FROM THE ABOVE ARTICLE,

1. CRITIQUE on the Financial Statement and identify where the financials were misvalued and WHY.

2. Discuss the stock market value.

3. Discuss price earning ratio.

4. Analysis on the dividends.

5. Assign a competitor and compare its financial practice.

764 PAL HOLDINGS, INC. 8th Floor PNB Financial Center Pres. Diosdado Macapagal Ave. CCP Complex, Pasay City MANAGEMENT REPORT a) CORPORATE HISTORY PAL Holdings, Inc. ("PHI", or the "Company") was originally incorporated on 10 May 1930 under the corporate name "Baguio Gold Mining Company". In 1996, the Philippine Securities and Exchange Commission (the "SEC") approved the Company's change of name to "Baguio Gold Holdings Corporation" as well as the amendment of the Company's primary purpose to that of a holding company. The Company finally adopted its current the corporate name "PAL Holdings, Inc." in 2007 as it embarked on the consolidation of the interests of the Lucio Tan Group in the airline business. In line with the airline consolidation purpose afore-mentioned, the Company acquired in 2007 a total of 8,823,640,223 shares in Philippine Airlines, Inc. ("PAL" or the "Airline"), from six holding companies (the "Six Holding Companies") which at that time owned 81.57% of the issued and outstanding common shares in the Airline. At the same time, it acquired from the Six Holding Companies (except Maxell Holdings Corporation) the shares owned by the same in PR Holdings, Inc. (PR), equivalent to 82.33% of PR. Both acquisitions were made by way of dacion en pago. In 2012, San Miguel Equity Investments Inc. (SMEII), a wholly owned subsidiary of San Miguel Corporation, acquired 49% equity interest in Trustmark Holdings Corporation (Trustmark). Trustmark then owned 97.71% of the Company, which in turn indirectly owned, thru PR. 84.67% of PAL. The proceeds from the investment of SMEII in Trustmark flowed down to PAL with the subscription by Trustmark of 17.00 billion shares in the Company for P17.00 billion and subsequently, the subscription by the Company of 85 billion shares in PAL for P17.00 billion. Later that same year, the Company increased its in authorized capital stock to P 23.00 billion in support of which, the amount of P2.42 billion was subscribed by Trustmark. As a result, Trustmark's ownership in the Company increased from 97.71% to 99.45%. In 2013, the Company had another round of capital increase to P30.00 billion with new subscriptions of P2.42 billion, of which P603.75 million was received in cash as of December 31, 2015. As a result of the additional issuance of sl Screenshot Trustmark's ownership in the Company decreased from 99.45% to 89.78%. 1 The JUN 8 ITEM 1. BUSINESS 765 as of December 31, 2015. As a result of the additional issuance of shares, Trustmark's ownership in the Company decreased from 99.45% to 89.78%. The Company thereafter changed its in accounting period from fiscal year ending March 31 to calendar year ending December 31. 1 In 2014, Buona Sorte Holdings, Inc. ("BSHI") and Horizon Global Investments Limited ("HGIL") acquired the 49% stake of SMEII in Trustmark at 9% and 40%, respectively. As of December 31, 2019 and 2018, Trustmark is 60% owned by BSHI and 40% owned by HGIL. BSHI and Trustmark were likewise incorporated in the Philippines and are part of the Lucio Tan Group of Companies while HGIL was incorporated in British Virgin Islands. In 2016, the Company undertook a share swap transaction, whereby it acquired PAL shares from existing PAL shareholders in exchange for new shares of the Company at a share swap ratio of 5:1 or five (5) PAL shares for every one (1) PHI share. The Company issued a total of 124.29 million new shares from its authorized but unissued capital stock in favor of PAL shareholders who participated in the PAL share swap transaction in exchange for 0.65% additional interest in PAL. As of December 31, 2019, PHI has effective ownership interest in PAL of 98.92%. Also in 2016, the Company undertook a separate share swap transaction for the acquisition of Zuma Holdings Management Corporation (ZUMA), the holding company of Air Philippines Corporation (APC), from its existing shareholders at a share swap exchange ratio of 19:1 corresponding to 19 PHI shares for every one (1) ZUMA share. The Company issued 840.46 million new shares from its authorized but unissued capital stock valued at P5.00 per share in favor of the holder of Zuma shares, Cosmic Holdings Corporation. Accordingly, as of December 31, 2019 and 2018, the Company owned 51% of ZUMA. As a result of the above-described share swap transactions, Trustmark's ownership in the Company decreased from 89.78% to 86.42% as of 31 December 2018. In February 2019, ANA Holdings, Inc. (ANA HO), the parent company of All Nippon Airways (ANA), acquired 1,103,042,933 shares held by Trustmark ir equivalent to 9.5% of the current outstanding shares of PHI. As a result o Screenshot transaction, Trustmark's ownership in the Company decreased from 86.42% to JUN 8 765 76.92% as of 31 December 2019. b) DESCRIPTION OF SUBSIDIARIES Philippine Airlines, Inc. PAL, a corporation organized and existing under the laws of the Republic of the Philippines, was incorporated on 25 February 1941. It is the national flag carrier of the Philippines and its principal activity is to provide air transportation for passengers and cargo within and outside the Philippines. PAL flies to the most popular domestic jet routes and international and regional points that are either most visited by Filipinos or provide a good source of visitors to the Philippines. As of 31 December 2019, PAL's route network covered 31 points in the Philippines and 40 international destinations. PAL was certified as a 4-Star Airline by Skytrax, the international air transport rating organization. PAL joined 40 other renowned air carriers in this prestigious 2 service status, and is the first and only airline in the Philippines to earn the 4-Star rating. PR Holdings, Inc. PR was organized by a consortium of investors for the purpose of bidding for and acquiring the shares of stock of PAL in accordance with the single-buyer requirement of the bidding guidelines set by the then seller, the National Government of the Republic of the Philippines. PR acquired on 25 March 1992, 67% of the outstanding capital stock of PAL. PR was partially dissolved or liquidated in 1998 with a decrease in its authorized capital stock and retirement of some of its shares in exchange for PAL shares to retiring stockholders as return of capital. Zuma Holdings and Management Corporation ZUMA was incorporated and registered with the SEC on 25 August 1989. I Screenshot organized primarily to engage in the business of a holding company. It has an JUN 8 765 ZUMA was incorporated and registered with the SEC on 25 August 1989. It was organized primarily to engage in the business of a holding company. It has an investment in Air Philippines Corporation (APC), a 99.97%-owned subsidiary. APC is primarily engaged in the business of air transportation for the carriage of passengers and cargo within and outside the Philippines. APC is currently doing business under the name and style of Philippine Airlines or PAL Express. ITEM 2. DIRECTORS AND OFFICERS Please refer to pages 5 thru 12 of the Information Statement. ITEM 3. MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) The consolidated financial statements referred to consist of the financial statements. of the Company and its subsidiaries. The financial statements of the subsidiaries are prepared using consistent accounting policies as those of the Company. Companies included in the consolidation are PAL and PR and ZUMA. The Company owns 98.92% of PAL directly and an indirect ownership in 0.35% of PAL's shares through an 82.33% direct ownership in PR. In turn, PR owns 0.42% of PAL. When the Company acquired 51% ownership interest in ZUMA in 2017, it effectively obtained control over APC. Subsidiaries are consolidated from the date on which control is transferred to the Company and cease to be consolidated from the date on which control is transferred out of the Company. All intercompany accounts and transactions with subsidiaries are eliminated in full. I. RESULTS OF OPERATIONS Stiff competition, matched with ever increasing costs, have caused the Company to incur losses over the last three years. The Company has lined up various revenue enhancement programs, cash generation strategies and cost control initiatives to improve the results of its operations. 3 Screenshot a. Three Months Ended March 31, 2020 versus March 31, 2019 JUN 8 D 765 a. Three Months Ended March 31, 2020 versus March 31, 2019 (In thousands) Revenues 3M2020 P32,073,109 38,625,023 3M2019 P39,244,489 Operating expenses 36,713,874 Other charges-net 2,727,524 3,032,447 Loss before income tax (9,279,438) (501,832) Income tax expense 4,986 198,769 Net loss (9,284,424) (700,601) (1,434,270) 639,789 Other comprehensive income (loss) Total comprehensive loss (10,718,694) (60,812) The Company reported a total comprehensive loss of P10.72 billion for the quarter ended March 31, 2020, P10.66 billion higher than last year's same period total comprehensive loss of P60.81 million, as the Group's operations were severely affected by the worldwide travel restrictions due to coronavirus (COVID-19) outbreak. Consolidated revenues for the first quarter of 2020 amounted to P32.07 billion, 18.3% lower than the P39.24 billion recognized in 2019. The reduction in revenues was mainly due to 21.4% drop in passenger revenues as a result of flight cancellations in March 2020 due to COVID-19 outbreak. Consolidated operating expenses increased to P38.63 billion, 5.2% higher than last year's same quarter total of P36.71 billion, mainly due to the increase in flying operations expenses particularly fuel expenses as a result of hedging losses. This however was offset by the decrease in other Group's operating expenses due to reduced flight operations during the quarter. Total other charges decreased to P2.73 billion mainly due to lower financing charges as a result of payment of loans. Estimated income tax expense of P4.99 million was recognized during the quarter as a result of the operations of the Group as well as the movements of deferred tax assets and liabilities on all deductible temporary differences in accordance with PAS 12, Income Taxes. The Company recognized other comprehensive loss of P1.43 billion for the current quarter as against other comprehensive income of P639.79 million for the same quarter last year. This was mainly brought about by the fair value adjustments of the Company's quoted investments which substantially decreased during the current quarter. b. Calendar Year Ended December 31, 2019 versus December 31, 2018 (In thousands) Revenues FY2019 P154,536,731 O JUN 8 FY2 Screenshot P150,481,358 765 b. Calendar Year Ended December 31, 2019 versus December 31, 2018 (In thousands) Revenues FY2019 P154,536,731 151,663,611 FY2018 P150.481,358 156.465,663 Operating expenses Other charges-net 14,072,994 1,445,474 Loss before income tax (11,199,874) (7,429,779) Income tax benefit (1,497,158) (3,722,221) Net loss (9,702,716) (3,707,558) Other comprehensive income (loss) (496,238) 864,153 Total comprehensive loss (10,198.954 (2,843.405 The Company reported a consolidated total comprehensive loss of P 10.20 billion for the year ended December 31, 2019, P7.36 billion higher than last year's consolidated total comprehensive loss of F2.84 billion. Consolidated revenues amounted to P 154.54 billion for the year ended December 31, 2019, up by P4.06 billion or 2.7% higher than the same period last year. This was on account of the increase in passenger revenues by 4.2% due to additional frequencies and new routes which resulted to the growth in passenger numbers, partly offset by lower cargo revenues by 8.2% and ancillary revenues by 5.0%. Consolidated expenses for the year ended December 31, 2019 decreased by P 4.80 billion or 3.1% versus the same period in 2018. The main contributors for the decrease were flying operations and passenger service expenses, which were partly offset by the increase in aircraft and traffic servicing expenses. Flying operations expenses decreased by P4.72 billion or 5.4% on account of lower jet fuel costs due to the decrease in jet fuel price from an average of US$ 94.38 per barrel in 2018 to US$ 86.93 per barrel in 2019. The adoption of PFRS 16, Leases in 2019 resulted to the increase in depreciation by P16.92 billion and reduction in lease charges by P16.87 billion due to changes in accounting for leases. Passenger service expenses declined by P245.71 million or 1.9% mainly due to JUN 8 4 Screenshot 765 Passenger service expenses declined by P245.71 million or 1.9% mainly due to lower expenses in flight amenities. Aircraft and traffic servicing expenses increased by P180.23 million or 0.9% mainly due to higher landing and take-off fees. Total other charges amounted to P14.07 billion in 2019, up by P12.63 billion or 873.6% from P1.45 billion in 2018. Financing charges increased by P6.76 billion or 128.4% mainly due to the adoption of PFRS 16 and additional aircraft financing. There were also more charges incurred during the year and significantly less one-off gains compared to 2018 where it booked income from reversal of provision for contingency for the Flight Attendants and Stewards Association of the Philippines (FASAP) case, reassessment of the carrying values of asset restoration obligations for certain aircraft and credit memos received from various aircraft manufacturers. Income tax benefit of P1.50 billion was recognized during the current period as a result of the operations of the Group as well as the movements of deferred tax assets and liabilities on all deductible temporary differences in accordance with PAS 12, Income Taxes. 5 For the year ended December 31, 2019, the Company recognized other comprehensive loss of P496.24 million as against the other comprehensive income of P864.15 million in 2018. The decline was mainly due to the changes in actuarial assumptions of retirement benefits. c. Calendar Year Ended December 31, 2018 versus December 31, 2017 FY2018 FY2017 (In thousands) Revenues P150,481,358 P129,521,845 156,465,663 132,087,411 Operating expenses Other charges-net 1,445,474 3,898,662 Loss before income tax (7,429,779) (6,464,228) (3,722,221) 2,893 Income tax expense (benefit) Net loss (3,707,558) (6,467,1 Screenshot 1,856,0 Other comprehensive income 864,153 Total comunrahanciua loco 13.0.12 105 (1 611 115) O JUN 8 765 c. Calendar Year Ended December 31, 2018 versus December 31, 2017 FY2018 FY2017 (In thousands) Revenues P150,481,358 P129,521,845 Operating expenses 156,465,663 132,087,411 Other charges-net 1,445,474 3,898,662 Loss before income tax (7,429,779) (6,464,228) Income tax expense (benefit) (3,722,221) 2,893 Net loss (3,707,558) (6,467,121) Other comprehensive income 864,153 1,856,006 Total comprehensive loss (2,843,405 (4,611,115) The Company's financial performance for the year ended December 31, 2018, showed a consolidated total comprehensive loss of P2.84 billion or 38.3% lower as compared with the consolidated total comprehensive loss of P4.61 billion in 2017. Consolidated revenues for the year ended December 31, 2018 amounted to P 150.48 billion, up by P20.96 billion or 16.2% over the last year's figure of P 129.52 billion. Passenger revenues which contributed the biggest share of 85.7% of the total revenues grew by P17.67 billion in 2018 as a result of the increase in the volume of passengers carried and number of flights operated. PAL operated 112,072 flights and carried 15.9 million passengers in 2018 vis a vis 103,362 flights and 14.5 million passengers in 2017. Cargo revenues increased by 21.7% or P1.82 billion due to volume and improvement in yields. Ancillary revenues likewise increased by 17.0% or P1.63 billion as a result of the growth in volume of passengers. Consolidated expenses increased by 18.5% from P132.09 billion for the year ended December 31, 2017 to P155.47 billion in the same period in 2018. The increase in expenses was attributable to higher flying operations, aircraft and traffic servicing, maintenance and reservation and sales expenses. The increase in flying operations expenses was attributable to fuel costs and lease charges. Fuel consumption increased by P14.36 billion from P38.43 billion in 2017 to P52.79 billion in 2018. The increase was mainly due to the escalation in jet fuel prices from an average of US$ 75.59 per barrel in 2017 to US$ 94.38 per barrel in 2018. Lease charges also increased by P3.91 billion due to the delivery of additional two aircraft in December 2017 and nine aircraft in 2018. Growth in number of flights operated in 2018 had the effect of increasing aircraft and traffic servicing expenses by P1.69 billion or 9.5% on account of ground handling charges and landing and take-off fees. JUN 8 O Screenshot 765 Maintenance costs increased by 7.9% or P1.53 billion from P19.44 billion in 2017 to P20.97 billion in 2018 as a result of additional aircraft deliveries in 2018. Higher booking fees and volume incentives as a result of the growth in sales in 2018 increased the reservation and sales expenses to P10.86 billion or 12.4% higher than the P9.67 billion in 2017. Total other charges amounted to P1.45 billion in 2018 versus the P3.90 billion incurred in 2017. The reduction in expense by P2.45 billion was primarily due to the reversal of provision for contingency for the Flight Attendants and Stewards Association of the Philippines (FASAP) case as a result of Supreme Court's final decision dated September 18, 2018 in favor of PAL. The reassessment done on deferred tax assets and liabilities on all deductible temporary differences in accordance with PAS 12, Income Taxes during the year 2018, resulted in the recognition of income tax benefit of P3.72 billion. For the year ended December 31, 2018, the Company recognized other comprehensive income of P864.15 million which was attributable mainly to the changes in actuarial assumptions primarily due to the increase in discount rates. This was lower than last year's other comprehensive income of P1.86 billion which was recognized as a result of the increase in market value of the Company's quoted investments. d. Calendar Year Ended December 31, 2017 versus December 31, 2016 (In thousands) FY2017 FY2016 Revenues P129,509,253 P114,457,062 Operating expenses 132,151,076 104,815,110 Other charges-net 3,822,405 2,515,543 Income (loss) before income tax (6,464,228) 7,126,409 Income tax expense 2,893 2,198,013 Net income (loss) (6,467,121) 4,928,396 Other comprehensive income 1,856,006 936,106 Total comprehensive income (loss) (4,611,115) 5,864,502 The Company's financial performance for the year ended December 31, 2017, showed a consolidated total comprehensive loss of P4.6 billion as compared with the consolidated total comprehensive income of P5.9 billion in 2016. Consolidated revenues for the current year amounted to P129.5 billion, up by P 15.0 billion or 13.2% higher than last year's figure of P114.5 billion. The increase in revenues was attributable mainly to higher passenger revenues brought about by the growth in volume of passengers carried and number of flights mounted. During the year, new international points and city pairs Screenshot introduced. Flights between Clark and Seoul, Cebu and Chengdu, Kalibo....... Chanadu Kalibo and Cuanozbou and Cabu and Donokal- and dailu carico to JUN 8 765 up by 15.0 billion or 13.2% higher than last year's figure of P114.5 billion. The increase in revenues was attributable mainly to higher passenger revenues brought about by the growth in volume of passengers carried and number of flights mounted. During the year, new international points and city pairs were introduced. Flights between Clark and Seoul, Cebu and Chengdu, Kalibo and Chengdu, Kalibo and Guangzhou and Cebu and Bangkok and daily service to Kuala Lumpur commenced. On the domestic network, route sectors originating Clark Airport in Pampanga, Cebu, and Davao were also introduced during the 7 year. PAL carried 14.5 million passengers vis-a-vis 13.4 million in 2016. Consolidated operating expenses amounted to P132.2 billion for the year ended December 31, 2017, up by 26.1% or P27.3 billion from P104.8 billion in 2016. The main drivers for the growth are attributable to flying operations expenses, maintenance, passenger service, aircraft and traffic servicing, and reservation and sales. Flying operations expenses increased by 31.7% from P51.1 billion in 2016 to P 67.3 billion in 2017. Jet fuel costs represent the biggest expense of PAL. PAL spent P37.7 billion for jet fuel in 2017 compared with P26.1 billion in 2016. This represents 10.1 million barrels burned during the current year versus 9.1 barrels in the previous year. Jet fuel prices increased from an average of US$ 67.57 per barrel in 2016 to US$ 75.59 per barrel in the current year. Aircraft lease rentals increased to P14.1 billion during the current year compared to P 11.6 billion in 2016 due to phase in of additional B777 and A321 aircraft. Maintenance expenses grew by 23.5% or P3.7 billion over the last year's figure of P15.7 billion. This was due to higher aircraft, engine and component repair and maintenance costs incurred during the current period as a result of the additional aircraft deliveries and increase in utilization. Passenger service expenses amounted to P12.6 billion for 2017, higher by P2.3 billion or 22.1% from the year ago level of P10.3 billion. This was mainly due to the growth in passenger traffic and flights operated in the current year by 8.3% and 3.2%, respectively. The increase in number of flights operated in 2017 resulted to higher aircrai. traffic servicino expenses particularly ground handling charges and landing and JUN 8 Screenshot 765 The increase in number of flights operated in 2017 resulted to higher aircraft and traffic servicing expenses particularly ground handling charges and landing and take-off charges by P2.7 billion or 18.0% over the year ago level of P15.1 billion. Reservation and sales were up by 18.7% or P1.5 billion higher than the previous year. This was due to higher booking fees incurred as a result of the increase in number of passengers carried. For the year ended December 31, 2017, the Company incurred other charges-net of P338.0 million versus the P474.9 million other income recognized in 2016. The reduction in income was primarily due to the impairment of some aircraft and engines in 2017. The reassessment done on the deferred tax assets and liabilities on all deductible temporary differences in accordance with PAS 12, Income Taxes, as well as the current income tax payable based on PAL's operations, resulted in the recognition of a net income tax expense of P2.9 million. For the year ended December 31, 2017, the Company recognized other comprehensive income of P1.9 billion as against P936.1 million in 2016. The increase was mainly brought about by the net changes in fair value of AFS 8 investments as the market value of the Company's quoted investments significantly increased during the year. II. PLAN OF OPERATIONS The Airline will consistently deliver the quality of service empowered by its distinct service culture, the 'Buong Pusong Alaga' or whole hearted service, leveraged on its brand equity 'the Heart of the Filipino'. PAL will continue to provide the excellent flying experience to its passengers. The technologically advanced and fuel efficient A321-271 NEO aircraft Screenshot order will be delivered in the coming years. These new aircraft type will ... salus naula 1. allan namnaw hadu ainanalt but will JUN O 8 765 The technologically advanced and fuel efficient A321-271 NEO aircraft on order will be delivered in the coming years. These new aircraft type will not only replace the older narrow body aircraft but will result to operational efficiency and reliability, at the same time improve the product and service offerings. The Airline will continue to expand its route network. New destinations and city pairs will be introduced in year 2020. Flight schedules and timings will also be improved to provide more convenience and better connections, thus attracting more passengers. PAL will further explore sales and business opportunities; invest on resource management programs and efficient operating systems; optimize flight and ground operations; and constantly prioritize safety. Major plans include the implementation of improved sales strategies and revenue generation, cost management, and manpower development, on its quest to bring back PAL's profitability. Impact of COVID-19 As the COVID-19 situation continues to evolve, all PAL's international and domestic flights to and from our hubs in Manila, Cebu, and Clark are cancelled until May 31, 2020 due to the quarantine restrictions extended by the Philippine Government for specific locations. As a consequence, PAL deployed 8% of its workforce to provide support during the pause in operations. Philippine Airlines plan to resume reduced number of weekly flights on most domestic routes and on selected international by June 2020 and as PAL's capacity and flight schedule increases, more employees will be deployed to support the operations, but this will depend on COVID-19 conditions: community quarantine restrictions, travel bans imposed by various governments and their impact on passenger demand, and above all on the public health and safety situation in each of the countries that PAL serves. As of March 31, 2020, PAL has already received P4.92 billion from BSHI lodged as deposit for future stock subscription. Currently, PAL is also in discussion with a few local banks for possible liquidity facilities. 9 Screenshot JUN 8 O 765 April 202 aircraft denivery adjust neet plan and align with the recovery of travel demand. Most of the deliveries were postponed to 2022-2025. PAL is committed to keep the flag carrier continuously flying in the safest condition even in the midst of COVID-19 pandemic. PAL will continue to assess any and all possibilities available to mitigate the increasing risks it is currently facing. III. FINANCIAL CONDITION a. March 31, 2020 versus December 31, 2019 The Company's consolidated total assets as of March 31, 2020 amounted to P327.77 billion, 3.1% higher than the December 31, 2019 balance of P317.83 billion. The increase was primarily brought about by the effect of remeasurement of outstanding fuel deals to fair value. The increase in total current assets by 10.8 % from P47.81 billion as of December 31, 2019 to P52.96 billion as of March 31, 2020 was driven primarily by the increase in other current assets by 302.5% as a result of mark- to-market valuation of outstanding fuel derivative contracts. This was partially offset by the decrease in cash and cash equivalents, receivables and expendable parts, fuel, materials and supplies account. Cash and cash equivalents decreased by 66.1% due to payment of various loans. Receivables decreased by 10.1% on account of lower trade receivables. Expendable parts, fuel, materials and supplies account likewise decreased by 8.9% due to lower fuel inventory. The increase in total noncurrent assets by 1.8% or P 4.79 billion was attributable to the increase in other noncurrent assets by 32.1% mainly due to security or margin deposits to various hedging counterparties and effect of remeasurement of outstanding fuel deals to fair value. This was partially offset by the decrease in property and equipment due to depreciation. Consolidated total liabilities increased by 1.4% or P4.33 billion from P312.93 billion as of December 31, 2019 to P317.26 billion as of March 31, 2020. This was on account of the increase in total current liabilities by 14.2% or P14.53 billion, offset by the decrease in total noncurrent liabilities by 4.9% or P10.20 billion. Current liabilities increased by P14.53 billion primarily due to the increase in accrued expenses and other current liabilities by 99.9% and unearned transportation revenue by 8.6%. The increase in accrued expenses and other current liabilities was mainly due to higher derivative liabilities as a result of remeasurement of outstanding fuel deals to fair value. Unearned transport revenue increased by P1.39 billion due to the increase in passenger ticket Screenshot that have yet to be utilized. These were partially offset by the decrease in notes JUN 8 765 revenue increased by P1.39 billion due to the increase in passenger ticket sales that have yet to be utilized. These were partially offset by the decrease in notes payable by P6.52 billion and current portion of long-term obligations by P0.59 10 billion due to payment of loans. Accounts payable likewise decreased by P 2.76 billion or 18.2%. Noncurrent liabilities declined by 10.20 billion primarily due to reclassification of deposit from non-controlling interest of a subsidiary to equity account and decrease in long-term obligations due to payments made. These were offset by the increase in reserves and other noncurrent liabilities. due to the effect of remeasurement of outstanding fuel deals to fair value. Consolidated total equity balance as of March 31, 2020 amounted to P10.51 billion, up by 114.6% from the December 31, 2019 balance of P4.90 billion. The upward movement was brought about by the deposit from non-controlling interest of a subsidiary offset by the consolidated total comprehensive loss for the three months ended March 31, 2020. In 2019, PAL received cash as deposits for future stock subscription from BSHI totaling P11.41 billion which was presented as deposit from non- controlling interest of a subsidiary under noncurrent liabilities as of December 31, 2019. In March 2020, PAL received additional deposits for future stock subscription from BSHI amounting to P4.92 billion. As of March 31, 2020, the total deposits of P16.33 billion were presented as non-controlling interests in the consolidated equity of PHI as PAL's application for the increase in authorized capital stock has been filed with the SEC. b. December 31, 2019 versus December 31, 2018 The Company's consolidated total assets as of December 31, 2019 amounted to P317.83 billion, 59.6% higher than the December 31, 2018 balance of P 199.20 billion. The significant increase was brought about by the adoption of PFRS 16, Leases, effective January 1, 2019 as discussed in Note 3 of the Notes to the Consolidated Financial Statements. The increase in total current assets by P8.13 billion or 20.5% from P. billion as of December 31 2018 to 247 81 billion as of December 31 2019 JUN 8 Screenshot 765 billion as of December 31, 2018 to P47.81 billion as of December 31, 2019 was primarily due to improved cash levels which increased by 116.3%. Expendable parts, fuel, materials and supplies account increased by 5.4% driven by the build-up of flight equipment expendable parts. Likewise, assets held for sale increased by 131.9% due to reclassification of two aircraft. Other current assets declined by 20.7% mainly due to lower derivative assets and deposits and prepayments. The increase in total noncurrent assets by P110.50 billion or 69.3% was mainly due to the recognition of right-of-use assets under property and equipment-at cost which increased by 84.1% due to the adoption of PFRS 16. Deferred income tax assets increased by 52.0% or P 1.72 billion. Other noncurrent assets likewise increased by 5.4% due to higher security deposits. Consolidated total liabilities increased by 66.0% from P188.51 billion as of December 31, 2018 to P312.93 billion as of December 31, 2019. This was on account of the increase in total current liabilities by 8.8% from P94.29 billion 11 as of December 31, 2018 to P102.59 billion as of December 31,2019 and increase in total noncurrent liabilities of 123.2% from P94.22 billion to P 210.34 billion. Current liabilities increased by 8.8% primarily due to the increase in current portion of long-term obligations and accrued expenses and other current liabilities, partly offset by the decrease in notes payable and accounts payable. The increase in current portion of long-term obligations by P9.57 billion or 47.5% was due to the recognition of lease liabilities for right-of-use assets under PFRS 16. Accrued expenses and other current liabilities went up by P 2.11 billion or 10.1% on account of higher maintenance and repair costs. Notes payable and accounts payable decreased as there were payments made during the year. Noncurrent liabilities grew by 123.2% as a result of the adoption of PFRS 16. The recognition of lease liabilities for right-of-use assets increased the long- term obligations by P101.34 billion or 129.3%. Accrued employee benefits increased by 21.2% due to additional provision for retirement. Reserve Screenshot other noncurrent liabilities increased by 21.3% mainly due to deferred rev under frequent flver program. JUN 8 765 In 2019, PAL received cash as deposits for future stock subscription from its shareholders totaling P11.41 billion with the intention to convert to equity upon approval by the SEC of PAL's application for the increase in authorized capital stock. As of December 31, 2019, the cash deposits are presented as deposit from non-controlling interest of a subsidiary under noncurrent liabilities. Consolidated total equity balance as of December 31, 2019 amounted to P4.90 billion, down by 54.2% from the December 31, 2018 balance of P10.69 billion. This was on account of the increase in deficit brought about by the reported net loss during the year and other comprehensive loss resulting from remeasurement losses on defined benefits plans. Non-controlling interests increased by 183.5% due to PAL's disposal of partial interest in a subsidiary. C. December 31, 2018 versus December 31, 2017 As of December 31, 2018, the Company's consolidated total assets amounted to P199.20 billion or P19.24 billion higher than December 31, 2017 balance of P179.96 billion. The increase was on account of the upward movement in total current assets and noncurrent assets. Total current assets grew by P3.83 billion or 10.7% from P35.86 billion as of December 31, 2017. This was due to the increase in other current assets, receivables, and expendable parts, fuel, materials and supplies offset in part by the decrease in cash and cash equivalents. Cash and cash equivalents decreased by P3.09 billion or 30.7% as compared to the previous year's balance of P10.07 billion due to settlement of loans due in 2018. 12 Receivables went up by P 2.00 billion or 11.3 % mainly from non-trade receivables. Expendable parts, fuels materials and supplies grew by 39.1% or P1.37 billion due to increase in flight equipment-expendable parts and fuel inventory. Other current assets increased by P3.60 billion versus the December 31, 2017 JUN 8 Screenshot 765 Other current assets increased by P3.60 billion versus the December 31, 2017 balance of P3.75 billion mainly attributed to the effect of remeasurement of outstanding fuel deals to fair value. Assets held for sale was reduced by 5.3% due to sale of some aircraft. Total noncurrent assets increased by P15.42 billion or 10.7% higher than the December 31, 2017 balance of P144.10 billion. This was mainly due to the increase in property and equipment-at cost, other noncurrent assets and deferred income tax assets-net. Property and equipment-at cost grew to P128.40 billion as of December 31, 2018, P7.09 billion higher than last year's balance of P121.31 billion, mainly due to acquisition of A321NEO aircraft offset by return of pre-delivery payments made for delivered aircraft. Deferred income tax assets-net increased to P3.31 billion as of December 31, 2018 due to recognition of net operating loss carry over. Other noncurrent assets as of December 31, 2018 amounted to P22.77 billion, up by P5.52 billion from the previous year's balance of P17.25 billion, mainly attributed to the effect of remeasurement of outstanding fuel deals to fair value and security deposits for aircraft deliveries. Total liabilities increased to P188.51 billion versus the December 31, 2017 balance of P165.98 billion as a result of the increase in current liabilities by 12.0% or P10.13 billion and increase in noncurrent liabilities by 15.2% or P 12.40 billion. The 12.0% increase in current liabilities was mainly driven by the increase in accrued expenses by P 5.90 billion or 39.3% due to the effect of remeasurement of outstanding fuel deals to fair value and maintenance repair costs. Accounts payable likewise increased by P5.28 billion or 46.3% on account of maintenance, ground handling charges, and landing and take-off fees. Notes payable grew by P2.61 billion or 14.7% due to availments of short-term loans. These were offset in part by the decrease in current portion of long-term obligations by P3.41 billion or 14.5% due to settlement made. The increase in noncurrent liabilities by 15.2% or P12.40 billion from P81.82 billion as of December 31, 2017 to P94.22 billion as of December 31, 3018 was mainly due to long term obligations which increased by P11.65 billion or 17.5% as a result of the delivery of six A321NEO aircraft under finance lease. 13 Screenshot JUN O 8 765 Reserves and other noncurrent liabilities grew by P610.07 million or 12.5% due to the effect of remeasurement of outstanding fuel deals to fair value. The Company's consolidated total equity was down by 23.5% from P13.98 billion as of December 31, 2017 to P10.69 billion as of December 31, 2018. The decline was brought about mainly by the total comprehensive loss for the year ended December 31, 2018. Additional paid-in capital (APIC) decreased by P25.34 billion as the SEC approved the Company's equity restructuring to partially wipe out the Company's deficit using its APIC. Other equity reserves of P1.36 billion was recognized as a result of the change in ownership interest of PAL in Fortunate Star Limited (FSL) in 2018. d. December 31, 2017 versus December 31, 2016 As of December 31, 2017, the Company's consolidated Total Assets amounted to P180.0 billion or P15.4 billion higher than December 31, 2016 balance of P 164.6 billion. This was on account of the increase in Current Assets by 5.4% and increase in Noncurrent Assets by 10.4%. Total Current Assets as of December 31, 2017 amounted to P35.9 billion, up by P1.8 billion from P34.0 billion as of December 31, 2016. This was due to the increase in Receivables, Expendable Parts, Fuel, Materials and Supplies account, and Assets Held for Sale offset in part by lower Other Current Assets. Assets Held for Sale comprised of certain aircraft and engines amounted to P 785.0 million as of December 31, 2017. Other Current Assets decreased by 8.2% mainly due to the returned security deposits related to fuel hedging transactions. Total Noncurrent Assets increased by P13.5 billion mainly due to the increase in Property and Equipment, Other Noncurrent Assets and Investment Properties offset in part by the decrease in Deferred Income Tax Assets-net. Property and Equipment increased to P122.6 billion as of December 31, 2017, P9.9 billion or 8.8% higher than the previous year's balance of P112.7 billion, mainly due to the delivery of five Q400NG aircraft and pre-delivery payments made related to future acquisition of A350 and A321 aircraft. Investment Properties increased to P3.6 billion as of December 31, 2017 due to purchase of a property in Southern Philippines. Other Noncurrent Assets as of December 31, 2017 amounted to P17.2 billion, up by P3.3 billion from the previous year's balance of P13.9 billion, brought about by the increase in security deposits for various leased aircraft and manufacturer's credit received during the current year. Total Liabilities increased to P166.0 billion versus the December 31, balance of 112 0 billion as a result of the increase in Current Liabilities by JUN 8 Screenshot 765 Total Liabilities increased to 166.0 billion versus the December 31, 2016 balance of P142.9 billion as a result of the increase in Current Liabilities by 30.8% or P19.8 billion and increase in Noncurrent Liabilities by 4.1% or P3.2 14 billion. The 30.8% increase in Current Liabilities was attributable to the increase in Current Portion of Long-term Obligations due to loans related to aircraft financing by P10.5 billion and increase in Notes Payable pertaining to PAL's unsecured short term loans from local banks by P10.1 billion. Accounts Payable which consists mainly of obligations to various suppliers increased by P2.8 billion offset by the decrease in Accrued Expenses and Other Current Liabilities by P5.1 billion brought about by the settlement of disputed CAAP and MIAA charges. Unearned Transportation Revenue increased by 10.2% as a result of the growth in passenger sales. The increase in Noncurrent Liabilities of P3.2 billion from P78.6 billion as of December 31, 2016 to P81.8 billion as of December 31, 3017 was mainly due to loans related to aircraft financing. The Company's consolidated Total Equity was down by 35.5% from P21.7 billion as of December 31, 2016 to P14.0 billion as of December 31, 2017. The decline was brought about mainly by the resulted total comprehensive loss for the current period. IV. KEY PERFORMANCE INDICATORS TOP FIVE (5) QUALITATIVE KEY PERFORMANCE INDICATORS OF PAL Key Performance Indicator Measurement Methodology Aircraft Maintenance Check Completion Number of checks performed less number of maintenance delays over number of checks performed Number of aircraft accidents/incidents related By occurrence and mor Screenshot by Flight Operations Office JUN O 8 Mission Statement To maintain aircraft with the highest degree of airworthiness, reliability and presentability in the most cost and effective manner To conduct and maintain safe, reliable, cost and effective flight operations 765 IV. KEY PERFORMANCE INDICATORS TOP FIVE (5) QUALITATIVE KEY PERFORMANCE INDICATORS OF PAL Key Performance Indicator Measurement Methodology Number of checks performed less number of maintenance delays over number of checks performed Number of aircraft related By occurrence and monitoring accidents/incidents by Flight Operations Safety Office Percentage Deviation from Industry Standards (OTP Participation) Number of flights operated less number of flights delayed over total flights operated Number of safety violations incurred by cabin crew Number of incidents of safety violation incurred by cabin crew per month Net Revenues generated from passengers and cargoes carried Percentage Deviation from Budget/Forecasted Revenues. Company uses the following major performance measures. Analyses are employed by comparisons and measurements on a consolidated basis based on the financial data as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019. 15 2020 Key Performance Indicators Total Comprehensive Income (Loss) Attributable to Equity Holders Current Ratio (P10,824 million) 0.45 Debt to Equity Ratio 20.72 Basic Earnings (Loss) Per Share: Computed based on Net Loss Computed based on Total (PO.808) Comprabancius Income (Loca). (B0.023) O Mission Statement To maintain aircraft with the highest Aircraft Maintenance Check degree of airworthiness, reliability Completion and presentability in the most cost and effective manner To conduct and maintain safe, reliable, cost and effective flight operations To achieve On-Time Performance on all flights operated To provide safe, on time, quality and cost effective inflight service for total passenger satisfaction To maximize revenue generation in passenger and cargo sales through increased yields by diversifying market segments. and efficient management of seat inventory and cargo space JUN 8 2019 P199 million 0.47 46.54 (PO.0 Screenshot 0.017 765 2019 vs 2018 FY2019 FY2018 Key Performance Indicators Total Comprehensive Loss Attributable to Equity Holders Current Ratio (P11,245 million) (P3,666 million) 0.47 0.42 46.54 11.13 Debt to Equity Ratio Basic Loss Per Share: (PO.888) (PO.373) Computed based on Net Loss Computed based on Total Comprehensive Loss (P0.969) (P0.316) 2018 vs 2017 FY2018 FY2017 Key Performance Indicators Total Comprehensive Loss Attributable to Equity Holders (P3,666 million) (P5,513 million) Current Ratio 0.42 0.43 Debt to Equity Ratio 11.13 7.73 Basic Loss Per Share: Computed based on Net Loss (PO.373) (PO.632) Computed based on Total Comprehensive Loss (P0.316) (PO.475) 2017 vs 2016 FY2017 FY2016 Key Performance Indicators Total Comprehensive Income (Loss) (P5,513 million) P4,708 million Attributable to Equity Holders Current Ratio 0.43 0.53 Debt to Equity Ratio 7.73 3.96 Basic Earnings (Loss) Per Share: Computed based on Net Income (Loss) (PO.632) PO.358 Computed based on Total Comprehensive Income (Loss) (PO.475) P0.408 The manner by which the Company calculates the above indicators are as follows: 16 Screenshot JUN O O 8 D 765 Current Ratio = Current Assets / Current Liabilities Debt to Equity Ratio = Notes Payable + Current and Noncurrent Long-term Obligations / Total Equity Earnings (Loss) Per Share = Net Income (Loss) or Total Comprehensive Income (Loss) Attributable to Holders of Parent Company Common Shares Outstanding ITEM 4. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Price of, and Dividends on, Registrant's Common Equity and Related Stockholder Matters 1. Market Information The market for the registrant's common equity is the Philippine Stock Exchange. The high, low and closing prices for each quarter for the past three years are as follows: HIGH LOW CLOSE Php Php Php 2020 First Quarter 7.98 5.00 6.60 2019 Fourth Quarter 10.50 7.10 7.85 Third Quarter 9.49 7.99 8.24 Second Quarter 10.70 9.00 9.18 First Quarter 17.80 8.33 10.60 Fourth Quarter 8.90 7.50 8.33 Third Quarter 9.36 7.60 8.25 Second Quarter 10.10 8.00 8.59 First Quarter 12.52 9.80 10.00 Fourth Quarter 5.65 4.70 5.15 Third Quarter 5.39 5.00 5.05 Second Quarter 5.60 5.00 5.05 First Quarter 5.82 5.00 5.48 As of June 15, 2020, the latest practicable trading date, the Company's shares were traded at P7.00 per share. JUN 8 2018 2017 Screenshot 765 2. Holders The number of stockholders of record as of 15 June 2020 is 6,453 and total number of common shares outstanding as of the same date was 11,610,978,242. The Company has no preferred shares. The top 20 stockholders as of 15 June 2020 are as follows: Stockholders' Name % to Total 1 Trustmark Holdings Corporation 2 ANA Holdings, Inc. Top Direct Investments Ltd. No. of Shares Held 8,930,733,170.00 76.9161% 1,103,042,933.00 9.5000% 460,507,500.00 3.9661% 378,206,590.00 3.2573% 206,842,500.00 1.7814% 176,400,000.00 1.5192% 171,000,000.00 1.4727% 59,239,637.00 0.5102% Cosmic Holdings Corporation Fast Accurate Investments Ltd. City Trade Investments Ltd. 7 Corporate Supreme Ltd. 8 PCD Nominee Corporation (Filipino) 9 One Corporate Grand Tours Inc. 36,000,000.00 0.3101% 10 36,000,000.00 0.3101% Principal Grand Tours International Inc. 2 11 Pan-Asia Securities Corp. 16,058,709.00 0.1383% 12 9,450,000.00 0.0814% Government of the Republic of the Philippines 13 Land Bank of the Philippines 6,750,000.00 0.0581% 14 Wonderoad Corporation 4,613,255.00 0.0397% 15 2,981,797.00 0.0257% AFP Retirement and Separation Benefits System 16 AAA Strategic Investment Ltd. 1,581,817.00 0.0136% 17 846,132.00 0.0073% PCD Nominee Corporation (Non- Filipino) 18 William Lee 314,172.00 0.0027% 19 Commercial Investment Co. Ltd. 229,708.00 0.0020% 20 Luisita P. Bothelho 181,124.00 0.0016% Subscription rights were assigned to Videlo Holdings, Inc. (VHI) on October 23, 2014. The application for clearance to register the subscription rights under the name of VHI is still pending approval with the BIR. 2 Subscription rights were assigned to Emelar Holdco, Inc. (EHI) on October 23, 2014. The application for clearance to register the subscription rights under the name of EHI is still pending approval with the BIR. 3. Dividends a. The Company did not declare any cash dividends during the past 3 years. JUN 8 3 4 5 6 D Screenshot 765 3. Dividends a. The Company did not declare any cash dividends during the past 3 years. The Board of Directors may declare dividends only from the surplus profits arising from the business of the Company and in accordance with 18 the preferences constituted in favor of preferred stock when and if such preferred stock be issued and outstanding. b. There are no other restrictions that limit the ability to pay dividends on common equity or that are likely to do so in the future. 4. Recent Sales of Unregistered or Exempt Securities, Including Recent Issuance of Securities Constituting an Exempt Transaction (for the past 3 years). There was no recorded sale of unregistered securities during the past 3 years. ITEM 5. INDEPENDENT PUBLIC ACCOUNTANTS AND EXTERNAL AUDIT FEES Please see pages 13 thru 14 of the Information Statement. ITEM 6. CORPORATE GOVERNANCE REPORT (a) The evaluation system established by the Company to measure or determine the level of compliance of the Board of Directors and top-level Management with its Manual of Corporate Governance. The Company subscribes and has adopted the prescribed rules and leading practices of good corporate governance. It has been implementing and evaluating the performances of the Board of Directors and Management through the Performance Evaluation, the Corporate Governance Guideline Listed Companies, and the Corporate Governance Scorecard. JUN O 8 Screenshot 765 (b) Measures being undertaken by the Company to fully comply with the adopted leading practices on good corporate governance. In 2017, the Company amended its Manual on Corporate Governance ("Revised Manual") in accordance with SEC Memorandum Circular No. 19, Series of 2016 to fully comply with the adopted leading practices on good corporate governance. It continues to implement an evaluation system to ensure compliance by the Board of Directors and Management with the provisions of the Manual. Currently, the Company is in the process of once again revising its Manual to conform to best practices in corporate governance. (c) Any deviation from the Company's Manual on Corporate Governance. It shall include a disclosure of the name and position of the person(s) involved, and the sanctions imposed on said individual. The Company is substantially compliant with its Revised Manual on Corporate Governance which was adopted on 24 April 2017. (d) Any plan to improve corporate governance of the Company. The Company strives to improve its good Corporate Governance by way of 19 strengthening the audit system of its subsidiaries. The Compliance Officer ensures that the Manual is periodically reviewed by the Board of Directors in order that revisions can be promptly instituted to respond to the needs of the Company and its stakeholders. The Corporation undertakes to provide without charge to each stockholder, upon written request by the stockholder, a copy of the Corporation's Annual Report on SEC- Form 17-A and SEC Form 17-Q. Please direct all such requests to the Corporate Secretary, Atty. Ma. Cecilia L. Pesayco, 2/F Allied Bank Center, 6754 Ayala Avenue, Makati City, Philippines. JUN 8 Screenshot 764 PAL HOLDINGS, INC. 8th Floor PNB Financial Center Pres. Diosdado Macapagal Ave. CCP Complex, Pasay City MANAGEMENT REPORT a) CORPORATE HISTORY PAL Holdings, Inc. ("PHI", or the "Company") was originally incorporated on 10 May 1930 under the corporate name "Baguio Gold Mining Company". In 1996, the Philippine Securities and Exchange Commission (the "SEC") approved the Company's change of name to "Baguio Gold Holdings Corporation" as well as the amendment of the Company's primary purpose to that of a holding company. The Company finally adopted its current the corporate name "PAL Holdings, Inc." in 2007 as it embarked on the consolidation of the interests of the Lucio Tan Group in the airline business. In line with the airline consolidation purpose afore-mentioned, the Company acquired in 2007 a total of 8,823,640,223 shares in Philippine Airlines, Inc. ("PAL" or the "Airline"), from six holding companies (the "Six Holding Companies") which at that time owned 81.57% of the issued and outstanding common shares in the Airline. At the same time, it acquired from the Six Holding Companies (except Maxell Holdings Corporation) the shares owned by the same in PR Holdings, Inc. (PR), equivalent to 82.33% of PR. Both acquisitions were made by way of dacion en pago. In 2012, San Miguel Equity Investments Inc. (SMEII), a wholly owned subsidiary of San Miguel Corporation, acquired 49% equity interest in Trustmark Holdings Corporation (Trustmark). Trustmark then owned 97.71% of the Company, which in turn indirectly owned, thru PR. 84.67% of PAL. The proceeds from the investment of SMEII in Trustmark flowed down to PAL with the subscription by Trustmark of 17.00 billion shares in the Company for P17.00 billion and subsequently, the subscription by the Company of 85 billion shares in PAL for P17.00 billion. Later that same year, the Company increased its in authorized capital stock to P 23.00 billion in support of which, the amount of P2.42 billion was subscribed by Trustmark. As a result, Trustmark's ownership in the Company increased from 97.71% to 99.45%. In 2013, the Company had another round of capital increase to P30.00 billion with new subscriptions of P2.42 billion, of which P603.75 million was received in cash as of December 31, 2015. As a result of the additional issuance of sl Screenshot Trustmark's ownership in the Company decreased from 99.45% to 89.78%. 1 The JUN 8 ITEM 1. BUSINESS 765 as of December 31, 2015. As a result of the additional issuance of shares, Trustmark's ownership in the Company decreased from 99.45% to 89.78%. The Company thereafter changed its in accounting period from fiscal year ending March 31 to calendar year ending December 31. 1 In 2014, Buona Sorte Holdings, Inc. ("BSHI") and Horizon Global Investments Limited ("HGIL") acquired the 49% stake of SMEII in Trustmark at 9% and 40%, respectively. As of December 31, 2019 and 2018, Trustmark is 60% owned by BSHI and 40% owned by HGIL. BSHI and Trustmark were likewise incorporated in the Philippines and are part of the Lucio Tan Group of Companies while HGIL was incorporated in British Virgin Islands. In 2016, the Company undertook a share swap transaction, whereby it acquired PAL shares from existing PAL shareholders in exchange for new shares of the Company at a share swap ratio of 5:1 or five (5) PAL shares for every one (1) PHI share. The Company issued a total of 124.29 million new shares from its authorized but unissued capital stock in favor of PAL shareholders who participated in the PAL share swap transaction in exchange for 0.65% additional interest in PAL. As of December 31, 2019, PHI has effective ownership interest in PAL of 98.92%. Also in 2016, the Company undertook a separate share swap transaction for the acquisition of Zuma Holdings Management Corporation (ZUMA), the holding company of Air Philippines Corporation (APC), from its existing shareholders at a share swap exchange ratio of 19:1 corresponding to 19 PHI shares for every one (1) ZUMA share. The Company issued 840.46 million new shares from its authorized but unissued capital stock valued at P5.00 per share in favor of the holder of Zuma shares, Cosmic Holdings Corporation. Accordingly, as of December 31, 2019 and 2018, the Company owned 51% of ZUMA. As a result of the above-described share swap transactions, Trustmark's ownership in the Company decreased from 89.78% to 86.42% as of 31 December 2018. In February 2019, ANA Holdings, Inc. (ANA HO), the parent company of All Nippon Airways (ANA), acquired 1,103,042,933 shares held by Trustmark ir equivalent to 9.5% of the current outstanding shares of PHI. As a result o Screenshot transaction, Trustmark's ownership in the Company decreased from 86.42% to JUN 8 765 76.92% as of 31 December 2019. b) DESCRIPTION OF SUBSIDIARIES Philippine Airlines, Inc. PAL, a corporation organized and existing under the laws of the Republic of the Philippines, was incorporated on 25 February 1941. It is the national flag carrier of the Philippines and its principal activity is to provide air transportation for passengers and cargo within and outside the Philippines. PAL flies to the most popular domestic jet routes and international and regional points that are either most visited by Filipinos or provide a good source of visitors to the Philippines. As of 31 December 2019, PAL's route network covered 31 points in the Philippines and 40 international destinations. PAL was certified as a 4-Star Airline by Skytrax, the international air transport rating organization. PAL joined 40 other renowned air carriers in this prestigious 2 service status, and is the first and only airline in the Philippines to earn the 4-Star rating. PR Holdings, Inc. PR was organized by a consortium of investors for the purpose of bidding for and acquiring the shares of stock of PAL in accordance with the single-buyer requirement of the bidding guidelines set by the then seller, the National Government of the Republic of the Philippines. PR acquired on 25 March 1992, 67% of the outstanding capital stock of PAL. PR was partially dissolved or liquidated in 1998 with a decrease in its authorized capital stock and retirement of some of its shares in exchange for PAL shares to retiring stockholders as return of capital. Zuma Holdings and Management Corporation ZUMA was incorporated and registered with the SEC on 25 August 1989. I Screenshot organized primarily to engage in the business of a holding company. It has an JUN 8 765 ZUMA was incorporated and registered with the SEC on 25 August 1989. It was organized primarily to engage in the business of a holding company. It has an investment in Air Philippines Corporation (APC), a 99.97%-owned subsidiary. APC is primarily engaged in the business of air transportation for the carriage of passengers and cargo within and outside the Philippines. APC is currently doing business under the name and style of Philippine Airlines or PAL Express. ITEM 2. DIRECTORS AND OFFICERS Please refer to pages 5 thru 12 of the Information Statement. ITEM 3. MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) The consolidated financial statements referred to consist of the financial statements. of the Company and its subsidiaries. The financial statements of the subsidiaries are prepared using consistent accounting policies as those of the Company. Companies included in the consolidation are PAL and PR and ZUMA. The Company owns 98.92% of PAL directly and an indirect ownership in 0.35% of PAL's shares through an 82.33% direct ownership in PR. In turn, PR owns 0.42% of PAL. When the Company acquired 51% ownership interest in ZUMA in 2017, it effectively obtained control over APC. Subsidiaries are consolidated from the date on which control is transferred to the Company and cease to be consolidated from the date on which control is transferred out of the Company. All intercompany accounts and transactions with subsidiaries are eliminated in full. I. RESULTS OF OPERATIONS Stiff competition, matched with ever increasing costs, have caused the Company to incur losses over the last three years. The Company has lined up various revenue enhancement programs, cash generation strategies and cost control initiatives to improve the results of its operations. 3 Screenshot a. Three Months Ended March 31, 2020 versus March 31, 2019 JUN 8 D 765 a. Three Months Ended March 31, 2020 versus March 31, 2019 (In thousands) Revenues 3M2020 P32,073,109 38,625,023 3M2019 P39,244,489 Operating expenses 36,713,874 Other charges-net 2,727,524 3,032,447 Loss before income tax (9,279,438) (501,832) Income tax expense 4,986 198,769 Net loss (9,284,424) (700,601) (1,434,270) 639,789 Other comprehensive income (loss) Total comprehensive loss (10,718,694) (60,812) The Company reported a total comprehensive loss of P10.72 billion for the quarter ended March 31, 2020, P10.66 billion higher than last year's same period total comprehensive loss of P60.81 million, as the Group's operations were severely affected by the worldwide travel restrictions due to coronavirus (COVID-19) outbreak. Consolidated revenues for the first quarter of 2020 amounted to P32.07 billion