Docstoc

MANILA JOCKEY CLUB_ INC

Document Sample
MANILA JOCKEY CLUB_ INC Powered By Docstoc
					The prospectus is being displayed in the website to make the prospectus accessible to more investors. The PSE
assumes no responsibility for the correctness of any of the statements made or opinions or reports expressed in the
Prospectus. Furthermore, the Stock Exchange makes no representation as to the completeness of the Prospectus
and disclaims any liability whatsoever for any loss arising from or in reliance in whole or in part on the contents
of the Prospectus.




                       MANILA JOCKEY CLUB, INC.
                                   San Lazaro Leisure and Business Park
                                    Governor‘s Drive, Barangay Lantic
                                             Carmona, Cavite
                                     Telephone No. (+632) 687-9889


                       Prospectus Relating to the 1:2 Stock Rights Offering
                                of up to 287,492,659 Common Shares
                            at an Offer Price of P 1.00 per Rights Share
                  To be listed and traded in The Philippine Stock Exchange, Inc.


                                 Issue Manager and Lead Underwriter




                                        RCBC Capital Corporation


                                                 May 6, 2011

THE SECURITIES BEING OFFERED ARE EXEMPT AND, ACCORDINGLY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
REGULATION CODE AND ANY FURTHER OFFER OR SALE THEREOF IS SUBJECT TO
REGISTRATION REQUIREMENTS UNDER THE SECURITIES REGULATION CODE UNLESS SUCH
OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION PURSUANT TO SECTION 10 OF THE
SECURITIES AND REGULATION CODE.
                                        Manila Jockey Club, Inc.
                                     San Lazaro Leisure and Business Park
                                      Governor‘s Drive, Barangay Lantic
                                                Carmona, Cavite
                                       Telephone No. (+632) 687-9889
                                     Website: http://www.manilajockey.com

                       Prospectus Relating to the Offer of 1:2 Stock Rights Offering
                                     of up to 287,492,659 Common Shares
                                 at an Offer Price of P 1.00 per Rights Share
                       To be listed and traded in the Philippine Stock Exchange, Inc.

This Prospectus relates to the offering for subscription (the ―Offer‖) of up to 287,492,659 shares of common stock
(the ―Rights Shares‖), with par value P1.00 per share (the ―Common Shares‖), of Manila Jockey Club, Inc. (―MJC‖
or the ―Company‖), a corporation organized under Philippine laws by way of a stock rights offering to existing
holders of Common Shares at the proportion of one (1) Rights Share for every two (2) Common Shares held as of
Record Date of May 6, 2011, at an offer price of P1.00 per Rights Share (the ―Offer Price‖). Fractions of the Rights
Shares will not be allotted to existing shareholders and fractional entitlements will be rounded down to the nearest
whole number of the Rights Shares. Such fractions will be aggregated and sold for the benefit of the Company. The
Rights Shares shall be issued out of the existing unissued but authorized capital stock of the Company.

As of the date of this Prospectus, the authorized capital stock of the Company is P1 billion divided into 1 billion
Common Shares with a par value of P1.00 per share. As of the date of this Prospectus, 574,994,780
Common Shares are issued and 574,985,318 Common Shares are outstanding. After the completion of the Offer, the
issued and outstanding Common Shares of the Company shall be 862,487,439 Common Shares and 862,477,977
Common Shares, respectively.

All of the Common Shares of the Company issued and to be issued pursuant to the Offer have, or will have, identical
rights and privileges. The Common Shares may be owned by any person or entity regardless of citizenship or
nationality, subject to the nationality limits under Philippine law. See ―Terms and Conditions of The Rights Shares‖
on page 13 of this Prospectus.

The Company is allowed to declare dividends from its surplus profits at such times and in such percentage as the
Board of Directors may deem appropriate. No dividend shall be declared that will impair the capital of the Company.
Stock Dividends shall be declared in accordance with law. The Company has regularly declared cash dividends since
2007 and has since then paid dividends amounting to a total of P 258,336,882.67 as of the date of this Prospectus. See
―Dividend Policy‖ on page 24 of this Prospectus.

The Company expects to raise gross proceeds of approximately P287,492,659 from the Offer. After deducting the
registration and licensing fees, listing fees, taxes, or other fees and expenses related to the Offer, the net proceeds
from the Offer is estimated to be P281,287,548.85. The net proceeds from the Offer will be used by the Company to
retire its short-term loans, fully pay its subscriptions in MJC Investments Corporation (―MJIC‖), and for general
working capital purposes in accordance with the ―Use of Proceeds‖ on Page 22 of this Prospectus.

The Company‘s Common Shares are listed at The Philippine Stock Exchange, Inc. (―PSE‖) under the symbol ―MJC‖.
On May 3, 2011, the closing price of MJC was P2.03.

The information contained in this Prospectus is publicly available and has been supplied by the Company solely for
the purpose of the Offer. The Company accepts full responsibility for the accuracy and completeness of the
                                                        Page 2
information contained herein. The Company confirms that, after having made all reasonable inquiries, and to the best
of its knowledge and belief, there are no material facts, the omission of which would make any statement in the
Prospectus misleading in any material respect. Neither the delivery of the Prospectus nor any sale made hereunder
shall, under any circumstance, create any implication that the information contained herein is correct as of any time
subsequent to the date hereof.

RCBC Capital Corporation (―RCBC Capital‖) will act as Issue Manager and Lead Underwriter of the Offer but no
underwriting fees will be collected with respect to the Stock Rights Offering. In the event that the Rights Shares are
not fully subscribed by existing shareholders of MJC, such unsubscribed shares (the ―QIB Shares‖) shall be offered
by RCBC Capital only to qualified institutional buyers (―QIBs‖) as the term is defined under the Securities
Regulation Code. Any Rights Share that would be left unsubscribed at the end of the Offer Period shall be firmly
underwritten by RCBC Capital. Details regarding the engagement of the Underwriter can be found under Plan of
Distribution on Page 28 of this Prospectus.

Prospective investors to the Rights Shares must conduct their own evaluation of the Company, and the terms and
conditions of the Offer, including the merits and risks involved. Please refer to the Risk Factors discussed on Page 17
of the Prospectus. The readers of this Prospectus are further enjoined to consult their financial advisers, tax
consultants, and other professional advisers with respect to the acquisition, holding, or disposal of the Offer Shares
described herein.

No dealer, salesman, or any other person has been authorized to give any information or to make any representation
not contained in this Prospectus. If given or made, any such information or representation must not be relied upon as
having been authorized by the Company or the Underwriter. The distribution of this Prospectus and the offer and sale
of the Rights Shares may, in certain jurisdictions, be restricted by law. The Company and the Underwriter require
persons into whose possession this Prospectus comes, to inform themselves of and observe all such restrictions.

In making an investment decision, investors must rely on their own examination of the Company and the terms of the
Offer, including the material risks involved. The Offer is being made on the basis of this Prospectus only.

Market data and certain industry forecasts used throughout this Prospectus were obtained from internal surveys,
market research, publicly available information and industry publications. Industry publications generally state that
the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and
completeness of such information is not guaranteed. Similarly, internal surveys, industry forecasts and market
research, while believed to be reliable, have not been independently verified, and neither the Company nor the
Underwriter makes any representation as to the accuracy of such information.

On 31 January 2011, the Company filed a letter with the Securities and Exchange Commission (―SEC‖) requesting
for an opinion from the SEC on the applicability of Section 10.1 (e) of the Securities Regulation Code (―SRC‖) on the
common shares to be issued relative to the Company‘s Stock Rights Offering (―Rights Shares‖). On March 21, 2011,
the Company has obtained a Confirmation of Exempt Transaction from the SEC covering the Rights Shares. The
Company filed its application for the listing and trading of the Rights Shares with the PSE on 26 January 2011, The
PSE approved the application to list the Rights Shares on April 13, 2011, subject to the fulfillment of certain listing
conditions.

The PSE assumes no responsibility for the correctness of any statements made or opinions expressed in this
Prospectus. The PSE makes no representation as to its completeness and expressly disclaims any liability whatsoever
for any loss arising from reliance on the entire or any part of this Prospectus. Such approval for listing is permissive
only and does not constitute a recommendation or endorsement of the Rights Shares by the PSE.

THE SECURITIES BEING OFFERED ARE EXEMPT AND, ACCORDINGLY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
REGULATION CODE AND ANY FURTHER OFFER OR SALE THEREOF IS SUBJECT TO
REGISTRATION REQUIREMENTS UNDER THE SECURITIES REGULATION CODE UNLESS SUCH
OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION PURSUANT TO SECTION 10 OF THE
SECURITIES AND REGULATION CODE.


                                                        Page 3
SUBSCRIBED AND SWORN to before me thisO        4 MAY 201
~fianJ; exhibiting to me her Community Tax Certificate
                                                                  tn
                                                            2if892252Jf2
                                                                           ~S16 CI~
                                                                             37 issue8l9~8
                                                                                                Metro Manila,
                                                                                              ,~-68~/2011in
  aSIg City, Metro Manila, and Philippine Passport No. XX              ; issued on      I    7 ,and expiring
on   Ol/27,e2014.


Doc. No. ~;
Page No. JJ!l.-;
Book No.-----'-;
Series of 2011.
                                                              TABLE OF CONTENTS


                                                                                                                                                            PAGE

GLOSSARY OF CERTAIN TERMS...................................................................................................................... 6
SUMMARY ........................................................................................................................................................... 9
SUMMARY OF FINANCIAL AND OPERATING INFORMATION................................................................... 10
THE RIGHTS OFFER.......................................................................................................................................... 12
TERMS AND CONDITIONS OF THE OFFER.................................................................................................... 13
RISK FACTORS .................................................................................................................................................. 17
USE OF PROCEEDS ........................................................................................................................................... 22
DIVIDEND POLICY ........................................................................................................................................... 24
RECENT SALES OF UNREGISTERED OR EXEMPT SECURITIES ................................................................. 25
DETERMINATION OF OFFER PRICE ............................................................................................................... 26
DILUTION .......................................................................................................................................................... 27
PLAN OF DISTRIBUTION ................................................................................................................................. 28
DESCRIPTION OF THE SECURITIES ............................................................................................................... 29
MANAGEMENT‘S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ..................................................................................................................................................... 32
THE COMPANY ................................................................................................................................................. 39
INDUSTRY OVERVIEW .................................................................................................................................... 46
REGULATORY MATTERS ................................................................................................................................ 50
MANAGEMENT AND CERTAIN SHAREHOLDERS........................................................................................ 52
DIRECTORS AND EXECUTIVE OFFFICERS: .................................................................................................. 55
SECURITY OWNERSHIP OF CERTAIN RECORD AND BENEFICIAL OWNERS .......................................... 61
MATERIAL CONTRACTS AND AGREEMENTS.............................................................................................. 64
MARKET INFORMATION ................................................................................................................................. 66
THE PHILIPPINE STOCK MARKET ................................................................................................................. 67
PHILIPPINE TAXATION.................................................................................................................................... 71
INTERESTS OF EXPERTS AND COUNSEL...................................................................................................... 74


APPENDIX:
AUDITED FINANCIAL STATEMENTS FOR THE YEARS 2010, 2009 AND 2008




                                                                              Page 5
                                                   GLOSSARY OF CERTAIN TERMS

Unless otherwise specified, the following words or expressions shall have the following meanings:


Applicant ...................................................................... A person, whether natural or juridical, who subscribes to the
                                                                                 Offer Shares by submitting a Subscription Application

Aries ............................................................................. Aries Prime Resources, Inc., now known as ―MJC
                                                                                    Investments Corporation‖

Application or Application to Subscribe
and Purchase ................................................................ The application to subscribe to and purchase the Offer
                                                                              Shares under the Offer

Banking Day ................................................................. Any day, except Saturday, Sunday, and legal holidays, when
                                                                              banks and financial institutions are open for business in
                                                                              Metro Manila

Biohitech....................................................................... Biohitech Philippines, Inc.

BIR ............................................................................... Bureau of Internal Revenue

Board of Directors or Directors ...................................... The Directors of the Company

Book Value per Common Share..................................... The result of dividing the Total Stockholders‘ Equity
                                                                 account of the Company by the total number of Common
                                                                 Shares issued and outstanding

Common Shares or Shares ............................................. The shares of common stock with a par value of P1.00 per
                                                                      share in the share capital of the Company, including the
                                                                      Offer Shares

Corporation Code .......................................................... Batas Pambansa Blg. 68, otherwise known as the
                                                                            Corporation Code of the Philippines

Eligible Stockholders..................................................... All registered stockholders of the Company as of Record
                                                                           Date

EVAT ........................................................................... Expanded Value Added Tax

Government .................................................................. The Government of the Republic of the Philippines

Issue Manager, Lead Underwriter,
RCBC Capital ............................................................... RCBC Capital Corporation

MJC or the Company .................................................... Manila Jockey Club, Inc.

MJIC............................................................................. MJC Investments Corporation, formerly known as ―Aries
                                                                                  Prime Holdings, Inc.‖

NVTL ........................................................................... New Victor Technology Ltd.

Offer ............................................................................ The offer for subscription of up to 287,492,659 common
                                                                                   shares to qualified existing stockholders.

                                                                        Page 6
Offer Period .................................................................. The period commencing at 9:00 a.m. on May 16, 2011 and
                                                                                ending at 11:00 am on May 20, 2011, within which the
                                                                                Eligible Applicants may subscribe to the Offer Shares

Offer Price .................................................................... P1.00 per offer share

OTB.............................................................................. Off-Track Betting Stations, stations where the betting public
                                                                                  may place bets outside the racetrack during the horse races
                                                                                  conducted by the Company.

PAGCOR ...................................................................... Philippine Amusement and Gaming Corporation

P or Php ........................................................................ Philippine Peso

PDTC............................................................................ Philippine Depository and Trust Corporation

PRC .............................................................................. Philippine Racing Club, Inc.

Prospectus ..................................................................... This document together with all its annexes and attachments

PSE ............................................................................... The Philippine Stock Exchange, Inc.

QIBs ............................................................................. Qualified Institutional Buyers/Investors as defined under
                                                                                   Section 10.1(l) of the Securities Regulation Code

R.A. 7716...................................................................... Republic Act no. 7716, popularly known as the Expanded
                                                                                Value Added Tax Law

R.A. 8407...................................................................... Republic Act no. 8407- an Act granting MJC a franchise to
                                                                                construct, operate, and maintain a racetrack for horse racing
                                                                                in the City of Manila or any place within the provinces of
                                                                                Bulacan, Cavite or Rizal and extending the said franchise for
                                                                                another twenty-five (25) years.

Receiving Agent ............................................................ Rizal Commercial Banking               Corporation   Trust   and
                                                                             Investments Division

Record Date .................................................................. May 6, 2011, which was set fifteen (15) trading days from
                                                                               the approval of the PSE of the Offer.

Rights Shares ................................................................ up to 287,492,659 Common Shares to be issued from the
                                                                               Company‘s unissued authorized capital stock

Rights Entitlement ......................................................... One (1) Rights Share for every two (2) Common Shares of
                                                                             MJC held as of the Record Date

SEC .............................................................................. Securities and Exchange Commission

Selling Agents ............................................................... Trading Participants of the PSE

SLLP ............................................................................ San Lazaro Leisure Park

SLLPHI ........................................................................ SLLP Holdings, Inc.

SLRDC ......................................................................... San Lazaro Resources and Development Corporation
                                                                          Page 7
SRC .............................................................................. Republic Act No. 8799 otherwise known as the Securities
                                                                                   Regulation Code

Stock Transfer Agent..................................................... Rizal Commercial Banking Corporation Stock Transfer
                                                                          Department

Trading Participant ........................................................ any Member broker of the PSE

Trading Day .................................................................. Any day on which trading is allowed in the PSE

US Dollars, US$ ............................................................ United States Dollars




                                                                     Page 8
                                                    SUMMARY
The following summary is qualified in its entirety by more detailed information and financial statements, including
notes thereto, appearing elsewhere in this Prospectus. The readers are advised to read this entire Prospectus carefully,
including the financial statements and related notes contained herein. For a discussion of certain matters that should
be considered in evaluating an investment in the Rights Shares, see “Risk Factors” on page 17 of this Prospectus.
Overview

Manila Jockey Club, Inc. (the ―Company‖ or ―MJC‖) was incorporated on March 22, 1937. On October 23, 1972, the
Company was granted a franchise under Republic Act No. 6631 to operate and maintain a racetrack and conduct
horse races therein. The franchise was renewed on November 23, 1997 under R.A. No. 8407 for another term of
twenty five (25) years. Under R.A. No. 8407, the Company shall pay annually to the National Treasury a franchise
tax equivalent to 25% of its gross earnings from bets on the horse races. However, the Company now pays value
added tax equivalent to twelve percent (12%) of its gross revenues from horse races pursuant to Republic Act No.
7716 or the Expanded VAT Law.

In line with the Company‘s vision to expand its business operations and to enhance the value of the shareholders‘
investment, the Company is also engaged in the development of its real estate assets through joint venture agreements
with a leading property developer, Ayala Land, Inc.. Likewise, the Company has ventured into gaming operations
with the establishment of a casino known as the PAGCOR Club Carmona, located at the 3rd Floor of the Turf Club
Building at the San Lazaro Leisure Park (―SLLP‖) in Carmona, Cavite.(Please refer to the Description of Business
section on page 41 for details on the Company’s existing projects with ALI.)

The Company‘s office is located at the 14th Floor, Strata 100 Building, F. Ortigas Jr. Road, Ortigas Center, Pasig
City.

Use of Proceeds

The proceeds from the Stock Rights Offering will be utilized for the full payment of its shares in MJC Investments
Corporation, retirement of short term loans, and for general working capital purposes.

Please refer to the section entitled ―Use of Proceeds‖ on page 22 of this Prospectus for full details on the use of
proceeds from the Offer.

Risks of Investing

Before making an investment decision, investors should carefully consider the risks associated with an investment in
the Common Shares. These risks include:

    •    Risks relating to the Company and its Horse Racing business;
    •    Risks relating to the Company and its Real Estate Development;
    •    Risks relating to the Philippines; and
    •    Risks relating to the Company‘s Common Shares.

Please refer to the section entitled ―Risk Factors‖ on page 17 of this Prospectus, which, while not intended to be an
exhaustive enumeration of all risks, must be considered in connection with a purchase of Rights Shares.

Forward-Looking Statements

This Prospectus includes forward-looking statements. The Company has based these forward-looking statements
largely on its current expectations and projections about future events and financial trends affecting its business. The
words ―believes,‖ ―may,‖ ―will,‖ ―estimates,‖ ―continues,‖ ―anticipates,‖ ―intends,‖ ―expects‖ and similar words are
intended to identify forward-looking statements. In light of these risks and uncertainties associated with forward-
looking statements, investors should be aware that the forward-looking events and circumstances discussed in this
Prospectus might not occur. The Company‘s actual results could differ substantially from those anticipated in the
Company‘s forward-looking statements.

                                                        Page 9
                        SUMMARY OF FINANCIAL AND OPERATING INFORMATION
Summary of Financial Information

The following table presents summary financial information for the Company and should be read in conjunction with
the Auditors’ Report and the Financial Statements and notes thereto contained in this Prospectus found on page --
and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
found on page 32. The summary financial information presented below for the years ended December 31, 2010, 2009
and 2008 was derived from the audited financial statements of the Company, as audited by SyCip Gorres Velayo &
Co., a member practice of Ernst & Young Global, in accordance with Philippine Financial Reporting Standards
(“PFRS”) effective as of December 31, 2009. The summary financial information set out below does not purport to
project the results of operations or financial condition of the Company for any future period or date. Please refer to
the Financial Statements section found at the end of this Prospectus.

 (in Philippine Pesos)                                                        Audited
 BALANCE SHEET                                                            As of December 31
 ASSETS                                                  2010                  2009                    2008
 Cash and cash equivalents                               153,796,880             138,444,127             180,767,090
 Held for trading investments                             30,380,000              20,506,500
 Receivables                                             247,318,848             319,504,571             301,237,132
 Real estate inventories                                 331,686,119             396,283,498             563,125,372
 Other current assets                                     10,788,436               4,633,130              33,698,280
 Total Current Assets                                    773,970,283             879,371,826           1,078,827,874
 Real estate receivables-net                              67,787,165              74,216,187              29,965,327
 Interest in a jointly controlled entity                   5,197,120
 Available for sale fin. Assets                           29,737,447              22,381,951              16,940,505
 Property and Equipment                                1,213,322,752           1,309,596,319           1,342,031,957
 Investment Properties                                 1,223,943,004           1,232,494,728           1,173,573,567
 Goodwill                                                 75,816,953              75,816,953                        -
 Other noncurrent assets                                  29,410,614              31,297,859              39,527,413
 Total Noncurrent Assets                               2,645,215,055           2,745,803,997           2,602,038,769
 TOTAL ASSETS                                          3,419,185,338           3,625,175,823           3,680,866,643
 LIABILITIES AND EQUITY
 Short-term loans and borrowings                         323,750,000             319,500,000             326,000,000
 Current portion of long-term loans and borrowings        53,013,240             179,992,666             173,522,626
 Accounts payable and other liabilities                  370,930,349             439,972,089             537,280,961
 Income tax payable                                       15,304,403                  564,843                 340,729
 Due to related parties                                   53,842,233              48,890,000              23,000,000
 Total Current Liabilities                               816,840,225             988,919,598           1,060,144,316
 Long-term loans and borrowings                           58,727,388             111,737,847             282,007,534
 Accrued retirement benefits payable                      64,236,501              56,312,963              45,448,976
 Deferred income tax liabilities                         318,041,073             343,525,930             179,402,473
 Total Noncurrent Liabilities                            441,004,962             511,576,740             506,858,983
 TOTAL LIABILITIES                                     1,257,845,187           1,500,496,338           1,567,003,299
 TOTAL EQUITY                                          2,161,340,151           2,124,679,485           2,113,863,344
 TOTAL LIABILITIES AND EQUITY                          3,419,185,338           3,625,175,823           3,680,866,643

                                                      Page 10
                                Summary Operating Information of the Company
(in Philippine Pesos)                                                       Audited
INCOME STATEMENT                                                For the Year ended December 31
REVENUES                                              2010                   2009                2008
Club races                                             297,239,492           279,902,325          273,368,692
Real estate                                            148,383,065           311,425,887          311,776,284
Rent                                                   178,919,567           156,352,624          146,151,546
TOTAL REVENUES                                         624,542,124           747,680,836          731,296,522
Cost of Sales and Services
Club races                                             206,521,821           194,849,432          177,765,928
Real Estate                                             64,202,459           207,227,628          230,769,177
Rent                                                   104,586,336            68,546,464           88,594,396
TOTAL COST OF SALES AND SERVICES                       375,310,616           470,623,524          497,129,501
GROSS PROFIT                                           249,231,508           277,057,312          234,167,021
General and administrative                            (221,886,567)         (209,688,755)        (188,432,900)
Interest Income                                         12,751,790            59,804,895           45,760,847
Finance costs                                          (41,840,503)          (61,416,552)         (48,216,549)
Unrealized gain (losses) on fair value changes of
held for trading investments                             9,873,500             1,326,172                     -
Equity in net earnings (losses) of a jointly
controlled entity and an associate                      10,170,853
Other income (charges)                                   8,207,141           (11,401,499)         (43,672,673)
EBIT                                                    26,507,722           115,486,468           45,366,593
INCOME (LOSS) BEFORE INCOME TAX                         26,507,722            55,681,573             (394,254)
Provision for (Benefit from) Income Tax
Current                                                 29,137,108            20,675,297           43,267,604
Deferred                                               (25,521,634)           (6,239,860)         (64,860,246)
Income Tax                                               3,615,474            14,435,437          (21,592,642)
NET INCOME                                              22,892,248            41,246,136           21,198,388
Net changes in fair values of available-for-sale
financial assets- net of deferred income tax             7,318,719             5,414,239           (8,831,838)
TOTAL COMPREHENSIVE INCOME                              30,210,967            46,660,375           12,366,550




                                                    Page 11
                                              THE RIGHTS OFFER
The Company is offering for subscription up to 287,492,659 Rights Shares by way of a stock rights offering to
Eligible Investors at the proportion of one (1) Rights Share for every two (2) existing Common Shares held as of
Record Date at the Offer Price of P1.00 per Rights Share. The Rights Shares will be issued out of the existing
unissued but authorized capital stock of the Company.

Fractions of the Rights Shares will not be allotted to existing shareholders and fractional entitlements will be rounded
down to the nearest whole number of the Rights Shares. Such fractions will be aggregated and sold for the benefit of
the Company.

Key Dates of the Offer:

                           Record Date                                      May 6, 2011
                           Ex-Date                                          May 3, 2011
                           Offer Period                                   May –16-20, 2011
                           Listing Date                                     May 30, 2011

The above key dates may change at the discretion of the Company and the Issue Manager and Lead Underwriter,
subject to the approval of the PSE.




                                                       Page 12
                          TERMS AND CONDITIONS OF THE OFFER

Issuer                     Manila Jockey Club, Inc. (―MJC‖ or the ―Company‖)

Rights Shares              Up to 287,492,659 Common Shares of the Company with a par value of P1.00 per share.
                           The Rights Shares shall rank equally in all respects with existing Common Shares,
                           including the right to receive all dividends or distributions made, paid or declared after a
                           valid subscription agreement is perfected between the Company and a buyer as evidenced
                           by the written acceptance by the Company of the application to subscribe (the
                           ―Application to Subscribe and Purchase‖ or the ―Application‖) of the buyer.

Number of Rights Shares    Up to 287,492,659 Rights Shares will be issued from the Company‘s existing authorized
                           but unissued capital stock.

Offer Price                The Rights Shares are being offered at a price of P1.00 per share which is equivalent to
                           the par value of the Company.

Offer Period               The Offer Period shall commence on May 16, 2011 and end on May 20, 2011. The
                           Company and the Underwriter reserve the right to extend or terminate the Offer Period
                           with prior approval of the SEC and the PSE.

                           Applications must be received by the Receiving Agent or the designated branches of
                           RCBC not later than 11:00 a.m. on May 20, 2011. Applications received thereafter or
                           without the required documents will be rejected. Applications shall be considered
                           irrevocable upon submission to the Receiving Agent or to the designated branches of
                           RCBC, and shall be subject to the terms and conditions of the Offer as stated in this
                           Prospectus and in the Application. The actual subscription and/or purchase of the Rights
                           Shares shall become effective only upon the actual listing of the Rights Shares on the
                           PSE.

Eligible Investors         The Rights Shares are being offered to eligible existing holders of record of Common
                           Shares as of the Record Date. Holders of Common Shares who are eligible to participate
                           in the Offer are: (i) holders located inside the Philippines and (ii) holders located in
                           jurisdictions outside the Philippines where it is legal to participate in the Offer under the
                           securities laws of such jurisdiction.
                           The Common Shares of the Company may be held by any natural person of legal age
                           residing in the Philippines regardless of nationality, or any corporation, association,
                           partnership, trust account, fund or entity residing in and organized under the laws of the
                           Philippines and/or licensed to do business in the Philippines, regardless of nationality,
                           subject to the right of the Company to reject an Application or reduce the number of
                           Rights Shares applied for subscription or purchase if the same will cause the Company to
                           be in breach of the Philippine ownership requirement under relevant Philippine laws.

Rights Entitlement         Each eligible holder of Common Shares is entitled to subscribe to one (1) Rights Share
                           for every two (2) Common Shares held as of the Record Date (the ―Entitlement Shares‖).
                           Fractions of the Rights Shares will not be allotted to existing shareholders and fractional
                           entitlements will be rounded down to the nearest whole number of the Rights Shares.
                           Such fractions will be aggregated and sold for the benefit of the Company.

                           Subscription to the Rights Shares in certain jurisdictions may be restricted by law.
                           Foreign investors interested in subscribing or purchasing the Rights Shares should inform
                           themselves of the applicable legal requirements under the laws and regulations of the
                           countries of their nationality, residence or domicile, and as to any relevant tax or foreign

                                                 Page 13
                            exchange control laws and regulations affecting them personally. Foreign investors, both
                            corporate and individual, warrant that their purchase of the Rights Shares will not violate
                            the laws of their jurisdiction and that they are allowed to acquire, purchase and hold the
                            Rights Shares.

Additional Subscription     If an applicant fully subscribes to his Entitlement Shares and subject to the availability of
                            unsubscribed Rights Shares arising from the failure of the other eligible stockholders to
                            fully exercise their Rights Shares entitlement, the applicant may simultaneously apply for
                            an additional subscription of the unsubscribed Rights Shares (the ―Additional Rights
                            Shares‖). The Additional Rights Shares are payable in full upon submission of the
                            Application. If the aggregate number of Additional Rights Shares available for
                            subscription equals or exceeds the aggregate number of Additional Rights Shares so
                            subscribed for, an applicant will be allocated the number of Additional Rights Shares
                            indicated in his Application. If the aggregate number of Additional Rights Shares
                            available for subscription is less than the aggregate number of Additional Rights Shares
                            so subscribed for, the available Additional Rights Shares will be allocated to applicants
                            who have applied to subscribe for such Additional Rights Shares. Such, allocation will be
                            made at the discretion of the Company primarily based on each applicant‘s relative
                            shareholding in the Company as of the Record Date, provided that no applicant for
                            Additional Rights Shares shall be allocated more Additional Rights Shares than the
                            number for which they have applied. There can be no guarantee made as to the number
                            of Additional Rights Shares an applicant may be allocated. A subscription for Additional
                            Rights Shares is irrevocable on the part of the applicant and may not be cancelled or
                            modified by such applicant.
                            To the extent that any Rights Shares remain unsubscribed in the Offer after the second
Offer to QIBs
                            round of the Offer, such Rights Shares, subject to certain conditions, will be offered to
                            qualified institutional investors (―QIBs‖) as defined under Section 10.1 (l) of the
                            Securities Regulation Code (SRC) and such offering to QIBs and any Rights Shares that
                            will be left unsubscribed at the end of the Offer Period will be firmly underwritten by the
                            Issue Manager and Lead Underwriter, as required by the Philippine Stock Exchange
                            (PSE).
                            The Rights Shares may be subscribed to or held by any person of legal age or duly
Restrictions on Ownership
                            organized and existing corporations, partnerships or other corporate entities regardless of
                            nationality. However, because the Company owns land, Philippine laws limit foreign
                            shareholdings in the Company to a maximum of 40% of its issued and outstanding capital
                            stock. Any subsequent transfer of the Company‘ common shares by Filipinos to non-
                            Filipinos will also be subject to the limitation that any such transfers will not cause
                            foreign shareholdings in the Company to exceed 40% of the Company‘s issued and
                            outstanding capital stock. In the event that foreign ownership of the Company‘s issued
                            and outstanding capital stock will exceed 40%, the Company has the right to reject a
                            transfer request by persons to persons other than Philippine Nationals.
Procedure for Application   All Applications shall be evidenced by the application to subscribe and purchase form,
                            duly executed in each case by an authorized signatory of the applicant and accompanied
                            by one completed signature card which, for corporate and institutional applicants, should
                            be authenticated by the corporate secretary, and the corresponding payment for the Rights
                            Shares covered by the Application and all other required documents. The duly executed
                            Application and required documents should be submitted during the Offer Period to the
                            same office where it was obtained.



                            If the applicant is a corporation, partnership, or trust account, the Application must be
                            accompanied by the following documents:

                                     A certified true copy of the applicant‘s latest articles of incorporation and

                                                  Page 14
                                   by-laws and other constitutive documents (each as amended to date) duly
                                   certified by its corporate secretary;
                                   A certified true copy of the applicant‘s SEC certificate of registration duly
                                   certified by its corporate secretary; and
                                   A duly notarized corporate secretary‘s certificate setting forth the resolution of
                                   the applicant‘s Board of Directors or equivalent body authorizing the purchase of
                                   the Rights Shares indicated in the application, identifying the designated
                                   signatories authorized for the purpose, including his or her specimen signature,
                                   and certifying to the percentage of the applicant‘s capital or capital stock held by
                                   Philippine Nationals.

Payment Terms             The Rights Shares must be paid for in full upon submission of the Application. Payment
                          must be made by a check drawn against a bank in Metro Manila to the order of ―MJC
                          Rights Offer‖. The check must be dated as of the date of submission of the Application
                          and crossed for deposit.
                          The Rights Shares shall be non-transferrable and not accepted for trading until the Rights
                          Shares are fully paid.

Acceptance/Rejection of   The Company has full discretion to accept or reject all or a portion of any Application
Applications              under the terms and conditions of the Offer. The actual number of Rights Shares to which
                          any applicant may be entitled is subject to the confirmation of the Company.
                          Applications where checks are dishonored upon first presentment and Applications which
                          do not comply with the terms of the Offer shall be rejected. Moreover, payment received
                          upon submission of an Application does not constitute approval or acceptance by the
                          Company of the Application.
                          An Application, when accepted, shall constitute an agreement between the applicant and
                          the Company for the subscription to the Rights Shares at the time, in the manner and
                          subject to terms and conditions set forth in the Application and those described in this
                          Prospectus. Notwithstanding the acceptance of any Application by the Company, the
                          actual subscription and/or purchase by an applicant of the Rights Shares will become
                          effective only upon listing of the Rights Shares on the PSE. If such condition is not
                          fulfilled on or before the periods provided above, all application payments will be
                          returned to the applicants without interest and, in the meantime, the said application
                          payments will be held in a separate bank account with the Receiving Agent.

Waiver of Entitlement     If a shareholder does not Subscribe to this Rights Offering or subscribes to less than the
                          full amount of shares that he is entitled, the shareholder automatically waives his right to
                          subscribe to the balance. Failure to deliver the Subscription Application or to make
                          payment in full of the Subscription Price or to submit the required attachment on or
                          before 11:00 a.m. on the date of closing of the Rights Offering shall constitute a waiver of
                          the Rights of the applicant under The Rights Offering.

Refunds                   In the event that the number of Rights Shares to be received by an applicant is less than
                          the number covered by its Application, or if an Application is rejected by the Company,
                          then the Company shall refund, without interest, via check payable to the relevant
                          applicant, within five (5) banking days from the end of the Offer Period, the amount
                          corresponding to the number of Rights Shares not issued to such applicant. Such refund
                          check shall be made available at the office of the Receiving Agent. Refund checks that
                          remain unclaimed after 30 days from the date such checks are made available for pick-up
                          shall be mailed at the applicant‘s risk to the address indicated in the Application.

                          RCBC Trust and Investments Division with office address at the 9th Floor, Yuchengco
Receiving Agent
                          Tower, RCBC Plaza, 6819 Ayala Avenue, Makati City.

                                                Page 15
Stock Transfer Agent           RCBC Stock Transfer Department with office address at Ground Floor, West Wing
                               Grepalife Building, 221 Sen. Gil Puyat Avenue, Makati City

Issuance and Transfer Taxes    All documentary stamp taxes applicable to the original issuance of the Rights Shares shall
                               be for the sole account of the Company.

Registration and Lodgment of   All Rights Shares are required to be lodged with the Philippine Depository & Trust Corp.
Shares with the PDTC           (the ―PDTC‖) within two (2) trading days prior to the Listing Date. All Applicants must
                               indicate their designated Trading Participant/brokers and other required information for
                               the PDTC lodgment of the Rights Shares in the Application.
                               The applicant may request for their shares in certificated form and receive stock
                               certificates evidencing their investment in the Rights Shares through their respective
                               Trading Participants/brokers after full payment and lodgment of the Rights Shares and in
                               accordance with existing procedure. Stock Certificates requested will be issued and made
                               available by the Stock Transfer Agent within three trading days from the Listing Date.
                               Any expense incurred in connection with such issuance of certificates shall be borne by
                               the applicant.

Registration of Foreign        The Bangko Sentral ng Pilipinas, the central bank of the Philippines (the ―BSP‖) requires
Investments                    that investments in shares of stock funded by inward remittance of foreign currency be
                               registered with the BSP if the foreign exchange needed to service capital repatriation or
                               dividend remittance is to be sourced from the domestic banking system. The registration
                               with the BSP of all foreign investments in the Rights Shares shall be the responsibility of
                               the foreign investor.

Listing and Trading            The Company‘s application for the listing of the Rights Shares was approved by the PSE
                               on April 13, 2011. All of the Rights Shares are expected to be listed on the PSE on
                               May 30, 2011. Trading is expected to commence on the same date that the relevant
                               Rights Shares are listed on the PSE.

Timetable                      The expected timetable of the Offer is tentatively scheduled as follows:

                               Ex-Date: .......................................................................................... May 3, 2011

                               Record Date:.................................................................................... May 6, 2011

                               Offer Period:..........................................................................May 16 to 20, 2011

                               Listing Date: .................................................................................. May 30, 2011


Commitment to Purchase         RCBC Capital Corporation, Issue Manager and Lead Underwriter shall purchase, or
                               procure qualified institutional buyers in the Philippines to purchase a portion of the
                               unsubscribed Rights Shares after the second round to ensure that the Rights Shares
                               covered by the Offer are fully subscribed. Any Rights Share that will be left unsubscribed
                               at the end of the Offer Period shall be firmly underwritten by RCBC Capital. See ―Plan of
                               Distribution‖.




                                                            Page 16
                                               RISK FACTORS

An investment in the Company carries with it risks reasonably expected in real estate development, horse racing and
gaming operations.

Prospective investors should carefully consider the risks described below, in addition to the other information
contained in this Prospectus, the Company’s financial statements, and the notes relating thereto before making any
investment decision relating to the Rights Shares. The following risks do not purport to disclose all the risks of
investing in the Rights Shares. Neither is the Company’s current performance an indication of its future performance.
The occurrence of any of the events discussed below and any additional risks and uncertainties not presently known
to the Company or that are currently considered immaterial could have a material adverse effect on the Company’s
business, financial condition, results of operations and prospects. These may cause adverse movements in the market
price of the Rights Shares.

Any security may experience upward or downward price movements. There is an inherent risk that losses may be
incurred as a result of buying and selling securities. There is an extra risk of losses when securities are bought from
smaller companies.

An investor should seek professional advice if he or she is uncertain of, or has not understood any aspect of the
securities to invest in or the nature of risks involved in trading of securities, especially in the trading of high-risk
securities. Investors should undertake independent research regarding the Company and the trading of securities
before commencing any trading activity and may request all publicly available information regarding the Company
and the Rights Shares from the SEC. Each investor should consult its, his or her own counsel, accountant and other
advisors as to legal, tax, business, financial and related aspects of an investment in the Rights Shares.

Risks Relating to the Company and its Horse Racing Business

Risks associated to any legal requirements or national statutes

The Company operates its horse races pursuant to the government franchise lodged under Republic Act No. 6631
which was renewed on November 23, 1997 under R.A. No. 8407 for another term of twenty five (25) years. This is
further discuss under "The Company" portion of this Prospectus. Given the 25-year term of the franchise and in view
of the provisions of the Franchise, the Company believes that there are no direct risks associated with national
statutes.

Risks relating to Competition in the Horse-Racing and Betting Business

There are only 2 players in the horse-racing and betting industry in the Philippines: MJC and Philippine Racing Club
(―PRC‖). Due to different schedules of races and sharing arrangements of some resources, the Company believes that
there are no major risks associated with PRC‘s horse racing operations. Please see Horse Racing Industry found in
the “Industry Overview” section of this Prospectus.

Horse diseases may spread and lead to mortality of racehorses.

Horse disease can lead to mortality of racehorse and, at the very least, disability of horses to participate in races. In
1998, the Company suffered a disease outbreak in its stables which severely afflicted the horses. As a result of the
disease, horse racing was suspended pending the remedial measures to cure said disease and to halt its spread. The
Company implemented measures to minimize the occurrence of such disease outbreak such as the regular injection of
preventive medicines.

The Company created a task force within management to carefully monitor the conditions of the horse stables for
possible disease outbreaks. Measures have been taken to improve the cleanliness and sanitation of the stables to
prevent the recurrence of said disease. The Company also bars horses afflicted with the Equine Infectious Anemia

                                                        Page 17
(EIA) virus from entering the SLLP complex. It screens running horses for the EIA virus using imported kits to apply
the Coggins test. Said test is now mandatory for all racehorses and is periodically conducted.

Jockeys are exposed to safety and health risks.

The low body weight requirement for jockeys may potentially increase the risk of acquiring eating disorders and
adopting unhealthy behaviors in order to control weight. This may affect the riding skills of the jockeys and their
overall performance during the race. Jockeys are also prone to physical injuries which may pose significant impact on
their races.

The Company is also exposed to various operational risks.

The Company is exposed to a number of risks including occupational accidents, labor disputes, changes in the
regulatory environment and natural phenomena such as inclement weather conditions, floods, volcanic eruptions, and
earthquakes. Such circumstances may cause damage to the Company‘s properties, particularly its racing facilities and
stables, injuries, deaths, environmental damages, operational delays, monetary losses and possible legal liabilities.

The Management instigates safety and preventive guidelines for its jockeys and racehorses in order to reduce the risks
of inclement weather conditions, floods and other fortuitous events. Given these guidelines, the Company will have
sufficient basis whether or not to stop the conduct of races.

The Company cannot assure that the insurance coverage it maintains shall be adequate to cover all possible damage
and economic loss resulting from these operational risks. Insurance premiums may also prove to be uneconomical.
Losses from uninsured risks may cause an adverse impact on the operations and financial performance of the
Company.

Technical risks

The Company currently employs a computerized betting system using advanced technology in the racing facility in
Carmona, Cavite as well as in the off-track betting (―OTB‖) stations. Any technical or system problem may disrupt
the conduct of races.

The Company employs competent and skilled technical personnel to maintain the smooth conduct of the races on a
daily basis. Likewise, each OTB station has a technical personnel on standby to prevent any interruption during the
races.


Risks Relating to the Company and its Real Estate Development Business

Competition in the real estate industry could adversely affect the Company’s business.

The real estate industry is one of the best performing sectors in the country due to growing demand for residential
developments mostly coming from the OFWs. Reservation sales of residential houses and condominium units
continue to grow as OFW remittances maintain an upward trend. Money sent home by OFWs hit a new monthly
record high of $1.623 billion in June 2010 due to the continued deployment of professional and skilled Filipinos
abroad, as reported by the Bangko Sentral ng Pilipinas (BSP) last August 16, 2010. Statistics released by the central
bank showed that money sent home by OFWs went up by 8.3 percent or $125 million in June 2010 from $1.498
billion in the same month last year. As a result, old and new players took advantage of this booming demand and
even developed different types of projects based on the changing demographics and lifestyles of the buyers. This and
together with other factors such as lower interest rates and improving economy, led to a tighter competition in the real
estate market. Such significant competition from other property developers may adversely affect the Company‘s
ability to successfully sell its units.

As a young player in the property sector, the Company shall continue to partner with big players such as Ayala Land,
Inc. and shall remain focused on its niche market in order to reduce risks in competition. The markets of the
Company are the OFWs and the ―A‖ and ―B‖ classes which account for approximately 80% of sales.
                                                       Page 18
The Company’s existing real estate development contract is only with one developer, subjecting it to concentration
risk.

The Company‘s current existing real estate project is with Ayala Land, Inc. (―ALI‖) for the development of its Sta.
Cruz, Manila property. The Company in 2005 signed Joint Development Agreements (―JDAs‖) with ALI‘s wholly
owned subsidiaries for the construction of townhouses and residential condominium buildings. Under the JDAs, the
Company will contribute the land, while the ALI subsidiaries will contribute the financial and technical resources
required for the development of the townhouses and condominium buildings. Given this, the Company‘s business and
financial condition is considered dependent on ALI‘s financial capability, marketing and sales strategies, and
technical expertise in real estate development.

However, ALI is one of the leading and largest real estate property developers in the country. It has also recorded
sales in one of its completed projects Celadon Residences. The Company has also conducted its due diligence prior to
the signing of its JDAs with ALI. In addition to this, the Company intends to broaden its partnership with other
reputable real estate developers for its future real estate projects.


Sales from OFW market may be affected by the economies of the sponsoring countries.

Families of OFWs account for approximately 50% of the domestic marketfor the residential units of the Company.
Any change in the performance of the OFW market may have an impact on the revenues and sales of the Company.

For the first half of 2010, the BSP reported that OFW remittances went up by 6.9 percent to $9.062 billion from
$8.479 billion in the same period last year.

Main sources of OFW remittances include the US, Canada, Saudi Arabia, United Kingdom, Singapore, United Arab
Emirates, and Italy. These countries accounted for 81.7 percent of the total remittances in the first half of the year.

The remittances and purchasing power of OFWs may be affected by the following factors:

         Any slowdown in the economies of the US, Canada, Saudi Arabia, United Kingdom, Singapore, United
         Arab Emirates, and Italy or other countries with OFWs.
         Significant drop in the foreign currencies of employing countries.
         Material change in any legislation pertaining to the employment contracts and benefits of OFWs.
         Any change in Philippine legislation that could lead to restrictions on deployment of OFWs.
         Terrorist attacks in the Middle East or other countries which may prompt the government to restrict
         deployments in these countries.
         Any employment ban imposed by other countries to OFWs.

The Company mitigates this risk by expanding its presence in the domestic market through advertisements and
improved marketing strategies.

Higher inflation and interest rates could have a material adverse effect on the abilities of the Company and its
buyers to obtain financing.

Inflationary pressures may push interest rates upward which would make it more expensive for the Company to
secure loans to finance ongoing and new projects. Likewise, higher interest rates may lead to lower sales and lower
demand for residential developments as potential buyers may have difficulty in securing funds to support the
purchase of new homes.




                                                       Page 19
Failure by the Company’s joint venture partners, developers, and significant contractors to deliver committed
performance may adversely affect the Company’s operations.

The Company develops its current and future projects with joint venture partners, operators and sub-contractors. Any
contract or joint venture entered into by the Company carries risks associated with the failure of the parties thereto to
perform their contractual obligations. Failure by any party to deliver its obligations may adversely affect the
Company‘s operations or may make the project not feasible. To mitigate this risk, the Company carefully selects
partners with proven technical competence and financial capability.

Delay in project completion and inability to meet clients’ requirements may adversely affect the Company’s
reputation.

The Company‘s reputation may be affected if any of its projects undergo construction failures, design flaws, quality
control issues, and other problems leading to delay in project completion. The Company cannot provide any
assurance that such events will not result in a manner that would adversely affect its operations or financial
conditions. Moreover, this may also affect the Company‘s capability to secure funding for its various projects from
external sources. To mitigate this risk, the Company implements a strict quality control system to oversee the various
phases of a project‘s development. In addition, the Company has a team of experienced engineers to ensure that the
projects are built and completed up to the highest standards.

Environmental laws could adversely affect the Company’s business

Real estate developers are required to follow strictly the guidelines of the Department of Environment and Natural
Resources. There can be no assurance that current environmental laws and regulations applicable to the Company
will not increase the costs of operating its facilities above currently projected levels or require future capital
expenditures. The introduction or inconsistent application of, or changes in, laws and regulations applicable to the
Company‘s business could have a material adverse effect on its business, financial condition or results of operations.
The Company has and will always comply with the environmental laws.

Other Risks Relating to the Company

Additional capital may be needed for its horse racing and real estate development operations in the future. If the
Company is unable to raise the needed financing, its businesses may be adversely affected.

The Company may need additional financing in the future to acquire new equipment or new betting system for their
horse racing business and to acquire new land/properties to build new projects. The Company‘s ability to raise
financing will depend on various conditions such as the amount of capital required, the state of financial markets, the
investors‘ perception of risks, the Philippine economic condition, and such other factors which the Company has no
control of. The Company cannot assure that the required capital may be raised at the desired time and cost. If the
Company is unable to raise financing as required, its operations and financial condition may be adversely affected.

Inflationary pressures especially on fuel and equipment costs could adversely affect the Company’s operating
costs.

The continued increase in fuel and equipment costs may have an adverse impact on the Company‘s business,
profitability and cash flows. The Company employs cost-saving measures to mitigate this risk.


Risks affecting the Philippines.

Changes in Philippine economic condition may adversely affect the Company’s business, financial condition and
results of operations.

The Company‘s business is generally influenced by the performance of the Philippine economy. Movements in
various economic factors such as inflation, interest rates, foreign exchange rates, taxation, etc., may affect the
Company‘s prospects and financial performance.
                                                        Page 20
A slowdown in the Philippine economy may materially affect the Company‘s operations and financial conditions.
Moreover, there is no assurance that the current and future administration will be able to adopt economic policies
conducive to sustaining economic growth.

Any political instability in the Philippines may adversely affect the Company

The Philippines has from time to time experienced political instability. There is no assurance that the political
environment in the Philippines will remain stable. Any incidence or perception of political instability such as major
public protests or the involvement of the military in any political movement could have a negative effect on the
economic conditions of the Philippines. This in turn could have a material impact on the Company‘s business and
financial conditions.

Changes in government laws and regulations may adversely affect the Company’s business and operations.

The Company believes that it currently complies with existing laws and regulations. The Company cannot provide
assurance that new rules and regulations will not be enacted or that existing rules and regulations will not be applied
in a manner that could limit horse-racing activities or curtail further real estate development. Additionally, new rules
and regulations that may be enacted may increase the Company‘s operating costs and may adversely affect the
Company‘s results of operations and financial condition.


Risks Relating to the Offer

Share price of the Company’s common stock may decline.

The market price of the Company‘s shares at the time of the offering may not be indicative of the market price after
such offerings are completed. Factors other than the Company‘s financial and operational results that may affect the
price of the Company‘s common stock include, but are not limited to, the following:
    variations in the Company‘s financial performance;
    changes in estimates of the Company‘s financial performance by securities analysts;
    global financial performance;
    market volatility, particularly in the horse racing and real estate sectors in which the Company operates; and
    announcements by the Company or its competitors relating to significant mergers and/or acquisitions (including,
    without limitation, the Acquisitions, strategic alliances, joint ventures or their termination, or of sales of interests
    in subsidiaries or joint ventures, or of the exchange of assets and activities.

In addition, if the market for property stocks or the stock market in general experience loss of investor confidence, the
trading price of the Company‘s common stock could decline for reasons unrelated to its business, operating results or
financial condition. The trading price of the Company‘s common stock might also decline in reaction to events that
affect PRC or other property companies even if these events do not directly affect the Company. Some companies
that have had volatile market prices for their securities have had securities class actions filed against them. A suit
filed against the Company, regardless of its merits or outcome, could cause the Company to incur substantial costs
and could divert management‘s attention.

Listing of the Offer Shares may not occur on the expected listing date.

While the PSE may approve the offering, the Offer Shares will only be listed after the Company has complied with
PSE‘s post-approval listing requirements. There can be no assurance that there will be no event that may delay the
listing of the Offer Shares.




                                                         Page 21
                                                USE OF PROCEEDS

Manila Jockey Club, Inc. (―MJC‖ or the ―Company‖) expects to raise gross proceeds from the Offer of
up to P 287.5 million. After deducting estimated applicable taxes, listing and other fees and expenses related to the
Offer of P6.2 million, net proceeds to the Company from the Offer is expected to be approximately P 281.3 million.

The following table presents the breakdown of the net proceeds from the Offering:

            GROSS PROCEEDS (Maximum)                                                     P287,492,659.00
            Less: Offer Related Expenses
            PSE listing and processing fees                           P 333,191.78
            SEC confirmation of exempt transaction                       321,991.78
            Documentary stamp tax                                      2,874,926.59
            Receiving Agency Fee                                          75,000.00
            Professional and Legal Fees                                2,500,000.00
            Estimated cost of printing and publication                   100,000.00
            Total Offer Related Expenses                                                    6,205,110.15
            ESTIMATED NET PROCEEDS                                                       P281,287,548.85

The proceeds from the Stock Rights Offering will be used as follows:

                            Use of Proceeds                              Amount             Disbursement
            Full Payment of subscriptions to 107 million
            shares of MJC Investments Corporation (MJIC)1               P80,520,003.00       2nd Quarter 2011
            Retirement of short term loans2                             161,562,500.01       2nd Quarter 2011
            General working capital                                      39,205,045.84       2nd Quarter 2011
            ESTIMATED NET PROCEEDS                                    P281,287,548.85                                  [●]


The following Short-Term Loans were obtained from Banco de Oro Unibank, Inc. (―BDO‖) and Bank of the
 Philippine Islands (―BPI‖) to finance general working capital requirements of the Company. The details of the
 outstanding short-term loans to be retired are as follows:


                                                                                     Interest
      BANCO DE ORO         Principal balance   Interest rate                                         Total payable
                                                                 Maturity date   expenses for the
      UNIBANK, INC.              (Php)          per annum                                               (Php)
                                                                                 year 2011 (Php)

    100M OMNIBUS LINE          12,500,000.00             9.00%       4/28/2011        375,000.00       12,875,000.00
    100M TERM LOAN             13,571,428.61             9.00%       11/5/2015      1,574,192.76       15,145,621.37
                               27,142,857.13             9.00%       11/5/2015      3,148,385.52       30,291,242.65
                               10,178,571.39             9.00%       11/5/2015      1,180,644.57       11,359,215.96
                               16,964,285.74             9.00%       11/5/2015      1,967,740.95       18,932,026.69
    TOTAL                      80,357,142.87                                        8,245,963.80       88,603,106.67



1
    On January 23, 2009, the Company executed a subscription agreement to subscribe 107,360,137 shares of MJIC,
    equivalent to 50.23% interest in MJIC. As of December 31, 2009, the Company has made a partial payment to MJIC
    of P26.8 million, equivalent to 25% of the total subscription price. The remaining balance of P80.5 million is
    payable upon call by the Board of Directors of MJIC. (Please refer to the section on “The Company” found on page
    39 of this Prospectus for further information on this transaction.)


                                                           Page 22
    BANK OF THE
                         Principal balance   Interest rate                   Interest expense    Total payable
     PHILIPPINE                                              Maturity date
                               (Php)          per annum                           (Php)             (Php)
      ISLANDS

 SHORT TERM                  13,500,000.00          6.00%        4/26/2011        810,000.00       14,310,000.00
 LOANS                        2,500,000.00          5.75%        4/12/2011        123,750.00        2,623,750.00
                             10,000,000.00          5.75%        4/12/2011        553,143.34       10,553,143.34
                             20,000,000.00          5.75%        4/15/2011       1,150,000.00      21,150,000.00
                             11,000,000.00          5.75%        4/15/2011        632,500.00       11,632,500.00
                             12,000,000.00          5.75%        11/5/2015        690,000.00       12,690,000.00
 TOTAL                       69,000,000.00                                       3,959,393.34      72,959,393.34
 Grand Total                149,357,142.87                                     12,205,357.14      161,562,500.01

Since March 2004, the Company had availed of various short term loans in the form of promissory notes (PNs) from
BDO with interest rates ranging from 7.11% to 9.00% and tenors of 90 days, for general corporate purposes. As of
December 31, 2010, the principal amount of the BDO PNs is approximately P165.4 million.

Similarly, the Company avails of short-term financing from BPI for working capital requirements. The promissory
notes (―PNs‖) covering these loans have terms ranging from three months to six months and are renewed upon
maturity. These loans bear interest which ranges from 6.25% to 8.25% from period January to September 2010. As of
December 31, 2010, the principal amount of the short-term loans outstanding is P267.5 million. As of December 31,
2010, the principal amount of the short-term loans outstanding with BPI is P267.5 million

None of the proceeds from this Rights Offer will be used to settle any loan obligation to the Issue Manager and Lead
Underwriter, RCBC Capital, or any of its affiliates.

The foregoing discussion represents a best estimate of the use of the net proceeds of the Offer based on the
Company‘s current plans and anticipated expenditures. Actual use of the net proceeds may vary from the foregoing
discussion and management may find it necessary or advisable to use portions of the net proceeds of the Offer for
other purposes. In the event of any deviation, adjustment or reallocation in the planned use of proceeds, the Company
will secure the approval of its Board of Directors for such deviation, adjustment or reallocation and promptly make
the appropriate disclosures to the SEC and the PSE. The Company shall regularly disclose to the PSE, through the
Online Disclosure System ("ODiSy"), any disbursements from the proceeds generated from the Offer.




                                                      Page 23
                                               DIVIDEND POLICY

The Company does not adopt a specific dividend policy to afford its shareholders and Board of Directors the
flexibility in declaring dividends.

As provided by law, the shareholders of the Company are entitled to receive a proportionate share in cash dividends
that may be declared by the Board of Directors out of surplus profits derived from the Company‘s operations. The
same right exists with respect to a stock dividend, the declaration of which is subject to the approval of stockholders
representing at least two-thirds (2/3) of the outstanding shares entitled to vote. The amount depends on the
Company‘s profits and its capital expenditure and investment requirements at the relevant time. There are no
restrictions other than profit levels or retained earnings that limit the payment of dividend on common shares.

Since the year 2007, the Company has declared the following cash and stock dividends:


         Dividend               Dividend                              Percentage
                                                    Cash/Stock                             Amount in Pesos
       Payment Dates           Record Dates                            Declared
       August 3, 2007          July 16, 2007            Stock             25%               P89,997,123.00
        May 3, 2007            April 3, 2007            Cash              10%               P33,343,624.87
        June 4, 2008           May 12, 2008             Cash              10%               P44,998,531.80
      February 14, 2011      January 19, 2011           Stock             20%               P89,997,603.00
                                                           Total To Date                    P258,336,882.67



See ―Description of the Securities—Dividend Rights of Common Shares‖.




                                                       Page 24
                    RECENT SALES OF UNREGISTERED OR EXEMPT SECURITIES

In October 2008, the Company entered into various Subscription Agreements with the following existing
shareholders of the Company whereby the said existing shareholders agreed to subscribe to a total of 35,002,937 new
common shares of the Company at P1.00 per share equivalent to P35,002,937.00. Of the total P35,002,937.00 total
subscription price, P8,751,222.00 have been paid by the respective shareholders upon signing of the Subscription
Contract. Pursuant to the Call for Full Payment made by the Company, the balance of P26,251,715.00 amount of
unpaid subscriptions have been fully paid by the respective subscribers and received by the Company on March 15,
2011.


                                     Amount Subscribed                                            Amount Subscribed
           Subscriber Name            and Fully Paid                        Subscriber Name        and Fully Paid

 1   ALFONSO R. REYNO, JR.                 8,496,430.00        22   VICTOR CHAN                          196,150.00
 2   ARCO EQUITIES, INC.                   5,249,278.00        23   MJCI INVESTMENTS, INC.               163,313.00
 3   EXEQUIEL D. ROBLES                    2,843,208.00        24   BALLIGI Z. FONACIER                  120,656.00
 4   GUILBERT WONG CHUN LONG               2,478,964.00        25   ELBA &/OR RITA CRUZ                   85,445.00
 5   MARITESS CALZADO                      2,268,143.00        26   MRC ITF: DIEGO ALFONSO S.             76,213.00
                                                                    REYNO
 6 PEDRO TAN                               2,122,949.00        27   YOLANDA G. REYNO &/OR                 63,039.00
                                                                    ROSENDO GUEVARA
 7   DW CAPITAL, INC.                      1,999,754.00        28   WONG CHUNG TAK                        51,806.00
 8   PRIMITIVO GARCIA III                  1,645,501.00        29   ARTURO L. TIU                         51,281.00
 9   F. ARTHUR VILLARAZA                   1,465,434.00        30   WALFRIDO MENESES                      51,260.00
10   EDGARDO B. ESPIRITU                   1,243,967.00        31   ALFONSO VICTORIO G.                   32,915.00
                                                                    REYNO III
11 FERDINAND A. DOMINGO                     648,551.00         32   CHRISTOPHER G. REYNO                  25,150.00
12 JUT HOLDINGS, INC.                       574,380.00         33   PATRICK G. REYNO                      14,154.00
13 TORMIL REALTY &                          528,863.00         34   ALFONSO G. REYNO III ITF:              9,750.00
   DEVELOPMENT CORPORATION                                          LEON ALFONSO M. REYNO
14 LEMUEL M. SANTOS                         438,677.00         35   ALFONSO G. REYNO III ITF:              9,750.00
                                                                    FILIPPO LUIS M. REYNO
15 MARTIN CEPEDA                            408,211.00         36   MARIZA SANTOS TAN                      3,745.00
16 DERWIN WONG                              370,354.00         37   JUANITA U. TAN                         2,793.00
17 BETTY WONG                               336,708.00         38   MAY NERI ITF: ALIANA NERI              1,950.00
18   ROSENDO G. GUEVARA                     292,336.00         39   MARILOU U. PUA                           957.00
19   STA. LUCIA REALTY DEV'T INC            216,040.00         40   DERICK WONG                              176.00
20   RUDDY TAN                              210,915.00         41   DAVIDSON WONG                            176.00
21   JEFFREY TAN                            203,532.00         42   JEMIE U. TAN                              63.00
     Subtotal                            34,042,195.00              Subtotal                             960,742.00

                                                                    Total                             35,002,937.00


The Company is still to file the Listing Application with the PSE and the Notice of Exempt Transaction with the SEC
covering the issuance of the 35,002,937 Common Shares to the above subscribers and existing shareholders. This sale
of new common shares of the Company to its existing shareholders may qualify as an exempt transaction under
Section 10.1(e) of the Securities Regulation Code.




                                                     Page 25
                                  DETERMINATION OF OFFER PRICE
The Rights Shares shall be offered to all eligible holders of Common Shares as of the Record Date at the Offer Price
of P1.00 per Rights Share which is equivalent to the Company‘s par value. The adjusted net book value per share of
the Company after the Offer will be P2.83 per share. Please see the following section on “Dilution” for further
information.

In determining the Offer Price, the Company has considered its recent sale of common shares issued by way of
private placement to selected investors at a price of P1.00 per share amounting to a total of P35,002,937. The
Company intends to offer the Rights Shares at the same price it has offered new shares to selected investors. Please
see discussion on Recent Sales of Unregistered or Exempt Securities found on Page 25 of this Prospectus.




                                                      Page 26
                                                         DILUTION

After the completion of the Offer, Eligible Shareholders who exercised their rights to purchase their proportionate
Offer Shares will not suffer any dilution in their respective shareholdings in the Company.

The net book value of the Company as of December 31, 2010 was P2,161,340,151.00. Net book value represent‘s the
company‘s total assets less its total liabilities.

Upon receipt of the estimated P281,287,548.85 net proceeds of the Offer and the issuance of a total of 287,492,659
new Common Shares pursuant to the Offer, the Company‘s adjusted net book value would approximately be P2.83
per share. This represents the immediate decrease of P0.93 per share for existing holders of the Company‘s Shares.

The calculation of net assets per share before and after the Offer is presented below.


Net book value as of December 31, 2010 (a)                          P 2,161,340,151.00
Issued and outstanding Common Shares prior to the Offer (b)                574,985,318
Net book value per Share as of December 31, 2010 (c) 1              P             3.76
Offer Price per Offer Share (d )                                    P             1.00
Offer Shares (e)                                                           287,492,659
Gross Proceeds 2                                                    P 287,492,659.00
Net Proceeds (f)                                                    P 281,492,659.00
Adjusted net book value after the Offer (g) 3                       P 2,442,832,810.00
Adjusted net book value per Share after the Offer (h) 4             P             2.83
Decrease per share attributable to the Offer Shares 5               P             0.93


Note:
(1) Computed by dividing (a) by (b)
(2) Computed by multiplying (d) by (e)
(3) Commputed by adding (a) and (f)
(4) Computed by dividing (g) by the sum of (b) and (e)
(5) Commputed by subtracting (c) and (h)




                                                          Page 27
                                           PLAN OF DISTRIBUTION

The Rights Offer

The Rights Shares shall be offered on a pro-rata basis to existing holders of Common Shares of the Company as of
the Record Date which will be set after the Board of Directors of the PSE approves the Listing Application for the
Rights Shares. Under the PSE‘s Revised Listing Rules, the Company, subject to the approval of the PSE and the SEC,
shall set the Record Date which shall not be less than 15 trading days from approval of the PSE Board of Directors.
The Offer shall be in the proportion of one (1) Rights Share for every two (2) Common Shares held as of the Record
Date at an Offer Price of P1.00 per Rights Share. The unexercised Rights Shares shall be offered to those
shareholders who had previously exercised their rights and had signified their intention to subscribe to any
unsubscribed Rights Shares via payment of the total Offer Price of the Rights Shares they wish to subscribe in excess
of their entitlements. The Additional Rights Shares to which an applicant is entitled to subscribe shall be in the
proportion to the number of Common Shares held by such applicant as of the Record Date to the total number of
Common Shares held by all applicants to Additional Rights Shares as of the Record Date.

Existing shareholdings in certificated and scripless form will be treated as separate shareholdings for the purpose of
calculating entitlements under the Offer. Fractions of Rights Shares will not be allotted to existing shareholders and
fractional entitlements will be rounded down to the nearest whole number of Rights Shares. Such fractions will be
aggregated and sold for the benefit of the Company.

To the extent that any Rights Shares remain unsubscribed in the Offer after the second round of the Offer, such
Rights Shares, subject to certain conditions, will be offered to qualified institutional investors (―QIBs‖) as defined
under Section 10.1 (l) of the Securities Regulation Code (SRC) and such offering to QIBs will be underwritten, as
required by the Philippine Stock Exchange (PSE).

RCBC Capital Corporation (―RCBC Capital‖), Issue Manager and Lead Underwriter has agreed to firmly commit to
purchase, or procure qualified institutional buyers (QIBs) in the Philippines to purchase a portion of the unsubscribed
Rights Shares after the second round to ensure that the Rights Shares covered by the Offer are fully subscribed. Any
Rights Share that will be left unsubscribed at the end of the Offer Period shall be firmly underwritten by RCBC
Capital. RCBC Capital shall not be entitled to fees other than for the unsubscribed Rights Shares actually sold to
QIBs.

Relationship with Issuer

RCBC Capital Corporation has over 35 years of experience in investment banking in the Philippines and is one of the
country's leading investment houses. Throughout its existence it has acted either as financial advisor, issue manager
and/or lead, co-lead or participating underwriter in various equity, quasi-equity and debt transactions to raise
necessary funding for private and government corporations.

Other than as issue manager and underwriter, RCBC Capital does not have any material direct relationship with the
Company in terms of equity interests, and does not have any right to designate or nominate any member of the
Company‘s board of directors. RCBC Capital or its affiliates may provide investment banking or brokerage services
to the Company in the future.




                                                       Page 28
                                    DESCRIPTION OF THE SECURITIES

The following are general information relating to the Company’s capital stock but do not purport to be complete or to
give full effect to the provisions of law and is in all respects qualified by reference to the applicable provisions of the
Company’s amended articles of incorporation and amended by-laws.

Share Capital

The authorized capital of the Company is P1 billion, divided into 1 billion Common Shares, with a par value of P1.00
per share. As of the date of this Prospectus, 574,994,780 Common Shares are issued and 574,985,318 Common
Shares are outstanding. Upon the completion of the Offer, the Company will have 862,487,439 Common Shares
issued and 862,477,977 outstanding shares, respectively.

On April 16, 2008, the Board of Directors approved the increase in the Company‘s authorized capital stock from
P500.0 million to P1.0 billion. The increase in the Company‘s authorized capital stock was approved by the
stockholders of the Company at the Annual Stockholders‘ Meeting held on June 18, 2008.

To support the increase in authorized capital stock, the Company has declared a Twenty Percent (20%) stock
dividend covering 89,997,063 common shares. The 89,997,063 common shares covering the 20% stock dividend
were declared to all existing stockholders of record as of January 19, 2011 and which were listed with the Philippine
Stock Exchange, Inc. on February 14, 2011. The stock dividend shares came from the unrestricted portion of the
Company‘s retained earnings.

In addition, stockholders of MJC subscribed to the increase in the authorized capital stock amounting to Thirty Five
Million Two Thousand Nine Hundred Thirty Seven (35,002,937) shares and have paid an initial down payment at
least twenty five percent (25%) of the subscription price of One Peso (P1.00) per share, amounting to Eight Million
Seven Hundred Fifty Thousand Seven Hundred Thirty Four and 25/100 Pesos (P8,750,734.25) The shares to be
issued pursuant to the subscription were taken from the increase of capital stock . Pursuant to the Call for Full
Payment made by the Company, the balance of P26,251,715.00 amount of unpaid subscriptions have been fully paid
by the respective subscribers and received by the Company on March 15, 2011. This has caused the full issuance of
the 35,002,937 common shares subscribed above.


On May 11, 2010, the SEC has approved the Company‘s increase in authorized capital stock from P500.0 million to
P1.0 billion.


Voting Rights of Common Shares

Each Common Share is equal in all respects to every other Common Share. All the Common Shares have full voting
and dividend rights. Stockholders may vote at all meetings the number of shares registered in their respective names
either in person or by proxy executed in writing (which must be filed with the Corporate Secretary at least three days
before the date of the stockholders‘ meeting) including the election of Directors, where each stockholder or his proxy
may vote such number of shares in his name for as many persons as there are Directors, or he may cumulate said
shares and give one candidate as many votes as the number of Directors to be elected multiplied by the number of his
shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit,
provided, however, that the whole number of votes cast by him shall not exceed the number of shares owned by him
as shown on the Company‘s stock transfer multiplied by the whole number of Directors to be elected.

Dividend Rights of Common Shares

The shareholders of the Company are entitled to receive a proportionate share in cash dividends that may be declared
by the Board of Directors out of surplus profits derived from the Company‘s operations. The same right exists with
respect to a stock dividend, the declaration of which is subject to the approval of stockholders representing at least
two-thirds (2/3) of the outstanding shares entitled to vote. The amount will depend on the Company‘s profits and its
capital expenditure and investment requirements at the relevant time.

                                                         Page 29
Rights of Common Shares to Assets of Company

Each holder of a Common Share is entitled to a pro rata share in the assets of the Company available for distribution
to the shareholders in the event of dissolution, liquidation and winding up.

Other Features and Characteristics of Common Shares

The Common Shares are neither convertible nor subject to redemption. All of the Company‘s issued Common Shares
are fully paid and non-assessable and are free and clear of all liens, claims and encumbrances. All documentary
stamp taxes due on the issuance of all issued Common Shares have been fully paid.



RESTRICTIONS ON TRANSFER OF SHARES

Pre-Emptive Rights

The Corporation Code confers pre-emptive rights on shareholders of a Philippine corporation, which entitle them to
subscribe to all issues or other disposition of shares of any class by the corporation in proportion to their respective
shareholdings, subject to certain exceptions. A Philippine corporation may provide for the exclusion of these pre-
emptive rights in its articles of incorporation. The amended articles of incorporation of the Company provide that the
shareholders shall not have any pre-emptive rights.

Appraisal Rights

A stockholder shall have the right to dissent and demand payment of fair value of the share in case he voted against
the following proposed corporate actions: (a) 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 outstanding shares of any class, or extending or shortening the term of corporate existence; (b) in
case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate
property and assets; and (c) in case of merger or consolidation.

The appraisal right may be exercised by the dissenting stockholder by making a written demand for payment of the
fair value of his shares on the company within thirty (30) days after the date on which the vote was taken and within
ten (10) days after demanding payment on his shares, he shall submit the certificate of stocks representing his shares
to the company for notation thereon that such shares are dissenting shares. If the proposed corporate action is
implemented and if there is agreement as to the fair value of the shares, the company shall pay the fair value of the
shares to such stockholder upon surrender and transfer of the certificate of stocks. The fair value of the share shall be
determined as to the day prior to the date on which the vote was taken, excluding any appreciation or depreciation in
anticipation of such corporate actions. Provided, that no payment shall be made to any dissenting stockholder, unless
the company has unrestricted retained earnings in its books to cover such payment. If within a period of sixty (60)
days from the date of the corporate action was approved, the withdrawing stockholder of the company cannot agree
on the fair value of the shares, it shall be determined and appraised by three (3) disinterested persons, one of whom
shall be named by the dissenting stockholder, another by the company and third by the two previously chose. The
findings of the majority of the appraisers will be final and the award shall be paid by the company within thirty (30)
days after the award is made. Upon payment of the agreed or awarded price, the stockholder shall forthwith transfer
his share to the company. From the time of demand for payment of the fair value of the stockholder shares, all rights
accruing to such shares, including voting and dividend rights shall be suspended.

Treasury Shares

As of the date of this Prospectus, the Company has 9,462 treasury shares.

                                                         Page 30
Stock Transfer Agent

The Company‘s share register is maintained at the principal office of the Company‘s share transfer agent, RCBC
Stock Transfer Department, located at the Ground Floor, West Wing, Grepalife Building, 221 Sen. Gil Puyat Avenue,
Makati City.

Change in Control

There are no existing provisions in the amended articles of incorporation or the amended by-laws of the Company
which will delay, defer or in any manner prevent a change in control of the Company.




                                                    Page 31
     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                         RESULTS OF OPERATIONS

The following management’s discussion and analysis of the Company’s financial condition and results of operations
should be read in conjunction with the Company’s audited financial statements as of and for the years ended
December 31, 2010, 2009 and 2008, including the related notes thereto, contained in this Prospectus. This
Prospectus contains forward-looking statements that are based largely on the Company’s current expectations and
projections about future events and trends affecting its business and operations. The Company cautions investors that
its business and financial performance is subject to substantive risks and uncertainties. The Company’s actual results
may differ materially from those discussed in the forward -looking statements as a result of various factors,
including, without limitation, those set out in the section “Risk Factors”. In evaluating the Company’s business,
investors should carefully consider all of the information contained in “Risk Factors”.

December 31, 2010 vs December 31, 2009

RESULTS OF OPERATIONS

Revenues

                                              For the Year ending December 31
       REVENUES              2010           %         2009        %        2010 vs 2009             % Change
       Club races         297,239,492      47.6%         279,902,325      37.4%       17,337,167          6.2%
       Real estate        148,383,065      23.8%         311,425,887      41.7%    (163,042,822)        -52.4%
       Rent               178,919,567      28.6%         156,352,624      20.9%       22,566,943         14.4%
       TOTAL              624,542,124    100.0%          747,680,836    100.0%     (123,138,712)        -16.5%

For the year 2010, the Company posted revenues of P624.54 million, a 16.5% decrease from the P747.68 million
generated in 2009. This decrease in revenues was attributable to the decline in sales of real estate assets.


Cost of Sales and Services

The Company‘s total cost of sales and services, selling expenses and general and administrative expenses were lower
by P83.11 million compared to the P680.31 million posted during same period in 2009. The decrease in total cost and
expenses was directly attributed to the cost saving programs implemented by the Company and to the decline in real
estate sales during the year.

As a result of lower real estate sales, audited total comprehensive income for 2010 amounted to P30.21 million which
is P16.45 million lower than 2009‘s P46.66 million comprehensive income.


Liquidity

The Company‘s working capital are generally generated from its businesses: horse-racing, real estate and leasing
operations. To provide for additional capital and liquidity, the Company tapped local banks. For the year 2010, the
liquidity ratio was 0.95:1.00. The cos and expenses to revenues ratio is 0.96:1.00 in 2010 compared to 0.91:1.00 in
2009.


It is anticipated that the financial condition of the Company will further improve considering the continuous revenue
stream it will obtain from its real estate projects, the casino operations at the Turf Club and leasing of BPO building
one, Vertex One, at Sta. Cruz Manila.

                                                       Page 32
There is no particular event that will trigger a direct or contingent financial obligation that would be material to the
Company, including events of default and acceleration of an obligation.

The Company is not aware of any seasonal aspects or known events or uncertainties which will have a material effect
on the sales and overall financial condition or results of operations of the Company.

There were no material off-balance sheet transactions, arrangement, obligation, contingent or otherwise that occurred
during the fiscal year. There were no other relationship of the Company with unsolicited entities or other persons
created during the fiscal year.

There is a plan or commitment for capital expenditures for the coming year, for establishing a hotel casino, and
building a BPO building in Sta. Cruz Manila.

Discussion on some Significant Changes in Financial Condition

Current Assets decreased because of the following:

         Cash and cash equivalents increased due to increased funds from higher sales in horse races and interests
         earned from bank deposits;

         Held for trading investments increased during the year due to unrealized fair value changes of the securities.
         These investments consist of quoted equity securities that are designated as at FVPL:
         Receivables decreased due to better collections during the year;

         Real estate inventories decreased due to the sale of lots in the Company‘s real estate projects; and

         Other current assets increased due to the necessary adjustments on prepaid marketing fees as a result of the
         real estate projects and other prepayments that were expended in the year 2010.

Noncurrent Assets decreased due to the following:

         Real estate Receivables, under noncurrent assets, decreased due to collections of outstanding receivables
         during the year;

         Interest in a jointly controlled entity was recognized during the year. This pertains to the Company‘s
         interest in BPO operations, a joint venture with Ayala Land Inc (ALI);

         Available for sale investments increased comparing it from previous year. This is due to the favorable
         increase in market prices of securities listed in the stock market;

         Property plant and equipment decreased due to the net effect of depreciation and acquisition, recognized
         during the year;

         Investment properties decreased due to depreciation effect of BPO building located at Sta. Cruz Manila;

         Goodwill amount recognized during the year was the same as in 2009. Goodwill was as a result of business
         combination entered by the Company with MJIC;

         Other Noncurrent Assets decreased due to the recognition of expenses and reclassification to current assets
         that are expected to be utilized in the next period.

Current Liabilities decreased because of the following:

         Short-term interest bearing loans and borrowings increased due to loan availments.


                                                          Page 33
         Current portion of long term loans and borrowings decreased compared to last year. The decrease was
         mainly due to payments made on matured loans;

         Accounts payable and other liabilities decreased due to the realization of cash received from real estate sales
         that already satisfied the revenue recognition. The remaining balance of trade payable and buyers‘ deposit
         represent cash received from real estate sales where criterion of full accrual method on revenue recognition
         is not satisfied;

         Income tax payable increased and was mainly due to various adjustments in taxable income compared to
         previous year; and

         Due to related parties increased because of advances from affiliates and stockholders to finance necessary
         capital and operating expenses of the Company.

Non-current Liabilities decreased due to the following:

         Long term loans and borrowings decreased due to reclassifications to short term loans and decreasing
         principal loan amounts;

         Accrued retirement benefits payable increased because of additional recognition of retirement benefit
         obligation during the year; and

         Deferred income tax liabilities decreased because of the revaluation increment in real estate inventories that
         were recognized during the year.

Equity accounts increased due to the following:

         Capital stocks increased due to issuance of additional stocks;

         Deposits for future stock subscription decreased due to full payment of capital stocks subscribed by
         stockholders and subsequent issuance of stocks;

         Net changes in fair value of available for sale increased due to favorable quoted price of stocks at the end of
         the year.


December 31, 2009 vs December 31, 2008

RESULTS OF OPERATIONS

Revenues

                                                            As of December 31
      REVENUES               2009            %               2008          %          2009 vs 2008     %Change
      Club races           279,902,325      37.4%          273,368,692     37.4%          6,533,633         2.4%
      Real estate          311,425,887      41.7%          311,776,284     42.6%          (350,397)        -0.1%
      Rent                 156,352,624      20.9%          146,151,546     20.0%         10,201,078         7.0%
      TOTAL                747,680,836     100.0%          731,296,522    100.0%         16,384,314         2.2%

Since 2008, revenues from the Company‘s real estate business surpassed its racing operations by 5%. Success in the
real estate business could be attributed to strategic partnerships with market leaders in real estate development such as
SM Prime Holdings, Inc. and Ayala Land, Inc.


                                                          Page 34
For the year 2009, the Company registered gross revenues amounting to P747.68 million, which is an improvement
by 2.2% compared to previous year‘s P731.30 million gross revenues. This growth in the gross revenues could be
attributed to better sales from club races and increased leasing operations. Revenues from the real estate business was
stable at P311.43 million.

Due to the Company‘s cost saving programs implemented, total cost of sale and services as well as the general and
administrative expenses were reduced by P26 million and P21 million, respectively.

In view of the foregoing, gross profit in 2009 improved by 43% to P277.06 million from P234.17 million in 2008.
Due to this, higher interest income and gain on fair value changes of held for trading investments, Company‘s net
income almost doubled from P21.20 million in 2008 to P41.25 million in 2009.

Earnings per share for 2009 is P0.075 as compared to income per share of P0.048 in 2008.

Total assets in 2009 amounted to P3.63 billion with a net decrease of P55.69 million compared to P3.68 billion in the
year 2008. Total Current Assets decreased by approximately P200 million, driven by the decrease in real estate
inventories by P166.84 million as some lots in the Company‘s real estate projects were sold during the year and
decrease in cash by P42.32 million which were used to partially settle maturing obligations.

Real Estate Receivables, under noncurrent assets, increased by P44.25 million due to the effect of percentage of
completion (POC) method in recognizing revenue of real estate transactions. Property, plant and equipment
decreased by P32.43 million due to the net effect of depreciation and acquisition, recognized during the year.
Investment Properties increased by P58.92 million due to cost associated with BPO building located at Sta. Cruz,
Manila.

With the additional income recognized in 2009, the Company was able to settle some maturing debt obligations and
brought down its total liabilities by 15.1% or from P1.56 billion to P1.33 billion.

Total Equity as of December 31, 2009 amounted to P2.30 billion which was 8.6% higher than 2008‘s total equity of
P2.11 billion. This increase could be attributed to the additional earnings posted in 2009.


Discussion on some Significant Changes in Financial Condition

Current Assets decreased because of the following:

Cash and cash equivalents decreased by P42.32 million due to the payment of loans. Cash and cash equivalents as of
December 31, 2009 and 2008 amounted to P138.44 million and P180.76 million, respectively.

Held for trading investments recognized during the year 2009 amounted to P20.50 million. These investments consist
of quoted equity securities that are designated as at FVPL.

Receivables increased by P18.26 million due to the percentage of completion (POC) treatment on sales of real estate
activities of the Company. Receivables as of December 31, 2009 and 2008 amounted to P319.50 million and P301.23
million, respectively.

Real estate inventories decreased by P166.84 million due to the sale of lots of the Company‘s real estate projects.
Real estate inventories as of December 31, 2009 and 2008 amounted to P396.28 million and P563.12 million.

Other current assets decreased by P29.06 million due to the necessary adjustment on prepaid marketing fees as a
result of the real estate projects and other prepayments that were expended in the year 2009. Other current assets as of
December 31, 2009 and 2008 amounted to P4.63 million and P33.69 million, respectively.




                                                       Page 35
Noncurrent Assets decreased due to the following:

Real Estate Receivables, under noncurrent assets, increased by P44.25 million due to the effect of percentage of
completion (POC) method in recognizing revenue of real estate transactions. Noncurrent real estate receivables
amounted to P74.21 million and P29.96 million as of December 31, 2009 and 2008, respectively.

Available for sale investments increased by P5.44 million due to the favorable increase in market prices of securities
listed in the stock market. Available for sale investments amounted to P22.38 million and P16.94 million as of
December 31, 2009 and 2008, respectively.;

Property plant and equipment decreased by P32.43 million due to the net effect of depreciation and acquisition
recognized during the year. Property plant and equipment as of December 31, 2009 and 2008 amounted to P1.309
billion and P1.342 million, respectively;

Investment Properties increased by P58.92 million due to the cost associated with the BPO building located in Sta.
Cruz, Manila. Investment properties amounted to P1.232 billion and P1.173 billion as of December 31, 2009 and
2008, respectively;

Goodwill amounting to P75.81 million was recognized during the year of 2009 as a result of business combination
entered by the Company with MIC;

Other Noncurrent Assets decreased by P8.22 million due to the recognition of expenses and reclassification to current
assets that are expected to be utilized in the next period. Noncurrent assets as of December 31, 2009 and 2008
amounted to P31.29 million and P39.52 million, respectively.


Current Liabilities decreased because of the following:

Short-term interest-bearing loans and borrowings decreased by P6.5 million due to the net effect of reclassification of
long-term loans and payments made on matured loans. Short-term interest-bearing loans and borrowing amounted to
P319.5 million and P326 million as of December 31, 2009 and 2008, respectively.

Current portion of long-term loans and borrowings increased by P6.47 million compared to last year, this was mainly
due to the reclassification of maturing loans from long-term loans. Current portion of long-term loans and borrowings
amounted to P179.99 million and P173.52 million as of December 31, 2009, and 2008, respectively;

Accounts payables and other liabilities decreased by P97.30 million due to the realization of cash received from real
estate sales that already satisfied the revenue recognition. The remaining balance of trade payable and buyers‘ deposit
represents cash received from real estate sales where criterion of full accrual method on revenue recognition is not
satisfied. Accounts payable and other liabilities amounted to P439.97 million and P537.28 million as of December
31, 2009 and 2008, respectively;

Income tax payable increased by P224,114 and was mainly due to the increase in net income compared to the
previous year. Income tax payable as of December 31, 2009 and 2008 amounted to P564,843 and P340,729,
respectively; and

Due to related parties increased by P25.89 million due to additional advances from affiliates and stockholders. This
was used to finance necessary capital and operating expenses of the Company. Due to related parties as of December
31, 2009 and 2008 amounted to P48.89 million and P23 million, respectively.

Non-current Liabilities decreased due to the following:

Accrued retirement benefits payable increased by P10.86 million because of the additional recognition of retirement
benefit obligation during the year. Accrued retirement benefit payable amounted to P56.31 million and P45.44
million as of December 31, 2009 and 2008, respectively;


                                                          Page 36
Non-current interest bearing liabilities decreased by P170.26 Million due to the reclassification of maturing loans to
current liabilities. Non-current interest bearing liabilities amounted to P111.73 million and P282 million as of
December 31, 2009, and 2008, respectively; and

Deferred income tax liabilities decreased by P6.2 million due to the revaluation increment in real estate inventories
recognized during the year. Deferred income tax liabilities amounted to P173.18 million and P179.40 million as of
December 31, 2009, and 2008, respectively.

Equity accounts increased due to the following:

Deposits for future stock subscriptions increased by P5.9 million because of payment received for future stock
subscriptions during the year. Deposit for future stock subscriptions amounted to P8.34 million and P2.42 million,
respectively.

Revaluation increment in real estate properties decreased by P84.41 million due to the realized appraisal from real
estate transactions during the year. Revaluation increment as of December 31, 2009 and 2008 amounted to P871.51
Million and P955.93 million, respectively;

Unappropriated retained earnings increased by P118.25 million due to the earnings from the sale of real estate units
and income earned by the Company during the year. Unappropriated retained earnings as of December 31, 2009 and
2008 amounted to P784.85 million and P666.60 million, respectively; and

Net changes in fair values of available for sale investments increased by P5.41 million due to favorable quoted prices
of equity investments at the end of the year. Net changes in fair values of available for sale investments as of
December 31, 2009 and 2008 amounted to P4.86 million and P(550,036), respectively.



Top Five (5) key performance indicators:

MJC looks closely at the following to determine its over-all performance:

                                                                 As of December 31
                                                    2010                2009                 2008
            Sales to Revenues                       0.476               0.374                0.373
            Sales to Expenses Ratio                 1.664               1.109                1.066
            Current Ratio                           0.950               0.889                1.017
            Asset Liability Ratio                   2.718               2.725                2.348
            Earnings per Share                      0.020               0.075                0.048

Sales to total revenue ratio is computed by dividing the income from horse racing to total sales of the Company, it
indicates the performance by percentage of the income from horse racing to total revenue of the Company. Sales is
monitored every interim period and compared to past interim periods. Sales and other revenues indicate the over-all
performance of the Company as it conducts horse races.

Sales to expenses ratio is computed by dividing sales over expenses. This allows the company to see how sales can
cover the expenses.

Current ratio is computed by dividing current assets over current liabilities. This indicates the ability of the company
to pay its current liabilities.

We also compute for the total Assets over total liabilities. This shows the relationship of total assets of the Company
with its total liabilities.




                                                       Page 37
Earnings per share are computed by dividing the Company‘s net income over the number of outstanding shares. This
is to determine the value of the Company to each stockholder. Results are compared to previous levels of earnings per
share.

All ratios are computed and are compared to previous year‘s ratios.


INDEPENDENT PUBLIC ACCOUNTANT

From 2008 to 2010, the Independent Public Accountant is Sycip Gorres Velayo & Co. with address at 6760 Ayala
Avenue, 1226 Makati City. A representative of SGV & Co. is expected to attend in the coming Annual Stockholders‘
Meeting with an opportunity to make any statements, if they so desire, and will be available to respond to appropriate
questions. The partner-in-charge for MJC in SGV & Co. is Ms. Josephine H. Estomo, who is also recommended as
such for 2010. SGV & Co. is being recommended for re-appointment as Independent Public Accountant. In
compliance with SRC Rule 68, Paragraph 3 (b) (iv), the independent external auditor or the partner is rotated every
five (5) year or earlier.


AUDIT AND AUDIT-RELATED FEES

The Company‘s external auditor, Sycip Gorres Velayo and Company, was paid an aggregate amount of P1.3 million
for 2010 as professional fees for the audit of the Company‘s annual financial statements. The audit committee
approved the policies and procedure for said services. No other fees were paid to said auditors for other services. For
2009 and 2008, the External Auditor was paid P1.1 million and P900 thousand, respectively, for its audit of the 2009
and 2008 financial statements.


FINANCIAL STATEMENTS

Audited Financial statements are attached hereto and incorporated herein by reference.


CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES

There are no disagreements with the auditors on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures.




                                                       Page 38
                                                THE COMPANY

OVERVIEW

Manila Jockey Club, Inc. (the ―Company‖) was incorporated on March 22, 1937. On October 23, 1972, the Company
was granted a franchise through Republic Act No. 6631 to operate and maintain a racetrack and conduct horse races
therein. The franchise was renewed on November 23, 1997 under R.A. No. 8407 for another term of twenty five (25)
years. Under R.A. No. 8407, the Company shall pay annually to the National Treasury a franchise tax equivalent to
25% of its gross earnings from bets on the horse races. However, the Company now pays value added tax equivalent
to twelve percent (12%) of its gross revenues from horse races pursuant to Republic Act No. 7716 or the Expanded
VAT Law.

In line with the Company‘s vision to expand its business operations and to enhance the value of the shareholders‘
investment, the Company is also engaged in the development of its real estate assets through joint venture agreements
with leading property developers. Likewise, the Company has recently ventured into gaming operations with the
establishment of the Casino Filipino at the 3rd Floor of the Turf Club at the San Lazaro Leisure Park (―SLLP‖) in
Carmona, Cavite, in partnership with the Philippine Amusement and Gaming and Corporation (―PAGCOR‖).

Employees

The Company has race day and monthly employees.

         Raceday – 464
         Monthly – 99
         Officers – 60
         Contractual – 171
         Total = 794


The total number of race day employees is as follows:

a.   For Tuesday to Sunday racing days                  -         464 employees

b.   Total number of monthly employees                 -       171 employees.
     The monthly employees have a five-year Collective Bargaining Agreement (―CBA‖) with the Company which is
     set to expire on December 31, 2010. As of the date of this Prospectus, the new CBA of the monthly employees
     are still being negotiated with the Company. The Company also has a CBA with the race day employees for a
     period of five (5) years starting July 1, 2009. Both CBAs contain supplemental benefits for the employees such
     as vacation and sick leaves and retirement benefits. The Company has not experienced any labor strike in the last
     three (3) years.

Subsidiaries




                                                            Page 39
The Company has two (2) wholly owned subsidiaries namely, San Lazaro Resources and Development Corporation
(―SLRDC‖) and San Lazaro Leisure Park Holdings, Inc. (―SLLPHI‖), which was formerly named SLLP
Development, Inc. The Company also has a 50% interest in MJC Investments Corporation (MJIC) and Biohitech
Philippines, Inc. (Biohitech). New Victor Technology Ltd. (NVTL) is a special-purpose entity considered also as a
subsidiary based on the substance of the relationship between the Company and NVTL.

SLLPHI was incorporated on August 19, 2004 while SLRDC was incorporated on September 22, 2000. These
subsidiaries were originally formed to be the holding companies for the non-racing assets of the Company. Both
companies were incorporated with the primary purpose to purchase, subscribe and acquire property, shares of stock,
bonds, securities and other evidences of indebtedness. However, the transfer of the non-racing assets to these two (2)
subsidiaries has not been implemented as these companies have not started commercial operations.

NVTL, which is a corporation organized in 2005 under the laws of Hong Kong S.A.R, supplies and leases the slot
machines to PAGCOR at the VIP Club of the PAGCOR Club San Lazaro at the Turf Club, SLLP.

MJIC, formerly Aries Prime Resources, Inc., is a publicly listed company incorporated in the Philippines. The
purpose of MJIC is to carry on the business of an investment holding company.

On July 24, 2008, the Company and MJIC entered into a Memorandum of Agreement that sets forth and discusses the
following conditions:

    a.   The Company shall acquire at least 90% of the outstanding capital stock of MJIC through subscription of the
         unsubscribed portion of the authorized capital stock of MJIC.
    b.   The Company shall transfer, convey, and assign the Sta. Cruz Property and the gaming machinery to MJIC
         in exchange for shares of the capital stock of MJIC.
    c.   Exchange ratio shall be one share of MJIC for every P1 zonal value of the Sta. Cruz Property.
    d.   Prior to the property-for-share exchange and in order that the Company shall have immediate control of
         MJIC, the Company shall subscribe to 107,360,137 shares of stock of MJIC out of the unsubscribed portion
         of the latter‘s authorized capital stock.

On February 5, 2009, the MOA with MJIC was amended to reflect the use of the appraised value of the Sta. Cruz
property instead of the zonal value of the property-for-share exchange.

On January 23, 2009, in accordance with the MOA, the Company executed a subscription agreement to subscribe
107,360,137 shares of MJIC, equivalent to 50.23% interest in MJIC. As of December 31, 2010, the Company has
made a partial payment to MJIC of P26.8 million, equivalent to 25% of the total subscription price. The remaining
balance of P80.5 million is payable upon call by the Board of Directors of MJIC.

The MOA also provided that prior to the property-for-share exchange, MJIC shall cause the removal from its books
of all assets and liabilities to be implemented as follows:

    i.                                                                             =
         MJIC shall cause the payment of its existing liabilities in the amount of P14.2 million;

    ii. MJIC shall cause the assignment of its marketable securities and receivables to MIC‘s previous
           stockholders;

    iii. MJIC shall spin off its five-hectare property in Tanza, Cavite to a new corporation (NEWCO) to be
         organized by MIC and assign the shares of the capital stock of NEWCO to MIC‘s previous stockholders.

On December 6, 2010, the NEWCO was incorporated as Sierra Prime Properties Corporation. The removal of the
assets and liabilities in the books of MJIC, as well as the transfer of said assets and liabilities to NEWCO, have not
yet been implemented as of April 27, 2011.




                                                       Page 40
Biohitech was incorporated on April 3, 2007 and was formed with the primary purpose of establishing a waste
management facility in Carmona, Cavite. The facility will manufacture organic fertilizer out of horse manure. As of
December 31, 2010, Biohitech has not yet started commercial operations.

The Company incorporated on August 16, 2010 and holds 100% interest in MJC Forex Corporation (MFC), a
company incorporated and domiciled in the Philippines and engaged in the business of money changing or currency
exchange and dealing and brokering in all currencies with local foreign individuals and other entities. As of April 27,
2011, MFC has not yet started commercial operations.

The Company has a 33% ownership in Techsystems, Inc. (Techsystems) undertakes to facilitate the short message
service betting or online betting for the races conducted by the Company. As of December 31, 2010, Techsystems
has not yet started commercial operations.


The foregoing transactions were approved by the respective board of directors of the Company and the said
subsidiaries.

DESCRIPTION OF BUSINESS

Racing Operations

(1) Horse Races

The Company transferred its racing operations on April 1, 2003 to its new horse racing facility of world class
standards in Carmona, Cavite.

(2) Off Track Betting Stations (―OTBs‖)

OTBs are stations where the betting public may place bets outside the race track on the horse races conducted by the
Company. The OTBs are strategically located at designated areas in Metro Manila and other parts of the country.

The Company is expanding its OTB network in Metro Manila as well as in provincial areas. The Company now has a
total of 255 quality OTB stations, 29 of which are located in provincial areas. Last year, the Company had 231 OTBs
with 23 provincial OTBs in operation. The OTB sales account for 93.5% of the total sales generated from the races.


Real Estate Development

Pursuant to the Company‘s rationalization and maximization of its corporate assets, the Company branched out into
the development of its non racing real estate assets.

(1) Carmona Townships -Carmona, Cavite Property (San Lazaro Leisure Park)

    The Company has seventy seven (77) hectares of property located in Carmona, Cavite now known as the San
    Lazaro Leisure Park (SLLP). Fifty four (54) hectares of the SLLP is devoted to the racing business where the
    following were constructed:

         1.       Two (2) new race tracks of world-class standards
         2.       A modern Turf Club building
         3.       A stabling complex housing 1,200 horses.

    Said property is the current home of the new racetrack of the Company after it relocated its racing operations on
    April 1, 2003.

    For 2006, the total amount of P149 million was spent on the Turf Club as well as for the purchase of machinery
    and equipment at the SLLP. Said amount is 24% of the total revenue for 2006. For 2007, MJC spent P18.1
                                                       Page 41
   million for improvements at the SLLP. In 2008, the Company incurred development cost at the Carmona
   property in the amount of P18.9 million. P12.9 million was incurred for development cost in 2009.

   Canyon Ranch

   In 2004, the Company entered into a joint venture agreement with prominent real estate developer Century
   Communities Corporation (―CCC‖) for the development of the 17.09-hectare portion of the Carmona property
   into a mixed-use commercial and upscale residential community. The development is now known as ―Canyon
   Ranch‖.

   The development sells only house-and-lot packages. There are six models offered: Napa, a duplex with floor area
   of 50 sq. m. per house; Stanford (70 sq. m.); Delano (101 sq. m).; Freemont (105 sq. m.); Berkely (sq. m.) and
   Atherton (280 sq. m.).

   Phase I has a total of 427 residential and commercial units. The Company expects sales proceeds of P259 million
   from the project.

   Phase II has a total of 370 units with no commercial areas assigned to it. Market demand is expected to dictate
   pricing and some allotted models may be converted to the more affordable Napa or Stanford.

(2) Manila Townships- Sta. Cruz, Manila Property (San Lazaro Tourism & Business Park)

   The Company‘s 16-hectare property in Sta. Cruz, Manila (the ―Sta. Cruz Property‖) did not remain a parcel of
   idle land after it transferred its racing operations to Carmona, Cavite. In 2001, SM Prime Holdings, Inc. erected
   the SM San Lazaro Mall at the 4-hectare portion of the property.

   As part of the over-all development of the Sta. Cruz property, the Company signed on February 26, 2005 Joint
   Development Agreements (―JDAs‖) with the country‘s largest real property developer, Ayala Land Inc. (―ALI‖),
   through ALI‘s wholly-owned subsidiaries, Avida Land Corporation (―AVIDA‖) and Alveo Land Corporation
   (Alveo), formerly Community Innovations Inc. (―CII‖) for the construction of townhouses and residential
   condominium buildings at the 6.47-hectare portion of the Sta. Cruz property.

   Under the JDAs, the Company will contribute the land and Alveo and AVIDA will contribute the financial and
   technical resources required for the development of the townhouses and condominium buildings.

       Celadon Residences(Alveo)

       ―Celadon Residences‖ is an upscale 202-unit Mediterranean-inspired townhouse community spread over 4.2
       hectares. Buyers may choose from three (3) types of units, with floor areas ranging from 168 to 204 sq. m.
       All units will have three (3) bedrooms and pocket gardens on the ground floor. The additional option of a
       guestroom or home office affords residents more breathing room for their needs. For relaxation and
       recreational purposes, they may visit the centrally-located 3,200 sq. m. village park and pavilion, which
       boast of landscaped gardens, adult and child swimming pools, and children‘s zone, and open playfield, and a
       multi-purpose court. As of April 10, 2010, 77 units has been sold for MJC. Overall sold units is 90% or 182
       units. The balance of 13 units or 14% is still unsold.

       Celadon Park(Alveo)

       ―Celadon Park‖ is a four (4) tower condominium structure to be erected on a one (1) hectare portion of the
       Sta. Cruz Property. The units come in various sizes from one bedroom to three bedrooms. It shall also have
       2 (two) kinds of penthouse suites. It will also have swimming pools, a fitness center, function rooms,
       children‘s playground and a multi-purpose amphitheater. Tower 1 is currently under construction and
       estimated to be completed by 2011 while Tower 2 will be completed by 2014.




                                                     Page 42
        Avida Towers (AVIDA)

        ―Avida Towers‖ is envisioned to be a cluster of five (5) condominium towers, priced within reach of middle-
        income earners. The floor area of each unit ranges from 22 to 53 sq. m., offering studios, one-bedrooms,
        two-bedrooms, and lofts. The facilities include a clubhouse, adult and child swimming pools, children‘s
        playground, basketball court, and jogging path.

        Tower 1, 2 & 3 are already completed while Tower 4 & 5 are under construction. It is estimated that Tower
        4 & 5 will be completed by 2011 and 2012, respectively.

        The projects are sanctuaries conveniently located near schools like University of Santo Tomas, Far Eastern
        University, and University of the East; hospitals such as the UST hospital, St. Jude, and Chinese General;
        shopping areas including SM San Lazaro, SM Manila, and Divisoria; government structures such as the
        Manila City Hall and the Malacanang Palace among other famous landmarks in Manila.

        Vertex (ALI)

        In November 21, 2007, construction started for the BPO Building at the property of the Company at Sta.
        Cruz, Manila. The BPO Building is a joint venture project with Ayala Land, Inc. (ALI) with ALI having
        70% interest and MJC 30%. Construction for said tower was completed on March 2009. The tower is
        named Vertex I.

        The Vertex I, the first of 2 towers, is a 14-storey, 21,000 square meter Grade-A facility designed to address
        the office space requirements and to cater to the 24x7 sq. m. work environment of BPO firms. It provides
        large and efficient building floor plates, telco & data redundancies, large capacity, high-speed elevators,
        100% back-up power, support retail amenities and parks & open spaces. The project site is considered an
        ideal location for BPO firms due to its close proximity to the University Belt and its accessibility to the
        major business districts, airports and seaports in the Metropolis. The project will be the largest BPO facility
        in the city of Manila providing approximately 6,000 job opportunities for the residents of the city.

        Construction of Vertex 2 is subject to occupancy rate of Vertex I.

Gaming Operations

As part of its business diversification, the Company commenced its gaming operations. In October 2003, the
Company entered into an agreement with PAGCOR for establishment of a gaming pit and VIP Club at the 3rd Floor
of the Turf Club Building in Carmona, Cavite.

For the Gaming Pit, PAGCOR leases from the Company an area of 925.5 sq. m. for the card and table games at P400
per sq. m. subject to an escalation rate of 5% per year.

The Company‘s subsidiary, NVTL, supplied a total of 200 slot machines to PAGCOR for the VIP Club under a lease
contract. Under the contract, NVTL shall receive forty percent (40%) of the revenues from the VIP Club as its share.
As of December 31, 2010, the NVTL owned total slot machines number is 170. In addition, NVTL has 60 more slot
machines which is an a revenue sharing arrangement with Gammarus, Ltd. And F2 System, Inc.

On March 18, 2010, MIC was granted a Permit to Operate by PAGCOR for the establishment, maintenance and
operation of a casino, PAGCOR San Lazaro, within the San Lazaro Tourism and Business Park in Sta. Cruz, Manila.
The permit shall be for a period of ten years, to commence on the sate of actual operation of PAGCOR San Lazaro.




                                                      Page 43
PROPERTIES

Sta. Cruz Property

The principal properties of the Club are located in Sta. Cruz, Manila with an area of 11.6 hectares under Transfer
Certificates of Title Numbers 270082, 270083, 270084, 270085, 270086, 270087, 270088, 270089, 270090, and
270091 and in Carmona, Cavite with an area of 77 hectares. The Sta. Cruz property is subject of a real estate
mortgage in favor of Banco de Oro Universal Bank as collateral for its loans. The Company entered into a
Memorandum of Agreement with KPPI Land Corporation for the acquisition of the Carmona property which resulted
in the development of a new racing facility and relocation of the race track in Sta. Cruz, Manila to Carmona, Cavite.

Cavite Property

On December 3, 1997, MJIC entered into a joint venture agreement with Sta. Lucia Realty Development, Inc.
(SLRDI) to develop the land with an approximate area of 52,616 square meters situated in the Municipality of Tanza,
Cavite into a residential, commercial and golf course development known as Saddle and Clubs. The development of
the property commenced in 1998 but was placed on hold due to unfavorable and uncertain market conditions. The
development is still on hold as of April 27, 2011.

The property is used by MJIC as collateral for its notes payable to WINCORP.

Rizal Property

                                                                         P
In previous years, the Parent Compay paid deposits to Winbank totaling =4.5 million for the purchase of a parcel of
land in Montalban, Rizal. The parcel of land is subject to a court proceeding due to the alleged noncompliance of
Winbank with the requirements in holding a public auction. The case stemmed from the default of Winbank‘s debtor.
The bank filed for foreclosure on the collateral at the Regional Trial Court, which was then auctioned off with the
bank as the winning bidder. The debtor objected to the foreclosure proceedings but the Court of Appeals upheld the
bank. The case was then brought by petition for review to the Supreme Court, after a motion for reconsideration filed
by the debtors reinstated the petition.

                                                   =
In 2009, the Parent Company paid an additional P4.5 million to Winbank as full payment for the parcel of land. The
title to the property was transferred to the Parent Company during the same year. The amount of the deposit and the
additional payment to Winbank, including the related capitalizable acquisition costs of the land, was presented as part
of ―Investment properties‖ in the 2010 and 2009 consolidated balance sheets.

On April 28, 2010, the Supreme Court ruled with finality to dismiss the Petition for Review filed by the debtors,
resulting in the consolidation of the title of the Parent Company on the property. The issuance and implementation of
the writ of execution in favor of the Parent Company is still pending as of April 27, 2011.




                                                       Page 44
INVESTOR RELATIONS

The Company promotes fairness and transparency of information to its stockholders. The Company believes that such
transparency and full disclosure of information would strengthen its relationship with its stockholders and further
build investor confidence.

The Company, through its Corporate Information Officer (―CIO‖), communicates to its stockholders by way of
timely and full disclosure of material information and reportorial requirements. The CIO of the Company is
Atty. Heather Ezra C. Annang. She can be contacted thru email via atty_heather@yahoo.com or via telephone
(632) 631-2892.

Further, the Company maintains a website: www.manilajockey.com, which includes a section on ―Investor
Relations.‖ The Investor Relations tab in the Company‘s website opens to a menu of financial reports submitted to
the PSE and SEC, corporate disclosures and the Company‘s Manual of Corporate Governance. This section is
updated on a regular basis every time a disclosure or submission of financial reports are made.



RECENT DEVELOPMENTS AND PLAN OF OPERATIONS

Venture into hotel and resorts development

The Manila Jockey Club Group is breaking into the hotel and resort business by investing about P1.5 billion in two
key projects- one at San Lazaro Business Park in Sta. Cruz, Manila and the other at its new horse racing complex in
Carmona, Cavite. The investments will be made by Manila Jockey Club, Inc. (MJC) through its subsidiary, MJC
Investments Corp. (MJIC). The Company has earmarked about P1 billion for a 250-room world-class hotel in Manila
and another P500 million for a 200-romm resort hotel facility in Cavite. Both are Philippine Economic Zone
Authority-registered tourism zones. It will occupy less than 2,000 square meters of the about 1.6 hectare property of
the MJC group in the area. The Company is in the process on coming up with an agreement with a world-renowned
hotel management company to run the hotel which would be designed to cater to the increasing demand of tourist for
an upscale but affordable hotel in the area. The hotel project is fully endorsed by the city government of Manila. The
tourism projects will be funded with a combination of equity and borrowings. While the group has not enlisted any
partner for the projects, getting a strategic investor could be an option.




                                                      Page 45
                                          INDUSTRY OVERVIEW

The information presented in this section has been extracted from publicly available documents that have not been
prepared nor independently verified by the Company, the Financial Adviser or any of their respective affiliates or
advisers in connection with the Listing.

HORSE RACING INDUSTRY

There are only two (2) companies who are actively involved in the horse-racing and betting industry: Manila Jockey
Club, Inc. (―MJC‖) and Philippine Racing Club, Inc. (―PRC‖). PRC holds its races on days when the Company does
not hold its own races. MJC and PRC share the use of most of the OTBs they have established during their race days.
Hence, there exists a healthy competition in the racing industry.

                                                           MJC                            PRC

              Racetrack Facility Location             Carmona, Cavite                Naic, Cavite
              No. of OTB stations                           255                           288

The following presents the income statements of MJC and PRC as of December 31, 2010.

              (in Philippine pesos)                       MJC                              PRC
              Income Statement                                  As of December 31, 2010
              Club races                                       297,239,492                   309,711,523
              Real estate                                      148,383,065                      14,774,525
              Rent                                             178,919,567                               -
              Others                                                     -                       4,374,359
              TOTAL REVENUES                                   624,542,124                   328,860,407
              TOTAL COST OF SALES
              AND SERVICES                                     375,310,616                   371,913,581
              GROSS PROFIT                                     249,231,508                   (43,053,174)
              EBITDA                                            68,348,225                      37,798,415
              EBIT                                              68,348,225                   (14,351,658)
              INCOME (LOSS) BEFORE
              INCOME TAX                                        26,507,722                   (43,053,174)
              NET INCOME/(LOSS)                                 22,892,248                   (33,941,877)


              Industry Ratios                             MJC                          PRC
              Profitability                                      As of December 31, 2010
              Revenue Growth Rate                              -16.5%                     -2.7%
              Gross Profit Margin                              39.9%                     -13.1%
              EBITDA Margin                                    10.9%                     11.5%
              Net Income Margin                                3.7%                       -10.3%
              Return on Equity                                 1.8%                        -2.8%




                                                     Page 46
Below presents the financial condition of MJC and PRC as of December 31, 2010:

             (in Philippine pesos)                                 MJC                       PRC
             Balance Sheet                                              As of December 31, 2010
             Total Current Assets                                  773,970,283                  90,939,365
             Total Noncurrent Assets                             2,645,215,055               1,882,361,262
             Total Assets                                        3,419,185,338               1,973,300,627
             Total Current Liabilities                             816,840,225                 306,327,360
             Total Noncurrent Liabilities                          441,004,962                 452,031,324
             Total Liabilities                                   1,257,845,187                 758,358,684
             Total Equity                                        2,161,340,151               1,214,941,943


             Industry Ratios                                      MJC                       PRC
             Liquidity                                                  As of December 31, 2010
             Current Ratio                                         0.95                      0.30
             Current Assets/Total Assets                           0.23                      0.05
             Interest Coverage Ratio                               1.63                     (0.50)


             Solvency
             Total Liabilities to Total Equity                     0.58                     0.62
                             *
             Debt to Equity                                    0.20                         0.23
            *Considered only interest bearing loans and borrowings.

    Market Information
    (as of May 3, 2011)


                                                  Market
                  2010 Net         %age            Cap.     Current
                   Income         Change         (in PBn)    Price        PBV (x)   PER (x)          BVPS     EPS

      MJC         22,892,248         -44.50%         2.00        2.03        0.81      76.48           2.51   0.03
      PRC         -33,941,877        -20.41%         3.30        5.30        2.55      na              2.07    na




                                                       Page 47
REAL ESTATE INDUSTRY

Competition

Real Estate development and selling is very competitive. The Company believes that its strength lie in its partnership
with leading property developers such as Ayala Land, Inc. and SM Prime Holdings. It is involved in both commercial
and residential properties that cater to the middle-income and high-end market segments.

For commercial and office rental properties, major competitors include Ayala Land, Robinsons Land, AIG Group,
and RCBC. For BPO office buildings, the industry players are Ayala Land, Megaworld and Robinsons Land.

As for the middle-income/affordable housing business, the market is dominated by the likes of Ayala Land, SM
Development Corp, Megaworld, Filinvest Land and DMCI Homes. While for residential lots and condominium sales,
key competitors are Ayala Land, Megaworld and Fil-Estate Land.

Industry

The real estate industry is just now recovering from the effects of the 1997 Asian financial crisis that brought the
Philippine Real Estate sector into a long swoon. The current property boom indicates that the industry has awakened
from the slumber and is now on a steady climb.

The residential and commercial/office and segments of the Philippine real estate industry have shown remarkable
year-on-year growth in terms of the number of development projects, as well as sales. The promising outlook for the
residential sector is fuelled by rising incomes due to the steady rise in the Philippine economy for the past several
years, as well as massive inflows from overseas Filipino workers It can also be noted that the increasing number of
expatriates in the country have contributed to the demand for such residential facilities.

Office Market

The positive outlook for the commercial/office sector is driven by the upsurge in the number of Business Process
Outsourcing (BPO) companies that are setting-up offices in the Philippines. The employment and income boom
generated by these companies in turn fuel a consumer boom that has resulted in the take-up of more commercial
spaces.

Signs of leveling off in the office market are also becoming more apparent. This was supported by reports from CB
Richard Ellis stating that there was no significant change in rents for the different districts with the exception of the
CBD and the Fort Bonifacio District which both registered a relatively negligible decrease. Tenant movements were
noticed during the period but can be considered negligible as well. The situation was seen to even out as the increase
in vacancy in some districts was offset by the decrease in the others. Further contributing to the stability of the market
was that no turnover of new office space was reported during the recent months.

The office market is seen leveling off as indicated by the current office rental levels. Vacancy is likewise seen to level
off even as the new office spaces become available in the market.

                      DISTRICT                            RENTS                    VACANCY
                      Makati CBD                          Php792 psm/mo            10.52%
                      Ortigas Center                      Php555 psm/mo            3.07%
                      Quezon City                         Php476 psm/mo            12.69%
                      Alabang Business District           Php481 psm/mo            10.90%
                      Fort Bonifacio                      Php625 psm/mo            7.63%
                   Source: CB Richard Ellis

The BPO sector will still continue to be the main driver of the office market and that situation is not seen to change
anytime soon. As a result, headcounts for workers in the BPO sector are still expected to increase in the few years to

                                                        Page 48
come as MNCs continue to outsource some of their activities to stay afloat. This will mean additional space
requirements in the periods to come.

We can also expect some buildings to come on stream within the next several months, most of which will be in the
Fort Bonifacio District. This will be a welcome development especially for the expanding BPO industry. The lack of
large bulk office spaces with large floor plates in the Fort Bonifacio district will prompt more office building
constructions in the coming periods.

Additional pressure will be felt by the CBD as the new buildings in the different districts become operational. This
will be more evident in the Fort Bonifacio district which continues to be the top destination for BPO companies.
Lower rents and better fit out offered by these new completions will be hard to pass up on by new tenants as well as
existing cost sensitive tenants in the CBD.

Demand is also shifting outside Metro Manila as office developments in the major cities of the country are also
making some headway. Developers, both major and local, have started construction on new office buildings with
some nearing completion. An active pipeline of office development currently exists with projects set to commence in
the not so distant future.

Residential Market

Very little has changed in the luxury residential condominium market during the past year. The market remained
strong supported by the continued high demand for units in this segment. Expatriates continue to increase as
international business process outsourcing (BPO) companies expand their presence in the country. In the same
manner, MNCs continue to offshore some of their shared services to their offices in the country and along with these
additional expatriates to oversee these activities. This has triggered an increase in housing requirements in a market
which is already in great need of new supply. This trend is expected to continue for the months to come as MNCs
continue to outsource some of their business functions to the country.

Despite the minimal movements in rental rates, there has been an increase in demand from expatriates for this type of
residences. This has prompted luxury residences to be a viable investment. However, there also seems to be a scarcity
of sites in which to construct new development given that there are only two areas in which this would be viable,
Makati CBD and Bonifacio Global City.

                                       District                   Rental Rates
                              Makati CBD                     Php180K – Php220K
                              Rockwell Center                Php160K – Php180K
                              Bonifacio Global City          Php180K – Php220K
                             Source: CB Richard Ellis

                                      District                   Rental Rates
                              Forbes Park                  Php200K – Php750K
                              Dasmariñas Village           Php180K – Php350K
                              Urdaneta Village             Php160K – Php250K
                              Bel Air Village              Php70K – Php180K
                             Source: CB Richard Ellis

In the Makati CBD, securing a location for such a development would be costly and will require securing a site which
currently has an existing structure and demolishing it to make way for the new building. Such was the case with the
two upcoming luxury condominiums, the Raffles Residences and Discovery Primea. In the case of Bonifacio Global
City, the site may be obtained but at a hefty price.

Whichever location is chosen, the project must be carefully managed because of the costs involved as well as the
length of time required to complete the project which is three years at the least.


                                                        Page 49
                                          REGULATORY MATTERS
EMPLOYEES

As of December 31, 2010, the Company has four hundred sixty four (464) raceday employees and one hundred
seventy eight (171) regular employees. The Company does not foresee any special undertaking that will warrant
hiring of additional employees in the next twelve (12) months. All employees are considered significant contributors
to the success of the Company. No special arrangement has been made for the retention of these employees.

CORPORATE GOVERNANCE

The Company‘s platform of corporate governance is anchored on its Manual on Corporate Governance (Manual).
The Manual institutionalizes the principles of good corporate governance in the entire organization. It also lays down
the Company‘s compliance system and identifies the responsibilities of the Board and management in relation to
good corporate governance.

The Company believes that compliance with the principles of good corporate governance begins with the Board of
Directors. It is the board‘s duty and responsibility to foster the long-term success of the company and secure its
sustained competitiveness in a manner consistent with its fiduciary responsibilities, which must be exercised in the
best interests of the Company, and in proper cases, its shareholders.

The corporation‘s Board of Directors is composed of individuals of proven competence, integrity, and probity. These
individuals determine the Company‘s purposes, vision and mission, and strategies to carry out its objectives, ensure
compliance with all relevant laws, regulations and codes of best business practices, adopt a system of internal checks
and balances, and install a process of selection to ensure a mix of competent directors and officers.

Two independent directors (namely, Maria Louisa T. Morales and John Anthony B. Espiritu) sit on the Board. The
Company adopts the definition of Independence in the Securities Regulation Code, and considers as an independent
director as one who, except for his director‘s fees and shareholdings, is independent of management and free from
any business or other relationship which, or could reasonably be perceived to, materially interfere with his exercise of
independent judgment in carrying out his responsibilities as a director in the Company.

The Board is supported in its corporate governance functions by three (3) committees: the Compensation and
Remuneration Committee, the Nomination Committee, and the Audit Committee. The Compensation and
Remuneration Committee is tasked to establish a formal and transparent procedure for developing a policy on
executive remuneration and for fixing the remuneration packages of corporate officers and directors, and provide
oversight over remuneration of senior management and other key personnel ensuring that compensation is consistent
with the Company‘s culture, strategy, and control environment. The Nomination Committee evaluates all candidates
nominated to the Board in accordance with the Manual. The Audit Committee reviews and approves the Company‘s
financial reports, performs oversight financial management functions, and evaluates and approves internal and
external audit plans.

Below are the Committees and their corresponding members:

    Nomination Committee
       Alfonso G. Reyno III                           -         Chairman
       Ma. Luisa T. Reyes                             -         Member
       (Independent Director)
       Jalane U. Tan                                  -         Member
       Ferdinand A. Domingo                           -         Member




                                                          Page 50
    Compensation and Remuneration Committee
       Chairperson      -
       Pedro O. Tan                                   -         Chairman
       Alfonso G. Reyno III                           -         Member
       Mariza Santos-Tan                              -         Member
       John Anthony B. Espiritu                       -         Member
       (Independent Director)

    Audit Committee
       John Anthony B. Espiritu                       -         Chairman
       (Independent Director)
       Jalane U. Tan                                  -         Vice-Chairman
       Mariza Santos-Tan                              -         Member
       Alfonso G. Reyno III                           -         Member
       Derick Wong                                    -         Member


As part of corporate measures to ensure compliance with the principles and policies embodied in the Manual, the
Board of Directors designated Atty. Heather Ezra C. Annang, as the Company‘s Compliance Officer. Attorney
Annang is responsible for, among matters, determining and measuring compliance with the Manual; appearing before
the Philippine SEC upon summons on matters relating to the Manual; identifying, monitoring, and controlling
compliance with corporate governance matters; and recommending to the Board of Directors the review of the
Manual. Attorney Annang works closely with the Board of Directors, top management, and board committees to
evaluate and monitor compliance with the Manual. Specifically, she determines the level of compliance and
accordingly recommends the adoption of measures to improve such compliance. Likewise, the various board
committees perform oversight duties and functions to ensure proper compliance with the Manual and other corporate
policies. The Company also submits governance reports required by the Philippine SEC and the PSE to determine
compliance with their rules and regulations, the Manual, and the Code of Corporate Governance.

In line with the Company‘s aspirations for growth and development, the Company continues to work towards
enhancing its adherence to the principles and best practices of good corporate governance.

CORPORATE SOCIAL RESPONSIBILITY

The Company manifests and demonstrates its responsibility to society in various ways. In aspiring to be a world-class
company, impact to society and the environment is an important element in the way the Company conducts its
business.

INSURANCE

It is the Company‘s policy to obtain insurance coverage for its operating assets and employees that is in line with
industry standards and good business practices.

DIRECTOR’S AND OFFICERS’ LIABILITY INSURANCE

The Company has a Directors‘ and Officers‘ Liability Insurance which provides financial protection for the directors
and officers of the Company in the event they are sued in conjunction with the performance of their duties as they
relate to the Company.

EMPLOYEE INSURANCE

The Company provides its employees with group accident insurance and medical hospitalization insurance coverage
in line with good business practice and in accordance with Philippine standards.




                                                          Page 51
INTELLECTUAL PROPERTY

The Company has exclusive rights to its corporate logo. Management believes that the Company‘s business as a
whole is not materially dependent on such mark or on any other intellectual property.


LEGAL PROCEEDINGS

Neither the Company nor its subsidiaries are involved in any litigation that affects or will affect its interests. It has
neither any knowledge of any litigation, present or contemplated, against the Company.


REGULATORY MATTERS ON REAL ESTATE BUSINESS

The Housing and Land Use Regulatory Board (HLURB) is one of the government agencies which play a major role
in enhancing and reinforcing rational housing and real estate service delivery via a triad of strategies namely: policy,
planning and regulation. Thus, it promulgates rules and regulations wherein owners and developers take
responsibilities and obligations in completing the project in accordance with the approved development plan.

Accordingly, the HLURB regulates the Corporation‘s real estate projects in joint venture with leading property
developers and issues the corresponding License to Sell and Development Permits to projects such as the Avida
Towers, Celadon Residences and Canyon Ranch.


REGULATORY MATTER ON HORSE RACING BUSINESS

The racing operations of the Corporation are subject to government regulations of government entities such as the
Games and Amusement Board (GAB) and the Philippine Racing Commission (Philracom). The GAB regulates the
aspects of gaming and betting. It approves the types of betting, the system and types of bet of races conducted by the
Corporation in accordance with its franchise.

Initially, GAB was vested with supervisory authority over three (3) professional sports, namely, Jai Alai, Boxing and
Wrestling and Racing. However, in 1974, the regulatory and supervisory authority and functions of GAB over
horseracing, except for the betting aspect thereof, were removed from GAB and transferred to the Philracom, which
was created pursuant to Presidential Decree No. 420 issued on 20 March 1974.

Section 8 of Presidential Decree No. 420 states as follows: ―The functions of the Games and Amusements Board with
respect to horseracing, except those related to the supervision and regulation of betting in horseracing as provided for
in Sections 6, 11, 15, 18 and 24 of Republic Act 309, as amended, are hereby transferred to the Commission.‖
Moreover, under Section 11 of the same law, ―the one percentum of the gross receipts derived from the total sale of
tickets for pari mutuel races, shall constitute as a special fund for the use of Games and Amusements Board.‖

One the one hand, Philracom is the government body that regulates the components of the race such as the horses,
jockeys and the conduct of horse racing itself.     Also, Presidential Decree No. 420 grants Philracom one
percentum of the gross receipts derived from the total sale of tickets for daily double, liave, forecast, jackpot and
similar events as special fund.

This source of funding has been embodied in MJC‘s franchise. Under Section 8 of MCJI‘s Charter, the distribution
of total wager funds or gross receipts from the sale of betting tickets is as follows: (a) eight two percent (82%) among
the holders of winning tickets whether from pari mutual daily double, forecast, liave, quenelle, trifecta or any other
manner of betting; (b) eight and one-half percent (8 ½%) to be retained by the grantee as its commission/fee for
conducting the horse races; (c) eight and one-half percent (8 ½%) for the payment of stakes and prizes of win, place
and show horses and authorized bonus for jockeys; and (d) one percent (1%) for the use of the Philippine Racing
Commission provided that in the case of gross receipts derived from the total sale of pari mutuel races, one percent
                                                          Page 52
(1%) government share shall be set aside for the use of the Games and Amusements Board, to be shared equally with
the Jockeys and Horse Trainers Injury, Disability and Death Compensation Fund.

There is only one other racing club in the Philippines which is the Philippine Racing Club, Inc. (PRCI). As of the
present, both racing entities have existed without the other encroaching substantially with the other‘s revenue.
However, there is competition with respect to the quality of service, number of off-track betting stations as well as
horse prize winnings of the horse owners. MJC does not hold races on those days when PRCI holds its races.




                                                      Page 53
                          MANAGEMENT AND CERTAIN SHAREHOLDERS


NUMBER OF SHARES OUTSTANDING

The Company has an authorized capital stock of P1 billion divided into 1 billion shares with a par value of P1.00 per
share. As of the date of this Prospectus, outstanding shares of the Company consisted of 574,985,318 Common
Shares. See ―Description of Securities‖ on page 29 of this Prospectus.


HOLDERS OF THE COMPANY’S COMMON SHARES

As of December 31, 2010, the Top 20 Stockholders of the Company are as follows:

                                                                                      No. of
       Rank     Stockholder Name                                                      Shares         %age
          1     PCD Nominee Corporation-Filipino                                    78,719,903      17.49%
          2     ARCO Equities, Inc.                                                 71,263,245      15.84%
          3     Alfonso R. Reyno Jr.                                                47,581,487      10.57%
          4     Exequiel D. Robles                                                  38,692,060      8.60%
          5     Guilbert Wong Chun Long                                             36,752,041      8.17%
          6     Maritess R. Calzado                                                 29,473,671      6.55%
          7     Avecshares Asia Inc.                                                18,850,000      4.19%
          8     Edgardo B. Espiritu                                                 16,252,976      3.61%
          9     F. Arthur L. Villaraza                                              11,938,496      2.65%
         10     JUT Holdings, Inc.                                                  7,816,500       1.74%
         11     Tormil Realty & Development                                         7,197,082       1.60%
         12     Dante and/or Maria Luisa Morales                                    6,903,125       1.53%
         13     Martin or Dulce or Candice Cepeda                                   5,555,178       1.23%
         14     Derwin Wong                                                         5,040,000       1.12%
         15     PCD Nominee Corporation-Non-Filipino                                5,031,034       1.12%
         16     Betty Wong                                                          4,582,125       1.02%
         17     Santiago S. Cua Jr.                                                 3,811,041       0.85%
         18     Rosendo G. Guevara                                                  2,886,627       0.64%
         19     Ruddy C. Tan                                                        2,870,250       0.64%
         20     Caridad Say                                                         2,790,000       0.62%
                Subtotal                                                           404,006,841      89.78%
                Others                                                              45,978,477      10.22%
                Total                                                              449,985,318     100.00%



BOARD OF DIRECTORS

The Board of Directors holds regular meetings at such dates as may be fixed by resolution, to be updated on the
business and to be consulted for material decisions of the Company. Directors have a term of one year, subject to
re-election. A director who was elected to fill any vacancy holds office only for the unexpired term of his
predecessor.




                                                      Page 54
DIRECTORS AND EXECUTIVE OFFFICERS:

Following are the names, ages, positions and period of services of all directors and executive officers:

          POSITION                         NAME                CITIZENSHIP          AGE        TERM OF      PERIOD
                                                                                                OFFICE     SERVED
 Chairman & President            Alfonso R. Reyno, Jr.             Filipino           65          1        1997-2010
 Vice Chairman                   Mariza Santos-Tan                 Filipino           51          1        1997-2010
 Director & EVP/COO              Alfonso G. Reyno III              Filipino           40          1        1997-2010
 Director & Treasurer            Pedro O. Tan                      Filipino           73          1        1997-2010
 Director (Independent)          John Anthony B. Espiritu          Filipino           46          1        2008-2010
 Director                        Derick Wong                       Filipino           31          1        2003-2010
 Director                        Jalane U. Tan                     Filipino           30          1          2010
 Director                        Christopher G. Reyno              Filipino           34          1        2002-2010
 Director (Independent)          Ma. Luisa T. Morales              Filipino           66          1        2002-2009
 Director/Vice President for     Patrick G. Reyno                  Filipino           39          1          2010
 Strategic Planning and
 Business Development
 Director, General Counsel       Ferdinand A. Domingo              Filipino           56            1      1995-2009
 and Corporate Secretary

The members of the Board of Directors are elected at the general meeting of stockholders, who shall hold office for
the term of one (1) year or until their successors shall have been elected and qualified.

The Management Committee members and other Officers of the Company, unless removed by the Board of
Directors, shall serve as such until their successors are elected or appointed.

The business experience of each of the Company’s directors, officers, and members of senior management covering
the past five years are described below:


DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

ALFONSO R. REYNO, JR.

Filipino, was born on July 8, 1944. He graduated from the University of the Philippines in 1965 with a degree of
Bachelor of Arts, Political Science and finished his Bachelor of Laws degree in the same school in 1969. He
formerly occupied the following government positions: Deputy Minister of Defense (1984-1986), Member of the
Batasang Pambansa (1984-1986), Vice Governor of Cagayan (1980-1984), Member of the Board of Trustees of the
Cagayan State University (1979-1986). He is affiliated with and occupies the following positions in various
institutions, during the last five (5) years viz: Chairman and President, Manila Jockey Club, Inc. (March 1, 1997 to
Present),; Chairman and President, Arco Management & Development Corporation, Arco Equities, Inc., Arco
Ventures, Inc. (1995 to Present), Bonaventure Development Corporation (1983 to Present); Managing Partner,
Reyno Tiu Domingo & Santos Law Offices (1976 to Present), Chairman and President of MJC Investments
Corporation (2009 to present).

ALFONSO G. REYNO III

Filipino, was born on March 9, 1970, is a lawyer by profession. He is affiliated with and occupies the following
position in various institutions in the last five (5) years, viz: President, Arco Ventures, Inc. (1995 to Present),
Director, Arco Management & Development Corporation, Bonaventure Development Corporation. Arco Equities,
Inc. (1995 to present), Junior Associate, ACCRA Law Offices (1997-1999), Junior Partner, Reyno Tiu Domingo &
Santos Law Offices (1999 to present),Director of MJC Investments Corporation (2009 to present).



                                                       Page 55
MARIZA SANTOS-TAN

Filipino, was born on May 29, 1958 at Quezon City. She graduated from the San Sebastian College with a degree,
Bachelor of Science in Commerce. At present, she is affiliated with and occupies the following positions in various
institutions in the last five (5) years, viz: Director, Consolidated Insurance Co., Inc.; Unioil Resources and Holdings
Co., Inc.; Vice Chairman and Director, Manila Jockey Club, Inc.; Vice-President and Corporate Secretary, Sta. Lucia
Realty Development, Inc.; Director and Corporate Secretary, Sta. Lucia East Grandmall and Orchard Golf and
Country Club; President, Royale Tagaytay Golf and Country Club. She is currently a Vice Chairman of MJC
Investments Corporation.


PEDRO O. TAN

Filipino, was born on November 13, 1937. He graduated from the Far Eastern University with a degree of Bachelor
of Science in Business Administration. He is affiliated with and occupies the following positions in various
institutions in the last five (5) years, viz: President, General Manager and Director, Triplex Enterprises, Inc. and
Gibson Manufacturing Co., Inc.; President and Director, Burlington Philippines Industries, Inc., Evergrow Industries,
Inc., and HPT Industries, Inc.; Treasurer and Director, Zipporah Holding Corporation, Blue Ridge Mineral
Corporation, Highland Securities Philippines and Liberty Telecoms Holdings, Inc. Currently a director of MJC
Investments Corporation


DERICK WONG

Filipino, was born on July 20, 1979 at Manila. He graduated from the Oxford Brookes University in Oxford, United
Kingdom with a degree of Bachelor of Arts in Business Economics. In the last five (5) years, he had worked with
Allied Pickfords Hong Kong Limited as Business Development Manager in 2005-2009. Settlements (Divisional
Head) at Thing-On Securities Limited in 2009 up to present. A non-executive director of Shenzhen Hi-Tech
Holdings Limited and director and member of the audit committee of MJC Investments Corporation.


JOHN ANTHONY B. ESPIRITU

Filipino, was born on July 12, 1963. He graduated from University of Michigan, Ann Arbon Michigan, United States
with a degree of Bachelor of Business Administration in May 1985. He also obtained from said university and
masteral degree in Business Administration in May 1990. He occupied and is currently holding the following
position during the last five (5) year: President/Director of EBE Land, Inc. (January 1997 to present); Chairman
/Publisher of the Philippine news, San Francisco, California (November 2004 to present); Director of Asia-Pacific
Medical Corp of Saipan, Northern Marianas Islands (June 1998 to present). He is currently an independent director
of MJC.


PATRICK G. REYNO

Filipino, was born on May 5, 1971. He graduated from Harvard University in 1991 with a degree of A.B. Economics
and Social Studies Magna Cum Laude. In 1997, he received a Diploma in French Languages and Civilization at the
University of Paris. In 2006, he obtained his Masters in Business Administration with Honors from Columbia
University. He worked at Morgan Stanley‘s Investment Banking Division in Hongkong as a Corporate Finance
Analyst form 1994 to 1996, and SGV‘s Corporate Finance Department from 1993-1994, and at Dharmala Securities
Hongkong from 1991 to 1993. During the last five (5) years,he concurrently hold the positions of Director and Vice
President for Strategic Planning and Business Development at the Manila Jockey Club, Inc.




                                                       Page 56
CHRISTOPHER G. REYNO

Filipino, was born on October 30, 1975. He graduated from De La Salle University in 1997 with a degree of Bachelor
of Arts major in Liberal Arts. He is affiliated with and occupies the following positions in various institutions during
the last five years, viz: Director, ARCO Management & Development Corporation; Director ARCO Ventures, Inc.;
Director, ARCO Equities, Inc.; Director, Bonaventure Development Corporation and Technical Assistant, Board of
Directors of the Philippine National Bank.


MA. LUISA TORRES-MORALES

Filipino, was born on June 21, 1944. She graduated from Assumption College with a Bachelor of Arts degree in
Commerce. In the last five (5) years, she is affiliated with and is a Director of Tormil Realty Corporation. Currently a
director of MJC Investments Corporation.


JALANE U. TAN

Filipino, was born on January 25, 1981. She graduated from Pitzer College, Claremont, California with a degree of
Bachelor of Arts Legal Studies and Philosophy in 2003. She took a Juris Doctor New England Law in Boston,
Massachusetts in 2008. Passed the Washington State Bar in 2008 and New York State Bar in 2009. In the last five
(5) years, she has worked with UNDP Hanoi Vietnam; Intern – Jun Ze Jun Law Offices, Beijing, China in 2006;
Intern – Asian Pacific American Dispute Resolution Center in Los Angeles, California in 2006. Massachusetts
Appellate Tax Board in Boston, MA. She is currently a Commodity Trader and director of MJC Investments
Corporation.


FERDINAND A. DOMINGO

Filipino, was born on June 22, 1952. He graduated from the University of the Philippines in 1972 with a degree of
Bachelor of Arts and Political Science and finished his Bachelor of Laws degree in the same school in 1977. In the
last five (5) years or more he is affiliated with and occupies the following positions in various institutions, viz:
Senior Partner, Reyno Tiu Domingo & Santos Law Offices (September 1, 1991 to Present); President, Aries Prime
Resources, Inc., (July 10, 2003 to Present); Director, CICI General Insurance Corporation (May 2001 to Present);
Director, WINBANK, Inc. (October 2001 to Present); Member, Board of Trustees, College of St. Lawrence-Balagtas,
Bulacan (May 1993 to Present); Director, United Overseas Bank ( May 2001 to July 2002); Corporate Secretary,
Westmont Bank (May 17, 2000 to January 16, 2004); Corporate Secretary, Planters Products, Inc. (October 20, 1998
to January 2001); Director, PNB Holdings Ltd. and PNB Hongkong Branch (1998 to February 2000); Bank Attorney,
Philippine National Bank (1978-1984; Corporate Secretary, Philippine Racing Club, Inc. (1994-1997); Legal Counsel
and Corporate Secretary, National Steel Corporation (May 3, 1995 to March 1997).


INDEPENDENT DIRECTORS

John Anthony B. Espiritu and Ma. Luisa T. Morales are the independent director of the Company. Director Espiritu
was appointed as Director after Rogelio B. Espiritu resigned. They independent of management and free from any
business or other relationship where it could, or could reasonably be perceived to mutually interfere with their
exercise of independent judgement to carry out their responsibilities as directors.



FAMILY RELATIONSHIPS
Alfonso G. Reyno III, Patrick G. Reyno and Christopher G. Reyno are the sons of Alfonso R. Reyno, Jr. Ma. Luisa
Torres Morales is the mother-in-law of Alfonso G. Reyno III.


                                                       Page 57
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of the directors are involved in any bankruptcy petition, or was convicted by final judgment of any criminal
offense, or subject to any order, judgment or decree or has violated a Securities or Commodities Law.



DESCRIPTION OF ANY MATERIAL PENDING LEGAL PROCEEDING TO WHICH THE COMPANY IS
A PARTY

As of December 31, 2010, there are pending claims and legal actions by third parties against or involving the
Company arising from the normal course of business. In the opinion of the Company‘s management and its counsel,
liabilities arising from these claims, if any, would not have material effect on the Company and any liability or loss
arising therefrom would be taken up when final resolution of the claims and actions are determined.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In the normal course of business, the Company has the following significant transactions with its subsidiaries and key
management personnel:

    a.   Non-interest bearing advances to SLRDC amounting to P1.045 million as of December 31, 2010 which are
         due and demandable.

    b.   Non-interest bearing advances to SLLPHI amounting to P525, 985 in 2010 which are due and demandable.
         The outstanding liability to SLLPHI amount to P4.2 million as of December 31, 2010.

    c.   Non-interest bearing advances to Biohitech amounting to P17.4 million as of December 31, 2010 which are
         due and demandable.

    d.   Non-interest bearing advances to MIC amounting to P3.7 million as of December 31, 2010 which are due
         and demandable. In 2010, MIC extended an P18.0 million loan to the Company, which was fully paid as of
         December 31, 2010. Interest expense on said loan amounted to P1.45 million.

    e.   Non-interest bearing advances to MJC Forex amounting to P5,720 as of December 31, 2010 which is
         currently due and demandable.

    f.   Advances to NVTL, a special purpose entity, amounting to P23.97 million as of December 31, 2010 was
         extended to finance the purchase of slot machines for use in the casino operations and for NVTL‘s
         operational requirements. The Company receives the proceeds from casino operations from PAGCOR and
         remits the same subsequently. In 2010, the Company offsets its advances to NVTL with the outstanding
         balance of Due to NVTL and imposed a 9% interest on the outstanding balance.

    g.   Advances to Techsystems amounting to 400,987 in 2010. Advances to Techsystems are currently due and
         demandable, non-interest bearing unsecured and payable in cash.

The foregoing transactions were approved by the respective board of directors of the Company and the said
subsidiaries and associates.




                                                       Page 58
RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability, directly, or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions. Parties are also
considered to be related if they are subject to common control or common significant influence.

In the normal course of business, the Group has transactions and account balances with related parties as follows:

         a.      Interest-bearing and non-interest bearing advances from/to associate, affiliates, and stockholder:

                                                                                            Interest Income                       Interest Expense
                                                                                                     on Due                                 on Due
                                                                               Due from        from Related             Due to           to Related
              Related Party               Relationship                   Related Parties1            Parties2   Related Parties             Parties3
         Techsystems                       Associate         2010              =
                                                                               P400,987                   P–
                                                                                                          =                 P–
                                                                                                                            =                    P–
                                                                                                                                                 =
                                                             2009                164,525


         Silang Prime Properties
            Corporation (SPPC)              Affiliate        2010            19,241,029           2,017,976                  –                    –
                                                             2009
                                                             2008                      –                   –                –                     –
         Westmont    Investment             Affiliate        2010                      –                   –       15,202,233
         Corporation
         1
              Included in the “Receivables” account (see Note 7)
         2
               Included in the “Interest income” account (see Note 21)
         3
               Included in the “Finance costs” account (see Note 22)


         b.      Advances to Techsystems are currently due and demandable and non-interest bearing.

         c.      MJIC extended interest-bearing advances to its affiliate, SPPC, which is covered by various promissory
                 notes with maturity period of one year and interest rate of 12% interest per annum. In 2010, the
                 Company waived the interest on the loan receivable from SPPC.

         d.      MJIC obtained loans from various creditors through WINCORP in 1997 to finance the acquisition of
                 the parcel of land located in Tanza, Cavite. The loan is secured by the related property with carrying
                 value of P37.7 million as of December 31, 2010. Notes payable to WINCORP carries various interest
                 rates ranging from, 12% to 17% which are due and demandable. WINCORP waived accrual of interest
                 from March 2000 and granted discounts on all subsequent principal repayments. In 2010 and 2009, a
                 partial settlement was made on the notes payable (including the accrued interest) amounting to P1.0
                 million and P6.4 million, respectively. No additional loan was obtained in 2010 and 2009.

         e.      In 2009, Biohitech obtained advances from its affiliate, BHK, to finance the construction of the building
                 housing the fermentation machine and for the importation of additional machines. The advances are due
                 and demandable and non-interest bearing. The conversion of these advances into share of stock of
                 Biohitech is still subject for approval by the BOD and has not been finalized as of April 27, 2011.

         f.      Advances from a stockholder bear an average interest rate of 10% in 2009 and 2008

         g.      The Parent Company has a lease agreement with Arco Management and Development Corporation, an
                 affiliate, in the lease of office space and four parking lots

         h.      The Parent Company grants salary loans and advances to its employees payable through salary
                 deductions. The loans bear an average interest rate of 10.5% in 2010 and 2009, Compensation of key
                 management         personnel       of       the        Parent        Company         amounted           to
                 =              =              =                 =
                 P31.9 million, P26.7 million, P26.5 million and P24.5 million in 2010, 2009, and 2008, respectively.
                 The Company has no standard arrangement with regards to the remuneration of its directors. In 2010,
                                                             =             =                 =
                 2009, and 2008, the BOD received a total of P1.3 million, P3.0 million, and P0.8 million, respectively.


                                                                          Page 59
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

      Position                Name                                                Annual Compensation
                                                               2009                        2010                                  2011
                                                                                                                                 (est.)
                                                      Salary           Bonus          Salary         Bonus             Salary             Bonus
Chairman & President   Alfonso R. Reyno, Jr.          P2,030,770       P169,230      P2,400,000      P200,000         P2,400,000          P200,000
Vice Chairman          Mariza Santos-Tan                775,385          64,615           936,000          78,000        936,000            78,000
Director, EVP & COO    Alfonso G. Reyno III             863,076          71,923       1,920,000        160,000         1,920,000           160,000
Director & Treasurer   Pedro O. Tan                     710,770          59,230           936,000          78,000        936,000            78,000


All directors are entitled to per diem of P3,500.00-10,000.00 for their attendance at each meeting of the Board.
Likewise, the President, Executive Vice President and Treasurer shall each be entitled to reimbursement of
transportation, communication and representation expenses in the amount of P5,000.00 monthly. There are no
contracts with the named executive officers for any compensation plan or arrangement that will result from the
resignation, retirement or any other termination of employment of said executive officers. There are no outstanding
warrants or options being held by the named executive officers or directors and neither are there any change in
control arrangements made with the named executive officers and the directors. Thus, there is compliance with SEC
Memorandum Circular No. 8 Series of 2004.



AS A GROUP

                                                                       Annual Compensation
                                               2009                            2010                                     2011 (est.)
                                  Salary                Bonus           Salary      Bonus                           Salary        Bonus
Director & Officers                P5,280,001              P44,538           P3,360,000         P280,000            P3,360,000            P280,000




EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT

There are no existing employment contracts with executive officers. There is also no arrangement for compensation
to be received from the Company in the event of a change of control of the Company.




                                                                   Page 60
         SECURITY OWNERSHIP OF CERTAIN RECORD AND BENEFICIAL OWNERS

The following table sets forth information with respect to a record or beneficial owner directly or indirectly owning
more than 5% of the Company‘s Capital Stock as of June 30, 2010.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT

         a.          Security ownership of Certain Record and Beneficial Owners as of December 31, 2010:

 Title of                                                Name of Beneficial   Citizenship   No. of Shares     Percent of
  Class          Name and Address of Owner and               Owner and                          Held            Class
                 Relationship with Issuer                 Relationship with
                                                           Record Owner
Common           PCD Nominee Corporation                                       Filipino        78,719,903        17.49%
                 G/F, Makati Stock Exchange Bldg.                                                   (r) (d)
                 6767 Ayala Avenue, Makati City
Common           ARCO Equities, Inc.                                           Filipino        71,263,245        15.84%
                 12/F, Strata 100 Building                                                          (r) (d)
                 F. Ortigas Jr., Ortigas Center, Pasig
                 City
Common           Reyno, Alfonso R. Jr.                                         Filipino        47,581,487        10.57%
                 12/F, Strata 100 Building                                                          (r) (d)
                 F. Ortigas Jr., Ortigas Center, Pasig
                 City
Common           Robles, Exequiel D.                                           Filipino        38,692,060         8.60%
                 Sta. Lucia Realty East Grandmall                                                   (r) (d)
                 3/F, Bldg. 2, Marcos Highway cor.
                 Felix Avenue, Cainta, Rizal
Common           Wong Chung Long, Gilbert                                      Filipino        36,752,041         8.16%
                 22/F, Pearlbank Center                                                             (r) (d)
                 146 Valero Street
                 Salcedo Village, Makati City
Common        Calzado, Maritess                                                Filipino        29,473,671         6.55%
              12/F, Strata 100 Building                                                             (r) (d)
              F. Ortigas Jr., Ortigas Center
              Pasig City
r - Record
b - Beneficial
d - Direct
I - Indirect

There is no actual natural or judicial person that directs the voting or disposition of the shares held by the PCD
Nominee Corporation. Further, there is no beneficial owner of the shares held by the PCD Nominee Corporation that
holds or can vote on 5% or more of the Company‘s voting securities. Atty. Alfonso R. Reyno, Jr., pursuant to a
proxy, is the person authorized to vote for the shares held by ARCO Equities, Inc.




                                                         Page 61
         (b)     Security Ownership of Directors as of December 31, 2010

    TITLE OF           NAME OF BENEFICIAL                 AMOUNT AND          CITIZENS    PERCENT OF
     CLASS                  OWNER                          NATURE OF             HIP        CLASS
                                                           BENEFICIAL
                                                           OWNERSHIP

     Common        Reyno, Alfonso R. Jr.                   47,581,487 (d)      Filipino     10.57%
                   12/F, Strata 100 Building
                   F. Ortigas Jr., Ortigas Center
                   Pasig City
     Common        Tan, Pedro O.                              1,673,162 (d)    Filipino     0.37%
                   2255 Pasong Tamo Street
                   Makati City
     Common        Reyno, Alfonso G. III                       692,449 (d)     Filipino     0.15%
                   12/F, Strata 100 Building
                   F. Ortigas Jr., Ortigas Center
                   Pasig City
     Common        Wong, Derick                                   2,400 (d)    Filipino     0.00%
                   1136 Soler Street
                   Binondo, Manila
     Common        Santos-Tan, Mariza                             3,745 (d)    Filipino     0.00%
                   Cluster 351 A Alexandra Cond.
                   Meralco Avenue, Pasig City
     Common        Reyno, Christopher G.                       345,360 (d)     Filipino     0.07%
                   12/F, Strata 100 Building
                   F. Ortigas Jr., Ortigas Center
                   Pasig City
     Common        Reyno, Patrick G.                           167,000 (d)     Filipino     0.03%
                   12/F, Strata 100 Building
                   F. Ortigas Jr., Ortigas Center
                   Pasig City
     Common        Torres-Morales, Ma. Luisa                         15 (d)    Filipino     0.00%
                   No. 3 Pili Road
                   South Forbes Park, Makati City
     Common        Espiritu, John Anthony                             1 (d)    Filipino     0.00%
                   17 Penthouse B, Ritz Towers,
                   Ayala Ave.,
                   Makati City
     Common        Tan, Jalane U.                                     1 (d)    Filipino     0.00%
                   146 Valero St., The Pearlbank
                   Centre
                    Salcedo Village, Makati City
     Common        Ferdinand A. Domingo                  2,559,907 (r) (d)     Filipino     0.56%
                   12/F, Strata 100 Building
                   F. Ortigas Jr., Ortigas Center
                   Pasig City
r - Record
b - Beneficial
d - Direct
I - Indirect




                                                    Page 62
         (c)      Security Ownership of Management as of December 31, 2010

    TITLE OF            NAME OF BENEFICIAL                  AMOUNT AND              CITIZENS         PERCENT OF
     CLASS                   OWNER                           NATURE OF                 HIP             CLASS
                                                             BENEFICIAL
                                                             OWNERSHIP

    Common          Alfonso R. Reyno, Jr.                 47,581,487 (r) (d)          Filipino          10.57%
                       Chairman and President
    Common          Mariza Santos-Tan                             3,745 (r) (d)       Filipino           0.00%
                       Vice Chairman
    Common          Alfonso G. Reyno III                        692,449 (r) (d)       Filipino           0.15%
                       Executive Vice President/COO
    Common          Pedro O. Tan                           1,673,162 (r) (d)          Filipino           0.37%
                       Treasurer
    Common          Reyno, Patrick G.                           167,000 (r) (d)       Filipino           0.00%
                      VP for Strategic Planning and
                      Business Development
    Common          Nesror N. Ubalde                                  -               Filipino             -
                      Chief Finance Officer
    Common          Ferdinand A. Domingo                    2,559,907 (r) (d)         Filipino           0.56%
                       General Counsel & Corporate
                       Secretary
 r - Record
 b - Beneficial
 d - Direct
 I - Indirect

         (d)      Security ownership as a Group as of December 31, 2010.

    TITLE OF                     NAME                      AMOUNT AND             CITIZENS        PERCENT OF
     CLASS                                                  NATURE OF                HIP            CLASS
                                                            BENEFICIAL
                                                            OWNERSHIP

    Common          Directors & Officers                        53,025,527          Filipino          11.78%



VOTING TRUST

No voting trust or similar agreement was signed which will give any party more than 5% of the outstanding capital
stock.




                                                      Page 63
                             MATERIAL CONTRACTS AND AGREEMENTS
The following are summaries of the material terms of the principal contracts related to the Company’s horse racing
operations real estate development. Accordingly, the following summaries are subject to the full text of each contract.

Memorandum of Agreement with Aries Prime Resources, Inc.

Pursuant to the approval of MJC‘s stockholders of the spin-off of the non-core assets of MJC to a qualified listed
company in order to rationalize those relating to real estate development, MJC entered into a Memorandum of Agreement
(―MOA‖) with Aries Prime Resources Inc. (―Aries‖, now MJC Investments Corporation) on July 24, 2008, for the transfer
of MJC‘s non-core assets to the latter under a property-for-share exchange subject to the following basic conditions:

    1.   The exchange shall be at the ratio of one (1) share of stock of Aries for every One Peso (P1.00) value of the MJC
         assets;

    2.   The property-for-swap exchange shall result in the acquisition by MJC of at least ninety percent (90%) of the
         outstanding capital stock of Aries;

    3.   Aries shall have a clean balance sheet; and

    4.   There is no material relationship between Aries and MJC.

The exchange ratio of one (1) share of stock of Aries for every P1.00 value of the MJC assets was agreed upon by the
parties on the basis that the MJC asset shall be the only asset of Aries after the swap transaction. The value of the
property to be swapped with the shares of Aries was appraised by Cuervo Appraisers, Inc. The latter used the Sales
Comparison Approach and the Anticipated Development Approach in its appraisal.

To clean-up its balance sheet, Aries shall undertake the following pursuant to Section 5 of the MOA states:

         “xxx

         5.1 ARIES shall cause the removal from its books of all assets and liabilities prior to the execution
         of the Deed of Exchange to be implemented as follows:

             5.1.1 ARIES shall cause the payment of its existing liabilities in the amount of P14.2 million.

             5.1.2 ARIES shall cause the assignment of its marketable securities and receivables to its
             stockholders.

             5.1.3 ARIES shall spin off its 5-hectare property in Tanza, Cavite to a new corporation
             (“NEWCO”) to be organized by ARIES and assign the shares of the capital stock of NEWCO
             to the stockholders of ARIES.xxx.”


Agreements with Ayala Land, Inc.
       Memorandum of Agreement dated July 18, 2007
       Amendment Agreement to the Memorandum of Agreement dated November 9, 2007
       Joint Development Agreement dated July 18, 2007
       Amendment Agreement to the Joint Development Agreement dated November 9, 2007
       Joint Venture Agreement dated December 12, 2008
       Lease and Marketing Management Agreement dated December 12, 2008
       Lease Agreement dated December 12, 2008

The Project subject of the Agreements of the Company with Ayala Land, Inc. (―ALI‖) is the Building Complex
covering two (2) parcels of land with aggregate area of 11,611.30 square meters located at Sta. Cruz, Manila. The
                                                       Page 64
parties agreed to construct and develop the Project into a residential complex consisting of condominium buildings
and townhouses and their respective utilities and facilities for the use and benefit of the residents or occupants of such
buildings or townhouses.

Under the Agreements of the Company with ALI, the parties agreed to enter into the following transactions:

    1.   ALI and MJC entered into the Joint Development Agreement whereby:
         (i) MJC will be responsible for the construction, development and operation of the Building Complex,
               including the funding thereof and will and operate all the Units within the Building Complex,
         (ii) ALI and MJC will be jointly responsible for the construction, development and operation of the Office
               Buildings, including the funding thereof,
         (iii) MJC will allot the Project Site for the purposes of the Project
         (iv) ALI was appointed as the development manager responsible for overseeing and coordinating the
               performance of all the necessary work for the purpose of planning, construction, and development of the
               Building Complex;

    2.   ALI and MJC entered into a Joint Venture Agreement for the purpose of leasing the Developed Office Units
         as well as administering the common areas.

    3.   Lease Agreement covering the Project Site and the airspace over the Project Site to the extent occupied by
         the Units owned by ALI in the Building Complex;

    4.   Lease and Marketing Management Agreement for the purpose of leasing out pooled Units of ALI and MJC
         in the Building Complex to third parties and to proportionately share in the revenues arising from such
         arrangement. MJC appointed ALI as lease manager for the leasing of the Units in both the Office Buildings
         and Retail Component allocated to it under the Project with overall responsibility for the management of
         office and retail client accounts, lease administration, operations management and handling tenant relations;

Please refer to the discussion on the “Real Estate Development” under the section “Description of Business” of this
Prospectus for further information on the projects subject of the Agreements between MJC and ALI.

Joint Development Agreement with Community Innovations, Inc.

The Joint Development Agreement of MJC with Community Innovations, Inc. (―CII‖) provides for the joint
undertakings of the parties to develop the 52,000 square meter property in Sta. Cruz, Manila into a primarily
residential complex consisting of condominium buildings and townhouses and their respective utilities and facilities
for the use and benefit of the residents and occupants of such buildings or townhouses. MJC agreed to contribute all
of its rights, title, and interest in and to the Project Area and CII in turn has agreed to contribute the cash to finance
and the expertise to implement the development, marketing and sale of condominium or townhouse units in the
Project, in consideration for which MJC and CII shall distribute and allocate between themselves the residential units
resulting from the development of the Project corresponding to their pro-rata interest therein as a return on their
respective contributions, subject to certain terms and conditions.

The residential condominium buildings constructed pursuant to the Joint Development Agreement with Community
Innovations, Inc. are Celadon Park Towers 1 and 2, while the townhouses are Celadon Townhouses. In Celadon
Tower 1, there are a total of 163 units of which 20 units and 9 parking slots are allocated to MJC. It is now 97%
completed and will be ready for turnover by the 3Q of this year. Tower 2 has a total of 407 units with 57 units and 16
parking slots allotted to MJC. Tower 2 is 33% complete and is scheduled for turnover in 2013. For the Celadon
Residences Townhomes, a total of 202 units are 100% complete. MJC shares 90 units of the total. All the
townhouses are now ready for occupancy.




                                                        Page 65
                                              MARKET INFORMATION


The Company‘s Common Shares are traded on the PSE under the symbol ―MJC‖. The Company‘s Common Stock
was first listed on October 11, 1963.

The following table sets out the high and low sales price for the Company‘s Common Shares as reported on the PSE
for the periods indicated:

                    1st Quarter                    2nd Quarter                    3rd Quarter                  4th Quarter
           2010         2009    2008     2010         2009     2008      2010        2009     2008      2010       2009    2008
 Par
           P 1.00     P 1.00    P 1.00   P 1.00       P 1.00    P 1.00   P 1.00      P 1.00   P 1.00    P 1.00    P 1.00   P 1.00
 Value
 High      3.00        3.10     4.50      3.45        3.50      4.80      3.49       3.10      4.40     4.85      3.40      3.80
 Low       2.55        2.80     4.00      2.70        3.10      2.55      2.90       2.85      3.80     2.02      2.90      2.40
 Vol.      3,550      384,940   7,145    195,095     48,717    71,323    59,967     69,900    38,203   415,200    9,390    12,661

On May 3, 2011, the closing price of the Company‘s Common Shares on the PSE was P2.03per Common Share.


DIVIDENDS

The Company’s Dividend Policy

See ―Dividend Policy‖ on page 24 of this Prospectus.




                                                               Page 66
                                                         THE PHILIPPINE STOCK MARKET

BRIEF HISTORY

The Philippines initially had two stock exchanges, the Manila Stock Exchange, which was organized in 1927, and the
Makati Stock Exchange, which began operations in 1963. Each exchange was self-regulating, governed by its
respective Board of Governors elected annually by its members.

Several steps initiated by Government have resulted in the unification of the two bourses into the PSE. The PSE was
incorporated in 1992 by officers of both the Makati and the Manila Stock Exchanges. In March 1994, the licenses of
the two exchanges were revoked. While the PSE maintains two trading floors, one in Makati City and the other in
Pasig City, these floors are linked by an automated trading system which integrates all bid and ask quotations from
the bourses.

On August 8, 2001, PSE completed its demutualization, converting from a non-stock member-governed institution
into a stock corporation in compliance with the requirements of the SRC. The PSE has an authorized capital stock of
P 37 million, of which P 15 million is subscribed and fully paid-up. Each of the 184 member-brokers was granted
50,000 common shares of the new PSE at a par value of P 1.00 per share. In addition, a trading right evidenced by a
―Trading Participant Certificate‖ was immediately conferred on each member broker allowing the use of the PSE‘s
trading facilities. As a result of the demutualization, the composition of the PSE Board of Governors was changed,
requiring the inclusion of seven brokers and eight non-brokers, one of whom is the President.

On December 15, 2003, the PSE listed its shares by way of introduction at its own bourse as part of a series of
reforms aimed at strengthening the Philippine securities industry.

The table below sets forth movements in the composite index from 1999 up to the first half of 2009, and shows the
number of listed companies, market capitalization, and value of shares traded for the same period:

SELECTED STOCK EXCHANGE DATA

                                                                          Composite         Number of    Aggregate       Combined
                                                                           Index at           Listed      Market          Value of
                                                                            Closing         Companies   Capitalization   Turnover
Year                                                                  (in P billions)
1999 ..............................................................        2,142.9            226          1,937.7          713.9
2000 ..............................................................        1,494.5            230          2,577.6          357.6
2001 ..............................................................        1,168.1            232          2,142.6          159.5
2002 ..............................................................        1,018.4            234          2,083.2          159.7
2003 ..............................................................        1,442.4            236          2,973.8          145.4
2004 ..............................................................        1,822.8            236          4,766.2          206.6
2005 ..............................................................        2,096.0            237          5,948.4          383.5
2006 ..............................................................        2,982.5            240          7,172.8          572.6
2007 ..............................................................        3,621.6            244          7,978.5        1,338.2
2008 ..............................................................        1,872.8            246          4,069.2          763.9
2009 ..............................................................        2,829.0            248          5,932.9          633.2
2010 ..............................................................        4,201.1            253          5,498.9        1,207.4

Source: Philippine Stock Exchange, Inc.

TRADING AND SETTLEMENT

The PSE is a double auction market. Buyers and sellers are each represented by stock brokers. To trade, bids or ask
prices are posted on the PSE‘s electronic trading system. A buy (or sell) order that matches the lowest asked (or
highest bid) price is automatically executed. Buy and sell orders received by one broker at the same price are crossed
at the PSE at the indicated price. Payment of purchases of listed securities must be made by the buyer on or before the
third trading day (the settlement date) after the trade.



                                                                                  Page 67
Trading on the PSE starts at 9:30 am and ends at 12:00 pm with a 10-minute extension during which transactions may
be conducted, provided that they are executed at the last traded price and are only for the purpose of completing
unfinished orders. Trading days are Monday to Friday, except legal holidays and days when the BSP clearing house
is closed.

Minimum trading lots range from 5 to 1,000,000 shares depending on the price range and nature of the security
traded. Odd-sized lots are traded by brokers on a board specifically designed for odd-lot trading.

To maintain stability in the stock market, daily price swings are monitored and regulated. Under current PSE
regulations, when the price of a listed security moves up by 50.0% or down by 50.0% in one day (based on the
previous closing price or last posted bid price, whichever is higher), the price of that security is automatically frozen
by the PSE, unless there is an official statement from the company or a government agency justifying such price
fluctuation, in which case the affected security can still be traded but only at the frozen price.

SCRIPLESS TRADING

In 1995, the Philippine Depository & Trust Corporation (formerly the Philippine Central Depository, Inc.), was
organized to establish a central depository in the Philippines and introduce scripless or book-entry trading in the
Philippines. On December 16, 1996, the PDTC was granted a provisional license by the Philippine SEC to act as a
central securities depository.

All listed securities at the PSE have been converted into book-entry settlement in the PDTC. The depository service
of the PDTC provides the infrastructure for lodgment (deposit) and upliftment (withdrawal) of securities, pledge of
securities, securities lending and borrowing and corporate actions including shareholders‘ meetings, dividend
declarations and rights offerings. The PDTC also provides depository and settlement services for non-PSE trades of
listed equity securities. For transactions on the PSE, the security element of the trade will be settled through the
book-entry system, while the cash element will be settled through the current settlement banks, Rizal Commercial
Banking Corporation and Banco de Oro – Unibank, Inc.

In order to benefit from the book-entry system, securities must be immobilized into the PDTC system through a
process called lodgment. Lodgment is the process by which shareholders transfer legal title (but not beneficial title)
over their shares of stock in favor of PCD Nominee Corporation (‗‗PCD Nominee‘‘), a corporation wholly owned by
the PDTC whose sole purpose is to act as nominee and legal title holder of all shares of stock lodged into the PDTC.
‗‗Immobilization‘‘ is the process by which the warrant or share certificates of lodging holders are canceled by the
transfer agent and the corresponding transfer of beneficial ownership of the immobilized shares in the account of
PCNC through the PDTC participant will be recorded in the Issuer‘s registry. This trust arrangement between the
participants and PDTC through PCD Nominee is established by and explained in the PDTC Rules and Operating
Procedures approved by the Philippine SEC. No consideration is paid for the transfer of legal title to PCD Nominee.
Once lodged, transfers of beneficial title of the securities are accomplished via book-entry settlement.

Under the current PDTC system, only participants (e.g. brokers and custodians) will be recognized by the PDTC as
the beneficial owners of the lodged equity securities. Thus, each beneficial owner of shares through his participant,
will be the beneficial owner to the extent of the number of shares held by such participant in the records of the PCD
Nominee. All lodgments, trades and uplifts on these shares will have to be coursed through a participant. Ownership
and transfers of beneficial interests in the shares will be reflected, with respect to the participant‘s aggregate holdings,
in the PDTC system, and with respect to each beneficial owner‘s holdings, in the records of the participants.
Beneficial owners are thus advised that in order to exercise their rights as beneficial owners of the lodged shares, they
must rely on their participant-brokers and/or participant-custodians.

Any beneficial owner of shares who wishes to trade his interests in the shares must course the trade through a
participant. The participant can execute PSE trades and non-PSE trades of lodged equity securities through the PDTC
system. All matched transactions in the PSE trading system will be fed through the Securities Clearing Corporation of
the Philippines (SCCP), and into the PDTC system. Once it is determined on the settlement date (trading date plus
three trading days) that there are adequate securities in the securities settlement account of the participant-seller and
adequate cleared funds in the settlement bank account of the participant-buyer, the PSE trades are automatically

                                                         Page 68
settled in the SCCP Central Clearing and Central Settlement (‗‗CCCS‘‘) system, in accordance with the SCCP and
PDTC Rules and Operating Procedures. Once settled, the beneficial ownership of the securities is transferred from
the participant-seller to the participant-buyer without the physical transfer of stock certificates covering the traded
securities.

If a stockholder wishes to withdraw his stockholdings from the PDTC System, the PDTC has a procedure of
upliftment under which PCD Nominee will transfer back to the stockholder the legal title to the shares lodged. The
uplifting shareholder shall follow the Rules and Operating Procedures of the PDTC for the upliftment of shares
lodged under the name of PCD Nominee. The transfer agent shall prepare and send a Registry Confirmation Advice
to the PDTC covering the new number of shares lodged under PCD Nominee. The expenses for upliftment are for
the account of the uplifting shareholder.

The difference between the depository and the registry would be on the recording of ownership of the shares in the
issuing corporations‘ books. In the depository set-up, shares are simply immobilized, wherein customers‘ certificates
are canceled and a confirmation advice is issued in the name of PCD Nominee Corp. to confirm new balances of the
shares lodged with the PDTC. Transfers among/between broker and/or custodian accounts, as the case may be, will
only be made within the book-entry system of PDTC. However, as far as the issuing corporation is concerned, the
underlying certificates are in the nominee‘s name. In the registry set-up, settlement and recording of ownership of
traded securities will already be directly made in the corresponding issuing company‘s transfer agents‘ books or
system. Likewise, recording will already be at the beneficiary level (whether it be a client or a registered custodian
holding securities for its clients), thereby removing from the broker its current ‗‗de facto‘‘ custodianship role.


AMENDED RULE ON LODGMENT OF SECURITIES

On June 24, 2009, the PSE apprised all listed companies and market participants through Memorandum No. 2009-
0320 that commencing on July 1, 2009, as a condition for the listing and trading of the securities of an applicant
company, the applicant company shall electronically lodge its registered securities with the PDTC or any other entity
duly authorized by the SEC, without any jumbo or mother certificate in compliance with the requirements of Section
43 of the Securities Regulation Code. In compliance with the foregoing requirement, actual listing and trading of
securities on the scheduled listing date shall take effect only after submission by the applicant company of the
documentary requirements stated in Article III Part A of the Revised Listing Rules.

Further, the PSE apprised all listed companies and market participants on May 21, 2010 through Memorandum No.
2010-0246 that the Amended Rule on Lodgment of Securities under Section 16 of Article III, Part A of the Revised
Listing Rules of the Exchange shall apply to all securities that are lodged with the PDTC or any other entity duly
authorized by the SEC.

For listing applications, the amended rule on lodgment of securities is applicable to:

             a.   The offer shares/securities of the applicant company in the case of an initial public
                  offering;
             b.   The shares/securities that are lodged with the PDTC, or any other entity duly
                  authorized by the Commission in the case of a listing by way of introduction;
             c.   New securities to be offered and applied for listing by an existing listed company;
                  and
             d.   Additional listing of securities of an existing listed company.

Pursuant to the said amendment, the PDTC issued an implementing procedure in support thereof to wit:

For new companies to be listed at the PSE as of July 1, 2009 the usual procedure will be observed but the Transfer
Agent on the companies shall no longer issue a certificate to PCD Nominee Corp but shall issue a Registry
Confirmation Advice, which shall be the basis for the PDTC to credit the holdings of the Depository Participants on
listing date.



                                                        Page 69
On the other hand, for existing listed companies, the PDTC shall wait for the advice of the Transfer Agents that it is
ready to accept surrender of PCNC jumbo certificates and upon such advice the PDTC shall surrender all PCNC
jumbo certificates to the Transfer Agents for cancellation. The Transfer Agents shall issue a Registry Confirmation
Advice to PCNC evidencing the total number of shares registered in the name of PCNC in the Issuer‘s registry as of
confirmation date.

SETTLEMENT

The Securities Clearing Corporation of the Philippines (SCCP) is a wholly-owned subsidiary of the Philippine Stock
Exchange, Inc., and was organized primarily as a clearance and settlement agency for SCCP-eligible trades executed
through the facilities of the PSE. It is responsible for (a) synchronizing the settlement of funds and the transfer of
securities through Delivery versus Payment (DVP) clearing and settlement of transactions of Clearing Members, who
are also Trading Participants of the Exchange; (b) guaranteeing the settlement of trades in the event of a Trading
Participant‘s default through the implementation of its Fails Management System and administration of the Clearing
and Trade Guaranty Fund (CTGF), and; (c) performance of Risk Management and Monitoring to ensure final and
irrevocable settlement.


SCCP settles PSE trades on a 3-day rolling settlement environment, which means that settlement of trades takes place
three (3) business days after transaction date (T+3). The deadline for settlement of trades is 12:00 noon of T+3.
Securities sold should be in scripless form and lodged under the Phil. Depository & Trust Corporation‘s (PDTC‘s)
book entry system. Each Trading Participant maintains a Cash Settlement Account with one of the two existing
Settlement Banks of SCCP which are Banco de Oro – EPCI, Inc. and Rizal Commercial Banking Corporation.
Payment for securities bought should be in good, cleared funds and should be final and irrevocable. Settlement is
presently on a broker level.


SCCP implemented its new clearing and settlement system called Central Clearing and Central Settlement (CCCS)
last May 29, 2006. CCCS employs multilateral netting whereby the system automatically offsets ―buy‖ and ―sell‖
transactions on a per issue and a per flag basis to arrive at a net receipt or a net delivery security position for each
Clearing Member. All cash debits and credits are also netted into a single net cash position for each Clearing
Member. Novation of the original PSE trade contracts occurs, and SCCP stands between the original trading parties
and becomes the Central Counterparty to each PSE-Eligible trade cleared through it.




                                                       Page 70
                                           PHILIPPINE TAXATION
The following is a general description of certain Philippine tax aspects of the investment in the Company. The
statements made regarding taxation in the Philippines are based upon laws, regulations, rulings, income tax treaties,
administrative practices and judicial decisions in effect at the date of this Prospectus and are subject to any changes
occurring after such date. Subsequent legislative, judicial or administrative changes or interpretations may be
retroactive and could affect the tax consequences to the prospective investor.

The tax treatment of a prospective investor may vary depending on such investor‘s particular situation and certain
investors may be subject to special rules not discussed below. This summary does not purport to be a comprehensive
description of all of the tax considerations that may be relevant to a decision to invest in the shares and does not
purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in
securities) may be subject to special rates. This discussion does not provide information regarding the tax aspects of
acquiring, owning, holding or disposing of the shares under applicable tax laws of other applicable jurisdictions and
the specific Philippine tax consequence in light of particular situations of acquiring, owning, holding and disposing of
the shares in such other jurisdictions.

EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF
THE SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF LOCAL AND NATIONAL TAX
LAWS

As used herein, the term ―resident alien‖ refers to an individual whose residence is within the Philippines and who is
not a citizen thereof. A ―non-resident alien‖ is an individual whose residence is not within the Philippines and who is
not a citizen thereof; a non-resident alien who is actually within the Philippines for an aggregate period of more than
180 days during any calendar year is considered a non-resident alien engaged in trade or business in the Philippines;
otherwise, such non-resident alien who is actually within the Philippines for an aggregate period of 180 days or less
during any calendar year is considered a non-resident alien not engaged in trade or business in the Philippines. A
―domestic corporation‖ is created or organized under the laws of the Philippines; a ―resident foreign corporation‖ is a
non-Philippine corporation engaged in trade or business in the Philippines; and a ―non-resident foreign corporation‖
is a non-Philippine corporation not engaged in trade or business in the Philippines.

CORPORATE INCOME TAX

In general, a tax of thirty-five per cent is imposed upon the taxable net income of a domestic corporation from all
sources (within and outside the Philippines). However, effective January 1, 2009, the corporate income tax rate was
reduced to 30% pursuant to Republic Act 9337. Gross interest income from Philippine currency bank deposits and
yield from deposit substitutes, trust fund and similar arrangements as well as royalties from sources within the
Philippines are however subject to a final withholding tax of twenty per cent of the gross amount of such income.

TAX ON DIVIDENDS

Under current law, cash and property dividends received from a domestic corporation by individual stockholders who
are either citizens or residents of the Philippines are subject to tax of ten per cent. Cash and property dividends
received by domestic corporations or resident foreign corporations are not subject to tax.

Cash and property dividends received from a domestic corporation by a non-resident foreign corporation not engaged
in trade or business in the Philippines are generally subject to tax at the rate of thirty-five per cent (35%). However,
please note that effective January 1, 2009, the tax rate was reduced to 30% pursuant to Republic Act 9337.

Subject to applicable preferential tax rates under treaties in force between the Philippines and the country of domicile
of such non-resident foreign corporation, cash and/or property dividends received from a domestic corporation by a
non-resident corporation are subject to final withholding tax at the rate of 15 per cent; provided that the country in
which the non-resident foreign corporation is domiciled (i) imposes no taxes on foreign–sourced dividends or (ii)
allows a credit against the tax due from the non-resident foreign corporation taxes deemed to have been paid in the

                                                       Page 71
Philippines equivalent to the difference between the regular income tax on corporations and the 15 per cent tax on
dividends.

SALE, EXCHANGE OR DISPOSITION OF SHARES

Capital Gains Tax

Net capital gains realized by a resident or non-resident other than a dealer in securities during each taxable year from
the sale, exchange or disposition of shares of stock in a Philippine corporation listed at and effected outside of the
facilities of the PSE, are subject to tax as follows: 5.0% on gains not exceeding P100,000.00 and 10.0% on gains over
P100,000.00.

Gains from the sale or disposition of shares in a Philippine corporation may be exempt from capital gains tax or
subject to a preferential rate under a tax treaty. An application for tax treaty relief must be filed (and approved) by
the Philippine tax authorities in order to obtain such exemption under a tax treaty. A prospective investor should
consult its own tax advisor with respect to the applicable rates under the relevant tax treaty.

The transfer of shares shall not be recorded in the books of the Company unless the BIR certifies that the capital gains
and documentary stamp taxes relating to the sale or transfer have been paid or, where applicable, tax treaty relief has
been confirmed by the International Tax Affairs Division of the BIR in respect of the capital gains tax or other
conditions have been met.

Taxes on Transfer of Shares Listed and Traded at the Philippine Stock Exchange

A sale, barter, exchange or other disposition of shares of stock listed at and effected through the facilities of the PSE
by a resident or a non-resident holder, other than a dealer in securities, is subject to a stock transaction tax at the rate
of 0.5% of the gross selling price or gross value in cash of the shares of stock sold, bartered, exchanged or otherwise
disposed, unless an applicable treaty exempts such sale from the said tax. The stock transaction tax is classified as a
percentage tax and is paid in lieu of capital gains tax.

In addition, a value added tax of 12.0% is imposed on the commission earned by the PSE-registered broker who
facilitated the sale, barter, exchange or disposition through the PSE, and is generally passed on to the client.

DOCUMENTARY STAMP TAX

The original issue of shares is subject to documentary stamp tax of P1.00 for each P200.00, or a fractional part
thereof, of the par value of the shares issued. The transfer of shares is subject to a documentary stamp tax of P0.75
for each P200.00, or a fractional part thereof of the par value of the shares transferred. . However, the sale, barter or
exchange of shares of stock listed and traded through the local stock exchange shall not be subject to documentary
stamp tax for a period of five (5) years from the effectivity of Republic Act No. 9243 dated February 17, 2004. Please
note that the said exemption expired on March 20, 2009. However, on June 30, 2009, President Gloria Macapal-
Arroyo signed Republic Act 9648, which permanently exempts the sale, barter or exchange of shares of stock listed
and traded through the local stock exchange from the documentary stamp tax and was made retroactive to March 20,
2009.

ESTATE AND GIFT TAXES

The transfer of shares of stock upon the death of an individual holder to his heirs by way of succession, whether such
holder was a citizen of the Philippines or an alien and regardless of residence, is subject to Philippine taxes at
progressive rates ranging from 5.0% to 20.0% (if the net estate is over P200,000). Individual and corporate holders,
whether or not citizens or residents of the Philippines, who transfer shares of stock by way of gift or donation are
liable to pay Philippine donors‘ tax on such a transfer of shares ranging from 2.0% to 15.0% of the net gifts during
the year exceeding P100,000. The rate of tax with respect to net gifts made to a stranger (i.e., one who is not a
brother, sister, spouse, ancestor, lineal descendant or relative by consanguinity within the fourth degree of
relationship) is a flat rate of 30.0%.



                                                         Page 72
Estate and donors‘ taxes, however, shall not be collected in respect of intangible personal property, such as shares of
stock: (a) if the deceased at the time of his death or the donor at the time of his donation was a citizen and resident of
a foreign country which at the time of his death or donation did not impose a transfer tax of any character, in respect
of intangible personal property of citizens of the Philippines not residing in that foreign country, or (b) if the laws of
the foreign country of which the deceased or donor was a citizen and resident at the time of his death or donation
allows a similar exemption from transfer or death taxes of every character or description in respect of intangible
personal property owned by citizens of the Philippines not residing in that foreign country.

TAXATION OUTSIDE THE PHILIPPINES

Shares of stock in a domestic corporation are considered under Philippine law as situated in the Philippines and the
gain derived from their sale is entirely from Philippine sources; hence such gain is subject to Philippine income tax
and capital gains tax and the transfer of such shares by gift (donation) or succession is subject to the donors‘ or estate
taxes, each as described above.

The tax treatment of a non-resident holder of shares of stock in jurisdictions outside the Philippines may vary
depending on the tax laws applicable to such holder by reason of domicile or business activities and such holder‘s
particular situation. This Prospectus does not discuss the tax consideration on non-resident holders of shares of stock
under laws other than those of the Philippines.




                                                        Page 73
                               INTERESTS OF EXPERTS AND COUNSEL
The financial statements of the Company were audited by SyCip Gorres Velayo & Co. as of and for the years ended
December 31, 2010, 2009 and 2008. The external auditors have no shareholdings in the Company, or any right,
whether legally enforceable or not, to nominate persons or to subscribe to the securities of the Company, in
accordance with the professional standards on independence set by the Board of Accountancy and the Professional
Regulation Commission.

Certain Philippine legal matters in connection with the Offer have been passed upon for the Company and the
Underwriters by Picazo Buyco Tan Fider & Santos Law Firm, Manila, Philippines.

The aforesaid counsels have no shareholdings in the Company, or any right, whether legally enforceable or not, to
nominate persons or to subscribe to the securities of the Company, in accordance with the standards or independence
required in the Code of Professional Responsibility and as prescribed by the Supreme Court of the Philippines.

The named external auditor and the aforesaid legal counsels have not acted and will not act as promoter, underwriter,
voting trustee, officer or employee of the Company.




                                                      Page 74
Parties to the Offer

Issuer ....................................................................   Manila Jockey Club, Inc.
                                                                              14th Floor, Strata 100 Building
                                                                              Emerald Avenue, Ortigas Center
                                                                              Pasig City
                                                                              Tel. No. (632) 631-2892

Issue Manager and Underwriter ..............................                  RCBC Capital Corporation
                                                                              7th Floor, Yuchengco Tower, RCBC Plaza
                                                                              6819 Ayala Avenue, Makati City
                                                                              Philippines
                                                                              Tel. No. (632) 894-9000

Legal Counsel to the                                                          Picazo Buyco Tan Fider & Santos
Issuer and Underwriter                                                        18th, 19th & 17th Floors Liberty Center
as to Philippine law ...............................................          104 H.V. dela Costa Street
                                                                              Salcedo Village Makati City
                                                                              Philippines
                                                                              Tel. No. (632) 888-0999

Receiving Agent .....................................................         Rizal Commercial Banking Corporation
                                                                              Trust and Investments Division
                                                                              9th Floor, Yuchengco Tower, RCBC Plaza
                                                                              6819 Ayala Avenue, Makati City
                                                                              Philippines
                                                                              Tel. No. (632) 894-9000

Stock Transfer Agent..............................................            Rizal Commercial Banking Corporation
                                                                              Stock Transfer Department
                                                                              Ground Floor, West Wing, Grepalife Building
                                                                              221 Sen. Gil Puyat Avenue, Makati City
                                                                              Philippines
                                                                              Tel. No. (632) 892-1461, 892-0426

Independent Public Accountants ............................                   SyCip Gorres Velayo & Co.
                                                                              6760 Ayala Avenue,
                                                                              Makati City, Philippines
                                                                              Tel. No. (632) 891-0307




                                                                              Page 75
                                                          COVER SHEET

                                                                                                 P W - 8 0 3
                                                                                                        SEC Registration Number

M A N I L A                      J O C K E Y                 C L U B ,                I N C .

A N D               S U B S I D I A R I E S




                                                           (Company’s Full Name)

 S a n              L a z a r o                  L e i        s u r e             P a r k ,

 B r g y            .        L a n t       i     c    ,      C a r m o n a                   ,   C a v i         t e




                                           (Business Address: No. Street City/Town/Province)

                    Nestor N. Ubalde                                                                         914-4758
                        (Contact Person)                                                            (Company Telephone Number)

 1 2         3 1                                             A A C F S
Month         Day                                               (Form Type)                                          Month          Day
    (Fiscal Year)                                                                                                    (Annual Meeting)



                                                   (Secondary License Type, If Applicable)



Dept. Requiring this Doc.                                                                         Amended Articles Number/Section

                                                                                                     Total Amount of Borrowings


Total No. of Stockholders                                                                         Domestic                Foreign


                                               To be accomplished by SEC Personnel concerned



              File Number                                         LCU



              Document ID                                        Cashier



              STAMPS
                                                                                    Remarks: Please use BLACK ink for scanning purposes.




                                                                                                     *SGVMC311721*
                                                                            SyCip Gorres Velayo & Co.
                                                                            6760 Ayala Avenue
                                                                            1226 Makati City
                                                                            Philippines
                                                                            Phone: (632) 891 0307
                                                                            Fax:   (632) 819 0872
                                                                            www.sgv.com.ph

                                                                            BOA/PRC Reg. No. 0001
                                                                            SEC Accreditation No. 0012-FR-2
INDEPENDENT AUDITORS’ REPORT



The Stockholders and the Board of Directors
Manila Jockey Club, Inc.
San Lazaro Leisure Park
Brgy. Lantic, Carmona, Cavite


We have audited the accompanying consolidated financial statements of Manila Jockey Club, Inc. and
its subsidiaries, which comprise the consolidated balance sheets as at December 31, 2010 and 2009,
and the consolidated statements of comprehensive income, statements of changes in equity and
statements of cash flows for each of the three years in the period ended December 31, 2010, and a
summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Philippine Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.




                                                                              *SGVMC311721*
                                                                         A member firm of Ernst & Young Global Limited
                                                 -2-



Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of Manila Jockey Club, Inc. and its subsidiaries as at December 31, 2010 and 2009,
and their financial performance and their cash flows for each of the three years in the period ended
December 31, 2010 in accordance with Philippine Financial Reporting Standards.


SYCIP GORRES VELAYO & CO.




Josephine H. Estomo
Partner
CPA Certificate No. 46349
SEC Accreditation No. 0078-AR-2
Tax Identification No. 102-086-208
BIR Accreditation No. 08-001998-18-2009,
    June 1, 2009, Valid until May 31, 2012
PTR No. 2641524, January 3, 2011, Makati City

April 27, 2011




                                                                           *SGVMC311721*
MANILA JOCKEY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

                                                                             December 31
                                                                                      2009             2008
                                                                              (As restated,    (As restated,
                                                                     2010           Note 2)          Note 2)

ASSETS

Current Assets
Cash (Note 6)                                                =
                                                             P153,796,880    =
                                                                             P138,444,127     P180,767,090
                                                                                              =
Held for trading investments (Note 7)                           30,380,000     20,506,500                 –
Receivables (Notes 8, 16 and 27)                               247,318,848    319,504,571       301,237,132
Real estate inventories (Note 9)                               331,686,119    396,283,498       563,125,372
Other current assets (Note 10)                                  10,788,436      4,633,130        33,698,280
Total Current Assets                                           773,970,283    879,371,826     1,078,827,874

Noncurrent Assets
Real estate receivables - net of current portion (Note 8)       67,787,165      74,216,187       29,965,327
Interest in a jointly controlled entity (Notes 11 and 14)        5,197,120               –                –
Available-for-sale financial assets (Note 12)                   29,737,447      22,381,951       16,940,505
Property and equipment (Notes 13 and 31)                     1,213,322,752   1,309,596,319    1,342,031,957
Investment properties (Notes 11, 14, 16 and 27)              1,223,943,004   1,232,494,728    1,173,573,567
Goodwill (Note 5)                                               75,816,953      75,816,953                –
Other noncurrent assets (Note 15)                               29,410,614      31,297,859       39,527,413
Total Noncurrent Assets                                      2,645,215,055   2,745,803,997    2,602,038,769

TOTAL ASSETS                                                P3,419,185,338 P3,625,175,823 P3,680,866,643
                                                            =              =              =


LIABILITIES AND EQUITY

Current Liabilities
Short-term loans and borrowings (Notes 14 and 16)            =
                                                             P323,750,000    =
                                                                             P319,500,000     =
                                                                                              P326,000,000
Accounts payable and other liabilities (Note 17)               370,930,349    432,365,974      537,280,961
Income tax payable                                              15,304,403        564,843          340,729
Current portion of long-term loans and borrowings
    (Notes 13, 14 and 16)                                      53,013,240     171,356,548       173,522,626
Due to related parties (Notes 14 and 27)                       53,842,233      65,132,233        23,000,000
Total Current Liabilities                                     816,840,225     988,919,598     1,060,144,316

Noncurrent Liabilities
Long-term loans and borrowings - net of current portion
    (Notes 13, 14 and 16)                                      58,727,388     111,737,847      282,007,534
Accrued retirement benefits (Note 22)                          64,236,501      56,312,963       45,448,976
Deferred income tax liabilities - net (Note 26)               318,041,073     343,525,930      349,738,583
Total Noncurrent Liabilities                                  441,004,962     511,576,740      677,195,093

Total Liabilities                                            1,257,845,187   1,500,496,338    1,737,339,409

(Forward)




                                                                               *SGVMC311721*
                                                        -2-


                                                                                December 31
                                                                                         2009             2008
                                                                                 (As restated,    (As restated,
                                                                        2010           Note 2)          Note 2)
Equity
Attributable to equity holders of the parent company:
    Capital stock (Note 28)                                     P548,733,603
                                                                =               =
                                                                                P449,985,318     P449,985,318
                                                                                                 =
    Deposits for future stock subscription (Note 28)                       –       8,347,199        2,423,475
    Net cumulative changes in fair values of available-for-
         sale financial assets - net of related deferred
         income tax effect (Note 12)                               12,182,922      4,864,203         (550,036)
    Retained earnings (Note 28):
         Appropriated                                              17,180,917      17,180,917       17,180,917
         Unappropriated                                         1,407,712,622   1,486,034,472    1,452,196,028
    Cost of shares held by a subsidiary (3,375,000 shares
         in 2010 and 2009) (Note 28)                               (8,707,500)    (8,707,500)             –
                                                                1,977,102,564 1,957,704,609 1,921,235,702
Noncontrolling interests (Note 3)                                 184,237,587    166,974,876     22,291,532
Total Equity                                                    2,161,340,151 2,124,679,485 1,943,527,234
TOTAL LIABILITIES AND EQUITY                                                   =              =
                                                               =3,419,185,338 P3,625,175,823 P3,680,866,643
                                                               P

See accompanying Notes to Consolidated Financial Statements.




                                                                                   *SGVMC311721*
MANILA JOCKEY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                                           Years Ended December 31
                                                                       2010         2009         2008
REVENUES
Club races                                                                   =           =
                                                               P297,239,492 P279,902,325 P273,368,692
                                                               =
Real estate                                                      148,383,065 311,425,887 311,776,284
Rent (Notes 13 and 14)                                           178,919,567 156,352,624 146,151,546
                                                                 624,542,124 747,680,836 731,296,522
COSTS OF SALES AND SERVICES (Note 18)
Club races                                                      206,521,821    223,491,432    177,765,928
Real estate                                                      64,202,459    169,417,532    194,294,451
Rent                                                            104,586,336     68,546,464     88,594,396
                                                                375,310,616    461,455,428    460,654,775
GROSS PROFIT                                                    249,231,508 286,225,408 270,641,747
Selling expense                                                 (20,459,626) (37,810,096) (36,474,726)
General and administrative expenses (Note 19)                  (201,426,941) (181,046,755) (188,432,900)
Interest income (Notes 23 and 27)                                12,751,790    59,804,895    45,760,847
Finance costs (Notes 24 and 27)                                 (41,840,503) (61,416,552) (48,216,549)
Unrealized gains on fair value changes of held for
    trading investments (Note 7)                                  9,873,500      1,326,172              –
Equity in net earnings (losses) of a jointly controlled
    entity and an associate (Notes 11 and 15)                    10,170,853              –       (338,902)
Other income (charges) - net (Note 25)                            8,207,141    (11,401,499)   (43,333,771)
INCOME (LOSS) BEFORE INCOME TAX                                  26,507,722     55,681,573       (394,254)
PROVISION FOR (BENEFIT FROM)
   INCOME TAX (Note 26)
Current                                                          29,137,108     20,675,297     43,267,604
Deferred                                                        (25,521,634)    (6,239,860)   (64,860,246)
                                                                  3,615,474     14,435,437    (21,592,642)
NET INCOME                                                       22,892,248     41,246,136     21,198,388
OTHER COMPREHENSIVE INCOME (LOSS)
Net changes in fair values of available-for-sale
    financial assets - net of deferred income tax
    effect (Note 12)                                              7,318,719      5,414,239     (8,831,838)
TOTAL COMPREHENSIVE INCOME                                      =
                                                                P30,210,967    =
                                                                               P46,660,375    =
                                                                                              P12,366,550
Net income (loss) attributable to:
    Equity holders of the parent company                        =
                                                                P11,675,213    P33,838,444
                                                                               =              =
                                                                                              P21,602,269
    Noncontrolling interests                                      11,217,035     7,407,692       (403,881)
                                                                =
                                                                P22,892,248    =
                                                                               P41,246,136    =
                                                                                              P21,198,388
Total comprehensive income (loss) attributable to:
    Equity holders of the parent company                        =
                                                                P18,993,932    =
                                                                               P39,252,683    =
                                                                                              P12,770,431
    Noncontrolling interests                                      11,217,035     7,407,692       (403,881)
                                                                =
                                                                P30,210,967    =
                                                                               P46,660,375    =
                                                                                              P12,366,550
Basic/Diluted Earnings Per Share Attributable to
   Equity Holders of the Parent Company
   (Note 29)                                                         =
                                                                     P0.020        P0.063
                                                                                   =               =
                                                                                                   P0.041

See accompanying Notes to Consolidated Financial Statements.


                                                                                *SGVMC311721*
MANILA JOCKEY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

                                                                                                                   Attributable to Equity Holders of the Parent Company
                                                                                                                                              Net Cumulative
                                                                                                                                                    Changes
                                                                                                                                                       in Fair
                                                                                                                                                   Values of
                                                                                                                                 Revaluation      Available-
                                                                                                              Deposits for         Increment          for-sale                                      Shares
                                                                          Capital Stock (Note 28)             Future Stock     in Real Estate      Financial                                     Held by a
                                                                                Subscription                  Subscription         Properties          Assets    Retained Earnings (Note 28)    Subsidiary                     Noncontrolling
                                                              Capital Stock       Receivable           Net        (Note 28)         (Note 28)       (Note 12) Appropriated Unappropriated         (Note 28)        Subtotal         Interests            Total

BALANCES AT DECEMBER 31, 2007,
    AS PREVIOUSLY REPORTED                                    P449,985,318
                                                              =                          =
                                                                                         P–    P449,985,318
                                                                                               =                       P– P1,066,467,622
                                                                                                                       = =                      =
                                                                                                                                                P8,281,802    P17,180,917
                                                                                                                                                              =               P579,460,779
                                                                                                                                                                              =                        = =
                                                                                                                                                                                                       P– P2,121,376,438         P22,695,413
                                                                                                                                                                                                                                 =              =
                                                                                                                                                                                                                                                P2,144,071,851
Effect of closing revaluation increment in real estate
    properties to retained earnings (Note 2)                              –                –             –              – (1,066,467,622)                –               –      896,131,512              –     (170,336,110)               –      (170,336,110)

BALANCES AT DECEMBER 31, 2007, AS RESTATED                     449,985,318                 –    449,985,318             –               –        8,281,802      17,180,917    1,475,592,291               – 1,951,040,328         22,695,413     1,973,735,741
Net income (loss) for the year                                           –                 –              –             –               –                –               –       21,602,269              –     21,602,269           (403,881)       21,198,388
Other comprehensive loss                                                 –                 –              –             –               –       (8,831,838)              –                –              –     (8,831,838)                 –        (8,831,838)
Total comprehensive income (loss) for the year                           –                 –              –             –               –       (8,831,838)              –       21,602,269              –     12,770,431           (403,881)       12,366,550
Deposits for future stock subscription                                   –                 –              –     2,423,475               –                –               –                –              –      2,423,475                  –         2,423,475
                           =
Cash dividends declared - P0.10 per share                                –                 –              –             –               –                –               –      (44,998,532)             –    (44,998,532)                 –       (44,998,532)
BALANCES AT DECEMBER 31, 2008, AS RESTATED                    P449,985,318
                                                              =                          =
                                                                                         P–    P449,985,318
                                                                                               =               =
                                                                                                               P2,423,475              P–
                                                                                                                                       =        (P550,036)
                                                                                                                                                 =            =
                                                                                                                                                              P17,180,917    P
                                                                                                                                                                             = 1,452,196,028           P– P1,921,235,702
                                                                                                                                                                                                       = =                       =
                                                                                                                                                                                                                                 P22,291,532    =
                                                                                                                                                                                                                                                P1,943,527,234

BALANCES AT DECEMBER 31, 2008,
    AS PREVIOUSLY REPORTED                                    P449,985,318
                                                              =                          P–
                                                                                         =     =
                                                                                               P449,985,318    P2,423,475
                                                                                                               =              P955,931,256
                                                                                                                              =                 (P550,036)
                                                                                                                                                 =            =
                                                                                                                                                              P17,180,917     P666,600,882
                                                                                                                                                                              =                        = =
                                                                                                                                                                                                       P– P2,091,571,812         P22,291,532
                                                                                                                                                                                                                                 =              P2,113,863,344
                                                                                                                                                                                                                                                =
Effect of closing revaluation increment in real estate
    properties to retained earnings (Note 2)                              –                –             –              –    (955,931,256)               –               –      785,595,146              –    (170,336,110)                –      (170,336,110)

BALANCES AT DECEMBER 31, 2008, AS RESTATED                     449,985,318                 –    449,985,318     2,423,475                   –     (550,036)    17,180,917     1,452,196,028             –     1,921,235,702       22,291,532     1,943,527,234
Net income for the year                                                  –                 –              –             –                   –            –              –        33,838,444             –        33,838,444        7,407,692        41,246,136
Other comprehensive income                                               –                 –              –             –                   –    5,414,239              –                 –             –         5,414,239                –         5,414,239
Total comprehensive income for the year                                  –                 –              –             –                   –    5,414,239              –        33,838,444             –        39,252,683        7,407,692        46,660,375
Noncontrolling interest arising from business combination
    (Note 5)                                                              –                –             –              –                   –            –               –                –              –                –      137,275,652      137,275,652
Cost of shares held by a subsidiary arising from business
    combination                                                           –                –             –              –                   –            –               –                –     (8,707,500)      (8,707,500)               –        (8,707,500)
Additional deposits for future stock subscription (Note 28)               –                –             –      5,923,724                   –            –               –                –              –        5,923,724                –         5,923,724

BALANCES AT DECEMBER 31, 2009, AS RESTATED                    P449,985,318
                                                              =                          =
                                                                                         P–    P449,985,318
                                                                                               =               =
                                                                                                               P8,347,199               P–
                                                                                                                                        =       P4,864,203
                                                                                                                                                =             =
                                                                                                                                                              P17,180,917    P
                                                                                                                                                                             = 1,486,034,472   (P8,707,500) P1,957,704,609 P166,974,876
                                                                                                                                                                                                =           =              =                    =
                                                                                                                                                                                                                                                P2,124,679,485

(Forward)




                                                                                                                                                                                                                       *SGVMC311721*
                                                                                                                                     -2-


                                                                                                                     Attributable to Equity Holders of the Parent Company
                                                                                                                                                 Net Cumulative
                                                                                                                                                        Changes
                                                                                                                                                           in Fair
                                                                                                                                                       Values of
                                                                                                                                    Revaluation       Available-
                                                                                                               Deposits for           Increment          for-sale                                    Shares
                                                                        Capital Stock (Note 28)                Future Stock       in Real Estate        Financial                                 Held by a
                                                                              Subscription                     Subscription           Properties           Assets Retained Earnings (Note 28)    Subsidiary                    Noncontrolling
                                                              Capital Stock     Receivable              Net        (Note 28)           (Note 28)        (Note 12) Appropriated Unappropriated      (Note 28)        Subtotal        Interests           Total

BALANCES AT DECEMBER 31, 2009,
    AS PREVIOUSLY REPORTED                                    P449,985,318
                                                              =                        = =
                                                                                       P– P449,985,318          P8,347,199
                                                                                                                =               P871,512,316
                                                                                                                                =                  =
                                                                                                                                                   P4,864,203    P17,180,917
                                                                                                                                                                 =             P784,858,266
                                                                                                                                                                               =                (P8,707,500) P2,128,040,719 P166,974,876 P2,295,015,595
                                                                                                                                                                                                 =           =              =            =
Effect of closing revaluation increment in real estate
    properties to retained earnings (Note 2)                              –              –                –              –       (871,512,316)              –              –     701,176,206              –    (170,336,110)               –    (170,336,110)

BALANCES AT DECEMBER 31, 2009, AS RESTATED                     449,985,318               –    449,985,318        8,347,199                  –       4,864,203     17,180,917 1,486,034,472       (8,707,500)   1,957,704,609     166,974,876    2,124,679,485
Net income for the year                                                  –               –              –                –                  –               –              –    11,675,213                –       11,675,213      11,217,035       22,892,248
Other comprehensive income                                               –               –              –                –                  –       7,318,719              –             –                –        7,318,719               –        7,318,719
Total comprehensive income for the year                                  –               –              –                –                  –       7,318,719              –    11,675,213                –       18,993,932      11,217,035       30,210,967
Noncontrolling interest on additional subscription
    of shares of stock of a subsidiary                                   –              –                  –             –                  –               –              –               –              –               –        6,045,676       6,045,676
Additional deposits for future stock subscription (Note 28)              –              –                  –       404,023                  –               –              –               –              –         404,023                –         404,023
Subscription of capital stock (Note 28)                         35,002,937    (26,251,715)         8,751,222    (8,751,222)                 –               –              –               –              –               –                –               –
Stock dividends declared (Note 28)                              89,997,063              –         89,997,063             –                  –               –              –     (89,997,063)             –               –                –               –

BALANCES AT DECEMBER 31, 2010                                 =             =
                                                              P574,985,318 (P26,251,715) P548,733,603
                                                                                         =                              P–
                                                                                                                        =                  =
                                                                                                                                           P–     P12,182,922
                                                                                                                                                  =              =           P
                                                                                                                                                                 P17,180,917 = 1,407,712,622     =           P               =            P
                                                                                                                                                                                                (P8,707,500) = 1,977,102,564 P184,237,587 = 2,161,340,151


See accompanying Notes to Consolidated Financial Statements.




                                                                                                                                                                                                                                   *SGVMC311721*
MANILA JOCKEY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                             Years Ended December 31
                                                            2010         2009        2008
CASH FLOWS FROM OPERATING
    ACTIVITIES
Income (loss) before income tax                       =
                                                      P26,507,722    P55,681,573
                                                                     =                =
                                                                                     (P394,254)
Adjustments for:
    Depreciation (Note 20)                            119,578,875    115,193,336     87,335,753
    Amortization of franchise fee (Note 18)             1,794,000      1,794,000      1,794,000
    Interest income (Note 23)                         (12,751,790)   (59,804,895)   (45,760,847)
    Finance costs (Note 24)                            41,840,503     61,416,552     48,216,549
    Unrealized gains on fair value changes of held
       for trading investments (Note 7)                (9,873,500)    (1,326,172)             –
    Equity in net losses (earnings) of a jointly
       controlled entity and an associate
       (Notes 11 and 15)                              (10,170,853)             –        338,902
    Dividend income (Note 25)                            (714,409)    (1,058,071)    (1,058,071)
    Unrealized foreign exchange loss (gain) - net          47,562        132,623       (345,917)
    Movement in accrued retirement benefits
       (Note 22)                                        7,923,538     10,863,987      3,887,756
    Reversal of various liabilities (Note 25)         (27,494,807)   (34,652,039)   (48,840,538)
Operating income before working capital changes       136,686,841    148,240,894     45,173,333
Decrease (increase) in:
    Receivables                                        90,729,306     19,401,224     53,008,295
    Real estate inventories                            64,597,379    166,841,875    190,750,661
    Other current assets                               (6,155,306)    29,243,925     19,877,470
Decrease in accounts payable and other liabilities    (23,135,009)   (34,710,322)   (36,201,429)
Cash generated from operations                        262,723,211    329,017,596    272,608,330
Income taxes paid, including creditable withholding
    and final taxes                                   (14,397,548)   (20,637,024)   (85,619,309)
Net cash from operating activities                    248,325,663    308,380,572    186,989,021

CASH FLOWS FROM INVESTING
    ACTIVITIES
Proceeds from:
     Short-term investments                                     –              –     18,444,066
     Held for trading investments                               –        450,572              –
Acquisitions of property and equipment (Note 13)      (14,281,021)   (80,953,642)   (94,351,965)
Contributions in development of investment
    properties (Note 14)                               (3,874,901)   (18,766,918) (190,742,404)
Interest received (Note 23)                               637,229      2,912,666     1,186,934
Dividends received (Note 25)                              714,409      1,058,071     1,058,071
Proceeds from (payments for) deposits (Note 15)            93,245      1,935,554    (2,749,151)
Net cash used in investing activities                 (16,711,039)   (93,363,697) (267,154,449)

(Forward)




                                                                       *SGVMC311721*
                                                        -2-


                                                                       Years Ended December 31
                                                                      2010         2009        2008

CASH FLOWS FROM FINANCING
    ACTIVITIES
Proceeds from (payments of) short-term loans and
    borrowings (Note 16)                                         P4,250,000
                                                                 =              =           =
                                                                               (P6,500,000) P70,000,000
Proceeds from:
    Deposits for future stock subscription (Note 28)               404,023       5,923,724      2,423,475
    Long-term loans and borrowings (Note 16)                             –               –    393,138,490
    Advances from related parties (Note 27)                              –               –     23,000,000
Payments of:
    Long-term loans and borrowings (Note 16)                   (170,319,048) (176,731,890) (213,748,490)
    Obligations under finance lease (Note 16)                    (1,034,719)   (2,975,608)   (5,487,047)
    Advances from related parties (Note 27)                     (11,290,000) (12,750,000)             –
Interest paid                                                   (44,270,241) (64,173,441) (39,026,980)
Proceeds from subscription to capital stock of
    subsidiary                                                    6,045,676             –               –
Dividends paid by the Parent Company (Note 28)                            –             –     (44,105,899)
Net cash from (used in) financing activities                   (216,214,309) (257,207,215)    186,193,549

EFFECT OF EXCHANGE RATE CHANGES
   ON CASH                                                          (47,562)      (132,623)      561,417

NET INCREASE (DECREASE) IN CASH                                  15,352,753    (42,322,963)   106,589,538

CASH AT BEGINNING OF YEAR                                       138,444,127    180,767,090     74,177,552

CASH AT END OF YEAR (Note 6)                                                =            =
                                                               P153,796,880 P138,444,127 P180,767,090
                                                               =

See accompanying Notes to Consolidated Financial Statements.




                                                                                *SGVMC311721*
MANILA JOCKEY CLUB, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Corporate Information

   Manila Jockey Club, Inc. (the “Parent Company”) was incorporated in the Philippines on
   March 22, 1937.

   The Parent Company is presently engaged in the construction, operations and maintenance of a
   racetrack located in Cavite, Philippines and in the holding or conducting of horse races therein
   with bettings both directly or indirectly by means of mechanical, electric and/or computerized
   totalizator. It has a congressional franchise granted under Republic Act (R.A.) No. 8407 to hold
   such races and to maintain the race track. The Parent Company is also engaged in the
   development and sale of condominium units and residential properties and lease of an office
   building through joint venture arrangements with certain developers.

   Under R.A. No. 8407, the Parent Company shall pay annually to the National Treasury a franchise
   tax equivalent to 25% of its gross earnings from horse races in lieu of all taxes, except income tax,
   that are imposed by the national or local government on the activities covered by the franchise.
   Starting 2001, the Company has paid value-added tax (VAT) in lieu of the franchise tax by virtue
   of the provision of R.A. No. 7716 or the Expanded VAT Law.

   The Parent Company holds 100% interest in SLLP Holdings, Inc. (SLLPHI) and San Lazaro
   Resources and Development Corporation (SLRDC), which are both incorporated and domiciled in
   the Philippines. Starting April 2007, the Parent Company holds a 50% interest in Biohitech
   Philippines, Inc. (Biohitech), a company incorporated and domiciled in the Philippines and
   engaged in the supply, installation and maintenance of waste treatment systems, including the
   marketing and distribution of the by-products generated by the systems. As of April 27, 2011,
   SLLPHI, SLRDC and Biohitech have not yet started commercial operations.

   On January 23, 2009, the Parent Company acquired a 50.23% interest in MJC Investments
   Corporation (MIC), formerly Aries Prime Resources, Inc., a publicly listed company incorporated
   and domiciled in the Philippines. The acquisition was made in accordance with the provisions of
   the Memorandum of Agreement (MOA) entered into by both parties in 2008, wherein the Parent
   Company will transfer its non-core assets to MIC under a property-for-share exchange subject to
   agreed conditions (see Note 5).

   The Parent Company incorporated on August 16, 2010 and holds 100% interest in MJC Forex
   Corporation (MFC), a company incorporated and domiciled in the Philippines and engaged in the
   business of money changing or currency exchange and dealing and brokering in all currencies with
   local or foreign individuals and other entities. As of April 27, 2011, MFC has not yet started
   commercial operations.

   The Parent Company also has a special-purpose entity (SPE), New Victor Technology Limited
   (NVTL), which is incorporated in Hongkong and domiciled in the Philippines. The business
   purpose of NVTL is to purchase slot machines for lease to the Philippine Amusement and Gaming
   Corporation (PAGCOR), which operates the casino of the Parent Company located within the Turf
   Club at Carmona.

   The registered office address of the Parent Company is San Lazaro Leisure Park, Brgy. Lantic,
   Carmona, Cavite.



                                                                            *SGVMC311721*
                                                 -2-


   The consolidated financial statements of Manila Jockey Club, Inc. and its subsidiaries as at
   December 31, 2010 and 2009 and for each of the three years in the period ended
   December 31, 2010 were authorized for issue by the Board of Directors (BOD) on April 27, 2011.


2. Basis of Preparation and Changes in Accounting Policies and Disclosures

   Basis of Preparation
   The consolidated financial statements are prepared using the historical cost basis, except for held
   for trading investments and available-for-sale (AFS) financial assets which are carried at fair
   value. The consolidated financial statements are presented in Philippine Peso (Peso), the Parent
   Company’s functional and presentation currency, and rounded off to the nearest Peso, except
   when otherwise indicated.

   Statement of Compliance
   The consolidated financial statements have been prepared in compliance with Philippine Financial
   Reporting Standards (PFRS). The term PFRS, in general, includes all applicable PFRS, Philippine
   Accounting Standards (PAS), and interpretations issued by former Standing Interpretations
   Committee, the Philippine Interpretations Committee and the International Financial Reporting
   Interpretations Committee (IFRIC) which have been approved by the Philippine Financial
   Reporting Standards Council and adopted by the Philippine Securities and Exchange
   Commission (SEC).

   Changes in Accounting Policies and Disclosures
   The accounting policies adopted are consistent with those of the previous financial years except
   for the adoption of the following new and amended PFRS, amended PAS new and amended
   Philippine Interpretations based on IFRIC interpretations which became effective on
   January 1, 2010 and a voluntary change in accounting policy on revaluation increment on real
   estate properties carried at deemed cost.

   New Accounting Standards, Interpretations and Amendments Effective in 2010

   ·   PFRS 2, Share-based Payment (Amendment) - Group Cash-settled Share-based Payment
       Transactions, clarifies the scope and the accounting for group cash-settled share-based
       payment transactions.

   ·   PFRS 3 (Revised), Business Combinations, and PAS 27 (Amended), Consolidated and
       Separate Financial Statements, introduce a number of changes in the accounting for business
       combinations that will impact the amount of goodwill recognized, the reported results in the
       period that an acquisition occurs, and future reported results. PAS 27 (Amended) requires,
       among others, that (a) change in ownership interests of a subsidiary (that do not result in loss
       of control) will be accounted for as an equity transaction and will have no impact on goodwill
       nor will it give rise to a gain or loss; (b) losses incurred by the subsidiary will be allocated
       between the controlling and noncontrolling interests (previously referred to as “minority
       interests”), even if the losses exceed the noncontrolling equity investment in the subsidiary;
       and (c) on loss of control of a subsidiary, any retained interest will be remeasured to fair value
       and this will impact the gain or loss recognized on disposal. The changes introduced by the
       revised PFRS 3 must be applied prospectively, while the amended PAS 27 must be applied
       retrospectively, with certain exceptions.




                                                                            *SGVMC311721*
                                               -3-


·   PAS 39, Financial Instruments: Recognition and Measurement (Amendment) - Eligible
    Hedged Items, addresses only the designation of a one-sided risk in a hedged item, and the
    designation of inflation as a hedged risk or portion in particular situations. The amendment
    clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow
    variability of a financial instrument as a hedged item.

·   Philippine Interpretation IFRIC 17, Distributions of Non-cash Assets to Owners, provides
    guidance on accounting for arrangements whereby an entity distributes non-cash assets to
    shareholders either as a distribution of reserves or as dividends.

The adoption of the above changes did not have an impact on the consolidated financial
statements.

Improvements to PFRSs
Improvements to PFRSs, an omnibus of amendments to standards, deal primarily with a view to
removing inconsistencies and clarifying wordings. There are separate transitional provisions for
each standard.

The adoption of the following improvements in PFRS did not have a significant impact on the
consolidated financial statements:

·   PFRS 8, Operating Segments, clarifies that the segment assets and liabilities need only be
    reported when those assets and liabilities are included in measures that are used by the chief
    operating decision maker. As a Group’s chief operating decision maker does review segment
    assets and liabilities, the Group has continued to disclose this information in Note 30.

·   PAS 7, Statement of Cash Flows, states that only expenditure that results in a recognized asset
    can be classified as a cash flow from investing activities.

·   PAS 17, Leases, removes the specific guidance on classifying land as a lease. Prior to the
    amendment, leases on land were classified as operating leases. The amendment now requires
    that leases of land are classified as either “finance” or “operating” in accordance with the
    general principles of PAS 17.

The following improvements in PFRS are not relevant to the consolidated financial statements:

·   PFRS 2, Share-based Payment
·   PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations
·   PAS 1, Presentation of Financial Statements
·   PAS 36, Impairment of Assets
·   PAS 38, Intangible Assets
·   PAS 39, Financial Instruments: Recognition and Measurement
·   Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives
·   Philippine Interpretation IFRIC 16, Hedge of a Net Investment in a Foreign Operation

Deemed Cost Adjustment
In accordance with the general requirement under PFRS 1, First-time Adoption of Philippine
Financial Reporting Standards, the Group opted to close out the “Revaluation increment in real
                                           P
estate properties” account amounting to =896.1 million, net of related deferred income tax of
P397.2 million, as of January 1, 2008 to retained earnings. The revaluation increment pertains to
=
the remaining balance of the deemed cost adjustment on certain real estate inventories and
investment properties, which arose when the Group transitioned to PFRS in 2005 (see Notes 9, 14
and 28). The Group also adjusted its deferred income tax liability relating to the previous
                                                           P
revaluation increment, as of January 1, 2008, amounting to =170.3 million.

                                                                          *SGVMC311721*
                                              -4-


This adjustment to retained earnings has no effect on profit or loss and earnings per share for the
years ended December 31, 2010, 2009 and 2008.

New Accounting Standards, Interpretations and Amendments to
Existing Standards Effective Subsequent to December 31, 2010
The Group will adopt the following standards and interpretations enumerated below when these
become effective subsequent to January 1, 2011. Except as otherwise indicated, the Group does
not expect the adoption of these new and amended PFRS and Philippine Interpretations to have
significant impact on the consolidated financial statements. The relevant disclosures will be
included in the notes to the consolidated financial statements when these become effective.

Effective in 2011

·   PAS 24 (Amended), Related Party Disclosures, clarifies the definition of a related party to
    simplify the identification of such relationships and to eliminate inconsistencies in its
    application. The revised standard introduces a partial exemption of disclosure requirements for
    government related entities.

·   PAS 32, Financial Instruments: Presentation (Amendment) - Classification of Rights Issues,
    amends the definition of a financial liability in order to classify rights issues (and certain
    options or warrants) as equity instruments in cases where such rights are given pro-rata to all
    of the existing owners of the same class of an entity’s non-derivative equity instruments, or to
    acquire a fixed number of the entity’s own equity instruments for a fixed amount in any
    currency.

·   Philippine Interpretation IFRIC 14 (Amendment), Prepayments of Minimum Funding
    Requirement, provides guidance on assessing the recoverable amount of a net pension asset.
    The amendment permits an entity to treat the prepayment of a minimum funding requirement
    as an asset.

·   Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity
    Instruments, clarifies that equity instruments issued to a creditor to extinguish a financial
    liability qualify as consideration paid. The equity instruments issued are measured at their fair
    value. In case that this cannot be reliably measured, the instruments are measured at the fair
    value of the liability extinguished. Any gain or loss is recognized immediately in profit or
    loss.

Improvements to PFRSs 2010
The omnibus amendments to PFRSs issued in 2010 were issued primarily with a view to remove
inconsistencies and clarify wordings. The amendments are effective for annual periods beginning
on or after January 1, 2011, except as otherwise stated. The Group has not yet adopted the
following amendments and anticipates that these changes will have no material effect on the
consolidated financial statements.

·   PFRS 3, Business Combinations
·   PFRS 7, Financial Instruments: Disclosures
·   PAS 1, Presentation of Financial Statements
·   PAS 27, Consolidated and Separate Financial Statements
·   Philippine Interpretation IFRIC 13, Customer Loyalty Programmes




                                                                         *SGVMC311721*
                                                  -5-


   Effective in 2012

   ·   PFRS 7, Financial Instruments: Disclosures (Amendments) - Disclosures - Transfers of
       Financial Assets, will allow users of financial statements to improve their understanding of
       transfer transactions of financial assets (for example, securitizations), including understanding
       the possible effects of any risks that may remain with the entity that transferred the assets. The
       amendments also require additional disclosures if a disproportionate amount of transfer
       transactions are undertaken around the end of a reporting period.

   ·   PAS 12, Income Taxes (Amendment) - Deferred Tax: Recovery of Underlying Assets, provides
       a practical solution to the problem of assessing whether recovery of an asset will be through
       use or sale. It introduces a presumption that recovery of the carrying amount of an asset will
       normally be through sale.

   ·   Philippine Interpretation IFRIC 15, Agreements for Construction of Real Estate, covers
       accounting for revenue and associated expenses by entities that undertake the construction of
       real estate directly or through subcontractors. This Interpretation requires that revenue on
       construction of real estate be recognized only upon completion, except when such contract
       qualifies as construction contract to be accounted for under PAS 11, Construction Contracts,
       or involves rendering of services in which case revenue is recognized based on stage of
       completion. Contracts involving provision of services with the construction materials and
       where the risks and reward of ownership are transferred to the buyer on a continuous basis
       will also be accounted for based on stage of completion. The Group expects the adoption of
                                                      =
       this Philippine Interpretation to result in an P83.5 million decrease in retained earnings as of
       January 1, 2010 upon adoption in 2012.

   Effective in 2013

   ·   PFRS 9, Financial Instruments: Classification and Measurement, will eventually replace
       PAS 39, Financial Instruments: Recognition and Measurement, and introduces new
       requirements for classifying and measuring financial assets. Under PFRS 9, all financial
       assets are initially measured at fair value plus, in the case of a financial asset not at fair value
       through profit or loss, transaction costs. All financial assets that are currently in the scope of
       PAS 39 are divided into two classifications, namely (a) those measured at amortized cost and
       (b) those measured at fair value. Classification is made at the time the financial asset is
       initially recognized, which is when the entity becomes a party to the contractual provisions of
       the instrument.


3. Summary of Significant Accounting and Financial Reporting Policies

   Basis of Consolidation
   Basis of Consolidation from January 1, 2010
   The consolidated financial statements comprise the financial statements of the Parent Company
   and its subsidiaries (collectively referred to as “the Group”) as at December 31 of each year.




                                                                              *SGVMC311721*
                                              -6-


These subsidiaries and the percentage of ownership of the Parent Company in 2010 and 2009 are
as follows:

                                                           2010          2009
                 SLLPHI                                 100.00%        100.00%
                 SLRDC                                  100.00%        100.00%
                 MFC                                    100.00%              –
                 MIC                                     50.23%         50.23%
                 Biohitech                               50.00%         50.00%
                 NVTL                                      SPE            SPE

A subsidiary is an entity in which the Parent Company holds, directly or indirectly, more than half
of the issued share capital, or controls more than half of the voting power, or exercises control
over the operation and management of the subsidiary. An SPE is consolidated when the substance
of the relationship between the Parent Company and the SPE indicates that the SPE is controlled
by the Parent Company.

Subsidiaries, including the SPE, are fully consolidated from the date of acquisition, being the date
on which the Parent Company obtains control, and continue to be consolidated until the date when
such control ceases. Control exists when:

·   the activities of the subsidiary or the SPE are, in substance, being conducted on behalf of the
    Parent Company;
·   the Parent Company has, in substance, rights to obtain a majority of the benefits of the
    subsidiary or the SPE’s activities through an agreement, contract or other arrangement; and
·   the Parent Company has, in substance, the decision-making powers to control or obtain control
    over the subsidiary or SPE’s assets.

The consolidated financial statements and the financial statements of the subsidiaries and SPE are
prepared for the same reporting period as the Parent Company using consistent accounting
policies. All significant intercompany transactions and balances, including intercompany profits
and losses and unrealized profits and losses, are eliminated in the consolidated financial statements
in full.

Losses within a subsidiary are attributed to the noncontrolling interest even if that results in a
deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction. If the Parent Company loses control over a subsidiary, it:

·   derecognizes the assets (including goodwill) and liabilities of the subsidiary;
·   derecognizes the carrying amount of any noncontrolling interest;
·   derecognizes the cumulative translation differences, if any, recorded in equity;
·   recognizes the fair value of the consideration received;
·   recognizes the fair value of any investment retained;
·   recognizes any surplus or deficit in profit or loss; and,
·   reclassifies the Parent Company’s share of components previously recognized in other
    comprehensive income or profit or loss or retained earnings, as appropriate.




                                                                         *SGVMC311721*
                                               -7-


Basis of Consolidation Prior to January 1, 2010
The above mentioned requirements were applied on a prospective basis. The following
differences, however, are carried forward in certain instances from the previous basis of
consolidation:

·   Acquisitions of noncontrolling interests prior to January 1, 2010 were accounted for using the
    Parent Company extension method, whereby, the difference between the consideration and the
    book value of the share of the net assets acquired were recognized in goodwill.
·   Losses incurred by the Group were attributed to the noncontrolling interest until the balance
    was reduced to nil. Any further excess losses were attributed to the Parent Company, unless
    the noncontrolling interest had a binding obligation to cover these. Losses prior to
    January 1, 2010 were not reallocated between the noncontrolling interest and the equity
    holders of the Parent Company.
·   Upon loss of control, the Group accounted for the investment retained at its proportionate
    share of net asset value at the date control was lost. The carrying value of such investments at
    January 1, 2010 have not been restated.

Noncontrolling Interests
Noncontrolling interests represent the portion of income and expense and net assets in the
subsidiaries and SPE not held by the Parent Company. These are presented separately in the
consolidated statement of comprehensive income and within equity in the consolidated balance
sheet, separate from the equity attributable to the holders of the Parent Company. Noncontrolling
interests represent the interests of noncontrolling shareholders in MIC, Biohitech and NVTL.

Business Combinations and Goodwill
Business Combinations from January 1, 2010
Business combinations are accounted for using the acquisition method. The cost of an acquisition
is measured as the aggregate of the consideration transferred, measured at acquisition date fair
value and the amount of any noncontrolling interest in the acquiree. For each business
combination, the acquirer measures the noncontrolling interest in the acquiree either at fair value
or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are
expensed and included in general and administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value at the acquisition date
through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at
the acquisition date. Subsequent changes to the fair value of the contingent consideration which is
deemed to be an asset or liability will be recognized in accordance with PAS 39 either in profit or
loss or as a change to other comprehensive income. If the contingent consideration is classified as
equity, it should not be remeasured until it is finally settled within equity.




                                                                          *SGVMC311721*
                                              -8-


Goodwill acquired in a business combination is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount recognized for noncontrolling interest
over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than
the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or
loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit
from the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation. Goodwill
disposed of in this circumstance is measured based on the relative values of the operation disposed
of and the portion of the cash-generating unit retained.

When subsidiaries are sold, the difference between the selling price and net assets and goodwill is
recognized in the consolidated statement of comprehensive income.

Business Combinations Prior to January 1, 2010
In comparison to the above-mentioned requirements, the following differences applied:

Business combinations were accounted for using the purchase accounting method. This involves
recognizing identifiable assets (including previously unrecognized intangible assets) and liabilities
(including contingent liabilities but excluding future restructuring) of the acquired business at fair
value. Transaction costs directly attributable to the acquisition formed part of the acquisition
costs. The noncontrolling interest (formerly known as ‘minority interest’) was measured at the
proportionate share of the acquiree’s identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Any additional
acquired share of interest did not affect previously recognized goodwill.

When the Group acquired a business, embedded derivatives separated from the host contract by
the acquiree were not reassessed on acquisition unless the business combination resulted in a
change in the terms of the contract that significantly modified the cash flows that otherwise would
have been required under the contract.

Contingent consideration was recognized if, and only if, the Group had a present obligation, the
economic outflow was more likely than not and a reliable estimate was determinable. Subsequent
adjustments to the contingent consideration were recognized as part of goodwill.

Cash
Cash includes cash on hand and in banks.

Financial Assets and Financial Liabilities
The Group recognizes a financial asset or a financial liability in the consolidated balance sheet
when it becomes a party to the contractual provisions of the instrument.




                                                                         *SGVMC311721*
                                                -9-


All regular way purchases and sales of financial assets are recognized on the trade date, i.e., the
date that the Group commits to purchase the asset. Regular way purchases or sales are purchases
or sales of financial assets that require delivery of assets within the period generally established by
regulation or convention in the market place.

Financial assets and financial liabilities are recognized initially at fair value. Transaction costs are
included in the initial measurement of all financial assets and financial liabilities, except for
financial instruments measured at fair value through profit or loss (FVPL). Fair value is
determined by reference to the transaction price or other market prices. If such market prices are
not readily determinable, the fair value of the consideration is estimated as the sum of all future
cash payments or receipts, discounted using the prevailing market rates of interest for similar
instruments with similar maturities.

Financial assets are classified into the following categories:
a. Financial assets at FVPL
b. Loans and receivables
c. Held-to-maturity (HTM) investments
d. AFS financial assets

Financial liabilities, on the other hand, are classified into the following categories:
a. Financial liabilities at FVPL
b. Other financial liabilities

The Group determines the classification at initial recognition and, where allowed and appropriate,
re-evaluates this classification at every balance sheet date.

a. Financial assets or financial liabilities at FVPL
   Financial assets or financial liabilities classified in this category are designated by
   management on initial recognition when the following criteria are met:

    ·   the designation eliminates or significantly reduces the inconsistent treatment that would
        otherwise arise from measuring the assets or recognizing gains or losses on them on a
        different basis; or
    ·   the assets and liabilities are part of a group of financial assets and financial liabilities,
        respectively, or both financial assets and financial liabilities, which are managed and their
        performance is evaluated on a fair value basis, in accordance with a documented risk
        management or investment strategy; or
    ·   the financial instrument contains an embedded derivative, unless the embedded derivative
        does not significantly modify the cash flows or it is clear, with little or no analysis, that it
        would not be separately recorded.

    Financial assets and financial liabilities at FVPL are carried in the consolidated balance sheet
    at fair value. Changes in fair value are accounted for directly in profit or loss. Interest earned
    is recorded as interest income, while dividend income is recorded as other income according to
    the terms of the contract, or when the right of the payment has been established. Interest
    incurred is recorded as finance cost.

    The Group’s financial assets at FVPL consist of investments in quoted equity securities that
    are held for trading as of December 31, 2010 and 2009 (see Note 7). The Group has not
    designated any financial liability at FVPL as of December 31, 2010 and 2009.




                                                                           *SGVMC311721*
                                            - 10 -


   Embedded derivatives
   An embedded derivative is separated from the host financial or non-financial contract and
   accounted for as a derivative if all of the following conditions are met: (1) the economic
   characteristics and risks of the embedded derivatives are not closely related to the economic
   characteristic of the host contract; (2) a separate instrument with the same terms as the
   embedded derivative would meet the definition of a derivative; and (3) the hybrid or combined
   instrument is not recognized at FVPL.

   The Group assesses whether embedded derivatives are required to be separated from host
   contracts when the Group first becomes a party to the contract. Reassessment only occurs if
   there is a change in the terms of the contract that significantly modifies the cash flows that
   would otherwise be required.

   Embedded derivatives that are bifurcated from the host contracts are accounted for as financial
   assets at FVPL. Changes in fair values are included in profit or loss.

   The Group has no embedded derivatives as of December 31, 2010 and 2009.

b. Loans and receivables
   Loans and receivables are non-derivative financial assets with fixed or determinable payments
   that are not quoted in an active market. They arise when the Group provides money, goods
   or services directly to a debtor with no intention of trading the receivables. Loans and
   receivables are carried at cost or amortized cost in the consolidated balance sheet.
   Amortization is determined using the effective interest rate method. Loans and receivables are
   included in current assets if maturity is within 12 months from the balance sheet date.
   Otherwise, these are classified as noncurrent assets.

    Included in this category are the Group’s cash, receivables and deposits as of
    December 31, 2010 and 2009 (see Note 32).

c. HTM investments
   HTM investments are non-derivative financial assets with fixed or determinable payments and
   fixed maturities which the Group has the positive intention and ability to hold to maturity.
   HTM investments are carried at cost or amortized cost in the consolidated balance sheet.
   Amortization is determined using the effective interest rate method. Assets under this
   category are classified as current assets if maturity is within 12 months from the balance sheet
   date and as noncurrent assets if maturity is more than a year.

    The Group has not designated any financial asset as HTM investments as of
    December 31, 2010 and 2009.

d. AFS financial assets
   AFS financial assets are non-derivative financial assets that are either designated in this
   category or not classified in any of the other categories. Financial assets may be designated at
   initial recognition as AFS if they are purchased and held indefinitely and may be sold in
   response to liquidity requirement or changes in market conditions. AFS financial assets are
   carried at fair value in the consolidated balance sheet. Changes in the fair value of
   investments classified as AFS financial assets are recognized as other comprehensive income,
   except for the foreign exchange fluctuations on AFS debt securities and the related effective
   interest which are taken directly to profit or loss. These changes in fair values are recognized




                                                                       *SGVMC311721*
                                              - 11 -


    in equity until the investment is sold, collected or otherwise disposed of, or until the
    investment is determined to be impaired, at which time the cumulative gain or loss previously
    reported in the consolidated statement of comprehensive income and in equity is included in
    profit or loss.

    Unquoted AFS financial assets that do not have ready market prices are measured at cost, less
    allowance for impairment, if any, since their fair market value cannot be reliably measured.

    The Group’s AFS financial assets consist of investments in quoted and unquoted equity
    securities, preferred shares and club membership shares as of December 31, 2010 and 2009
    (see Notes 12 and 32).

e. Other financial liabilities
   This category pertains to financial liabilities that are not held for trading or not designated at
   FVPL upon the inception of the liability. These include liabilities arising from operations
   (e.g., payables and accruals) or borrowings (e.g., loans and obligations arising from finance
   lease). The liabilities are recognized initially at fair value and are subsequently carried at
   amortized cost, taking into account the impact of applying the effective interest rate method of
   amortization (or accretion) for any related premium (or discount) and any directly attributable
   transaction costs. Gains and losses on amortization and accretion are recognized in profit or
   loss.

    Included in this category are the Group’s short-term and long-term loans and borrowings,
    accounts payable and other liabilities and due to related parties as of December 31, 2010
    and 2009 (see Note 32).

Determination of Fair Value
The fair value of financial instruments traded in active markets at the balance sheet date is based
on their quoted market price or dealer price quotations (bid price for long positions and ask price
for short positions), without any deduction for transaction costs. When current bid and asking
prices are not available, the price of the most recent transaction provides evidence of the current
fair value as long as there has not been a significant change in economic circumstances since the
time of the transaction.

For all other financial instruments not listed in an active market, the fair value is determined by
using appropriate valuation techniques. Valuation techniques include net present value
techniques, comparison to similar instruments for which market observable prices exist, options
pricing models and other relevant valuation models.

Derecognition of Financial Assets and Financial Liabilities
Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is derecognized where:

·   the rights to receive cash flows from the asset have expired; or
·   the Group retains the right to receive cash flows from the asset, but has assumed an obligation
    to pay them in full without material delay to a third party under a ‘pass-through’ arrangement;
    or
·   the Group has transferred its rights to receive cash flows from the asset and either (a) has
    transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
    retained substantially all the risks and rewards of the asset, but has transferred control of the
    asset.


                                                                           *SGVMC311721*
                                              - 12 -


Where the Group has transferred its rights to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards of the asset nor transferred control
of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the
asset. Continuing involvement that takes the form of a guarantee over the transferred asset is
measured at the lower of original carrying amount of the asset and the maximum amount of
consideration that the Group could be required to pay.

Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or has expired.

Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in profit or loss.

Day 1 Difference
Where the transaction price in a non-active market is different from the fair value of other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable markets, the Group recognizes the difference
between the transaction price and fair value (a Day 1 difference) in profit or loss unless it qualifies
for recognition as some other type of asset. In cases where data used is not observable, the
difference between the transaction price and model value is only recognized in profit or loss when
the inputs become observable or when the instrument is derecognized. For each transaction, the
Group determines the appropriate method of recognizing the Day 1 difference.

Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated
balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized
amounts and there is an intention to settle on a net basis, or to realize the asset and settle the
liability simultaneously. This is not generally the case with master netting agreements, and the
related assets and liabilities are presented gross in the consolidated balance sheet.

Impairment of Financial Assets
The Group assesses at each balance sheet date whether a financial asset or group of financial
assets is impaired.

Assets carried at amortized cost
The Group first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. Objective evidence includes observable data that
comes to the attention of the Group about loss events such as, but not limited to, significant
financial difficulty of the counterparty, a breach of contract, such as a default or delinquency in
interest or principal payments, probability that the borrower will enter bankruptcy or other
financial reorganization. If it is determined that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, the asset is included in the group
of financial assets with similar credit risk characteristics and that group of financial assets is
collectively assessed for impairment. Assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognized are not included in the collective
assessment of impairment.




                                                                          *SGVMC311721*
                                              - 13 -


If there is objective evidence that an impairment loss on loans and receivables carried at amortized
cost has been incurred, the amount of loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset’s original effective interest rate
(i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset
is reduced either directly or through the use of an allowance account. The amount of loss is
recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed by adjusting the allowance account. The amount of the
reversal is recognized in profit or loss. Interest income continues to be accrued on the reduced
carrying amount based on the original effective interest rate of the asset. Loans, together with the
associated allowance, are written off when there is no realistic prospect of future recovery and all
collateral, if any, has been realized or has been transferred to the Group. If in a subsequent year,
the amount of the estimated impairment loss increases or decreases because of an event occurring
after the impairment was recognized, the previously recognized impairment loss is increased or
reduced by adjusting the allowance for impairment losses account. If a future write-off is later
recovered, the recovery is recognized in profit or loss under “Other income (charges)” account.
Any subsequent reversal of an impairment loss is recognized in profit or loss under “Other income
(charges)” account, to the extent that the carrying value of the asset does not exceed its amortized
cost at reversal date.

Assets carried at cost
If there is objective evidence that an impairment loss on an unquoted equity instrument that is not
carried at fair value or on a derivative asset that is linked to and must be settled by delivery of such
unquoted equity instrument has been incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated cash flows discounted at
the current market rate of return for a similar financial asset.

AFS financial assets
In case of equity investments classified as AFS financial assets, impairment indicators would
include a significant or prolonged decline in the fair value of the investments below its cost.
Where there is evidence of impairment, the cumulative loss, measured as the difference between
the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognized in profit or loss, is removed from equity and recognized in profit or loss.
Impairment losses on equity investments are not reversed through profit or loss. Increases in fair
value after impairment are recognized as other comprehensive income and in equity.

Real Estate Inventories
Real estate inventories are valued at the lower of cost and net realizable value.

Costs consist of all expenditures incurred which are directly attributable to the acquisition,
development and construction of the real estate properties. The carrying values of revalued real
estate properties as of January 1, 2004 transferred to real estate inventories in 2005 were
considered as the assets’ deemed cost as of said date in accordance with PFRS 1. Interest on loans
(borrowing costs) incurred during the development or construction phase were also capitalized as
part of the cost of the real estate inventories.

Net realizable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and estimated costs necessary to make the sale.



                                                                           *SGVMC311721*
                                             - 14 -


Interest in a Jointly Controlled Entity
The Parent Company has an interest in a jointly controlled entity, whereby the venturers have a
contractual arrangement that establishes joint control over the economic activities of the entity.
The agreement requires unanimous agreement for financial and operating decisions among the
venturers. The Parent Company recognizes its interest in the jointly controlled entity using the
equity method. The interest in a jointly controlled entity is carried in the consolidated balance
sheet at cost plus post-acquisition changes in the Parent Company’s share in the net assets of the
jointly controlled entity, less any impairment in value. The consolidated statement of
comprehensive income reflects the Parent Company’s share in the results of the operations of the
jointly controlled entity.

Adjustments are made in the consolidated financial statements to eliminate the Parent Company’s
share of intragroup balances, transactions and unrealized gains and losses on such transactions
between the Parent Company and its jointly controlled entity. Losses on transactions are
recognized immediately if the loss provides evidence of an impairment loss.

Investment in an Associate
Investment in an associate, on which the Group has significant influence, is accounted for under
the equity method in accordance with PAS 28. Under this method, the cost of investment in an
associate is increased or decreased by the Group’s equity in net earnings or losses and share in
other changes in the net assets of the associate since date of acquisition. Dividends received from
the associate are not considered income but are deducted from the “Investment in an associate”
account.

The equity method of accounting is discontinued from the date that the Group ceases to have
significant influence over an associate and from that date, the investment is accounted for in
accordance with the provisions of PAS 39, provided that the associate does not become a
subsidiary as defined in PAS 27, or a joint venture as defined in PAS 31, Interests in Joint
Ventures.

The carrying amount of the investment at the date it ceases to be an associate is regarded as its
cost on initial measurement as a financial asset in accordance with PAS 39. The carrying value of
the investment is reviewed periodically for any impairment when events or changes in
circumstances indicate that the carrying value may be permanently unrecoverable.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the
Group does not recognize further losses unless it has incurred obligations or made payments on
behalf of the associate.

Property and Equipment
Property and equipment (except for land) is stated at cost, excluding the costs of day-to-day
servicing, less accumulated depreciation and any accumulated impairment in value. Land is stated
at cost less any accumulated impairment in value.

The initial cost of property and equipment comprises its purchase price, any related capitalizable
borrowing costs and other directly attributable costs of bringing the property and equipment to its
working condition and location for its intended use. Expenditures incurred after the property and
equipment have been put into operation, such as repairs and maintenance costs, are normally




                                                                         *SGVMC311721*
                                             - 15 -


charged to income in the period in which the costs are incurred. In situations where it can be
clearly demonstrated that the expenditures have resulted in an increase in the future economic
benefits expected to be obtained from the use of an item of property and equipment beyond its
originally assessed standard of performance, the expenditures are capitalized as an additional cost
of property and equipment.

Depreciation commences when an asset is in its location and condition capable of being operated
in the manner intended by the management. Depreciation ceases at the earlier of the date that the
asset is classified as held for sale in accordance with PFRS 5 and the date the asset is
derecognized.

Depreciation is computed on the straight-line basis over the estimated useful lives of the assets as
follows:

                                                                 No. of Years
                 Land improvements                                    5 to 25
                 Building and improvements                            5 to 25
                 Machinery and equipment                              3 to 10
                 Transportation equipment                             5 to 10
                 Furniture and fixtures                                     5

In 2009, the Parent Company changed the useful lives of its property and equipment. The change
in estimate was based on the evaluation of management and was applied prospectively
(see Note 4).

The assets’ estimated useful lives and depreciation method are reviewed periodically to ensure that
the periods and method of depreciation are consistent with the expected pattern of economic
benefits from the items of property and equipment.

When assets are sold or retired, their costs and accumulated depreciation, including any
accumulated impairment in value, are eliminated from the accounts. Any gain or loss resulting
from their disposal is included in profit or loss.

Construction in progress is stated at cost. This includes cost of construction, borrowing costs
incurred during the development or construction phase and other direct costs. Borrowing costs are
capitalized until the property is completed and becomes operational. Construction in progress is
not depreciated until such time as the relevant assets are completed and put into operational use.
The capitalized interest is amortized over the estimated useful life of the related assets.

Investment Properties
The Group’s investment properties consist of land not used in operations and land and building
held for lease. Investment properties are measured initially at cost, including transaction costs.
The revalued amount of the land is taken as their deemed cost in accordance with PFRS 1 as of the
date of adoption.

Investment properties are subsequently measured at cost less accumulated depreciation (except for
land) and any accumulated impairment in value. Land is subsequently carried at cost less any
impairment in value.




                                                                        *SGVMC311721*
                                              - 16 -


Depreciation of investment properties commences once it becomes available for use and is
calculated on a straight-line basis over the estimated useful life of 25 years. Depreciation ceases at
the earlier of the date that the asset is classified as held for sale in accordance with PFRS 5 and the
date the asset is derecognized. The estimated useful life and depreciation method are reviewed
periodically to ensure that the period and method of depreciation are consistent with the expected
pattern of economic benefits from the items of investment property.

Investment properties are derecognized when either they have been disposed of or when the
investment properties are permanently withdrawn from use or no future economic benefit is
expected from its disposal. Any gain or loss on the retirement or disposal of investment properties
is recognized in profit or loss in the year of retirement or disposal.

Transfers are made to investment properties when, and only when, there is a change in use,
evidenced by the end of owner occupation or commencement of an operating lease to another
party.

Transfers are made from investment properties when, and only when, there is a change in use,
evidenced by commencement of owner occupation or commencement of development with a view
to sell. When an entity decides to dispose of an investment property without development, it
continues to treat the property as an investment property until it is derecognized (eliminated from
the consolidated balance sheet) and does not treat it as inventory. Similarly, if an entity begins to
redevelop an existing investment property for continued future use as investment property, the
property remains as investment property and is not reclassified as owner-occupied property during
the redevelopment.

Transfers between investment property, owner-occupied property and inventories do not change
the carrying amount of the property transferred and they do not change the cost of that property for
measurement or disclosure purposes.

Construction in progress is stated at cost. This includes cost of construction, borrowing costs
incurred during the development or construction phase and other direct costs. Borrowing costs are
capitalized until the investment property is completed and becomes operational. Construction in
progress is not depreciated until such time as the relevant assets are completed and put into
operational use. The capitalized interest is amortized over the estimated useful life of the related
assets.

Franchise Fee
The franchise fee, presented as part of “Other noncurrent assets” in the consolidated balance sheet,
is accounted for at cost less accumulated amortization and any accumulated impairment in value.
Costs incurred for the renewal of the Parent Company’s franchise for another 25 years starting
November 23, 1997 have been capitalized and are amortized over the period covered by the new
franchise (see Note 15). The carrying value of the franchise is reviewed for impairment when
these are indicators of impairment and any impairment loss is recognized in profit or loss.

Impairment of Nonfinancial Assets
The Group assesses at each balance sheet date whether there is an indication that its interest in a
jointly controlled entity, property and equipment, investment properties, goodwill, franchise fee
and investment in an associate may be impaired. If any such indication exists, or when annual
impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable
amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair
value less costs to sell and its value in use and is determined for an individual asset, unless the
asset does not generate cash inflows that are largely independent of those from other assets or




                                                                          *SGVMC311721*
                                               - 17 -


groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset
is considered impaired and is written down to its recoverable amount. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the
asset. Impairment losses are recognized in profit or loss in those expense categories consistent
with the function of the impaired asset.

An assessment is made at each balance sheet date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognized impairment loss is
reversed only if there has been a change in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized. If that is the case, the carrying value of the
asset is increased to its recoverable amount. That increased amount cannot exceed the carrying
amount that would have been determined, net of depreciation and amortization, had no impairment
loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss.
After such a reversal, the depreciation and amortization charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its
remaining useful life.

Goodwill
Goodwill is reviewed for impairment annually, or more frequently if events or changes in
circumstances indicate that the carrying value not be recoverable.

Impairment is determined for goodwill by assessing the recoverable amount of the cash-generating
unit (or group of cash-generating units’) to which the goodwill relates. Recoverable amount is the
higher of the cash-generating unit’s (or group of cash-generating units’) fair value less costs to sell
and its value in use. However, it is not always necessary to determine both the cash-generating
unit’s (or group of cash-generating units’) fair value less costs to sell and its value in use. If either
of these amounts exceed the goodwill’s carrying amount, the cash-generating unit is not impaired
and it is not necessary to estimate the other amount.

Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is
less than the carrying amount of the cash-generating unit (or group of cash-generating units) to
which goodwill has been allocated, an impairment loss is recognized immediately in the
consolidated statement of comprehensive income. Impairment losses relating to goodwill cannot
be reversed for subsequent increases in its recoverable amount in future periods.

The Group performs its annual impairment test of goodwill as of December 31 of each year.

Capital Stock
Capital stock represents the portion of the paid in capital representing the total par value of the
shares issued. When the Parent Company issues more than one class of stock, a separate account
is maintained for each class of stock and the number of shares issued. Incremental costs incurred
directly attributable to the issuance of new shares are shown in equity as a deduction from
proceeds, net of tax.

The Parent Company’s shares which are acquired and held by a subsidiary (treasury shares) are
deducted from equity and accounted for at cost. No gain or loss is recognized in profit or loss on
the purchase, sale, issue or cancellation of the Parent Company’s own equity instruments. Any
difference between the carrying amount and the consideration is recognized as additional paid-in
capital.




                                                                            *SGVMC311721*
                                              - 18 -


Deposits for Future Stock Subscription
Deposits for future stock subscription represent the deposits received by the Parent Company from
a person or entity, which may or may not be an existing stockholder, to subscribe for a fixed
number of shares in any currency in the Parent Company’s capital stock. This will be applied as
payment upon issuance or subscription of the shares of stock.

Retained Earnings
Retained earnings represent the cumulative balance of net income or loss, dividend distributions
and effects of changes in accounting policy.

Unappropriated retained earnings represent that portion which is free and can be declared as
dividends to stockholders, after adjustments for any unrealized items, which are considered not
available for dividend declaration.

Appropriated retained earnings represent that portion which has been restricted and therefore is
not available for any dividend declaration.

Dividend Distribution
Dividends are recognized as a liability and deducted from equity when declared by the BOD of the
Parent Company. Dividends for the year that are declared after the balance sheet date are dealt
with as an event after the balance sheet date.

Earnings Per Share
Basic earnings per share (EPS) is computed by dividing the net income attributable to equity
holders of the Parent Company for the year by the weighted average number of common shares
outstanding during the year after giving retroactive effect to stock dividends declared and stock
rights exercised during the year, if any.

Diluted EPS is calculated by dividing the net income attributable to equity holders of the Parent
Company for the year by the weighted average number of common shares outstanding during the
year plus the weighted average number of common shares that would be issued on conversion of
all the dilutive potential common shares into common shares.

The Parent Company currently does not have potential dilutive common shares.

Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received, excluding discounts and sales taxes. The Group assesses its revenue
arrangements against specific criteria in order to determine if it is acting as principal or agent. The
Group has concluded that it is acting as an agent in its club racing operations and as principal in all
other arrangements (i.e., real estate sales and rental services). The following specific recognition
criteria must also be met before revenue is recognized:

Commission income from club races
Revenue is recognized as earned based on a percentage of gross receipts from ticket sales from
horse racing operations in accordance with the Parent Company’s franchise agreement.

Real estate sales
Revenue from the sale of condominium units and residential properties from the joint venture,
where there are material obligations under the sales contract to provide improvements after the
property is sold, are recognized under the percentage-of-completion method. Under this method,
revenue on sale is recognized as the related obligations are fulfilled.

                                                                          *SGVMC311721*
                                             - 19 -


Revenue on sales of real estate properties where a sufficient down payment has been received, the
collectability of the sales price is reasonably assured, the refund period has expired, the
receivables are not subordinated and the seller is not obligated to complete improvements, is
accounted for under the full accrual method. If the criterion of full accrual method were not
satisfied, any cash received by the Group is considered as trade payable and buyers’ deposits and
included as part of “Accounts payable and other liabilities” in the consolidated balance sheet.

Rental income from stables, building and other facilities
Revenue from the lease of stables, building and other facilities is recognized in the consolidated
statement of comprehensive income on a straight-line basis over the lease term.

Interest income
Revenue is recognized as the interest accrues taking into account the effective yield on the asset.

Dividend income
Revenue is recognized when the Group’s right to receive the payment is established.

Cost of Sales and Services and Expenses
Cost of club races, cost of rental services and expenses are recognized in profit or loss at the date
they are incurred.

Cost of real estate sales pertains to the cost of the land and is recognized under the percentage-of-
completion method, if the criterion of the full accrual method are not satisfied.

Selling expense pertains to the marketing fees related to the real estate sales.        General and
administrative expenses constitute cost of administering the business.

Other Comprehensive Income
Items of income and expense (including items previously presented under the consolidated
statement of changes in equity) that are not recognized in profit or loss for the year are recognized
as other comprehensive income and are presented as other comprehensive income in the
consolidated statement of comprehensive income. Other comprehensive income of the Group
pertains to gains and losses on remeasuring AFS financial assets.

Retirement Benefits Cost
Retirement benefits cost is determined using the projected unit credit actuarial valuation method.
This method reflects the services rendered by employees to date and incorporates assumptions
concerning employee’s projected salaries. Retirement benefits cost includes current service cost,
interest cost, expected return on plan assets, amortization of actuarial gains and losses over the
expected remaining working lives of the covered employees and amortization of unrecognized
past service cost.

Actuarial gains and losses are recognized as income or expense when the cumulative unrecognized
actuarial gains or losses exceed the corridor (10% of the higher of the present value of the defined
benefit obligation and the fair values of the plan assets). Past service cost is recognized as an
expense on a straight-line basis over the average period until the benefits become vested. If the
benefits are already vested immediately following the introduction of, or changes to, the
retirement plan, past service cost is recognized immediately.

The accrued retirement benefits is the aggregate of the present value of the defined benefit
obligation at the balance sheet date, plus any actuarial gains or losses not recognized less any past
service cost not yet recognized and the fair value of plan assets out of which obligations are to be
settled directly. If such aggregate is negative (net pension asset), the asset is measured at the



                                                                         *SGVMC311721*
                                              - 20 -


lower of such aggregate or the aggregate of cumulative unrecognized net actuarial losses and past
service cost, and the present value of any economic benefits in the form of refund from the plan or
reductions in the future contributions to the plan.

Leases
The determination of whether the arrangement is, or contains a lease is based on the substance of
the arrangement at inception date of whether the fulfillment of the arrangement is dependent on
the use of a specific asset or assets or the arrangement conveys a right to use the asset. A
reassessment is made after inception of the lease only if one of the following applies:

(a) there is a change in contractual terms, other than a renewal or extension of the arrangement;
(b) a renewal option is exercised or extension granted, unless the term of the renewal or extension
    was initially included in the lease term;
(c) there is a change in the determination of whether fulfillment is dependent on a specified asset;
    or
(d) there is substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gives rise to reassessment for scenario (a), (c) or (d) and at the date of
renewal or extension period for scenario (b).

The Group as lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the inception of the lease at the fair value of the
leased property or, if lower, at the present value of minimum lease payments. In calculating the
present value of the minimum lease payments, the discount factor used is the interest rate implicit
in the lease, when it is practicable to determine it; otherwise, the Group’s incremental
borrowing rate is used. Initial direct costs incurred, if any, are included as part of the asset. Lease
payments are apportioned between the finance charge and the reduction of the outstanding liability
so as to achieve a constant periodic rate of interest on the remaining balance of the liability for
each period. Finance charges are charged directly against profit or loss.

Finance lease gives rise to depreciation expense for the asset as well as a finance expense for each
accounting period. The depreciation policy for leased assets is consistent with that for depreciable
assets that are owned.

Leases, where the lessor retains substantially all the risks and benefits of ownership of the asset,
are classified as operating leases. Operating lease payments are recognized as an expense in profit
or loss on a straight-line basis over the lease term.

The Group as a lessor
Leases where the Group does not transfer substantially all the risks and benefits of ownership of
the asset are classified as operating leases. Rental income is recognized in profit or loss on a
straight-line basis over the lease term. Initial direct costs incurred in negotiating an operating
lease are added to the carrying amount of the leased asset and recognized over the lease term on
the same basis as rental income. Contingent rents are recognized as revenue in the period in which
these are earned.

Borrowing Costs
Borrowing costs are capitalized if these are directly attributable to the acquisition or construction
of a qualifying asset. Capitalization of borrowing costs commences when the activities to prepare
the asset are in progress and expenditures and borrowing costs are being incurred. Borrowing
costs are capitalized until the assets are substantially ready for their intended use. All other
borrowing costs are expensed as incurred.

                                                                          *SGVMC311721*
                                              - 21 -


Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted at the balance
sheet date.

For income tax purposes, full revenue recognition on real estate sales is applied when more than
25% of the contract price has been collected in the year of sale; otherwise, the installment method
is applied where real estate sales are recognized based on collection multiplied by the gross profit
rates of the individual sales contracts.

Deferred income tax
Deferred income tax is recognized using the balance sheet liability method, on all temporary
differences at the balance sheet date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences, including
asset revaluations. Deferred income tax assets are recognized for all deductible temporary
differences, carryforward benefits of unused tax credits from excess minimum corporate income
tax (MCIT) over the regular corporate income tax (RCIT) and unused net operating loss carryover
(NOLCO), to the extent that it is probable that sufficient future taxable income will be available
against which the deductible temporary differences and carryforward benefits of unused tax credits
and unused tax losses can be utilized.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient future taxable income will be
available to allow all or part of the deferred income tax asset to be utilized. Unrecognized
deferred income tax assets are reassessed at each balance sheet date and are recognized to the
extent that it has become probable that sufficient future taxable income will allow the deferred
income tax assets to be recovered.

Deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are
expected to apply to the year when the assets are realized or the liabilities are settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable
right exists to offset current income tax assets against current income tax liabilities and the related
deferred income taxes relate to the same taxable entity and the same taxation authority.

Income tax relating to items recognized directly in equity is recognized in equity and not in profit
or loss.

VAT
Revenue, expenses and assets are recognized net of the amount of VAT except where the VAT
incurred on a purchase of assets or services are not recoverable from the taxation authority, in
which case the VAT is recognized as part of the cost of acquisition of the asset or as part of the
expense item as applicable.




                                                                          *SGVMC311721*
                                                 - 22 -


   Foreign Currency-Denominated Transactions and Translations
   Transactions denominated in foreign currency are recorded using the exchange rate at the date of
   the transaction. Outstanding monetary assets and liabilities denominated in foreign currencies are
   translated using the closing exchange rate at balance sheet date. All foreign exchange gains and
   losses are recognized in profit or loss.

   Provisions and Contingencies
   Provisions are recognized when: (1) the Group has a present obligation (legal or constructive) as a
   result of a past event; (2) it is probable that an outflow of resources embodying economic benefits
   will be required to settle the obligation; and (3) a reliable estimate of the amount of the obligation
   can be made. If the effect of the time value of money is material, provisions are determined by
   discounting the expected future cash flows at a pre-tax rate that reflects current market assessment
   of the time value of money and, where appropriate, the risks specific to the liability. Where
   discounting is used, the increase in the provision due to the passage of time is recognized as an
   interest expense. When the Group expects a provision or loss to be reimbursed, the
   reimbursement is recognized as a separate asset but only when the reimbursement is virtually
   certain and its amount is estimable.

   Contingent liabilities are not recognized in the consolidated financial statements but are disclosed
   unless the possibility of an outflow of resources embodying economic benefits is remote.

   Contingent assets are not recognized in the consolidated financial statements but are disclosed
   when an inflow of economic benefits is probable. Contingent assets are assessed continually to
   ensure that developments are appropriately reflected in the consolidated financial statements. If it
   has become virtually certain that an inflow of economic benefits will arise, the asset and the
   related income are recognized in the consolidated financial statements.

   Segment Reporting
   The Group’s operating businesses are organized and managed separately according to the nature
   of the products and services provided, with each segment representing a strategic business unit
   that offers different products and serves different markets. Financial information on the Group’s
   operating segments is presented in Note 30 to the consolidated financial statements.

   Events After the Balance Sheet Date
   Post year-end events that provide additional information about the Group’s position at the balance
   sheet date (adjusting events), if any, are reflected in the consolidated financial statements. Post
   year-end events that are not adjusting events are disclosed in the notes to the consolidated
   financial statements when material.


4. Significant Accounting Judgments, Estimates and Assumptions

   The preparation of the consolidated financial statements in accordance with PFRS requires the
   Group to make judgments, estimates and assumptions that affect the amounts reported in the
   consolidated financial statements and accompanying notes. The judgments, estimates and
   assumptions used are based on management’s evaluation of relevant facts and circumstances as of
   the date of the consolidated financial statements. Actual results could differ from the estimates
   and assumptions used. The effects of any change in estimates or assumptions are reflected in the
   consolidated financial statements when these become reasonably determinable.

   Estimates and judgments are continually evaluated and are based on historical experience and
   other factors, including expectations of future events that are believed to be reasonable under the
   circumstances.

                                                                            *SGVMC311721*
                                              - 23 -


Judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on
amounts recognized in the consolidated financial statements.

Determination if control exists in an investee company
Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries,
more than half of the voting power of an entity unless, in exceptional circumstances, it can be
clearly demonstrated that such ownership does not constitute control. Management has
determined that despite only having 50.23% ownership in MIC and 50.00% ownership in
Biohitech, it has control by virtue of its power to cast the majority of votes at meetings of the BOD
and control of the entity is by that BOD.

Consolidation of an SPE
An entity is considered an SPE and included in consolidation, even in cases when the Parent
Company owns less than one-half or none of the SPE’s equity, when the substance of the
relationship between the Parent Company and the SPE indicates that the SPE is controlled by the
Parent Company. While the Parent Company has no ownership interest in NVTL, this SPE is
included in consolidation because the Parent Company has the ability to govern its financial and
operating policies and its activities primarily benefit the Parent Company.

Determination if joint control exists in a jointly controlled entity
Joint control is the contractually agreed sharing of control over an economic activity and exists
only when the strategic financial and operating decisions relating to the activity require the
unanimous consent of the parties sharing control. The strategic financial and operating decisions
of the San Lazaro BPO Complex Joint Venture (San Lazaro JV) are being managed by a Tenant
Review Committee, which is composed of representatives from the venturers. Management has
determined that it has joint control since the strategic financial and operating decisions of the San
Lazaro JV are made jointly by the venturers through the said committee.

Classification of financial instruments
The Group classifies financial instruments, or their component parts, on initial recognition as a
financial asset, a financial liability or an equity instrument in accordance with the substance of the
contractual arrangement and the definitions of the instruments. The substance of financial
instruments, rather than their legal form, governs their classification in the consolidated balance
sheet. The Group determines the classification on initial recognition and re-evaluates this
designation at every balance sheet date, as appropriate. The Group’s classifications of financial
instruments are shown in Note 32.

Classification of leases
Management exercises judgment in determining whether substantially all the significant risks and
rewards of ownership of the leased assets are transferred to the Group. Lease agreements which
transfer to the Group substantially all the risks and rewards incidental to ownership of the leased
items are accounted for as finance leases. Otherwise, these are considered as operating leases.

Operating lease commitments - the Group as lessor
The Group has entered into lease agreements on certain items of its property and equipment and
investment properties. The Group has determined that it retains all the significant risks and
rewards of ownership of these properties since there will be no transfer of ownership of the leased
properties to the lessees. Accordingly, the lease agreements are accounted for as operating leases
(see Notes 13, 14 and 31).



                                                                         *SGVMC311721*
                                              - 24 -


Operating lease commitments - the Parent Company as lessee
The Parent Company has entered into a lease agreement for the lease of office and parking lots
where it has determined that the risks and rewards related to the leased assets are retained by the
lessor since there will be no transfer of ownership of the leased properties to the Parent Company.
As such, the lease agreement was accounted for as an operating lease (see Note 31).

Finance lease commitments - the Parent Company as lessee
The Parent Company has entered into lease agreements covering certain transportation equipment.
The Parent Company has determined that since the lease agreements provide for the turnover of
ownership of the transportation equipment at the end of the lease term, the risks and rewards of
ownership have been transferred to the Parent Company. Accordingly, the lease agreements are
accounted for as finance leases (see Notes 13 and 31).

Impairment of noncurrent nonfinancial assets, except goodwill
The Group assesses at each balance sheet date whether there is any indication that its interest in a
joint venture, property and equipment, investment properties, franchise fee and investment in an
associate may be impaired. Indication of impairment include: (a) decline in the asset’s market
value that is significantly higher than would be expected from normal use; (b) evidence of
obsolescence or physical damage; (c) internal reports indicate that the economic performance of
the asset will be worse than expected; etc. If such indication exists, the entity shall estimate the
recoverable amount of the asset, which is the higher of an asset’s or cash-generating unit’s fair
value less costs to sell and its value in use.

There were no indications that the total carrying value of the Group’s interest in a jointly
controlled entity, property and equipment and franchise fee as of December 31, 2010 and 2009
         P                    =
totaling =1,240.0 million and P1,333.0 million, respectively, were impaired (see Notes 11, 13 and
15).

                                                                               P
Accumulated impairment loss on investment property with carrying value of =37.7 million
            P
amounted to =23.3 million as of December 31, 2010 and 2009 (see Note 14). No impairment loss
was recognized in 2010, 2009 and 2008.

Recognition of deferred income tax assets
The Group reviews the carrying amount of the deferred income tax assets at each balance sheet
date and adjusts to the extent that it is no longer probable that sufficient future taxable profit will
be available to allow all or part of the deferred income tax assets to be utilized.

As of December 31, 2010 and 2009, the Parent Company recognized deferred income tax assets
               P                 =
amounting to =21.4 million and P20.7 million, respectively (see Note 26). Deferred income tax
                                         P                P
assets of the subsidiaries amounting to =0.8 million and =1.4 million as of December 31, 2010
and 2009 were not recognized as management believes that the subsidiaries may not have
sufficient future taxable income against which its unused NOLCO and excess MCIT over RCIT
may be applied (see Note 26).

Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation and uncertainty at
the balance sheet date that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.

Determination of fair value of financial instruments
Financial assets and financial liabilities, on initial recognition, are accounted for at fair value. The
fair values of financial assets and financial liabilities on initial recognition are normally the
transaction prices. In the case of those financial assets and financial liabilities that have no active

                                                                           *SGVMC311721*
                                            - 25 -


markets, fair values are determined using an appropriate valuation technique. The Group has
quoted financial assets carried at fair value referred with prices in active markets. There are no
financial assets and financial liabilities carried at fair value derived from valuation techniques.

                                                 P                       P
The fair values of financial assets amounted to =529.1 million and =575.1 million as of
December 31, 2010 and 2009. On the other hand, the fair values of financial liabilities amounted
    P                   P
to =755.1 million and =990.6 million as of December 31, 2010 and 2009, respectively
(see Note 32).

Estimation of allowance for doubtful accounts
The allowance for doubtful accounts relating to receivables is estimated based on two methods.
The amounts calculated using each of these methods are combined to determine the total
allowance to be provided. First, specific accounts are evaluated based on information that certain
customers may be unable to meet their financial obligations. In these cases, judgment is used
based on the best available facts and circumstances, including but not limited to, the length of
relationship with the customer and the customer’s current credit status based on third party credit
reports and known market factors, to record specific reserves against amounts due to reduce
receivable amounts expected to be collected. These specific reserves are re-evaluated and adjusted
as additional information received impacts the amounts estimated. Second, a collective
assessment of historical collection, write-off, experience and customer payment terms is made.

The amount and timing of recorded expenses for any period could therefore differ based on the
judgments or estimates made. An increase in the Group’s allowance for doubtful accounts will
increase its recorded operating expenses and decrease its current assets.

The carrying value of receivables (including noncurrent portion of real estate receivables), net of
                                                                                   P
allowance for doubtful accounts, as of December 31, 2010 and 2009 amounted to =315.1 million
    =
and P393.7 million, respectively. The allowance for doubtful accounts as of December 31, 2010
                      P                 P
and 2009 amounted to =3.5 million and =2.4 million, respectively (see Note 8).

                                               P              =            P
Provision for doubtful accounts amounted to =3.5 million, P2.4 million and =5.2 million in 2010,
2009 and 2008, respectively (see Notes 8 and 19). In 2010, 2009 and 2008, receivable accounts
                                                         P            P
without previous impairment allowance amounting =26.1 million, =54.2 million and =93.7     P
million, respectively, were written off (see Notes 8 and 25).

Determination of net realizable value of real estate inventories
The Group’s estimates of the net realizable values of real estate inventories are based on the most
reliable evidence available at the time the estimates are made of the amount that the inventories
are expected to be realized. These estimates consider the fluctuations of price or cost directly
relating to events occurring after the end of the period to the extent that such events confirm
conditions existing at the end of the period. A new assessment is made of the net realizable value
in each subsequent period. When the circumstances that previously caused inventories to be
written down below cost no longer exist or when there is a clear evidence of an increase in net
realizable value because of change in economic circumstances, the amount of the write-down is
reversed so that the new carrying amount is the lower of the cost and the revised net realizable
value.

                                                     P                      =
The Group’s real estate inventories amounting to =331.7 million and P396.3 million as of
December 31, 2010 and 2009, respectively, are carried at cost (see Note 9).

Estimation of percentage of completion
The Group estimates the percentage of completion of ongoing projects for purposes of accounting
for the estimated costs of development as well as real estate revenue to be recognized. The
percentage of completion is based on the technical evaluation of the project engineers.

                                                                       *SGVMC311721*
                                             - 26 -


                                  P              =                  =
Real estate revenues amounted to =148.4 million, P311.4 million and P311.8 million, respectively,
                                            =              =                  =
while cost of real estate sales amounted to P64.2 million, P169.4 million and P194.3 million in
2010, 2009 and 2008, respectively (see Note 18).

Estimation of impairment of AFS financial assets
The Group treats AFS financial assets as impaired when there has been a significant or prolonged
decline in the fair value below their cost or where other objective evidence of impairment exists.
The determination of what is ‘significant’ or ‘prolonged’ requires judgment. The Group treats
‘significant’ generally as 30% or more of original cost and ‘prolonged’ as greater than 12 months.
In addition, the Group evaluates other factors, including normal volatility in share price for quoted
equity securities and the future cash flows and the discount factors for unquoted equity securities.

As of December 31, 2010 and 2009, the aggregate carrying value of the Group’s AFS financial
                    =                   =
assets amounted to P29.7 million and P22.4 million, respectively (see Note 12). The Group
believes that its AFS financial assets are not impaired. Accordingly, no impairment loss was
recognized in 2010, 2009 and 2008.

Estimation of the useful lives of property and equipment and investment properties
The Group estimates the useful lives of property and equipment and investment properties based
on the internal technical evaluation and experience with similar assets. Estimated useful lives of
property and equipment and investment properties (the period over which the assets are expected
to be available for its intended use) are reviewed periodically and are updated if expectations
differ from previous estimates due to physical wear and tear, technical and commercial
obsolescence and other limits on the use of the assets.

In 2009, the Parent Company changed the useful lives of its property and equipment. The change
in estimate was based on the evaluation of management and was applied prospectively. The
                                                                          =
change in useful lives resulted in an increase in depreciation expense of P23.4 million 2009.

As of December 31, 2010 and 2009, the net book value of depreciable property and equipment
            P                  P
amounted to =896.8 million and =985.9 million, respectively (see Note 13). The net book value of
                                                  P                      P
depreciable investment property amounted to =296.2 million and =304.8 million as of
December 31, 2010 and 2009, respectively (see Note 14).

Impairment of goodwill
The Group reviews whether the goodwill, acquired through a business combination and amounting
   P
to =75.8 million as of December 31, 2010 and 2009, is impaired. The review is performed
annually, or more frequently if events or changes in circumstances indicate the carrying value may
be impaired.     Impairment is determined by assessing the recoverable amount of the
cash-generating unit to which the goodwill is allocated. Recoverable amount is the higher of the
cash-generating unit’s fair value less costs to sell and its value in use. Where the recoverable
amount of the cash-generating unit is less than its carrying amount, an impairment loss is
recognized in profit or loss.

Management performed its annual impairment test on goodwill and determined the recoverable
amount based on the fair value less costs to sell of the cash-generating unit to which the goodwill
is allocated. The fair value less costs to sell computation is based on available data from binding
sales transactions in an arm’s length transaction of similar assets and observable market prices less
incremental costs for disposing of the asset. As of December 31, 2010 and 2009, the recoverable
amount of the cash-generating unit to which the goodwill is allocated is greater than its carrying
amount. Accordingly, no impairment loss was recognized in 2010 and 2009 (see Note 5).




                                                                         *SGVMC311721*
                                                 - 27 -


   Provisions
   The Group provides for present obligations (legal or constructive) where it is probable that there
   will be an outflow of resources embodying economic benefits that will be required to settle said
   obligations. An estimate of the provision is based on known information at balance sheet date, net
   of any estimated amount that may be reimbursed to the Group. No provisions were recognized as
   of December 31, 2010 and 2009.

   Estimation of retirement benefits cost and obligations
   The determination of the obligation and retirement benefits cost is dependent on management’s
   selection of certain assumptions used by the actuary in calculating such amounts. Those
   assumptions are described in Note 22 and include, among others, discount rates, expected rate of
   return on plan assets and expected rate of salary increases. Actual results that differ from the
   Parent Company’s assumptions are accumulated and amortized over the future periods and
   therefore, generally affect the recognized expense and recorded obligation in such future periods.
   While the Parent Company believes that the assumptions are reasonable and appropriate,
   significant differences in the actual experience or significant changes in the assumptions may
   materially affect the retirement obligations.

                                                                                      P
   As of December 31, 2010 and 2009, unrecognized net actuarial gains amounted to =29.5 million
       =                                                                          =
   and P25.0 million, respectively, while accrued retirement benefits amounted to P64.2 million and
   =                                                                                  P
   P56.3 million, respectively (see Note 22). Retirement benefits cost amounted to =9.2 million,
   P12.7 million and =9.2 million in 2010, 2009 and 2008, respectively.
   =                 P


5. Business Combination and Goodwill

   On April 16, 2008, the BOD gave authority to the Parent Company’s management to enter into a
   MOA with MIC for the transfer of some assets of the Parent Company to the latter under a
   property-for-share exchange, subject to agreed conditions. These assets refer to certain properties
   and the gaming equipment.

   On July 24, 2008, the Parent Company and MIC entered into a MOA that sets forth and discusses
   the following conditions:

   i.     The Parent Company shall acquire at least 90% of the outstanding capital stock of MIC
          through subscription of the unsubscribed portion of the authorized capital stock of MIC.
   ii.    The Parent Company shall transfer, convey and assign the Sta. Cruz Property and the gaming
          machinery to MIC in exchange for shares of the capital stock of MIC.
   iii.                                                        =
          Exchange ratio shall be one share of MIC for every P1 zonal value of the Sta. Cruz Property.
   iv.    Prior to the property-for-share exchange and in order that the Parent Company shall have
          immediate control of MIC, the Parent Company shall subscribe to 107,360,137 shares of stock
          of MIC out of the unsubscribed portion of the latter’s authorized capital stock.
   v.     Subscription shall result in the acquisition by the Parent Company of at least 90% of the
          outstanding capital stock of MIC.




                                                                           *SGVMC311721*
                                             - 28 -


On January 23, 2009, in accordance with the MOA, the Parent Company executed a subscription
agreement to subscribe, out of the unissued portion of the authorized capital stock of MIC, at the
                      P
subscription price of =1 per share for 107,360,137 shares, equivalent to 50.23% ownership in
MIC, making the Parent Company the majority stockholder.

On February 5, 2009, the MOA with MIC was amended to reflect the use of the appraised value of
the Sta. Cruz property instead of the zonal value in the property-for-share exchange.

The MOA also provided that prior to the property-for-share exchange, MIC shall cause the
removal from its books of all assets and liabilities to be implemented as follows:

                                                                            P
i. MIC shall cause the payment of its existing liabilities in the amount of =14.2 million;
ii. MIC shall cause the assignment of its marketable securities and receivables to MIC’s previous
     stockholders;
iii. MIC shall spin off its five-hectare property in Tanza, Cavite to a new corporation (NEWCO)
     to be organized by MIC and assign the shares of the capital stock of NEWCO to MIC’s
     previous stockholders.

On December 6, 2010, the NEWCO was incorporated as Sierra Prime Properties Corporation.
The removal of the assets and liabilities in the books of MIC, as well as the transfer of said assets
and liabilities to NEWCO, have not yet been implemented as of April 27, 2011.

                                                        =
In 2010, the Parent Company has made partial payment of P26.8 million, representing the initial
                                                                             =
payment of 25% of the subscription price to MIC. The remaining balance of P80.5 million is
payable upon the call of the BOD of MIC.

The fair values of the identifiable assets and liabilities of MIC, which are equal to their carrying
values as at the date of acquisition were:

    Assets
    Cash                                                                 =
                                                                         P1,536,688
    Held for trading investments                                         28,338,400
    Receivables                                                          16,757,603
    Other current assets                                                    178,775
    Investment property                                                  37,679,140
                                                                         84,490,606
    Liabilities
    Due to related parties                                               (21,142,771)
    Accrued expenses and other liabilities                                  (364,495)
    Income tax payable                                                      (185,841)
                                                                         (21,693,107)
    Net assets                                                            62,797,499
    Noncontrolling interests (49.8%)                                     (31,254,315)
    Goodwill arising on acquisition                                       75,816,953
    Total consideration                                                P107,360,137
                                                                       =

                                               P
The total cost of the combination amounting to =107.4 million was broken down as follows:

    Cash consideration                                                   P26,840,034
                                                                         =
    Liability on subscription                                              80,520,103
                                                                        =
                                                                        P107,360,137




                                                                         *SGVMC311721*
                                                - 29 -


                                                                       =
   From January 23, 2009, the date of acquisition, MIC has contributed P0.8 million net income to
   the Group’s consolidated net income for 2009.

   Impairment Testing of Goodwill
   In 2010, the Group performed its annual impairment testing of goodwill related to the acquisition
   of MIC. The recoverable amount was determined based on the fair value less costs to sell. The
   fair value less costs to sell was based on available data from observable market prices of the shares
   of stock of MIC less incremental costs for disposing of the asset. The recoverable amount of MIC,
   including the goodwill, is higher than the Group’s share in MIC’s net assets plus goodwill, thus,
   no impairment loss was recognized in 2010.

   The calculation of the recoverable amount used on fair value less costs to sell is most sensitive to
   the market price of the shares in the active market. Management believes that no reasonably
   possible change in the market price would cause the carrying value of the Group’s share in MIC’s
   net assets and goodwill to materially exceed its recoverable amount.


6. Cash

                                                                         2010               2009
       Cash on hand                                                 P8,883,822
                                                                    =                =
                                                                                     P21,905,795
       Cash in banks                                               144,913,058        116,538,332
                                                                 P153,796,880
                                                                 =                  P138,444,127
                                                                                    =

   Cash in banks generally earn interest at the respective bank deposit rates.

                                                       =             =                =
   Interest income earned on cash in banks amounted to P0.6 million, P0.9 million and P1.2 million
   in 2010, 2009 and 2008, respectively (see Note 23).


7. Held for Trading Investments

                                                     =                       =
   Held for trading investments amounting to P30.4 million and P20.5 million as of
   December 31, 2010 and 2009 consist of quoted equity securities. The fair values of held for
   trading investments were determined based on published prices in the active market.

                                                                                      P
   Unrealized gains on fair value changes of held for trading investments amounted to =9.9 million
       P
   and =1.3 million in 2010 and 2009, respectively.


8. Receivables

                                                                        2010               2009
       Real estate receivables - current portion (Note 16)       P103,724,807
                                                                 =                  =
                                                                                    P178,507,752
       Receivables from off-track betting (OTB) operators          64,736,002         64,555,633
       Rent receivables                                            37,899,070         39,403,920
       Due from related parties (Note 27)                          19,642,017         19,405,554
       (Forward)




                                                                            *SGVMC311721*
                                             - 30 -


                                                                     2010              2009
    Dividends receivable (Note 11)                             P4,973,733
                                                               =                          P–
                                                                                          =
    Deposits and advances to contractors (Note 13)               2,382,631         2,382,631
    Claims for tax credit certificates (TCC)                     2,252,054         2,252,054
    Others (Note 27)                                           15,208,534         15,367,027
                                                              250,818,848        321,874,571
    Less allowance for doubtful accounts                         3,500,000         2,370,000
                                                            P247,318,848
                                                            =                  =
                                                                               P319,504,571

Real Estate Receivables
The real estate receivables of the Group are as follows:

                                                                   2010               2009
    Current                                                 P103,724,807
                                                            =                  =
                                                                               P178,507,752
    Noncurrent                                                67,787,165         74,216,187
    Total                                                   P171,511,972
                                                            =                  P252,723,939
                                                                               =

                                                                  P            P
Interest income earned from real estate receivables amounted to =12.1 million, =56.9 million,
=
P44.6 million in 2010, 2009 and 2008, respectively (see Note 23).

Certain real estate receivables were used by the Parent Company as collateral for its interest-
bearing loans obtained from a local bank (see Note 16).

Claims for TCC
                               =
The Parent Company accrued P2.3 million for its claim against the City of Manila for a tax refund
for undue payment of franchise tax on race tracks, amusement taxes on admission and real
property taxes levied against the Parent Company for the years 1994 and 1995 pursuant to Manila
Revenue Code of 1993 (Ordinance No. 7794).

The Trial Court rendered a decision in favor of the Company on March 7, 1997 ordering the City
                                                            P
of Manila to grant the Parent Company a tax refund of =2.3 million and for which a writ of
execution was already issued on May 12, 2003 by the Trial Court. Prior to the implementation of
the writ of execution, the Parent Company entered into a compromise agreement with the City of
Manila for an out-of-court settlement. The writ of execution issued by the Trial Court has not been
implemented as of April 27, 2011.

Allowance for Doubtful Accounts
The following table shows the rollforward of the allowance for doubtful accounts pertaining to
rent receivables as of December 31:

                                                                     2010              2009
    Balance at beginning of year                               P2,370,000
                                                               =                =
                                                                                P12,016,766
    Provision for the year (Note 19)                             3,500,000         2,370,000
    Written-off during the year                                (2,370,000)      (12,016,766)
    Balance at end of year                                     P3,500,000
                                                               =                 P2,370,000
                                                                                 =

                                                                  P           P
The Parent Company directly wrote-off receivables amounting to =26.1 million, =54.2 million and
P
=93.7 million in 2010, 2009 and 2008, respectively (see Note 25).




                                                                       *SGVMC311721*
                                                - 31 -


9. Real Estate Inventories

                                                                       2010               2009
       Sta. Cruz property                                       P267,649,327
                                                                =                  P322,663,478
                                                                                   =
       Carmona property                                           14,044,235         17,157,163
       Memorial lots                                              49,992,557         56,462,857
                                                                P331,686,119
                                                                =                  P396,283,498
                                                                                   =

   The Parent Company entered into agreements with certain real estate developers to develop
   properties of the Parent Company located in Sta. Cruz, Manila and Carmona, Cavite into
   residential complexes. Significant provisions of the agreements are discussed below.

   Sta. Cruz Property
   On February 26, 2005, the Parent Company entered into Joint Development Agreements (JDAs)
   with Avida Land Corporation (Avida) and Alveo Land Corporation [Alveo, formerly Community
   Innovations, Inc. (CII)] for the development of 5.2 hectares and 1.3 hectares (the “Project Areas”),
   respectively, of the Parent Company’s 11.6-hectare property located in Sta. Cruz, Manila, into a
   primary residential complex consisting of condominium buildings and townhouses (the “Project”).
   Under the JDAs, the Parent Company agreed and contributed to the Project its rights, title and
   interest in and to the Project Areas while Avida and Alveo agreed and provided the necessary
   capital to finance the Project and expertise to develop the Project Areas. In return for their
   respective contributions to the Project, the Parent Company, Avida and Alveo received their
   respective allocation as described in the JDAs. As of December 31, 2010, the project is still
   ongoing.

   Carmona Property
   On February 24, 2004, the Parent Company entered into a Joint Venture Agreement (JVA) with
   Century Communities Corporation (CCC) for the development of 17.09 hectares of the Parent
   Company’s 33-hectare property in Carmona, Cavite into an exclusive residential subdivision with
   some commercial areas.

   On December 20, 2006, the Parent Company executed a deed of assignment of receivables without
   recourse effective July 31, 2006. Under this deed of assignment, the Parent Company, together
   with CCC, assigned portion of the receivables arising from pre-selling of residential and
   commercial units from the Carmona Project to Filipinas Investments Ltd. (FIL), an indirect
   wholly-owned subsidiary of Capmark Financial Group, Inc., in exchange for a certain assignment
   price subject to future reconciliation by the parties involved, which was completed in 2007. The
   Parent Company’s share in the total cash proceeds from the assignment of receivable amounted to
   =                                              P
   P127.9 million. Of the total cash proceeds, =73.2 million pertained to existing receivables sold
   without recourse. The Parent Company derecognized these receivables upon assignment. The
                                                             P
   remaining portion of such cash proceeds amounting to =54.7 million was treated as a loan from
   FIL and measured at amortized cost. The Parent Company amortized the said loan as revenue was
                                                                                   P
   recognized on the units sold. In 2008, the amortization of the loan amounted to =35.1 million and
                                                                       =
   accretion of interest on the day 1 difference amounting to P2.2 million was recognized
   (see Note 24). The loan was fully settled in 2008.

   Deemed Cost Adjustment
                                                                                 P
   On January 1, 2004, the revalued amount of investment properties amounting to =1,962.3 million
   was taken as their deemed cost in accordance with PFRS 1. The revaluation increment on land,
                                           P
   net of deferred income tax, amounted to =1,576.4 million as of that date.




                                                                           *SGVMC311721*
                                               - 32 -


                                                   =
   In 2005, investment properties amounting to P1,085.7 million were reclassified to real estate
   inventories. The corresponding revaluation increment, net of deferred income tax, relating to
                            =
   these items, amounted to P967.3 million as of that date.

   The difference between the net deemed cost and the net pre-PFRS cost amounting to P187.2  =
                P
   million and =204.4 million as of December 31, 2010 and 2009, respectively, net of related
                                    =                 =
   deferred income tax amounting to P80.2 million and P97.1 million as of the same dates, represents
   the remaining balance of the deemed cost adjustment (see Notes 2 and 28).


10. Other Current Assets

                                                                       2010               2009
       Input VAT                                                 P4,691,632
                                                                 =                  =
                                                                                    P2,014,045
       Prepayments                                                 5,251,526          1,127,644
       Others                                                        845,278          1,491,441
                                                                P10,788,436
                                                                =                   P4,633,130
                                                                                    =


11. Interest in a Jointly Controlled Entity
   On December 12, 2008, the Parent Company entered into a JVA with Ayala Land, Inc. (ALI) to
   create the San Lazaro JV, an unincorporated taxable JV and a jointly controlled entity, for the
   purpose of leasing, managing and administering the developed office units in the building complex
   at the Sta. Cruz property (the Building Complex). The Building Complex was constructed and
   developed under a JDA also with ALI (see Note 14).

   Under the JVA, the Parent Company and ALI contributed and pooled together under one operation
   and management their respective allocated developed office units and an initial operating cash
   requirement in accordance with their respective interest in the JV of 70% for ALI and 30% for the
   Parent Company. Rent income derived from the lease of the developed office units shall first be
   applied to the payment of the expenses incurred by the JV in the operation, management and
   maintenance of the leasable areas. Thereafter, the net rental income of the JV shall be divided
   between ALI and the Company as cash dividends on a quarterly basis in proportion with their
   respective interests in the JV.

   The movement of the accumulated equity in net earnings of the San Lazaro JV as of December 31,
   2010 follows:

               Balance at beginning of year                              =
                                                                         P–
               Equity in net earnings for the year               10,170,853
               Share on dividends declared (Note 8)              (4,973,733)
               Balance at end of year                            =
                                                                 P5,197,120

   The Parent Company’s share of the assets, liabilities, income and expenses of the JV as of and for
   the year ended December 31, 2010 are as follows:
               Current assets                                  =
                                                               P241,456,070
               Noncurrent assets                                   8,627,600
               Current liabilities                               179,213,595
               Noncurrent liabilities                             28,798,802
               Equity                                             42,071,273
               Income                                            143,699,782
               Expenses                                          109,796,938
               Net income                                         33,902,844

                                                                          *SGVMC311721*
                                               - 33 -


   The Parent Company has no share in any contingent liabilities or capital commitments of the JV as
   of December 31, 2010.


12. Available-for-sale Financial Assets

                                                                       2010               2009
       Quoted equity securities                                  P19,219,207
                                                                 =                  P11,840,943
                                                                                    =
       Preferred shares:
            Quoted                                                     75,470               73,238
            Unquoted                                                7,134,270            7,134,270
       Club membership shares:
            Quoted                                                 3,115,000          3,140,000
            Unquoted                                                 193,500            193,500
                                                                 P29,737,447
                                                                 =                  P22,381,951
                                                                                    =

   The reconciliation of the carrying amounts of AFS financial assets are as follows:

                                                                       2010               2009
       Balance at beginning of year                              P22,381,951
                                                                 =                  =
                                                                                    P16,940,505
       Mark-to-market gains during the year                        7,355,496          5,441,446
       Balance at end of year                                    P29,737,447
                                                                 =                  =
                                                                                    P22,381,951

   The Group’s AFS financial assets are carried at fair value with net cumulative gains amounting to
   =                   P
   P12.2 million and =4.9 million as of December 31, 2010 and 2009, respectively, reflected in the
   equity section of the consolidated balance sheets and in the consolidated statements of changes in
   equity under “Net cumulative changes in fair values of AFS financial assets”.

   The movements in “Net cumulative changes in fair values of AFS financial assets” are as follows:

                                                                        2010                   2009
       Balance at beginning of year                               P4,864,203
                                                                  =                       =
                                                                                         (P550,036)
       Mark-to-market gains during the year                         7,318,719             5,414,239
       Balance at end of year                                    P12,182,922
                                                                 =                      P4,864,203
                                                                                        =

   The fair values of quoted AFS financial assets were determined based on published prices in the
   active market. AFS financial assets that are unquoted and do not have ready market prices are
   measured at cost, less allowance for impairment, if any, since their fair value cannot be reliably
   measured.

                                                      P                        =
   Dividend income from these investments amounted to =0.7 million in 2010 and P1.1 million in
   both 2009 and 2008 (see Note 25).




                                                                           *SGVMC311721*
                                                     - 34 -


13. Property and Equipment

                                                                      2010
                                                                          Reclassifications
                                       January 1              Additions and Adjustments             December 31
       Cost
       Land                         =
                                    P304,869,383                      P–
                                                                      =                    P–
                                                                                           =        =
                                                                                                    P304,869,383
       Land improvements              337,046,417                       –                    –        337,046,417
       Building and improvements      644,212,399                 94,483            5,728,443         650,035,325
       Machinery and equipment        469,130,176              5,850,708                     –        474,980,884
       Transportation equipment        23,067,280              2,558,929                     –         25,626,209
       Furniture and fixtures          16,206,695              3,386,255              380,450          19,973,400
                                    1,794,532,350             11,890,375            6,108,893       1,812,531,618
       Accumulated depreciation
       Land improvements                84,932,690          13,522,991                       –          98,455,681
       Building and improvements       145,388,299          27,427,559                       –         172,815,858
       Machinery and equipment         248,473,844          61,430,611                   2,221         309,906,676
       Transportation equipment         16,178,301           1,866,931                       –          18,045,232
       Furniture and fixtures            8,767,912           2,904,158                       –          11,672,070
                                       503,741,046        107,152,250                    2,221         610,895,517
       Net book value                1,290,791,304         (95,261,875)              6,106,672       1,201,636,101
       Construction in progress         18,805,015           2,390,646              (9,509,010)         11,686,651
                                   =
                                   P1,309,596,319         =
                                                         (P92,871,229)             =
                                                                                  (P3,402,338)     =
                                                                                                   P1,213,322,752

                                                                       2009
                                                                              Reclassifications
                                                                                            and
                                        January 1              Additions         Adjustments         December 31
       Cost
       Land                         P305,661,265
                                    =                                 =
                                                                      P–             =
                                                                                    (P791,882)      P304,869,383
                                                                                                    =
       Land improvements              337,170,053                      –             (123,636)        337,046,417
       Building and improvements      634,488,976              8,439,052            1,284,371         644,212,399
       Machinery and equipment        413,754,152             56,328,099             (952,075)        469,130,176
       Transportation equipment        20,670,486              2,421,794               (25,000)        23,067,280
       Furniture and fixtures          14,570,000                454,342            1,182,353          16,206,695
                                    1,726,314,932             67,643,287              574,131       1,794,532,350
       Accumulated depreciation
       Land improvements               70,667,143           14,433,359                (167,812)        84,932,690
       Building and improvements      119,133,684           26,322,416                  (67,801)      145,388,299
       Machinery and equipment        182,601,375           65,718,647                  153,822       248,473,844
       Transportation equipment        13,239,815            3,079,527                (141,041)        16,178,301
       Furniture and fixtures           5,180,059            3,614,490                  (26,637)        8,767,912
                                      390,822,076         113,168,439                 (249,469)       503,741,046
       Net book value               1,335,492,856         (45,525,152)                  823,600     1,290,791,304
       Construction in progress         6,539,101           13,310,355              (1,044,441)        18,805,015
                                   P1,342,031,957
                                   =                      =
                                                         (P32,214,797)                =
                                                                                     (P220,841)    P1,309,596,319
                                                                                                   =

   Depreciation Charges
   The amount of depreciation is allocated as follows:

                                                                 2010                   2009                2008
    Cost of club races (Note 18)                          =
                                                          P48,538,793            =
                                                                                 P67,693,018         P44,582,020
                                                                                                     =
    Cost of rental services (Note 18)                       49,367,037             41,924,205          40,509,664
    General and administrative expenses
       (Note 19)                                            9,246,420    3,551,216                     2,244,069
                                                                      =
                                                         P107,152,250 P113,168,439
                                                         =                                           P87,335,753
                                                                                                     =




                                                                                       *SGVMC311721*
                                             - 35 -


Construction in Progress
“Construction in progress” pertains to accumulated costs incurred in the development of the
Carmona property as part of the Parent Company’s expansion program.

Capitalized Borrowing Costs
Land improvements, building and improvements and machinery and equipment include
capitalized borrowing costs incurred in connection with the construction and development of the
                             =
said properties amounting to P68.6 million in 2005. No interest on loans was capitalized in 2010
and 2009. Undepreciated capitalized interest relating to property and equipment as of
                                          =                 =
December 31, 2010 and 2009 amounted to P52.5 million and P55.3 million, respectively.

Carmona Property
In 2001, the Parent Company acquired a parcel of land located in Carmona, Cavite from KPPI
                                  P
Land Corporation (KPPI) valued at =523.6 million payable in 12 equal quarterly installments from
2001 to 2004. The remaining installment payments due in 2004 were rescheduled as part of the
requirements of the term loan obtained from a local bank. As of December 31, 2008, total
                                                     P
payments made by the Parent Company amounted to =433.7 million. No payments were made
                                             =
in 2010 and 2009. The outstanding balance of P89.9 million as of December 31, 2010 and 2009 is
included under “Accounts payable and other liabilities” in the consolidated balance sheets
(see Note 17).

In 2002, the Parent Company entered into several contracts with different private entities related to
the Parent Company’s expansion program in Carmona. Contracts include the construction of the
Turf Club, construction and development of the racetrack, site grading, and development of access
roads, water distribution and fire protection works necessary to bring the site in operation. Under
the terms of the contracts, the Parent Company is required to make a deposit of 15% and retain an
amount equivalent to 10% on each of the progress billings made by the contractors. As of
December 31, 2010 and 2009, the unapplied portion of the deposits to contractors amounting to
P2.4 million and the amount retained by the Parent Company out of the progress billings made by
=
                               P
the contractors amounting to =11.4 million, are shown as part of “Receivables” (see Note 8) and
“Accounts payable and other liabilities” (see Note 17), respectively, in the consolidated balance
sheets. The outstanding obligations of the Parent Company to the contractors amounted to
=                 P
P2.0 million and =10.8 million as of December 31, 2010 and 2009, respectively (see Note 17).

On March 4, 2008, Piedras Negras Construction and Development Corporation (PNCDC) and the
Parent Company reached an amicable settlement on the court case filed by PNCDC against the
Parent Company for three construction contracts and works performed by PNCDC for the
development of the racetrack complex in the SLLP Leisure Park in Carmona, Cavite. The
compromise agreement between the Parent Company and PNCDC provided for the payment of
=                                                                         P
P21.0 million in three installments. The first installment, amounting to =11.0 million, shall be
                                                                               =
payable upon signing of the compromise agreement. The remaining balance of P10.0 million shall
                                     =
be paid in two equal installments of P5.0 million each on March 4, 2009 and December 4, 2009.
In view of this compromise agreement, the Parent Company reversed its previously recorded
                         P
liabilities amounting to =11.7 million recognized under “Other income (charges) - net” in 2007.
                                                                    =
The remaining carrying value of the amount payable to PNCDC of P21.0 million was adjusted to
                     =
its present value of P19.2 million. The difference between the carrying value and present value of
                            P
the liability amounting to =1.8 million was recognized as a day 1 difference included under
                                                                                 P
“Interest income” in 2007. In 2009 and 2008, the Parent Company recognized =1.4 million and




                                                                         *SGVMC311721*
                                             - 36 -


=
P0.4 million, respectively, as accretion of interest recognized under “Finance costs” (see Note 24).
                                          =                     =
Payments to PNCDC amounting to P10.0 million and P11.0 million in 2009 and 2008,
respectively, pertained to the second and last installment payments in accordance with the
compromise agreement. The liability was fully settled in 2009.

Assets Under Finance Lease
In 2008, the Parent Company entered into lease agreements covering certain transportation
equipment. The carrying value of the assets acquired under finance lease through auto-loans as of
                                               =                 =
December 31, 2010 and 2009 amounted to P1.5 million and P1.9 million, respectively. The
                                                                   =                P
carrying value of the obligations under finance lease amounting to P2.6 million and =3.7 million
as of December 31, 2010 and 2009, respectively, is included under “Long-term loans and
borrowings” in the consolidated balance sheets (see Notes 16 and 31).

Assets Under Operating Lease
· The Parent Company has various operating lease agreements for its cluster stables with horse
   owners. The lease agreements provide for fixed monthly payments which are subject to rental
   escalations and renewal options. The carrying value of the cluster stables, included under
   “Building and improvements” account, that are leased out on these operating leases amounted
       P                 P
   to =37.0 million and =34.0 million as of December 31, 2010 and 2009, respectively. Rent
                                                                   =              =
   income from stable rentals in 2010, 2009 and 2008 amounted to P55.5 million, P33.8 million
        =
   and P23.6 million, respectively.

·   The Parent Company has various operating lease agreements with concessionaires to lease
    certain areas within the Turf Club. Rent income from concessionaires amounted to
    P12.9 million, P12.8 million and P4.0 million in 2010, 2009 and 2008, respectively.
    =              =                 =

·   The Parent Company has also executed a MOA with PAGCOR whereby the latter agrees to
    lease a certain area within the Turf Club at Carmona for its casino operations and related
    activities. The lease shall be for a period of five years beginning from the date when PAGCOR
    commences its casino operations. Rent income from PAGCOR amounted to =1.1 million,  P
    P1.0 million and =1.6 million in 2010, 2009 and 2008, respectively.
    =                  P

·   On June 21, 2005, NVTL, as represented by the Parent Company, entered into a lease
    agreement with PAGCOR for the lease of 200 slot machines and the network system linking
    these machines, which are included under “Machine and equipment” account. In 2006, NVTL
                                                                          =
    purchased the slot machines for lease to PAGCOR amounting to P120.9 million. Monthly
    rental rate to PAGCOR is equivalent to 40% of the slot machines’ gross revenue after players’
    winnings and all applicable taxes. The start of the lease coincides with the opening of the Turf
    Club on December 8, 2006. In 2010 and 2009, NVTL acquired new slot machines amounting
       P                 P
    to =1.7 million and =8.2 million, respectively. The carrying value of these slot machines
                                                                                  P
    under operating lease as of December 31, 2010 and 2009 amounted to =45.4 million and
    =
    P80.9 million, respectively. Rent income from PAGCOR amounted to P102.1 million,=
    =                  =
    P106.4 million and P116.9 million in 2010, 2009 and 2008, respectively.

                                                                            P
    In 2009, NVTL’s acquisition of machinery and equipment amounting to =8.2 million were
    unpaid and is presented under “Accounts payable and other liabilities” in the consolidated
    balance sheet as of December 31, 2009 (see Note 17).




                                                                        *SGVMC311721*
                                                  - 37 -


14. Investment Properties

                                                                            2010               2009
       Land:
          Sta. Cruz property - unused portion (Note 16)            P471,971,653
                                                                   =                 =
                                                                                     P471,971,653
          Sta. Cruz property - held for lease                        238,168,692       238,168,692
          Carmona property (Note 13)                                 109,750,785       109,750,785
          Cavite property                                             60,949,420        60,949,420
          Undivided interest in a parcel of land                      56,723,976        56,723,976
          Rizal property                                              13,434,651        13,434,651
                                                                     950,999,177       950,999,177
       Less allowance for impairment loss on
          Cavite property                                            23,270,280         23,270,280
                                                                    927,728,897        927,728,897
       Building:
           Developed office units (Note 11)                         250,202,011       256,752,193
           Retail development area                                   46,012,096        48,013,638
                                                                    296,214,107       304,765,831
                                                                 P1,223,943,004
                                                                 =                 =
                                                                                   P1,232,494,728

   The movements in the carrying amount of investment properties in 2010 and 2009 are shown
   below:

                                                                      2010
                                                                        Construction in
                                                 Land          Building       Progress             Total
     Cost
     Balance at beginning of year         P950,999,177
                                          =                =
                                                           P306,790,728               P– P1,257,789,905
                                                                                      = =
     Additions                                        –                –       3,874,901      3,874,901
     Reclassifications                                –        3,874,901      (3,874,901)             –
     Balance at end of year                 950,999,177      310,665,629               – 1,261,664,806
     Accumulated Depreciation and
         Impairment Loss
     Balance at beginning of year           (23,270,280)      (2,024,897)             –    (25,295,177)
     Depreciation for the year                        –      (12,426,625)             –    (12,426,625)
     Balance at end of year                 (23,270,280)     (14,451,522)             –    (37,721,802)
     Net Book Value                       P927,728,897
                                          =                P296,214,107
                                                           =                         P =
                                                                                     =– P1,223,943,004

                                                                      2009
                                                                        Construction in
                                                  Land         Building        Progress              Total
     Cost
     Balance at beginning of year         =
                                          P876,615,106               P–
                                                                     =      P296,958,461 P1,173,573,567
                                                                            =            =
     Additions arising from acquisition
         of a subsidiary (Note 5)           60,949,420                –                –       60,949,420
     Additions                              13,434,651                –        9,832,267       23,266,918
     Reclassifications                               –      306,790,728     (306,790,728)               –
     Balance at end of year                950,999,177      306,790,728                –    1,257,789,905
     (Forward)




                                                                              *SGVMC311721*
                                                - 38 -


                                                                    2009
                                                                      Construction in
                                                Land         Building        Progress            Total
 Accumulated Depreciation and
     Impairment Loss
 Balance at beginning of year                     =
                                                  P–              =
                                                                  P–              P–
                                                                                  =                =
                                                                                                   P–
 Allowance for impairment loss
     relating to additions arising
     from acquisition of a subsidiary
     (Note 5)                             (23,270,280)              –              –       (23,270,280)
 Depreciation for the year                          –      (2,024,897)             –        (2,024,897)
 Balance at end of year                   (23,270,280)     (2,024,897)             –       (25,295,177)
 Net Book Value                         =
                                        P927,728,897     P304,765,831
                                                         =                        P–
                                                                                  =     P1,232,494,728
                                                                                        =

                                                                       P
The 5.1 hectare property in Sta. Cruz with carrying value of =472.0 million as of
December 31, 2010 and 2009 is used by the Parent Company as collateral for its interest-bearing
loans obtained from a local bank (see Note 16). The Cavite property with carrying value of
=
P37.7 million as of December 31, 2010 and 2009 is used by a subsidiary as collateral for its notes
payable to a related party (see Note 27).

Sta. Cruz Property - Held for Lease
On March 26, 2007, the Parent Company entered into a JDA with ALI (amended and
supplemented on July 18, 2007) for the construction, financing, development and operation of a
building complex on the parcel of land located at Sta. Cruz, Manila. The Building Complex shall
consist of two office buildings with a retail development area to primarily cater to business
processing outsourcing companies. As of December 31, 2009, the first building is 100%
completed. Construction for the second building is placed on hold as of December 31, 2010.

Under the JDA, the Parent Company agreed to contribute the necessary cash to fully finance the
construction and development of the retail development area and its corresponding share (30%) of
the development of the office units. In return for their respective contributions (see Note 11), the
parties will distribute and allocate among themselves the developed units.                   As of
December 31, 2010 and 2009, the Parent Company’s contribution to the JDA amounted to
=                  =
P310.7 million and P306.7 million, respectively, and is presented as the cost of “Building” under
“Investment properties” in the consolidated balance sheets.

On December 12, 2008, the Parent Company and ALI executed a Deed of Partition for the
distribution and allocation of the developed units. The entire retail development area and the
appurtenant parking lots were allocated to the Parent Company in return for its contribution for the
construction and development of the said area. For the Parent Company’s contribution in the
construction and development of the office building, the Parent Company was allocated developed
office units located at various floors and the appurtenant parking lots.

Capitalized borrowing costs incurred in connection with the construction and development of the
                               P
Building Complex amounted to =8.0 million in 2008. The capitalization rate used to determine the
amount of borrowing costs eligible for capitalization was 7.37% in 2008. No interest on loans was
capitalized in 2010 and 2009. Undepreciated capitalized interest relating to the Building Complex
                                                 =               P
as of December 31, 2010 and 2009 amounted to P7.7 million and =8.0 million, respectively.

Cavite Property
On December 3, 1997, MIC entered into a joint venture agreement with Sta. Lucia Realty
Development, Inc. (SLRDI) to develop the land with an approximate area of 52,616 square meters
situated in the Municipality of Tanza, Cavite into a residential, commercial and golf course
development known as Saddle and Clubs.

                                                                          *SGVMC311721*
                                            - 39 -


The development of the property commenced in 1998 but was placed on hold due to unfavorable
and uncertain market conditions. The development is still on hold as of April 27, 2011.

Rizal Property
                                                                                 P
In previous years, the Parent Compay paid deposits to Winbank totaling =4.5 million for the
purchase of a parcel of land in Montalban, Rizal. The parcel of land is subject to a court
proceeding due to the alleged noncompliance of Winbank with the requirements in holding a
public auction. The case stemmed from the default of Winbank’s debtor. The bank filed for
foreclosure on the collateral at the Regional Trial Court, which was then auctioned off with the
bank as the winning bidder. The debtor objected to the foreclosure proceedings but the Court of
Appeals upheld the bank. The case was then brought by petition for review to the Supreme Court,
after a motion for reconsideration filed by the debtors reinstated the petition.

                                                  P
In 2009, the Parent Company paid an additional =4.5 million to Winbank as full payment for the
parcel of land. The title to the property was transferred to the Parent Company during the same
year. The amount of the deposit and the additional payment to Winbank, including the related
capitalizable acquisition costs of the land, was presented as part of “Investment properties” in
the 2010 and 2009 consolidated balance sheets.

On April 28, 2010, the Supreme Court ruled with finality to dismiss the Petition for Review filed
by the debtors, resulting in the consolidation of the title of the Parent Company on the property.
The issuance and implementation of the writ of execution in favor of the Parent Company is still
pending as of April 27, 2011.

Assets Under Operating Lease
In 2009, the Parent Company entered into lease agreements with various tenants for the retail
development area of the aforementioned Building Complex. Portions of the area are rented out at
different rates per square meter with lease terms ranging from three to five years. Rent income
                                                =                =
from the retail development area amounted to P7.3 million and P2.4 million in 2010 and 2009,
respectively.

In 2010, the Parent Company and ALI, through the San Lazaro JV, entered into lease agreements
with various tenants for the developed office units in the Building Complex. Equity in the net
                               =
earnings of the JV amounted to P10.2 million in 2010.

Deemed Cost Adjustment
The difference between the net deemed cost and the net pre-PFRS cost of investment properties
              P
amounting to =496.8 million as of December 31, 2010 and 2009, net of related deferred income
                  P
tax amounting to =212.9 million as of the same dates, represents the remaining balance of the
deemed cost adjustment (see Notes 2 and 28).

Fair Market Values
The fair market values of the Group’s investment properties as of December 31, 2010 and 2009
are shown below:

           Sta. Cruz property (unused portion)                   =
                                                                 P1,508,533,510
           Sta. Cruz property (held for lease)                      746,606,590
           Carmona property                                         238,357,875
           Cavite property                                           37,679,140
           Undivided interest in a parcel of land                    80,000,000
           Rizal property                                            13,434,651
                                                                 =
                                                                 P2,624,611,766




                                                                       *SGVMC311721*
                                               - 40 -


   The fair market value of the Sta. Cruz and Carmona properties were taken from the appraisal
   reports as of May 5, 2010 and December 31, 2007, respectively, while the fair market value of the
   Cavite property was taken from the appraisal report as of December 31, 2008. The appraisal
   reports determined the fair market values of the properties using the sales comparison approach
   and income approach by land residual technique. Management believes that there are no material
   changes in fair value of these investment properties as of December 31, 2010 from the most recent
   valuations performed by the independent appraisers.


15. Other Noncurrent Assets

                                                                     2010               2009
       Franchise fee                                           P21,560,839
                                                               =                  P23,354,839
                                                                                  =
       Meralco cash bond deposits                                3,299,680          3,299,680
       Others                                                    4,550,095          4,643,340
                                                               P29,410,614
                                                               =                  =
                                                                                  P31,297,859

   Franchise Fee
   A reconciliation of the carrying amounts of franchise fee at the beginning and end of 2010 and
   2009 is shown below:

                                                                     2010               2009
       Acquisition cost                                        P44,850,000
                                                               =                  =
                                                                                  P44,850,000
       Accumulated amortization:
          Balance at beginning of year                           21,495,161         19,701,161
          Amortization for the year                               1,794,000          1,794,000
          Balance at end of year                                 23,289,161         21,495,161
                                                               P21,560,839
                                                               =                  =
                                                                                  P23,354,839

   Investment in an Associate
   The investment in an associate, Techsystems, Inc. (Techsystems), pertains to the acquisition cost
   representing 33% ownership by the Parent Company. Techsystems undertakes to facilitate the
   short message service betting or online betting for the races conducted by the Company. As of
   December 31, 2010, Techsystems has not yet started commercial operations.

   The carrying amount of the investment in Techsystems as of December 31 follows:

                                                                     2010               2009
       Acquisition cost                                         P1,000,000
                                                                =                  P1,000,000
                                                                                   =
       Accumulated equity in net losses of an associate:
         Balance at beginning of year                            (1,000,000)       (1,000,000)
         Equity in net loss for the year                                   –                 –
         Balance at end of year                                  (1,000,000)       (1,000,000)
                                                                         P–
                                                                         =                 P–
                                                                                           =

   As of December 31, 2010 and 2009, the unrecognized equity in net losses of Techsystems
               P                P
   amounted to =1.8 million and =1.1 million, respectively.




                                                                         *SGVMC311721*
                                                - 41 -


   The summarized financial information of Techsystems as of and for the years ended
   December 31 is as follows:

                                                                         2010               2009
       Total assets                                                 P258,100
                                                                    =                    =
                                                                                         P35,476
       Total liabilities                                            5,849,737          3,544,275
       Capital deficiency                                          (5,591,637)        (3,508,799)
       Income                                                               –                144
       Expenses                                                     2,082,837          2,152,479
       Net loss                                                     2,082,837          2,152,335

   Others
                                                            P
   Others include short-term investments amounting to =1.3 million as of December 31, 2010
   and 2009 that are used as surety bonds (as required under the legal proceedings) in connection with
   certain ongoing litigations of the Parent Company.


16. Short-term and Long-term Loans and Borrowings

   Short-term Loans

                                                                       2010               2009
       Bank of the Philippine Islands (BPI)                     P267,500,000
                                                                =                  P244,500,000
                                                                                   =
       Banco de Oro Unibank, Inc. (BDO)                           56,250,000         75,000,000
                                                                P323,750,000
                                                                =                  P319,500,000
                                                                                   =

   The Parent Company avails of short-term financing from BPI for working capital requirements.
   The promissory notes covering these loans have terms of one year or less and are renewed upon
   maturity. These loans bear average interest at 6.20% and 7.57% in 2010 and 2009, respectively,
   that is fixed until maturity.

   In 2008, the Parent Company obtained short-term loans from BDO with original principal amount
      =
   of P100.0 million and maturity date in February and April 2009. Upon maturity in 2009, the term
                                                                     =
   of the remaining outstanding balance of the loans totaling P25.0 million was extended until
   January 2010. The loans bear average interest rate of 9.13%, fixed for a certain number of days
   subject to quarterly repricing. The loans are secured by real estate mortgages on certain investment
   properties of the Parent Company. As of December 31, 2010, these loans were fully paid.

   In 2009, the Parent Company obtained additional short-term loans from BDO for working capital
                                                                P
   requirements with original principal amount totaling =50.0 million and maturity date in
   February 2010. The loans bear average interest at 10.75%, fixed for a certain number of days
   subject to quarterly repricing. These loans were fully paid in 2010.

   In 2010, the Parent Company obtained additional short-term loans from BDO for working capital
                                                                 P
   requirements with original principal amount totaling =218.8 million. The promissory
   notes covering these loans have terms ranging from three to six months and bear
   average interest at 9.39%, fixed for a certain number of days subject to quarterly repricing. The
   loans are secured by real estate mortgages on certain investment properties of the Parent Company
                           P
   with carrying value of =472.0 million (see Note 14). As of December 31, 2010, the remaining
                                                                            =
   outstanding balance of the short-term loans availed in 2010 amounted to P56.3 million.

                                                     P             =                 P
   Interest expense on short-term loans amounted to =20.8 million, P28.5 million and =12.5 million
   in 2010, 2009 and 2008, respectively (see Note 24).



                                                                           *SGVMC311721*
                                             - 42 -


Long-term Loans

                                                                     2010              2009
     Current:
        Loans:
          Bank loans                                         P44,469,048
                                                             =                  =
                                                                                P44,469,048
          Term loan I                                                   –         95,850,000
          Term loan III                                         7,500,000         30,000,000
        Obligations under finance lease (Note 13)               1,044,192          1,037,500
                                                               53,013,240       171,356,548
     Noncurrent:
        Loans:
          Bank loans                                          57,142,857         101,611,905
          Term loan III                                                –           7,500,000
        Obligations under finance lease (Note 13)              1,584,531           2,625,942
                                                              58,727,388         111,737,847
                                                            P111,740,628
                                                            =                  =
                                                                               P283,094,395

a.   Bank Loans

                                                                       P
     The Parent Company obtained loans from a local bank amounting to =45.0 million in 2006,
     =                           P
     P71.0 million in 2007 and =100.0 million in 2008 for working capital requirements. These
     loans bear interest of 7.10% to 10.75% per annum and will mature in November 2011 and
     2015.

     These loans are payable in equal quarterly installments and interest rates are subject to
     quarterly repricing. The loans are secured by receivables from real estate sales (see Note 8)
     and real estate mortgages on certain investment properties of the Parent Company with
                       =
     carrying value of P472.0 million (see Note 14).

b.   Term Loan I

                                                                                  P
     On October 16, 2003, the Parent Company obtained a term loan amounting to =479.2 million
     from a local bank with a term of seven years and maturity date on October 16, 2010. Portion
     of the proceeds from this loan was utilized to pay off the Parent Company’s long-term
                                               P                     P
     and short-term loans in the amount of =176.3 million and =150.0 million, respectively.
     The remaining balance of the loan proceeds was used to finance the Parent Company’s
     expansion program in Carmona, Cavite (see Note 13). The loan bears interest at 8.76% fixed
     for 92 days, subject to quarterly repricing. Equal quarterly amortizations commenced on
     January 16, 2006 with the remaining principal payable at maturity date.

     In January 2006, the local bank granted the Parent Company a new amortization schedule for
     the payments of the remaining balance of the loan. In 2010, the remaining outstanding
                                           =
     balance of the term loan amounting to P95.9 million was fully paid.

     This loan was secured by real estate mortgages on certain investment properties of the Parent
                                     P
     Company with carrying value of =472.0 million as of December 31, 2009 (see Note 14).




                                                                       *SGVMC311721*
                                                 - 43 -


        The loan is subject to certain covenants, which included among others, maintenance of
        debt-equity ratio and earnings before interest expense, depreciation and amortization
                                  P
        (EBITDA) of not less than =150.0 million as at year end.

        As of December 31, 2009, the Parent Company has complied with the loan covenants.

   c.   Term Loan III

                                                                                        P
        On March 19, 2004, the Parent Company obtained a term loan amounting to =150.0 million
        from a local bank with a term of seven years and maturity date on March 19, 2011. The
        amount is payable in equal quarterly installments starting at the end of the ninth quarter from
        the initial date of drawdown which commenced on September 10, 2006. The loan bears an
        interest rate of 8.75% fixed up to maturity. The loan proceeds were likewise used to finance
        the Parent Company’s expansion program in Carmona, Cavite (see Note 13). This loan is
        secured by real estate mortgages on certain investment properties of the Parent Company with
                           =
        carrying value of P472.0 million as of December 31, 2010 and 2009 (see Note 14).

   d.   Obligations Under Finance Lease

        The finance lease has an effective interest rate of 11.02% which is equal to the rate implicit in
        the lease. Lease payments are made on a monthly basis (see Note 31).

                                                                 =               P
   Interest expense on bank loans and term loans amounted to P20.8 million, =30.4 million and
   =
   P32.3 million in 2010, 2009 and 2008, respectively (see Note 24). Interest expense recognized on
                                               P             =                 =
   obligations under finance lease amounted to =0.3 million, P0.4 million and P0.1 million in 2010,
   2009 and 2008, respectively (see Note 24).


17. Accounts Payable and Other Liabilities

                                                                         2010                2009
        Accounts payable (Note 13)                                P55,803,916
                                                                  =                   P69,902,676
                                                                                      =
        Trade payable and buyers’ deposits                          12,433,805          52,923,891
        Accrued expenses                                            12,427,780           8,859,238
        Documentary stamps payable                                  38,968,888          38,804,015
        Retention payable (Note 13)                                 19,755,184          20,451,127
        Due to contractors (Note 13)                                48,563,671          51,854,059
        Due to KPPI (Note 13)                                       89,900,000          89,900,000
        Cash bond on OTB operators                                  31,946,485          25,867,185
        Others                                                      61,130,620          73,803,783
                                                                 P370,930,349
                                                                 =                   P432,365,974
                                                                                     =

   Trade payable and buyers’ deposits represent cash received by the Parent Company from real
   estate sales where the criterion of full accrual method on revenue recognition is not satisfied.

   Others include amounts due to the Philippine Racing Commission, withholding taxes on winnings,
   dividends payable to winning bettors and stockholders and unearned income.




                                                                             *SGVMC311721*
                                                 - 44 -


18. Cost of Sales and Services

   Cost of club races consist of:

                                                           2010          2009          2008
       Personnel costs (Note 21)                                  =             =
                                                    P80,235,925 P76,774,767 P59,718,332
                                                    =
       Depreciation (Note 13)                         48,538,793    67,693,018    44,582,020
       Commission                                     33,377,858    30,006,634    28,853,595
       Utilities                                       5,303,624     9,681,016    12,465,756
       Transportation and travel                       7,854,569     7,671,816     7,400,248
       Supplies                                        6,482,719     8,017,700     1,933,541
       Repairs and maintenance                         5,271,444     6,597,097             –
       Contracted services                             3,807,919     1,948,872     1,703,940
       Meals and refreshments                          2,717,685     2,116,930     1,895,960
       Rent (Note 31)                                  2,188,070     4,407,687     1,830,709
       Amortization of franchise fee (Note 15)         1,794,000     1,794,000     1,794,000
       Gas, fuel and oil                               1,273,566       577,532     4,032,178
       Security services                               1,100,819       597,836             –
       Taxes and licenses                                643,094     2,278,421       584,733
       Others                                          5,931,736     3,328,106    10,970,916
                                                                 =             =
                                                   P206,521,821 P223,491,432 P177,765,928
                                                   =

   Cost of real estate sales consist of:

                                                          2010            2009         2008
       Cost of real estate properties sold          P64,202,459
                                                    =              =            =
                                                                   P168,706,160 P190,750,661
       Others                                                 –         711,372    3,543,790
                                                    P64,202,459
                                                    =              =            =
                                                                   P169,417,532 P194,294,451

   Cost of rental services consist of:

                                                           2010            2009           2008
       Depreciation (Notes 13 and 14)               =
                                                    P61,793,662     =
                                                                    P43,949,102    =
                                                                                   P40,509,664
       Food and beverage                              26,245,414      20,438,942     45,580,671
       Utilities                                       8,442,743               –              –
       Personnel costs (Note 21)                       2,663,840          19,131              –
       Repairs and maintenance                         2,326,559               –              –
       Contracted services                             1,248,206       1,061,934              –
       Meals and refreshments                          1,222,132       2,017,860      1,807,231
       Others                                            643,780       1,059,495        696,830
                                                   =
                                                   P104,586,336     P68,546,464
                                                                    =              P88,594,396
                                                                                   =




                                                                          *SGVMC311721*
                                                - 45 -


19. General and Administrative Expenses

                                                          2010          2009          2008
       Personnel costs (Note 21)                                 =             =
                                                   P44,492,163 P44,280,935 P66,689,672
                                                   =
       Utilities                                     34,186,812    14,053,562    20,405,424
       Taxes and licenses                            21,907,382    18,315,037    16,967,050
       Contracted services                           18,095,975   19,209,711     13,865,898
       Professional fees                             14,963,671     9,930,095    10,390,301
       Depreciation (Note 13)                         9,246,420     3,551,216     2,244,069
       Security services                              7,241,955     7,452,958     5,995,362
       Gas, fuel and oil                              7,236,190     3,240,952     3,631,724
       Meals and refreshments                         6,328,896     4,701,073     4,760,146
       Transportation and travel                      5,487,793     4,313,485     5,310,053
       Repairs and maintenance                        4,809,696    13,578,349     7,478,647
       Rent (Note 31)                                 3,912,362     6,586,967     2,831,548
       Provision for doubtful accounts (Note 8)       3,500,000     2,370,000     5,175,235
       Advertising                                    2,891,738     3,659,579       575,649
       Insurance                                      2,099,851     1,539,269     1,799,378
       Supplies                                       1,281,087     1,283,131     1,436,041
       Others                                        13,744,950    22,980,436    18,876,703
                                                                =             =
                                                  P201,426,941 P181,046,755 P188,432,900
                                                  =


20. Depreciation

                                                           2010            2009            2008
       Cost of club races (Note 18)                 P48,538,793
                                                    =               =
                                                                    P67,693,018     =
                                                                                    P44,582,020
       Cost of rental services (Note 18)              61,793,662      43,949,102      40,509,664
       General and administrative expense
          (Note 19)                                  9,246,420    3,551,216           2,244,069
                                                               =
                                                  P119,578,875 P115,193,336
                                                  =                                 =
                                                                                    P87,335,753


21. Personnel Costs

                                                          2010         2009         2008
       Salaries and wages                                       =            =
                                                   P109,230,957 P100,433,648 P110,050,068
                                                   =
       Retirement benefits costs (Note 22)            9,165,913   12,709,098    9,180,513
       Other employee benefits                        8,995,058    7,932,087    7,177,423
                                                                =            =
                                                   P127,391,928 P121,074,833 P126,408,004
                                                   =


22. Retirement Benefits Cost

   The Parent Company has two tax-qualified, funded, noncontributory retirement plans covering
   both regular permanent and race day operation employees. The retirement plans provide for
   benefits on retirement, death and disability equivalent to a certain percentage of salary for every
   year of service based on the final monthly salary of the employee at the time of retirement, death
   or disability. An independent actuary, using the projected unit credit method, conducted the
   actuarial valuation of the fund. The latest actuarial valuation reports are as of December 31, 2010.



                                                                           *SGVMC311721*
                                              - 46 -


The details of the retirement benefits costs are as follows:

                                                    2010              2009             2008
 Current service costs                        =
                                              P4,998,799        P4,578,773
                                                                =                =
                                                                                 P4,018,600
 Interest costs                                 6,838,061         9,562,149        7,068,355
 Expected return on plan assets               (1,700,275)       (1,431,824)      (1,875,634)
 Net actuarial gains recognized
     during the year                            (970,672)                –          (30,808)
                                              =
                                              P9,165,913       =
                                                               P12,709,098       =
                                                                                 P9,180,513

The details of accrued retirement benefits as of December 31 are as follows:

                                                    2010              2009             2008
 Defined benefit obligation                  =
                                             P71,453,657       P65,877,272
                                                               =                =
                                                                                P82,432,315
 Fair value of plan assets                   (36,744,723)      (34,594,807)     (40,078,423)
                                               34,708,934        31,282,465       42,353,892
 Unrecognized actuarial gains                  29,527,567        25,030,498        3,095,084
                                             =
                                             P64,236,501       P56,312,963
                                                               =                =
                                                                                P45,448,976

Movements in the accrued retirement benefits follow:

                                                   2010              2009             2008
 Balance at beginning of year                =
                                             P56,312,963       =
                                                               P45,448,976      =
                                                                                P41,561,220
 Net retirement benefits costs for
     the year                                   9,165,913        12,709,098        9,180,513
 Contributions for the year                    (1,140,000)       (1,845,111)      (5,292,757)
 Direct payments from book reserve               (102,375)                –                –
 Balance at end of year                      =
                                             P64,236,501       =
                                                               P56,312,963      =
                                                                                P45,448,976

Changes in present value of defined benefit obligation are as follows:

                                                    2010                 2009          2008
 Defined benefit obligation at
     beginning of year                      =
                                            P65,877,272        P82,432,315
                                                               =                P70,472,135
                                                                                =
 Current service costs                         4,998,799         4,578,773         4,018,600
 Interest costs                                6,838,061         9,562,149         7,068,355
 Benefits paid                                (2,318,634)      (10,410,768)       (3,354,342)
 Direct payments from book reserve              (102,375)                –                 –
 Actuarial losses (gains)                     (3,839,466)      (20,285,197)        4,227,567
 Defined benefit obligation at
     end of year                            =
                                            P71,453,657        =
                                                               P65,877,272      P82,432,315
                                                                                =

Changes in fair value of plan assets are as follows:

                                                    2010                 2009          2008
 Fair value of plan assets at
     beginning of year                      =
                                            P34,594,807        P40,078,423
                                                               =                P36,543,480
                                                                                =
 Expected return on plan assets               1,700,275          1,431,824        1,875,634
 Contributions                                1,140,000          1,845,111        5,292,757
 (Forward)


                                                                          *SGVMC311721*
                                                      - 47 -


                                                           2010               2009                    2008
  Benefits paid                                      =
                                                    (P2,318,634)        =
                                                                       (P10,410,768)            =
                                                                                               (P3,354,342)
  Actuarial gains (losses)                             1,628,275          1,650,217               (279,106)
  Fair value of plan assets at
      end of year                                   =
                                                    P36,744,723         P34,594,807
                                                                        =                      =
                                                                                               P40,078,423
  Actual return on plan assets                       =
                                                     P3,328,550          P3,082,041
                                                                         =                      =
                                                                                                P1,596,528

The major categories of net plan assets as a percentage of the fair value of total plan assets are as
follows:

                                                            2010                    2009              2008
  Cash equivalents                                        8.31%                    1.69%             1.37%
  Receivables                                             1.22%                    6.30%             1.54%
  Investments in government and
      corporate debt securities                           90.62%               92.16%                97.24%
  Liabilities                                            (0.15%)              (0.15%)               (0.15%)
                                                        100.00%              100.00%               100.00%

                                         P
The Parent Company expects to contribute =4.9 million in 2011.

The overall expected return on the plan assets is determined based on the market prices prevailing
on the date applicable to the period over which the obligation is to be settled. There has been no
significant change in the expected rate of return on plan assets.

The principal assumptions used in determining retirement benefits cost of the Company as of
January 1 are as follows:

                                                            2010                 2009                2008
  Discount rates                                         10.38%                11.60%               10.03%
  Expected rate of return on plan
      assets                                              5.00%                    5.00%             5.00%
  Expected rate of salary increase                        5.00%                    4.00%             5.00%

As of December 31, 2010, the discount rate is 7.70% while the expected rate of salary increase is
5.00% and 4.00% for regular permanent and race day operation employees, respectively. The
expected rate of return on plan assets is 5.50%.

There are 635 and 634 employees in the plan as of December 31, 2010 and 2009, respectively.

Relevant amounts for the current and previous years are as follows:

                                            2010              2009          2008          2007         2006
Defined benefit obligation         (P71,453,657)
                                    =                 =             =             =             =
                                                     (P65,877,272) (P82,432,315) (P70,472,135) (P63,143,934)
Plan assets                           36,744,723        34,594,807    40,078,423    36,543,480   38,056,257
Plan deficit                         (34,708,934)     (31,282,465) (42,353,892) (33,928,655) (25,087,677)
Experience adjustment on benefit
     obligation - loss (gain)        (4,373,896)      (21,872,666)    6,251,625      (9,094,850)          –
Experience adjustment on plan
     assets - loss (gain)             1,628,275         1,650,217      (279,106)     (2,191,808)          –




                                                                                     *SGVMC311721*
                                               - 48 -


23. Interest Income

   Interest income related to:

                                                         2010            2009              2008
     Real estate receivables (Note 8)              =
                                                   P12,114,561     =
                                                                   P56,892,229       P44,573,913
                                                                                     =
     Cash in banks (Note 6)                            637,229         894,690         1,186,934
     Advances to related parties (Note 27)                   –       2,017,976                 –
                                                   =
                                                   P12,751,790     =
                                                                   P59,804,895       =
                                                                                     P45,760,847


24. Finance Costs

   Interest expense related to:

                                                       2010              2009              2008
     Loans and borrowings (Note 16)              =
                                                 P41,342,723       P58,945,150
                                                                   =                 P44,746,882
                                                                                     =
     Obligations under finance lease
         (Note 16)                                      292,950           363,851          64,838
     Due to related parties (Note 27)                         –           575,278         357,277
     Accretion of day 1 difference
         (Notes 9 and 13)                                  –         1,442,745         2,630,098
     Bank charges and others                         204,830            89,528           417,454
                                                 =
                                                 P41,840,503       P61,416,552
                                                                   =                 =
                                                                                     P48,216,549


25. Other Income (Charges)

                                                         2010             2009               2008
     Reversal of various liabilities             =
                                                 P27,494,807       P34,652,039
                                                                   =                  =
                                                                                      P48,840,538
     Write-off of receivables (Note 8)           (26,146,780)      (54,219,273)       (93,685,453)
     Dividend income (Note 12)                        714,409        1,058,071          1,058,071
     Foreign exchange gain (loss) - net              (163,631)        (348,197)           243,240
     Others - net                                   6,308,336        7,455,861           (209,833)
                                                  =
                                                  P8,207,141       =
                                                                  (P11,401,499)       =
                                                                                     (P43,333,771)


26. Income Taxes

   a. The provision for current income tax consist of the following:

                                                       2010                  2009            2008
       RCIT                                      =
                                                 P28,991,318           P20,556,732
                                                                       =               =
                                                                                       P43,117,421
       MCIT                                           29,040                     –               –
       Final tax on interest income                  116,750               118,565         150,183
                                                 =
                                                 P29,137,108           =
                                                                       P20,675,297     =
                                                                                       P43,267,604




                                                                            *SGVMC311721*
                                                        - 49 -


b. The components of the Group’s net deferred income tax liabilities as of December 31 are as
   follows:

                                                                                       2010            2009
     Deferred income tax assets on (recognized in profit
        or loss):
        Accrued retirement benefits                                             P19,270,950
                                                                                =               =
                                                                                                P16,893,889
        Allowance for doubtful accounts                                            1,050,000         711,000
        Unamortized past service cost                                                655,591         911,413
        Unearned income                                                              230,773       1,531,913
        Accrued rent expense                                                         186,170         583,841
        Unrealized foreign exchange losses - net                                      14,268          39,787
                                                                                  21,407,752      20,671,843
     Deferred income tax liabilities on (recognized in
        profit or loss):
        Unrealized gain from real estate transactions                           (27,783,822)     (34,341,679)
        Undepreciated capitalized borrowing costs                               (18,039,247)     (18,990,911)
        Unrealized gains on fair value changes of held
            for trading investments                                                (202,525)               –
        Difference between depreciation of leased
            assets and payments                                                    (123,515)        (102,244)
        Rent receivable                                                             (66,772)        (711,375)
     Deferred income tax liabilities on (recognized
        directly in other comprehensive income):
        Unrealized deemed cost adjustment on real
            estate properties (Note 28)*                                     (293,168,960)      (310,024,357)
        Changes in fair value of AFS financial assets                             (63,984)           (27,207)
                                                                             (339,448,825)      (364,197,773)
     Net deferred income tax liabilities                                    (P318,041,073)
                                                                             =                  =
                                                                                               (P343,525,930)
     * Reversal of deferred income tax liabilities is through profit or loss.

c. SLLPHI has no provision for income tax in 2010, 2009, and 2008 since the Company has not
   yet started commercial operations.

d. As of December 31, 2009, SLRDC did not recognize deferred income tax asset on NOLCO
                P
   amounting to =1.2 million. The NOLCO expired in 2010.

     SLRDC has no provision for income tax in 2010, 2009, and 2008 since the Company has not
     yet started commercial operations.

e.   MIC did not recognize deferred income tax assets on the following carry forward benefits of
     unused NOLCO and excess MCIT over RCIT as of December 31:

                                                                                      2010            2009
     NOLCO                                                                       P2,444,019
                                                                                 =                 P431,526
                                                                                                   =
     Excess of MCIT over RCIT                                                       106,936          77,896




                                                                                         *SGVMC311721*
                                              - 50 -


     As of December 31, 2010, the details of NOLCO and excess of MCIT over RCIT are as
     follows:

                                                                Tax effect of
       Year Incurred    Year of Expiration          NOLCO           NOLCO               MCIT
           2009                  2012              =
                                                   P431,526        =
                                                                   P129,457           =
                                                                                      P77,896
           2010                  2013              2,012,493         603,748            29,040
                                                 =
                                                 P2,444,019        =
                                                                   P733,205          P106,936
                                                                                     =

     MIC’s current provision for income tax in 2010 and 2009 represents MCIT amounting to
     =         P
     P0.02 and =0.07 million, respectively.

f.   The reconciliation of the Group’s provision for (benefit from) income tax at the statutory tax
     rates to the provision for (benefit from) income tax shown in the consolidated statements of
     comprehensive income is as follows:

                                                            2010            2009            2008
     Income tax at statutory rates                     =
                                                       P7,952,317     P16,704,472
                                                                      =                 =
                                                                                       (P137,989)
     Additions to (reductions in) income tax
         resulting from tax effects of:
         Nontaxable income                              (5,485,368)    (2,649,637)      (370,325)
         Nondeductible expenses and others               3,291,306        453,327        805,853
         Difference in tax rates used on fair value
             changes of held for trading securities     (2,759,525)             –                –
         Movements in unrecognized deferred
             income tax assets                            632,788           –      928,153
         Interest income subjected to final tax           (72,176)   (148,970)    (135,059)
         Nondeductible interest expense                    56,132      76,245      119,802
     Effect of change in tax rate                               –           – (22,803,077)
     Provision for (benefit from) income tax                       =           =
                                                       P3,615,474 P14,435,437 (P21,592,642)
                                                       =

g. Under R.A. 9337, the Expanded VAT Act of 2005, which took effect on November 1, 2005,
   the corporate income tax rate shall be 35% for three years effective on November 1, 2005, and
   30% starting on January 1, 2009 and thereafter; and the unallowable deduction for interest
   expense shall be 42% of the interest income subject to final tax effective November 1, 2005
   and 33% effective January 1, 2009.

h. The President signed into law on June 17, 2008 RA 9504 amending provisions of the 1997
   Tax Code. RA 9504 became effective on July 7, 2008 fifteen (15) days after its publication
   last June 22, 2008 in major newspapers of general circulation. The new law shall be effective
   starting taxable year 2008. The new law includes provision relating to the availment of
   optional standard deductions (OSD). Corporations, except for nonresident foreign
   corporations, may now elect to claim standard deduction in an amount not exceeding 40% of
   their gross income. A corporation must signify in its return its intention to avail the OSD. If
   no indication is made, it shall be considered as having availed of the itemized deductions. The
   availment of the OSD shall be irrevocable for the taxable year for which the return is made.

     On September 24, 2008, the Bureau of Internal Revenue issued Revenue Regulation 10-2008
     for the implementing guidance of guidelines of the law.




                                                                        *SGVMC311721*
                                                                      - 51 -


27. Related Party Transactions

   Parties are considered to be related if one party has the ability, directly, or indirectly, to control the
   other party or exercise significant influence over the other party in making financial and operating
   decisions. Parties are also considered to be related if they are subject to common control or
   common significant influence.

   In the normal course of business, the Group has transactions and account balances with related
   parties as follows:

   a. Interest-bearing and non-interest bearing advances from/to associate, affiliates and
      stockholder:

                                                                                         Interest Income                        Interest Expense
                                                                                                  on Due                                  on Due
                                                                            Due from        from Related              Due to           to Related
             Related Party             Relationship                   Related Parties1            Parties2    Related Parties             Parties3
       Techsystems                      Associate         2010              =
                                                                            P400,987                   P–
                                                                                                       =                  =
                                                                                                                          P–                   P–
                                                                                                                                               =
                                                          2009                164,524                    –                  –                    –
       Silang Prime Properties
          Corporation (SPPC)              Affiliate       2010            19,241,030                   –                   –                    –
                                                          2009            19,241,030           2,017,976                   –                    –
       Westmont Investment
        Corporation
        (WINCORP)                         Affiliate       2010                     –                  –           15,202,233                    –
                                                          2009                     –                  –           16,242,233                    –
       Biohitech Korea (BHK)              Affiliate       2010                     –                  –           38,640,000                    –
                                                          2009                     –                  –           38,640,000                    –
       Individual                       Stockholder       2010                     –                  –                    –                    –
                                                          2009                     –                  –           10,250,000             575,278
                                                          2010           =
                                                                         P19,642,017                 P
                                                                                                     =–         P
                                                                                                                = 53,842,233                  =
                                                                                                                                              P–
                                                          2009           P19,405,554
                                                                         =                   =
                                                                                             P2,017,976         =
                                                                                                                P65,132,233            P575,278
                                                                                                                                       =
       1
           Included in the “Receivables” account (see Note 8)
       2
            Included in the “Interest income” account (see Note 23)
       3
            Included in the “Finance costs” account (see Note 24)


   b. Advances to Techsystems are currently due and demandable, non-interest bearing, unsecured
      and payable in cash.

   c. MIC extended interest-bearing advances to its affiliate, SPPC, which is covered by various
      promissory notes with maturity period of one year and interest rate of 12% per annum in
      previous years. In 2010, the Company waived the interest on the loan receivable from SPPC.

   d. MIC obtained loans from various creditors through WINCORP in 1997 to finance the
      acquisition of the parcel of land located in Tanza, Cavite (see Note 14). The loan is secured
                                                     P
      by the related property with carrying value of =37.7 million as of December 31, 2010. Notes
      payable to WINCORP carries various interest rates ranging from 12% to 17% which are due
      and demandable. WINCORP waived accrual of interest from March 2000 and granted
      discounts on all subsequent principal repayments. In 2010 and 2009, a partial settlement was
                                                                                  P
      made on the notes payable (including the accrued interest) amounting to =1.0 million and
      =
      P6.4 million, respectively. No additional loan was obtained in 2010 and 2009.

   e. In 2009, Biohitech obtained advances from its affiliate, BHK, to finance the construction of
      the building housing the fermentation machine and for the importation of additional machines.
      The advances are due and demandable and non-interest bearing and remain outstanding as of
      December 31, 2010. The conversion of these advances into shares of stock of Biohitech is still
      subject for approval by the BOD and has not been finalized as of April 27, 2011.



                                                                                                             *SGVMC311721*
                                               - 52 -


   f.   Advances from a stockholder bear an average interest rate of 10% in 2009.

   g. The Parent Company has a lease agreement with Arco Management and Development
      Corporation, an affiliate under common control, in the lease of office space and four parking
      lots (see Note 31).

   h. The Parent Company grants salary loans and advances to its employees payable through salary
      deductions. The loans bear an average interest rate of 10.5% in 2010 and 2009 (see Note 8).

   i.   Compensation of key management personnel of the Parent Company amounted to
        =               =                 =
        P31.9 million, P26.7 million and P26.5 million in 2010, 2009 and 2008, respectively. The
        Parent Company has no standard arrangement with regards to the remuneration of its
                                                                       P             =
        directors. In 2010, 2009 and 2008, the BOD received a total of =1.3 million, P3.0 million and
        P0.8 million, respectively.
        =

   Terms and conditions of transactions with related parties
   Outstanding balances at year-end are unsecured and settlement occurs in cash, unless otherwise
   indicated. There have been no guarantees provided or received for any related party receivables or
   payables. No impairment has been recorded on receivables in 2010, 2009 and 2008.


28. Equity

   Capital Stock
   The details of the Parent Company’s capital stock as of December 31 are as follows:

                                                      2010                          2010
                                              Number of                       Number of
                                                 Shares         Amount           Shares        Amount
                          =
        Common shares - P1 par value
          Authorized - 1,000,000,000 and
           500,000,000 shares in 2010
           and 2009, respectively
           Issued and outstanding (held
              by 1,025, 1,015 and 1,018
              equity holders in 2010, 2009
              and 2008, respectively)        449,985,318    P449,985,318
                                                            =                             =
                                                                              449,985,318 P449,985,318
           Subscribed                        125,000,000      125,000,000               –            –
           Subscription receivable           (26,251,715)     (26,251,715)              –            –
                                             548,733,603    P548,733,603
                                                            =                             =
                                                                              449,985,318 P449,985,318

   Shares of stock of the Parent Company that were held by a subsidiary aggregated to 3,375,000
                        P
   shares equivalent to =8.7 million as of December 31, 2010 and 2009.

   Increase in Authorized Capital Stock and Stock Dividends
   During the annual stockholders’ meeting of the Parent Company held last June 18, 2008, the
   stockholders approved and ratified the following:

   i.   20% stock dividends or 89,997,063 shares out of the unappropriated retained earnings which
        will come from an increase in authorized capital stock. Record date of the stock dividends
        shall be fixed by the SEC after clearance and approval; and




                                                                             *SGVMC311721*
                                            - 53 -


ii. Increase of its authorized capital stock from 500 million shares to one billion shares with par
             P
    value of =1 per share.
On May 11, 2010, the application for the increase in authorized capital stock was approved by the
SEC. On December 23, 2010, the SEC approved the record date for the 20% stock dividends to be
January 19, 2011. The stock dividends were paid out and issued to the stockholders of record on
February 14, 2011 and was listed in the PSE on the same date.
Deposits for Future Stock Subscription
                                                                                  =
Since the increase in authorized capital stock is 500 million shares amounting to P500.0 million,
                                     P
the subscribed portion should be =125.0 million. In order to comply with the minimum
capitalization requirement of the Corporation Code, on October 8, 2008, the BOD of the Parent
Company approved the subscription by stockholders in the increase in the authorized capital stock
amounting to 35,002,937 shares.

In 2010 and 2009, the Parent Company received deposits for future stock subscription amounting
   P                P
to =0.4 million and =5.9 million from existing and new stockholders in anticipation of the Parent
Company’s increase in capital stock.
Upon approval of the increase in authorized capital stock in 2010, the amount of the deposits for
                                       P
future stock subscription amounting to =8.8 million was applied as payment for the subscription of
the 35,002,937 shares.
During the regular meeting of the BOD of the Parent Company held on January 26, 2011, the
BOD approved the call for the payment of the balance of the additional subscription of 35,002,937
shares.
Treasury Shares
On January 13, 2011, the Parent Company purchased the delinquent shares from its 2004 stock
rights offering totaling 9,462 shares. The amount paid for the acquisition of the treasury shares
              P
amounted to =7,096.

Stock Rights Offer
During the annual stockholders’ meeting of the Parent Company held last June 18, 2010, the
stockholders approved and ratified the stock rights offer as approved by the BOD during its
meeting held on October 28, 2009. The stock rights will be offered to existing stockholders at a
ratio of one share for every two shares held at par value. The proceeds from the stock rights offer
will be used for capital expenditures, retirement of loans and full payment of the subscription
payable to MIC.
On April 13, 2011, the PSE approved the Parent Company’s application for the additional listing
                                                     =
of up to 287,492,659 common shares with par value of P1.00 per share to cover the 1:2 stock
rights offering.
As of April 27, 2011, the application for the stock rights offer has not yet been approved by the
SEC.
Appropriation of Retained Earnings
Appropriated portion of the Parent Company’s retained earnings for building improvements
            P
amounted to =17.2 million as of December 31, 2010 and 2009.
Declaration of Dividends
                                                                         P
On April 16, 2008, the BOD approved the declaration of cash dividends of =0.10 per share to
stockholders of record as of May 12, 2008 payable on June 4, 2008.

There were no dividends declared during 2010 and 2009.

                                                                       *SGVMC311721*
                                                 - 54 -


   The amount of the deemed cost adjustment and undistributed earnings of the JV included in the
   balance of the unappropriated retained earnings is restricted and not available for dividend
   declaration.

   Deemed Cost Adjustment
   The unappropriated retained earnings include the remaining balance of the deemed cost adjustment
   which arose when the Group transitioned to PFRS in 2005.

   The components of the deemed cost adjustment as of December 31 are as follows:

                                                                        2010              2009
       Real estate inventories ( Note 9)                        P267,496,089
                                                                =                 P
                                                                                  =301,466,786
       Investment properties (Note 14)                            709,733,777       709,733,777
       Revaluation increment                                      977,229,866     1,011,200,563
       Deferred income tax liability (Note 26)                  (293,168,960)      (310,024,357)
       Deemed cost adjustment                                   P684,060,906
                                                                =                 P
                                                                                  =701,176,206

   The deemed cost adjustment will be realized through sales for both real estate inventories and land
   under investment properties.


29. Basic/Diluted Earnings per Share

   Basic/diluted earnings per share were computed as follows:

                                                            2010              2009              2008
       Net income attributable to equity
           holders of the parent company             =
                                                     P11,675,213      =
                                                                      P33,838,444       =
                                                                                        P21,602,269
       Divided by weighted average number
           of outstanding common shares               574,985,318     539,982,381       530,982,381
       Basic/diluted earnings per share                   =
                                                          P0.020          =
                                                                          P0.063             P0.041
                                                                                             =

   The Parent Company does not have potential dilutive common shares as of December 31, 2010,
   2009 and 2008. Therefore, the basic and diluted earnings per share are the same as of those dates.


30. Operating Segment Information

   The Group’s operating businesses are organized and managed separately according to the nature of
   the products and services provided. The Group’s three reportable operating segments are the
   operation and maintenance of race tracks and holding of horse races, the development and sale of
   real estate properties and rental of stables, building and other facilities. No operating segments
   have been aggregated to form these reportable operating segments.

   Management monitors the operating results of its operating segments separately for the purpose of
   making decisions about resource allocation and performance assessment. Segment performance is
   evaluated based on net income or loss and is measured consistently with the total comprehensive
   income in the consolidated financial statements.

   As of December 31, 2010, 2009 and 2008, the Group has no transactions between reportable
   segments. The Group measures the segment net income or loss, segment assets and segment
   liabilities for each reportable segment in a manner similar to the measurement of the Group’s total
   comprehensive income.

                                                                          *SGVMC311721*
                                                   - 55 -


The Group’s asset-producing revenues are located in the Philippines (i.e., one geographical
location). Therefore, geographical segment information is no longer presented.

Segment Revenue and Expenses
The segment results for the years ended December 31 follow:

                                                                  2010
                               Club Races      Real Estate            Rent       Unallocated             Total
 Segment revenue             =
                             P297,239,492    =
                                             P160,497,624     P188,967,278
                                                              =                  =
                                                                                 P18,841,014      =
                                                                                                  P665,545,408
 Cost and expenses           (206,521,821)     (84,662,085)   (138,484,190)     (209,369,590)     (639,037,686)
 Income (loss) before
   income tax                   90,717,671      75,835,539       50,483,088      (190,528,576)       26,507,722
 Provision for income tax                –               –                –         3,615,474         3,615,474
 Net income (loss)            =
                              P90,717,671     =
                                              P75,835,539      P50,483,088
                                                               =                =
                                                                               (P194,144,050)      =
                                                                                                   P22,892,248

                                                                   2009
                               Club Races      Real Estate             Rent      Unallocated             Total
 Segment revenue             =
                             P279,902,325    =
                                             P368,318,116     P156,352,624
                                                              =                   P4,238,838
                                                                                  =               P808,811,903
                                                                                                  =
 Cost and expenses           (223,491,492)   (207,227,628)      (68,546,464)    (253,864,746)     (753,130,330)
 Income (loss) before
   income tax                  56,410,833     161,090,488       87,806,160      (249,625,908)       55,681,573
 Provision for income tax               –               –                –        14,435,437        14,435,437
 Net income (loss)            P56,410,833
                              =              =
                                             P161,090,488      P87,806,160
                                                               =                =
                                                                               (P264,061,345)      =
                                                                                                   P41,246,136

                                                                   2008
                               Club Races      Real Estate             Rent      Unallocated             Total
 Segment revenue             =
                             P273,368,692    P356,350,197
                                             =                =
                                                              P146,151,546        P1,186,934
                                                                                  =               =
                                                                                                  P777,057,369
 Cost and expenses           (177,765,928)   (230,769,177)      (88,594,396)    (280,322,122)     (777,451,623)
 Income (loss) before
   income tax                  95,602,764     125,581,020       57,557,150      (279,135,188)         (394,254)
 Benefit from income tax                –               –                –        (21,592,642)     (21,592,642)
 Net income (loss)            P95,602,764
                              =              =
                                             P125,581,020      P57,557,150
                                                               =                =
                                                                               (P257,542,546)      =
                                                                                                   P21,198,388

Finance costs, unrealized gains on fair value changes of held for trading investments, other income
(charges) and income taxes are not allocated to individual segments as the underlying instruments
are managed on a group basis and are not provided to the chief operating decision maker at the
operating segment level in 2010, 2009 and 2008. Equity in net earnings of an interest in a jointly
                                 P
controlled entity amounting to =10.2 million in 2010 are included in the segment revenue of
operating segment “Rent”.

Segment Assets and Liabilities and Other Information
                                                                 2010
                               Club Races     Real Estate            Rent        Unallocated            Total
 Assets                     =              =
                            P1,231,868,806 P1,183,950,358     P635,245,221
                                                              =                 =             =
                                                                                P368,120,953 P3,419,185,338
 Liabilities                   160,442,790    165,709,223       99,347,086        832,346,088   1,257,845,187
 Capital expenditures            5,217,226              –        8,167,607          4,771,089      18,155,922
 Interest income                         –     12,114,561                –            637,229      12,751,790
 Finance cost                            –              –                –         41,840,503      41,840,503
 Depreciation                   48,538,793              –       61,793,662          9,246,420     119,578,875

                                                                 2009
                                Club Races     Real Estate            Rent        Unallocated             Total
 Assets                     P1,298,186,991 P1,369,924,476
                            =              =                  =
                                                              P428,441,432      P528,622,924
                                                                                =                P3,625,175,823
                                                                                                 =
 Liabilities                   190,477,854     52,923,891      329,605,894       927,488,699      1,500,496,338
 Capital expenditures           27,728,141               –      56,363,751         6,694,017         90,785,909
 Interest income                         –     56,892,229                –         2,912,666         59,804,895
 Finance cost                            –               –               –        61,416,552         61,416,552
 Depreciation                   67,693,018               –      43,949,102         3,551,216        115,193,336



                                                                                    *SGVMC311721*
                                                    - 56 -


31. Commitments and Contingencies
   The following are the significant commitments and contingencies involving the Group:
   a. Operating Lease Commitment - the Parent Company as Lessee
        On January 1, 2008, the Parent Company renewed its lease agreement with Arco Management
        and Development Corporation, an affiliate, for the lease of office space and four parking lots.
        The lease is for a period of five years starting 2008 and includes an annual escalation rate of
        5%. The future minimum lease payments under this operating lease as of December 31 are as
        follows:
                                                                             2010             2009
        Within one year                                                P4,410,551
                                                                       =                =
                                                                                        P4,200,525
        After one year but not more than five years                      4,631,079        9,041,630
                                                                       P9,041,630
                                                                       =               P13,242,155
                                                                                       =

                                                                 P
        Total rent expense from this operating lease amounted to =4.2 million in 2010, 2009 and 2008
        (see Notes 18 and 19).
   b. Operating Lease Commitment - the Parent Company as Lessor
        On July 12, 2008, the Parent Company renewed its contract of lease with PAGCOR for the
        lease of an area of 929.5 square meters within the Turf Club at Carmona for its casino
        operations and related activities (see Note 13). The lease shall be for a period of five years
        beginning from the date when PAGCOR commences its casino operations. The monthly
                        P
        rental shall be =400 per square meter subject to a five percent (5%) escalation rate computed
        on an annual basis.
        The future minimum lease receivables under this lease agreement are as follows:
                                                                             2010              2009
        Within one year                                                P1,051,481
                                                                       =                 =
                                                                                         P1,001,410
        After one year but not more than five years                      1,104,055         2,155,536
                                                                       P2,155,536
                                                                       =                 P3,156,946
                                                                                         =

                                            =             =                =
        Rent income from PAGCOR amounted to P1.1 million, P1.0 million and P1.6 million in 2010,
        2009 and 2008, respectively.
   c.   Finance Lease Commitment - the Parent Company as Lessee
        In 2008, the Parent Company entered into lease agreements covering certain transportation
        equipment (see Note 13). As of December 31, 2010 and 2009, the future minimum lease
        payments (MLP) together with the present value (PV) of the net minimum lease payments
        (NMLP) are as follows:
                                                             2010                         2009
                                                  Future MLP PV of NMLP         Future MLP     PV of NMLP
           Within one year                         =
                                                   P1,054,512     =
                                                                  P845,697       P1,054,512
                                                                                 =               =
                                                                                                 P758,272
           After one year but not more
               than five years                       1,582,248      1,440,061    2,636,760      2,288,540
           Total MLP                                 2,636,760      2,285,758    3,691,272      3,046,812
           Amounts representing finance charges       (351,002)             –     (644,460)             –
           PV of minimum lease payments            = 2,285,758
                                                   P              = 2,285,758
                                                                  P             P3,046,812
                                                                                =              =
                                                                                               P3,046,812

        The liability relating to this finance lease is shown as “Obligations under finance lease” under
        “Long-term loans and borrowings” in the consolidated balance sheets (see Note 16).

                                                                                *SGVMC311721*
                                                 - 57 -


   d. Claims and Legal Actions

       As of December 31, 2010 and 2009, there are pending claims and legal actions against or in
       favor of the Parent Company arising from the normal course of business, in addition to the
       matters already mentioned elsewhere in these financial statements. In the opinion of the
       Parent Company’s management and its legal counsel, liabilities arising from these claims, if
       any, would not have any material effect on the Parent Company and any liability or loss
       arising there from would be taken up when the final resolution of the claims and actions are
       determined.


32. Financial Assets and Financial Liabilities

   Categories of Financial Instruments
   The following tables present the classification of the Group’s assets and liabilities into their
   respective financial instrument category as of December 31:

   Assets
                                                                2010
                                  Financial                       AFS
                                  Assets at   Loans and      Financial   Nonfinancial
                                     FVPL Receivables           Assets         Assets          Total
     Cash                               =   =
                                        P– P153,796,880            P–
                                                                   =              =
                                                                                  P–    =
                                                                                        P153,796,880
     Held for trading
       investments               30,380,000              –          –               –     30,380,000
     Receivables                          –    310,471,328          –       4,634,685    315,106,013
     Real estate inventories              –              –          –     331,686,119    331,686,119
     Other current assets                 –              –          –      10,788,436     10,788,436
     Interest in a jointly
          controlled entity              –            –           –      5,197,120      5,197,120
     AFS financial assets                –            – 29,737,447               –     29,737,447
     Property and equipment              –            –           – 1,213,322,752 1,213,322,752
     Investment properties               –            –           – 1,223,943,004 1,223,943,004
     Goodwill                            –            –           –     75,816,953     75,816,953
     Other noncurrent assets             –    4,700,014           –     24,710,600     29,410,614
                               =           =            =           =              =
                               P30,380,000 P468,968,222 P29,737,447 P2,890,099,669 P3,419,185,338

                                                               2009
                                  Financial                      AFS
                                  Assets at     Loans and    Financial   Nonfinancial
                                     FVPL      Receivables      Assets         Assets          Total
     Cash                               =
                                        P–    P138,444,127
                                              =                    P–
                                                                   =              =
                                                                                  P–    =
                                                                                        P138,444,127
     Held for trading
       investments               20,506,500                        –             –     20,506,500
     Receivables                          –   389,086,073          –     4,634,685    393,720,758
     Real estate inventories              –             –          –   396,283,498    396,283,498
     Other current assets                 –             –          –     4,633,130      4,633,130
     AFS financial assets                 –             – 22,381,951             –     22,381,951
     Property and equipment               –             –          – 1,309,596,319 1,309,596,319
     Investment properties                –             –          – 1,232,494,728 1,232,494,728
     Goodwill                             –             –          –    75,816,953     75,816,953
     Other noncurrent assets              –     4,700,014          –    26,597,845     31,297,859
                               P20,506,500 P532,230,214 P22,381,951 P3,050,057,158 P3,625,175,823
                               =            =             =          =             =




                                                                          *SGVMC311721*
                                                - 58 -


Liabilities

                                                                       2010
                                              Other Financial       Nonfinancial
                                                   Liabilities          Liabilities             Total
    Loans and borrowings                        =
                                                P435,490,628                    P–
                                                                                =       P435,490,628
                                                                                        =
    Accounts payable and other liabilities        266,722,758         104,207,591         370,930,349
    Income tax payable                                       –         15,304,403          15,304,403
    Due to related parties                         53,842,233                     –        53,842,233
    Accrued retirement benefits payable                      –         64,236,501          64,236,501
    Deferred tax liabilities - net                           –        318,041,073         318,041,073
                                                =
                                                P756,055,619        P501,789,568
                                                                    =                 P1,257,845,187
                                                                                      =

                                                                      2009
                                                Other Financial      Nonfinancial
                                                     Liabilities       Liabilities             Total
    Loans and borrowings                         =
                                                 P602,594,395                  P–
                                                                               =        =
                                                                                        P602,594,395
    Accounts payable and other liabilities         321,132,063       111,233,911         432,365,974
    Income tax payable                                         –         564,843             564,843
    Due to related parties                          65,132,233                   –        65,132,233
    Accrued retirement benefits                                –      56,312,963          56,312,963
    Deferred tax liabilities - net                             –     343,525,930         343,525,930
                                                 =
                                                 P988,858,691       P511,637,647
                                                                    =                 P1,550,496,338
                                                                                      =

Fair Values
The following tables present the carrying values and estimated fair values of the Group’s financial
assets and financial liabilities as of December 31:

                                                         2010                               2009
                                         Carrying                Fair         Carrying               Fair
                                           Value                Value           Value               Value
Financial Assets
Financial assets at FVPL:
   Held for trading investments       =
                                      P30,380,000         P30,380,000
                                                          =                =
                                                                           P20,506,500       =
                                                                                             P20,506,500
Loans and receivables:
   Cash                               153,796,880         153,796,880      138,444,127       138,444,127
   Receivables*                       310,471,328         310,471,328      389,086,073       389,086,073
   Deposits**                           4,700,014           4,700,014        4,700,014         4,700,014
                                      468,968,222         468,968,222      532,230,214       532,230,214
AFS financial assets:
  Quoted                              22,409,677           22,409,677      15,054,181         15,054,181
  Unquoted                             7,327,770            7,327,770       7,327,770          7,327,770
                                      29,737,447           29,737,447      22,381,951         22,381,951
                                    =
                                    P529,085,669         P529,085,669
                                                         =               =
                                                                         P575,118,665       =
                                                                                            P575,118,665
Financial Liabilities
Other financial liabilities:
   Loans and borrowings             =
                                    P435,490,628         P434,573,369
                                                         =               =
                                                                         P602,594,395       =
                                                                                            P604,370,957
   Accounts payable and other
       liabilities***                266,722,758          266,722,758     321,132,063        321,132,063
   Due to related parties             53,842,233           53,842,233      65,132,233         65,132,233
                                    =756,055,619
                                    P                    P
                                                         =755,138,360    =
                                                                         P988,858,691       P990,635,253
                                                                                            =
                                                              P
  * Amounts are exclusive of nonfinancial assets amounting to =4.6 million as of December 31, 2010 and 2009.
 ** Included in “Other noncurrent assets” account in the consolidated balance sheets.
                                                                       P                    =
*** Amounts are exclusive of nonfinancial liabilities amounting to =104.2 million and P111.2 million as of
    December 31, 2010 and 2009, respectively.




                                                                              *SGVMC311721*
                                                - 59 -


   The following methods and assumptions were used to estimate the fair value of each class of
   financial instruments for which it is practicable to estimate such value:

   Cash, receivables and accounts payable and other liabilities and due to related parties
   The carrying amounts of these financial instruments approximate their fair values due to the
   short-term nature of the transactions.

   Deposits
   The carrying value of deposits is the best estimate of its fair value since the related contracts and
   agreements pertaining to these deposits have indeterminable terms.

   Held for trading investments and AFS financial assets
   For publicly traded equity securities, fair values are based on quoted prices published in the
   Philippine equity markets. For unquoted equity securities for which no reliable basis for fair value
   measurement is available, these are carried at cost net of impairment, if any.

   Loans and borrowings
   The fair values are based on the expected cash flows on the instruments, discounted using the
   prevailing interest rate as of December 31, 2010 and 2009 for a comparable instrument in the
   market. Loans and borrowings are discounted using the BSP average lending rates of 7.67% and
   8.99% as of December 31, 2010 and 2009, respectively.

   Fair Value Hierarchy
   The Group measures the fair value of financial instruments carried at fair value using the
   following hierarchy:

   ·   Level 1 - quoted (unadjusted) prices in active markets for identical assets and liabilities
   ·   Level 2 - other techniques for which all inputs which have a significant effect on the recorded
       fair value are observable either directly or indirectly
   ·   Level 3 - techniques which use inputs which have a significant effect on the recorded fair
       value that are not based on observable data

   As of December 31, 2010 and 2009, the Group’s quoted held for trading investments and AFS
                                                                                  =
   financial assets measured at fair value under the Level 1 hierarchy totaled P52.8 million and
   =
   P35.6 million, respectively. There are no financial instruments measured at fair value under the
   Level 2 and Level 3 hierarchies. There were no transfers between the hierarchy in 2010 and 2009.


33. Financial Risk Management Objectives and Policies

   The Group’s financial instruments comprise cash and cash equivalents, held for trading
   investments, receivables, AFS financial assets, deposits, accounts payable and other liabilities,
   interest-bearing loans and borrowings and due to related parties. The main purpose of these
   financial instruments is to finance the Group’s operations.

   The main risks arising from the use of these financial instruments include cash flow interest rate
   risk, equity price risk, foreign currency risk, credit risk and liquidity risk. The Group’s BOD
   reviews and approves the policies for managing these risks and these are summarized below.




                                                                            *SGVMC311721*
                                              - 60 -


Cash flow interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes
in market interest rate relates primarily to the Group’s interest-bearing loans and borrowings
which carry floating interest rates (see Note 16).

The Group’s interest rate risk management policy focuses on reducing the overall interest expense
and exposure to changes in interest rates. Risk of changes in market interest rates is related
primarily to the Group’s interest on financial instruments classified as floating rate as it can
cause a change in the amount of interest payments. Interest on financial instruments classified as
floating rate is repriced at intervals of less than a year. The financial instruments of the Group that
bear fixed interest rates or are noninterest-bearing are not included in the succeeding analyses. The
Group invests excess funds in short-term investments in order to mitigate any increase in interest
rate on borrowings.

The following table demonstrates the sensitivity of the Group’s income before income tax to a
reasonably possible change in interest rates, with all other variables held constant, for the years
ended December 31, 2010 and 2009. There is no impact on the Group’s equity other than those
affecting profit or loss.

                                     Increase (decrease)                Effect on income
                                         in basis points               before income tax
       2010                                       +1%                         =
                                                                             (P4,328,619)
                                                   -1%                          4,328,619
       2009                                        +1%                         (5,989,310)
                                                    -1%                         5,989,310
Equity price risk
Equity price risk is the risk that the fair values of quoted equity securities will fluctuate because of
changes in the level of indices and the value of individual stocks. The Group is exposed to equity
price risk because of quoted equity investments held by the Group, which are classified in the
consolidated balance sheets as held for trading investments and AFS financial assets.

The following table demonstrates the sensitivity of the Group’s equity to a reasonably possible
change in the PSE index (PSEi), with all other variables held constant, for the years ended
December 31, 2010 and 2009.

                                    Increase (decrease)
                                               in PSEi                    Effect on equity
       2010                                      +15%                          =
                                                                               P7,828,452
                                                 -15%                           (7,828,452)
       2009                                      +15%                            1,563,008
                                                  -15%                          (1,563,008)

Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows from the Group’s
foreign-currency denominated assets or liabilities may fluctuate due to changes in foreign
exchange rates.

The Group’s foreign currency risk relates to its foreign currency-denominated cash in banks. The
latter pertains to the foreign-currency denominated acquisition of equipment by NVTL. To
manage this risk, management closely monitors the movements in exchange rates and regularly
assesses future foreign exchange rate movements.



                                                                           *SGVMC311721*
                                                    - 61 -


The Group’s outstanding foreign currency-denominated financial asset pertaining to cash in banks
as of December 31 and its Peso equivalent are as follows:

                                                                              Philippine
                                                              US Dollar             Peso
                       2010                                  US$12,663        =
                                                                              P555,186
                       2009                                     22,067        1,022,955

                                                                                 P
As of December 31, 2010 and 2009, the applicable closing exchange rates were =43.84 and
P                                                                     =                =
=46.20 to US$1, respectively. Net foreign exchange loss amounted to P0.2 million and P0.3
                                                                                P
million in 2010 and 2009, respectively, while foreign exchange gain amounted to =0.2 million
in 2008.

The sensitivity of the Group’s income before income tax to a reasonably possible change in the US
Dollar exchange rate against the Peso, with all other variables held constant, has no significant
effect in the financial statements for the years ended December 31, 2010 and 2009.

Credit risk
Credit risk arises because the counterparty may fail to discharge its contractual obligations. The
Group transacts only with related parties and recognized and creditworthy third parties.
Receivable balances are monitored on an ongoing basis. Further, management intensifies its
collection efforts to collect from defaulting third parties.

The Group’s policy is to enter into transactions with a diversity of creditworthy parties to mitigate
any significant concentration of credit risk. There is no significant concentration of credit risk in
the Group.

The table below shows the maximum exposure to credit risk of the Group as of December 31,
2010 and 2009. The maximum exposure is shown gross, before the effect of mitigation through
the use of master netting and collateral agreements.

                                                                                 2010              2009
    Loans and receivables:
       Cash in banks                                                  P144,913,058
                                                                      =                    =
                                                                                           P116,538,332
       Receivables:
           Real estate receivables                                      171,511,972          252,723,939
           Receivables from OTB operators                                64,736,002           64,555,633
           Rent receivables                                              34,399,070           37,033,920
           Due from related parties                                      19,642,017           19,405,554
           Dividends receivable                                           4,973,733                    –
           Others                                                        15,208,534           15,367,027
                                                                        310,471,328          389,086,073
         Deposits*                                                        4,700,014            4,700,014
                                                                      P460,084,400
                                                                      =                    P510,324,419
                                                                                           =
    * Included in “Other noncurrent assets” account in the consolidated balance sheets

Where financial instruments are recorded at fair value, the amounts shown above represent the
current credit risk exposure but not the maximum risk exposure that could arise in the future.




                                                                                    *SGVMC311721*
                                                    - 62 -


The credit quality of financial assets is managed by the Group using internal credit ratings. The
tables below show the credit quality of financial assets based on the Group’s credit rating system
as of December 31.

                                                                      2010
                                                           Past Due but
                                                         not Individually Individually
                                          Standard Grade        Impaired     Impaired                    Total
 Loans and receivables:
   Cash in banks                              =
                                              P144,913,058                     P–
                                                                               =              P– P 144,913,058
                                                                                              = =
   Receivables
     Real estate receivable s                  171,511,972                     –               – 171,511,972
     Receivables from OTB operators              2,842,428            61,893,574               –   64,736,002
     Rent receivables                           27,494,119             6,904,951       3,500,000   37,899,070
     Due from related parties                   19,642,017                     –               –   19,642,017
     Dividends receivable                        4,973,733                     –               –    4,973,733
     Others                                     10,987,672             4,220,862               –   15,208,534
   Deposits*                                     4,700,014                     –               –    4,700,014
                                              =387,065,013
                                              P                      =73,019,387
                                                                     P                =3,500,000 P463,584,400
                                                                                      P          =


                                                                              2009
                                                                    Past Due but
                                                                 not Individually Individually
                                             Standard Grade             Impaired     Impaired            Total
 Loans and receivables:
   Cash in banks                              =
                                              P116,538,332                      =
                                                                                P–            = =
                                                                                              P– P116,538,332
   Receivables
     Real estate receivable s                  252,723,939                     –                – 252,723,939
     Receivables from OTB operators              2,662,059            61,893,574                –   64,555,633
     Rent receivables                           24,282,620            12,751,300        2,370,000   39,403,920
     Due from related parties                   19,405,554                     –                –   19,405,554
     Others                                      9,485,500             5,881,527                –   15,367,027
   Deposits*                                     4,700,014                     –                –    4,700,014
                                              P429,798,018
                                              =                      P80,526,401
                                                                     =                 =          =
                                                                                       P2,370,000 P512,694,419
* Included in “Other noncurrent assets” account in the consolidated balance sheets.

The credit quality of the financial assets was determined as follows:

Cash in banks and deposits
These are considered standard grade based on the nature of the counterparty and the Company’s
internal rating system. Cash and deposits are limited to highly reputable banks and counterparties
duly authorized by the BOD.

Receivables
Standard grade pertains to receivables from existing and active buyers, OTB operators, lessees,
related parties and other counterparties. These receivables have no history of significant default or
delinquency in collections but have a reasonable probability of uncollectibility.

                                                             =                 =
Past due but not impaired loans and receivables amounting to P73.0 million and P80.5 million as
of December 31, 2010 and 2009, respectively, are aged more than one year but less than three
years.




                                                                                      *SGVMC311721*
                                                     - 63 -


Liquidity risk
Liquidity risk is defined as the risk that the Group would not be able to settle or meet its
obligations on time or at a reasonable price. The Group’s objective is to maintain a balance
between continuity of funding and flexibility by regularly evaluating its projected and actual cash
flows and through the use of bank loans and extension of suppliers’ credit terms. The Group
maximizes the net cash inflows from operations to finance its working capital requirements.

The tables below summarize the maturity profile of the Group’s financial liabilities as of
December 31, 2010 and 2009 based on contractual undiscounted payments (principal and interest)
and the profile of the financial assets used to manage the Company liquidity risk.

December 31, 2010
                                       Within        >1 year to      3 years to            5 years
                                       1 year         <3 years        <5 years           and more               Total
Loans and borrowings*:
    Bank loans                  =
                                P398,501,607      =
                                                  P37,571,428 P32,428,571
                                                              =                                    =
                                                                                                   P–    =
                                                                                                         P468,501,606
    Term Loan III                  8,156,250                –           –                            –      8,156,250
    Obligations under
        finance lease               1,044,192        1,584,531                 –                    –       2,628,723
Accounts payable and
  other liabilities**            266,722,758                –           –                           –     266,722,758
Due to related parties            53,842,233                –           –                           –      53,842,233
                                =728,267,040
                                P                 =
                                                  P39,155,959 P32,428,571
                                                              =                                    P
                                                                                                   =–    =799,851,570
                                                                                                         P
                                                     P
  * Amounts are inclusive of interest amounting to =43.8 million.
                                                                   P
 ** Amounts are exclusive of nonfinancial liabilities amounting to =104.2 million.

                                             Within            >1 year to             3 years to
                                              1 year            <3 years               <5 years                 Total
 Cash on hand                             P8,883,822
                                          =                           =
                                                                      P–                     =
                                                                                             P–            P8,883,822
                                                                                                           =
 Financial assets at FVPL
   Held for trading investments            30,380,000                    –                    –            30,380,000
 Loans and receivables:
    Cash in banks                        144,913,058                    –                     –           144,913,058
    Receivables*                         242,684,163           67,787,165                     –           310,471,328
    Deposits**                                     –                    –             4,700,014             4,700,014
                                         387,597,221           67,787,165             4,700,014           460,084,400
AFS financial assets                               –                    –            29,737,447            29,737,447
                                        P
                                        =426,861,043          =67,787,165
                                                              P                     P
                                                                                    =34,437,461          =529,085,669
                                                                                                         P
                                                             P
 * Amounts are exclusive of nonfinancial assets amounting to =4.6 million.
** Included in “Other noncurrent assets” account in the consolidated balance sheets.

December 31, 2009
                                       Within        >1 year to       3 years to            5 years
                                       1 year         <3 years         <5 years           and more              Total
Loans and borrowings*:
    Bank loans                  =
                                P405,047,174       =
                                                   P75,127,932 P36,044,643
                                                               =                       =
                                                                                       P15,780,357       P532,000,106
                                                                                                         =
    Term Loan I                  102,129,996                 –           –                       –        102,129,996
    Term Loan III                 33,281,250         8,156,250           –                       –         41,437,500
    Obligations under
        finance lease               1,037,500        2,625,942                 –                    –       3,663,442
Accounts payable and
  other liabilities**             321,132,063                –           –                       –    321,132,063
Due to related parties             65,132,233                –           –                       –     65,132,233
                                =
                                P927,760,216       =           =
                                                   P85,910,124 P36,044,643             =           =
                                                                                       P15,780,357 P1,065,495,340
                                                    P
 * Amounts are inclusive of interest amounting to =76.6 million.
                                                                  P
** Amounts are exclusive of nonfinancial liabilities amounting to =111.2 million.

                                                                                       *SGVMC311721*
                                                        - 64 -


                                                 Within            >1 year to         3 years to
                                                 1 year             <3 years           <5 years               Total
    Cash on hand                            =
                                            P21,905,795                   P–
                                                                          =                  =
                                                                                             P–         =
                                                                                                        P21,905,795
    Financial assets at FVPL
      Held for trading investments           20,506,500                     –                 –          20,506,500
    Loans and receivables:
       Cash in banks                       116,538,332                     –                 –          116,538,332
       Receivables*                        314,869,886            74,216,187                 –          389,086,073
       Deposits**                                    –                     –         4,700,014            4,700,014
                                           431,408,218            74,216,187         4,700,014          510,324,419
    AFS financial assets                             –                     –        22,381,951           22,381,951
                                          =
                                          P473,820,513           =
                                                                 P74,216,187       P27,081,965
                                                                                   =                   =
                                                                                                       P575,118,665
                                                                 P
     * Amounts are exclusive of nonfinancial assets amounting to =4.6 million.
    ** Included in “Other noncurrent assets” account in the consolidated balance sheets.



34. Capital Management

   The Group maintains a capital base to cover risks inherent in the business. The Group manages its
   capital structure and makes adjustments to it in light of changes in economic conditions and the
   risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group
   may adjust the amount of dividend payments to shareholders, return capital to shareholders or
   issue capital securities.

   The following table summarizes the total capital considered by the Group:

                                                                                  2010                    2009
       Capital stock                                                       P548,733,603
                                                                           =                       P
                                                                                                   =449,985,318
       Deposits for future stock subscription                                         –               8,347,199
       Net changes in fair values of AFS financial assets                    12,182,922               4,864,203
       Retained earnings:
           Appropriated                                                      17,180,917            17,180,917
           Unappropriated                                                 1,407,712,622         1,486,034,472
       Treasury stock                                                        (8,707,500)           (8,707,500)
                                                                        P1,977,102,564
                                                                        =                     P1,957,704,609
                                                                                              =

   The Parent Company is required to maintain a maximum debt-to-equity ratio of 0.8 to 1.0 by its
   bank creditors as of December 31, 2009. For the year ended December 31, 2010, the Parent
   Company is no longer required to maintain debt-to-equity ratio. The Group still monitors its use of
   capital and capital adequacy by using debt-to-equity ratio. The debt-to-equity ratios as of
   December 31 are as follows:

                                                                                  2010                  2009
       Total debt                                                       P1,257,845,187
                                                                        =                    =
                                                                                             P1,500,496,338
       Total equity                                                       1,977,102,564        1,957,704,609
       Debt-to-equity ratio                                                      0.64:1               0.77:1

   No changes were made in the objectives, policies and processes from the previous years.




                                                                                           *SGVMC311721*
                                              - 65 -


35. Other Matters

   a. Philippine Economic Zone Authority (PEZA) - Carmona Property

       Presidential Proclamation No. 1517, signed on May 26, 2008, creating and designating several
       parcels of land of the private domain situated at Barangay Lantic, Municipality of Carmona,
       Province of Cavite as Tourism Economic Zone pursuant to R.A. No. 7916 as amended by
       R. A. No. 8748.

       The registration as an Econozone Developer/Operator shall entitle the Parent Company to
       establish, develop, construct, administer, manage and operate a Special Economic Zone to be
       known as San Lazaro Leisure and Business Park (SLLBP).

       The SLLBP consisting of an area of 542,294 square meters.

   b. PEZA - Sta. Cruz Property

       Presidential Proclamation No. 1727, dated February 13, 2009, created and designated several
       parcels of land owned by the Parent Company at the site of the former San Lazaro race track
       in Sta. Cruz, Manila consisting of 74,244 square meters, as a tourism economic zone with
       information technology component and to be known as the San Lazaro Tourism and Business
       Park.

       Pursuant to the proclamation, the Parent Company and the PEZA signed on February 29, 2009
       the Registration Agreement to entitle the Parent Company to develop and operate the
       aforementioned special economic zone. A certificate of registration was thereafter issued.

   c. Permit to Operate - PAGCOR San Lazaro

       On March 18, 2010, MIC was granted a Permit to Operate by PAGCOR for the establishment,
       maintenance and operation of a casino, PAGCOR San Lazaro, within the San Lazaro Tourism
       and Business Park in Sta. Cruz, Manila. The permit shall be for a period of ten years, to
       commence on the date of actual operation of PAGCOR San Lazaro.

   d. Memorandum of Understanding (MOU) with AAPC Singapore Pte. Ltd. (AAPC)

       On November 23, 2010, MIC and AAPC entered into a MOU appointing AAPC to provide
       hotel-consultancy services and hotel management services (including pre-opening services)
       for the planned hotel to be constructed within the San Lazaro Tourism and Business Park at
       Sta. Cruz, Manila. The hotel will be part of a mixed used development which may include a
       casino and retail space. The casino will be operated by PAGCOR while the hotel and related
       facilities shall be operated by AAPC.




                                                                        *SGVMC311721*
Manila Jockey Club Inc
SEC 17 A Supplementary Schedules
For the year ended December 31, 2010

Schedule E - Property Plant and Equipment
            Classification             Beginning Balance   Additions at Cost   Retirements     Other Charges -        Ending Balance
                                                                                             additions (deductions)
LAND                                        304,869,383                                                                 304,869,383
LAND IMPROVEMENTS                           337,046,417                                                                 337,046,417
                                                                                                                                       Improvement of various offices. Cabling 2 doors
BUILDINGS and IMPROVEMENTS                  644,212,399              94,483                            5,728,443        650,035,325    Magnetic Access
                                                                                                                                       Acquired new Desktop Computer, Laptop &
MACHINERY and EQUIPMENT                    469,130,176           5,850,708                                              474,980,884    Navision File Converter
FURNITURE and FIXTURES                      16,206,695           3,386,255                               380,450         19,973,400    Accquired new Tables, Cabinets & Chairs
TRANSPORTATION EQUIPMENT                    23,067,280           2,558,929                                               25,626,209    Acquired new cars for Offices
CONSTRUCTION IN PROGRESS                    18,805,015           2,390,646                            (9,509,010)        11,686,651
TOTAL                                    1,813,337,365          14,281,021             -              (3,400,117)     1,824,218,269
Manila Jockey Club Inc
SEC 17 A Supplementary Schedules
For the year ended December 31, 2010

Schedule F - Accumulated Depreciation
            Classification              Beginning Balance   Additions charged to   Retirements     Other Charges -        Ending Balance
                                                             costs and expenses                  additions (deductions)
LAND IMPROVEMENTS                            84,932,690            13,522,991                                                98,455,681
BUILDINGS and IMPROVEMENTS                  145,388,299            27,427,559                                               172,815,858
MACHINERY and EQUIPMENT                     248,473,844            61,430,611                                   2,221       309,906,676
FURNITURE and FIXTURES                        8,767,912             2,904,158                                                11,672,070
TRANSPORTATION EQUIPMENT                     16,178,301             1,866,931                                                18,045,232

TOTAL                                       503,741,046           107,152,250              -                    2,221       610,895,517
Manila Jockey Club Inc
SEC 17 A Supplementary Schedules
For the year ended December 31, 2010

Schedule H- Long term debt
   Title of issue and type of   Amount authorized by indenture   Amount shown under caption "Current portion      Amount shown under caption "Long-Term Debt" in related balance sheet

           obligation                                             of long term debt" in related balance sheet

BANK LOANS                                      366,000,000.00                                  51,969,048.00                                                             57,142,857.00

                                                                                                                ♦ Interest Rate (Range) = 9.00% - 10.75%
                                                                                                                ♦ No. of Periodic Installment = 4
                                                                                                                ♦ Amount of Periodic Installment = P3,571,428.57
                                                                                                                ♦ Maturity Date = November, 2015


BANK FINANCING (Car Plan)                         5,272,560.00                                   1,044,192.00                                                              1,584,531.00

                                                                                                                ♦ Interest Rate = 11.02%
                                                                                                                ♦ No. of Periodic Installment = 12
                                                                                                                ♦ Amount of Periodic Installment = P87,876.00
                                                                                                                ♦ Maturity Date = December, 2013
MANILA JOCKEY CLUB, INC.
Schedule I. Capital Stock
For the Year Ended December 31, 2011

  Title of Issue   Number of Shares    No. of Shares Issued    No. of Shares Reserved for Options,                  Number of Shares Held By
                     Authorized         and Outstanding       Warrants, Conversions and Other Rights
                                                                                                       Affiliates    Directors, Officers and   Others
                                                                                                                           Employees
 Common Shares       1,000,000,000         449,985,318                         N/A                     3,375,000           53,025,527           N/A

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:104
posted:8/28/2011
language:English
pages:156