Megaworld: Q2/H1 financial statement

8/11/2019 Megaworld: Q2/H1 financial statement

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SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-Q

QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIESREGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER

1. For the quarterly period ended 30 June 2014

2. Commission Identification Number: 167423 3. BIR Tax Identification No.: 000-477-103

4. MEGAWORLD CORPORATIONExact name of issuer as specified in its charter

5. Metro ManilaProvince, Country or other jurisdiction of incorporation or organization

6. (SEC Use Only)Industry Classification Code

7. 28th Floor, The World Centre330 Sen. Gil J. Puyat AvenueMakati City, Philippines 1227

Address of issuers principal office

8. (632) 867-8826 to 40Issuers telephone number, including area code

9. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of theRSA

Title of Each Class Number of Shares of Stock Outstanding

Common 32,141,138,454Preferred 6,000,000,000Total 38,141,138,454

10. Are any or all of the securities listed on a Stock Exchange?

Yes [X] No [ ]

If yes, state the name of such Stock Exchange and the class/es of securities listed therein:

The shares of common stock of the Company are listed on the Philippine StockExchange.

11. Indicate by check mark whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17

thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26

and 141 of The Corporation Code of the Philippines, during the preceding twelve (12)

months (or for such shorter period the registrant was required to file such reports).

Yes [X] No [ ]


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(b) has been subject to such filing requirements for the past ninety (90) days.

Yes [X]

No [ ]

PART 1 FINANCIAL INFORMATION

Item 1. Financial Statements

Interim financial statements are attached as Exhibits 1 to 5 hereof and incorporated herein by

reference:

Exhibit 1 - Consolidated Statements

of

Financial Position as

of

December 31 2013

and June 30, 2014

Exhibit 2 - Consolidated Statements of Income for the periods ended June 30 2013

and June 30, 2014

Exhibit 3 Consolidated Statements of Changes

in

Equity as of June 30 2013

and June 30, 2014

Exhibit 4 - Consolidated Statements of Cash Flows as

of

June 30, 2013 and

June 30 2014

Exhibit

5

Notes to Interim Financial Information

Item

2.

Management s Discussion and Analysis

of

Results

of

Operations and Financial Condition

Please refer to Exhibit 6 hereof.

Item

3.

Aging

of

Accounts Receivables


Item

4.

Schedule of Financial Soundness Indicators


PART OTHER INFORMATION

The Company is not

in

possession

of

information which has not been previously reported

in

a report on SEC Form 17-C and with respect to which a report on SEC Form 17-C is required

to be filed.

SIGNATURE

Pursuant to the requirements

of

the Securities Regulation Code, the issuer has duly

caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

By

MEGAWORLD CORPORATION

Issuer

F R ~ ~ ~ O

Treasurer (Principal Financial Officer)

and Duly Authorized Officer

August 12, 2014


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MEGAWORLD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousand pesos)

Unaudited Audited

June 30, 2014 December 31, 2013

CURRENT ASSETS

Cash and cash equivalents 28,581,341P 31,751,906P

Trade and other receivables - net 22,959,681 19,557,352

Financial assets at fair value through profit or loss 291,000 258,000Residential and condominium units for sale 48,395,331 35,109,686

Property development costs 10,284,625 9,707,715

Prepayments and other current assets - net 3,325,454 2,073,711

Total Current Assets 113,837,432 98,458,370

NON-CURRENT ASSETS

Trade and other receivables - net 27,313,778 23,439,511

Advances to landowners and joint ventures 4,775,001 3,737,052

Land for future development 12,976,428 5,049,385

Investments in available-for-sale securities 6,674,411 3,928,755Investments in and advances to associates and other

related parties - net 5,057,164 12,774,500

Investment property - net 33,288,701 24,946,939

Property and equipment - net 1,660,710 701,674

Deferred tax assets - net 48,639 43,615

Other non-current assets 1,896,914 802,304

Total Non-current Assets 93,691,746 75,423,735

TOTAL ASSETS 207,529,178P 173,882,105P

A S S E T S

EXHIBIT 1


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Unaudited Audited

June 30, 2014 December 31, 2013

CURRENT LIABILITIES

Interest-bearing loans and borrowings 1,735,863P 1,564,723P

Bonds payable 5,000,000 -

Trade and other payables 9,727,727 7,198,373

Customers' deposits 6,086,163 4,112,697

Reserve for property development 6,850,392 6,879,582

Deferred income on real estate sales 4,892,270 4,118,887

Income tax payable 10,792 66,466

Other current liabilities 2,151,701 1,955,789

Total Current Liabilities 36,454,908 25,896,517

NON-CURRENT LIABILITIES

Interest-bearing loans and borrowings 1,476,763 2,235,182

Bonds payable 19,413,103 24,826,702

Customers' deposits 1,994,086 1,002,305

Redeemable preferred shares 1,257,988 -

Reserve for property development 6,799,968 5,385,667

Deferred income on real estate sales 4,326,522 3,349,019

Deferred tax liabilities - net 7,575,151 6,733,095

Advances from associates and other related parties 741,481 120,488Retirement benefit obligation 827,730 748,399

Other non-current liabilities 1,862,499 1,631,710

Total Non-current Liabilities 46,275,291 46,032,567

Total Liabilities 82,730,199 71,929,084

EQUITY

Total equity attributable to the company's shareholders 107,486,858 91,927,391

Non-controlling interests 17,312,121 10,025,630

Total Equity 124,798,979 101,953,021

TOTAL LIABILITIES AND EQUITY 207,529,178P 173,882,105P

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LIABILITIES AND EQUITY


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CONSOLIDATED STATEMENTS OF INCOME

(In thousand pesos, except earnings per share)

2014 Unaudited 2014 Unaudited 2013 Unaudited 2013 Unaudited

Apr 1 - Jun 30 Jan 1 - Jun 30 Apr 1 - Jun 30 Jan 1 - Jun 30

(As Restated) (As Restated)

REVENUES AND INCOME

Real estate sales 6,556,797P 12,010,448P 5,742,101P 10,533,1P

Interest income on real estate sales 397,288 786,040 371,500 726,7

Realized gross profit on prior years' sales 883,935 1,820,136 776,171 1,608,1

Rental income 1,731,638 3,444,284 1,434,467 2,828,9

Hotel operations 253,474 368,419 112,407 224,7

Equity share in net earnings of associates 131,870 304,394 122,682 230,2Interest and other income - net 12,056,057 13,223,762 570,573 1,128,8

22,011,059 31,957,483 9,129,901 17,280,8

COSTS AND EXPENSES

Real estate sales 3,855,855 7,142,998 3,421,777 6,366,2

Deferred gross profit 1,407,284 2,612,132 1,115,642 2,396,1

Hotel operations 117,409 177,132 63,113 119,5

Operating expenses 1,781,026 3,213,134 1,026,161 2,293,3

Interest and other charges - net 85,068 710,159 376,289 596,0

Tax expense 937,228 1,577,251 710,154 1,280,2

8,183,870 15,432,806 6,713,136 13,051,7

PROFIT FOR THE PERIOD

BEFORE PREACQUISITION INCOME 13,827,189 16,524,677 2,416,765 4,229,1

PREACQUISITION INCOME OF SUBSIDIARIES 78,159 )( 83,362 )( - -

NET PROFIT FOR THE PERIOD 13,749,030P 16,441,315P 2,416,765P 4,229,1P

Net profit attributable to:

Company's shareholders 13,678,417P 16,326,574P 2,406,986P 4,187,6P

Non-controlling interests 70,613 114,741 9,779 41,4

13,749,030P 16,441,315P 2,416,765P 4,229,1P

Earnings Per Share

Basic 0.433P 0.517P 0.083P 0.1P

Diluted 0.430P 0.513P 0.083P 0.1P

EXHIBIT


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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousand pesos)

2014 Unaudited 2014 Unaudited 2013 Unaudited 2013 Unaudited

Apr 1 - Jun 30 Jan 1 - Jun 30 Apr 1 - Jun 30 Jan 1 - Jun 30

(As Restated) (As Restated)

NET PROFIT FOR THE PERIOD 13,749,030P 16,441,315P 2,416,765P 4,229,113P

OTHER COMPREHENSIVE INCOME (LOSS)

Items that will not be reclassified

subsequently to profit or loss -

Actuarial gains(losses) on retirement benefit obligations 4,630 )( 4,630 )( 4,725 9,449

Items that will be reclassified

subsequently to profit or loss:

Net unrealized fair value gains (losses) on

available-for-sale securities 22,081 )( 423,497 329,978 931,758

Exchange difference on translating foreign operations 53,053 )( 113,477 )( 15,936 (10,774

75,134 )( 310,020 345,914 920,984

79,764 )( 305,390 350,639 930,433

TOTAL COMPREHENSIVE INCOME

FOR THE PERIOD 13,669,266P 16,746,705P 2,767,404P 5,159,546P

Total comprehensive income attributable to:

Companys shareholders 13,598,653 16,631,964 2,757,625 5,118,131

Non-controlling interests 70,613 114,741 9,779 41,415

13,669,266P 16,746,705P 2,767,404P 5,159,546P


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STATEMENTS OF CHANGES IN EQUITY

(In thousand pesos)

Unaudited Unaudited

June 30, 2014 June 30, 2013

(As Restated)

CAPITAL STOCK 32,326,715P 29,595,080P

ADDITIONAL PAID-IN CAPITAL 16,647,265 8,432,990

TREASURY STOCK 633,722 )( 633,722 )(

NET ACTUARIAL GAINS (LOSSES) ON

RETIREMENT BENEFIT PLAN 131,978 )( 152,913 )(

NET UNREALIZED GAINS ON

AVAILABLE-FOR-SALE SECURITIES 2,226,729 1,645,138

SHARE IN OTHER COMPREHENSIVE

INCOME OF ASSOCIATES - 1,445

ACCUMULATED TRANSLATION ADJUSTMENT 504,332 )( 437,263 )(

RETAINED EARNINGS 57,556,181 38,709,269

NON-CONTROLLING INTERESTS 17,312,121 9,992,069

TOTAL EQUITY 124,798,979P 87,152,093P

EXHIBIT 3


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MEGAWORLD CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOW(In thousand pesos)

Unaudited UnauditedJune 30, 2014 June 30, 2013

(As Restated)

CASH FLOWS FROM OPERATING ACTIVITIES

Income before tax 18,018,566P 5,509,391P

Adjustments for:

Depreciation and amortization 571,978 442,579

Interest expense 642,985 508,065

Interest and other income 12,550,414 )( 838,848 )(

Share option benefits expense 26,586 35,114Equity in net earnings of associates 304,394 )( 230,261 )(

Operating income before working capital changes 6,405,307 5,426,040

Net Changes in Operating Assets and Liabilities

Increase in current and non-current assets 6,251,523 )( 5,542,915 )(

Increase in current and other current liabilities 1,739,531 883,398

Increase in reserve for property development 577,245 1,004,873

Cash generated from operations 2,470,560 1,771,396

Cash paid for income taxes 978,361 )( 648,742 )(

NET CASH FROM OPERATING ACTIVITIES 1,492,199 1,122,654

CASH FLOWS USED IN INVESTING ACTIVITIES 7,560,967 )( 3,428,712 )(

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 1,273,080 )( 12,187,180

NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS 7,341,848 )( 9,881,122

BEGINNING BALANCE OF CASH AND CASHEQUIVALENTS OF ACQUIRED SUBSIDIARIES 4,514,093 -

PREACQUISITION CHANGES IN CASH AND CASHEQUIVALENTS OF ACQUIRED SUBSIDIARIES 342,810 )( -

CASH AND CASH EQUIVALENTS

AT BEGINNING OF PERIOD 31,751,906 26,826,715

CASH AND CASH EQUIVALENTS

AT END OF THE PERIOD 28,581,341P 36,707,837P

EXHIBIT 4


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MEGAWORLD CORPORATION AND SUBSIDIARIESNOTES TO INTERIM FINANCIAL INFORMATION

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013(UNAUDITED)

(Amounts in Phi li ppine Pesos)

1.

CORPORATE INFORMATION

Megaworld Corporation (the Company) was incorporated in the Philippines onAugust 24, 1989, primarily to engage in the development of large scale mixed-useplanned communities or townships that integrate residential, commercial, leisure andentertainment components. The Company is presently engaged inproperty-related activities, such as, project design, construction and propertymanagement. The Companys real estate portfolio includes residential condominiumunits, subdivision lots and townhouses, as well as office projects and retail spaces.

All of the Companys common shares of stock are listed at the Philippine StockExchange (PSE).

The registered office of the Company, which is also its principal place of business, islocated at the 28thFloor, The World Centre Building, Sen. Gil Puyat Avenue, MakatiCity.

Alliance Global Group, Inc. (AGI or parent company), also a publicly listedcompany in the Philippines, is the ultimate parent company of MegaworldCorporation and its subsidiaries (the Group). AGI is a holding company and ispresently engaged in the food and beverage business, real estate, quick servicerestaurant and tourism-oriented businesses. AGIs 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, Quezon City.

The Company holds ownership interests in the following subsidiaries and associates:

Explanatory Percentage of Ownership

Subsidiaries/Associates Notes June 2014 December 2013

Subsidiaries:

Megaworld Land, Inc. (MLI) 100% 100%

Prestige Hotels and Resorts, Inc. (PHRI) 100% 100%

Mactan Oceanview Properties

and Holdings, Inc. (MOPHI) 100% 100%

Megaworld Cayman Islands, Inc. (MCII) 100% 100%

Richmonde Hotel Group International Limited (RHGIL) 100% 100%

Eastwood Cyber One Corporation (ECOC) 100% 100%

Megaworld Cebu Properties Inc. (MCP)

(formerly Forbes Town Properties and Holdings, Inc.) 100% 100%

Megaworld Newport Property

Holdings, Inc. (MNPHI) 100% 100%

Oceantown Properties, Inc. (OPI) 100% 100%

EXHIBIT 5


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Explanatory Percentage of Ownership

Subsidiaries/Associates_________ Notes June 2014 December 2013_

Subsidiaries:

Piedmont Property Ventures, Inc. (PPVI) 100% 100%

Stonehaven Land, Inc. (SLI) 100% 100%

Streamwood Property, Inc. (SP) 100% 100%

Suntrust Properties, Inc. (SPI) 100% 100%

Lucky Chinatown Cinemas, Inc. (LCCI) 100% 100%

Luxury Global Hotels and Leisure, Inc. (LGHLI) 100% 100%

Suntrust Ecotown Developers, Inc. (SEDI) 100% 100%

Woodside Greentown Properties Inc. (WGPI)

(formerly Union Ajinomoto Realty Corporation) 100% 100%

Citywalk Building Administration, Inc. (CBAI) (a) 100% -

Forbestown Commercial Center

Administration, Inc. (FCCAI) (a) 100% -

Paseo Center Building Administration, Inc. (PCBAI) (a) 100% -

Megaworld Global-Estates, Inc. (MGEI) (b) 88.25% -

Empire East Land Holdings, Inc. and Subsidiaries (EELHI) 81.72% 81.53%

Global-Estate Resorts, Inc. and Subsidiaries (GERI) (c) 80.41% -

Megaworld Central Properties, Inc. (MCPI) 76.54% 76.50%

La Fuerza, Inc. (LFI) (d) 66.67% -

Twin Lakes Corporation (TLC) (e) 61.17% -

Megaworld-Daewoo Corporation (MDC) 60% 60%

Eastwood Cinema 2000, Inc. (EC2000) 55% 55%

Gilmore Property Marketing Associates, Inc. (GPMAI) 52.13% 52.04%

Megaworld Resort Estates, Inc. (MREI) 51% 51%

Manila Bayshore Property Holdings, Inc. (MBPHI) (f) 50.92% 54.50%

Megaworld Globus Asia, Inc. (MGAI) 50% 50%

Philippine International Properties, Inc. (PIPI) 50% 50%

Townsquare Development, Inc. (TDI) 30.60% 30.60%

Associates:

Bonifacio West Development Corporation (BWDC) (g) 46.11% -

Suntrust Home Developers, Inc. (SHDI) 42.48% 42.48%

Palm Tree Holdings and Development

Corporation (PTHDC) 40% 40%

Resorts World Bayshore City, Inc. (RWBCI) 10% 10%

Travellers International Hotel Group, Inc. (TIHGI) (h) - 9%

Megaworld Global Estates, Inc. (MGEI) (b) - 54.82%

La Fuerza, Inc. (LFI) (d) - 50%

Twin Lakes Corporation (TLC) (e) - 31.35%

Global Estate Resorts, Inc. (GERI) (c) - 24.70%

Explanatory Notes:

(a) CBAI, FCCAI and PCBAI were incorporated to engage in operation, maintenance, and administration of

Citywalk and Cyber Mall, Forbestown Center and Paseo Center, respectively. These companies became

subsidiaries of the Company through MLI, its parent company.


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(b) MGEI was incorporated on March 14, 2011 and started its commercial operations on January 2014. As at

December 31, 2013, the ownership is composed of 40% direct ownership and 14.82% indirect thru GERI.

Because of the Companys increased ownership in GERI, the indirect ownership increased to 48.25%

resulting to the Companys total interest in MGEI to 88.25% as at June 30, 2014. Thus, MGEI is now a

subsidiary of the Company.

(c) In 2013, the Company acquired 24.70% ownership interest on GERI. Due to various acquisitions in 2014

including the purchase of all shares held by AGI, the Companys ownership increased to 80.41%, making

GERI a subsidiary of the Company as at June 30, 2014.

(d) On November 4, 2013, the Company acquired 50% ownership interest over LFI which is engaged in

leasing of real estate properties. On January 21, 2014, the Company acquired additional 16.67% interest

resulting to an increase in ownership to 66.67%.

(e) As at December 31, 2013, the Companys interest in TLC is 31.35% consisting of 19% direct ownership

and 12.35% indirect ownership through GERI. Due to additional shares purchase and increased ownership

in GERI, the Companysownership in TLC increased to 61.17% as at June 30, 2014.

(f) MBPHI was incorporated in October 2011 and started its commercial operations on January 1, 2012. The

Company holds 50% direct ownership in MBPHI; the latter is also 50% owned by TIHGI. As a result of

Companys sale of majority of its TIHGI shares to AGI, the Companysownership interest also decreased

to 50.92% as at June 30, 2014.

(g) BWDC, engaged in real estate business is considered as an associate of the Company as at June 30, 2014.(h) On June 20, 2014, the Company sold majority of its shares held to AGI reducing the Com panys

ownership from 9% to 1.84%. TIHGI is now reclassified to investment in available-for-sale securities due

to lack of significant influence over TIHGI.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies that have been used in the preparation of theseconsolidated financial statements are summarized below. The policies have beenconsistently applied to all the periods presented, unless otherwise stated.

2.1 Basis of Preparation of Consolidated Financial Statements

These interim consolidated financial statements are for the six months endedJune 30, 2014 and 2013. They have been prepared in accordance with PhilippineAccounting Standard (PAS) 34, Interim Financial Reporting. They do not include all ofthe information and disclosures required in the annual audited consolidated financialstatements and should be read in conjunction with the consolidated financialstatements of the Group as of and for the year ended December 31, 2013.

The preparation of interim consolidated financial statements in accordance withPhilippine Financial Reporting Standards (PFRS) requires management to make

judgments, estimates and assumptions that effect the application of policies andreported amounts of assets and liabilities, income and expenses. Although theseestimates are based on managements best knowledge of current events and actions,actual results may ultimately differ from those estimates.

These interim consolidated financial statements are presented in Philippine pesos, thefunctional and presentation currency of the Parent Company and its subsidiaries, andall values represent absolute amounts except when otherwise indicated.


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2.2 Adoption of New and Amended PFRS

These interim consolidated financial statements have been prepared in accordancewith the accounting policies adopted in the last annual financial statements for the

year ended December 31, 2013:

Effective in 2014 that are relevant to the Group

i. PAS 19 (Amendment), Employee Benefits Defined Benefit Plans EmployeeContributions (effective from January 1, 2014). The amendment clarifies that ifthe amount of the contributions from employees or third parties is dependenton the number of years of service, an entity shall attribute the contributions toperiods of service using the same attribution method (i.e., either using theplans contribution formula or on a straight-line basis) for the gross benefit.The amendment has no impact on the Groups consolidated financialstatements.

ii. PAS 32 (Amendment), Financial Instruments: Presentation Offsetting FinancialAssets and Financial Liabilities (effective from January 1, 2014). Theamendment provides guidance to address inconsistencies in applying thecriteria for offsetting financial assets and financial liabilities. It clarifies that aright of set-off is required to be legally enforceable, in the normal course ofbusiness, in the event of default and in the event of insolvency or bankruptcyof the entity and all of the counterparties. The amendment also clarifies theprinciple behind net settlement and includes an example of a gross settlementsystem with characteristics that would satisfy the criterion for net settlement.The amendment affects presentation only and has no impact on the Groups

financial performance and financial position.

iii. PAS 36 (Amendment), Impairment of Assets Recoverable Amount Disclosures forNon-financial Assets (effective from January 1, 2014). The amendment clarifiesthat the requirements for the disclosure of information about the recoverableamount of assets or cash-generating units is limited only to the recoverableamount of impaired assets that is based on fair value less cost of disposal. Italso introduces an explicit requirement to disclose the discount rate used indetermining impairment (or reversals) where recoverable amount based on fairvalue less cost of disposal is determined using a present value technique. Theamendment pertains to disclosure requirements only and has no impact on the

Groups financial performance and financial position.

iv. PAS 39 (Amendment), Financial Instruments: Recognition and Measurement Novation of Derivatives and Continuation of Hedge Accounting(effective from January1, 2014). The amendment provides some relief from the requirements onhedge accounting by allowing entities to continue the use of hedge accountingwhen a derivative is novated to a clearing counterparty resulting in terminationor expiration of the original hedging instrument as a consequence of laws andregulations, or the introduction thereof. As the Group neither enters into


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transactions involving derivative instruments nor it applies hedge accounting,the amendment has no impact on the consolidated financial statements.

v. PFRS 10, 12 and PAS 27 (Amendments) Investment Entities (effective fromJanuary 1, 2014). The amendments define the term investment entities,

provide supporting guidance, and require investment entities to measureinvestments in the form of controlling interest in another entity, at fair valuethrough profit or loss. The amendments have no material impact on theGroups financial statements.

Effective subsequent to 2014

i. PFRS 9, Financial Instruments: Classification and Measurement. This is the first partof a new standard on financial instruments that will replace PAS 39, FinancialInstruments: Recognition and Measurement, in its entirety. The first phase of thestandard was issued in November 2009 and October 2010 and contains newrequirements and guidance for the classification, measurement and recognition

of financial assets and financial liabilities. It requires financial assets to beclassified into two measurement categories: amortized cost or fair value. Debtinstruments that are held within a business model whose objective is to collectthe contractual cash flows that represent solely payments of principal andinterest on the principal outstanding are generally measured at amortized cost.All other debt instruments and equity instruments are measured at fair value.In addition, PFRS 9 allows entities to make an irrevocable election to presentsubsequent changes in the fair value of an equity instrument that is not held fortrading in other comprehensive income.

The accounting for embedded derivatives in host contracts that are financial

assets is simplified by removing the requirement to consider whether or notthey are closely related, and, in most arrangements, does not require separationfrom the host contract.

For liabilities, the standard retains most of the PAS 39 requirements whichinclude amortized cost accounting for most financial liabilities, with bifurcationof embedded derivatives. The main change is that, in case where the fair valueoption is taken for financial liabilities, the part of a fair value change due to theliabilitys credit risk is recognized in other comprehensive income rather than inprofit or loss, unless this creates an accounting mismatch.

In November 2013, the IASB has published amendments to International

Financial Reporting Standard (IFRS) 9 that contain new chapter and model onhedge accounting that provides significant improvements principally by aligninghedge accounting more closely with the risk management activities undertakenby entities when hedging their financial and non-financial risk exposures. Theamendment also now requires changes in the fair value of an entitys own debtinstruments caused by changes in its own credit quality to be recognized inother comprehensive income rather in profit or loss. It also includes theremoval of the January 1, 2015 mandatory effective date of IFRS 9.


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To date, the remaining chapter of IFRS/PFRS 9 dealing with impairmentmethodology is still being completed. Further, the IASB is currently discussingsome limited modifications to address certain application issues regardingclassification of financial assets and to provide other considerations indetermining business model.

The Group does not expect to implement and adopt PFRS 9 until itseffective date. In addition, management is currently assessing the impact ofPFRS 9 on the consolidated financial statements of the Group and it willconduct a comprehensive study of the potential impact of this standard priorto its mandatory adoption date to assess the impact of all changes.

ii. Philippine IFRIC 15,Agreements for Construction of Real Estate. This Philippineinterpretation is based on IFRIC interpretation issued by the IASB in July2008 effective for annual periods beginning on or after January 1, 2009. Theadoption of this interpretation in the Philippines, however, was deferred by

the FRSC and Philippine Securities and Exchange Commission after givingdue considerations on various application issues and the implication on thisinterpretation of the IASBs on-going revision of the Revenue Recognitionstandard. This interpretation provides guidance on how to determinewhether an agreement for the construction of real estate is within the scopeof PAS 11, Construction Contracts, or PAS 18, Revenue, and accordingly, whenrevenue from the construction should be recognized. The main expectedchange in practice is a shift from recognizing revenue using the percentage ofcompletion method (i.e., as a construction progresses, by reference to thestage of completion of the development) to recognizing revenue atcompletion upon or after delivery. The Group is currently evaluating the

impact of this interpretation on its consolidated financial statements inpreparation for its adoption when this becomes mandatorily effective in thePhilippines.

iii. Annual Improvements to PFRS. Annual Improvements to PFRS (2010-2012Cycle) and PFRS (2011-2013 Cycle) made minor amendments to a numberof PFRS, which are effective for annual period beginning on or after July 1,2014. Among those improvements, the following amendments are relevantto the Group but management does not expect a material impact on theGroups consolidated financial statements:

Annual Improvements to PFRS (2010-2012 Cycle)

(a) PAS 16 (Amendment), Property, Plant and Equipment and PAS 38

(Amendment),Intangible Assets. The amendments clarify that when an itemof property, plant and equipment, and intangible assets is revalued, thegross carrying amount is adjusted in a manner that is consistent with arevaluation of the carrying amount of the asset.


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(b) PAS 24 (Amendment), Related Party Disclosures. The amendment clarifies

that an entity providing key management services to a reporting entity isdeemed to be a related party of the latter. It also requires and clarifies thatthe information required to be disclosed in the financial statements are theamounts incurred by the reporting entity for key management personnel

services that are provided by a separate management entity and should notthe amounts of compensation paid or payable by the key managemententity to its employees or directors.

(c) PFRS 3 (Amendment), Business Combinations (effective July 1, 2014).

Requires contingent consideration that is classified as an asset or a liabilityto be measured at fair value at each reporting date.

(d) PFRS 13 (Amendment), Fair Value Measurement. The amendment, through

a revision only in the basis of conclusion of PFRS 13, clarifies that issuingPFRS 13 and amending certain provisions of PFRS 9 and PAS 39 relatedto discounting of financial instruments, did not remove the ability to

measure short-term receivables and payables with no stated interest rate onan undiscounted basis, when the effect of not discounting is immaterial.

Annual Improvements to PFRS (2011-2013 Cycle)

(a)

PFRS 3 (Amendment), Business Combinations (effective July 1, 2014).Clarifies that PFRS 3 excludes from its scope the accounting for theformation of a joint arrangement in the financial statements of the jointarrangement itself.

(b) PFRS 13 (Amendment), Fair Value Measurement. The amendment clarifies

that the scope of the exception for measuring the fair value of a group offinancial assets and financial liabilities on a net basis (the portfolioexception) applies to all contracts within the scope of, and accounted for inaccordance with, PAS 39 or PFRS 9, regardless of whether they meet thedefinition of financial assets or financial liabilities as defined in PAS 32.

(c) PAS 40 (Amendment), Investment Property. The amendment clarifies theinterrelationship of PFRS 3, Business Combinations, and PAS 40 indetermining the classification of property as an investment property orowner-occupied property, and explicitly requires an entity to usejudgment in determining whether the acquisition of an investmentproperty is an acquisition of an asset or a group of asset, or a businesscombination in reference to PFRS 3.


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3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS

The Groups consolidated financial statements prepared in accordance with PFRSrequire management to make judgments and estimates that affect amounts reported inthe financial statements and related notes. Judgments and estimates are continuallyevaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under circumstances.Actual results may ultimately vary from these estimates.

3.1 Critical Judgments in Applying Accounting Policies

In the process of applying the Groups accounting policies, management has made thefollowing judgments, apart from those involving estimation, which have the mostsignificant effect on the amounts recognized in the consolidated financial statements:

(a) Impairment of Investment in AFS Securities

The determination when an investment is other than temporarily impairedrequires significant judgment. In making this judgment, the Group evaluates,among other factors, the duration and extent to which the fair value of aninvestment is less than its cost; and the financial health of and near-term businessoutlook for the investee, including factors such as industry and sectorperformance, changes in technology and in operational and financing cash flows.

(b)

Distinction Among Investment Property and Owner-Occupied Properties and Land for FutureDevelopment

The Group determines whether a property qualifies as Investment Property. Inmaking 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 propertybut also to other assets used in the production or supply process while Land forFuture Development are properties intended solely for future development.

(c) Distinction between Operating and Finance Leases

The Group has entered into various lease agreements. Critical judgment wasexercised by management to distinguish each lease agreement as either anoperating or finance lease by looking at the transfer or retention of significantrisk 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.

(d) Consolidation of Entities in which the Group Holds Less than 50%

Management considers that the Group has de facto control of TDI even thoughit holds less than 50% of the ordinary shares and voting rights in the latter. TheGroup is the majority shareholder of TDI with a 30.60% equity interest and hasappointed 4 out of a total 5 members of the BOD. In making judgment


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regarding its involvement in TDI, management considered the Groups votingrights, the relative size and dispersion of the voting rights held by othershareholders and the extent of recent participation by those shareholders ingeneral meetings. Based on recent experience, there is no history of othershareholders forming a group to exercise their votes collectively or to preventthe Group from having the practical ability to direct the relevant activities ofTDI.

3.2 Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sourcesof estimation uncertainty at the end of the reporting period, that have a significantrisk of causing a material adjustment to the carrying amounts of assets and liabilitieswithin the next financial year.

(a)

Revenue Recognition Using the Percentage-of-Completion Method

The Group uses the percentage-of-completion method in accounting for itsrealized gross profit on real estate sales. The use of the percentage-of-completion method requires the Group to estimate the portion completed usingrelevant information such as costs incurred to date as a proportion of the totalbudgeted cost of the project and estimates by engineers and other experts.

(b)

Determining Net Realizable Value of Residential and Condominium Units for Sale andProperty Development Costs and Land for Future Development

In determining the net realizable value of residential and condominium units forsale and property development costs, management takes into account the mostreliable evidence available at the times the estimates are made. The future

realization of the carrying amounts of real estate for sale and propertydevelopment costs is affected by price changes in the different market segmentsas well as the trends in the real estate industry. These are considered key sourcesof estimation and uncertainty and may cause significant adjustments to theGroups Residential and Condominium Units for Sale and PropertyDevelopment Costs within the next financial year.

(c)

Fair Value of Share Options

The Company estimates the fair value of the share options by applying an optionvaluation model, taking into account the terms and conditions on which theshare options were granted.

(d) Fair Value Measurement of Investment Property

Investment Property is measured using the cost model. The fair value disclosedin the consolidated financial statements is determined by the Group using thediscounted cash flows valuation technique since the information on current orrecent prices of investment property is not available. The Group usesassumptions that are mainly based on market conditions existing at eachreporting period, such as: the receipt of contractual rentals; expected future


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market rentals; void periods; maintenance requirements; and appropriatediscount rates. These valuations are regularly compared to actual market yielddata and actual transactions by the Group and those reported by the market.The expected future market rentals are determined on the basis of currentmarket rentals for similar properties in the same location and condition.

(e)

Estimating Useful Lives of Property and Equipment and Investment Property

The Group estimates the useful lives of property and equipment and investmentproperty based on the period over which the assets are expected to be availablefor use. The estimated useful lives of property and equipment and investmentproperty are reviewed periodically and are updated if expectations differ fromprevious estimates due to physical wear and tear, technical or commercialobsolescence and legal or other limits on the use of the assets. In addition,estimation of the useful lives of property and equipment and investmentproperty is based on collective assessment of industry practice, internal technicalevaluation and experience with similar assets.

(f)

Impairment of Trade and Other Receivables

Adequate amount of allowance is provided for specific and groups of accounts,where an objective evidence of impairment exists. The Group evaluates theseaccounts based on available facts and circumstances, including, but not limitedto, the length of the Groups relationship with the customers, the customerscurrent credit status based on third party credit reports and known marketforces, average age of accounts, collection experience and historical lossexperience.

(g)

Valuation of Financial Assets Other than Trade and Other Receivables

The Group carries certain financial assets at fair value, which requires theextensive use of accounting estimates and judgment. In cases when activemarket quotes are not available, fair value is determined by reference to thecurrent market value of another instrument which is substantially the same or iscalculated based on the expected cash flows of the underlying net base of theinstrument. The amount of changes in fair value would differ had the Grouputilized different valuation methods and assumptions. Any change in fair valueof these financial assets and liabilities would affect profit and loss and equity.

(h)

Determining Realizable Amount of Deferred Tax Assets

The Group reviews its deferred tax assets at the end of each reporting periodand reduces the carrying amount to the extent that it is no longer probable thatsufficient taxable profit will be available to allow all or part of the deferred taxasset to be utilized.


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(i)

Impairment of Non-financial Assets

In assessing impairment, management estimates the recoverable amount of eachasset or a cash-generating unit based on expected future cash flows and uses aninterest rate to calculate the present value of those cash flows. Estimationuncertainties relates to assumptions about future operating results and thedetermination of suitable discount rate. Management believes that theassumptions used in the estimation of fair values reflected in the consolidatedfinancial statements are appropriate and reasonable, significant changes in theseassumptions may materially affect the assessment of recoverable values and anyresulting impairment loss could have a material adverse effect on the results ofoperations.

(j)

Valuation of Post-employment Defined Benefit

The determination of the Companys obligation and cost of post-employmentdefined benefit is dependent on the selection of certain assumptions used by

actuaries in calculating such amounts. Those assumptions include, amongothers, discount rates, salary rate increase, and employee turnover rate. Asignificant change in any of these actuarial assumptions may generally affect therecognized expense and the carrying amount of the post-employment benefitobligation in the next reporting period.

(k)

Business Combinations

On initial recognition, the assets and liabilities of the acquired business and theconsideration paid for them are included in the consolidated financial statementsat their fair values. In measuring fair value, management uses estimates of futurecash flows and discount rates. Any subsequent change in these estimates would

affect the amount of goodwill if the change qualifies as a measurement periodadjustment. Any other change would be recognized in profit or loss in thesubsequent period.


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4. SEGMENT INFORMATION

4.1 Business Segments

The Groups operating businesses are organized and managed separately according tothe nature of products and services provided, with each segment representing astrategic business unit that offers different products and serves different markets. TheGroup is engaged in the development of residential and office units including urbancenters integrating office, residential and commercial components. The Real Estatesegment pertains to the development and sale of residential and office developments.The Rental segment includes leasing of office and commercial spaces. The HotelOperations segment relates to the management of hotel business operations. TheCorporate and Others segment includes cinema operations, marketing services, generaland corporate income and expense items. The Group generally accounts forintersegment sales and transfers as if the sales or transfers were to third parties atcurrent market prices.

4.2

Segment Assets and Liabilities

Segment assets are allocated based on their physical location and use or directassociation with a specific segment and they include all operating assets used by asegment and consist principally of operating cash, receivables, real estate inventories,property and equipment, and investment property, net of allowances and provisions.Similar to segment assets, segment liabilities are also allocated based on their use ordirect association with a specific segment. Segment liabilities include all operatingliabilities and consist principally of accounts, wages, taxes currently payable, andaccrued liabilities.

4.3

Intersegment Transactions

Segment revenues, expenses and performance include sales and purchases betweenbusiness 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 industrysegments for the six months ended June 30, 2014 and 2013 and certain asset andliability information regarding segments as at June 30, 2014 and June 30, 2013.

June 30, 2014Hotel Corporate

Real Estate Rental Operations and Others Elimination Consolidated

TOTAL REVENUES

Sales to external customers P 14,616,624,218 P 3,444,283,749 P 368,418,777 P 793,763,398 P - P 19,223,090,142

Intersegment sales - 110,323,197 - 258,808,376 ( 369,131,573) -

Total revenues P 14,616,624,218 P 3,554,606,946 P 368,418,777 P 1,052,571,774 (P 369,131,573) P 19,223,090,142

RESULTS

Segment results P 3,400,215,175 P 2,512,005,503 P 89,943,309 P 38,011,699 (P 29,654,813) P 6,010,520,873

Interest and other income 12,429,998,591

Interest and other charges ( 642,985,529)

Equity in net earnings of associates 304,394,257

Tax expense ( 1,577,250,807)

Pre-acquisition income of subsidiaries ( 83,362,308)

Net Profit P 16,441,315,077

ASSETS AND LIABILITIES

Segment assets P 154,785,163,150 P39,212,712,352 P 1,105,722,535 P 7,368,417,205 P - P 202,472,015,242

Investments in and advances

to associates and other

related parties - net - - - 5,057,164,390 - 5,057,164,390

Total assets P154,785,163,150 P39,212,712,352 P 1,105,722,535 P 12,425,581,595 P - P 207,529,179,632

Segment liabilities P 73,764,180,938 P5,599,128,633 P 200,132,214 P 3,166,758,828 P - P 82,730,200,613


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June 30, 2013 (As Restated)

Hotel CorporateReal Estate Rental Operations and Others Elimination Consolidated

TOTAL REVENUES

Sales to external customers P 12,868,020,309 P 2,828,913,058 P 224,789,443 P 317,902,090 P - P 16,239,624,900

Intersegment sales - 56,518,234 - 226,237,781 ( 282,756,015) -

Total revenues P 12,868,020,309 P 2,885,431,292 P 224,789,443 P 544,139,871 (P 282,756,015) P 16,239,624,900

RESULTS

Segment results P 2,686,901,768 P 2,226,576,292 P 47,682,015 P 6,360,963 P 12,944,427 P 4,980,465,465

Interest and other income 810,945,105

Interest and other charges ( 512,280,666)

Equity in net earnings of associates 230,261,131

Tax expense ( 1,280,278,149)

Net Profit P 4,229,112,886

ASSETS AND LIABILITIES

Segment assets P 122,801,233,374 P19,021,620,341 P 250,052,696 P12,929,029,224 P - P 155,001,935,635

Investments in and advances

to associates and other

related parties - net - - - 8,183,504,164 - 8,183,504,164

Total assets P 122,801,233,374 P 19,021,620,341 P 250,052,696 P21,112,533,388 P - P 163,185,439,799

Segment liabilities P 67,487,689,162 P 2,304,240,711 P 106,777,036 P 6,134,639,515 P - P 76,033,346,424

5. STOCK RIGHTS

As a result of the stock rights offering, 5,127,556,725 common shares were subscribedand issued on June 1, 2009. Of the total exercise price, 50% was paid as of May 31,2009 and the remaining 50% was paid by the subscribers in 2010. Relative to theshare subscription, 4,102,045,380 stock warrants were issued and these will beexercisable beginning on the second year until five years from issue date. As of thesecond quarter of 2014, 3,997,510,899 stock warrants were exercised. The remainingwarrants are exercisable until 2015.


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6. EMPLOYEE BENEFITS

Effect of Restatement to Comparative Financial Statements

The Group has applied PAS 19 (Revised) retrospectively in accordance with itstransitional provisions. Consequently, it restated the comparative financial statementsfor June 30, 2013. The effects of the adoption of PAS 19 (Revised) on theconsolidated statements of income, consolidated statements of comprehensiveincome, and consolidated components of equity as at and for the six months endedJune 30, 2013 are shown below:

Increase(Decrease)Consolidated Statements of Income

Operating Expenses P 8,118,411Interest and Other Chargesnet 18,484,313Tax Expense (7,980,817)

P 18,621,907

Consolidated Statements of Comprehensive IncomeActuarial Gains (Losses) on

Retirement Benefit Obligations P 9,448,879

Consolidated Components of EquityRetained Earnings P (9,932,522)Net Actuarial Gains (Losses) on

Retirement Benefit Plan (152,912,835)Non-controlling Interest (9,994,638)

(P 172,839,995)

7. CASH DIVIDENDS

The details of the Companys cash dividend declarations, both for preferred andcommon shares, are as follows:

2014

Declaration date/date of approval by BOD June 16, 2014

Date of record June 30, 2014

Date of payment July 24, 2014

Amounts declared and for payment P 1,246,941,619


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8. EARNINGS PER SHARE

Earnings per share (EPS) amounts were computed as follows:

June 30, 2014 June 30, 2013(As Restated)

Net profit attributable to Companysshareholders P 16,326,574,092 P 4,187,697,549

Computed dividends on cumulativepreferred shares series A ( 297,534) ( 297,534)

Profit available to Companyscommon shareholders P 16,326,276,558 P 4,187,400,015

Divided by weighted average number

of outstanding common shares31,607,906,288

28,811,940,441Basic EPS P 0.517 P 0.145

Divided by weighted average numberof outstanding common sharesand potential dilutive shares 31,831,289,628 29,037,708,847

Diluted EPS P 0.513 P 0.144

9. COMMITMENTS AND CONTINGENCIES

There are commitments, guarantees and contingent liabilities that arise in the normalcourse of operations of the Group which are not reflected in the accompanyinginterim consolidated financial statements. The management of the Group is of theopinion, that losses, if any, from these items will not have any material effect on itsconsolidated financial statements.

In addition, there are no material off-balance sheet transactions, arrangements,obligations and other relationships of the Group with unconsolidated entities orother persons created during the reporting period.


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10. SEASONAL FLUCTUATIONS

There were no seasonal aspects that had a material effect on the financial conditionor results of operations of the Group.

11. RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group has various financial instruments such as cash and cash equivalents,financial assets at FVTPL, available-for-sale securities, interest-bearing loans andborrowings, bonds, trade receivables and payables which arise directly from theGroups business operation. The financial debts were issued to raise funds for theGroups capital expenditures.

Exposure to currency, interest rate, credit, liquidity and equity risk arise in theordinary course of the Groups business activities. The main objective of theGroups 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 speculativepurposes.

11.1 Foreign Currency Sensitivity

Most of the Groups transactions are carried out in Philippine peso, its functionalcurrency. Exposures to currency exchange rates arise mainly from the GroupsU.S. dollar-denominated cash and cash equivalents, and bonds which have been usedto fund new projects and to refinance certain indebtedness for general corporatepurposes.

Exposures to foreign exchange rates vary during the period depending on thevolume of overseas transactions and mainly affect consolidated profit or loss of theGroup. Management is confident that any exposure to foreign exchange rates willnot adversely affect the Groups financial performance.

11.2 Interest Rate Sensitivity

The Groups interest risk management policy is to minimize interest rate cash flowrisk exposures to changes in interest rates. The Group maintains a debt portfoliounit of both fixed and floating interest rates. Changes in the market interest rates

related primarily to the Groups interest-bearing debt obligations with floatinginterest rate can directly cause a change in the amount of interest payment.

The Group manages its interest risk by leveraging the fixed interest rate debtobligations over the floating interest rate debt obligations in its debt portfolio.


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11.3 Credit Risk

Generally, the Groups credit risk is attributable to trade receivables, rentalreceivables and other financial assets. The Group maintains defined credit policiesand continuously monitors defaults of customers and other counterparties, identified

either individually or by group, and incorporate this information into its credit riskcontrols. Where available at a reasonable cost, external credit ratings and/or reportson customers and other counterparties are obtained and used. The Groups policy isto deal only with creditworthy counterparties. In addition, for a significantproportion of sales, advance payments are received to mitigate credit risk.

11.4 Liquidity Risk

The Group manages its liquidity needs by carefully monitoring scheduled debtservicing payments for long-term financial liabilities as well as cash outflows due in aday-to-day business. Liquidity needs are monitored in various time bands, on aday-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 a one-year period are identified monthly.

The Group maintains cash to meet its liquidity requirements for up to 60-dayperiods. Excess cash are invested in time deposits or short-term marketablesecurities. Funding for long-term liquidity needs is additionally secured by anadequate amount of committed credit facilities and the ability to sell long-termfinancial assets.

11.5

Other Price Risk Sensitivity

The Groups market price risk arises from its investments carried at fair value(financial assets classified as FVTPL and AFS). It manages its risk arising fromchanges in market price by monitoring the changes in the market price of theinvestments.

The investments in listed equity securities are considered long-term strategicinvestments. In accordance with the Groups policies, no specific hedging activitiesare undertaken in relation to these investments. The investments are continuouslymonitored and voting rights arising from these equity instruments are utilized in theGroups favor.


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12. CATEGORIES AND FAIR VALUES OF FINANCIAL ASSETS ANDLIABILITIES

12.1 Carrying Amounts and Fair Values by Category

The carrying amounts and fair values of the categories of financial assets andliabilities presented in the consolidated statements of financial position are shownbelow.

June 30, 2014 (Unaudited) December 31, 2013 (Audited)Carrying Values Fair Values Carrying Values Fair Values

Financial AssetsLoans and receivables:

Cash and cash equivalents P 28,581,340,903 P 28,581,340,903 P 31,751,905,645 P 31,751,905,645Trade and other receivables - net 46,733,203,693 46,733,203,693 41,376,845,105 41,376,845,105Advances to associates and other

related parties 3,833,767,860 3,833,767,860 2,808,216,620 2,808,216,620Guarantee and other deposits 545,385,748 545,385,748 435,979,746 435,979,746

P 79,693,698,204 P 79,693,698,204 P 76,372,947,116 P 76,372,947,116

Financial assets at FVTPL P 291,000,000 P 291,000,000 P 258,000,000 P 258,000,000

AFS Equity securities P 6,674,411,156 P 6,674,411,156 P 3,928,755,091 P 3,928,755,091

Financial LiabilitiesFinancial liabilities at amortized cost:

Interest-bearingloans and borrowings P 3,212,626,630 P 3,212,626,630 P 3,799,905,234 P 3,799,905,234

Bonds payable 24,413,103,120 24,413,103,120 24,826,702,190 24,826,702,190Trade and other payables 9,727,727,044 9,727,727,044 7,198,373,106 7,198,373,106Advances from other

related parties 741,481,286 741,481,286 120,487,829 120,487,829Redeemable preferred shares 1,257,987,900 1,257,987,900

P 39,352,925,980 P 39,352,925,980 P 35,945,468,359 P 35,945,468,359

12.2

Fair Value Hierarchy

The Group uses the following hierarchy level in determining the fair values that willbe disclosed for its financial instruments.

a.) Level 1: quoted prices (unadjusted) in active markets for identical assets orliabilities that an entity can access at the measurement date;

b.) Level 2: inputs other than quoted prices included within Level 1 that areobservable 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 marketdata (unobservable inputs).

The level within which the asset or liability is classified is determined based on thelowest level of significant input to the fair value measurement. The financial assetsat FVTPL is categorized in Level 1 as quoted prices are available. Except forPhp3.43 million AFS equity securities categorized in Level 3, all other AFS equitysecurities are categorized in Level 1.


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1

Managements Discussion and Analysis of Results of Operations and FinancialCondition

Results of Operations

(Based on Financial Statements adopted in accordance with the Philippine FinancialReporting Standards)

Review of June 30, 2014 versus June 30, 2013 (As Restated)

The Group posted a record high of 288.77% increase in consolidated net profit amountingto Php16.44 billion (inclusive of Php11.62 billion non-recurring gains from the acquisitionand sale of subsidiary and associate) for the first half of 2014. Excluding the one-time gains,net income of Php4.83 billion translates to 14.10% increase year on year.

Consolidated revenues comprising of real estate sales, rental income, hotel operations, and

other revenues posted an increase of 84.93% from Php17.28 billion to Php31.96 billion.Core revenues amounted to Php20.34 billion, resulting from strong property sales andsustained growth in leasing and hotel income, 17.71% higher than the Php17.28 billionrevenues of the same period.

Development.Among product portfolios, the bulk of generated consolidated revenues arederived from the sale of condominium units and residential lots amounting to Php12.01billion in 2014 compared to Php10.53 billion in 2013, an increase of 14.03%. The Groupsregistered sales mostly came from the following projects: McKinley West Village, TheVenice Luxury Residences, One Eastwood Avenue, Three Central, Savoy Hotel, UptownRitz Residences, Greenbelt Hamilton, One Uptown Residences, Viceroy Towers, One

Pacific Residences, Uptown Parksuites, One Madison Place, One Central, Noble Place,Golfhills Garden Square, and Paseo Heights.

Leasing.Rental income contributed 16.93% to the core revenues and amounted to Php3.44billion compared to Php2.83 billion reflected last year second quarter, a 21.75% increase.Contributing to the growth are the escalation of rental rates and increase in demand foroffice space from BPO Companies.

Hotel Operations. With the consolidation of a new subsidiary, the Groups revenuesattributable to hotel operations grew by 63.90% posting an amount of Php368.42 million insecond quarter 2014 from Php224.79 million in second quarter 2013.

In general, the increase in costs and expenses by 18.24% from Php13.05 billion in secondquarter 2013 to Php15.43 billion in second quarter 2014 was mainly due to the increase inrecognized real estate sales and increase in other administrative and corporate overheadexpenses. Income tax expense in second quarter 2014 amounted to Php1.58 billion resultingto a 23.20% increase from the second quarter 2013 reported amount of Php1.28 billion dueto higher taxable income.

EXHIBIT 6


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2

There were no seasonal aspects that had a material effect on the financial condition orfinancial performance of the Group. Neither were there any trends, events or uncertaintiesthat have had or that are reasonably expected to have a material impact on net sales orrevenues or income from continuing operations. The Group is not aware of events that willcause material change in the relationship between costs and revenues.

There are no significant elements of income or loss that did not arise from the Groupscontinuing operations.

Financial Condition

The Group maintains a prudent financial policy as it engages to a more competitive andchallenging environment. The Groups Statement of Financial Position reflects stablefinancial growth. Total resources as of June 30, 2014 amounted to Php207.53 billion postedan increase of 19.35% compared to Php173.88 billion as of December 31, 2013.

The Group shows steady liquid position as of June 30, 2014 by having its current assets atPhp113.84 billion as against its current obligations at Php36.45 billion. Current assets postedan increase of 15.62% from December 31, 2013 balance of Php98.46 billion. Currentobligations reflected an increase of 40.77% from December 31, 2013 balance of Php25.90billion.

Cash and cash equivalents decreased by 9.99% from Php31.75 billion in 2013 to Php28.58billion in 2014 due to capital expenditure and operating activities for business expansion. Anincrease of 16.92% from its current and non-current trade and other receivablesPhp50.27billion as of June 30, 2014 compared to Php43.00 billion as of December 31, 2013, was dueto additional sales for the period and contribution of a new subsidiary. Residential and

condominium units for sale further increased by 37.84% from Php35.11 billion in 2013 toPhp48.40 billion in 2014 mainly due to the consolidation of a new subsidiary. Propertydevelopment costs increased by 5.94% from Php9.71 billion in 2013 to Php10.28 billion in2014. The Groups investments in available-for-sale securities increased by 69.89%, fromPhp3.93 billion in 2013 to Php6.67 billion in 2014 due to reclassification of investment inassociate as available-for-sale securities resulting from decrease in ownership. InvestmentProperty increased by 33.44% amounting to Php33.29 billion in June 30, 2014 fromPhp24.95 billion in December 31, 2013 due to completion of properties for lease andconsolidation of newly acquired subsidiaries.

Trade and other payables amounted to Php9.73 billion and Php7.20 billion as of June 30,

2014 and December 31, 2013, respectively. Aside from the payable arising from declarationof dividends, the increase of 35.14% was also due to the consolidation of new subsidiaries.Total customers depositscurrent and non-current as of June 30, 2014 amounted to Php8.08billion compared to Php5.12 billion as of December 31, 2013 with 57.97% increase. Thecombined effect of current and non-current deferred income on real estate sales increased by23.45% which amounted to Php9.22 billion as of June 30, 2014 compared to Php7.47 billionas of December 31, 2013.


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3

The interest-bearing loans and borrowings current and non-current amounted to Php3.21billion resulted in a 15.46% decrease from previous year-ends Php3.80 billion mainly due toprincipal payments of loans. Total other liabilities amounted to Php4.01 billion fromPhp3.59 billion as of June 30, 2014 and December 31, 2013, respectively translating to a11.89% increase.

Total Equity (including non-controlling interest) increased by 22.41% from Php101.95billion as of December 31, 2013 to Php124.80 billion as of June 30, 2014 due to the Groupscontinuous profitability including the non-recurring gains from the acquisition and sale ofsubsidiary and associate.

The top five (5) key performance indicators of the Group are shown below:

June 30, 2014 December 31, 2013Current Ratio *1 3.12:1 3.80:1Quick Ratio *2 0.78:1 1.23:1Debt to Equity Ratio *3 0.22:1 0.28:1

June 30, 2014 June 30, 2013(As Restated)

Return on Assets *4 8.62% 2.76%Return on Equity *5 16.37% 5.64%

*1 Current Assets / Current Liabilities*2 Cash and Cash Equivalents / Current Liabilities*3 Interest Bearing Loans and Borrowings and Bonds payable /StockholdersEquity*4 Net Income / Average Total Assets*5 Net Income / Average StockholdersEquity (Computed using figures attributable only to

parent company shareholders)

With its strong financial position, the Group will continue investing in and pursuingexpansion activities as it focuses on identifying new markets, maintaining establishedmarkets and tapping business opportunities.

Material Changes in the Year 2014 Financial Statements(Increase/decrease of 5% or more versus December 31, 2013)

Statement of Financial Position

9.99% decrease in cash and cash equivalentsDue to capital expenditure and operating activities for business expansion

16.92% increase in trade and other receivablescurrent and non-currentPrimarily due to additional sales booking for the period and contribution of a new subsidiary

12.79% increase in financial assets at fair value through profit or lossDue to increase in market value of financial assets


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5

83.76% decrease in income tax payableDue to payment of prior year income tax due

100% increase in redeemable preferred sharesDue to consolidation of a new subsidiary

12.51% increase in deferred tax liabilitiesPertains to tax effects of taxable and deductible temporary differences

515.40% increase in advances from associates and other related partiesDue to consolidation of a new subsidiary

10.60% increase in retirement benefit obligationAdditional accrual of retirement plan of employees

11.89% increase in other liabilitiescurrent and non-currentAdditional increase on deferred income and consolidation of new subsidiaries

(Increase/decrease of 5% or more versus June 30, 2013)

Statements of Income

14.03% increase in real estate salesPrimarily due to higher sales recognized for the period

8.17% increase in interest income on real estate salesRecognition of interest income from prior years sales

13.18% increase in realized gross profit on prior years salesRepresents portion of gross profit from real estate sales made in prior years realized for theperiod

21.75% increase in rental incomeDue to escalation of rental rates and increase in demand for office space from BPOCompanies

63.90% increase in hotel operationsDue to consolidation of a new subsidiary

32.20% increase in equity share in net earnings of associatesRepresents the companys share in the net earnings of its associates

1071.44% increase in interest and other income-netMainly due to non-recurring gains from the acquisition and sale of subsidiary and associate

12.20% increase in cost of real estate salesDue to increase in real estate sales


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40.11% increase in operating expensesDue to increase in other administrative and corporate overhead expenses and contributionfrom new subsidiaries

9.01% increase in deferred gross profitPertains to the portion of gross profit from current real estate sales to be realized in futureperiods

19.15% increase in interest and other chargesnetMainly due to interest expense on dollar bonds

48.11% increase in hotel operations expensesDue to consolidation of a new subsidiary

23.20% increase in income tax expenseDue to higher taxable income and tax effects of deductible temporary differences

There are no other significant changes in the Groups financial position (5% or more) andcondition that will warrant a more detailed discussion. Further, there are no material eventsand uncertainties known to management that would have impact or change the reportedfinancial information and condition on the Group.

There are no known trends or demands, commitments, events or uncertainties that willresult in or that are reasonably likely to result in increasing or decreasing the G roupsliquidity in any material way. The Group does not anticipate having any cash flow or liquidityproblems. The Group is not in default or breach of any note, loan, lease or otherindebtedness or financing arrangement requiring it to make payments.

There are no material off-balance sheet transactions, arrangements, obligations (includingcontingent obligations), and other relationships of the Group with unconsolidated entities orother persons created during the reporting period.

The Group has no unusual nature of transactions or events that affects assets, liabilities,equity, net income or cash flows.

There were no seasonal aspects that had a material effect on the financial condition orresults of operations of the Group.

The unaudited interim condensed consolidated financial statements do not include all theinformation and disclosure required in the financial statements and should be read inconjunction with the Groups consolidated annual financial statements as of and for the yearended December 31, 2013.

The accounting policies and methods of computation adopted in preparation of the Groupsunaudited interim consolidated financial statements are the same with the most recentannual financial statements for the year ended December 31, 2013.


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There were no known material events subsequent to the end of the interim period that havenot been reflected in the Groups Financial Statements for the second quarter of 2014.

There were no changes in estimates of amount reported in the current financial year orchanges in estimates of amounts reported in prior financial years.

There was no contingent liability reflected in the most recent annual financial statements, thesame in the current year consolidated financial statements for the second quarter of 2014.There are commitments, guarantees and contingent liabilities that arise in the normal courseof operations of the Group which are not reflected in the accompanying interimconsolidated financial statements. The management of the Group is of the opinion thatlosses, if any, from these items will not have any material effect on its interim consolidatedfinancial statements.

There were no other material issuances, repurchases or repayments of debt and equitysecurities.

There are no material commitments for capital expenditures, events or uncertainties thathave had or that are reasonable expected to have a material impact on the continuingoperations of the Group.


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Aging of Accounts Receivables

June 30, 2014

(In thousand pesos)

Past due

TOTAL CURRENT/ 7 Months - Above accounts & item

NOT YET DUE 1-3 Months 4-6 Months 1 Year 1 Year in Litigation

Type of Receivables:

a. Trade and other receivables 50,273,459 48,608,538 995,706 346,410 181,561 141,244 -

EXHIBIT 7


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Current ratio 3.12 :1.00 3.80 :1.00

Quick ratio 0.78 :1.00 1.23 :1.00

Debt-to-equity ratio 0.22 :1.00 0.28 :1.00

Interest-bearing debt to total capitalization ratio 0.20 :1.00 0.24 :1.00

Asset-to-equity ratio 1.66 :1.00 1.71 :1.00

Interest rate coverage ratio

Net profit margin

Return on assets

Return on equity


SCHEDULE OF FINANCIAL SOUNDNESS INDICATORS

JUNE 30, 2014 AND DECEMBER 31, 2013

JUNE 30, 2014 DECEMBER 31, 2013

8.62% 2.76%

16.37% 5.64%

JUNE 30, 2013

( As Restated )

2172.37% 821.00%

51.45% 24.47%

EXHIBIT 8

LIQUIDITY RATIOS measure the business ability to pay short-term debt.Current ratiocomputed as current assets divided by current liabilitiesQuick ratiocomputed as cash and cash equivalents divided by current liabilities

SOLVENCY RATIOS measure the business ability to pay all debts, particularly long-term debt.Debt to equity ratiocomputed as interest bearing loans and borrowings and bonds payable

divided by total stockholders equity.Interest-bearing debt to total capitalization ratiocomputed as interest-bearing debt divided

by interest-bearing debt+stockholders equity attributable to the company's

shareholders.

ASSET-TO-EQUITY RATIOS measure financial leverage and long-term solvency. It showshow much of the assets are owned by the company. It is computed as totalassets divided by stockholders equity.

INTEREST RATE COVERAGE RATIOS measure the business ability to meet its interestpayments. It is computed as Earnings before income tax and interestexpense (EBIT) divided by interest payments.

PROFITABILITY RATIOSNet margincomputed as net profit divided by revenuesReturn on assetsnet profit divided by average total assets

Return on equitynet profit attributable to the company's shareholders divided by averagestockholders' equity attributable to the company's shareholders.

Documents

Megaworld: Q2/H1 financial statement