Company Profile

CHAIRMAN'S MESSAGE
MEGAWORLD ANNUAL REPORT 2011

The year 2011 saw a modest expansion in the local economy as the country’s gross domestic product grew by 3.7%, compared to 7.6% growth in the previous year. The economy’s rather lethargic movement in 2011 was attributed to a relatively weak export sector as well as cautious government spending. Despite the country’s sluggishness in 2011, however, the resulting growth rate still fell within the government’s official projection of around 3.6% to 4% for the year.

One of the few bright spots in the country’s economy in 2011 was the Philippine real estate industry which experienced another landmark year. In fact, 2011 proved to be a much stronger year for the local property industry than the previous on, buoyed largely by the increased demand for business process outsourcing (BPO) office space and the continued vibrancy of the middle-income residential property market.

The spike in foreign investments in real estate during the year manifested an exponential increase in investor confidence resulting from a marked growth in private infrastructure initiatives. Indeed, extensive property development activities in 2011 continued to transform metropolitan areas into growing world class cities. Moreover, real estate development continued in nearby towns and cities such as Cavite, Laguna, and Batangas, slowly but surely shaping up to be supplementary economic growth areas.

In 2011, Megaworld outdid itself and turned in another sterling performance, riding the crest of an increased demand for your Company’s BPO office spaces and the continued strong sales performance of its integrated townships. During the year, consolidated net income amounted to P8.16 billion, a gain of 60.37% from the previous year’s net income of P5.09 billion.

Consolidated total revenues composed of real estate sales, rental income, hotel income, and other revenues grew by a substantial 39.35% from P20.54 billion the previous year to P28.63 billion, on the back of strong property sales and increased leasing income and nonrecurring gain from the sale of shares. Rental income contributed 13.37% to the consolidated revenue figure and amounted to P3.83 billion for 2011, 42.02% higher than the P2.70 billion in revenues the previous year. The growth in rental income, in turn, is attributed to the escalation and completion of additional leasing properties and increase in demand for BPO office space.

As the Philippines surges ahead in the global job outsourcing industry, more and more foreign investors set up shop in the country. These investors hope to take advantage of friendly foreign investment policies and low labor costs to establish voice and non-voice outsourcing operations here in the country.

We foresaw this development and started constructing office buildings optimized for BPO operations as early as a few years ago, even before the local BPO boom. I am proud to say that we are now reaping the fruits of this move of ours. Because of this, Megaworld has risen to become the leading BPO office space provider in the country with a total BPO office space inventory of 400,000 square meters as of end-2011, largest in the country.

To complement the success of our BPO office space development projects, our fully integrated mega-communities continue to attract buyers, owing to the success of our pioneering “live-work-play-learn-shop” development concept. We have always made sure that our integrated townships provide basically everything that residents need within the community. This has allowed our communities to stand out above the rest in terms of comfort, convenience and plenitude which, in turn, made them highly attractive to our market and caused them to perform excellently in sales.

Right now, Megaworld continues to proudly carry the distinction of being the largest middle-income residential property developer in the country. To ensure that we keep this distinction, we have launched, in 2011 alone, nine new residential projects, including 10-story Belmont Luxury Hotel in Newport City and the 8 Newtown Boulevard in Cebu City. We expect these new projects to be completed in two to four years.

The 8 Newtown Boulevard residential project is situated in a piece of prime property in Cebu that is part of our 25-hectare land bank in that province. All-in-all, Megaworld has set in place a land bank with a total of around 230 hectares in key growth areas, including 55 hectares of prime land in Iloilo, 25 hectares in Cebu, within Fort Bonifacio, it has 7.1 hectares of the former NAPOLCOM land near the international schools. And 8.5 hectares at the North Central Business District in North Bonifacio. These have a total land area of 2.29 million square meters, of which around one million square meters will be developed into residential areas and around 886,000 square meters will be allocated for office spaces. The remaining land will be used for retail and leisure development projects.

Moreover, plans are afoot to develop the huge 34.5-hectare Joint United States Military Advisory Group (Jusmag) property in Fort Bonifacio over the next 20 years. We intend to turn this property located behind Forbes Park into a mixed-use complex at an estimated cost of at least P22 billion. This piece of prime land brings to around 105 hectares our total development portfolio in Fort Bonifacio.

The year 2011 was another kind year for Megaworld, with our targets achieved and our plans accomplished. As we gear up for another year, we foresee both challenges and opportunities for us. Reports show that the residential, commercial and office segments of the local real estate industry have recently been showing significant growth both in the number of projects and in sales. If this continues on to 2012 and beyond, we should expect the Philippines to eventually become replete with bustling metropolitan areas with modern skylines and complete mega-communities.

As increasing income from a slowly stabilizing economy fuel growth in residential property sales and the continued influx of foreign investors establishing job outsourcing businesses here drives office space sales and rentals upwards, we continue to ensure that we are both ready and capable to grab opportunities and overcome challenges that will come our way and provide our market with the best projects we can offer.

Again, we thank our stockholders for their undying support all these years. We extend our appreciation as well to our management and staff for their commitment to our ideals and objectives. Without your help, we would not have been able to succeed not only in changing the Philippines landscape but improving it and bringing it up to par with global standards. More than anything else, without your support, we would not have been able to make our world grow in more ways than one.

CORPORATE SOCIAL RESPONSIBILITY

Megaworld Foundation, Inc. is a non-stock, non-profit organization which aims to contribute to the country’s development, primarily by promoting education through scholarship programs for financially handicapped but deserving students. It also supports causes that promote poverty alleviation, people empowerment, social justice, good governance, environmental conservation and other noble undertakings.

The Foundation also aims to provide society with a new generation of professionals whose drive for excellence equals their passion for community involvement. Their academic skills and knowledge applied to the fields of Engineering, Architecture, Interior Design, Information Technology, Accountancy, Finance, Business and Legal courses, combined with the urgency to be socially responsible, shall be the foundation’s contribution to the country’s industrial advancement and economic progress.

History

Megaworld Foundation, Inc. was established in 1999 as Megaworld Corporation’s socio-civic arm. It initially offered scholarship grants to students taking up Engineering and Architecture courses at the University of the Philippines and Mapua Institute of Technology, where it sponsored 70 scholars from first to fourth year. In 2000, it included the following schools in its scholarship program: University of Santo Tomas, University of the East, Far Eastern University, Pamantasan ng Lungsod ng Maynila, and the Polytechnic University of the Philippines.

Since 1999, the Foundation has also given financial assistance and support to a variety of organizations that aim to promote social justice and improve the lives of Filipinos.

In 2005, it made the leadership grant part of its scholarship program as its way of supporting the country's future leaders. Leadership grants are given to students that excel both in their academic and extra-curricular activities.

In 2007, the Foundation partnered with DEPED’s Adopt-a-school Program and had a memorandum of agreement to support Raja Soliman High School and Jose Abad Santos High School. The Foundation has also been accredited to Philippine Council for NGO Certification. Last year, the Foundation became a member of Association of Foundations (AF). AF is a heterogeneous federation of foundations which aims to improve development work in the country by building its members’ capacities and by nurturing partnerships that will strengthen the network’s response to challenges and change.

Vision

To be a leading foundation that promotes corporate social responsibility by organizing and supporting educational and charitable programs geared toward the social and economic development of the less privileged.

Mission

• To provide scholarship grants to financially handicapped but academically qualified students
• To acknowledge students with leadership qualities and support their activities
• To provide financial assistance to foundations and socio-civic organizations that share the same vision as the Foundation

Officers of Megaworld Foundation, Inc.

• Andrew L. Tan – Chairman
• Francisco C. Canuto – President
• Kevin L. Tan – Treasurer
• Lourdes G. Clemente – Corporate Secretary
• Monica Solomon – Director

Total Number of Scholars for School Year 2009-2010

• Regular Scholarship – 245
• Special Scholarship – 111
• Leadership Grant – 5

Partner Schools and Universities for the Scholarship Program

• Adamson University
• Ateneo de Manila University
• Centro Escolar University
• De La Salle University - Manila
• Far Eastern University
• Far Eastern University – East Asia College
• Lyceum of the Philippines University
• Mapua Institute of Technology
• National University
• Pamantasan ng Lungsod ng Maynila
• Philippine School of Business Administartion
• Polytechnic University of the Philippines
• San Beda College
• San Sebastian College- Recoletos
• Technological Institute of the Philippines
• Technological University of the Philippines
• University of Santo Tomas
• University of the East – Manila
• University of the Philippines – Diliman

MEGAWORLD SPONSORSHIPS

A. MAJOR SPONSORSHIPS

1. Daughters of Mary Help Foundation
2. Haribon Foundation
3. Foundation of Our Lady Of Peace Mission
4. ABS-CBN Bantay Kalikasan
5. GMA Kapuso Foundation
6. Teen Dynamic Inc. (Efren Peñaflorida)
7. Caritas Manila
8. Hospicio de San Jose
9. Philippine Heart Center
10. Philippine Cancer Society
11. Philippine General Hospital
12. National Kidney Transplant Institute
13. Children's Hour Philippines, Inc.
14. ABS-CBN Kapit Bisig Para sa Ilog Pasig (KBPIP)
15. Unicef
16. National Press Club of the Philippines
17. Philippine Tuberculosis Society, Inc.
18. Cottolengo Filipino Bahay Para sa May Kapansanan
19. Let the (Special) Children Come to Me
20. Anawim Lay Missions Foundation Inc.
21. Dulaang Tahimik ng Pilipnas
22. Manila Boys Town
23. Golden Acres
24. Child Hope Asia
25. United Way Philippines Inc.
26. Create a Job for the Disabled
27. Worldwide Anti-Crime and Child Abuse Assistance Group, Inc.

B. MINOR SPONSORSHIPS

1. Central Luzon Conference of Seventh-Day Adventist Church
2. Episcopal Commission on Prison Pastoral Care
3. National Blind Masseurs
4. Masonic District NCR-A
5. Philippine Institute of Certified Public Accountants
6. Easter Heart Draw

OUTREACH/ACTIVITIES

1. CSR Expo 2009
2. PBSP Corporate Citizenship Workshop
3. La Mesa Eco-Park Tree Planting
4. Association of Foundations General Assembly
5. Philippine Council for NGO Council General Assembly
6. Medical Mission- Barangay Central BIR Road
7. Cottolengo Filipino Bahay Para sa May Kapansanan
8. Hospicio de San Jose
9. 10.10.10. A Run for Ilog Pasig