THE FUTURE - megawide.com.ph · Construction Corporation. It is the continued drive and goal of the...

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THE FUTURE IS OUR DESTINATIONFrom basic building methods to innovative solutions, Megawide continues to strengthen its foothold in the industry through strategic diversification, transforming into one of the leading and largest construction conglomerates in the country.

We blaze paths and build the foundation of a more stable future.

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Net Income

Total Market Capitalization

Consolidated

P1.9 Bn (+30%)

P31.7 BnAt a price of P14.80per share by the end of 2016

P38.5 BnOrder Book Backlog

P12.7 BnNew Contracts Booked

Construction

P1.0 Bn (+5%)

Airport

P903 M (+80%)

2016 IN REVIEWMEGAWIDE EPC

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INFRASTRUCTURE

Mactan-Cebu International Airport

Philippine School Infrastructure Project

Southwest Intermodal Transport Exchange

8.9 MPPAPassenger volume up

by 12% from 20159,580Classrooms built in

Regions 1, 2, 3, 4A, and CAR

306Total number of bays alloted for

embarkation, disembarkation,

and staging of PUVs

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Revenues

Cash & Cash Equivalents

EBITDA

Concession Assets

Net Income

Total Assets

Total Borrowings

Stockholders’ Equity

Net Income (attributable to equity holders of MWIDE)

Construction

Airport

Statement of Income

Statement of Financial Position

2016

2016

17,658

10,938

3,604

20,339

1,920

51,085

1,559

25,763

16,210

15,786

1,872

2015

2015

15,442

9,263

3,030

16,370

1,474

48,515

1,274

22,542

16,604

13,958

1,484

2014

2014

10,042

8,087

1,859

15,070

887

39,507

868

19,915

15,410

9,842

200

(in Million Php)

(in Million Php)

FINANCIAL HIGHLIGHTS

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Current Ratio

Debt-to-Equity Ratio

Net Debt-to-Equity Ratio

Net Debt-to-EBITDA Ratio

Return on Equity

Financial Ratios

2016

1.83

1.59

0.91

4.11

12%

2015

1.78

1.36

0.80

4.39

9%

2014

0.90

1.29

0.77

6.36

7%

Stock Information

2016

31,651

14.80

0.57

2015

14,397

6.20

0.41

2014

20,875

8.89

0.35

Market Capitalization(in Billion Php)

Stock Price(per share as of year-end, in Php)

Earnings Per Share

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OUR MISSIONTo improve communities through Engineering Excellence by continuously delivering the highest quality of service to our partners.

OUR VISIONTo become the Philippines’ leading and largest construction conglomerate.

OUR VALUESExcellence. Commitment. Innovation. Teamwork. Safety.

Ex.C.I.Te.S. is the acronym of the corporate values of Megawide Construction Corporation. It is the continued drive and goal of the company to institutionalize these values and infuse them into its culture.

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Message from the Chairman

The President’s Report

The Long View: 1997-2016

Business Review

Corporate Governance

The Heart of Engineering

Management Discussion and Analysis

Financial Report

Corporate Information

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12

16

18

30

52

58

70

183

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HARNESSING THE ORGANIZATION FOR GROWTH

Message from the Chairman

In 2016, the Philippine economy emerged as one of the fastest growing economies in Asia. Spurred by strong domestic consumption and benign inflation, gross domestic product (GDP) expanded 6.8%, outpacing neighboring Asian countries. Amidst some global uncertainties, the country’s solid macroeconomic fundamentals reaffirm that this bullish growth can be sustained in the years to come.

2016 was also a year of political transition. The Philippines welcomed a new administration with its 10-point socioeconomic agenda that promotes infrastructure spending. This course, which has been set for the next six years, bodes well for Megawide’s strategic direction.

The Company’s thrust last year towards vertical integration has been vital in weathering the risks of the cyclical nature of the construction business, and has successfully transformed the Company from a pure construction player to a diversified conglomerate.

At the forefront of the country’s “Golden Age of Infrastructure,” we remain optimistic that our competitive advantage, which gives us an edge in terms of pricing, quality, and consistency, lies in our core value of Engineering Excellence, and the proper utilization of our integrated downstream technologies such as precast, formworks, and modern construction equipment.

2016 was remarkable for Megawide, as we were able to hit our full-year targets and deliver steady growth across our business segments. Since our Company’s initial public offering in 2011, our construction revenues have more than doubled and grown at a compounded annual growth rate of 15%. Our order book has remained at a healthy level, propelled by new private sector contracts. We also expect an upside for our construction business, as we can generate economies of scale with big ticket government infrastructure projects while the government ramps up infrastructure spending.

One such project is the Mactan-Cebu International Airport (MCIA), a game changer not only for Megawide, but also for the country. The strong underlying growth of the airport is one of the Company’s revenue drivers in 2016.

2016 was remarkable for Megawide, as we were able to hit our full-year targets and deliver steady growth across our business segments.

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“We remain optimistic that our competitive advantage lies in our core value of Engineering Excellence, and the proper utilization of our integrated downstream technologies such as precast, formworks, and modern construction equipment.”

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We are confident that Megawide is poised to sustain an upward trajectory and growth. You can be assured that our focus will always be the creation of long-term shareholder value.

Our heightened efforts to market Cebu as both a tourist destination and an alternative gateway to the country have translated to growth in passenger and air traffic volume. Cebu is located at the center of the Philippines, making it an ideal jump-off point to the country’s centers of commerce and tourism. In 2016, it was named the world’s sixth best island, proof that it is a preferred destination for both domestic and international tourists.

MCIA is now being primed to capably welcome the steadily rising number of passengers, at the same time facilitate opportunities for investment and trade. Connectivity has already increased threefold, and Terminal 1 has undergone significant upgrades to improve efficiency. The highly-anticipated opening of Terminal 2 in June 2018 is expected to draw interest from international airlines who wish to avoid the congestion of Manila, and in doing so, establish Cebu as their main entry point to the Philippines.

Our efforts in the past three years to transform MCIA have consistently received international recognition. In 2016, CAPA Center for Aviation named MCIA as the Best Regional Airport in Asia Pacific, the first time that a Philippine airport has received such a prestigious award.

We will leverage on our track record and experience as the largest private airport operator in the country to further grow our airport business. We are uniquely placed to participate in the new modality implemented by the government for the development of Clark and the five regional airports, either as operator or as a Triple A contractor.

Our expansion into the airport segment allows us to build a sustainable foundation of a broader business, and safeguards Megawide from concentration risks in the construction industry. Our venture into land-based transportation gives us the same opportunity.

We are looking forward to the completion of the Southwest Intermodal Transport Exchange (SWITEX) towards the end of 2018, which will be another source of recurring income. SWITEX is intended to provide ease of travel for passengers coming from Cavite, and will elevate the standards for land-based transportation within Metro Manila.

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MICHAEL COSIQUIENChairman

As we continue our expansion, we also remain committed to our thrust for inclusive Corporate Social Responsibility through the Megawide Foundation, which is doing remarkable work for its three pillars: Education, Livelihood, and Safety and Environment. As of end 2016, the Foundation has spent Php1.5 million on reading programs, engineering scholarships, livelihood trainings, and environmental campaigns.

Megawide will continue to pursue organic growth by strengthening core businesses, while investing in assets that will generate stable recurring revenues. Part of this continued advancement is a parallel investment in our people. We are focused on upgrading their skill sets and technical expertise to ensure that they are fully equipped to deliver the quality of work that is inherent to Megawide.

We would like to express our gratitude to you, our stakeholders, for your support and trust in the Company. From our employees to our customers and partners in the private and public sectors, you are the force behind our bullish pursuit for innovation and industry leadership. From our humble beginnings to this vertically integrated organization that we are now, we are confident that Megawide is poised to sustain an upward trajectory and growth. You can be assured that our focus will always be the creation of long-term shareholder value.

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ENGINEERING THE FUTURE OF THE FILIPINO

The President’s Report

Year on Year Stock Performance

Megawide reached historic highs this year. Having established our foundations through last year’s vertical integration, we were able to focus on creating new possibilities for our business segments and establish our position as a leading and diversified infrastructure conglomerate.

We achieved consolidated revenues of Php17.7 billion in 2016, a 14% year-on-year growth from that of 2015, from the strong performance of our construction business and increasing contributions from Mactan-Cebu International Airport (MCIA). Overall, construction revenues contributed 89% while the airport generated 11%. Consolidated gross profit margin stands at 22%.

The movements in our operating revenues and expenses led to consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) of Php3.6 billion in 2016, increasing by 19% from the previous year with an improved EBITDA margin of 21%. Our consolidated net income grew by 30% to Php1.9 billion from last year’s Php1.5 billion, with the airport segment contributing 47% and the construction business bringing in 53%. Net income margin for the year is at 11%.

Consolidated return on equity registered at 12% in 2016 from 9% in 2015, while earnings per share is at 0.57 versus 0.41 the previous year.

We have maintained an optimal and well-capitalized balance sheet, with total assets amounting to Php51.1 billion, while shareholders’ equity ended the year at Php16.2 billion. Current ratio registered at 1.83x. Meanwhile, gross and net debt to equity ratios are still well within our loan covenants at 1.59x and 0.91x respectively, giving us more flexibility on our funding strategy to support future government infrastructure projects.

Our strong performance this year was significantly rewarded by the market, with our stock price jumping by 139% to end the year at Php14.8 from Php6.2 at end 2015, despite the broader index PSEi’s year-on-year decline of 2%. This resulted to a year-end total market capitalization of Php31.7 billion, the highest so far since our initial public offering.

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“Now, more than ever, Megawide is positioned for leadership in infrastructure and engineering.”

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Megawide reached historic highs this year. Having established our foundations through last year’s vertical integration, we were able to focus on creating new possibilities for our business segments and establish our position as a leading and diversified infrastructure conglomerate.

Sustaining Growth in the Construction Business

Our Engineering Procurement Construction (EPC) segment remains our stable and core business, accounting for 89% of the total revenues in 2016. Taking advantage of our precast facility in Taytay, Rizal, we were able to double our construction revenues since our debut in the market in 2011.

EPC revenues increased by 13%, ending at Php15.8 billion from last year’s Php14.0 billion, fueled by growth in private sector projects. Net income rose by 5% to Php1.0 billion from Php973 million in 2015. Gross profit margin and net income margin remain at our comfortable levels of 15% and 6.4%, respectively.

Our construction order book stood at Php38.5 billion, providing revenue visibility for the next two to three years. This was comprised of 65% Residential projects across all market segments, 28% Office and Commercial, and 7% Infrastructure projects. Our order book remains largely driven by private sector projects, as we await the roll out of infrastructure projects of the goverment. We engaged Php12.7 billion worth of new private sector projects at the end of the year.

Gaining Momentum in the Airport Business

GMR Megawide Cebu Airport Corporation (GMCAC) continued to deliver strong growth in 2016, with substantial contribution to our bottom line. Now on our second full year of operations, airport revenues rose by 26% to Php1.9 billion on the back of a robust increase in passenger traffic year-on-year. Revenues coming from the Passenger Service Charge (PSC) at MCIA accounted for 59% of total revenues, while non-aero and aero related revenues accounted for 28% and 13%, respectively.

The PSC, which is the terminal fee collected from all departing passengers, was implemented last June 2015. As a direct effect of its first full year of implementation, it rose 13% this year. Aero related revenues, which are revenues derived from aircraft related services, grew by 38%. Meanwhile, non-aero or commercial revenues similarly increased by 57%, owing to the increased commercial area and an attractive mix of commercial tenants, which resulted to higher average spending per passenger.

Airport EBITDA for 2016 was recorded at Php1.3 billion, a 34% increase compared to previous year’s Php971 million. As a result, EBITDA margin improved at the 70% level compared to last year’s 65%. Net income significantly jumped by 80% to Php903 million from Php501 million in 2015. Net income margin registered at 48%, better than the prior year’s 34%.

Air Traffic Movement (ATM) went up by 12%, with international flights overtaking the growth of domestic flights at 19% and 10%, respectively. While we handled 8.9 million passengers per annum (mppa) in 2016, well beyond Terminal 1’s (T1) designed capacity of 4.5 mppa, we still ensured the comfort of passengers by spreading out flights across different time slots. This is an increase of 2 million passengers in volume, or a 30% jump in passenger count since we took over airport operations in 2014. Domestic passengers still comprised the bulk of the passenger volume at 72% while International accounts for the remaining 28%. International passenger volume outperformed the growth of Domestic volume at 22%, ending at 2.5 million. This is a 47% increase since we took over in 2014. Meanwhile, Domestic passengers grew 8% to 6.4 million, representing a 23% growth since handover.

Consolidated Net Income Distribution

Consolidated Revenue Distribution

Order Book Mix

Construction Revenue

(in Million Php)

CAGR = 15%

(+13%)

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EDGAR SAAVEDRAPresident

We have been seriously monitoring our airport operational key performance indicators, including passenger throughput which includes check-in, security check, and baggage claim. Beyond improvement of these metrics, MCIA is still driven to grow both passenger and air traffic volume. The room for growth is promising. The single runway’s total Air Traffic Movement (ATM) capacity is 30 ATMs per hour, but we are currently only utilizing half of this number during peak hours.

International tourist arrivals are still led by the Korean market, which comprises 48%, followed by Japanese and Americans at 21% and 10%, respectively. We are seeing good growth momentum for Chinese tourists as we introduce new flights to China. Despite starting from a low base, Chinese tourist arrivals are now expected to grow faster as a result of the lifting of the travel ban to the Philippines, as well as the renewed economic ties of this administration with China. Total tourist arrivals in Cebu rose by 26%, outpacing the 11% growth of total tourist arrivals in the country.

In 2016, we opened five new domestic and eight new international routes in and out of Cebu, with introductory flights to two new China cities, Xiamen and Chengdu. As of December 2016, we are already serving 14 international and 25 domestic locations with 20 airline partners.

MCIA has garnered recognition from the industry. In September 2016, we were named Best Regional Airport in Asia Pacific by the CAPA Center for Aviation. We also received commendation in Airline Marketing for both Routes Asia 2016 and World Routes 2016. MCIA was also voted 2016 14th Best Airport in Asia by passengers, rising four places from 2015.

Looking Ahead

Megawide remains steadfast in its vision to become the country’s leading construction conglomerate. With Engineering Excellence at our core, we will continue to grow each of our business segments and evaluate business opportunities that allow us to harness our construction and engineering capabilities. We have successfully managed our transition to a diversified conglomerate, and established our position as the country’s largest private airport operator at the same time.

We also look forward to carving our niche in land-based transportation through the opening of the Southwest Intermodal Transport Exchange (SWITEX) in 2018, which will invigorate the Metro Manila commute system through automated facilities and processes that will closely replicate the efficiencies at MCIA.

We now set our sights on the development of Philippine infrastructure, particularly airports which are among the highest priorities for this administration. Even in this new direction for infrastructure investment, we stand at an advantageous position to participate through different modalities.

As we continue to venture into other businesses and pursue projects with a substantial socio-economic impact, we remain committed to maintaining our solid financial position through and with an organization that embodies strict corporate governance. We extend our sincerest gratitude to those who have guided us throughout this journey, and to those who have entrusted us with their own. To you, our shareholders, we express our deepest gratitude for your continued confidence and partnership. Now, more than ever, Megawide is positioned for leadership in infrastructure and engineering. We hope you will join us as we continue to engineer a very promising future.

Airport Net Income(in Million Php)

Passenger Volume(in Million)

+12%

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1997-2007Megawide began in 1997 as a construction firm. Within 10 years, we oversaw our first mid-rise residential project, obtained a Triple-A PCAB License, and won our first high-rise project with the SM Development Corporation.

2011The year marked a significant growth in the company with our Initial Public Offering, the construction of our precast plant in Taytay, Rizal, and the launch of our five-year strategic diversification plan.

2012-2013As we grew, we strengthened our commitment to nation-building and the local communities through PSIP Phases 1 and 2, awarded in 2012 and 2013, respectively. With the vision to transform the quality of public school structures in the country, we built over 7,000 classrooms in Regions 3 and 4A for Phase 1, and 2,440 classrooms in Regions 1, 2 , 3, and CAR for Phase 2. Megawide Foundation was alsoestablished in 2012.

THE LONG VIEW: 1997-2016Megawide has come a long way from our inception almost 20 years ago. From a pure construction firm, we transformed into one of the country’s most forward-looking conglomerates with a solid portfolio in the areas of Engineering Procurement Construction (EPC), airport infrastructure, and progressive property development. This is our story so far.

Berkeley Residences

Located in Quezon City, this was our first high-rise residential project, and our first contract with SMDC.

Megawide Precast Plant

The Megawide Precast Plant is one of the largest and most advanced in Southeast Asia.

Philippine School Infrastructure Project

PSIP is a government project, through the Department of Education, that addresses classroom backlog in the country.

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2014We won the Mactan-Cebu International Airport (MCIA) project, giving our diversification efforts a stronger foothold. In the same year, we obtained ISO 9001:2008 and ISO 14001:2004 certifications, as well as the OHSAS 18001:2007 certification for implementing practices that create a healthy and safe working environment. We also began to penetrate the upper market housing segment with the Proscenium project of Rockwell and Shang Salcedo of Shang Properties. Moreover, we won contracts for different residential and commercial markets with property developers such as 8990 Holdings, Inc., Greenway Properties Realty Corp., Arthaland Corporation, and Megaworld Corporation.

2015We expanded our portfolio in the mass housing sector with 8990’s Deca Homes, and increased our client portfolio with DoubleDragon’s flagship development. We also ventured further into more private sector and government infrastructure projects with the Southwest Intermodal Transport Exchange (SWITEX) project. For achieving safe man-hours in our project sites, the Safety Organization of the Philippines and the Occupational Safety and Health Center presented us five Awards of Merit and an Award of Excellence.

2016Even as we continue to advance with infrastructure development, EPC revenues increased by 13%, fueled by growth in private sector projects. The continued performance of our business segments were reflected in the strong appreciation of our share price, resulting in our highest market capitalization since our stock market debut in 2011.

Mactan-Cebu International Airport

MCIA is the second busiest international gateway in the country, envisioned as the World’s Friendliest Airport.

Southwest Intermodal Transport Exchange

Aside from being a transport hub, SWITEX will also feature offices, retail, dining, and shopping options.

Engineering Procurement Construction Business

EPC remains to be our stable and core business, being our biggest revenue generator in 2016.

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FROM THE PHILIPPINES TO THE WORLDBusiness Review

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ENGINEERING PROCUREMENT CONSTRUCTION:

BUILDING THE FOUNDATION OF A BRIGHTER TOMORROW

A Quest for Excellence

As one of the country’s fast-growing engineering conglomerates, we constantly strive for excellence, which enables us to deliver outstanding results, particularly in our Engineering Procurement Construction (EPC) business. This business segment remained our biggest revenue generator in 2016, accounting for 89% of the year’s total. It grew by 13% from Php14.0 billion in 2015 to Php15.8 billion, fueled primarily by private sector projects, including Meridian Park Phase 1 of DoubleDragon, Le Grand BPO Cluster Phases 1 and 2 of Megaworld, 8990 Tower Edsa and Deca Homes Tondo of 8990 Holdings, Landers Warehouse Balintawak and Otis of Southeast Asia Retail, Inc., and the Proscenium Lincoln and Lorraine Towers of Rockwell.

active in seeking opportunities in the social infrastructure sector like school projects, utility, and transportation sectors, with particular interest in airports, pursuing railway projects, and integrated transport systems like the North Integrated Transport System.

Regardless of the type of project we pursue—private sector or government infrastructure projects—Megawide will carry on in finding more opportunities to grow, creating a steady foundation for tomorrow, and making an indelible mark in the country’s changing skyline.

Our EPC business also contributed 64% to EBITDA, growing by 12% to Php2.3 billion versus 2015. Meanwhile, our net income in this segment increased by 5% to Php1.0 billion in the previous year.

Building an Enduring Future

We are in it for the long haul. We constantly build upon past successes to pave the way to a future that endures and is resilient against challenges. Our revenue visibility in the next two to three years remains positive, thanks to our construction order book that currently stands at Php38.5 billion. Private sector projects formed the bulk of our 2016 order book, where backlogs were mainly composed of residential projects across all market segments at 65%, followed by office and commercial projects at 28%, and infrastructure projects forming the remaining 7%.

Government infrastructure projects saw minimal movement during the year, although we were able to sign new contracts worth Php12.7 billion from the private sector. We also remained

A Filipino company, Megawide Construction Corporation began building the future almost 20 years ago. Our Engineering Excellence has allowed us to build a stable foundation, upon which coming generations can create an even more remarkable tomorrow. And we are just getting started.

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The Megawide Precast Plant: Molding Tomorrow’s Urban Landscape

Our vision of a stable future begins layer by layer, panel by panel, and piece by piece at our precast plant in Taytay, Rizal. With a total area of 71,000 m2, it is the largest and most advanced facility of its kind in the Philippines, and the second largest in Southeast Asia.

This is where we employ advanced precast construction technologies to produce components that make up the buildings of tomorrow, including the country’s most modern residential projects, offices, mixed-use complexes, and affordable housing projects.

Using cutting-edge tools and equipment such as carousels, welding machines, and molds, we are able to produce slabs, columns, stairs, and other products faster, with higher levels of standardization, lower long-term cost, and exceptional design.

In 2016, our team of experts from the Philippines, Germany, and Japan took us to another level, improving the plant’s productivity rate by 115% compared to the previous year, and increasing its capacity utilization from 33% in 2015 to 65% in 2016. Currently, the plant has an annual capacity of 108,000 or 9,000 m3 per month. We expect this to increase in the coming years as we, together with our partners, continue to mold tomorrow’s urban landscape.

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MACTAN-CEBU INTERNATIONAL AIRPORT:

CREATING A WORLD-CLASS GATEWAY

Improvements

The Department of Transportation, Mactan-Cebu International Airport Authority, and GMCAC signed the concession agreement, which defines the first phase of the development:

• Construction of a new passenger terminal (T2)• Construction of a new apron for T2• Renovation of the existing passenger terminal (T1)

Megawide partnered with India’s GMR Group, a company with major global interests in infrastructure development. Founded in 1978, GMR has core assets in airport, energy, highways, urban infrastructure, and a strong track record in public-private partnerships.

Passenger Traffic

MCIA was operating beyond capacity when GMCAC took over landside operations in November 2014. The existing terminal (T1), originally built to handle 4.1 million passengers per annum (mppa), was operating at 6.9 mppa demand during the handover year alone.

Through GMCAC’s efforts in upgrading the terminal, T1 managed to handle the increasing passenger traffic, and further escalated airport capacity from 4.5 mppa in 2014 to 8.9 mppa in 2016. By end 2017, GMCAC is looking to service 10 mppa.

Passenger Volume Growth

Air Traffic Volume

2015 2016Increase

(in %)

Domestic 5.89 6.38 8%

International 2.07 2.52 22%

TOTAL 7.96 8.89 12%

2015 2016Increase

(in %)

Domestic 51,173 56,210 10%

International 13,785 16,383 19%

TOTAL 64,958 72,593 12%

Breakdown of Tourists

International passengers comprised 28% of our total volume in 2016, or 2.5 million passengers in all. Koreans remained to have the highest share at 48% but the numbers of Japanese, American, and Chinese tourists are catching up for a healthier overall passenger mix.

2016 Increase (in %)

Korea 48%

Japan 21%

USA 10%

China 7%

EU 4%

Australia 3%

Taiwan 2%

Others 5%

TOTAL 100%

In 2013, GMR Megawide Cebu Airport Corporation (GMCAC) won the highly-competitive bid to construct and operate MCIA for 25 years.

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ASIANA AIRLINES INCHEON, SOUTH KOREA

CEBU PACIFIC INCHEON, SOUTH KOREAHONG KONG, CHINA SARTAIPEI, TAIWANSINGAPORETOKYO, JAPANNARITA, JAPAN

AIR ASIA INCHEON, SOUTH KOREAKUALA LUMPUR, MALAYSIASINGAPORE

JIN AIR INCHEON, SOUTH KOREAPUSAN, SOUTH KOREA

KOREAN AIRLINES INCHEON, SOUTH KOREAPUSAN, SOUTH KOREA

JEJU AIR INCHEON, SOUTH KOREA

XIAMEN AIR XIAMEN, CHINAFUZHOU, CHINA

T’WAY AIR DAEGU, KOREA

CATHAY PACIFIC HONG KONG, CHINA SAR

PHILIPPINE AIRLINES INCHEON, SOUTH KOREACHENGDU, CHINASINGAPORETOKYO, JAPANNARITA, JAPANOSAKA, JAPANKANSAI, JAPANNAGOYA, JAPAN

SICHUAN AIRLINES CHONGQING, CHINA

EVA AIR TAIPEI, TAIWAN

EMIRATES DUBAI, UAE

CHINA EASTERN AIRLINES SHANGHAI, CHINA

SILK AIR SINGAPORE

SCOOT SINGAPORE

VANILLA AIRLINES TOKYO, JAPANNARITA, JAPAN

KUNMING AIRLINES KUNMING, CHINA

CTUChengduTERMINAL 1

NEW INTERNATIONAL ROUTES

Route Development

The increase in passengers is a direct result of MCIA’s focus on route development. Connectivity has already increased threefold with the launch of a number of new domestic and international destinations.

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International DestinationsFrom 7 in November 2014, international destinations rose to 14 by the end of 2016. The 30 international flights or Air Traffic Movements (ATMs) per day in November 2014 gradually increased to 45 ATMs/day by the end of 2016.

Domestic DestinationsFrom 23 in November 2014, domestic destinations rose to 25 by the end of 2016. This led to an increase of 24 domestic flights or ATMs per day, from 115 to 139 in 2016.

Airline Destination

International

Philippine Airlines Los Angeles

Eva Air Taipei

Xiamen Air Xiamen

Emirates Dubai

China Eastern Chengdu

Philippines Air Asia Singapore

Philippines Air Asia Taipei

Philippine Airlines Singapore

T’way Daegu

Vanilla Air Narita

Domestic

Cebu Pacific Ormoc

Cebu Pacific Calbayog

Cebu Pacific Roxas

Philippine Airlines Kalibo

Philippine Airlines Caticlan

New Routes

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2. Introduction of new technologies that ensure faster processing time for passengers

a. New electronic access gates at the Final Check Zone, improving passenger verification and providing a convenient checkpoint for mobile check-in applications and passengers carrying hand baggageb. Universal self-service check-in kiosks for any airline’s usec. Upgrade of all baggage conveying systems for faster processing and increased capacityd. In-line security screening system, providing seamless passengers baggage screening after check-ine. New Flight Information Display Systems, replacing outdated screens with 120 high-resolution information screens

3. Implementation of functional and aesthetic improvements for passenger comfort

a. Eight new transfer counters in the Arrivals area for passengers with connecting flights. Bags can be checked-in up to 12 hours ahead.

b. Upgrade of passenger washrooms with 40% larger areac. A centralized taxi pick-up bay for white taxis, yellow taxis, app-based transportation, and a bus serviced. New passenger terminal seatse. Additional ATM locations from 6 to 20 unitsf. Roving customer service staff with uniforms designed by eminent Cebuano designer Cary Santiago

4. Enhancement of commercial mixRetail and Food and Beverage increased from 46 units to 60 units to provide wider choice and diversity for passengers.

Terminal 1 Innovations

Among the upgrades and renovations made by GMCAC in Terminal 1 within the first few months of assuming operations at MCIA are:

1. Creation of common-use facilities for both domestic and international passengers that improve traffic flow in the terminal

a. Universal check-in counters for any airlineb. Centralized Final Check Zone that processes domestic and international passengers simultaneously tripling capacity and improving securityc. New immigration counters with different lane categories at the Arrival and Departure levels, increasing waiting capacityd. Four new swing gates for either domestic or international passengers

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Terminal 2

The construction of a new world-class passenger terminal or MCIA Terminal 2 is now in full swing. Expected to start operations by June 2018, the terminal will increase passenger capacity to 12.5 mppa, signifying a more robust tourism growth in the region. Spanning 65,500 m2, T2 will not only lessen congestion, but will offer exciting and wide-ranging retail environment for passengers. Local and international retail brands will be present in the terminal as well as a wide variety of food and beverage options.

Rising as an iconic structure inspired by Cebu’s island heritage, T2 will feature a full roof structure built with glued laminated (glulam) timber, a highly-versatile engineered wood material used for the first time in an Asian airport.

GMCAC aims to make MCIA a vital part of the overall Cebu experience, not only with its distinctly Filipino look, but complete with the hospitality Filipinos are known for.

Construction

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AwardsOur efforts to elevate the quality of airport management and services in MCIA have brought us special recognitions from different award-giving bodies here and abroad.

November 2016Asia Pacific Regional Airport of the YearCAPA Aviation Awards for Excellence

October 201614th Best Airport in AsiaThe Guide to Sleeping in Airports website

March 2016Best PPP Deal in Asia Pacific RegionIJGlobal Asia Pacific Awards

December 20152015 Best Transport Deal in Asia PacificThomson Reuters’ Project Finance International

October 2015Best Transport Deal - Highly CommendedThe Asset Triple A Asia Infastructure Awards

18th Best Airport in AsiaThe Guide to Sleeping in Airports website

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SOUTHWEST INTERMODAL TRANSPORT EXCHANGE:

INTRODUCING A NEW COMMUTER EXPERIENCEAt Megawide, we are committed to helping build the nation, part of which is making Filipinos’ daily commute a new and exciting experience.

In 2015, through a joint venture with Waltermart, we won another government infrastructure project under the Build-Operate-Transfer modality to build the Southwest Intermodal Transport Exchange (SWITEX) along Cavite Expressway in Parañaque City.

Similar to an airport, there will be dedicated floors for arrivals and departures. The departure area will have 36 bays where public transports leave at 15-minute intervals, while the arrival area will have 23 bus bays.

Decongesting the Metro

The SWITEX is part of the government’s series of long-term solutions to help decongest the worsening Metro Manila traffic that reportedly costs the economy about Php3 billion per day. The traffic situation also greatly affects commuters as they have to spend a quarter of their day on the road.

With this infrastructure project, we will not only provide seamless connections between provincial and city transits, but also help declog traffic as the estimated 1,000 provincial buses servicing southwest of Metro Manila, particularly Cavite, are expected to dock in this terminal and will not be allowed to enter the Metro.

This will redefine the commuter experience in the country as we will introduce a world-class facility that provides easy transfers to in-city transportations, along with a good selection of dining and retail options designed to meet the demands of daily commuters.

This project is another step in pursuing our strategic diversification and ensuring a stable source of recurring income in the long term, while contributing to infrastructure development in the country.

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The integrated facility is expected to welcome 100,000 daily foot traffic, comprising mostly of employees who will complement our commercial business.

This progressive property development business will be completed at the end of 2018 and will start contributing to our bottomline in 2019.

“We welcome this opportunity to be part of the solution to the ever-growing issue of traffic in Metro Manila by contributing our expertise in engineering and infrastructure building,” Megawide President Edgar Saavedra said. He added that improving transportation interconnectivity is key to a developing economy, and investing in this kind of infrastructure will give the public a reliable and convenient transportation system that is long overdue.

Providing stable recurring revenues

With the construction of the SWITEX, we will undertake commercial development within the transport facility, and as a result, generate for us stable recurring revenues.

This project allows us to build a retail podium with 15,000 m2 of gross floor area (GFA) that will be open together with the terminal. On top of this, four BPO offices with a total of 60,000 m2 of GFA will be built in phases.

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BUILDING FOR ASIACorporate Governance

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Standing (L-R): Yerik C. Cosiquien, Hilario G. Davide, Jr., Michael C. CosiquienSeated (L-R): Edgar B. Saavedra, Leonilo G. Coronel, Oliver Y. Tan, Florentino A. Tuason, Jr.

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MICHAEL C. COSIQUIENCHAIRMAN AND CHIEF EXECUTIVE OFFICER

Mr. Cosiquien has been directing Megawide for the past 18 years, from a start-up construction firm to an expanding infrastructure conglomerate.

He has provided superior leadership in all aspects of the business as Chief Executive Officer.

Mr. Cosiquien holds a degree in Civil Engineering from the De La Salle University, and is a licensed Civil Engineer with over 20 years of professional engineering experience.

He has been the Chairman of the Board of Directors since 2004 and the Chief Executive Officer since 2010.

EDGAR B. SAAVEDRAPRESIDENT AND CHIEF OPERATING OFFICER

Mr. Saavedra has directed Megawide in setting the benchmark for Engineering Excellence with his strong expertise in European building technologies and advanced formwork systems.

As Chief Operating Officer, he is personally responsible for leading the Company’s diverse construction and social infrastructure projects, as well as for driving occupational safety and health.

Mr. Saavedra’s engineering experience spans over 20 years. He received his Bachelor’s degree in Civil Engineering from the De La Salle University. After obtaining his license as Civil Engineer, he pursued special studies in Foundation Formworks in Germany through the Philippine Institute of Civil Engineers.

Mr. Saavedra has been the President and member of the Board of Directors since 2004. He has been the Chief Operating Officer since 2010.

OLIVER Y. TANCHIEF FINANCE OFFICER AND CORPORATE INFORMATION OFFICER

Mr. Tan holds various CFO positions across the business groups, affiliates, and subsidiaries: CFO for Citicore, Citicore-Megawide Consortium Incorporated (CMCI), Megawide-World Citi Consortium Incorporated (MWCCI), GMR Megawide Cebu Airport Corporation (GMCAC) and Megawatt Clean Energy Incorporated (MCEI).

He is also a member of Megawide’s Executive Committee. Likewise, Mr. Tan is Director/Treasurer of CHII, CMCI, MWCCI, GMCAC and MCEI; Director and Corporate Secretary of Future State, MySpace Incorporated, and IRMO Incorporated (affiliate companies of Megawide).

He is a member of the Financial Executives Institute of the Philippines (FINEX). Prior to joining Megawide, Mr. Tan worked as financial analyst for Golden Astra Capital Incorporated, a private investment fund located in Makati with portfolios in Equities, Commodities, Options, Currencies, and other derivative financial instruments.

He finished Bachelor of Science in Business Administration major in Financial Management at the Philippine School of Business Administration (PSBA) after transferring from the University of Santo Tomas (UST), where he took up Bachelor of Science in Electrical Engineering.

DIRECTOR

Mr. Cosiquien has been member of the Board of Directors since 2004. He served as the Corporate Secretary for 7 years. He is also the General Manager of Cosmo Fortune Corporation.

Mr. Cosiquien is a Psychology and Economics graduate from the University of British Columbia.

YERIK C. COSIQUIEN

INDEPENDENT DIRECTOR AND CHAIRMAN OF THE AUDIT AND COMPLIANCE COMMITTEE

Mr. Coronel has been with Megawide since 2010. He is currently the Executive Director of Micro Finance Foundation and an independent Director of DBP-Daiwa Securities SMBC Philippines, Inc. He is currently a Director of the Philippine National Bank and Software Ventures International.

He holds a degree in Economics from the Ateneo de Manila University.

LEONILO G. CORONEL

DIRECTOR

Mr. Tuason has held significant positions in the government and the private sector.

He is currently a Senior Partner at Quasha Ancheta Pena and Nolasco Law Office. Prior to this, he was a Commissioner of the Commission on Elections, an Executive Judge of the Regional Trial Court in Makati City, and former First Senior Vice President of the Development Bank of the Philippines.

Mr. Tuason has been the Corporate Secretary from 2011 to 2016.

He obtained his Bachelor of Laws degree from the University of the Philippines.

FLORENTINO A. TUASON, JR.

INDEPENDENT DIRECTOR, CHAIRMAN OF THE CORPORATE GOVERNANCE, COMPENSATION AND NOMINATION COMMITTEE, AND CHAIRMAN OF THE RISK COMMITTEE

Mr. Davide was the former permanent Representative of the Republic of the Philippines to the United Nations in New York from February 2007 to April 2010. He also served as Chief Justice of the Supreme Court of the Philippines from November 1998 to December 2005. Mr. Davide was also the Commissioner of the 1986 Constitutional Commission.

He is currently an independent director and Vice Chairman of the Manila Bulletin Publishing Corporation. He is also an independent director of the Philippine Trust Company. Mr. Davide is also a trustee of the University of San Carlos in Cebu City.

He obtained his degree in Bachelor of Laws from the University of the Philippines.

HILARIO G. DAVIDE, JR.

BOARD OF DIRECTORS

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KEY OFFICERS

Michael CosiquienChairman and Chief Executive Officer

Edgar Saavedra President and Chief Operating Officer

Manuel Louie Ferrer Chief Marketing Officer

Oliver TanChief Financial Officer

Jesus Chua Chief Strategy Officer

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Claudia Soriano Vice President, Human Resources

Renato Uy Vice President, Comptrollership

Ronald Paulo Vice President, Operations

Maila Angela Ong President, Megawide Foundation

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Albert Saringo Vice President, Operations

Jouie Lee OliverVice President, CELD

Enrico Gaw Vice President, Batching Plant

Emily LimVice President, Cost, Contracts and Procurement

Abigail Joan Cosico Vice President, Investor Relations

Althea Oaminal Corporate Secretary and Corporate Information Officer

Jennifer LeeAssistant Corporate Secretary and Corporate Information Officer

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GMR MEGAWIDE CEBU AIRPORT CORPORATION

Board of Directors

MWM TERMINALS, INC. Board of Directors

Srinivas BommidalaChairman

Michael Cosiquien Chairman

Manuel Louie FerrerPresident

Edgar Saavedra Director

Oliver TanTreasurer

Wilson Jesse Lim, Jr. Director

Sidharath KapurDirector

Abraham Uypeckcuat Director

Florentino Tuason, Jr.Corporate Secretary

Puvan SripathyDirector

Manuel Gonzalez Corporate Secretary

Michael CosiquienDirector

Jesus ChuaDirector

Edgar SaavedraDirector

Wilson LimDirector

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MEGAWIDE FOUNDATIONBoard of Directors

Manuel Louie FerrerChairman

Edgar Saavedra Director

Ariel Querubin Independent Director

Maila Angela OngPresident

OFFICERS

Marie Arcie Anne Sercado Corporate Secretary

Oliver Tan Treasurer

Michael Cosiquien Director

CORPORATE GOVERNANCE STRUCTURE

Megawide follows principles of good governance, including honesty and accountability. The Company’s Corporate Governance structure includes various mechanisms, such as the structure of the board of directors and committees, oversight of management, and sound policies.

The systems and procedures of the Company are continuously reviewed and updated to adapt to the changing needs of the Company. Megawide fully complies with the Code of Corporate Governance prescribed by the Securities and Exchange Commission.

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CORPORATE GOVERNANCE REPORTThe Board of Directors and Management believe that Corporate Governance is one of the necessary components of what constitutes sound strategic business management. In this regard, Management undertakes necessary efforts to create corporate governance awareness within the organization as soon as possible.

The Corporate Governance Report is based on the outline of the ASEAN Corporate Governance Scorecard.

A. RIGHT OF SHAREHOLDERS

1. Voting Right

Shareholders shall have the right to elect, remove, and replace directors and vote on certain corporate acts in accordance with the Corporation Code. Cumulative voting shall be used in the election of directors. A director shall not be removed without cause if it will deny minority shareholders representation in the Board. Shareholders shall have the right to vote on all matters that require their consent or approval. Shareholders cast their votes on any resolution through the use of ballots.

2. Power of Inspection

All shareholders shall be allowed to inspect corporate books and records including minutes of Board meetings and stock registries in accordance with the Corporation Code and shall be furnished with annual reports, including financial statements, without cost or restrictions.

with any financial institution or creditor, whether local or foreign, from declaring dividends without its consent, and such consent has not yet been secured; or (c) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the Corporation, such as when there is a need for special reserve for probable contingencies.

5. Appraisal right

The shareholders shall have appraisal right or the right to dissent and demand payment of the fair value of their shares in the manner provided for under Section 82 of the Corporation Code of the Philippines, under any of the following circumstances:

• In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholders or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence;• In case of sale, lease, exchange, transfer, mortgage, pledge, or other disposition of all or substantially all of the corporate property and assets as provided in the Corporation Code; and• In case of merger or consolidation.

3. Right to information

The Shareholders shall be provided upon request, periodic reports which disclose personal and professional information about the directors and officers, and certain other matters such as their holdings of the Company’s shares, dealing with the Company, relationships among directors and key officers, and the aggregate compensation of directors and officers. The minority shareholders shall be granted the right to propose the holding of a meeting, and the right to propose items in the agenda of the meeting, provided the items are for legitimate business purposes. The minority shareholders shall have access to any and all information relating to matters for which the management is accountable for and to those relating to matters for which the management shall include such information and, if not included, then the minority shareholders shall be allowed to propose to include such matters in the agenda of stockholders’ meeting, being within the definition of “legitimate purposes”.

4. Right to dividends

Shareholders shall have the right to receive dividends subject to the discretion of the Board. The Company shall be compelled to declare dividends when its retained earnings shall be in excess of 100% of its paid-in capital stock, except: a) when justified by definite corporate expansion projects or programs approved by the Board or b) when the corporation is prohibited under any loan agreement

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6. Annual Stockholders’ Meeting (ASM)

a. For the convenience of shareholders, the venue for the 2016 ASM was held at Forbes Ballroom 3, Conrad Hotel Manila, Seaside Boulevard, Coral Way, Mall of Asia Complex, Pasay City.

b. The information statement states the voting and vote tabulation procedure.

c. Shareholders cast their vote on any resolution through the use of ballots.

d. Representatives of the external auditor, Punongbayan & Araullo were present to count and/or validate the votes during the ASM. They were also available to answer questions from the shareholders.

e. The Notice of 2016 ASM was released thirteen (13) days before the meeting.

f. Minutes of the 2016 ASM, which includes the votes taken for all resolutions, is available for download in the website. The minutes also includes the attendance of the Board during the ASM.

g. During the ASM, the floor was open to give the stockholders the opportunity to raise questions or any concern.

h. Shareholders are encouraged to participate in general meetings. The meetings of shareholders are held in venues which are accessible via various transportation methods to

encourage shareholders to attend. If the shareholders are unable to attend in person, proxy forms are provided for the shareholders to cast their vote.

i. The Company provides non-controlling or minority shareholders the right to nominate candidates to the Board of Directors. Information on the nomination of candidates are included in the Information Statement distributed to the shareholders.

B. EQUITABLE TREATMENT OF SHAREHOLDERS

1. All Company disclosures are in English.

2. Auditors seeking election/re-election are identified in the 2016 Notice of ASM.

3. Proxy forms are attached with the Notice of ASM.

4. Resolutions in the ASM deal with only one item, i.e., there is no bundling of several items into the same resolution.

5. The Company provided the rationale and explanation for each agenda which requires shareholders’ approval in the 2016 notice of ASM.

6. Insider Trading Policy

The directors and principal officers are required to report all acquisitions or disposals, or any changes in their shareholdings in the company within five (5) trading days from the transaction date. Notices of trading blackouts are disseminated to all covered personnel.

7. Related Party Transaction (RPT)

Audit committee performs the function of a Related Party Transaction committee, which should be tasked with reviewing all material related party transaction (RPT) of the Company which includes the following:

• Evaluates on an ongoing basis existing relations between and among businesses and counterparties to ensure that all related parties are continuously identified, RPTs are monitored and subsequent changes in relationships with counterparties (from non-related to related and vice versa) are captured. Related parties, RPTs and changes in relationships should be reflected in the relevant reports to the Board and regulators/ supervisors;

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• Evaluates all material RPTs to ensure that these are not undertaken on more favorable economic terms (e.g. price, commissions, interest rates, fees, tenor, collateral requirement) to such related parties than similar transactions with non-related parties under similar circumstances and that no corporate or business resources of the Company are misappropriated or misapplied, and to determine any potential reputational risk issues that may arise as a result of or in connection with the transactions. In evaluating RPTs, the Committee takes into account, among others, the following:

» The related party’s relationship to the Company and interest in the transaction;

» The material facts of the proposed RPT, including the proposed aggregate value of such transaction;

» The benefits of the Company of the proposed RPT;

» The availability of other sources of comparable products or services and

» An assessment of whether the proposed RPT is on term and condition that are comparable to the terms generally available to an unrelated party under similar circumstances. The Company should have an effective price discovery system in place and exercise due diligence in determining a fair price for RPTs

• Ensures that appropriate disclosure is made, and/or information is provided to regulating and supervising authorities relating the Company’s RPT exposures, and policies on conflicts of interest or potential conflicts of interest. The disclosure should include information on the approach to managing material conflicts of interest that are inconsistent with such policies, and conflicts that could arise as a result of the Corporation’s affiliation or transactions with other related parties;

• Reports to the BOD on a regular basis, the status and aggregate exposure to each related party, as well as the total amount of exposures to all related parties;

• Ensures that transaction with related parties, including write-off of exposures are subject to a periodic independent review or audit process; and

• Oversees the implementation of the system for identifying, monitoring, measuring, controlling, and reporting RPTs, including a periodic review of RPT policies and procedures.

8. Related Party Transactions Policy

A full, accurate, and timely disclosure of the Company’s policy governing RPT and other unusual or infrequent occurring transactions, as well as the review and approval of material and significant RPTs, is regarded as a good corporate governance practice geared towards the prevention of abusive dealings and transaction and the promotion of transparency. A separate manual has been created for the Related Party Transactions.

C. ROLE OF STAKEHOLDERS

1. Policies relating to health, safety, and welfare of employees

The company commits to provide and maintain a safe, secure, and healthy work environment. Employees are instructed to report accidents and unsafe conditions and practices to the Safety Department. The company also has health care benefits for employees covered by its insurance provider. The company’s Manual on Safety Procedures is properly disseminated to all its employees. Moreover, all employees are required to undergo annual medical check-up.

2. Policies and activities on Supplier/contractor as well as efforts to address customer welfare and safeguard creditors’ right and

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Policy Activities

Customers’ welfare

The company implements strict quality assurance and quality controls.

Conducts site visits to perform audit on the accomplishments and quality output of each site.

Supplier/contractor selection practice

The company has a supplier accreditation policy in place.

At least three suppliers are required to submit their bid proposals for review and evaluation, and a recommendation is submitted for consideration.

Environmentally friendly value-chain

ISO 14001:2004 Environmental Management System Standards

LEED Certification

The company is ISO 14001 compliant.

Community interaction Megawide Corporate Foundation, Inc.

Initiatives undertaken by the company include rehabilitation of Dormitory at the Hospicio de San Jose, Organic Farming in Silay,

Library upgrade of TUP

Anti-corruption programmes and procedures?

The company does not condone any dishonest, unethical, or unprofessional behavior regardless of his level of authority.

Violations or suspected violation of company policies can be brought to the attention of any of the following:

• Head of Human Resources Department• Compliance officer• Head of Audit Group

Safeguarding creditors’ rights

The company manages its cash flow to meet its obligations.

All obligations are settled promptly as part of the company’s commitment to its business partners.

3. Reward/Compensation Policy

Employees receive incentives based on their performance, which is evaluated every June and December.

4. Training and development programs for its employees

Depending on their work assignment and employee development plans, employees undergo, or are sent to, specialized training courses.

5. Corporate Social Responsibility

The Company, through Megawide Foundation, provides opportunities to the marginalized and disadvantaged communities where Megawide operates, especially in areas where the company’s expertise and resources are needed. Its vision is to be a leading agent of transformation, inspiring people and communities to practice excellence and innovation. To achieve this, the Foundation has identified three pillars where it aims to provide the most support in terms of expertise and resources–Education, Livelihood, and Safety and Environment.

A Company has a Corporate Social Responsibility Report published every year to discuss in detail all CSR activities and events.

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6. Procedures to protect an employee or person who reveals illegal/unethical behavior from retaliation

The company’s Code of Ethics and Business Conduct and other relevant rules and regulations shall serve as a guide in determining the penalties and sanctions to be imposed by the Human Resources Department where violations are proven and validated. Before enforcing any disciplinary sanction, due process shall be observed in the handling of all cases. Upon complainant’s request, the company shall use its best efforts to protect the identity of the complainant for any report made in good faith. Reports of violations or suspected violations shall be kept confidential, consistent with the need to conduct an adequate investigation.

ShareholderNumber of Common

SharesPercent Beneficial Owner

Citicore 1,362,957,505 56% Citicore

PCD Nominee Corporation (Filipino) 715,316,191 29% Various

PCD Nominee Corporation (Non-Filipino)

277,221,588 11% Various

Name of auditor Audit Fee Non-audit fee

Punongbayan & Araullo Php1,935,000 Php 480,000

2. External Auditor’s Fee (2016)

Except for the audit opinion rendered on the financial statements of Megawide and review for the use of proceeds on Megawide’s preferred shares, the external auditor did not provide any other type of services.

D. DISCLOSURE AND TRANSPARENCY

1. Ownership Structure

a. Holding 5% shareholding or more (as of December 31, 2016)

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3. Medium of Communication

We address the various information requirements of the investment commu-nity through the following:

a. Company WebsiteAll disclosures, stock information and information on Corporate Governance are available through the Company’s website (www.megawide.com.ph)

b. Analysts’ BriefingMegawide conducts analysts’ briefing on the Company’s financial and oper-ating results at least twice every year.

c. Investor conferences, Non-deal Roadshows, One-one-one Meetings and Conference Calls

To ensure transparency and accu-racy in information disclosures for stockholders and provide access to management, the IR Team, together with the CFO, Chairman, President and members of the Management, meet with investment fund managers as well as institutional investors to discuss in detail the company’s core businesses and strategic plans through one-on-one meetings, group meet-ings, conference calls, investor confer-ences and non-deal roadshows.

d. Press Releases

Megawide discloses to the exchange any latest news and updates on the Company’s business operations on a timely manner.

e. Site Visits

Megawide accommodates analysts’ and investors’ requests to visit the Precast Facility in Taytay, Mactan-Ce-bu International Airports and other Company projects. The IR group coordinates these requests with the respective groups.

4. Whisteblowing Policy

An important aspect of accountability and transparency is a mechanism that enables employees and other stakehold-ers of the Company to voice concerns in a responsible and effective manner.

Whistle Blowing Policy is intended to assist individuals who believe they have discovered impropriety within the Company. It contains the provisions to guide stakeholders of the Company how to, without fear of reprisal, internally disclose information which is believed to show serious malpractice or wrongdo-ing within the organization. A sepa-rate manual has been created for the Whistle Blowing Policy to support the existing Corporate Governance Manual for the promotion of a culture of fair and transparent by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour.

The Audited Financial Statements as of and for the year 2016 was released on 06 April 2017, which is within 120 day from the financial year end.

For the summary of the Company’s transaction with related parties as of December 31, 2016, please see Note 26 of the 2016 Audited Financial State-ments.

E. RESPONSIBILITIES OF THE BOARD

The Board is primarily responsible for the governance of the corporation. In setting the policies for the accomplish-ment of the corporate objectives, it shall provide an independent check on Management.

General Responsibility

It is the Board’s responsibility to foster the long term success of the corpora-tion, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interests of its stockholders. The Board should formulate the corpora-tion’s vision, mission, strategic objec-tives, policies and procedures that shall guide its activities, including the means to effectively monitor Management’s performance. The Board should oversee the development of and approve the Corporation’s business objectives and strategy, and monitor their implementa-tion, in order to sustain the Company’s long-term viability and strength.

Specific Duties and Functions

To ensure a high standard of best prac-tice for the corporation and its stock-holders, the Board should conduct itself with honesty and integrity in the perfor-mance of, among others, the following duties and functions:

• Implement a process for the selection of directors who can add value and contribute independent judgment to the formulation of sound corporate strategies and policies. Appoint competent, professional, honest and highly-motivated management officers. Adopt an effective succession planning program for Management.

• Provide sound strategic policies and guidelines to the corporation on major capital expenditures. Establish programs that can sustain its long-term viability and strength. Periodically evaluate and monitor the implementation of such policies and strategies, including the business plans, operating budgets and Management’s overall performance.

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• Ensure the corporation’s faithful compliance with all applicable laws, regulations and best business practices.

• Establish and maintain an investor relations program that will keep the stockholders informed of important developments in the corporation. If feasible, the corporation’s CEO or chief financial officer shall exercise oversight responsibility over this program.

• Identify the sectors in the community in which the corporation operates or are directly affected by its operations, and formulate a clear policy of accurate, timely and effective communication with them.

• Adopt a system of check and balance within the Board. A regular review of the effectiveness of such system should be conducted to ensure the integrity of the decision-making and reporting processes at all times. There should be a continuing review of the corporation’s internal control system in order to maintain its adequacy and effectiveness.

• Identify key risk areas and performance indicators and monitor these factors with due diligence to enable the corporation to anticipate and prepare for possible threats to its operational and financial viability.

• Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the corporation and its parent company, joint ventures, subsidiaries, associates, affiliates, major stockholders, officers and directors, including their spouses, children and dependent siblings and parents, and of interlocking director relationships by members of the Board.

• Constitute an Audit Committee and such other committees it deems necessary to assist the Board in the performance of its duties and responsibilities.

• Establish and maintain an alternative dispute resolution system in the corporation that can amicably settle conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including the regulatory authorities.

• Meet at such times or frequency as may be needed. The minutes of such meetings should be duly recorded. Independent views during Board meetings should be encouraged and given due consideration. The members of the Board should attend its regular and special meetings in person or through teleconferencing conducted in accordance with the rules and regulations of the Commission. Independent directors should always attend Board meetings. Unless otherwise provided in the by-laws, their absence shall not affect the quorum requirement. However, the Board may, to promote transparency, require the presence of at least one independent director in all its meetings. To monitor the directors’ compliance with attendance requirements, corporation shall submit to the Commission, on or before January 30 of the following year, a sworn certification about the directors’ record of attendance in Board meetings. The certification may be submitted through SEC Form 17-C or in a separate filling.

• Keep the activities and decisions of the Board within its authority under the articles of incorporation and by-laws, and in accordance with existing laws, rules and regulations.

• Approve the selection and assess the performance of the Management led by the Chief Executive Officer (CEO), and control functions led by their respective heads (Chief Risk Officer, Compliance Officer and Chief Audit Executive). The Compliance Officer who shall have the rank of at least senior vice president. In the absence of such appointment, the Corporate Secretary, preferably a lawyer, shall act as Compliance Officer.

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BOARD MEETINGS AND ATTENDANCE FOR 2016

Board Name Date of ElectionNo. of Meetings Held during the

year

No. of Meetings Attended %

Chairman Michael C. Cosiquien July 28, 2004 6 6 100

Member Edgar B. Saavedra July 28, 2004 6 5 83

Member Yerik Cosiquien July 28, 2004 6 5 83

Member Elizabeth Anne Uychaco March 16, 2011 4 4 1001

Member Oliver Tan September 16, 2016 2 2 1002

Member Florentino A. Tuason, Jr. April 8, 2011 6 6 100

Independent Hilario G. Davide, Jr. September 16, 2016 2 2 1002

Independent Leonor Briones July 19, 2010 2 2 1003

Independent Leonilo Coronel July 19, 2010 6 6 100

1 Ms. Uychaco’s term as director ended in 2016. From January 1, 2016 until the end of her term, there were only 4 Board meetings.2 Chief Justice Davide and Mr. Tan were elected to the Board of Directors on September 16, 2016. From the day of their election until December 31, 2016, there were only two Board meetings.3 Due to Sec. Briones’ appointment as Secretary of Education, effective July 1, 2016, she could no longer sit as a member of the Board of Directors. From January 1, 2016 until June 30, 2016, there were only two Board meetings.

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Office Name Date of Appointment

No. of Meetings Held during the

year

No. of Meetings Attended

%Length of

Service in the Committee

Chairman Michael C. Cosiquien November 4, 2011 0 N/A N/A 5 years

Member (ED) Edgar B. Saavedra November 4, 2011 0 N/A N/A 5 years

Member (ED) Oliver Y. Tan November 4, 2011 0 N/A N/A 5 years

Member (ID) Hilario G. Davide, Jr. September 16, 2016 0 N/A N/A 4 months



year


%Length of


Chairman Leonilo G. Coronel July 19, 2010 5 5 100 6 years

Member (ED) Michael C. Cosiquien March 16, 2011 5 5 100 5 years

Member (ID) Hilario G. Davide, Jr. 4 September 16, 2016 2 2 100 4 months

4Chief Justice Davide was made part of the Audit Committee on September 16, 2016. From the day of his election until December 31, 2016, there were only 2 Audit Committee Meetings.

BOARD COMMITTEESEXECUTIVE COMMITTEE

AUDIT AND COMPLIANCE COMMITTEE

The role of the Audit and Compliance Committee is to assist the Board of Directors of the Corporation (the “Board”) in its oversight and evaluation of:

• the quality and integrity of the financial statements of the Corporation,

• the compliance by the Corporation with legal and regulatory requirements in respect of financial disclosure,

• the qualification, independence and performance of the Corporation’s independent auditor,

• provide an avenue for communication between the independent auditor, the Corporation’s CFO and other financial senior management, other employees and the Board concerning accounting, auditing and Risk management matters.

• responsible for the recommendation of the appointment and retention (and termination) and for the compensation and the oversight of the work of the independent auditor (including oversight of the resolution of any disagreements between senior management and the independent auditor regarding financial reporting) for the purpose of preparing audit reports or performing other audit, review or attest services for the Corporation.

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year


%Length of


Chairman (ID) Hilario G. Davide, Jr. September 16, 2016 1 1 1005 4 months

Member (NED) Yerik C. Cosiquien July 19, 2010 2 2 100 6 years

Member Louie Ferrer March 16, 2011 2 2 100 5 years

Member (ID) Leonilo G. Coronel July 19, 2010 2 2 100 6 years

Member (ED) Edgar B. Saavedra March 16, 2011 2 2 100 5 years

Member Florentino A. Tuason, Jr. April 8, 2011 2 2 100 5 years

Member Oliver Y. Tan September 16, 2016 1 1 1006 4 months

Member Elizabeth Anne Uychaco March 16, 2011 1 1 1007 5 years

Member Leonor Briones July 19, 2010 1 1 1008 6 years

Governance, Compensation and Nomination Committee.5Chief Justice Davide was made part of the Corporate Governance, Compensation and Nomination Committee on September 16, 2016. From the day of their election until December 31, 2016, there was only 1 Corporate6Mr. Tan was made part of the Corporate Governance, Compensation and Nomination Committee on September 16, 2016. From the day of their election until December 31, 2016, there was only 1 Corporate Governance, Compensation and Nomination Committee.7Ms. Uychaco’s term as director ended in 2016. From January 1, 2016 until the end of her term, there was only 1 Corporate Governance, Compensation and Nomination Committee Meeting.8Ms. Briones’ term as director ended in 2016. From January 1, 2016 until the end of her term, there was only 1 Corporate Governance, Compensation and Nomination Committee Meeting.

CORPORATE GOVERNANCE, COMPENSATION, AND NOMINATION COMMITTEE

The Corporate Governance, Compensation, and Nomination Committee is tasked with ensuring compliance with the proper observance of corporate governance principles and practices. It is composed of at least three members, which includes the Chairman and at least two independent directors.



year


%Length of


Chairman (ID) Hilario G. Davide, Jr. September 16, 2016 0 0 N/A 4 months

Member (ID) Leonilo G. Coronel July 19, 2010 0 0 N/A 6 years

Member (ED) Michael C. Cosiquien March 16, 2011 0 0 N/A 5 years

Member (ED) Edgar B. Saavedra March 27, 2014 0 0 N/A 2 years

Member (ED) Oliver Tan September 16, 2016 0 0 N/A 4 months

Member (NED) Florentino A. Tuason, Jr. June 30, 2015 0 0 N/A 1 year

RISK COMMITTEE

The role of the Risk Committee is to oversee the enterprise risk management prac-tices of the Corporation, including management ability to assess and manage the Corporation’s risk and provides an open communication between management and the Board in order to effectively manage the risks.

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THE HEART OF ENGINEERINGCorporate Social Responsibility

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The Heart of Engineering

Megawide Corporate Foundation, Inc. was established in 2012 with the vision to become a leading agent of transformation. It continues to inspire people and communities to practice excellence and innovation through its three pillars: Education, Livelihood, and Safety & Environment.

I. Empowering the Youth through EDUCATION

Megawide Engineering Excellence Scholarship Program

The Foundation partnered with the Technological University of the Philippines (TUP) Manila and the University of the Philippines Diliman (UPD) to give scholarships to deserving Engineering students. The scholarship covers tuition and school fees, monthly stipend, and book allowance.

2016 was the first full operating year of the Scholarship Program.

Megawide Foundation Scholars 2016• 7 TUP students• 1 UP student

Megawide-TUP Center for Engineering Excellence Program

Aside from the scholarship program, the Foundation donated specialized engineering reference books and materials to the TUP College of Engineering to help the college obtain the Center of Excellence status from the Commission on Higher Education. This donation benefited at least 230 Engineering students.

Aklat Para sa Lahat

Aklat Para sa Lahat is one of Megawide Foundation’s first education projects, donating books and reading corners to day care and public school classrooms around the country. In partnership with the National Bookstore Foundation, the Department of Education, and different local government units, Aklat Para Sa Lahat has already reached NCR, Rizal, Bataan, Zambales, Subic, and Cebu.

• 22 daycare centers• 73 classrooms

II. Providing LIVELIHOOD Opportunities

Organic Farming Project in Silay, Negros Occidental

In partnership with Harbest Agribusiness Corporation, 20 housewives in a sugarcane farming community attended a 6-week training course on growing and harvesting high-value crops as an alternative source of income.

Cebu City Operation Second Chances Livelihood Training Program

To maximize construction capabilities and industry connections, the Foundation worked with the Philippine Contractors Association – Cebu to conduct skills development training for juvenile delinquents undergoing reformation in the Operation Second Chance Center. Megawide Construction, tool suppliers, and material contractors also donated carpentry and construction tools for the training.

III. Promoting a HEALTHY AND SAFE ENVIRONMENT

Megawide Building Green for the Marikina Watershed Project

In 2016, Megawide Foundation began its 3-year rehabilitation project in the Marikina Watershed in Antipolo, Rizal. In partnership with the Philippine Business for Social Progress, Megawide employees volunteered for a tree-planting activity in the first 3 hectares of the reforestation site.

• 5-hectare total adopted area • 1,875 forest tree seedlings • 1,250 fruit-bearing seedlings

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Surigao Mangrove Tree-Planting Activity - Earth Day 2016

In celebration of Earth Day 2016, Foundation volunteers, officials of the Department of Environment and Natural Resources, and alumni and staff members of St. Paul College-Surigao planted 5,000 mangrove propagules in Surigao City.

Megawide-Citicore Power Operation Tuli

Megawide Foundation’s Safety and Environment pillar also takes into account the well-being of its stakeholders.In order to encourage proper hygiene and the well-being of male children in Mariveles, Bataan, the Foundation provided free circumcision for 150 boys with the help of medical volunteers and the Next Generation Power Technology Corp.

IV. Going Beyond the Pillars

Megawide Foundation goes the extra mile to realize its vision to become an agent of transformation, through partnerships with different sectors and organizations that share its advocacies.

Rehabilitation of Hospicio de San Jose Dormitory

Megawide Foundation voluntarily rehabilitated a dormitory building that served as quarters for more than 150 children in Hospicio de San Jose after it caught fire in August 2016.

Christmas Thanksgiving Outreach

With Christmas as the time of generosity and thanksgiving, the Foundation hosted a dinner party for more than 50 Megawide utility and security personnel in recognition of their contributions to the entire Megawide organization.

V. Changing for the Better

To extend greater support in different areas, and achieve its goals in the coming years, Megawide Foundation has made important changes in the organization.

In July 2016, the Employee Volunteerism Policy was launched to actively engage more employees in Foundation programs. The Foundation Program Approval Policy was also implemented to streamline the evaluation of projects from external partners, partnerships for existing projects, and the granting of donations.

A special Board meeting held last November appointed the new Board and officers:• Chairman - Manuel Louie B. Ferrer• President - Maila Angela T. Ong • Corporate Secretary - Atty. Marie Arcie Anne M. Sercado

VI. The Journey Ahead

Currently applying for accreditation from the Department of Social Welfare and Development, the Bureau of Internal Revenue, and the Philippine Council for NGO Certification, Megawide Foundation can make bigger and more positive changes in the Philippines moving forward. It will soon launch projects with agencies such as the League of Corporate Foundations and the Philippine Business for Social Progress to expand the scope of implementation.

More importantly, the Foundation remains committed to strengthening its programs in order to create more opportunities for learning and livelihood, while encouraging environmental sustainability in communities throughout the country.

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Before After

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After

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MANAGEMENTDISCUSSION AND ANALYSIS

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Megawide has continued to grow its construction business and its airport operations with a year-end consolidated revenue of P17.658 billion in 2016, representing a 14% jump from the previous year. The company’s Engineering, Procurement, and Construction (EPC) remains the core revenue contributor, accounting for 89% of total consolidated revenues, while the balance 11% is from the Mactan Cebu International Airport (MCIA).

The Construction business grew by 13% year-on-year. The company’s growth is sustained by private sector projects in the residential, office, and commercial segments. As the new administration rolls out its aggressive infrastructure development program, we expect that the construction industry will be ripe for opportunities to participate in the (Public-Private Partnership) PPP programs, as well as tender unsolicited bid proposals, in addition to the private sector led projects that continue to grow. We remain positive that utilizing our pre-cast facilities, German formworks system, and modernized construction equipment will enable us to compete efficiently in terms of pricing, quality, and consistency.

The Mactan Cebu International Airport (MCIA) has continued to deliver a strong growth of 26% on our second full year of operations and management. Passenger volume in both the domestic and international segments, growing at 8% and 22% respectively, continue to propel revenue growth for the airport. We will persistently grow the

year’s revenue production for the two consecutive years and has achieved a compounded annual growth rate of 15%. Meanwhile, has continued to deliver a strong growth of 26% on our second full year of operations and management.

The construction revenue increased by 13% or P1.83 billion due to revenue earned from numerous significant contracts won by the Megawide such as Meridian Park Phase 1 of Double Dragon, Le Grand BPO Cluster Phase 1 & 2 of Megaworld, 8990 Tower in Edsa and Tondo of 8990 Holdings Inc, Landers Warehouse Balintawak & Otis of Southeast Asia Retail, Inc., Proscenium Lincoln and Lorraine Towers of Rockwell, Cyber Park Tower 2 by Araneta Group, Southeast Asia Campus by Megaworld, Arthaland Towers by Arthaland Corp., and three Solar Power farm projects. Total booked new contract in 2016 amounted by the Parent amounted to P12.73 billion. As a result, total construction order book as of December 31, 2016 stands at P38.49 billion. These new contracts include Phase 2 of Meridian Park of Double Dragon, 10 West, St. Moritz, Southeast Asean Campus, One Manchester Cebu of Megaworld, and 8990 Tondo and Cubao by 8990 Holdings Inc.

Meanwhile, Megawide’s airport subsidiary GMCAC posted an increase in revenues by 26% or P388 million due to increase in Aeronautical Revenues, Commercial Revenues, and Rental Revenues as a result of year-on-year increase in passenger traffic by 12%.

international traffic direct to Cebu as we market this to be an international gateway into the top tourist island destinations in the country. MCIA Terminal 2, currently under construction will provide the airport an additional 8 million annual passenger capacity when we complete construction in June 2018. Opportunities in the airport business segment in the near term would be the 5 regional airports that are scheduled for bidding in Dec 2017 as well as selected opportunities in company-initiated, unsolicited airport proposals to the government.

Moving forward, we expect the company to sustain these two business segments and evaluate opportunities that may allow us to participate in the government’s infrastructure program, as a contractor, or as a contractor and concession operator.

Review of results for the year ended December 31, 2016, as compared with the results for the year ended December 31, 2015

Results of Operations

Group Revenue increased by 14% or P2.22 billionThe Group has posted an all-time high revenue of P17.66 billion in 2016 which is 14% or 2.22 billion higher compared with the Group’s revenue in 2015. Of the total revenue, construction segment contributed 89% at P15.79 billion while airport segment contributed 11% at P1.87 billion. Construction Segment is continuously outperforming its previous

Company Outlook for 2017

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Domestic and international flights increased by 8% and 22%, respectively, due to introduction of Xiamen Airlines, China Eastern, Tiger Airway, Emirates, PAL Cebu to Los Angeles, and Eva Air and additional domestic flights to Davao, Bacolod, Butuan, Iloilo, Roxas, Ormoc, and CDO. Aero and aero-related revenues comprise 72% of the total airport revenues in 2016. Non-aero related revenues, which comprise 28% of the 2016 airport revenues, increased by P192 million or 57% in 2016 primarily due to new concessionaire contracts and advertisements from Jollibee, Suyen Corp., Starbucks, Bigby’s Quality Food, Ulli’s Streets of Asia, and the revamping of contract with Cesar’s Foodland Inc.

Gross Profit increased by 20% or P646 million Gross profit earned from construction is P2.36 billion or 61% of the Group’s gross profit while gross profit earned from airport operation amounted P1.51 million. Construction gross profit increased by 13% or P270 million while airport operations booked an increase in gross profit of P376 million, 33% higher than the gross profit earned in 2015. The increase in Group’s gross profit is primarily attributable to the increase in construction and airport revenue contribution.

Other Operating Expenses increased by 23% or P201 millionThe increase in other operating expenses is directly attributable to increase in revenues of the Group in 2016. As the airport facility is continuously renovated to meet capacity and service requirements mandated by the Concession Agreement, the airport segment procured more spares, worked, and supervised contractors. In addition, supplemental agreements were contracted in 2016

to serve the additional headcounts and work shifts related to projects to serve to increase passenger capacity. The implementation of the Baggage Handling System, opening of new toilet facilities around the airport, strengthening of access points after the Transport Security Administration and Engineering service contractors, and the mandatory labor cost rate adjustment all contributed to the increase in Group’s operating expense. Meanwhile, construction segment overhead increased due to increase in manpower of the support group to ensure quality of product and on-time delivery of service to clients. The ratio of operating expenses to total revenues of the Group remained at 6% for both years.

Operating Profit increased by 19% or P445 millionThe increase is a result of higher revenues from both construction and airport operations of the Group.

Finance Costs increased by 20% or P113 millionIncrease in finance cost is mainly due to the interest on P3 billion loan availment by GMCAC in 2016 to fund the construction of terminal 2. The loan availment of GMCAC were made in accordance with its drawdown schedule with the banks.

Finance Income increased by 30% or P43 millionThe Group’s finance income increased due to higher value of short-term placements and cash in bank of the Group.

Other Income increased by 204% or P50 millionThe increase is due to portion of the land sold in 2016 in which the Parent Company recorded a gain on P52 million and the increase in management fees to unconsolidated entities of the Group by P18 million.

Tax Expense decreased by 5% or P21 millionGMCAC’s tax expense decreased by P196 million in 2016 due to its availment of its ITH. Upon completion of the BOI registration terms and condition on the renovation of terminal 1, GMCAC availed its ITH incentive. GMCAC is entitled to ITH for period of three years or until December 2018. Meanwhile, Parent’s income tax has increased by 55% or P 140 million compared to 2015 income tax due to the expiration of the Parent’s Income Tax Holiday (ITH) Incentive in May 30, 2015 and growth in construction earnings in 2016.

Net Income increased by 30% or P446 millionThe Group’s Consolidated Net Profit increased by P446 million compared to the same period in 2015 due to strong earnings from both construction and airport operations.

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Financial Condition

Review of financial condition as of December 31, 2016, as compared with the financial condition as of December 31, 2015

Current Assets decreased by 7% or P1.52 billionThe following discussions provide a detailed analysis of the decrease in current assets:

Cash and cash equivalents increased by 91% or P2.99 millionCash inflow from operating activities of the Group amounted to P5.61 billion, P3.869 billion of which pertains to the Parent Company and P1.92 billion from the airport operation. The increase in operating cash inflow of the Group is mainly attributable to increase in revenue, efficiency in collecting its receivables, and cash management in paying its suppliers. For investing activities, total cash used up to fund the construction of Cebu Airport Terminal 2, procure construction equipment, temporarily place cash to higher yielding investments, and infuse cash to unconsolidated entities such as Southwest terminal amounted to P3 billion. Meanwhile, cost to reacquire and sell treasury shares of the Parent amounted to P1.95 billion. In 2016, the Parent purchased 410,842,702 common shares held by Sybase Equity Investment Corporation for a total consideration of P4.12 billion. On October 2016, 150 million of the treasury shares were resold.

Financial assets at fair value through profit or loss decreased by 22% or P1.31 billionThe decrease is due to reclassification of placements which matured at end of year but were reinvested in the next banking day of 2017.

Trade and other receivables decreased by 37% or P2.88 billionDecrease is primarily due to collection of progress billings of construction receivables as spike in revenue occurred towards the last quarter in 2015 while collection of which were received in early 2016.

Construction materials increased by 54% or P159 millionThe increase is due to voluminous purchases of construction materials as a result of the increase in projects’ requirement for both current and new projects. In addition, finished goods of the precast plant that were not yet delivered to the construction sites as of the end of 2016 also contributed to the increase in inventory.

Costs in excess of billings on uncompleted contracts – net decreased by 15% or P539 billion The decrease is typically due to realization of catch up of billings versus actual cost incurred to date for projects nearing completion like BPO Araneta Phase 1, Shangrila, Mareic, The Rise, Philam Life, Arthaland Substructure, Proscenium Substructure, The Hive Tower 1, Landers Otis and Balintawak, and LeGrand Towers ABC and DEF.

Other current assets increased by 4% or P57 millionThe increase is mainly due to increase in input vat of the Parent as a result of its voluminous purchases of construction materials and services.

Non-current assets increased by 16% or P4.09 millionThe following discussions provide a detailed analysis of the increase in non-current assets:

Available-for-sale financial assets (AFS) increased by P931MThe increase is due to the placement of the Parent Company’s excess funds to Retail Treasury Bond with an interest rate of 3.5% per annum as part of the Group’s cash management program.

Investments in associates and joint venture increased by 10% or P78 millionThe Parent Company infused additional fresh cash in MWM, Terminals Inc. (MWMTI) in 2016. MWMTI is the Consortium between Megawide and WM Property Management who will undertake the Concession Agreement that was signed on February 25, 2015 by MWMTI and DOTC for the construction and operation of Southwest terminal. The Group also recognized its share in net losses on its various equity investments totaling to P10 million.

Concession asset increased by 24% or P3.97 billion Increase is due to capital investments of airport subsidiary GMCAC related to the construction of the new terminal 2 of Mactan-Cebu International Airport. The terminal 2 is expected to be completed and operational by June 2018.

Property, plant, and equipment increased by 6% or P319 million In 2016, the Group purchased equipment totaling P909 million, of which P718 million is related to the construction segment to support the order book of the Parent. The Group’s depreciation in 2016 amounted to P504 million.

Deferred tax asset increase by P34 millionThe increase is due to the recognition of the Parent of deferred tax asset on the excess of actual cost over estimated cost on its on-going projects and on its retirement benefits in 2016.

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Other non-current assets decreased by 32% or P1.24 billion The decrease pertains to portion of Restricted Funds of GMCAC’s “Cash Flow Waterfall Accounts” required under the Omnibus Loan and Security Agreement that was released and transferred to unrestricted fund for use in operations amounting to P930 million. The agreement provides that working capital and capital expenditures of the next succeeding quarter’s budget shall be released by the bank from GMCAC Cash Flow Waterfall Accounts on a quarterly basis. Also, in 2016, recoupment of downpayment amounting to P391 million for the construction of Mactan-Cebu International Airport were applied against progress billings.

Current liabilities decreased by 9% or P1.19 billionThe following discussions provide a detailed analysis of the decrease in current liabilities:

Interest-bearing loans and borrowings current decreased by 25% or P903 millionThe Parent Company paid portion of its short-term bank loans to manage the volatility of interest rates on Short-term loans in anticipation to the increase in interest rate in 2017.

Trade and other payables decreased by 10% or P655 millionThe Parent paid its suppliers and subcontractors for its solar farm projects as these projects came into completion in 2016. The Parent also continue to benefit from the extended credit terms as a result of the Parent’s growing business relationship with its suppliers.

Advances from customers decreased by 24% or P414 millionThe decrease is due to the recoupment of downpayment from customers as a result of higher revenue generated by the Parent.

Billings in excess of costs on uncompleted contracts–net increased by 132% or P778 millionIncrease is mainly due to new significant contracts booked last year which are at its early phase like Proscenium Towers Lincoln and Lorraine, Double Dragon, 10 West, South East Asian Campus, and Araneta Phase 2. These projects also contributed a big portion of the Parent’s total construction revenue. Increase is typical as billings are higher compared to cost during early to middle phase of the construction.

Other current liabilities increased by 5% or P5 millionIncrease is only due to increase in withholding taxes of the Group.

Non-Current liabilities increased by 22% or P4.15 billionThe following discussions provide a detailed analysis of the increase in non-current liabilities:

Interest-bearing loans and borrowings - non-current increased by 22% or P4.12 billionThe increase is primarily due to GMCAC availment of P3.05 billion loan in 2016. The availment was made based on the drawdown schedule with bank to finance the construction of Terminal 2. Meanwhile, as a result of its cash management program, the Parent paid its short term bank loan to avail its P1 billion ten-year corporate term loan.

Deferred tax liability decreased by 100% or P145 millionDecrease is due to recognition of additional deferred tax asset of the Parent on retirement benefit obligation and actual versus estimated construction costs. The net amount of deferred tax asset or deferred tax liability is presented in either deferred tax asset or deferred tax liability.

Other non-current liabilities increased by P136 million or 144%The increase is due to the portion of the amount retained from the progress billings of Megawide GISPL Construction Joint venture (MGCJV), the construction arm created to facilitate construction of the airport terminal by GMCAC in 2016. MGCJV is 50% owned by Megawide and is accounted for as joint operations in the consolidated financial statements. Retention payable will be due upon final acceptance of the constructed facility. In addition, security deposits related to lease of space in terminal 1 of GMCAC also increased by P43 million. Equity decreased by 2% or P395 millionThe decrease is mainly the function of the Megawide’s treasury shares amounting to P1.96 billion, net of reissuance of treasury shares and it’s the corresponding increase in APIC and payment of preferred shares dividend amounting to P281. Meanwhile, total equity of the Group increased by P1.92 billion as result of the recognition of the Group’s net profit for 2016.

Review of results for the year ended December 31, 2015, as compared with results for the year ended December 31, 2014

Group Revenue increased by 54% For the year ended 2015, the Group recorded a consolidated revenues of P15.44 billion–the highest in the history of the Group. This is 54% or P5.40 billion higher compared to the same period in 2014. The bulk of the revenue was from its core construction business that reached P13.96 billion while airport operation revenues contributed P1.48 billion or 10% of the consolidated top line.

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Construction revenue increased by 42% or P4.12 billion compared to the same period in 2014 due to higher percentage of completion on on-going projects such as Araneta Gateway Tower 1, Meridian Park of Double Dragon, DepED school building project Phase 2, World Hotel Makati, Philamlife Corporate Tower in Mactan, Shangrila Salcedo Place, Fern Residences, Proscenium of Rockwell, and three Solar Power fram projects. On top of the higher construction revenues posted in 2015, the Company likewise booked new contracts amounting to P37.73 billion. These new contracts include 8990 Tower in Edsa and Tondo of Foghorn Inc., Tower One Plaza Magellan, Le Grand BPO Cluster Phase 1 & 2, South East Asia Campus of Megaworld, Philam Life Cebu of Philam Life Center Cebu, The Rise of The Rise Mixed Development Inc., Southwood Mall and Office Towers of Southwoods Mall Inc, Landers Warehouse Balintawak & Otis of Southeast Asia Retail, Inc.

Meanwhile, Megawide through its airport subsidiary GMCAC posted its first full-year airport operation revenues from the Mactan-Cebu International Airport of P1.48 billion due to strong Aeronautical Revenues, Commercial Revenues, and Rental Revenues as a result of the increased in passenger traffic of 15.5% compared to the same period in 2014. GMCAC continues to embark on new airline and destination marketing initiatives to add new routes and passenger volume, and at the same time continues to improve operating efficiencies in Terminal 1 to enhance passenger throughput.

In 2015, MCIA was voted as 18th best airport in Asia in a survey by a website that ranks airports based on responses from travelers.

Gross Profit increased by 84% Gross profit earned from construction is P2.09 billion or 65% of the Group’s gross profit and the balance pertains to airport operation. The Parent was able to outperform its gross profit in 2014 by P495M or 31% basically due to increase in construction revenue. On other hand, GMCAC booked a gross profit of P1.14 billion due to the increase in aero and non-aero related revenues.

Other Operating Expenses increased by 94%The increase in other operating expenses is directly proportionate to higher construction revenues posted in 2015 compared to the same period in 2014. Moreover, the full year impact of the operating expenses of GMCAC contributed to the increase in the consolidated Operating Expenses in 2015.

Operating Profit increased by 81%The increase is a result of higher construction revenues posted in 2015 compared to the same period in 2014 and the full year impact from airport operation of the Mactan-Cebu International Airport

Finance Costs increased by 26%Increase in finance cost is mainly due to interest cost of rehabilitated terminal 1 of GMCAC. Meanwhile, finance cost of construction segment decreased by P4.7 million.

Finance Income increased by 22%The Group’s finance income increased due to the interest income of the Parent Company on various short-term placements, which increased from P3.66 billion in 2014 to P6.0 billion in 2015.

Other Income decreased by 58%Group’s other income decrease is due to the decrease in gain on sale of equipment because the Parent has disposed majority of its old equipment

in 2014. There is also a decrease in share in net profit of investment in associate and decrease in income on amortization of deferred gain on sale and leaseback.

Tax Expense increased by 247%Tax expense increased due mainly on the expiration of the Parent’s ITH Incentive in June 2015 and GMCAC’s income tax for the full year of 2015.

Net Income increased by 66%The Group’s Consolidated Net Profit increased by P587 million compared to the same period in 2014 due to strong earnings from both construction and airport operations.

Financial Condition

Review of financial condition as of December 31, 2015, as compared with the financial condition as of December 31, 2014

Current Assets increased by 32% or P5.37 billionThe following discussions provide a detailed analysis of the increase in current assets:

Cash and cash equivalents decreased by 26% or P1.16 billionThe decrease was due to higher cash used in investing activities compared to total cash generated from operating activities and cash from financing activities. The Group generated a net cash flow from operation amounting to P3.38 billion, of which P2.35 billion came from its construction business while airport subsidiary GMCAC contributed P1.03 billion. The Group also generated net cash flow of P1.65 billion from its financing activities, of the total net cash generated from both operating and financing activities, P2.33 billion was temporarily parked in short term fixed income placements for future deployment in accordance to its

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capital expenditures plan, P1.12 billion was placed under trust in accordance with cash flow waterfall requirement on GMCAC’s bank loan, P1.41 billion was used to jump start the construction of the new Terminal 2 and facility improvements of the old Terminal 1 of the Mactan-Cebu International Airport while P571 million was used to acquire new construction equipment to support the construction business of the Group.

Financial assets at fair value through profit or loss increased by 64% or P2.33 millionThe increase is due to repositioning of portion of cash and cash equivalents to short-term placements as part of the cash management program of the Parent Company. Trade and other receivables–net increased by 65% or P3.07 billion.Increase is primarily due to the increase in contract receivables which is proportionate to the higher construction revenues recognized for the year as a result of higher percentage of completion on on-going projects and increase in retention receivables due to more projects completed for the year compared to the same period in 2014. Construction materials decreased by 9% or P29.67 millionThe decrease is mainly due to timing difference in placing the purchase orders and actual deliveries of the goods from the suppliers.

Costs in excess of billings on uncompleted contracts–net increased by 29% or P798 million The increase is typical cycle for projects near completion stage such as Bhotel, Rockwell Business Tower, the low-cost housing of NHA, New Frontier Theater,

and Hampton Towers M&N, wherein minimal revenues were recognized and similarly for new projects that just started because physical accomplishments is yet to be realized compared to cost accrued associated to mobilization and preliminary costs. These are projects like Mactan Cebu Airport Terminal 2, BPO Araneta Cyberpark 2, Urban Deca Ortigas, Urban Deca Tondo, and Southeast Asean Campus.

Other current assets increased by 28% or P354 millionThe increase is mainly due to new downpayments paid to suppliers and subcontractor of the Parent related to its newly booked projects in 2015.

Non-current assets increased by 16% or P3.64 billionThe following discussions provide a detailed analysis of the increase in non-current assets

Concession asset increased by 9% or P1.30 millionIncrease is due to capital investments of airport subsidiary GMCAC related to the renovation and upgrading of existing terminal 1 and construction of the new terminal 2 of Mactan-Cebu International Airport.

Property and equipment–net increased by 5% or P234 millionThe increase is mainly due to acquisition of construction equipment by the Parent Company that will be used to support the construction of new contracts in late 2014 to 2015.

Deferred tax assets decreased by P100% or P11 millionThe decrease is mainly due to utilization of income tax benefit of GMCAC from its previously recognized Deferred tax asset in 2014.

Other non-current assets increased by 116% or P2.08 billionThe establishment and filling up of the Debt Service Reserve Account (DSRA) amounting to P1.13 billion by the Parent’s airport subsidiary GMCAC primarily contributed to the increase in other non-current assets. The setting up of the DSRA is part of the “Cash Flow Waterfall Accounts” required under the Omnibus Loan and Security Agreement entered into between GMCAC and consortium Lenders last 2014 for the project financing of the construction of the new Terminal 2 and upfront premium paid to the government for the right to operate and maintain the Mactan-Cebu International Airport for 25 years.

Also in 2015, GMCAC used P684.47 million cash for downpayments to contractors and suppliers for the construction of airport terminal building and acquisitions of property and equipment, based on certain percentage of the contract price. The initial downpayment will eventually be recouped or deduced from the amount payable of GMAC either in pro-rated basis or in full once billed by the contractor and supplier.

Portion of increase in non-current assets also includes P112.36 million deferred transaction cost from GMCAC loan which will be treated as discount on the related debt upon drawdown.

Current liabilities decreased by 33% or P6.36 billionThe following discussions provide a detailed analysis of the increase in current liabilities.

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Interest-bearing loans and borrowings current decreased by 76% or P11.30 billionGMCAC paid its short-term bridge last April 2015 amounting to P11.30 billion.

Trade and other payables increased by 137% or P3.86 billionThe increase is due to the longer credit term extended by the supplier to the Parent as a result of the Parent’s growing business relationship with is suppliers and the availment of the Vendors Prepayment Program offered by local banks providing the Parent an additional credit term up to 180 days on top of the credit term provided by the suppliers and subcontractors. The increase is also the result of GMCAC’s accrual of the construction cost billed by supplier and subcontractors of the Mactan Cebu International Airport terminal 2. The construction of terminal 2 started in June 2015.

Advances from customers increased by 54% or P595 millionThe increase is the net effect of downpayments received by Parent for its new projects and recoupment of existing downpayment for its on-going projects. In 2015, the Parent Company received downpayments on new projects such as Philam Life Cebu, Southwood Mall and Office Towers, Proscenium, Le Grand BPO Clusters Tower 1 & 2, 8990 Tondo, Double Dragon, Landers Warehouse, and Arthaland Superstructure.

Billings in excess of costs on uncompleted contracts–net increased by 284% or P437 millionIncrease is mainly due to more revenues raised from on-going projects compared to actual cost accrued for the period such as Double Dragon of DD-Merridian Park Dev’t. Corp., Grass Tower 4 of SMDC., Philam Life Center Cebu of Philam Life, Southwoods Mall of Southwoods Mall Inc., BPO Araneta of Araneta Group, World Hotel of H2O Ventures, Proscenium of Rockwell, Le Grand BPO Cluster Tower 1 & 2 of Megaworld Corp., Landers Warehouse Otis and Balintawak, and Power projects.

Other current liabilities increased by 75% or P47 millionIncrease in deferred output VAT of GMCAC amounting P31M and Megawide amounting to P52 million. The deferred output VAT is based on revenue and will be due to government upon receipt of collection on trade receivables from customers.

Non-Current liabilities increased by 279% or P14 billion

Interest-bearing loans and borrowings-non-current increased by 277% or P13.93 millionOn December 17, 2014, GMCAC entered into a P20 billion (which at GMCAC’s option may be increased up to P23.3. billion) Omnibus Loan and Security Agreement with various banks. GMCAC availed a total of P13.95 billion in 2015. The proceeds of the loan was used to refinance the bridge facility of BDO which was used to partly finance the payment of the Project’s Upfront Premium and to finance the capital expenditures and other costs in relation to the Project. Meanwhile, the Parent redeemed P40 million of its corporate notes and availed additional finance lease of P20 million in 2015.

Retirement benefit obligation increased by 21% or P13 millionIncrease is due to accrual of retirement obligation by the Group.

Deferred tax liability increased by P145 millionDeferred tax liability pertains to deferred tax on the amortization of GMCAC’s concession asset. For financial reporting purposes, the concession asset is amortized on a straight-line basis over the useful life of 25 years following the period covered by the Concession Agreement when the infrastructure is ready for use but for tax purposes, the concession asset is amortized based on its useful life. The difference between the tax depreciation and financial depreciation is recognized as deferred tax liability.

Other non-current liability increased by P94 millionThis pertains to concessionaire’s rental security deposits to GMCAC, which represents guarantee amounts deposited by concessionaires upon execution of their respective lease agreements entered into with GMCAC. These deposits shall be applied against whatever amounts may be necessary to cover unpaid bills with the remaining amount refundable to the concessionaires at the end of the lease term. Retention payable of GMCAC is also booked under non-current liability. Retention payable pertains to 10% withheld by GMCAC based on the billings of its subcontractors. The retention is payable upon completion of the contract of the subcontractor.

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Equity attributable to Parent increased by 7% of P994 millionThe increase is the mainly the function of the Parent’s share in net income of the Group amounting to P1.27 billion and dividends paid on preferred shares amounting to P281 million in 2015.

Review of results for the year ended December 31, 2014, as compared with the results for the year ended December 31, 2013

Year 2014 is the maiden year for Megawide to recognize other revenues on top of its traditional construction business; a breakthrough in its continuous diversification initiatives to weather Megawide from the cyclical nature of the construction industry. The Group’s reported consolidated revenues of P10.04 billion for the year 2014 of which the airport business contributed P199.96 million for 2-month operations or 2% of consolidated revenues. The Group successfully took over the operations and maintenance of the MCIA last November 1, 2014. Moving forward, the Group’s airport business contribution to the consolidated revenues is expected to increase to double digit.

Meanwhile, Construction Revenues softened by P838 million due to new projects of the Parent Company that did not start as scheduled in 2014 and pushed the construction in the towards the end of 2014 and early 2015 due to various external reasons such as design coordination with Clients, access to site and other related site conditions, and Permitting Works which are typical and normal of start-up projects such as 8990

Tower of Foghorn Inc., the Proscenium of Rockwell, Tower One start-up projects such as Plaza Magellan of Megaworld, Philam Life Cebu of Philam Life, The Rise of The Rise Mixed Development Inc., and the MPOC. In addition, construction of PPP projects of the Parent did not start as scheduled as well such as Philippine Orthopedic Hospital and MCIA.

In 2015, there is a better outlook on construction revenues due to expected ramp up in percentage of completion for projects mentioned above. Moreover, the Parent Company’s Order Book soared to P30.26 billion as of March 30, 2015 due to increase in new projects booked later part of 2014 and early 2015.

In spite of the lower construction revenues posted in 2014, the Parent’s gross profit margin was maintained at 16%.

The increase in the Group’s operating expenses of P120 million were mainly due to consolidation of operating expenses of GMCAC and additional manpower employed during the year in preparation for the new projects in 2015.

Group’s finance income decreased by 75% or P343 million due to absence of one-time trading gain in financial assets particularly on government securities as the Company mobilized cash to fund its equity portion in GMCAC in relation to the MCIA Project.

Group’s finance costs increased by 5% or P20 million due to interest expense of GMCAC on its short-term bridge loan.

Group’s other income increased by 24% or P11 million mainly due to rental income on equipment of the Parent Company.

The Group’s consolidated core net profit reduced by 8% or P86 million (excluding one-time trading gain in 2013) mainly due to lower construction revenues realized–this is a typical cycle in the construction business if there are more projects at finishing stages than projects at early stages of construction.

There were no seasonal aspects that had a material effect on the financial condition or results of operations of Megawide.

There are no explanatory comments on the seasonality of interim operations. There are no material events subsequent to the end of the interim period that have not been reflected in the financial statements of the interim period.

There are no material amounts affecting assets, liabilities, equity, net income or cash flows that are unsual in nature; neither are there changes in estimates of amounts reported in prior interim period of the current financial year.

68

LIQUIDITY AND CAPITAL RESOURCES

As regards internal and external sources of liquidity by Megawide, funding will be sourced from internally generated cash flows, and also from borrowings or available credit facilities from other local and international commercial banks.

There is no material commitment for capital expenditures other than those performed in the ordinary course of trade or business.

There is no significant element of income not arising from continuing operations.

There have not been any seasonal aspects that had a material effect on the financial condition or results of operations of Megawide.

Notes:(1) Current Assets / Current Liabilities(2) Interest bearing loans and borrowings less cash and cash equivalents and financial assets valued through profit or loss / Stockholder’s Equity(3) Total Equity / Issued and Outstanding Shares(4) Net Profit / Issued and Outstanding Shares(5) Net Profit / Average Shares(6) Net Profit / Average Equity(7) Gross Profit / Revenue

Cash Flows

The following table sets forth information from Megawide’s pro forma statements of cash flows for the period indicated:

(Amount in Million Php) For the year ended December 31

Cash Flow 2016 2015

Net cash provided by (used in) operating activities 5,605 3,380

Net cash used in investing activities (3,010) (6,187)

Net cash provided by financing activities 369 1,651

Amount in Billion Php, except ratios and Earnings

per Share2016 2015 2014

Construction Order Backlog P 38.49 P 39.06 P 22.63

Current Ratio1 1.83 1.78 .90

Net Debt to Equity Ratio2 .91 .80 .77

Book Value Per Share3 4.52 4.35 6.42

Earnings per Share4 .57 .41 .35

Return on Assets5 .04 .03 .03

Return on Equity6 .12 .09 .07

Gross Profit Margin7 .22 .21 .17

Key Performance Indicators

Megawide’s key performance indicators (KPIs) are listed below:

69

The KPIs were chosen to provide management with a measure of Megawide’s sustainability on revenue growth (Construction Orders Backlog) financial strength (Current Ratio and Debt to Equity Ratio), and profitability (Earnings per Share, Return on Assets, Return on Equity, Gross Profit Margin).

Construction Orders Backlog corresponds to the value of any unfinished project phases. This provides a basis for near-term future source of production and revenues of Megawide. Construction Order Backlog tends to increase when booked construction contracts or orders increase. A larger Construction Order Backlog is indicative of higher profit in the future.

Item 7. Financial Statements

The audited financial statements and supplementary schedules to the financial statements duly submitted to BIR are attached as Exhibit 2 hereto.

Item 8. Changes in and Disagreements with External Accountants on Accounting and Financial Disclosure

1. External Audit Fees and Services

The following table sets out the aggregate fees billed for each of the last three (3) fiscal years for professional services rendered by Megawide’s external auditors:

Auditor Year Handling Partner

Punongbayan & Araullo

2016 and

2015

2016 – Mailene Sigue-Bisnar

2015 – Leonardo Cuaresma, Jr.

Particulars NatureAudit Fees (amounts in Php)

For the year ended December 31

2016 2015 2014

Punongbayan & Araullo

Audit of Financial Statements 1,485,000 1,350,000 P1,050,000

Except for the audit opinion rendered on the financial statements of Megawide required for annual filing with the SEC and the review for the use of proceeds on Megawide’s preferred shares, the afore-cited independent public accountant provide no other type of services.

Audit Committee Pre-Approval Policy

Megawide’s Audit and Compliance Committee is composed of the Chairman, Mr. Leonilo G. Coronel, and members, Michael C. Cosiquien and former Chief Justice Hilario Davide.

The Audit and Compliance Committee is required to pre-approve all audit and non-audit services rendered by and approve the engagement fees

and other compensation to be paid to the independent accountant. When deciding whether to approve these items, Megawide’s Audit and Compliance Committee takes into account whether the provision of any non-audit service is compatible with the independence standards under the guidelines of the SEC. To assist in this undertaking, the Audit and Compliance Committee actively engages in a dialogue with the external auditors with respect to any disclosed relationships or services that may impact their objectivity and independence and, if appropriate, recommends that the Board take appropriate action to ensure their independence.

2. Changes in and Disagreements with External Accountants on Accounting and Financial Disclosure

The name of the handling partner for the auditor of Megawide is as follows:

70

FINANCIAL REPORT

72

STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of Megawide Construction Corp. and its subsidiaries (the Group) is responsible for the preparation and fair presentation of the financial statements, including the schedules attached therein, for the years ended December 31, 2016, 2015 and 2014, in accordance with prescribed financial reporting framework indicated therein and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Included therein the following additional supplemental information filed separately from the basic financial statements:

Supplementary Schedules Required under Annex 68-E of the Securities Regulation Code Rule 68;

Reconciliation of Retained Earnings Available for Dividend Declaration; Schedule of PFRS and Interpretations adopted by the Securities and

Exchange Commission and the Financial Reporting Standards Council as of December 31, 2016;

Schedule of Financial Indicators for December 31, 2016 and 2015; Map showing the Relationship Between and Among the Company and its

Related Entities; Schedule of Proceeds and the Expenditures for the Recent Public Offering;

and, Details of Transactions with DOSRI.

In preparing the 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 to do so. The Board of Directors is responsible for overseeing the Group’s financial reporting process. The Board of Directors reviews and approves the financial statements, including the schedules attached therein, and submits the same to the stockholders. Punongbayan & Araullo, the independent auditors, appointed by the stockholders, has audited the financial statements of the Group in accordance with Philippine Standards on Auditing, and in their report to the stockholders, has expressed their opinion on the fairness of presentation upon completion of such audit.

73

STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of Megawide Construction Corp. and its subsidiaries (the Group) is responsible for the preparation and fair presentation of the financial statements, including the schedules attached therein, for the years ended December 31, 2016, 2015 and 2014, in accordance with prescribed financial reporting framework indicated therein and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Included therein the following additional supplemental information filed separately from the basic financial statements:

Supplementary Schedules Required under Annex 68-E of the Securities Regulation Code Rule 68;

Reconciliation of Retained Earnings Available for Dividend Declaration; Schedule of PFRS and Interpretations adopted by the Securities and

Exchange Commission and the Financial Reporting Standards Council as of December 31, 2016;

Schedule of Financial Indicators for December 31, 2016 and 2015; Map showing the Relationship Between and Among the Company and its

Related Entities; Schedule of Proceeds and the Expenditures for the Recent Public Offering;

and, Details of Transactions with DOSRI.

In preparing the 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 to do so. The Board of Directors is responsible for overseeing the Group’s financial reporting process. The Board of Directors reviews and approves the financial statements, including the schedules attached therein, and submits the same to the stockholders. Punongbayan & Araullo, the independent auditors, appointed by the stockholders, has audited the financial statements of the Group in accordance with Philippine Standards on Auditing, and in their report to the stockholders, has expressed their opinion on the fairness of presentation upon completion of such audit.

Corporate Information

Megawide Construction Corporation

Head Office:20 N. Domingo St. Brgy. Valencia, Quezon City 1112PhilippinesTel (+632) 655 1111

Common StockThe Company’s common stock (MWIDE) is listed and traded in the Philippine Stock Exchange.

Shareholder Services and AssistanceBanco de Oro Unibank, Inc. - Trust and Investments Groupserves as the Company’s stock transfer agent registrar.

For matters concerning dividend payments, account status, lost or damaged stock certificates or change of address, please write or call:

BDO UNIBANK, INC. - Trust and Investments Group 15th Floor South Tower, BDO Corporate Center, 7899 Makati Avenue, Makati City 0726

Tel. (+632) 8784963; 8784053 Fax (+632) 8784056 Email address: [email protected]

For inquiries or concerns from analysts, institutional investors, the financial community, customers, and the general public, please contact:

Investor Relations

Telephone Number (+632) 655 1111 ext 314

email: [email protected]: www.megawide.com.ph

www.megawide.com.ph

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