maintain a level of funding sufficient to cover the projected retirement benefit obligation. While there are no minimum funding requirements in the country, the size of the underfunding may pose a cash flow risk in about 25 years’ time when a significant number of employees is expected to retire.

The Group expects to make contributions of P78 million to the plan during the next reporting period.

The maturity profile of undiscounted expected benefit payments from the plan follows:

2019 2018

Within one year P 103,793,514 P 82,522,714 More than one year to 5 years 561,778,292 534,345,939 More than 5 years to 10 years 616,623,613 558,480,513 More than 10 years to 15 years 683,953,502 543,576,763 More than 15 years to 20 years 1,207,646,575 1,127,361,572

P 3,173,795,496 P 2,846,287,501

The weighted average duration of the DBO at the end of the reporting period is 19 years.

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26. TAXES

The components of tax expense as reported in the consolidated statements of income and consolidated statements of comprehensive income are as follows:

2019 2018 2017 Reported in consolidated statements of income: Current tax expense: Regular corporate income tax (RCIT) at 30% and 10% P 3,541,256,471 P 2,444,325,997 P 2,690,397,668 Final tax at 15% and 7.5% 136,799,818 59,730,934 49,171,943 Preferential tax at 5% 16,535,903 20,845,686 39,651,086 Minimum corporate income tax (MCIT) at 2% 3,139,384 15,408,366 20,590,854 3,697,731,576 2,540,310,983 2,799,811,551 Deferred tax expense relating to origination and reversal of temporary differences 2,383,925,714 3,004,051,425 1,263,638,611 P 6,081,657,290 P 5,544,362,408 P 4,063,450,162 Reported in consolidated statements of comprehensive income – Deferred tax income (expense) relating to origination and reversal of temporary differences P 106,078,710 (P 92,776,448) P 23,400,863

A reconciliation of tax on pretax profit computed at the applicable statutory rates to tax expense reported in the consolidated statements of income is as follows:

2019 2018 2017 Tax on pretax profit at 30% P 7,613,305,932 P 6,463,167,066 P 5,330,316,872 Adjustment for income subjected to lower income tax rates ( 156,046,868) ( 126,705,434) ( 185,221,815) Tax effects of: Non-taxable income ( 1,713,474,896) ( 1,094,661,187) ( 1,981,244,300) Non-deductible expenses 376,780,416 174,940,747 757,092,758 Unrecognized deferred tax assets on temporary differences 12,498,461 231,818 64,188,967 Miscellaneous ( 51,405,755) 120,924,598 78,317,680

P 6,081,657,290 P 5,544,362,408 P 4,063,450,162

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The deferred tax assets and liabilities relate to the following as of December 31:

2018 (As Restated – 2019 see Note 1.2)

Deferred tax assets: Difference between the fair value and carrying value of net assets acquired P 141,225,062 P 141,225,062 Retirement benefit obligation 41,738,560 35,167,572 Allowance for impairment of receivables 9,254,356 13,578,476 Allowance for property development costs 9,227,732 9,227,732 NOLCO 2,138,168 1,925,815

MCIT 5,592 3,810,616 Others 105,207,623 79,953,139

P 308,797,093 P 284,888,412 Deferred tax liabilities – net:

Uncollected gross profit P 7,039,045,027 P 5,655,708,165 Capitalized interest 3,567,031,120 2,941,415,673 Difference between the tax reporting base and financial reporting base of rental income 1,173,233,118 1,387,749,156 Unrealized foreign currency losses – net ( 706,060,353) ( 852,134,494) Retirement benefit obligation ( 363,444,295) ( 234,031,622) Share options ( 123,151,742) ( 47,031,487) Bond issuance costs 58,860,391 53,713,476 Uncollected rental income 34,979,523 81,643,541 Others 48,776,036 ( 35,879,843) P 10,729,268,825 P 8,951,152,565

No deferred tax liability has been recognized on the accumulated equity in net earnings of associates. The Group has no liability for tax should the amounts be declared as dividends since dividend income received from domestic corporation is not subject to income tax.

Some of the entities within the Group are subject to MCIT which is computed at 2% of gross income, net of allowable deductions as defined under the tax regulations. The details of MCIT paid by certain subsidiaries, which can be applied as deduction from their respective future RCIT payable within three years from the year the MCIT was incurred, are shown below.

Valid Subsidiaries Year Incurred Amount Until

GPMAI 2019 P 525 2022 2018 1,813 2021 2017 3,254 2020

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Valid Subsidiaries Year Incurred Amount Until

GERI 2019 P 3,247,632 2022 2018 7,336,263 2021 2017 2,681,515 2020 MCPI 2018 357,041 2021 The details of NOLCO incurred by certain subsidiaries, which can be claimed as deduction from their respective future taxable income within three years from the year the loss was incurred, are shown below. Valid Subsidiaries Year Incurred Amount Until GPMAI 2019 P 2,556,371 2022 2018 2,443,021 2021 2017 2,127,838 2020 DPDHI 2019 1,302,825 2022 2018 238,811 2021 2017 2,246,963 2020 ITMC 2017 350,747 2020 GERI 2018 25,720,027 2021 2017 11,798,726 2020 LSPI 2019 2,047,187 2022 2018 1,995,092 2021 2017 991,979 2020 PPVI 2019 39,068 2022 2018 23,813 2021 2017 22,585 2020 SLI 2019 39,060 2022 2018 23,814 2021 2017 22,584 2020 SP 2019 71,177 2022 2018 180,156 2021 2017 179,483 2020 Certain subsidiaries within the Group did not recognize the deferred tax assets on their MCIT and NOLCO as realization of such amounts is uncertain.

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The aggregated amounts of assets, retained earnings (deficit), revenues and net loss (profit) of the subsidiaries which incurred NOLCO are as follows: Retained Earnings Net Loss Assets (Deficit) Revenues (Profit)

2019 GPMAI P 597,508,230 P 270,011,027 P 7,624,319 (P 2,402,818 ) DPDHI 578,725,525 12,891,577 - 1,302,825 LSPI 1,090,298,586 ( 18,136,072) - 2,047,187 PPVI 45,996,125 ( 344,050) - 39,068 SLI 46,004,735 ( 335,431) - 39,060 SP 48,810,203 ( 1,346,640) - 71,177 P 2,407,343,404 P 262,740,411 P 7,624,319 P 1,096,499

2018 GPMAI P 595,218,231 P 267,727,189 P 5,897,566 P 2,775,782 DPDHI 578,801,111 14,194,401 - 238,811 ITMC 37,655,516 6,833,791 54,822,646 ( 7,458,516 ) LSPI 1,090,412,504 ( 16,088,885) - 1,995,092 PPVI 45,996,006 ( 304,981) - 23,813 SLI 46,004,614 ( 296,372) - 23,813 SP 48,850,801 ( 1,275,464) - 180,157 P 2,442,938,783 P 270,789,679 P 60,709,212 (P 2,221,048 )

Except for certain subsidiaries, management has assessed that the net losses incurred, as well as the related NOLCO, can be recovered through future operations and are not significant to the overall financial condition and financial performance of the Group.

In 2019, 2018 and 2017, the Group opted to continue claiming itemized deductions, except for MDC which opted to use OSD in those years, in computing for income tax dues.

ECOC and SEDI are registered with the Philippine Economic Zone Authority (PEZA) pursuant to Presidential Proclamation No. 191 dated October 6, 1999. As PEZA-registered entities, ECOC and SEDI are entitled to a preferential tax rate of 5% on gross income earned from registered activities, in lieu of all local and national taxes, and to other tax privileges.

In May 2014, the Board of Investments approved SPI’s application for registration on Suntrust Sentosa project. SPI shall be entitled to income tax holiday for four years from May 2014, or actual start of commercial operations/selling, whichever is earlier but in no case earlier than the date of registration, with certain terms.

Also, SPI’s The Regal Homes project has qualified in the definition of socialized housing under Section 3(r) of R.A. 7279, Urban Development and Housing Act of 1992. Under Section 20 of RA 7279, private sector participating in socialized housing shall be exempted from the payment of project-related income taxes, capital gains tax on raw lands use for the project, VAT for the project concerned, transfer tax for both raw and completed projects, and donor’s tax for both lands certified by the local government units to have been donated for socialized housing purposes.

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27. RELATED PARTY TRANSACTIONS

The Group’s related parties include the Parent Company, associates, the Group’s key management and other related parties under common ownership as described below and in the succeeding pages.

The summary of the Group’s transactions with its related parties as of December 31, 2019 and for the years ended December 31, 2019, 2018 and 2017 are as follows:

Outstanding Investment/

Related Party Amount of Transactions Receivable (Payable)

Category Notes 2019 2018 2017 2019 2018

Parent Company:

Dividends paid 27.5 (P 1,115,364,612) ( P 878,091,782 ) (P 762,935,662) P - P -

Investments in

equity securities 27.4 ( 29,424,000) ( 502,660,000 ) ( 394,772,000) 1,429,516,000 1,458,940,000

Dividend income 27.4 - 11,260,000 - - -

Customer’s deposits 27.1 - - ( 4,987,671,233) - -

Advances granted 27.2 930,000,000 - - 930,000,000 -

Associates:

Advances granted

(collected) 27.2 ( 34,488,474) 95,771,994 ( 28,152,065) 1,097,060,500 1,131,548,974

Rendering of services 27.1 10,691,973 8,352,552 5,917,616 399,286 3,954,253

Advances availed (paid) 27.3 177,592,234 ( 244,268 ) ( 616,539) ( 180,253,054) ( 2,660,820)

Subscription payable 19 1,114,665,008 - - 1,114,665,008 -

Related Parties Under

Common Ownership:

Reimbursement of

construction costs 27.1 - 3,995,657,527 - 3,056,180,769 3,056,180,769

Real estate sales 27.1 - 307,300,000 - - -

Advances availed (paid) 27.3 ( 148,172,551) 252,615,151 208,882,465 ( 2,734,629,747) ( 2,882,802,298)

Rendering of services 27.1 256,588,091 449,902,884 67,046,622 53,600,123 88,508,156

Advances granted 27.2 474,737,422 4,600,132 52,037,474 1,974,952,066 1,500,214,644

Dividend income 27.4 8,291,304 1,116,789 26,844,808 - -

Investments in

equity securities 27.4 682,407,513 - 358,433,898 3,029,992,155 2,347,584,642

Sale of investment

properties 27.8 47,125,000 - - 23,562,500 -

Key Management

Personnel –

Compensation 27.6 325,018,986 310,647,655 278,510,411 - -

None of the companies within the Group is a joint venture. The Group is not subject to joint control and none of its related parties exercise significant influence over it.

27.1 Real Estate Sales and Rendering of Services to Related Parties

The Group renders services to its related parties on a cost-plus basis, allowing a certain margin agreed upon by the parties at arm’s length. The summary of services offered by the Group is presented below.

Amount of Transactions 2019 2018 2017 Rendering of services P 256,588,091 P 449,902,884 P 72,964,238 Real estate sales - 307,300,000 - P 256,588,091 P 757,202,884 P 72,964,238

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The Group leases some of its investment properties to its associates and other related parties under common ownership with rental payments mutually agreed before the commencement of the lease. The leases have terms ranging from one to twenty-five years, with renewal options, and include annual escalation rates of 3% to 10%, except for contingent rent. The revenues earned from these related parties are included as part of Rental Income in the consolidated statements of income (see Note 12). The related outstanding receivables from these transactions, which are collectable on demand, unsecured and noninterest-bearing, are presented as part of Trade under the Trade and Other Receivables account in the consolidated statements of financial position (see Note 6).

The Company and a related party under common ownership are parties to a management agreement whereby the former provides management services for the overall administration of the latter’s leasing operations for a fee, which is based on certain rates of collections plus commission. Further, there are other management services provided to related parties under common ownership related to management of construction and development activities.

In 2017, the Group obtained advances amounting to P504.0 million from a related party under common ownership for working capital purposes.

Occasionally, the Company sells real properties to its related parties in the normal course of business.

In 2018, the Company sold certain parcels of land to a related party under common ownership amounting to P307.3 million. The transaction was fully settled in the same year. The sale is presented as part of Real Estate Sales in the 2018 consolidated statement of income. In 2016, the Company sold parcels of land located in Iloilo and Cebu to a related party under common ownership. Such sale is presented as part of Real Estate Sales account in the 2016 consolidated statement of income. The outstanding receivables arising from these transactions are presented as part of Trade under Trade and Other Receivables account in the 2016 consolidated statement of financial position (see Note 6). Unless otherwise indicated, the Group’s outstanding receivables from related parties arising from the above transactions are unsecured, noninterest-bearing, and collectible in cash under normal credit terms or through offsetting arrangements. There were no impairment losses recognized on the Group’s receivables from related parties in 2019, 2018 and 2017. In 2018, the Company agreed with a related party under common ownership to turn over a certain property under terms that the related party will reimburse the construction cost incurred by the Company amounting to P4.0 billion (see Note 12). The outstanding balance, which is collectable on demand, unsecured and interest-bearing, as of December 31, 2018 presented under non-current Other Trade Receivables in the 2018 consolidated statement of financial position is unsecured and repayable starting 2020. It also bears interest of 6% commencing in 2019 (see Note 6). Further, in 2016, the Company received cash from its Parent Company representing down payment for the sale of two commercial buildings developed by the Company, both located in Taguig, Metro Manila. The collections in 2016 did not reach the threshold set by the Company to be recognized as real estate sales; hence, are presented as part of Customers’ Deposits account in the 2016 consolidated statement of financial position. In 2017, both parties agreed to cancel the transaction; the Company cancelled the reservation, returned the payment and reimbursed the incidental expenses incurred by the Parent Company.

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27.2 Advances to Associates and Other Related Parties

Associates and other related parties under common ownership are granted noninterest-bearing, unsecured and collectable on demand advances by the Company and other entities within the Group with no definite repayment terms for working capital purposes. These are generally collectible in cash or through offsetting arrangements with the related parties.

The outstanding balances of Advances to associates and other related parties shown as part of Trade and Other Receivables account under Current Assets section in the consolidated statements of financial position are as follows (see Note 6).

2019 2018

Advances to associates P1,097,060,500 P 1,131,548,974 Advances to other related parties 2,904,952,066 1,500,214,644

P4,002,012,566 P 2,631,763,618 The movements in advances to associates and other related parties are as follows: 2019 2018

Balance at beginning of year P 2,631,763,618 P 2,531,401,492 Advances granted 1,500,167,429 500,635,698 Advances collected ( 129,918,481 ) ( 255,926,431 ) Advances eliminated through consolidation - ( 144,347,141) Balance at end of year P4,002,012,566 P 2,631,763,618 Advances to other related parties pertain to advances granted to entities under common ownership of the Parent Company. In 2019, this included advances granted to the Parent Company amounting to P930.0 million for working capital requirements. No impairment losses on the advances to associates and other related parties were recognized in 2019, 2018 and 2017 based on management’s assessment.

27.3 Advances from Associates and Other Related Parties

Certain expenses of the entities within the Group are paid by other related parties on behalf of the former. The Group also received cash advances from a certain related party under common ownership, for the development of a certain entertainment site which is an integrated tourism project planned by the Philippine Amusement and Gaming Corporation. The advances are noninterest-bearing, unsecured and with no repayment terms and are generally payable in cash upon demand or through offsetting arrangements with the related parties.

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The outstanding balances from these transactions, which are payable on demand, unsecured and noninterest-bearing, are presented as Advances from Associates and Other Related Parties under Current Section account in the consolidated statements of financial position and are broken down below: 2019 2018 Advances from associates P 180,253,054 P 2,660,820 Advances from other related parties 2,734,629,747 2,882,802,298 P 2,914,882,801 P 2,885,463,118 The movements in advances from associates and other related parties are as follows: 2019 2018 Balance at beginning of year P 2,885,463,118 P 2,633,192,235 Net availed 29,419,683 252,270,883 Balance at end of year P 2,914,882,801 P2,885,463,118 27.4 Investments in Equity Securities

The Group’s equity securities include investment in shares of the Parent Company and related parties under common ownership. The fair values of these securities have been determined directly by reference to published prices in an active market, except for the investment in shares of a related party under common ownership which was delisted in the stock exchange in 2019 measured using the discounted cash flows valuation technique [see Note 34.2(a)]. Movements and the related fair value gains or losses on these investments are shown and discussed in Note 9. Also, the Group received dividend income from these shares and is presented as part of Dividend income under Interest and Other Income – net account in the consolidated statements of income (see Note 23). No outstanding receivable arises from the transaction.

27.5 Dividends Paid to the Parent Company

The Parent Company received dividends from the Company amounting to P1.1 billion, P0.9 billion and P0.8 billion in 2019, 2018 and 2017, respectively. There is no outstanding liability arising from these transactions as of the end of both years (see Note 28.4).

27.6 Key Management Personnel Compensation The Group’s key management personnel compensation includes the following:

2019 2018 2017 Short-term benefits P 266,299,232 P 243,575,452 P 208,571,542 Post-employment benefits 40,002,345 40,573,332 52,431,834 Employee share option benefit 18,717,409 26,498,871 17,507,035 P 325,018,986 P 310,647,655 P 278,510,411

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27.7 Post-employment Plan

The Group has a formal retirement plan established separately for the Company and each of the significant subsidiaries, particularly GERI, EELHI and PHRI. The Group’s retirement fund for its post-employment defined benefit plan is administered and managed by trustee banks. The fair value and the composition of the plan assets as of December 31, 2019 and 2018 are presented in Note 25.3.

The Group’s transactions with the fund mainly pertain to contribution, benefit payments and interest income.

The retirement fund neither provides any guarantee or surety for any obligation of the Group

nor its investments covered by any restrictions or liens.

27.8 Sale of Investment Property

In 2019, the Group sold land and building classified as investment property at an aggregate amount of P47.1 million to a related party under common ownership. The outstanding receivables arising from these transactions are presented as part of Trade and Other Receivables in the 2019 consolidated statement of financial position (see Note 6).

28. EQUITY

Capital stock consists of: Shares Amount 2019 2018 2017 2019 2018 2017 Preferred shares Series “A”- P0.01 par value Authorized 6,000,000,000 6,000,000,000 6,000,000,000 P 60,000,000 P 60,000,000 P 60,000,000 Issued and outstanding 6,000,000,000 6,000,000,000 6,000,000,000 P 60,000,000 P 60,000,000 P 60,000,000 Common shares – P1 par value Authorized 40,140,000,000 40,140,000,000 40,140,000,000 P 40,140,000,000 P 40,140,000,000 P 40,140,000,000 Issued 32,370,865,872 32,370,865,872 32,370,865,872 P 32,370,865,872 P 32,370,865,872 P 32,370,865,872 Treasury shares: Balance at beginning of year ( 131,420,000 ) ( 131,420,000 ) ( 131,420,000 ) ( 118,555,453) ( 118,555,453 ) ( 118,555,453 ) Issuances during the year 500,000 - - 451,055 - - Balance at end of year ( 130,920,000 ) ( 131,420,000 ) ( 131,420,000 ) ( 118,104,398) ( 118,555,453 ) ( 118,555,453 ) Issued and outstanding 32,239,945,872 32,239,445,872 32,239,445,872 P 32,252,761,474 P 32,252,310,419 P 32,252,310,419 Total issued and outstanding shares P 32,312,761,474 P 32,312,310,419 P 31,312,310,419

On June 15, 1994, the SEC approved the listing of the Company’s common shares totaling 140,333,333. The shares were initially issued at an offer price of P4.8 per common share. As of December 31, 2019, there are 2,443 holders of the listed shares, which closed at P4.01 per share as of that date.

The following also illustrates the additional listings made by the Company (in shares): May 23, 1996 – 1.6 billion; January 8, 1997 – 2.1 billion; November 23, 1998 – 2.0 billion; August 19, 1999 – 3.0 billion; October 12, 2005 – 5.5 billion; November 21, 2006 – 10.0 billion and July 17, 2007 – 3.9 billion and 2012 – 3.1 billion. The Company also listed 700.0 million shares in 2013, 300.0 million shares in 2014, 8.0 million shares in 2015. There were no additional issuance of shares in the succeeding years.

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28.1 Preferred Shares Series “A”

The preferred shares are voting, cumulative, non-participating, non-convertible and non-redeemable with a par value of P0.01 per share. The shares earn dividends at 1% of par value per annum cumulative from date of issue. Dividends paid on cumulative preferred shares amounted to P0.6 million in 2019, 2018 and 2017 (see Note 28.4).

28.2 Common Shares

On May 23, 2013, the Company’s BOD approved a P10.0 billion increase in authorized capital stock (ACS) consisting of 10.0 billion shares with par value of P1.00 per share. On November 20, 2013, the SEC approved the P10.0 billion increase in ACS, of which 2.5 billion shares were subscribed and paid by the Parent Company at a price of P4.29 per share for a total subscription price of P10.7 billion. In 2009, 5,127,556,725 common shares were subscribed and issued through pre-emptive share rights offering. Moreover, shareholders were given four additional share warrants for every five share rights subscribed. For every share warrant, shareholders can avail of one common share at P1.00 per share. Relative to the share subscription, 4,102,045,364 share warrants were issued of which 4,101,662,246 warrants were exercised while the remaining 383,118 have expired.

28.3 Additional Paid-in Capital

The APIC pertains to the excess of the total proceeds received from the Company’s shareholders over the total par value of the common shares. There were no movements in the Company’s APIC accounts in 2018. In 2019, APIC amounting to P0.95 million was recognized by the Company as a result of exercise of 500,000 stock options. 28.4 Cash Dividends

The details of the Group’s cash dividend declarations, both for preferred and common shares, are as follows:

2019 2018 2017

Declaration date/date of approval by BOD June 21, 2019 June 8, 2018 June 8, 2017 Date of record July 5, 2019 June 26, 2018 June 23, 2017 Date paid July 31, 2019 July 20, 2018 July 19, 2017

Amounts declared and paid Common P 2,378,582,809 P 1,981,608,812 P 1,721,555,799 Preferred 600,000 600,000 600,000 P 2,379,182,809 P 1,982,208,812 P 1,722,155,799

Dividends per share: Common P 0.07 P 0.06 P 0.05 Preferred P 0.01 P 0.01 P 0.01

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28.5 Treasury Shares

This account also includes the Company’s common shares held and acquired by RHGI. The number of treasury common shares aggregated to P633.7 million as at December 31, 2019. The changes in market values of these shares, recognized as fair value gains or losses by the subsidiary, were eliminated in full and not recognized in the consolidated financial statements. In 2019, the Company has reissued 500,000 treasury shares as a result of exercise of the same number of stock options.

A portion of the Company’s retained earnings is restricted for dividend declaration up to the cost of treasury shares as of the end of the reporting period.

28.6 ESOP A total of P18.7 million, P26.5 million and P22.5 million share option benefits expense in 2019, 2018 and 2017, respectively, is recognized and presented as part of Salaries and employee benefits under Operating Expenses account in the consolidated statements of income (see Notes 22 and 25.2). (a) Company

In 2012, the Company’s BOD approved and the shareholders adopted an ESOP for the Company’s key executive officers.

The options shall generally vest on the 60th birthday of the option holder and may be exercised until the date of his/her retirement from the Company. The exercise price shall be at a 15% discount from the volume weighted average closing price of the Company’s shares for nine months immediately preceding the date of grant. Pursuant to this ESOP, on November 6, 2012, the Company granted share options to certain key executives to subscribe to 235.0 million common shares of the Company, at an exercise price of P1.77 per share. In 2013, additional share options were granted to certain key executives to subscribe to 20 million common shares of the Company at an exercise price of P2.33 per share. Additional 40 million share options were granted in 2014 at an average exercise price of P3.00 per share. In 2019, additional 10 million share options were granted at an exercise price of P1.77. There were no additional share options granted in 2018, and 2017. In 2019, 10 million share options were forfeited due to resignation of certain key executive officers. There was no forfeiture due to resignation in 2018. A total of 10 million and 5 million options have vested in 2019 and 2018, respectively. In 2019, 500,000 share options were exercised at a price of P1.77 per share. The fair value of the option granted was estimated using a variation of the Black-Scholes valuation model that takes into account factors specific to the ESOP.

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The following principal assumptions were used in the valuation:

Option life 6.08 to 30.17 years Share price at grant date P 2.54 to P 4.52 Exercise price at grant date P 1.77 to P 3.23 Fair value at grant date P 0.98 to P 2.15 Average standard deviation of share price return 10.98 % Average dividend yield 0.82 % Average risk-free investment rate 3.93 %

The underlying expected volatility was determined by reference to historical date of the Company’s shares over a period of time consistent with the option life. The Company recognized a total of P17.8 million, P23.2 million and P12.5 million share-based executive compensation in 2019, 2018 and 2017, respectively, as part of Salaries and employee benefits and a corresponding credit in Retained Earnings (see Note 25.2).

(b) GERI

In 2011, the BOD of GERI approved and the stockholders adopted an ESOP for its key executive officers.

Under the ESOP, GERI shall initially reserve for exercise of share options up to 500.0 million common shares of the GERI’s outstanding shares to be issued, in whole or in part, out of the authorized but unissued shares. Share options may be granted within 10 years from the adoption of the ESOP and may be exercised within seven years from date of grant. The options shall vest within three years from date of grant and the holder of an option may exercise only a third of the option at the end of each year of the three-year period. The exercise price shall be at a 15% discount from the volume weighted average closing price of the GERI’s shares for twelve months immediately preceding the date of grant. As of December 31, 2019, pursuant to this ESOP, the Company has granted the option to its key company executives to subscribe to P400.0 million shares of the Company. An option holder may exercise in whole or in part his vested option provided, that, an option exercisable but not actually exercised within a given year shall accrue and may be exercised at any time thereafter but prior to the expiration of said option’s life cycle. A total of P396.3 million and 383.0 million options have vested as at December 31, 2019 and 2018, respectively, but none of these have been exercised yet by any of the option holders as at the end of the reporting period. The fair value of the option granted was estimated using a variation of the Black-Scholes valuation model that takes into account factors specific to the ESOP.

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The following principal assumptions were used in the valuation:

Average option life 7 years Share price at grant date P1.02 to P2.10 Exercise price at grant date P1.0 to P1.93 Fair value at grant date P0.24 to P2.27 Standard deviation of share price return 12.16% to 57.10% Risk-free investment rate 2.14% to 2.59%

The underlying expected volatility was determined by reference to historical date of the GERI’s shares over a period of time consistent with the option life. GERI recognized a total of P0.9 million, P3.3 million and P10.0 million share-based compensation in 2019, 2018 and 2017, respectively, as part of Salaries and employee benefits and a corresponding credit in Non-controlling Interest (see Note 25.2).

28.7 Perpetual Capital Securities

On April 11, 2018, the Group issued bonds amounting $200.0 million. The bonds were issued with a nominal interest of 5.375% per annum and interest is payable semi-annually in arrears every April 11 and October 11. The bonds are currently listed in the Singapore Exchange. The financial instruments are treated as equity securities. These bonds may be voluntarily redeemed by the Company on April 11, 2023 or on any distribution date thereafter [see Note 3.1(h)].

28.8 Revaluation Reserves

The components and reconciliation of items of other comprehensive income presented in the consolidated statement of changes in equity at their aggregate amount under Revaluation Reserves account, are shown below and in the succeeding page.

Financial Retirement Cross

Assets at Benefit Currency Equity FVOCI Obligation Swaps Reserves

(Note 9) (Note 25) (Note 30) (Note 1) Total Balance as of January 1, 2019 ( P2,193,648,774) P 258,382,240 P 184,863,310 ( P 954,871,520 ) ( P 2,705,274,744) Remeasurements of retirement benefit post-employment obligation - ( 350,479,591) - - ( 350,479,591) Fair value gains on FVOCI 23,271,788 - - - 23,271,788

Fair value losses on cash flow hedge - - ( 293,369,328 ) - ( 293,369,328 ) Effect of change in percentage of ownership - - - 93,043,089 93,043,089 Share of non-controlling interest 4,938,079 15,732,908 - - 20,670,987 Share in OCI of associates - ( 11,417,059) - - ( 11,417,059 ) Other comprehensive income (loss) before tax 28,209,867 ( 346,163,742 ) ( 293,369,328 ) 93,043,089 ( 518,280,114) Tax income - 105,143,877 - - 105,143,877 Other comprehensive income (loss) after tax 28,209,867 ( 241,019,865 ) ( 293,369,328 ) P 93,043,089 ( 413,136,237 )

Balance as of December 31, 2019 ( P2,165,438,907) P 17,362,375 (P 108,506,018 ) (P 861,828,431 ) (P3,118,410,981)

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Financial Retirement Cross

Assets at Benefit Currency Equity FVOCI Obligation Swaps Reserves (Note 9) (Note 25) (Note 30) (Note 1) Total Balance as of January 1, 2018 As previously reported ( P 941,999,334) P 89,441,126 ( P 45,942,879 ) P - ( P 898,501,087) Effect of adoption of PFRS 9 ( 1,457,710,646) - - - ( 1,457,710,646) As restated ( 2,399,709,980) 89,441,126 ( 45,942,879 ) - ( 2,356,211,733) Remeasurements of retirement benefit post-employment obligation - 313,543,907 - - 313,543,907 Fair value gains on equity securities 121,702,361 - - - 121,702,361 Fair value losses on cash flow hedge - - 230,806,189 - 230,806,189 Effect of change in percentage of ownership - - - ( 954,871,520 ) ( 954,871,520 ) Share of non-controlling interest 84,358,845 ( 65,995,383 ) - - 18,363,462 Share in OCI of associates - 13,452,063 - - 13,452,063 Other comprehensive income (loss) before tax 206,061,206 261,000,587 230,806,189 ( 954,871,520 ) ( 257,003,538) Tax expense - ( 92,059,473 ) - - ( 92,059,473 ) Other comprehensive income (loss) after tax 206,061,206 168,941,114 230,806,189 ( 954,871,520 ) ( 349,063,011 ) Balance as of December 31, 2018 ( P2,193,648,774) P 258,382,240 P 184,863,310 (P 954,871,520 ) (P2,705,274,744 )

Balance as of January 1, 2017 ( P3,145,459,435) P 12,736,688 P - P - ( P 3,132,722,747) Remeasurements of retirement benefit post-employment obligation - 76,638,960 - - 76,638,960 Fair value gains on equity securities 751,345,581 - - - 751,345,581 Fair value losses on cash flow hedge - - ( 45,942,879 ) - ( 45,942,879 ) Realized fair value loss on impairment of equity securities 1,516,864,986 - - - 1,516,864,986 Share of non-controlling interest ( 66,252,556) ( 10,859,329 ) - - ( 77,111,885 ) Share in OCI of associates - 33,916,495 - - 33,916,495 Other comprehensive income (loss) before tax 2,201,958,011 99,696,126 ( 45,942,879 ) - 2,255,711,258 Tax expense - ( 22,991,688 ) - - ( 22,991,688 ) Other comprehensive income (loss) after tax 2,201,958,011 76,704,438 ( 45,942,879 ) - 2,232,719,570 Transfer to retained earnings - Recycling of accumulated fair value gains on disposed equity securities 1,502,090 - - - 1,502,090 Balance as of December 31, 2017 ( P 941,999,334) P 89,441,126 ( P 45,942,879 ) P - ( P 898,501,087 )

29. EARNINGS PER SHARE

EPS amounts were computed as follows: 2018 (As Restated – 2019 see Note 1.2) 2017

Net profit attributable to the Company’s shareholders P 17,931,417,072 P 15,208,138,139 P 13,145,556,720 Dividends on cumulative preferred shares Series “A” ( 600,000) ( 600,000 ) ( 600,000) Distribution to holders of perpetual securities ( 562,913,000) ( 290,336,000 ) - Profit available to the Company’s common shareholders P17,367,904,072 P 14,917,202,139 P 13,144,956,720 Balance carried forward P17,367,904,072 P 14,917,202,139 P 13,144,956,720

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2018 (As Restated – 2019 see Note 1.2) 2017 Balance brought forward P 17,367,904,072 P 14,917,202,139 P 13,144,956,720 Divided by weighted average number of outstanding common shares 31,819,612,539 31,819,445,872 31,819,445,872 Basic EPS P 0.546 P 0.469 P 0.413 Divided by weighted average number of outstanding common shares and potential dilutive shares 31,977,656,102 31,962,126,317 31,956,360,072 Diluted EPS P 0.543 P 0.467 P 0.411

In 2015, unexercised share warrants expired; hence, were no longer included in the computation. In addition, the potentially dilutive outstanding share options totaling 249.5 million in 2019, and 250 million each in 2018 and 2017 were also considered in the computations (see Note 28.6).

30. CROSS CURRENCY SWAP In 2017, the Company entered into a cross currency swap agreement with a local bank. Under the agreement, the Company will receive a total of $98.87 million to be paid on a quarterly basis beginning March 2019 up to December 2022 plus interest based on 3-month LIBOR plus a certain spread. In exchange, the Company shall make fixed quarterly payments in Philippine pesos plus a fixed interest of 4.91%.

In 2019, another cross currency swap was also agreed upon with the same bank. The Company will receive $95.62 million to be paid on a quarterly basis beginning December 2020 up to September 2024 plus interest based on 3-month LIBOR plus a certain spread. The Company shall make fixed quarterly payments in Philippine pesos plus a fixed interest of 4.82%. The Company has designated the cross currency swaps as hedging instruments to hedge the risk in changes in cash flows of its loan denominated in U.S. dollar as an effect of changes in foreign currency exchange rates and interest rates [see Notes 15.1(a) and 15.1(k)].

The table below sets out information about the Group’s hedging instruments and the related carrying amounts as of December 31:

USD Notional Derivative Derivative Amount Assets Liabilities

2019 Cash flow hedge – Cross currency swap $ 194,493,428 P - P 242,417,137

2018 Cash flow hedge – Cross currency swap $ 98,872,850 P 397,835,428 P -

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The hedging instruments have a negative fair value of P242.4 million at end of 2019 and a positive fair value of P397.8 million at end of 2018. This is presented as derivative liability under Other Liabilities and derivative asset under Prepayments and Other Current Assets in the consolidated statements of financial position, respectively (see Notes 8 and 19). The Company recognized unrealized loss on cash flow hedges amounting to P293.4 million and P45.9 million in 2019 and 2017, respectively, and unrealized gain on cash flow hedges amounting to P230.8 million in 2018. These are presented as part of other comprehensive income in the consolidated statements of comprehensive income. As of December 31, 2019, the Company has assessed that the cross currency swaps designated as cash flow hedges will continue to be highly effective over the term of the agreement; hence, the Company expects to continuously use hedge accounting on the hedging relationship of its cross currency swaps and on its interest-bearing loans.

31. COMMITMENTS AND CONTINGENCIES

31.1 Operating Lease Commitments – Group as Lessor

The Group is a lessor under several non-cancellable operating leases covering real estate properties for commercial use (see Note 12). Future minimum lease receivables under these agreements are as follows:

2019 2018 2017 Within one year P 16,115,991,723 P 13,657,827,621 P 11,186,808,674 After one year but not more than five years 85,094,765,950 73,017,572,590 62,432,922,236 More than five years 27,249,075,851 22,176,585,590 18,804,216,078 P128,459,833,524 P 108,851,985,801 P 92,423,946,988

The undiscounted maturity analysis of finance lease receivable at December 31, 2019 is as follows (see Note 6):

Within Less than More than 1 year 5 years 5 years Total Lease collection P 132,304,681 P 443,589,946 P 705,431,648 P1,281,326,275

Interest income ( 45,517,732) ( 169,861,949 ) ( 393,190,165 ) ( 608,569,846 )

Net present value P 86,786,949 P 273,727,997 P 312,241,483 P 672,756,429

31.2 Operating Lease Commitments – Group as Lessee (2018 and 2017)

The Group is a lessee under several non-cancellable operating leases covering condominium units for administrative use. The future minimum rental payables under these non-cancellable leases as at December 31 are as follows:

2018 2017 Within one year P 171,256,698 P 163,848,851 After one year but not more than five years 301,786,811 299,220,549 More than five years 860,310,427 840,102,841 P 1,333,353,936 P 1,303,172,241

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31.3 Others As at December 31, 2019 and 2018, the Group has unused long-term credit facilities amounting to P22.0 billion and P20.0 billion, respectively. There are other commitments and contingent liabilities that arise in the normal course of operations of the Group which are not reflected in the consolidated financial statements. The management of the Group is of the opinion that losses, if any, from these items will not have any material effect on its consolidated financial statements.

32. RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group has various financial instruments such as cash and cash equivalents, financial assets at FVOCI, interest-bearing loans and borrowings, bonds payable, trade receivables and payables which arise directly from the Group’s business operations. The financial liabilities were issued to raise funds for the Group’s capital expenditures. The Group does not actively engage in the trading of financial assets for speculative purposes. 32.1 Foreign Currency Sensitivity

Most of the Group’s transactions are carried out in Philippine peso, its functional currency. Exposures to currency exchange rates arise mainly from the Group’s U.S. dollar-denominated cash and cash equivalents, loans and bonds payable, which have been used to fund new projects and to refinance certain indebtedness for general corporate purposes.

As of December 31, 2019 and 2018, net foreign currency-denominated financial liabilities in U.S. dollar, translated into Philippine Peso at the closing rate, amounted to P20.9 billion and P18.1 billion, respectively. Management assessed that the reasonably possible change in exchange rates of Philippine Peso to U.S. dollar, based on the average market volatility in exchange rates, using standard deviation, in the previous 12 months at 68% confidence level is 4.59% and 4.32% in 2019 and 2018, respectively. If the exchange rate increased or decreased by such percentages, the profit before tax in 2019 and 2018 would have changed by P957.8 million and P783.0 million, respectively. Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions and mainly affect consolidated profit or loss of the Group. There are no material exposures on foreign exchange rate that affect the Group’s consolidated other comprehensive income. Nonetheless, the analysis above is considered to be representative of the Group’s currency risk. 32.2 Interest Rate Sensitivity The Group interest risk management policy is to minimize interest rate cash flow risk exposures to changes in interest rates. The Group maintains a debt portfolio unit of both fixed and floating interest rates. Most long-term borrowings are subject to fixed interest rate while other financial assets subject to variable interest rates. The Group’s ratio of fixed to floating rate debt stood at 1.86:1.00 and 3.26:1.00 as of December 31, 2019 and 2018, respectively.

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The sensitivity of the consolidated net results in 2019 and 2018 to a reasonably possible change of 1.0% in floating rates is P139.5 million and P120.5 million, respectively. The sensitivity of the consolidated equity in 2019 and 2018 to a reasonably possible change of 1.0% in floating rates is P97.7 million and P84.4 million, respectively. The calculations are based on the Group’s financial instruments held at each reporting date. All other variables are held constant. 32.3 Credit Risk The Group’s credit risk is attributable to trade receivables, rental receivables and other financial assets. The Group maintains defined credit policies and continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at a reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties. In addition, for a significant proportion of sales, advance payments are received to mitigate credit risk. Generally, the maximum credit risk exposure of financial assets is the carrying amount of the financial assets and contract assets as shown in the consolidated statements of financial position (or in the detailed analysis provided in the notes to consolidated financial statements), as summarized below.

2018 [As Restated – Notes 2019 see Note 2.1(b)(i)] Cash and cash equivalents 5 P23,104,875,672 P 17,543,095,320 Trade receivables 6, 20.2 28,754,602,121 19,747,614,362 Rent receivables 6 4,274,038,207 3,545,753,363 Other receivables 6 7,778,686,469 8,988,677,541 Advances to associates and other related parties 6 4,002,012,566 2,631,763,618 Contract assets 20 18,643,004,687 22,227,279,687 Guarantee and other deposits 14 1,007,434,782 896,576,344 P87,564,654,504 P 75,580,760,235

(a) Cash and Cash Equivalents

The credit risk for cash and cash equivalents is considered negligible since the counterparties are reputable banks with high quality external credit ratings. Included in the cash and cash equivalents are cash in banks and short-term placements which are insured by the Philippine Deposit Insurance Corporation up to a maximum coverage of P0.5 million for every depositor per banking institution.

(b) Trade and Other Receivables The Company applies the PFRS 9 simplified approach in measuring ECL which uses a lifetime expected loss allowance for all trade receivables and other receivables.

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To measure the expected credit losses, trade receivables and other receivables have been grouped based on shared credit risk characteristics and the days past due (age buckets). The other receivables relate to receivables from both third and related parties other than trade receivables and have substantially the same risk characteristics as the trade receivables. The Company has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the other assets. The expected loss rates are based on the payment profiles of sales over a period of 36 months before December 31 or January 1, 2018, respectively, and the corresponding historical credit losses experienced within such period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Company identifies headline inflation rate and bank lending rate to be the most relevant factors and accordingly adjusts the historical loss rates based on expected changes in these factors. The total loss allowance based on the provision matrix is P758.6 million and P701.3 million as of December 31, 2019 and 2018, respectively.

The Group considers credit enhancements in determining the expected credit loss. Trade receivables from real estate sales are collateralized by the real properties sold while rental receivables are secured to the extent of advanced rental and security deposits received from lessees. Further, customers are required to issue post-dated checks, which provide additional credit enhancement. The estimated fair value of collateral and other security enhancements held against trade receivables are presented below.

Gross Fair Maximum Value of Net Exposure Collaterals Exposure

2019 Real estate sales receivables P 28,426,905,161 P 44,895,455,760 P - Contract assets 18,643,004,687 35,512,470,476 - Rental receivables 4,274,038,207 5,889,977,004 - P 51,343,948,055 P86,297,903,240 P -

2018 Real estate sales receivables P 19,098,337,882 P 44,151,968,977 P - Contract assets 22,227,279,687 37,902,225,724 - Rental receivables 3,545,753,363 4,598,249,871 - P 44,871,370,932 P 86,652,444,572 P -

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Some of the unimpaired trade receivables and other receivables, which are mostly related to real estate sales, are past due as at the end of the reporting period and are presented below.

2019 2018 Current (not past due) P 42,870,472,698 P 32,712,352,562 Past due but not impaired: More than one month but not more than 3 months 952,404,341 1,066,369,947 More than 3 months but not more than 6 months 347,303,258 407,024,751 More than 6 months but not more than one year 437,324,418 531,772,791 More than one year 201,834,648 196,288,833 P 44,809,339,363 P 34,913,808,884

(c) Advances to Associates and Other Related Parties ECL for advances to associates, and other related parties, and other trade receivables from related parties, are measured and recognized using the liquidity approach. Management determines possible impairment based on the related party’s ability to repay the advances upon demand at the reporting date taking into consideration the historical defaults from the related parties.

The Company does not consider any significant risks in the advances to related parties as these are entities whose credit risks for liquid funds are considered negligible, have committed to financially support these related parties as part of AGI’s long-term corporate strategy. As of December 31, 2019 and 2018, impairment allowance is not material.

32.4 Liquidity Risk

The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash outflows due in a day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week, as well as on the basis of a rolling 30-day projection. Long-term needs for a six-month and one-year period are identified monthly.

The Group maintains cash to meet its liquidity requirements for up to 60-day periods. Excess cash is invested in time deposits or short-term marketable securities. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.

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As at December 31, 2019 and 2018, the Group’s financial liabilities have contractual maturities which are presented below.

2019 Within 1 to 5 More than Notes 1 Year Years 5 Years Interest-bearing loans and borrowings* 15 P 16,954,264,810 P 39,065,171,167 P - Trade and other payables 17 17,584,893,153 - - Bonds payable* 16 924,084,260 29,401,816,190 - Redeemable preferred shares* 18 263,171,069 508,981,904 - Advances from associates and other related parties 27.3 2,914,882,801 - - Lease liabilities* 19 149,699,644 250,541,462 899,315,917 Subscription payable 19 1,114,665,008 - - Other liabilities 19 1,700,760,516 2,026,599,582 - P 41,606,421,261 P 71,253,110,305 P 899,315,917

2018 Within 1 to 5 More than Notes 1 Year Years 5 Years Interest-bearing loans and borrowings* 15 P 12,778,778,253 P 35,658,590,575 P 2,455,139,170 Trade and other payables 17 13,681,236,131 - - Bonds payable* 16 1,202,612,500 30,032,563,750 - Redeemable preferred shares* 18 268,957,813 772,152,973 - Advances from associates and other related parties 27.3 2,885,463,118 - - Other liabilities 19 1,165,040,058 2,221,277,892 - P 31,982,087,873 P 68,684,585,190 P 2,455,139,170

*Inclusive of future interest costs

The contractual maturities in the above reflect the gross cash flows, which may differ from the carrying values of the liabilities at the reporting dates.

32.5 Other Price Risk Sensitivity The Group’s market price risk arises from its financial assets at carried at fair value. It manages its risk arising from changes in market price by monitoring the changes in the market price of the investments.

For equity securities listed in the Philippines, the observed volatility rates of the fair values of the Group’s investments held at fair value is determined based on the average market volatility in exchange rates, using standard deviation, in the previous 12 months, estimated at 99% level of confidence. Their impact on the Group’s consolidated net profit and consolidated equity as at December 31, 2019 and 2018 are summarized as follows:

Observed Impact on Equity Volatility Rates Increase Decrease 2019 Investment in equity securities: Holding company +/-6.11% P 61,138,035 ( P 61,138,035 ) Manufacturing +/-2.27% 6,752,926 ( 6,752,926 ) 2018 Investment in equity securities: Holding company +/-5.16% P 84,322,556 ( P 84,322,556 ) Tourism and leisure +/-4.79% 122,412,040 ( 122,412,040 ) Manufacturing +/-3.44% 14,426,210 ( 14,426,210 )

The investments in listed equity securities are considered long-term strategic investments. In accordance with the Group’s policies, no specific hedging activities are undertaken in relation to these investments. The investments are continuously monitored and voting rights arising from these equity instruments are utilized in the Group’s favor.

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33. CATEGORIES AND FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

33.1 Carrying Amounts and Fair Values by Category The carrying values and fair values of the categories of financial assets and financial liabilities presented in the consolidated statements of financial position are shown below.

2018 2019 [As Restated – see Note 2.1(b)] Notes Carrying Values Fair Values Carrying Values Fair Values Financial Assets At amortized costs: Cash and cash equivalents 5 P 23,104,875,672 P 23,104,875,672 P 17,543,095,320 P 17,543,095,320 Trade and other receivables – net 6, 27.2 44,809,339,363 45,290,907,850 34,913,808,884 35,203,467,398 Guarantee and other deposits 14 1,007,434,782 1,007,434,782 896,576,344 896,576,344 P 68,921,649,817 P 69,403,218,304 P 53,353,480,548 P 53,643,139,062 Financial assets at FVTPL – Derivative assets 8, 30 P - P - P 397,835,428 P 397,835,428 Financial assets at FVOCI – Equity securities 9 P 4,498,219,487 P 4,498,219,487 P 4,474,947,699 P 4,474,947,699 Financial Liabilities At amortized cost: Interest-bearing loans and borrowings 15 P 51,256,475,989 P 50,192,028,027 P 50,640,611,750 P 49,272,564,221 Bonds payable 16 24,623,883,690 23,667,412,590 25,102,042,365 23,366,702,221 Redeemable preferred shares 18 754,792,740 754,792,740 1,006,390,320 1,006,390,320 Trade and other payables 17 17,584,893,153 17,584,893,153 13,681,236,131 13,681,236,131 Advances from associates and

other related parties 27.3 2,914,882,801 2,914,882,801 2,885,463,118 2,885,463,118 Lease liabilities 19 653,588,108 653,588,108 - - Subscription payable 19 1,114,665,008 1,114,665,008 - - Other liabilities 19 3,727,360,098 3,727,360,098 3,386,317,950 3,386,317,950 P 102,630,541,587 P100,609,622,525 P 96,702,061,634 P 93,598,673,961 Financial liabilities at FVTPL – Derivative liabilities 19, 30 P 242,417,137 P 242,417,137 P - P -

See Notes 2.5, 2.6 and 2.11 for a description of the accounting policies for each category of financial instrument. A description of the Group’s risk management objectives and policies for financial instruments is provided in Note 32.

33.2 Offsetting of Financial Assets and Financial Liabilities The Group has not set-off financial instruments in 2019 and 2018 and does not have relevant offsetting arrangements, except as disclosed in Notes 27.2 and 27.3. Currently, all other financial assets and financial liabilities are settled on a gross basis; however, each party to the financial instrument (particularly related parties) will have the option to settle all such amounts on a net basis in the event of default of the other party through approval by both parties’ BOD and shareholders. As such, the Group’s outstanding receivables from and payables to the same related parties can be potentially offset to the extent of their corresponding outstanding balances. Further, certain trade receivables that were assigned on a with-recourse basis may be offset against the related outstanding borrowings from local banks (see Notes 15.2 and 15.4).

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34. FAIR VALUE MEASUREMENT AND DISCLOSURES

34.1 Fair Value Hierarchy

In accordance with PFRS 13, Fair Value Measurement, the fair value of financial assets and liabilities and non-financial assets which are measured at fair value on a recurring or non-recurring basis and those assets and liabilities not measured at fair value but for which fair value is disclosed in accordance with other relevant PFRS, are categorized into three levels based on the significance of inputs used to measure the fair value. The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that an entity can access at the measurement date;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and,

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.

For purposes of determining the market value at Level 1, a market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. For investments which do not have quoted market price, the fair value is determined by using generally acceptable pricing models and valuation techniques or by reference to the current market of another instrument which is substantially the same after taking into account the related credit risk of counterparties, or is calculated based on the expected cash flows of the underlying net asset base of the instrument.

When the Company uses valuation technique, it maximizes the use of observable market data where it is available and relies as little as possible on entity specific estimates. If all significant inputs required to determine the fair value of an instrument are observable, the instrument is included in Level 2. Otherwise, it is included in Level 3.

34.2 Financial Instruments Measurement at Fair Value

The table below and in the succeeding page shows the fair value hierarchy of the Group’s classes of financial assets and financial liabilities measured at fair value in the consolidated statements of financial position on a recurring basis as at December 31, 2019 and 2018 (see Notes 9 and 30). Level 1 Level 2 Level 3 Total 2019 Financial assets –

Equity securities P 1,865,987,171 P - P2,632,232,316 P 4,498,219,487 Financial liability – Derivatives P - P 242,417,137 P - P 242,417,137

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Level 1 Level 2 Level 3 Total 2018 Financial assets:

Equity securities P 4,447,497,801 P - P 27,449,898 P 4,474,947,699 Derivatives - 397,835,428 - 397,835,428 P 4,447,497,801 P 397,835,428 P 27,449,898 P 4,872,783,127

Described below are the information about how the fair values of the Group’s classes of financial assets are determined.

(a) Equity Securities

As at December 31, 2019 and 2018, instruments included in Level 1 comprise equity securities classified as financial assets at FVOCI. These securities were valued based on their market prices quoted in the PSE at the end of each reporting period. In 2019, equity securities classified as financial assets at FVOCI included in the prior years in Level 1 were transferred to Level 3 following the delisting of such shares from the stock exchange. The fair value of these equity securities is determined using discounted cash flows valuation technique with 12% discount rate, 4% terminal growth rate and forecasted annual net cash flows as key assumptions. The forecasted annual net cash flows were derived by taking into consideration the market conditions, economic factors, and historical performance and future projects of the investee company. The change in the valuation method resulted to P52.9 million fair value gains during the year.

Moreover, equity security held in certain investee companies are included in Level 3 since its market value is not quoted in an active market, hence, measured by reference to the fair value of a comparable instrument adjusted for inputs internally developed by management to consider the differences in corporate profile and historical performance of the entity.

(b) Derivatives The fair values of derivative financial instruments that are not quoted in an active market

are determined through valuation techniques using the net present value computation

34.3 Financial Instruments Measured at Amortized Cost for which Fair Value is Disclosed

The Group’s financial assets which are not measured at fair value in the consolidated statements of financial position but for which fair value is disclosed include cash and cash equivalents, which are categorized as Level 1, and trade and other receivables – net, and guarantee and other deposits which are categorized as Level 3. Financial liabilities which are not measured at fair value but for which fair value is disclosed pertain bonds payable, which are categorized as Level 1, and interest-bearing loans and borrowings, redeemable preferred shares, trade and other payables and advances from associates and other related parties which are categorized as Level 3. The fair value of the Group’s debt securities which consist of corporate bonds is estimated by reference to quoted bid price in active market at the end of the reporting period and is categorized within Level 1. For financial assets with fair values included in Level 1, management considers that the carrying amounts of these financial instruments approximate their fair values due to their short-term duration.

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The fair values of the financial assets and financial liabilities included in Level 3, which are not traded in an active market, are determined based on the expected cash flows of the underlying net asset or liability based on the instrument where the significant inputs required to determine the fair value of such instruments are not based on observable market data. Further, management considers that the carrying amounts of these financial instruments approximate their fair values as the effect of discounting is insignificant.

34.4 Fair Value of Investment Properties Measured at Cost for which Fair Value is

Disclosed The fair value of the Group’s investment properties earning rental income was determined through discounted cash flows valuation technique. The Group uses assumption that are mainly based on market conditions existing at each reporting period, such as: the receipt of contractual rentals; expected future market rentals; void periods; maintenance requirements; and appropriate discount rates. These valuations are regularly compared to actual market yield data and actual transactions by the Group and those reported by the market. The expected future market rentals are determined on the basis of current market rentals for similar properties in the same location and condition.

The Group determines the fair value of idle properties through appraisals by independent valuation specialists using market – based valuation approach where prices of comparable properties are adequate for specific market factors such as location and condition of the property. As at December 31, 2019 and 2018, the fair value of the Group’s investment properties is classified within Level 3 of the fair value hierarchy. The Level 3 fair value of the investment properties was determined using the income approach which is performed with values derived using a discounted cash flow model. The income approach uses future free cash flow projections and discounts them to arrive at a present value. The discount rate is based on the level of risk of the business opportunity and costs of capital. The most significant inputs into this valuation approach are the estimated expected future annual cash inflow and outgoing expenses, anticipated increase in market rental, discount rate and terminal capitalization rate. Also, there were no transfers into or out of Level 3 fair value hierarchy in 2019 and 2018.

35. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Group’s capital management objective is to ensure its ability to continue as a going concern and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The Group manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. It monitors capital using the debt-to-equity ratio using amounts of contracted borrowings versus total equity.

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2019 2018

Interest-bearing loans and borrowings P 51,256,475,989 P 50,640,611,750 Bonds payable 24,623,883,690 25,102,042,365

P 75,880,359,679 P 75,742,654,115

Total equity P 204,865,522,506 P188,740,420,533

Debt-to-equity ratio 0.37 : 1.00 0.40 : 1.00 The Group has complied with its covenant obligations, including maintaining the required debt-to-equity ratio for the years presented above.

36. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING

ACTIVITIES

Presented below is the reconciliation of the Group’s liabilities arising from financing activities, which includes both cash and non-cash changes.

Advances from Interest-bearing Associates Loans and Lease and Other Borrowings Bonds Payable Liabilities Related Parties (See Note 15) (See Note 16) (See Note 19) (See Note 27) Total Balance as of January 1, 2019, as previously reported P 50,640,611,750 P 25,102,042,365 P - P 2,885,463,118 P 78,628,117,233 Adoption of PFRS 16 - - 467,901,950 - 467,901,950 Balance as of January 1, 2019, as restated 50,640,611,750 25,102,042,365 467,901,950 2,885,463,118 79,096,019,183 Net cash flows: Proceeds 12,500,000,000 - - 32,361,651 12,532,361,651 Repayments ( 11,537,252,522 ) - ( 35,429,332 ) ( 2,941,968 ) ( 11,575,623,822 ) Non-cash financing activities: Foreign currency exchange ( 346,883,239 ) ( 493,907,863 ) ( 5,718,846 ) - ( 846,509,948 ) Amortization of bond issue cost - 15,749,188 - - 15,749,188 Additional lease liabilities - - 194,882,491 - 194,882,491

Interest amortization on lease liabilities - - 31,951,845 - 31,951,845

Balance as of December 31, 2019 P51,256,475,989 P24,623,883,690 P 653,588,108 P 2,914,882,801 P79,448,830,588 Balance as of January 1, 2018 P 40,536,800,278 P 34,364,985,052 P - P 2,633,192,235 P 77,534,977,565 Net cash flows: Proceeds 18,350,000,000 - - 366,705,230 18,716,705,230 Repayments ( 8,530,019,684 ) ( 10,425,600,000 ) - ( 12,339,277 ) ( 18,967,958,961 ) Non-cash financing activities: Foreign currency exchange 283,255,354 1,139,294,915 - - 1,422,550,269 Addition due to consolidation of new subsidiaries 575,802 - - 137,051,076 129,453,918

Elimination due to consolidation of new subsidiary - - - ( 239,146,146 ) ( 230,973,186 ) Amortization of bond issue cost - 23,362,398 - - 23,362,398

Balance as of December 31, 2018 P 50,640,611,750 P 25,102,042,365 P - P 2,885,463,118 P 78,628,117,233

Balance as of January 1, 2017 P 38,852,773,041 P 22,330,589,969 P - P 2,424,926,309 P 63,608,289,319 Net cash flows: Proceeds 7,900,000,000 11,943,791,282 - 229,092,519 20,072,883,801 Repayments ( 6,152,002,030 ) - - ( 20,826,593 ) ( 6,172,828,623 ) Non-cash financing activities: Translation adjustments ( 63,970,733 ) 49,389,436 - - ( 14,581,297 ) Amortization of bond issue cost - 41,214,365 - - 41.214.365

Balance as of December 31, 2017 P 40,536,800,278 P 34,364,985,052 P - P 2,633,192,235 P 77,534,977,565

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37. EVENTS AFTER THE REPORTING PERIOD

Subsequent to the end of the reporting period, the Group and other businesses have been significantly exposed to the risks brought about by the outbreak of the new coronavirus disease, COVID-19. Governmental efforts being implemented to control the spread of the virus include travel bans, quarantines, social distancing and suspension of non-essential services. The management of the Group is carefully reviewing all rules, regulations, and orders and responding accordingly. Though the disruption is currently expected to be temporary, the Group anticipates that these will have an adverse impact on economic and market conditions and affect various segments of its business. Work stoppage on construction sites and slowdown on the supply chain may potentially lead to delays on the targeted completion and turnover of projects. Community quarantine also requires temporary adjustment of mall operating hours and will reduce foot traffic. Likewise, travel restrictions have resulted into a reduction in hotel occupancies. While management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate the risks associated with COVID-19, the ultimate impact of the pandemic is highly uncertain and subject to change. The severity of these consequences will depend on certain developments, including the duration and spread of the outbreak, valuation of assets, and impact on the Group’s customers, suppliers, and employees. Specifically, demand for the Group’s real estate properties for sale is negatively affected due to reduced liquidity of potential customers and slowdown of construction progress. Leasing operations shall likewise be affected due to limited operating hours and tenants’ liquidity. Financial consequences of aforementioned impact are uncertain and cannot be predicted as of the date of the issuance of the Group’s consolidated financial statements. Accordingly, management is not able to reliably estimate the impact of the outbreak on the Group’s financial position and results of operation for future periods.

The Group would continue to conduct its business while placing paramount consideration on the health and welfare of its employees, customers, and other stakeholders. The Group has implemented measures to mitigate the transmission of COVID-19, such as by adjusting operating hours, making hand sanitizers available within its properties, increasing the frequency of disinfection of facilities, limiting face-to-face meetings, requiring temperature checks for employees and customers, and implementing health protocols for employees. The Group has also activated business continuity plans, both at the corporate level and business operations level, and conducted scenario planning and analysis to activate contingency plans. The Group has determined that these events are non-adjusting subsequent events. Accordingly, their impact was not reflected in the Group’s financial statements as of and for the year ended December 31, 2019.

38. OTHER MATTER

38.1 Other information required by the Securities and Exchange Commission

RA No. 11232, An Act Providing for the Revised Corporation Code of the Philippines (the Revised Corporation Code) took effect on March 8, 2019. The new provisions of the Revised Corporation Code or any amendments thereof have no impact to the Group’s consolidated financial statements

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38.2 International Organization for Standardization (ISO) Certification The Company was awarded a certificate of registration under ISO 9001:1994 on November 26, 1999 by Certification International Philippines, Inc. which was upgraded to ISO 9001:2000 and ISO 9001:2008 series on November 21, 2002 and November 25, 2011, respectively. Effective December 18, 2017, the Company has upgraded its Certification to ISO 9001:2015 for its quality management system. The scope of the certification covers all areas of the Company’s real estate development and marketing. Among others, the Company is required to undergo surveillance audits every six months.

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ISSUER

Megaworld Corporation 30th Floor

Alliance Global Tower 36th Street cor. 11th Avenue

Uptown Bonifacio, Taguig City Philippines

TRUSTEE

The Hongkong and Shanghai Banking

Corporation Limited Level 24, HSBC Main Building

1 Queen’s Road, Central Hong Kong

REGISTRAR, PRINCIPAL PAYING AGENT AND TRANSFER AGENT

The Hongkong and Shanghai Banking

Corporation Limited Level 24, HSBC Main Building

1 Queen’s Road, Central Hong Kong

LEGAL ADVISERS

To the Issuer as to English law

Latham & Watkins LLP

18th Floor, One Exchange Square 8 Connaught Place

Central, Hong Kong

To the Joint Bookrunners as to English law

Milbank LLP

30/F Alexandra House 18 Chater Road

Central, Hong Kong

To the Joint Bookrunners as to Philippine law

Picazo Buyco Tan Fider & Santos

Penthouse, Liberty Center – Picazo Law 104 H.V. dela Costa Street

Salcedo Village Makati City 1227, Philippines

To the Trustee as to English law

Milbank LLP 12 Marina Boulevard

#36-03 MBFC Tower 3 Singapore 018982

LISTING AGENT

Latham & Watkins LLP

9 Raffles Place #42-02 Republic Plaza

Singapore 048619

INDEPENDENT AUDITORS

Punongbayan & Araullo (Grant Thornton)

20th Floor, Tower 1 The Enterprise Center 6766 Ayala Avenue 1200 Makati City

Philippines

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