Mabuhay Holdings Corporation
President’s Report – 2014

Valued Shareholders of Mabuhay Holding Corporation, Ladies and Gentlemen:

Welcome to our Annual General Meeting!

As has become tradition, I will first share with you our outlook for the general economic situation throughout the world as well as in the Philippines specifically before I make my report on the operations of our company. I will not spend too much time in doing so this year, though, since the world economy has not changed much in recent months.

The economic situation in the United States appears to have improved, especially with the development of shale gas production which will substantially decrease the dependence of US on imported energy supplies and may eventually make US an exporter of energy. However, the US government is still encountering big budget and fiscal deficits. In a way, the US economy is still surviving on heavy borrowing. Under this situation, we cannot expect the United States to contribute much to boost the world economic growth at this stage.

Europe seems to get into better shape also, but economic problems in individual countries are still threatening the European community as a whole. The recent political and diplomatic upheavals, such as the turmoil in Ukraine, the civil wars in Syria and Iraq, the conflict between Israel and the Hamas etc, are seriously affecting the economic growth and we therefore cannot count on Europe to bring about the world economic recovery.

The Japanese economy appears to have improved quite a lot under the administration of Shinzo Abe. But if we take a closer look, the measures taken by Abe are just “cosmetic”, if I may use the term, which include the printing of more money, devaluation of the Japanese Yen and increasing the value added tax on the Japanese citizenry. All these actions may have temporary effects on the Japanese economy but they will definitely cause Japan more fiscal and social problems in the long run, particularly since Abe is eager to build up the Japanese armed forces
and increase military spending. The debt problem of the Japanese government is




even worse than that of the United States. The only consolation is that most of the Japanese government debts are domestic rather than foreign borrowings.

China, as another possible engine for world economic recovery, has also seen the gradual slowdown in its own economic growth. One unhealthy situation is that instead of closer cooperation, the United States has been trying to contain China in terms of its rapid emergence as a significant world power. This is not good for the developing countries, as the Chinese philosopher said, “when elephants fight, the little ants in the vicinity also get hurt”. In trying to break the US containment, China has recently advocated the establishment of new international financial institutions, namely, the BRICS Bank and the Asian Infrastructure Investment Bank, for the purpose of financing infrastructure projects in the developing countries. China is trying to escape the restrictions set by the World Bank and the Asian Development Bank which are significantly controlled by the USA and Japan, respectively. Effects of the Chinese proposals have yet to be seen but let us hope that the creation of new financial institutions using Chinese resources will be effective in boosting economic growth in the developing countries.

Despite the chaos in the various parts of the world, the Philippine economy has continued to perform well in the past year. All the three major international rating companies, namely, Standard & Poor, Moody’s and the Fitch Group, have accorded the Philippines with an investment rating last year. This explains the influx of foreign investments into our country. In April this year, our government registered a quadrupling of Foreign Direct Investments, or FDI, of US$597m. Recently, the internationally renowned Economic Intelligence Unit, or EIU, and the Japan-based R & I rating company have also raised the rating on the sovereign risk and political risk of the Philippines. With all these favorable evaluations of our country’s economy and the improved credit ratings, we can expect more foreign investors to look at the Philippines as an ideal country to put their investments.

Although the International Monetary Fund has recently slashed its earlier forecast on the Philippine economic growth due to the global risks, however, IMF still gives the opinion that the Philippines will outperform all other countries in Southeast Asia. Both exports and the incoming remittance of Overseas Filipino Workers continue to increase. In May this year, the government reported that our exports increased by 7% to reach US$5.5b while remittances from OFW’s hit US$10b mark in the first 5 months of this year. All these are indicators that the



Philippine economy has solid foundations and is developing well. We just hope that there will be less internecine fighting among our politicians and our government can channel all its efforts towards the improvement of our economy and the livelihood of our people.

Let us now turn to our own company. During this past year, Mabuhay Holdings Corporation has continued to exert efforts to nurture our affiliated company, IRC Properties, Inc. As you know, IRC owns a vast property in Binangonan, Rizal which measures more than 2,200 hectares in area. We are in the process of clearing the land from claimants and we have seen good results from our efforts. To date, IRC has completed Phase I of its low-cost housing project, the Sunshine Fiesta Subdivision, which comprises more than a thousand house units. We have also started Phase II, named Fiesta Casitas, which will provide another thousand houses. Recently, IRC entered into an agreement with Japanese investors for the development of still another low-cost housing project named Casas Aurora. This will be the first project in which IRC will be taking on the role of lead developer.

The negotiation of the sale of a piece of land by IRC to a leading property developer in our country has been widely reported by some local newspapers. This deal has been delayed due to some technicalities. However, it will be completed soon. We envision that this land transaction will lead to possible joint ventures between IRC and this group in the future. IRC also closed a deal and sold a piece of land to a group of Chinese developers. We expect this group to bring in some new ideas of land development since it has valuable experience in real estate development and has a stellar reputation in China. The participation of more foreign investors on the IRC property in Binangonan will definitely make our property more valuable and attractive.

Mabuhay has another affiliated company, the Tagaytay Properties & Holdings Corporation. TPHC was able to sell a piece of land in the former PC Camp area of Tagaytay. Despite this property having no access to the main roads, we were able to find an interested buyer. Another valuable property owned by TPHC is located near the Tagaytay rotonda, overlooking the Taal Lake. This land had been infested with squatters for decades. I am happy to report to you that we have been able to
evict the squatters and their illegal structures have been demolished. Some of the squatters have filed nuisance cases but we expect them to be completely resolved very soon. 





Some shareholders are not happy that the share price of Mabuhay Holdings has not improved over the past months. But as you are aware, IRC’s share price has substantially improved in the past year, and since Mabuhay owns roughly 40% of IRC, the market will soon come to realize the true value of Mabuhay Holdings. To that end, allow me to comment that you are the wiser group of investors for continuing to hold on to the shares of Mabuhay.

The management of Mabuhay Holdings Corporation will continue to diligently monitor the domestic and international economic conditions and we will continue to explore opportunities and work for the growth of our company. Again, allow me to extend our gratitude and appreciation to our valued shareholders for your continued support and trust. Let us look forward to a better year for Mabuhay. Thank you.



Esteban G. Peña Sy
President
July 29, 2014