2019 Integrated Report
A space to take your dreams further Today’s technology provides us with information and conveniences that have become indispensable in our everyday lives.
More than just creating spaces, we tap innovations that help you take your dreams further.
At Cebu Holdings, the spaces we envision and build are never just ours. They truly see completion only when they shelter someone else’s plans and hopes. It’s an honor to create the spaces where those dreams can take place. Cebu IT Park Bus Stops
Samar Stop 30 mins
Del Mar Stop 45 mins
Geonzon Stop 50 mins
1 CEBU HOLDINGS, INC. 2019 Integrated Report ABOUT THIS REPORT GRI 102-45, 102-50, 102-52, 102-53 102-54
This integrated report combines financial and sustainability data to inform stakeholders of Cebu Holdings, Inc. (CHI) and the public about the Company’s performance.
CHI expands and updates its reporting framework subscriptions to better track and manage issues material for its business. The preparation of this report follows the Integrated Report
This report documents CHI’s endeavors to improve its financial and non-financial performance through the integration of sustainability principles into its core strategies and operations.
KEY FEATURES AND SCOPE ADDITIONAL REFERENCE »» Third Integrated Report (13th combined Operational and financial performance reports report) covering CHI’s performance of the Company filed with the Securities and on financial, economic, social and Exchange Commission are available on the environment aspects Information Statement given to stockholders »» Contributions to the UN Sustainable and in the CHI website. Development Goals and the Four Focus Areas of parent company Ayala Land, Inc. As in past reports, this successfully completes the GRI Materiality Disclosures Service which »» This report has been prepared in verifies that GRI 102: General Standard accordance with the GRI Standards: Core Disclosures 2016 102-40 to 102-49 were Option and ASEAN Corporate Governance correctly located in both the GRI Content Scorecard (ACGS), see pages 134 to 135 Index (see pages 126 to 133) and in the pages for the ACGS Index. of this report. »» Consolidated data for fiscal year January 1 to December 31, 2019, covering FEEDBACK CHI’s internal business units and general Feedback and comments about this report contractors for property management may be emailed to (Ayala Property Management Corporation) [email protected]. and construction (Makati Development Corporation) »» Three years of historical information for comparison
2 A space to take your dreams further Contents 02 About this Report 04 Messages 16 Who We Are 22 Our Value Creation Process 28 Our Operational Performance 56 Engaging Our Stakeholders 66 Corporate Governance Practices 75 Disclosure and Transparency 80 Responsibilities of the Board 96 Enterprise-wide Risk Management 102 Appendices 126 GRI Content Index 134 ASEAN Corporate Governance Index 136 Financial Report
3 CEBU HOLDINGS, INC. 2019 Integrated Report ANNA MA. MARGARITA B. DY CHAIR
4 A space to take your dreams further Joint Message from the Chairman and the President
FOLLOWING ITS 30TH ANNIVERSARY MILESTONE, CEBU HOLDINGS INC. (CHI) scaled record heights in its 2019 performance.
The Company ended 2019 with revenues at P4.8 billion, a 29 percent growth compared to 2018. Our recurring income business was the biggest contributor to revenue at 51 percent. The opening of a new mall and BPO office tower, as well as the addition of leasable space in our existing properties, brought leasing income up to P2.4 billion.
5 CEBU HOLDINGS, INC. 2019 Integrated Report VALUABLE CONNECTIONS REINVESTMENT, REINVENTION IN I.T. PARK At Cebu Business Park, our flagship The opening of AyalaMalls Central project established three decades Bloc in December last year further ago, we continue to reinvest to keep increased Cebu IT Park’s value. Part of this 50-hectare development relevant. the stacked two-hectare superblock Plans are underway for a major development, it is a project of Central redevelopment that will enhance Block Developers, Inc., a partnership the estate’s position as the premier between CHI and parent company business and lifestyle address outside Ayala Land. of Metro Manila.
AyalaMalls Central Bloc is positioned Construction of The Flats within Cebu to be a vibrant hang-out destination Business Park and Cebu IT Park is also where the balance of work and play ongoing, with the two towers expected thrives. The five-level regional mall to be completed in 2021. This venture has 44,000 square meters of gross into co-living spaces demonstrates our leasable area for retail, dining, and capability to reinvent our products to entertainment shops. Designed match new industry trends. mainly for the BPO/IT workers and the community around Cebu IT Park, As we continuously reinvest in our Central Bloc features the latest estates, we also note best practices as gadgets and technology, trendy we complete our new developments in and practical retail concepts, and Mandaue City and Lapu-Lapu City. refreshing dining outlets and venues to chill out. An Ayala mall and a BPO office building in Gatewalk Central are under On top of the mall, Central Bloc construction. Envisioned to be the new Corporate Center Tower One opened central business district of Mandaue in December 2019 with 31,000 square City, the estate is designed with key meters of GLA. Soon to open is a 214- sustainability features such as a room Seda Hotel and a second BPO 30-meter-wide landscaped promenade office building which will add 41,000 that promotes pedestrian access, square meters of leasable space. and stormwater retention ponds per building to enhance resilience against Aside from providing a fresh mix of floods. shopping, dining, and entertainment options, Central Bloc improves Seagrove, located in Mactan island, connectivity within the IT Park by is positioned as an eco-tourism providing a pleasant pedestrian destination that will contribute to experience that links different areas of Cebu’s strong tourism industry while the estate. showcasing the property’s unique natural landscape.
6 A space to take your dreams further ANICETO V. BISNAR, JR.
PRESIDENT
7 CEBU HOLDINGS, INC. 2019 Integrated Report Joint Message from the Chairman and President
We also secured local government approval We strive to create this economic and social “As we have done to start work on the 26-hectare property impact in a sustainable manner, protecting in South Road Properties, in partnership the environment and preserving resources in the past 30 with Ayala Land and SM Prime Holdings, while developing our estates. In 2019, years, we aim to Inc. This much-awaited development is the CHI focused on increasing efficiencies by Company’s first venture toward the south of using alternative sources of power and strategically Cebu – an area with potential for growth and retrofitting properties with LED lighting. transform land infrastructure development. Waste collected from our business parks was composted, resulting in five tonnes of and help shape SUSTAINABLE TRANSFORMATIONS fertilizers that were used for landscaping Cebu’s economic within our developments. CHI employees These new estates are in key locations and community volunteers participated and social in Metro Cebu to catalyze growth with in an Assisted Natural Regeneration and landscapes to groundbreaking developments. As we bamboo planting activity in Ayala Land’s have done in the past 30 years, we carbon forest at Upland Greens in Cebu. make a positive aim to strategically transform land and impact on help shape Cebu’s economic and social Moving forward, we are confident that landscapes to make a positive impact on our decades of experience in developing society.” the community. master-planned communities, combined
8 A space to take your dreams further with new technologies and synergies, will Company. We face a brand-new reality in allow us to respond even faster to the 2020 but we are confident this organization changing needs of the market. has the experience, commitment and malasakit we need to continue to be a The initial phases of three new estates are driving force to the nation. under development. Projects in the pipeline include 109,571 square meters of office We thank our fellow Board members for and 62,400 square meters of retail, bringing contributing their expertise and wisdom our portfolio up to 607,309 square meters to steer the Company through these of total leasable space. We will also have a extraordinary times; the management total of 715 hotel rooms and 852 units of and employees for their dedication and co-living spaces in the next five years. hard work to realize this vision; and our shareholders for their continued trust in As we prepare this message to you our CHI. stockholders, we face the unprecedented challenges Covid-19 has imposed on Together, we will continue to enhance the whole world. While this situation the business while providing hope and unfolds, our focus is on the welfare of our opportunities for more Filipinos in the employees, the needs of our customers and communities we serve. the community, and the resilience of the
9 CEBU HOLDINGS, INC. 2019 Integrated Report MA. LUISA D. CHIONG
CHIEF FINANCE OFFICER / COMPLIANCE OFFICER
10 A space to take your dreams further Message from the Chief Finance Officer
GROWTH IS, MORE OFTEN THAN NOT, A LONG GAME.
It is correct to say that Cebu Holdings, Inc. (CHI) enjoyed a strong year in 2019.
Yet the fuller picture is that its dramatic growth in 2019 resulted from all the groundwork done and strides taken in every year of your Company’s story.
Revenue and net income after taxes reached their highest levels in 31 years, with revenue exceeding the previous year’s by 29 percent to P4.8 billion. After-tax income at P1.7 billion nearly doubled the 2018 bottomline of P857.1 million or 93 percent higher.
At 19 percent, return on equity ratio reached the highest level since 1993, which meant that your Company remained in a strong position to lay the groundwork for its future growth.
FINANCIAL HIGHLIGHTS
1.7B 93% NET INCOME Increase from 2018 ALL-TIME HIGH
4.8B 29% 29.2B 11% Increase from 2018 REVENUES TOTAL ASSETS Increase from 2018
per 323.5M share or 0.15 per share 6.8 STOCK PRICE DIVIDEND AMOUNT
11 CEBU HOLDINGS, INC. 2019 Integrated Report Message from the Chief Finance Officer
About 51 percent of CHI’s revenue Nineteen percent came from equity came from commercial and office in net earnings from affiliates, theater leasing, and this resulted from the income, and interest and other income. improvements in rental income from the mall and office spaces. Cost management and cost control REVENUE measures translated to a 66 percent In addition, there was also additional operating profit margin. 4.8 billion gross leasable area (GLA) in Ayala Center Cebu, the retail spaces Meanwhile, CHI’s net profit margin provided within Alcoves tower. The stood at 35 percent. 3.7 billion opening of AyalaMalls Central Bloc at the end of 2019 further expanded GLA Cash inflow from operations, especially 3.1 billion and created more spaces where young from our leasing projects, raised 2.7 billion
workers and families can interact and sufficient cash for CHI. This allowed 2.3 billion build a sense of community. the Company to fund projects under construction and pay off debts. This As for office leasing, all towers are brought our debt-to-equity ratio lower fully occupied except for the newly at 0.68:1 and further strengthened operational Central Bloc Corporate our capacity to raise funds for future
Tower One which was 48 percent projects. 15 16 17 18 19 leased out at the end of 2019. The Company spent a total of P1.62 Thirty percent of revenue came from billion for the ongoing development of real estate, including the sales of new projects and enhance activities of 29% commercial and residential lots and its existing projects. Increase from 2018 residential condominiums.
12 A space to take your dreams further To expand the Company’s leasing NEW LANDSCAPES assets, it has so far invested a total of P225.6 million to develop the As the market becomes more CITP and CBP dormitories, which competitive, we will focus on are expected to offer 852 rooms emphasizing what makes the CHI brand combined once completed. We are different. NET INCOME excited to see how these new spaces will make the lives of young workers The more competitive landscape now 1.7 billion and entrepreneurs easier, by freeing also calls for more efficient corporate them from the long commutes that governance, sound fiscal management, those who live further afield must strict implementation of internal endure. controls, and risk management.
CHI also invested P872.9 million in Most importantly, CHI will listen to the market and place the customer’s well- its CITP superblock project. This is for 857.1 million 827.2 million 753.4 million the completion of an additional mall, being at the center of everything we do. 679.7 million AyalaMalls Central Bloc, with a total GLA of 44,498 sq.m. and two office This is not a challenge we take lightly. towers, which will bring in a total GLA of 72,000 sq.m. We see our prospects continuing to rise in the coming years, as we expand our 15 16 17 18 19 Most of CHI’s buildings have already developments and initiate new ones. leveled to a state of stability where the margins are quite favorable. Projects New developments will drive our due for launching and undergoing financials. 93% Increase from 2018 various stages of development are looking good. These include the 26-hectare project within Cebu’s South Road Properties REVENUE MIX As a result of these positive outcomes, (SRP), an undertaking of the SM- we were able to declare dividends Ayala consortium that will consist 5% totaling to P323.5 million or 0.15 per of 70 percent commercial and 30 11% share. Our stock price closed at P6.8 percent residential development. 3% 30% per share end of December 2019 — Located within a 300-hectare estate also the highest since 1992—with a of reclaimed property, the SRP opens market capitalization of P14.7 billion. tremendous opportunities for business and tourism.
CHI will continue to invest more 51% on properties and leasing projects, Developing it also heeds appeals to a strategy that has contributed create more hubs of growth in Metro considerably to the rise in the Cebu and, in so doing, disperse not only Company’s consolidated assets. the familiar challenges of growth, but in million pesos its many opportunities as well. We believe this strategy holds that Retail/Office Space 2,446 Leasing Income fine balance between boldness and Our upcoming 13-hectare Seagrove in Residential Lot and 1,453 prudence. Mactan will provide discerning guests Condo Sales with a haven to enjoy the seascape, Theater Operations 134 We are optimistic it will further along with the deep satisfaction that Interest & Other 529 strengthen CHI’s position, whatever comes from knowing that one has Income supported a truly sustainable venture. clouds of uncertainty may drift over Equity in net 235 the global economy in the months Earnings ahead. The resort and retail center will include a Holiday Inn Resort and will feature
13 CEBU HOLDINGS, INC. 2019 Integrated Report Message from the Chief Finance Officer
CEBU HOLDINGS, INC. AND SUBSIDIARIES (Year Ended December 31)
2019 2018 2017 2016 2015
FOR THE YEAR (in million pesos)
Revenues 4,797 3,722 3,092 2,714 3,740
Net Income 1,658 857 753 680 827
Dividend Amount 324 324 288 230 230
AT YEAR-END (in million pesos)
Total Assets 29,243 26,342 20,588 19,616 19,733
Cash and Cash Equivalents 349 260 189 117 234 Commercial Loans 6,349 6,401 6,454 6,148 6,233
Stockholders' Equity 9,402 8,062 6,989 6,528 6,065
PER SHARE Earnings Per Share (EPS) 0.77 0.44 0.39 0.35 0.43 Price/ Earnings Per Share (P/E) 8.83 14.48 14.74 14.00 12.02
Dividend Per Share 0.15 0.15 0.15 0.12 0.12
FINANCIAL RATIOS Current Ratio 0.42 0.38 0.59 0.59 0.89
Commercial Debt-to-Equity Ratio 0.68 0.79 0.92 0.94 1.03
Net Debt-to-Equity Ratio 0.64 0.76 0.90 0.92 0.99
ROE 19% 11% 11% 11% 14%
Stock Price 6.80 6.37 5.75 4.90 5.18
14 A space to take your dreams further “CHI takes pride in its track record of ASSETS having built the foundations of strong 29.2 billion
business practices and systems that can 26.3 billion withstand difficulties and emerge all the 20.6 billion 19.7 billion better for them.” 19.6 billion boardwalks, lagoons, mangrove operations. Meanwhile, Central Bloc forests and pedestrian walks that Corporate Tower 2 neared completion connect to facilities. at the end of 2019 and is expected to be operational second quarter of 2020. It will not be a hub of mere consumption, however. This estate All told, these developments will 15 16 17 18 19 will show that it is possible to make position the Company to answer the mindful and informed choices as a market’s demands and ensure its consumer—to support developments growth. 11% that better the communities where Increase from 2018 these are based. With these developments, the Company will now offer in the next five STOCKHOLDERS’ EQUITY Leasing prospects are optimistic with years a total GLA of 237,334 sq.m. the opening of the Mandaue-based in commercial space and 236,119 master-planned Gatewalk Central sq.m. in office spaces. Commercial lots 9.4 billion and its superblock, which will house inventory will also be added, total hotel 8.1 billion local and international BPO offices. rooms will reach to 715 and co-living 7.0 billion In anticipation of changes in market spaces will be launched at 852 rooms. 6.5 billion forces, the Company is looking to These will ensure the Company’s 6.1 billion diversify its portfolio further. continued growth.
STABLE FOUNDATIONS CHI takes pride in its track record of having built the foundations of strong After AyalaMall’s trailblazing entry business practices and systems that into the Cebu market in 1994, the can withstand difficulties and emerge second Ayala mall (AyalaMalls Central all the better for them. 15 16 17 18 19 Bloc) opened in December 2019 in the middle of the Cebu IT Park, the When we celebrated our 30th 17% hub of Cebu’s flourishing information anniversary in 2018, we were deeply Increase from 2018 technology sector. grateful for the key role we have played in the story of Cebu’s growth. STOCK PRICE
The new AyalaMall Central Bloc offers 6.8 Peso per share
44,498 square meters of leasable There will always be external factors 6.4 space for shops and a host of activities beyond our control. All businesses that will attract the young, tech-savvy that are built to last know this. 5.8 5.2
generation, which accounts for a good Preparedness and risk management 4.9 majority of the city’s population. are key.
Meanwhile, the Ayala brand Seda CHI has spent years getting ready. Hotel in CITP soft opened in February of 2020. Despite the gloom and disruption that marked the early weeks of 2020, your A new office building, Central Bloc Company has done its best to face the Corporate Tower One, opened in year on a firm footing—in large part by December of 2019, as part of CITP’s staying attuned to its communities’ office towers that house technology- needs and aspirations. enabled firms like BPO and research 15 16 17 18 19
15 CEBU HOLDINGS, INC. 2019 Integrated Report Who we are 102-1, 102-2, 102-3, 102-6, 102-7
Our Company is a leading full-line property We are engaged in real estate development, “We play a developer with headquarters in Cebu City, including the sale of residential and office and publicly listed with the Philippine units and lease of commercial spaces. key role in Stock Exchange since 1994. creating major For three decades, our business has We play a key role in creating major growth transformed 156 hectares of land into growth areas in areas in the province of Cebu through integrated, master planned, and mixed-use the province of socially inclusive and environmentally eco-zones and business parks. responsible business strategies. Our Cebu through flagship project, the Cebu Business Park, Our Company’s ownership structure can socially remains the undisputed central business be found on the next page, and a more district of the capital city. comprehensive discussion of our corporate inclusive and governance practices is found on pages 70 environmentally to 95 of this report. responsible business strategies.”
16 A space to take your dreams further What we aim for 102-16 We shall be the premier real estate We ensure the trust and confidence of company in the region, creating and our stakeholders with sustainable growth enhancing integrated, master planned, while improving the quality of life of the and sustainable mixed-use developments communities we serve with passion and through a customer-focused and integrity. empowered team of professionals.
What inspires us 102-16 »» Focus on Customer »» Empowerment of People »» Bias for Results »» Pursuit of Excellence »» Entrepreneurial Drive »» Love of God »» Teamwork »» Responsibility to the Community »» Concern for People »» Enhancement of Quality of Life
Our Ownership Structure D.1, 102-2, 102-5 OWNERSHIP STRUCTURE 4% We provide value by engaging in real 4% property ownership, development, 8% AYALA LAND marketing and management. PCD NOMINEE CORP (NON-FILIPINO) 13%
Our Company was registered with the SEC PCD NOMINEE CORP (FILIPINO) on December 9, 1988, with an authorized PROVINCE OF CEBU capitalization of P1.0 billion. As of 71% December 31, 2019, our authorized capital OTHERS stock is at P3.0 billion.
17 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Structure
100% CLCI Cebu Leisure Company, Inc. 100% CBPTMI Cebu Business Park Theaters Management Company, Inc.
100% AiO Asian i-Office Properties, Inc.
55% CBDI Central Block Developers, Inc.
55% TPEPI Taft Punta Engaño Property, Inc. 37% CIHCI Cebu Insular Hotel Company, Inc.
35% SPI Southportal Properties, Inc.
35% ASPI Amaia Southern Properties, Inc.
35% SOLINEA Solinea, Inc.
15% CDPEI Cebu District Property Enterprise, Inc.
18 A space to take your dreams further Our Businesses 102-2 Office Space Leasing and Office Condominium Sales Estate Development and Management
Cebu Business Park Cebu I.T. Park Gatewalk Central Seagrove SRP Development
eBloc Towers Ayala Center Cebu Tower Tech Tower Central Bloc Corporate Towers BPI Cebu Corporate Center Leisure
Residential Subdivision City Sports Club Cebu and Condominium Sales Seda Ayala Center Cebu Seda Central Bloc Cebu
Retail Space Leasing Amara 1016 Residences Park Point Residences The Alcoves Solinea Sedona Parc Avida Towers Cebu Amaia Steps Mandaue
Co-living Space Leasing AyalaMalls • Ayala Center Cebu • Central Bloc The Flats at CBP • Gatewalk Central T h e F l a t s a t C I T P The Walk Garden Bloc Garden Row eBloc Towers retail Seagrove retail
19 CEBU HOLDINGS, INC. 2019 Integrated Report In 2015, the United Nations adopted 17 Sustainable CHI takes a holistic but targeted approach to the Global Development Goals that address the world’s most Goals, focusing on goals relevant to its business, and pressing problems across social, environmental and honing in on areas where it could make the greatest economic development issues. People from 193 member impact. nations are pursuing the universal call to action to end poverty, protect the planet, and ensure the peace and CHI CONTRIBUTED TO THE prosperity of all people by 2030. Achieving the targets FOLLOWING GOALS IN 2019: will require not only the government but other sectors of society to change the course of development. 11
The contribution of the private sector weighs heavily on the success of each goal. Cebu Holdings, Inc. (CHI), as a major player in the real estate industry of Cebu, SUSTAINABLE CITIES embraces its responsibility to respond to the challenge of AND COMMUNITIES sustainable development. »» CHI focuses on providing master planned, mixed- use developments that are resilient, eco-efficient, CHI is committed to continuously improve its business and inclusive. Through strengthened partnerships strategy and sustainability performance throughout the with local communities for environmental, livelihood, and disaster preparedness projects, CHI value chain to maintain long-term strategic position. creates a sustainable setting for the growth of local With a strong sense of responsibility to the community, economies. it continues to implement programs that contribute to »» In recent years, CHI has made several the sustainable development goals, keeping in mind its enhancements to its infrastructures, providing stakeholders through its various projects. better services for customers and the general public. These improvements facilitated mass transport systems, additional access roads, and With its cross-sectoral reach, CHI is poised to act as a pedestrian and PWD-friendly facilities. significant force in driving Cebu towards a sustainable future.
20 A space to take your dreams further 13 CLIMATE ACTION 17 »» Combined allocation of over 11,000 square meters of PARTNERSHIP FOR space used for native tree nursery establishment at CHI’s developed estates THE GOALS »» Preservation of over 1,000 native trees and wildlings at Seagrove Engagement with civil society organizations, »» Bamboo nursery establishment at Upland Greens government, local merchants, and neighboring »» Nurturing a carbon forest at Upland Greens communities for: »» Allocation of 52% of total mall GLA to support »» Upgraded wastewater treatment facility at Cebu I.T. SMEs and local/ Cebu homegrown products Park and services »» Awareness training on forest and marine ecosystems »» Provision of space to promote farm-to-market »» Survey and planning for marine ecosystem products from Cebu’s upland communities preservation and conservation for Seagrove »» Provision of spaces for environmental, »» Increased volunteer program participation for educational and health awareness programs environmental initiatives »» Ecosystems services awareness trainings for communities »» Provision of space and facilities for police community precincts within two estates RESPONSIBLE CONSUMPTION AND PRODUCTION »» Best practices in solid waste management in real estate properties and construction projects »» Resource conservation / materials efficiency 10 »» Innovative approaches to recycling and composting REDUCED INEQUALITIES »» Community partnership for livelihood through waste collection and segregation by »» 100,158 jobs generated by CHI developments, community partner including locators in its estates »» 13% of total GLA or 12,154 square meters provided for SMEs, new business entrants, and farmers »» 313 days of the year allocated to social enterprise 12 or pro-bono events for SMEs »» Skills training and learning sessions for employees and neighboring communities »» 4 women (out of 13) in senior leadership GOOD HEALTH AND positions WELL-BEING »» Catering to special needs of mothers »» Equal opportunities for men and women »» P 19.6 million in community investments in education, environment, livelihood, health and 3 wellness, arts and culture, and promotion of local products »» Over 3,000 square meters of mall space provided for exhibits, promotional activities on health and wellness by schools and health organizations »» Continuing programs on occupational health and safety
21 CEBU HOLDINGS, INC. 2019 Integrated Report OUR VALUE CREATION PROCESS
CHI’s operations correlate its business activities with a nurturing of human and professional relationships, all of which are defined by a common commitment toward sustainability. Passion, integrity, and sustainability drive CHI’s operations — from land acquisition to its development, operations and management.
PERFORMANCE METRICS
OPERATIONAL BUILDINGS
LAND ACQUISITION CONSTRUCTION CONSTRUCTION PROJECTS / OPERATIONAL PROPERTIES
WORKFORCE
GREEN AND OPEN SPACES
OUR CAPITALS
NATURAL HUMAN 167 hectares of land 14,537 75,933 GJ employees and outsourced personnel of total energy consumed CHI and ALI projects in Cebu 454,713 m3 total water consumed
MANUFACTURED INTELLECTUAL CAPITAL 156 hectares of developed estates 314 M in design and land development consultancy fees
FINANCIAL SOCIAL AND RELATIONSHIP 750 M capital expenditure 16 LGUs and 4 CSOs engaged in 2019
22 A space to take your dreams further FOCUS AREAS
SITE RESILIENCE
PEDESTRIAN MOBILITY AND TRANSIT CONNECTIVITY
CO - DEVELOPMENT / PARTNERSHIP LOCAL ECONOMIC DEVELOPMENT
REACH DIVERSE MARKET EFFICIENT RESOURCE USE AND WASTE MANAGEMENT STRENGTHEN LEASING
OPERATIONS
MRF
SEWAGE TREATMENT PLANT
OPEN & GREEN SPACES
OUR OUTPUTS OUR OUTCOMES
RESIDENTIAL PRODUCTS RESIDENTIAL UNIT OWNERS
High value residential spaces 5,749 total units sold 865 moved in 2019 INVESTORS (Ayala Land - CHI) Sustained financial growth
OFFICE TENANTS AND MERCHANTS
COMMERCIAL LEASING ASSETS High value commercial spaces
307,219 GLA SUPPLIERS Business opportunities and financial growth 100,158 workforce supported COMMUNITIES 22 tenants (office buildings) Economic growth and beneficial partnerships
1,297 merchants (retail space)
23 CEBU HOLDINGS, INC. 2019 Integrated Report FOCUS AREAS 102-31
ANTICIPATING AND PROTECTING PROVIDING ACCESS AND AGAINST ADVERSE EFFECTS OF ENHANCING MOVEMENT CLIMATE CHANGE
To enhance the ability of our sites to survive Mobility and connectivity for everyone take a high environmental stress and adverse events, we priority in our design and planning of livable and engage with our stakeholders in assessing risks, sustainable estates. We optimize urban networks for developing resilience strategies, and employing both traffic and pedestrian purposes. mitigation measures.
411,962 m2 27 35 GREEN AND OPEN SPACE BIKE RACKS PEDESTRIAN PRIORITY SIGNS 4,391 NUMBER OF TREES Enhanced 55 STREET SIGNAGES TRAFFIC 99 CALMING DEVICES NATIVE PLANT SPECIES 14,010 m2 86 11,021 m2 COMBINED SPACE FOR PWD RAMPS TREE NURSERY PUV TERMINALS 58 6,852 Enhanced COVERED EMERGENCY RESPONSE DRILLS STREETLIGHTS WALKWAYS 2 120,505 m 60 5 SPACE USED AS MARKED BUS STOPS EVACUATION AREA CROSSWALKS
SUPPORTING LOCAL MANAGING RESOURCES ECONOMIC DEVELOPMENT EFFICIENTLY
Our development projects generate direct and We maximize efficiency through the judicious use indirect employment and raise the number of of resources. We minimize waste creation on site homegrown business. and ensure that any resulting waste is handled appropriately.
WORKFORCE DISTRIBUTION 75,933.1 GJ TOTAL ENERGY CONSUMPTION 2019
69% BPO / IT / Telecom - 68,790 454,712.5 m3 15% Traditional Offices/ Banks - 14,562 TOTAL WATER CONSUMPTION
8% Retail / Hotel / Leisure - 8,208
6% Constuction - 6,430 7,310.5 tonnes WASTE COLLECTED IN COMMON AREAS 2% Residential - 2,168
24 A space to take your dreams further PERFORMANCE ECONOMIC VALUE METRICS DISTRIBUTED
1% OPERATIONAL BUILDINGS 11%
»» Providing efficient space for locators, merchants, shoppers, clients, 9% workforce, and other stakeholders
»» Metrics: 2% »» Energy efficiency 3.21B »» Water efficiency TOTAL DISTRIBUTED »» Number of tenants 77% »» Tenants’ industries
CONSTRUCTION PROJECTS / OPERATIONAL PROPERTIES
»» Creating the capacity to support Cebu’s economic growth PAYMENT TO SUPPLIERS 2,881,310,606
»» Metrics: PAYMENT TO EMPLOYEES 107,000,000 »» Gross Floor Area PAYMENT TO PROVIDERS OF CAPITAL 323,500,000 »» Gross Leasable Area »» Common Areas PAYMENT TO GOVERNMENT 404,589,715
»» Constructed Floor Area PAYMENT TO COMMUNITIES 20,000,000
WORKFORCE
»» Investing in our employees in an inclusive, engaging work SUPPLIERS environment 661 suppliers engaged, 92% local »» Metrics: (i.e. within Cebu province) »» Training hours EMPLOYEES »» Diversity 23 average training hours »» Employee engagement COMMUNITIES GREEN AND OPEN P20M worth of contribution as community investment, P16.5M amount of rent waived for CSOs, academic SPACES institutions, socio civic organizations, advocacy groups and SMEs »» Integrating the greenery of Cebu to the built environment we create SHAREHOLDERS »» Metrics: P355M worth of dividends, 97% NIAT increase in »» Green and open space area financial performance »» Number of trees »» Native plant species MERCHANTS »» Tree nursery area 52% GLA allocated to local (Philippine) and homegrown (Cebuano) brands, 13% GLA allocated to small and medium enterprises 25 CEBU HOLDINGS, INC. 2019 Integrated Report CHI: REACHING FOR OPTIMUM POTENTIAL
The word “chi” in Chinese means life force or energy, the driving force or enabler that makes one reach the highest or optimum potential.
Coincidence or not, Cebu Holdings Inc., also known by its acronym CHI, holds the self-same characteristic. As a major driver of Cebu’s property sector, CHI is transforming lives and businesses in ways that interact symbiotically with nature and the local environment.
Market Outlook in 2019 CHI’s Cebu Business Park (CBP) and Cebu meter mark and developers are looking I.T. Park (CITP) have shown high demand at options such as Mandaue and Mactan. despite its 30 percent premium compared In the last quarter of 2018, Mandaue’s with other locations. The 1.7 percent vacancy rate dropped to 6.5 percent, vacancy rate of CBP and CITP is notably significantly lower than its previous year’s lower than the 11 percent vacancy rate of 9.7 percent. other developments in Cebu. Central Visayas became the fourth largest Leading commercial real estate services economy in the country in 2018 when it and investment management firm Colliers recorded a gross domestic product growth International foresees CITP and CBP rate of 7.6 percent exceeding the national recording the most impressive boost in average of 6.2 percent. rents, with rates in Cebu expected to register an annual increase of four percent The expanding middle class and the over the next three years. increasing number of young professionals indicate a more upbeat economic activity Similarly, demand for office space will be for Metro Cebu in the next years. This steadily on the rise as Cebu continues to outlook goes not only for CBP and CITP but be an attractive location for enterprises also for the upcoming estates in the cities engaged in business process outsourcing of Mandaue and Lapu-Lapu. (BPO) and knowledge process outsourcing (KPO). Tourism and business prospects alike are seen to strengthen along with the Leasable office space in Metro Cebu had ongoing improvements of Mactan Cebu’s already breached the one million square international airport as well as road infrastructure.
26 A space to take your dreams further It can be said that CHI and chi are two words that share the same meaning—continuous improvement and aiming for the highest potential.
Strategies
CHI considers itself as part of the community where it operates. Its involvement includes taking advantage of business opportunities so that the gains enjoyed at the moment continue to bring prosperity to its stakeholders, particularly the community that it serves. This means pursuing expansion activities and introducing new projects.
STRONGER ASSET BASE BY LAND ACQUISITION AND DIVERSIFYING MARKETS HARNESSING PARTNERSHIP AND CONSTRUCTION OF NEW ESTATES THROUGH EQUITY HOLDINGS AND ACQUISITION NEW PRODUCTS
Despite higher rates, flagship estates Future growth is now moving towards Diversification is important to stay are enjoying good occupancy, new areas where living standards are relevant to more industries, markets, opening the possibility for fast improving, assuring environment- and communities. This strategy expansion of leasing assets. It is, friendly approaches and innovations. will also include the acquisition of therefore, necessary to engage in stakes in companies that produce strategic partnerships and property This will spur the growth of quality products and services that acquisitions to expand market share communities and further the goals of are responsive to the needs of the and enhance the holding company’s sustainable development. Company’s target markets. portfolio. This is necessary to maintain CHI’s status of being the preferred supplier of mixed-use commercial and lifestyle spaces.
27 CEBU HOLDINGS, INC. 2019 Integrated Report Operational Performance
28
A space to take your dreams further w Operational Performance
29
CEBU HOLDINGS, INC. 2019 Integrated Report w 4:20 Cebu Business Park Cebu, Philippines
1.3 Kilometers
30 A space to take your dreams further Master Planning for Sustainability
CEBU BUSINESS PARK, also known as the Cebu Central Business District, pioneered the concept of mixed-use estates in Cebu. Since it was launched more than three decades ago, the 50-hectare centrally-located development has become the nexus for business and leisure activities, attracting leading local and multinational firms and people seeking the best facilities for leisure and entertainment.
While creating an ideal environment for business and leisure to thrive, the CBP strives to showcase best practices in sustainability management of large-scale, integrated, mixed-use developments.
INPUTS OUTPUTS OUTCOMES
Partnership with key 44 42,446 jobs generated stakeholders operating buildings 5% increase in workforce
P114.4M invested 8 more on the rise Increase in property value for estate enhancement in 2019 Sprawling master planned integrated 3,607 50 hectares estate ancillary services developed land
31 CEBU HOLDINGS, INC. 2019 Integrated Report Cebu Business Park
CEBU BUSINESS PARK OPERATIONAL PERFORMANCE
Cebu Holdings, Inc. (CHI) provides a The estate’s facilities, road network, parks steady infusion of capital to enhance its and green areas are continuously being flagship project, the Cebu Business Park. improved to serve this growing community.
8 Ongoing Construction CBP has 44 operational buildings which In 2018, a police precinct was opened in 228,827 sqm host financial institutions, local and CBP and plans to construct a fire station multinational headquarters, BPOs and within the park are also underway. 15% condo residents. Eight buildings were under construction in 2019. These will bring up gross floor area to almost 912,000 square meters upon completion.
44 Operational Buildings 85% 683,112 sqm
CEBU BUSINESS PARK BUILD-UP 2019 Gross Floor Area 32 A space to take your dreams further SEDA AYALA CENTER CEBU: CELEBRATING CEBUANO HOSPITALITY
A year after its opening, Seda Ayala Center Cebu has established itself as a city hotel that proudly champions warm and welcoming traits that are distinctly Cebuano.
THE ALCOVES Now a four-star hotel, Seda features 301 guest rooms; Misto, its signature dining outlet; and eight One of the developments currently under function rooms for meetings and celebrations. These construction is Ayala Land Premier’s The Alcoves, make Seda Ayala Center Cebu a rising key player atop Ayala Center Cebu. With a direct elevator link in the hotel industry nestled at the bustling hub of from its private lobby to the mall on the ground Cebu Business Park. level, residents will have the conveniences of the Ongoing Construction cosmopolitan lifestyle. This residential tower is Since 2012, the Seda hotel group has welcomed scheduled to be completed by the second half of guests with pride with a combined 2,498 rooms and 2020. suites across different Seda hotels in the country.
THE FLATS AT CBP Seda Ayala Center Cebu embodies the group’s vision to stimulate progressive shifts in the Also under construction is The Flats at Cebu accommodation and hospitality sectors. The vision Business Park. This innovative new shared living strides on as its second 17-storey Seda Hotel is set spaces concept will have 397 units for lease in a to open doors at Cebu I.T. Park in 2020. prime location and is expected to be completed by the end of 2022.
33 CEBU HOLDINGS, INC. 2019 Integrated Report Cebu Business Park
AYALA CENTER CEBU 133,857 sqm Gross Leasable Area Strategically located as the centerpiece Center Cebu’s total leasable area to of Cebu Business Park, Ayala Center Cebu 133,857 square meters. attracts an average of 100,000 visitors a 99,085 Daily foot traffic day. Anchor store, Metro Gaisano, opened four department store floors in addition to its Offering a wide selection of retail options, existing supermarket and is set to fully re- 7,264 from bargain brands to boutiques featuring open in 2020. Daily vehicle count luxury items, Ayala Center dedicates more than half of its leasable space for local Ayala Center Cebu contributed P1.6 billion merchants and Philippine-made brands. to CHI’s revenue in 2019, nine percent higher than the previous year. Consolidated In 2019, a 7,760-square meter leasable mall occupancy as of December 2019 space located under The Alcoves tower was at 94.3 percent, with almost 500 mall was added to the mall. This brings Ayala merchants.
The Retail Competition and Open Access mechanism of the ACC SHIFTS TO Electric Power Industry Reform Act of 2001 allows contestable customers (big consumers of electricity like malls, universities, RENEWABLE ENERGY factories, and office buildings) to select from available and competing supply options. Typically agreements with retail Ayala Center Cebu is now 80 percent powered by clean electricity suppliers are renewed annually or biennially, giving and renewable energy. The region’s premier lifestyle qualified customers the freedom to switch to another supplier or destination signed a deal in 2017 for the supply of another energy source. lower cost electricity from hydroelectric and geothermal sources. The move to renewable energy has resulted in reduced power rates that also benefit the tenants of Ayala Center Cebu. From Energy collected from natural and renewable sources the time the mall started using power from this source in produces little or no greenhouse gas emissions versus 2017, the mall saved an average of 25 percent in 2018 and energy from traditional coal-fired power plants that brings 2019 compared with sourcing energy from a utility company. In harmful effects to the environment and health. 2019 alone, the mall saved P56.3 million and avoided over five million kilograms of CO2.
34 A space to take your dreams further Support for Local Enterprise
MERCHANTS PER GROUP Local (Philippine) and Cebuano various beneficiaries including civil society homegrown brands occupy more than organizations, advocacy groups, academic half of Ayala Center Cebu’s gross leasable institutions and medium and small scale 29% area. These total 398 or 71 percent of enterprises who conducted events, such as merchants, including kiosks and carts exhibits. operated by small enterprises.
In terms of workforce, the total count as 71% In 2019, 313 days or 85 percent of events of yearend reached 5,200. This includes spaces were used for social enterprise employees of service providers and mall events. Rental fees for a total of 14,183 merchants. square meters of space were waived for Local / Homegrown (with kiosk)
Foreign
COMMUNITY INVESTMENTS
3% 2%
9%
11% 23%
SITE RESILIENCE SOLID WASTE MANAGEMENT 7%
Practices to foster site resilience cover Ayala Center Cebu requires its merchants 45% health and safety and emergency response to strictly comply with waste management drills. Ayala Center Cebu conducted 104 regulation. All food and non-food drills in 2019, covering a wide scope of merchants follow waste labeling and External Partnership scenarios. Participation among occupants comply with the schedule for waste Environment was at 95 percent. collection. Tourism, Arts, Culture, Church
EFFICIENT RESOURCE USE Education Sports/Health and Wellness
Advocacy for Children Non-Recyclable Recyclable Entreprenuership / Livelihood 0.520 5.330 5.240 52,517 0.450 0.430 3.710 34,388 27,835 849 1,144 818
17 18 19 17 18 19 17 18 19
ELECTRICITY WATER WASTE CONSUMED CONSUMED GENERATEDGENERA Intensity, GJ/sqm intensity, cum/sqm tonnes
35 CEBU HOLDINGS, INC. 2019 Integrated Report Cebu Business Park
SUSTAINABILITY PERFORMANCE Cebu Business Park continued to lead by example in key economic and environmental areas. More Cebuanos now occupy higher-value jobs as the estate increased its employment count by five percent. Despite the increase in total workforce, the estate also managed to use resources more efficiently, most notably in the use of energy.
SITE RESILIENCE We enrich Cebu Business Park’s green landscape as we continue to grow endemic trees and 84,727 192,278 CCTV UPGRADE Widened our CCTV coverage propagate native plant species square meters of evacuation open and green space spaces in the event of (39% of gross land area) to further tighten security that are resilient to Cebu’s disasters or calamities and safety measures across the estate climate.
PEDESTRIAN MOBILITY AND TRANSIT CONNECTIVITY While rapid economic development promotes improvement in people’s lifestyle, it usually comes with strains on working conditions and mobility. CBP provides facilities to improve access and movement within the estate. 390 meters longest block Cebu Business Park has a public utility vehicle terminal where mallgoers and workers alike can conveniently find their daily commute. This serves nine public transportation routes with an estimated 335 trips that accommodate 8,803 passengers daily. For pedestrians, there are 84 linear meters in pathways for non- 4 meters motorized transport. sidewalk width in high traffic areas LOCAL ECONOMIC DEVELOPMENT
NUMBER OF WORKFORCE SUPPORTED 5% Increase from previous year
9% 1% 12% 46% 32% 42,446
Construction Residential Retail Hotel/ Leisure BPO/ IT /TELCO Traditional Office/ Banks
EFFICIENT RESOURCE USE AND WASTE MANAGEMENT
Non-Recyclable Recyclable 0.021 9.627 13.080 0.0062 0.0060 0.0057 0.0013 0.0011 0.0010 0.011 8.019 0.010 23.280 26.009 16.310
17 18 19 17 18 19 17 18 19 17 18 19
ELECTRICITY GHG EMISSION WATER WASTE CONSUMED INTENSITY CONSUMED GENERATED Intensity, GJ/sqm (Scope 1 and 2), GJ/ intensity, cum/sqm tonnes sqm 36 A space to take your dreams further Pre-schoolers held a summer class culminating event with a bamboo propagation activity and introduction to biodegradable waste GROWING OUR OWN NATIVE TREES management for young children with their parents. Cebu Business Park’s tree nursery sits on The park’s tree nursery and composting a 2,806-square meter space and has 81 facility serve as venue for basic mature trees ranging from 13 to 20 feet in environmental education for young height. Seedlings nurtured at the nursery students. has reached close to 5,000. These will be used for landscaping requirements of Cebu Business Park and Ayala Center Cebu.
42,446
Experiential Learning. Small children accompanied by their parents learn and appreciate the value of nurturing trees as they go outdoors and observe the trees and plants that grow.
The participants were introduced to compostable waste such as kitchen and yard waste. A short demo on the basic steps in composting was conducted using the bio-waste samples that the children brought from home and those collected from the tree nursery.
37 CEBU HOLDINGS, INC. 2019 Integrated Report Ayala Malls Central Bloc
Second Floor Third Floor Fourth Floor
38 A space to take your dreams further I.T. Capital of Cebu
CEBU I.T. PARK is a 27-hectare mixed-use business park that continues to attract internationally known brands in IT, BPO and other outsourcing services. The I.T. Park was the first PEZA- accredited I.T. park outside Metro Manila and has since catalyzed unprecedented growth in Cebu’s technology industry over the course of two decades.
The Company’s proven capability in developing master planned estates has earned it the trust of I.T. locators. Today, Cebu I.T. Park accounts for 70 percent of Cebu’s BPO and contact centers, including those engaged in research and development.
INPUTS OUTPUTS OUTCOMES
28 hectares 32 56,221 jobs generated developed land operating buildings 5% increase in workforce
9 more on the rise Increase in property value
Dynamic master planned integrated 619 estate ancillary services
39 CEBU HOLDINGS, INC. 2019 Integrated Report Cebu I.T. Park
CEBU I.T. PARK OPERATIONAL PERFORMANCE
With the continuing demand for In 2019, a loading and unloading bay commercial and living spaces in this prime was completed within the estate for the hub, nine buildings are currently under convenience of workers and residents in construction at Cebu I.T. Park. These will the area. This facility will host public utility bring total build-up to 41 buildings by vehicles and buses plying the streets of 9 Ongoing Construction 2021. the city and other parts of Metro Cebu. 216,400 sqm This supports CHI’s thrust to improve A pioneer in the information technology pedestrian and transit mobility within its industry in Cebu, the I.T. Park is designed developments. 22% for the needs of its locators including efficient office spaces, redundant telecom and power supply, 24/7 retail support, and green and recreational spaces.
78%
32 Operational Buildings 549,789 sqm
CEBU I.T. PARK BUILD-UP 2019 Gross Floor Area 40 A space to take your dreams further LED LIGHTS RETROFITTING: eBLOC TOWER 3 LIGHTS THE WAY
eBLOC TOWER 3 AT CEBU I.T. PARK became the test case for CHI properties as the seven-story building switched from conventional lighting to the energy- efficient LED.
By the end of 2019, 90 percent of the building’s common areas were retrofitted with LED lights. Full conversion to LED lighting is scheduled by 2020.
The business case for LED lighting is strong. In the Philippines and other tropical countries, air- conditioning accounts for a large part of a building’s energy use. LED’s emit less heat, lowering the THE FLATS AT CITP demand on air-conditioning and cooling systems. This makes them the ideal choice for use in such buildings. Currently under construction is The Flats at Fluorescent lamps currently being used in many Cebu I.T. Park. This innovative new shared buildings contain mercury, a toxic metal harmful living spaces concept will have 455 units for to humans and the eco-system. If not disposed of Ongoing Construction the I.T. hub’s growing community and will properly, the lamps can have a serious impact on be completed by 2022. the environment. LEDs, on the other hand, contain no mercury and have a much smaller environmental impact than incandescent lights.
The biggest advantage of LEDs compared with conventional bulbs is the long lifespan. While the typical lamp life of fluorescent lights is 10,000 hours, LEDs can last up to 25,000 hours. This translates to lower maintenance costs in terms of labor and replacement parts.
Other CHI properties are currently gearing up to switch from traditional lighting to LED, in line with the Company’s focus on more efficient use of resources in its projects.
41 CEBU HOLDINGS, INC. 2019 Integrated Report Cebu I.T. Park
Wonder Further at AyalaMalls Central Bloc Cebu I.T. Park’s central superblock opens with a new lifestyle center
NESTLED IN THE BUSTLING I.T. DISTRICT, The mall is the first component of the two-hectare Cebu I.T. Park, AyalaMalls’ newest project – central superblock, Central Bloc. This stacked AyalaMalls Central Bloc is positioned to be a development also includes a Seda hotel and two vibrant hangout destination where the balance BPO office towers. The 214-room Seda Central of work and play thrives. The five-level regional Bloc Cebu soft-opened in the first quarter of 2020. mall has 44,394 square meters of gross leasable Meanwhile, the two BPO office towers add over area for retail, dining and entertainment shops. 72,000 square meters of leasable space.
December 6, 2019 marked the much-awaited Aside from providing a fresh mix of shopping, opening of this new lifestyle anchor at the IT hub. dining and entertainment options, the Central Bloc improves connectivity within the IT Park by AyalaMalls Central Bloc is Cebu’s hip and providing a pleasant pedestrian experience that happening place featuring trendy and practical connects the different areas of the estate. retail concepts, refreshing dining outlets and venues to chill out in. It gives the young and The Central Bloc is a project of Central Block active workers an accessible and convenient Developers, Inc., a partnership between Cebu place to unwind and wander further after a busy Holdings, and parent company, Ayala Land. workday.
42 A space to take your dreams further SHOWCASING STARTUP BUSINESSES AT THE TRADING BLOC
To support budding entrepreneurs and homegrown brands, AyalaMalls Central Bloc opened a special section at the second level of the mall, called the Trading Bloc.
With smaller space cuts and more flexible leasing options, this space provides a platform for starting entrepreneurs to offer their products to a bigger market in a strategic location. The Trading Bloc is a showcase of the Cebuano entrepreneurial spirit, and follows in the wake of similar business platforms such as the Maze at Ayala Center Cebu and Sugbo Mercado at the Garden Bloc.
43 CEBU HOLDINGS, INC. 2019 Integrated Report Cebu I.T. Park
SUSTAINABILTY PERFORMANCE More Cebuanos now occupy higher-value jobs as the estate increased its employment count by five percent.
SITE RESILIENCE In 2019, a total of 58 emergency In addition, information on response trainings were emergency helplines are well- conducted to ensure business disseminated and prominently 58 102,836 sqm continuity and safety in the displayed and streets are well- total of emergency open and green space estate. These include emergency illuminated. response training (37% of gross land area) brigade drills, complex drills, and estate-wide drills.
PEDESTRIAN MOBILITY AND TRANSIT CONNECTIVITY
A loading and unloading bay was completed to host public utility vehicles and buses plying the streets of the city and other parts of Metro 3,800 sqm 4 meters 223 meters Cebu. loading and unloading bay sidewalk width longest block in high traffic areas
LOCAL ECONOMIC DEVELOPMENT
BPOs and I.T. companies are the biggest creators of jobs, generating NUMBER OF WORKFORCE 5% 49,204, or 88 percent of total jobs SUPPORTED Increase from last year created in the I.T. park.
2% 3% 5% 88% 2% 56,221
Construction Residential Retail Hotel/ Leisure BPO/ IT /TELCO Traditional Office/ Banks
EFFICIENT RESOURCE USE AND WASTE MANAGEMENT
Non-Recyclable The estate keeps close track of electricity Recyclable and water consumption, ensuring that these resources are used judiciously. The 0.019 design of the wastewater treatment plant 20.700 includes Sequencing Batch Reactors that 21.310 operate at 2.5 million liters per day (MLD), 0.013 0.013 or a total cycle time or treatment process of six hours. 4.960 32.950 43.027 23.280
17 18 19 17 18 19
WATER WASTE CONSUMED GENERATED intensity, cum/sqm tonnes
44 A space to take your dreams further MANAGING OUR WASTE EFFECTIVELY The estate has improved the recovery of biodegradable waste generated from the common areas. It conducts continuous compost production for use as organic fertilizers or soil enhancers.
In addition, recycling is practiced and enforced. Used bottles are regularly collected and recycled or reused. An average of 1,500 pieces of plastic bottles and 63 kilos of glass bottles are collected each month.
Cebu I.T. Park has allocated a 1,592-square meter space for a tree and bamboo nursery.
45 CEBU HOLDINGS, INC. 2019 Integrated Report Construction Progress Gatewalk Central
46 A space to take your dreams further Dynamic Center of Mandaue
A NEW INTEGRATED MIXED-USE DEVELOPMENT is about to transform one of Cebu’s promising cities into an all-around modern business and lifestyle enclave.
A joint venture between Cebu Holdings, Ayala Land and AboitizLand, Gatewalk Central is envisioned to be the Central Business District of Mandaue offering convenience and accessibility.
INPUTS OUTPUTS OUTCOMES
967 Intensified local economy P1.4B Linear meters of through job generation invested in 2019 road network
17.5 hectares 506 Increase in property value developed land Linear meters of pedestrian spine
1,927 Linear meters of sidewalk
Dynamic master planned integrated estate
47 CEBU HOLDINGS, INC. 2019 Integrated Report Gatewalk Central
GATEWALK CENTRAL ESTATE UPDATE
Gatewalk Central’s key features blend with This development received an entry level the personality and culture of Mandaue, 3-BERDE certification from Mandaue City which prides itself on being the industrial for environmental compliance. and creative hub of Central Visayas, and a population exposed to global influences. As a mixed-use development, Gatewalk Central will also have residential and office Land development at Gatewalk Central buildings. Its first BPO tower is currently was completed in 2018. Landscape works under construction beside the mall and is to enhance the estate are ongoing and expected to be completed in 2023. expected to be completed in 2020. Against this backdrop, Gatewalk Central Gatewalk Central’s first locator is a will weave features that will mix business four-storey Ayala mall that is set to be and pleasure, including office and completed in 2022. Construction is residential spaces, vibrant street life and currently at 40.8 percent. entertainment, a variety of retail and dining options, and transportation mobility.
48 A space to take your dreams further SUSTAINABILITY PERFORMANCE
SITE RESILIENCE
Green and Open Space Allocation 41,932.5 sqm (24% of total area)
Native Tree Nursery Space Allocation 3,613.8 sqm
Pre-project Assessments Technical Due Diligence Geohazard Study Hydrology and Flood Study
Drainage lines 2,481.5 linear meters
PEDESTRIAN MOBILITY AND TRANSIT CONNECTIVITY
Access Road 24-meter wide with 4 vehicular lanes
Transport Connectivity A few steps from the North Bus Terminal; 10 km from the airport and 4 km to Cebu Ferry Terminal
Proximity to Civic Uses Within 5-km radius are schools, universities, hospitals, government agencies
Longest Block Length 305 meters
Spending on Traffic Assessment P1.4 million
Sidewalk /pedestrian walkway 5-meter wide and 1,927 meters long
Allocation for PUV Terminal 6,000 sqm
49 CEBU HOLDINGS, INC. 2019 Integrated Report STOCKS INDEX PSEi
50 A space to take your dreams further A Celebration of Nature
CEBU HOLDINGS, IN PARTNERSHIP WITH TAFT PROPERTIES DEVELOPMENT INC., is building its first mixed-use resort estate in Mactan, an island a few kilometers away from Cebu City.
Seagrove is envisioned to be an eco-tourism destination, leveraging the Company’s expertise in master planned developments, while showcasing the location’s impressive natural setting.
Among the 13-hectare development’s unique features is a boardwalk where one can take leisurely walks by the sea or toward nearby shops and hotels.
INPUTS OUTPUTS OUTCOMES
Engaging technical 135,748 sqm Intensified local economy experts total land area through jobs generation
P147.7M 14,296 sqm Increase in property value invested for land road network development in 2019 Development programs: 5,800 sqm community livelihood and 14 hectares pedestrian spine environmental stewardship developed land
51 CEBU HOLDINGS, INC. 2019 Integrated Report Seagrove
SEAGROVE ESTATE UPDATE
CHI continues to rescue wildlings onsite while road networks are being carved out during construction. As of yearend, over a thousand seedlings have been nurtured at the native tree nursery.
52 A space to take your dreams further SUSTAINABILITY PERFORMANCE
SITE RESILIENCE
Green and Open Space Allocation 74,916.4 sqm (55% of total area)
Native Tree Nursery Allocation 3,010 sqm
Pre-project Assessments Technical Due Diligence Engineering Geological and Geohazard Assessment Coastal Engineering Study Marine Ecological Baseline Study
PEDESTRIAN MOBILITY AND TRANSIT CONNECTIVITY
Longest Block Length 334 meters
Sidewalk /pedestrian walkway 4 meters wide and 2,030 meters long
The Seagrove project team planted the first batch of trees at the project site during land development.
Monitoring and measurements are periodically done at the nursery.
53 CEBU HOLDINGS, INC. 2019 Integrated Report 54 A space to take your dreams further Ayala Land Premier’s Amara continues to be the aspirational seaside residential development in Cebu. Located in the municipality of Liloan, just 20 kilometers from Cebu City, residents enjoy the serene luxury of seaside living in this 40-hectare subdivision.
Its last phase was launched in December of 2018 and has been sold out.
With its North Tower turned over to residents, the South Tower of Amaia Steps in Subangdaku, Mandaue was launched in December of 2018. Construction has since started and the project was 21 percent sold as of the end of 2019.
55 CEBU HOLDINGS, INC. 2019 Integrated Report Engaging Stakeholders GRI 102-40, 102-42
CEBU HOLDINGS, INC. (CHI) maintains a list of key stakeholders to engage, listen, and respond to. These stakeholder groups were identified according to their level of influence and interest in the organization as well as the extent of the impact of its operations on them.
INVESTORS
w
EMPLOYEES MERCHANTS COMMUNITY CONSULTANTS CUSTOMERS SUPPLIERS LOCATORS
GOVERNMENT / REGULATORS
56 A space to take your dreams further Engaging Stakeholders CEBU HOLDINGS, INC. maintains a list of key stakeholders to engage, listen, and respond to. These stakeholder groups were identified according to their level of influence and interest on the organization as well as the extent of the impact of its operations to them.
57 CEBU HOLDINGS, INC. 2019 Integrated Report STAKEHOLDER ENGAGEMENT
We honor all our legal and voluntary commitments to stakeholder rights and provide all our key stakeholders with the opportunity to obtain effective and prompt redress whenever their rights are at risk or violated.
Customers
The Company has a Customer First Policy that prioritizes added value in the delivery of products and services to continually satisfy the changing expectations of customers. (OP14.1)
MERCHANTS AND SHOPPERS
CHI cultivates a customer-centric culture to improve the business process and the where every process begins and ends with overall business strategy. the customer in mind. The malls that CHI operates have been Customer reviews are conducted regularly found to be a good venue for collecting focusing on customer satisfaction and feedback. Moreover, these malls hold market leadership. Customer feedback is programs that support initiatives of gathered at every opportunity and used merchants and promote their brand and service. Local communities CSOs AND COMMUNITY PARTNERS
The Company works with civil society organizations (CSO’s) to ensure the protection of people and planet. CSO members sit on the Protected Area Management Board of Central Cebu and are CHI’s partners in environmental and conservation initiatives. We strive to be socially responsible in all our dealings with our neighboring communities in CHI conducts periodic training the areas where we operate. We ensure that our interactions serve our environment and on forest ecosystem services for stakeholders in a positive and progressive community partners, which includes manner, fully supportive of comprehensive and assisted natural regeneration and balanced type of development. native-tree growing activities. Ayala Land, CHI’s parent company, We regularly engage representatives from our local communities to assess their needs, nurtures 586 hectares of carbon pursue possible areas of collaboration, and use forests country-wide, of which 65 shared resources for programs that benefit our hectares in upland Cebu are managed larger community. by CHI.
58 A space to take your dreams further Compliance Creditors The company presents creditors with all The Company complies with all legal, consumer, and the information required to evaluate our financial reporting requirements against corruption, credit standing. including extortion and bribery.
The company is in compliance with all applicable laws and regulations. To this end, there has been no reported incident of any violation.
SHAREHOLDERS, INVESTORS AND ANALYSTS
Cebu Holdings, Inc. (CHI) is dedicated to disclosures, publications and news building stakeholder relationships vital for releases. the long-term success of its business. CHI responds promptly to concerns directly Investors and shareholders are apprised of addressed to the Company by way of visits, project developments and other relevant phone calls or online communication. information through regular meetings,
WORKFORCE AT Suppliers and CONSTRUCTION SITES Contractors CHI has a successful and decades-long The Company implements standard procurement policies partnership with Makati Development and procedures across its Corporation (MDC). MDC leads in business units. Regular supplier construction management practices accreditation and annual that minimize the risk inherent in the performance evaluation are construction process – from daily observed. (OP14.2) Data on local sourcing and safety meetings and site inspections to workforce count of all our units are workers’ training and responsible waste on page 26. management.
840 hours of weekly and monthly health and safety-related meetings conducted in 2019
5,365 new workers oriented on Our employees are integral environment, occupational health and to our corporate governance Employees safety procedures and programs processes. For instance, our Health, Safety and Welfare Policy keeps our people 353 construction workers completed well-informed about CHI’s training programs policies on hiring, employee engagement, training, health, emergency drills conducted across all safety, and welfare. The 64 highlights of our 2019 CHI construction projects Personality and Lifestyle Upliftment Strategy (PLUS) Program and other human capital initiatives are outlined in pages 60 to 65. (R15.1-1)
59 CEBU HOLDINGS, INC. 2019 Integrated Report PEOPLE DEVELOPMENT
Employees are the greatest asset of every organization. At the core of CHI’s DNA are its highly-motivated employees. This emanates from its commitment to the continuous development of its people. CHI’s employees are empowered to make significant contributions, thereby enabling them to achieve its strategic goals. By engaging its employees, the Company creates opportunities for them to achieve personal fulfillment and satisfaction.
CHI’s People Development Programs are centered on the following areas:
»» Project Development and other Technical Skills »» Disaster Readiness: evacuation drills and crisis communication »» Business Continuity »» Internal and Finance Process »» Information Technology »» Health and Safety »» Leadership »» Management Skills »» Behavioral/Values Formation
60 A space to take your dreams further In addition, employees are exposed to sustainability PEOPLE learning and work sessions such as: »» Review of Ayala Land Four Focus Areas and Orientation on Forest Ecosystem Services »» Waste Analysis and Characterization Study »» Office Waste Management and Reduction DEVELOPMENT »» Seagrove Socio-environmental Initiatives »» Coral Biology and Restoration Practices
CHI aims to cultivate a culture of collaboration and connectedness, where people have a genuine stake in the growth of the company. CHI values holistic development in their people and regularly conducts employee welfare programs and events that genuinely interest them.
By creating an environment of care, CHI is able to reach its ultimate goal of retaining its best talents while ensuring that their best interests are upheld.
61 CEBU HOLDINGS, INC. 2019 Integrated Report EMPLOYEE ENGAGEMENT
Summer Outing and Team Building
To enhance camaraderie and collaboration within the organization, CHI hosts its employees on an annual summer outing and team building. In line with its 30th anniversary activities, the 2019 annual gathering also featured a digital marketing talk and exciting team challenges for the employees.
Mood Wall
This is an interactive forum that serves as a venue for employees to express ideas and interest by participating in activities posted on the mood wall.
#OfficeGreenovation
• CHI Rethinks Waste Collection and Recycling through the ‘Working Towards Zero Waste Program’ • Optimum use of MS Teams and company video conferencing facility to reduce business travel
CHI PLUS
The Company continues to invest in activities that promote the overall well-being of CHIers. Among the year-long activities are basketball, badminton, participation in fun runs, and employee movie dates.
Fun Fest
Around 600 employees from 19 different Ayala-led companies in Cebu participated during the Ayala Business Club Fun Fest last September 22.
Led by ABCCI, the event aims to engage employees in various interactive games that help promote teamwork, camaraderie and synergy among Ayala-wide employees in Cebu.
62 A space to take your dreams further An engaged workforce is integral to delivering CHI’s strategies. In 2019, CHI measured its employee engagement activities through the ENGAGE survey by Willis Towers. It was the Company’s first time to conduct this survey.
The survey was structured to deliver key Employees rated Empowerment highest, insights that facilitate alignment among with a favorable rating of 93 percent. the Company’s employees and culture This was followed by Communication and and its business strategy. Fifty-five Agility. The results showed a Sustainable questions captured CHI’s performance Engagement score of 88 percent. These across fourteen categories, such as results were presented both to the communication, customer focus, learning Management Team and in a townhall with and development, and empowerment. all the employees.
63 CEBU HOLDINGS, INC. 2019 Integrated Report EMPLOYEE VOLUNTEER PROGRAMS
In 2019, CHI recorded a total of 5,883 Aside from actual volunteer hours, the total volunteer hours from various initiatives number includes credits from employee that include native tree growing contributions on recyclables and eWaste (rainforestation) and nurturing (assisted for CHI’s waste diversion program called natural regeneration). These activities ‘Working Towards Zero Waste’. In addition, support parent company Ayala Land’s this year’s program recognizes employees’ carbon neutrality project. Other activities personal volunteering time on external include bamboo propagation and planting, volunteer events that benefit various and community capacity building. sectors in the community.
CHI CARBON FOREST TROOPERS gave a boost to young trees at the Ayala Land Carbon Forest and Biodiversi- ty Reserve. These employee volunteers learned to identify native and exotic tree species and other activities that are part of the process of Assisted Natural Regeneration (ANR) covering 16 hectares.
ENVIRONMENTAL INITIATIVES. In 2019, CHI led employee volunteers of Ayala companies in Cebu in various activities such as: clean-up at Mahiga creek; tree rescue, inventory, monitoring and measurement at Seagrove; seed collection and enrichment planting at Upland Greens.
64 A space to take your dreams further OUTREACH PROGRAMS
As part of the Company’s year-long the beneficiaries. They also joined in 30th anniversary celebration, Cebu game and snacks with the children. Holdings Inc. (CHI) employees On November 22, the second batch participated in community engagement of volunteers visited children with activities in the month of November multiple disabilities at the Little Lambs 2019. Center of the Missionaries of the Poor. The Little Lambs Center is a permanent The event, dubbed INSPIRE: CHI at 30 home for the destitute, physically and Gives Back, was CHIers’ way of giving mentally handicapped children, and back to the community, particularly to receives those with cerebral palsy, the less fortunate in society. autism and Down syndrome.
The first event was held on November Employees brought hygiene supplies 15 with the underprivileged school and donated wheelchairs to the children of the Apostolic Sisters beneficiaries. CHIers also spent some of St. John, Paglaum sa Kinabuhi time interacting with the center’s Foundation in Banawa, Cebu City. residents who greatly enjoyed the Employees brought shoeboxes filled company of visitors. with school supplies each to give to
65 CEBU HOLDINGS, INC. 2019 Integrated Report 66 A space to take your dreams further Corporate Governance
THE PROVISION OF AN INCLUSIVE AND ENABLING ENVIRONMENT for all our stakeholders remains the Company’s priority. With this in mind, Cebu Holdings, Inc. (CHI) focuses on the continuous improvement of our corporate governance code to ensure that stakeholder rights are upheld while emulating the Company’s core values in our operations. In addition, CHI adopts shared value strategies to further strengthen our relationships with stakeholders and at the same time create gains for our Company and the communities it is involved with. CHI ensures full compliance with the Corporate Governance Code and adheres to a broad set of oversight controls to help pursue its objectives. The Company also continues to embed global sustainability frameworks in our operations to maximize returns while securing the business’ stability.
67 CEBU HOLDINGS, INC. 2019 Integrated Report GOVERNANCE STRUCTURE
BOARD OF DIRECTORS
CHIEF FINANCE COMMITTEES OFFICER • EXECUTIVE • AUDIT • CORPORATE GOVERNANCE PRESIDENT & NOMINATION • PERSONNEL & COMPENSATION • RISK OVERESIGHT • SUSTAINABILITY • RELATED PARTY MANAGEMENT TRANSACTIONS REVIEW COMMITTEE
BUSINESS CORPORATE FINANCE DEVELOPMENT SERVICES GROUP GROUP GROUP
LAND HUMAN RESOURCES CONTROL AND ACQUISITION AND ADMIN ANALYSIS
SUSTAINABILITY/ PROJECT COMMUNITY ACCOUNTING DEVELOPMENT RELATIONS
SALES AND LEASING TREASURY/ FUNDS INFORMATION MANAGEMENT SYSTEM
INNOVATION AND DESIGN CORPORATE RETAIL BUSINESS COMMUNICATIONS, FINANCE MEDIA RELATIONS AND LEGAL AFFAIRS
MARKETING 68 A space to take your dreams further CHI MARKS 25TH YEAR IN THE PSE
yala-led Cebu Holdings, Inc. (CHI) — Gatewalk Central in Mandaue City, and “We started Acommemorated its silver year in the Seagrove in Lapu-Lapu City, Mactan. Philippine Stock Exchange (PSE) last operations in February 26, 2019. With the current projects in the pipeline, CHI is expected to double its leasing Cebu three The property firm debuted in the portfolio to over 500,000 square meters of decades ago stock market on February 14, 1994. gross leasable area in the next three years. The recognition was also in time for with a vision the company’s 30th anniversary of “Our standing in the stock exchange incorporation. drives us not only to expand our portfolio to maximize for our stockholders, but also to operate the potential “We started operations in Cebu three along best practices of good governance decades ago with a vision to maximize the and sustainability. Thus, we are greatly of Cebu.” potential of Cebu. We believed that there honored that the PSE has recognized was an opportunity to bring in large-scale CHI’s performance with this silver year developments, attract more investors, and milestone,” Bisnar said. with it, higher value jobs and services,” CHI president Aniceto V. Bisnar, Jr. said in his message.
In his remarks during the bell ringing event, PSE President and Chief Executive Officer Ramon S. Monzon said, “The company’s productive history easily mirrors the progress of Cebu City. The tourism and economic growth experienced by the city created demand for residential, office, and commercial developments. This demand was readily met by CHI with projects such as the Cebu Business Park, Cebu I.T. Park, Ayala Center Cebu, City Sports Club Cebu, just to name a few.”
To contribute to spreading development outside the city center, CHI is also currently constructing two new estates
69 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
The year 1994 marks CHI’s listing with Annual Corporate Governance Report for the Philippine Stock Exchange (PSE). As assessing our performance and reporting mandated by the Securities and Exchange on other matters related to governance. Commission (SEC), CHI recognizes and abides by the principles of good corporate This allows us to communicate our governance and complies with the Code of practices related to upholding shareholder Corporate Governance which specifies the rights, fostering equitable treatment roles, duties, and responsibilities of our of shareholders, promoting the role of Board of Directors in line with Philippine stakeholders, advancing transparency laws. D.2.12 in disclosure, and streamlining board responsibilities and processes. Our Board and Management constantly aim for high governance standards and In 2019, CHI was recognized by the are held accountable for upholding Institute of Corporate Directors (ICD) in ethical behavior at all times. Corporate the Golden Arrow Awards. The Company governance is our primary system of received two arrows, having obtained a stewardship and control that guides score wiithin the 90 to 99-point range. our Company in fulfilling its long-term economic, moral, legal, and social Institutionalizing these principles and obligations. systems in our operations guarantees CHI’s long-term ability to create value for its We also adopt the ASEAN Corporate shareholders, stakeholders, and the nation. Governance Scorecard and the Further information on our corporate requirements of the PSE/SEC Integrated governance may be accessed through our company website.
70 A space to take your dreams further Rights of Shareholders
Our shareholders are important to CHI, are amendments to the Company’s “Institutionalizing and they have rights that are to be constitution, authorization for the issuance these principles respected and upheld. of additional shares of the Company, etc. and systems in Firstly, they have the right to share in Thirdly, shareholders have a right to our operations profits and dividends (A.1, D.2.5). It is participate effectively and vote in general guarantees CHI’s a Company policy to declare a portion shareholder meetings (A.3.1, A.3.2, A.3.3, long-term ability of its unrestricted retained earnings A.5.1, 102-21, 102.37). to create value for as dividends to shareholders, either its shareholders, in the form of stock or cash, or both. They have the right to nominate, elect, stakeholders, and the On November 27, 2019, we declared remove and replace directors, and vote on a dividend of ₱0.15 per share to all certain corporate acts in accordance with nation.” stockholders of record as of December the Corporation Code. They are also free to 11, 2019, payable to December 23 of the ask any questions or to voice out concerns same year. during meetings.
Secondly, shareholders have a right Lastly, they have a right to propose to participate in decisions concerning holding of special shareholders’ meetings. fundamental corporate changes Shareholders are given the opportunity to (A.2). Examples of these changes initiate meetings and include agenda items ahead of time.
71 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
Equitable Treatment of Shareholders (B.4, B.5, D)
CHI treats all shareholders equitably, and CHI exhibits a strict Insider Trading Policy recognizes, protects, and facilitates the (B.3, D.4), in which it prohibits insider exercise of their rights through constant trading in all its securities dealings. Anyone and open communication. Adequate who has knowledge of material facts or protection is also given to minority changes in the affairs of the Company that shareholders against any unfair conduct have not been disclosed to the public is on the part of the majority. not allowed to buy or sell the Company’s securities during trading blackout periods. In terms of shares and voting rights (B.1, B.1.1), shareholders are entitled to one Moreover, related party transactions or vote per common share of stock in the RPTs (B.4, B.5, D.3) may only be conducted Annual Stockholder’s Meeting. They may on an arm’s length basis. It must be in vote manually, electronically, or through a manner that ensures fairness to the a proxy. Results of the voting will be Company’s best interest, and no less validated by the external auditor, SyCip favorable than those generally available Gorres Velayo & Co. (SGV). to non-related parties under the same or similar circumstances. In cases of conflict, For the Annual Stockholders’ Meeting, CHI abides by the Alternative Dispute notices are mailed to shareholders at least Resolution Act of 2004 (RA 9825) to settle 21 days prior to the scheduled date (A.3, disputes without resorting to excessive B.2, A.3.18, A.3.19, B.2.3, B.2.4, E.3.11). litigation. This notice specifies the agenda and rationale for each item, and the profiles of The Company’s Control and Analysis and directors seeking election or re-election. Corporate Communications departments Auditors who seek appointment and set up an avenue to receive feedback, reappointment are also clearly identified in complaints, and queries from shareholders. the notice.
72 A space to take your dreams further “Institutionalizing these principles and systems in our operations guarantees CHI’s long-term ability to create value for its shareholders, stakeholders, and the nation.”
Role of Stakeholders (C.1, C.3, C.4, 102-16, 102-17, 102-21, 102-40, 102-42, 102-43, 102-44, SDG 16, 307-1)
CHI honors all its legal and voluntary 3. Suppliers and Contractors. The commitments to stakeholder rights and Company implements standard provides all its key stakeholders with the procurement policies and CUSTOMERS opportunity to obtain effective and prompt procedures across its business units. LOCAL COMMUNITIES redress whenever their rights are at risk or 4. Employees. They are integral to the violated. All stakeholders are encouraged organization and to the corporate SUPPLIERS AND to communicate their concerns about governance processes. Highlights of CONTRACTORS unethical practices to the board. Their the 2019 Personality and Lifestyle EMPLOYEES rights will not be compromised for doing Upliftment Strategy (PLUS) is so. outlined in pages 62 and 63 of the CREDITORS report. Key stakeholders are as follows: GOVERNMENT 5. Compliance. The Company complies AND REGULATORY with all legal, consumer, and 1. Customers. The Company has a INSTITUTIONS Customer First Policy that prioritizes financial reporting requirements added value in the delivery of against corruption, including products and services to satisfy the extortion and bribery. To this end, expectations of customers. there has been no reported incident of any violation. 2. Local Communities. CHI strives to be socially responsible in their 6. Government and Regulatory dealings with their neighboring Institutions. CHI presents them with communities in the areas where it all information required to evaluate operates. its credit standing. Sustainability Reporting In the aspect of sustainability, the of CHI. The Integrated Report
73 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
Right to voice “The goal of the Whistleblowing concerns and Policy is to provide complaints stakeholders with the means to come forward in order to Contact details are provided on the inside directly provide information to back cover of this report and on the top management or the Board of Company website for stockholders and stakeholders to access in the event of Directors.” concerns and/or complaints of possible violation of rights.
Whistleblowing Policy (C.2, C.4, D.2.6, 102-17, 102-33, 102-34, 103-2, SDG 16)
The company’s Whistleblowing Policy It covers concerns such as: conflicts of encourages transparency and empowers interest, misconduct or policy violations, all employees, thirdparty business partners theft, fraud and misappropriation, and stakeholders to report any suspected falsification of documents, financial reporting or known illegal or unethical activity. concerns, and retaliation complaints. The goal of the Whistleblowing Policy is to Our Online Whistleblowing Report allows provide stakeholders with the means to reporting through the website, making come forward in order to directly provide it open and easily accessible to all information to top management or the Board stakeholders. We have an identified of Directors (SR7.1, 14.3, 15.3-1). Ethics Committee at both the management and Board level to handle complaints. For more information, details are at the Company’s corporate governance page, at This policy was made to encourage the https://www.cebuholdings.com/governance_ reporting of suspected or known illegal list/1/. or unethical activity by CHI’s employees, third-party business partners, and other stakeholders.
74 A space to take your dreams further DISCLOSURE AND TRANSPARENCY C.2.1, D.6.1, D.6.2, D.7, D.9.1
CHI follows a mature disclosure policy contact details are made available to and procedure that are practical and the public; aligned with best practices and regulatory »» Policies governing Related Party expectations. (R8.1) Transactions will be disclosed; and »» The fairness of the transaction To ensure the adequacy and price on the acquisition or disposal comprehensiveness of each disclosure, the of assets will be evaluated by an Company adopts the following disclosure independent party. practices: Stakeholders may also contact the »» Release of financial statements Stakeholders Information Desk for 60 calendar days after the close assistance. Contact details are found on the of the financial year, along with inside back cover page of this report. (R8.5) a certification from the Board of Directors declaring the report to be Interim reports are published within 45 fair and accurate (D.7); days from end of reporting period. All »» The Company website to constantly disclosures are immediately posted on the be updated to provide information on Investor Relations section of our website the financial as well as non-financial and may be accessed through the following results of CHI’s business operations; link: http://www.cebuholdings.com/ »» Timely disclosure of every material disclosure_list/1/. (SR.8.1) fact or event that occurs, particularly on the acquisition or disposal of significant assets, will be provided to Furthermore, CHI’s Manual on Corporate the public; Governance is submitted to the SEC and PSE, and is regularly updated should there »» Investor concerns will be addressed by any changes. All information about our by the Control and Analysis and Corporate Communications corporate governance practices are found departments, whose names and on this link: http://www.cebuholdings.com/ governance_list/1/ (R8.7).
75 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
To better communicate CHI’s programs and initiatives, the Company has further enhanced its website by presenting information in a manner that is more convenient for the public to read and access while being compliant with SEC’s prescribed website template. Corporate Governance and investor relations disclosures are also regularly updated online for easier access. (AP11.1)
A. Transparent Ownership Structure D.1
CHI regularly discloses the top 100 holders of its common shares, the security ownership of beneficial owners having more than five percent of the Company’s total outstanding stock, and the B. External Audit shareholdings of members of the Board of Directors and key management officers. The Company has established appropriate standards for the selection of an external These are submitted to the SEC, PSE auditor, and exercise effective oversight and Philippine Dealing and Exchange on the process to strengthen the external Corporation (PDEx), and made available auditor’s independence and enhance audit to the general public regularly through quality. The selected external auditor postings on the Company’s Investor should have adequate quality control Relations website page, the PSE/SEC’s procedures and the ability to understand Integrated Annual Corporate Governance the Company’s complex related party Report, and the Definitive Information transactions, its counterparties, and Statement sent to CHI’s shareholders. valuations of such transactions. (SR9.2-1, 9.2-2) CHI also discloses the percentage of foreign ownership in the Company on a The appointment, reappointment, removal, monthly basis. (SR8.2; R14.1) and fees of the external auditor are recommended by the Audit Committee, As of December 31, 2019, the total approved by the Board and ratified by the number of shares owned by the public shareholders. amounted to 622,570,484 shares, equivalent to 28.87 percent of total Following CHI’s Revised Manual of outstanding shares. (SR13.2) Corporate Governance, the external auditor position rotates every five (5) CHI continues to strictly implement years or earlier, or the handling partner guidelines covering securities dealings to is replaced within the said time period. comply with government regulations. (SR9.1)
Details of this report are found on: https:// www.cebuholdings.com/wp-content/ uploads/2016/12/2020-01-15-PSE-BIR- PUBLIC-OWNERSHIP-REPORT_12.31.19. pdf
76 A space to take your dreams further The percentage of shareholders that ratified D. Internal Audit E.3 “The Audit the appointment, reappointment, removal, Committee is and fees of the external auditor are provided The Internal Audit Department (IAD) is an in the results of the Annual Stockholders’ independent unit that reports to the Audit empowered to Meeting and Voting. They may be accessed Committee. Through this committee, IAD independently through the following links: Results of assists the Board in the discharge of its Annual Stockholders’ Meeting (April 15, duties and responsibilities as provided for review the 2019) https://www.cebuholdings.com/wp- in the Code of Corporate Governance for integrity content/uploads/2016/12/2019-04-15- Publicly Listed Companies. SEC-PSE-PDEx-RESULT-OF-ASM_4.15.19. of financial pdf and The department provides independent reporting and https://www.cebuholdings.com/wp- and objective assurance and consultancy content/uploads/2016/12/MINUTES-OF- services to the company with the oversee the ASM-2019_15-APRIL-2019.pdf. objective of adding value and assisting independence the organization in accomplishing its C. Independent Public objectives through effective control, risk of external Accountants management, and governance processes. auditors.”
Assurance services involve the internal SGV & Co. is the principal accountant and auditor’s objective assessment of evidence external auditor of CHI, with Dolmar C. to provide opinions or conclusions Montañez as the partner-in-charge for the regarding an entity, operation, function, 2019 audit year. process, system or other subject matters.
The Audit Committee is empowered Consulting services are advisory in to independently review the integrity nature and are generally performed at of financial reporting and oversee the the specific request of the engagement independence of external auditors. The client. The nature and scope of consulting Committee, in its oversight function, is engagement are subject to agreement with likewise responsible for reviewing all the engagement client. financial reports for compliance with the internal financial management handbook The Internal Audit Plan is formulated and pertinent accounting standards, annually. Any revisions and/or updates including regulatory requirements. It also thereto within the year are presented to recommends to the Board and stockholders the Audit Committee for its approval. the appointment of external auditors and the setting of appropriate audit fees. The Department adopts an Internal Quality Assurance Improvement Program that C.1 Audit and Audit Related Fees D.5 involves periodic self-assessment and review. The department likewise conducts The Company and its various subsidiaries periodic departmental performance review and affiliates paid SGV the following fees in against its commitments. the past three years. (SR9.3) An external quality assurance review is AUDIT & AUDIT NON-AUDIT YEAR RELATED FEES FEES conducted every five years. (R12.1-1) 2019 1,146 458 Jennifer G. Sia serves as the Company’s 2018 1,300 477 Internal Audit Manager. (R12.3-1) 2017 1,488 706
Figures are in thousand pesos and exclusive of value-added- tax (VAT) and out of pocket expenses
77 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
Risk-Based Process-Focused Approach knowledge, experience and within the staff, including staff focus on process IAD conducts its audits in compliance improvement; and areas on which the IAD with the International Standards for the is able to add value to help improve the Professional Practice of Internal Auditing organization’s operations. (ISPPIA). E. Analysts’ Briefings In 2019, engagements were executed in D.6.3 accordance with the risk-based, process- focused approach. Regular audits of the CHI conducts quarterly briefings for Company’s high-risk key processes were both equity and credit analysts and conducted in accordance with an approved communicates directly with institutional Internal Audit Plan, and special audits were and individual investors through one- undertaken as necessary. on-one meetings, conference calls, and written communications such as email. External Quality Assurance Review (R11.1-1) (EQAR) Analysts and investors who are unable to An external assessment opinion by attend the quarterly briefings in person Punongbayan & Araullo (P&A), a member are invited to participate through a firm within Grant Thornton International teleconference facility. Ltd, in 2019 concluded that the Company’s internal audit activities generally conforms The list of the briefings can be found with the International Standards for the on the CHI website at http://www. Professional Practice of Internal Auditing cebuholdings.com/investor_rel_list/11/. (ISPPIA) as issued by the Institute of Internal Auditors (IIA). F. Media Briefings D.6.4 Internal Auditing Standard 1312 of the Institute of Internal Auditors (IIA) requires CHI’s Corporate Communications, Media external assessments be conducted at Relations and Legal Affairs Department least once every five years by a qualified, regularly engages the media through independent assessor or assessment team multiple channels, such as media from outside the Company. conferences, briefings, news releases, fact sheets, social gatherings and one-on- Aside from compliance with IIA’s one meetings. CHI occasionally supports International Professional Practices media-initiated causes and events that are Framework which includes the definition aligned with our principles and advocacies. of Internal Auditing, the ISPPIA and the (R11.1) Code of Ethics, the EQAR covered the assessment of IAD’s compliance with In 2019, aside from the Annual its charter, plans, policies, procedures, Stockholders’ Meeting, the Company met practices and applicable legislative and with representatives from local media regulatory requirements; expectations outlets, business reporters, and marketing of the IAD as expressed by stakeholders and social or lifestyle writers and bloggers (includes the Board of Directors and Audit to disseminate information on CHI’s new Committee, Senior Management and development, Central Bloc, as well as on IAD’s auditees); integration of the IAD into CHI’s 25th listing anniversary and other the organization’s governance process, developments in Cebu. including the attendant relationships between and among the key groups Data on media briefing are made available involved in that process; tools and in the Company’s website at www. techniques employed by the IAD; mix of cebuholdings.com/investor_rel_list/12/
78 A space to take your dreams further “The Company formulated a Data Privacy and an Employee Data Privacy Policy to set the guidelines for compliance. The guidelines and policy were already G. Company Website D.8 in place and observed in All information on Corporate Governance The Company formulated a Data Privacy 2019.” and Investor Relations related matters are and an Employee Data Privacy Policy to available online at www.cebuholdings.com. set the guidelines for compliance. The guidelines and policy were already in place Compliance with the Data Privacy Act of and observed in 2019. 2012 CHI has established its privacy and In 2012, the Congress of the Philippines data protection programs and have passed Republic Act No. 10173, also known prioritized critical activities such as as the Data Privacy Act (DPA)of 2012. The the implementation of privacy consent DPA Implementing Rules and Regulations clauses on its data collection forms, the were made effective on September 9, 2016. implementation of cyber security programs which include security penetration The Data Privacy Act protects individuals testing of critical websites to prevent data from unauthorized processing of personal hacking, and the dissemination of internal information that is private, not publicly educational campaigns on data privacy and available and identifiable and where the security. identity of the individual is apparent either through direct attribution or when put For more information, you may refer to together with other available information. our corporate governance page, at https:// www.cebuholdings.com/governance_ CHI appointed and registered a Data Privacy list/6/. Officer (DPO, through its parent Ayala Land, and a Compliance Officer for Privacy (COP) from CHI.
79 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
RESPONSIBILITIES OF THE BOARD
The overall stewardship of our Company Board duties and rests on the Board of Directors, the highest governing authority within CHI’s responsibilities E.1 management structure. The Board is responsible for the Company’s long- The Board is driven by the Company’s term success and sustained global mission and vision statement as follows: competitiveness. It ensures that CHI’s “We shall be the premier real estate obligations to its stakeholders are met company in the region, creating and while adhering to the principles of sound enhancing integrated, masterplanned, corporate governance as a model of best and sustainable mixed-use developments practices in the corporate sector. through a customer- focused and empowered team of professionals. We Through this report, we attempt to ensure the trust and confidence of our make known to our stockholders and stakeholders with sustainable growth other stakeholders the fiduciary roles, while improving the quality of life of the responsibilities, and accountabilities of communities we serve with passion and the Board as provided under the law, the integrity.” Company’s articles and by-laws, and other legal pronouncements and guidelines.
80 A space to take your dreams further This is reviewed by the Board as necessary deviation from the approved plans and “The Board is or at least annually as an agenda through targets. its regular scheduled Board meetings. responsible for (R2.2) A more complete list of their duties and the Company’s responsibilities can be found in https:// The Board Charter serves as a guide www.cebuholdings.com/governance_list/8/. long-term to the directors in the performance of success and their functions. It states the duties and responsibilities of the Board of Directors, Decisions Requiring sustained global particularly its imperative for good competitiveness.” governance of the Corporation. Board Approval
The Board, through its various committees, The charter operationalizes this through is responsible for approving certain different facets including, but not decisions that impact the Company limited to: implementation, assessment, greatly. The following decision points succession, and risk management. require approval of the Board before the departments involved are allowed to The Board charter contains clear and proceed. specific guidelines on internal processes, particularly the types of decisions »» Declaration of annual dividends to requiring Board approval. shareholders »» Material or significant related party The Board is responsible for the approval transactions and adoption of a corporate policy and corresponding strategy, with proactive »» Any revisions and/or updates for the Internal Audit Plan within the year oversight of strategy execution. Thus far, it has approved and adopted the Company’s »» Corporate policy and corresponding mission and core values as well as a Board strategy calendar which allows for a periodic review »» Appointment of some executive of the Company’s governance charter officers and its corporate strategy map with its »» Changes or revisions to the Related corresponding performance metrics and Party Transactions Review Committee targets. charter »» Retention of an independent director The assessments of actual performance in the same capacity after nine years against targets are regularly conducted. »» Remuneration for CEO and (R2.2, 2.9) management officers »» Appointment, reappointment, Our management committee keeps the removal, and fees of the external Board updated on issues concerning the auditor company’s strategy, risk management, »» The Company’s mission, core values and compliance, and explains any and Board calendar
81 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
Board Structure audit, risk management, related party E.2.4 transactions, and other key corporate governance concerns, such as nomination The Board is composed of nine members, and remuneration. three of whom are independent directors. The Board has designated a Lead Director The purpose, composition, functions, among the independent directors per the and responsibilities of all committees are Corporate Governance provision should contained in their respective Committee the Chairman not be an independent Charters available at our website. These director. The Chairman is a non-executive charters provide standards for evaluating director. Currently, Consul Enrique L. the performance of the committees. (R3.6- Benedicto is the Lead Director of CHI. 2, 3.6-3, 9.2-1) The functions of the lead director include, among others, the following: (R5.5) The committees are composed of Board »» Serve as intermediary between the members specifically chosen for their Chairman and the other directors particular background and areas of when necessary; expertise suitable to the functions assigned »» Convene and chair meetings of non- to the committee. executive directors; and »» Contribute to the performance The established committees are the evaluation of the Chairman, as following: required. »»Executive Committee A. Independent Directors »»Audit Committee E.2.5, E.2.6, E.2.7 »»Corporate Governance and Nomination Committee The Company defines independent »»Personnel and Compensation Committee directors as having no interests, »»Risk Oversight Committee, relationships, or previous engagements »»Sustainability Committee with CHI in any capacity that may interfere with their exercise of independent »»Related Party Transactions Review judgment. The independent directors shall Committee possess all the qualifications (and none of the disqualifications) to hold the positions. For a full description of the powers, duties, and responsibilities of each committee, Independent directors may serve for a visit https://www.cebuholdings.com/ period of not more than nine years and governance_list/9/ may hold only up to five board seats in publicly-listed companies simultaneously. Process and Criteria for (R4.2-1) Nominations to the Board (R2.8) We comply with the SEC rules on the nomination and election of an independent The Corporate Governance and Nomination director, and with the PSE requirement. Committee ensures adherence to pertinent rules and regulations in evaluating the CHI has three independent directors. qualifications of nominees for the following positions: B. Board Committees E.2, E.3 a. Board of Directors b. President and Chief Executive Officer As the Board of Directors is responsible c. Chief Finance Officer or Treasurer to shareholders in ensuring that value d. Group Directors or Vice President is created and sustained, committees e. Corporate Secretary assist the Board of Directors to fulfill f. Assistant Corporate Secretary its responsibility for oversight of the g. Other executive officers of the Corporation’s corporate governance company whose appointments require processes, particularly with respect to the Board’s approval
82 A space to take your dreams further Nomination Process for formal discussion; “The Board c) Relevant qualification, such as All Directors previous business experience, is composed
membership in good standing in of members The Corporate Governance and relevant industry, and membership Nomination Committee develops and in business or professional who possesses maintains a process that ensures all organizations; and the necessary directors nominated for election at the d) He/She shall possess integrity, annual stockholders’ meetings have probity, and diligence. qualifications all the qualifications (and none of the to effectively disqualifications) to become directors as The Board has to be composed in such required by all applicable rules. a way that it possesses, as a group, the participate necessary knowledge, skills and experience and help secure After passing this process, directors are required to properly perform its duties. then elected by company stockholders The Board shall encourage the selection of objective, who are entitled to vote. Such a mix of competent directors, each of whom independent shareholders also have the right to vote can add value and contribute independent on the election, removal, and replacement judgment in the formulation of sound judgment on of directors, and vote on certain corporate corporate strategies and policies. acts in accordance with the Corporation corporate Code. (R1.1 and 2.6) In the selection of candidates for the affairs and to
Board, the objectives set by the Board substantiate Cumulative voting shall be used in the for its composition are to be seriously election of directors. Directors may be considered, as well as the required proper checks removed with or without cause, but knowledge, abilities and experience needed and balances.” directors shall not be removed without to successfully manage the Corporation. cause if it will deny minority shareholder Careful attention must be given to ensure representation in the Board . that there is independence and diversity, and appropriate representation of women in The removal of directors, moreover, the Board. (R1.1) requires an affirmative vote of two- thirds of the outstanding capital of the corporation.
CRITERIA The Board is composed of members who possess the necessary qualifications to effectively participate and help secure objective, independent judgment on corporate affairs and to substantiate proper checks and balances. Per the Company’s Corporate Governance Manual, a director of Cebu Holdings, Inc. shall have the following qualifications:
a) He/She must own at least one (1) share of the capital stock of the Corporation; b) He/She must possess a college degree or its equivalent or adequate competence and understanding of the fundamentals of the real estate industry or sufficient experience and competence in managing a business to substitute for such
83 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
BOARD PROCESS E.3
Board Meetings and Attendance E.3.1, E.3.2, E.3.3, E.3.4, E.3.5
Board meetings are scheduled at the In Board and Committee meetings, the beginning of the year. The Board shall director should review meeting materials designate the days when it shall meet, and if called for, ask the necessary at a time and place determined by its questions or seek clarifications and Chairman, with further meetings to occur explanations. (R4.1-3) when deemed necessary by the Chairman or at least the request of two directors. The The Board may, to promote transparency, Board shall meet in person, teleconference require the presence of at least one or video conferencing facility or through independent director in all of its meetings. such other similar means. However, the absence of an independent director shall not affect the quorum Two-thirds of the number of directors as requirement if he is duly notified of the fixed in the articles of incorporation shall meeting but notwithstanding such notice constitute a quorum for the transaction of fails to attend. corporate business. In 2019, the Board had four regular and Directors are encouraged to attend all organizational meetings. All the board Board meetings, either in person or via members attended at least 75 percent of teleconferencing facility. A minimum the meetings for the year. The Executive attendance of more than 75 percent for Committee likewise convenes regularly all Board meetings shall be required for in lieu of the Board. Attendance of all a director to be eligible for re-election directors is detailed in the table found except in cases where a director contracts on https://www.cebuholdings.com/ illness, death in the immediate family, wp-content/uploads/2016/12/2020-01- serious accident or performs civic 03-CHI-ATTENDANCE-OF-DIRECTORS- obligations. IN-2019.pdf
84 A space to take your dreams further The Corporate Secretary E.3.7, E.3.8
The Corporate Secretary, although not a member of the Board of Directors, plays a key role in supporting the Board in the discharge of its functions and must share the visions and decisiveness of the CEO. He or she is a Filipino with excellent legal, financial, accounting, administrative, and interpersonal skills.
The Corporate Secretary is tasked to attend to the correspondences and files of the Company, and signs jointly with the president all stock certificates. The position is tasked to also record and process all movements of stock certificates. Since February 2014, Atty. June Vee D. Monteclaro-Navarro, Filipino, has served as the Corporate Secretary of the Company.
To view the duties and responsibilities of the Corporate Secretary, see the following link: https://www.cebuholdings.com/ governance_list/10/
Board Appointments and Re-election E.3.9, E.3.10, E.3.11, 102-24
The directors are elected by ballot, and been elected and qualified, in accordance each shareholder is entitled to cast as with the by-laws. many votes as the number of his/her shares, multiplied by the number of slots The Company bars an independent director for election. Pursuant to the Corporation from serving in such capacity after the term Code, any shareholder—including minority limit of nine (9) years, but may continue shareholders—shall have the right to to qualify for nomination and election as a nominate candidates to the Board. non-independent director. In the instance that the Company retains an independent For the election of directors, it is necessary director in the same capacity after nine for one-half plus one of the outstanding years, the board provides meritorious shares of stock to be represented. justification and seeks shareholders’ approval during the annual shareholders’ The Committee of Inspectors of Proxies meeting. . (R5.3-1, 5.3-2, 5.3-3) and Ballots appointed by the Board supervises the election. In 2019, SGV & Co. was appointed to validate the records. Directors hold office for the term of one year or until their successors shall have
85 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
Board Independence and Conflict of Interest E.2, 102-25
Members of the Board are obligated to of the written notification to the board or follow high ethical standards while bearing minutes of board meeting wherein the “Directors in mind the interests of all stakeholders. matter was discussed. are expected Directors are expected to act only in Executive directors shall hold no more than the best interest of the Company and two board seats in listed companies outside to act only are required to comply with the Code of the Corporation’s group. in the best Ethics. Thus, they are required to disclose annually any conflict of interest through a Independent directors may serve for a interest of Disclosure Form. Any material conflict of period of not more than nine years and the Company interest found shall cause disqualification may hold only up to five board seats in from the Board. publicly-listed companies simultaneously. and are This ensures that they have sufficient time required to Moreover, directors are required to abstain to fully prepare for meetings, challenge from participating in discussions and Management’s proposals/views, and comply with voting on any matter where they are in oversee the long-term strategy of the the Code of conflict of interest. (R7.1-2 and R15.2) Company. (R4.1-2, 5.3-1) Directors should keep the information Ethics.” contained in confidential reports or Insider Trading Policy discussions for at least two years, and In line with the Insider Trading Policy of the ensure that all persons who have access Company, each director is required to notify to this information on their behalf comply the Board at least one day before dealing in with this rule. the Company’s shares of stock. No person shall qualify or be eligible for nomination or If a director is interested in accepting a election to the Board if he or she is engaged directorship in another Company, he/she in any business which competes with, or should first notify the CHI’s board before is antagonistic to, that of the Company in accepting it. He/She shall provide a copy accordance with its by-laws.
86 A space to take your dreams further neither officers nor consultants of the Remuneration Company, receive a per diem of P40,000 D.2.11, E.3.12, E.3.13, E.3.14, E.3.15, 102-35, 102-36 for each Board meeting attended and P20,000 per Board committee meeting The Board of Directors determines a level actually attended. These amounts were of remuneration for its members that is implemented effective April 28, 2006. sufficient to attract and retain those who (R8.4) are competent, and compensate them not only for their performance of numerous Remuneration Process Discussion and responsibilities but also for undertaking approval of remuneration for CEO and certain risks as a Board member. The management officers are done through the compensation which may be in the form Personnel and Compensation Committee. of cash remuneration and/or stock option plans, shall be fixed by way of a resolution The committee establishes a formal and of the Board of Directors. (R2.5) transparent procedure for developing a policy for determining the remuneration of The compensation is determined through directors and officers that is consistent with a resolution of the Board, who may provide the Corporation’s culture and strategy as that only non-executive directors shall be well as the business environment in which entitled to such compensation. Moreover, it operates. It also provides oversight over the Company may purchase insurance remuneration of senior management and coverage for its directors at its own other key personnel. expense. (R2.5) None of the directors, in their personal No director should be involved in deciding capacity, has been contracted and his or her own remuneration. Furthermore, compensated by the Company for services the Company does not have stock rights, other than those provided as a director. options, and warrants for directors, Details about remuneration matters are executives, and employees. found on page 110-111.
Non-executive directors, defined as members of the Board who are
87 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
sector or broad industry group to which our Diversity, Company belongs.
Skills and The board regularly reviews its own composition, taking into account the Competencies evolving requirements of the Company and E.4.5, E.4.6, 102-26 best practices in corporate governance. CHI encourages the selection of a mix of The Company has a policy ensuring competent directors, where each can add diversity of experience and background of value and contribute independent judgment directors in the Board. to the formulation of sound corporate strategies and policies. Apart from educational requirements, a director should have sufficient CHI gives careful attention to ensure that understanding of business fundamentals there is independence and diversity, and and experience in managing a business. appropriate representation of women in the Board, subject to possession of knowledge, The CHI Board brings to the organization abilities, skills and experience determined a balanced mix of business, legal, and by the Board as necessary for the Board to finance competencies, with each director properly perform its functions. The Board is capable of adding value and rendering currently composed of eight male members independent judgment in relation to the and one female member. The Chairman of formulation of sound corporate policies on the Board is female. (R 1.4) issues of strategy, resources, standards and performance related to corporate It is important to have Board diversity to social responsibility, and environmental avoid groupthink and ensure that optimal and economic sustainability. decision-making is achieved. Diversity is not limited to gender and includes age, The Company also requires that at least ethnicity, culture, skills, competence and one of its non-executive directors should knowledge. have prior working experience in the
88 A space to take your dreams further Development and “CHI Training encourages D.2.8, E.5.6, E.5.7, 102-27 the selection of a mix of The Company, particularly the Chairman of the Board, assures the availability of competent proper orientation for first-time directors directors, and continuing training opportunities for all directors. The Compliance Officer where each ensures the attendance of board members can add and key officers at relevant trainings. The Corporate Secretary shall have such other value and responsibilities as the Board may impose contribute upon him or her, including the facilitation of trainings for directors when necessary. independent (R 1.3-1) judgment Prior to assuming office, directors and Performance to the re-elected officers shall attend a seminar formulation on corporate governance which shall be Appraisal conducted by a duly recognized private E.5.5, E.5.6, E.5.7, E.5.8, E.5.9, E.5.10, 102-28 of sound or government institutions that are duly corporate accredited by the SEC. If necessary, funds Following best practices, the Board shall be allocated by the Corporation for measures its assessment process and strategies this purpose.(R1.3.1) regularly carries out evaluations to appraise and its performance and ensure a balanced An orientation program for new directors composition or mix of backgrounds and policies.” is held whenever necessary to properly competencies. equip and prepare them for their role as members of the Board. (R1.1) The Board makes use of a self-assessment exercise, conducted and facilitated by CHI’s To keep our Board and key officers external partner, AON, implemented in the abreast on relevant corporate governance form of a formal questionnaire and cuts practices, laws, regulations and changing across each top management group based risks, the Company ensured 100 percent on four review clusters. The Assessment attendance to the Ayala Group continuing covers the Board of Directors, the Board education program on corporate Committees, individual directors, and the governance. The Company also actively president and CEO. encourages and supports its directors to attend continuing education programs on The results are compiled by the Compliance corporate directorship.(R1.1, 1.3-2) Officer and submitted back to the Board for discussion and appropriate action In 2019, we ensured the attendance through the corporate secretary. This of the members of the Board to the self-assessment survey covers compliance SEC-accredited Ayala Group Corporate with the Corporate Governance Manual, Governance and Risk Management Summit individual committee charters, and and the ICD’s Corporate Governance and performance scorecard for the president/ Orientation Program. That same year, a CEO. Results of the 2019 self-assessment third party assessment was conducted. were presented by the compliance officer (R1.1, 1.3) to the board on February 26, 2020.(R6.1, 6.2-1, 6.2-2)
89 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
PEOPLE ON THE BOARD
Directorships The current president is Aniceto V. Bisnar, “Our Company (R1.2) Jr. who assumed the position in January The Board of Directors has nine members, 2015. The former president was Francis O. seeks to majority of whom are independent and/ Monera who retired from the Company as of consistently or non-executive directors who possess December 31, 2014. (OP5) For a full list of the necessary qualifications to effectively their roles and responsibilities, visit https:// improve its participate and help secure objective, www.cebuholdings.com/governance_list/7/ business independent judgment on corporate affairs and to substantiate proper checks and Corporate Objectives fundamentals balances. D.2 and prospects
For CHI, the board is composed of the The Board and management committee to deliver following members: ensure that the Company achieves its increasing objectives with the implementation of Non-executive Directors 4 set strategies, maximizing efficiency of value to our Independent Directors 3 operations, exploring ways to grow the shareholders’ Executive Directors 2 business, and ensuring the sustainability of the Company. investments.” Chairman and President and CEO E.4, 102-23, 102-32 Shareholder Value Creation (R5.4-1, 5.4-2) Of the nine members of D.2 the Board, the president and the treasurer are executive directors. The rest are non- Our Company seeks to consistently executive or independent directors who improve its business fundamentals and are neither officers nor consultants of the prospects to deliver increasing value to our Company. shareholders’ investments. Our strategies, business models, and operating plans are The current chairman of the Board is Anna all oriented towards achieving consistent Ma. Margarita B. Dy who assumed the progress in all aspects of the business and position on April 24, 2017. As chairman, the value we create. she acts as the legal representative of the Company and has the following roles and We focus on growth, profitability, return responsibilities (R2.3): properly assesses on equity, asset efficiency, and total reports made by Management and shareholder return as key result areas for assures Board performance is evaluated our management team on a corporate, at least yearly, etc. More information on divisional, and individual level. These the chairman’s responsibilities may be form the basis of incentives such as found on the following link: https://www. management promotions, allocation of cebuholdings.com/governance_list/7/. a performance-based cash bonus, and executive stock ownership plan grants.
90 A space to take your dreams further Compliance Officer Code of Ethical Behavior E.2.1, E.2.2, E.2.3 Ma. Luisa D. Chiong is currently CHI’s Chief Financial Officer and Compliance Officer. The Code of Ethical Behavior outlines the She is not a member of the Board of general expectations and standards of Directors. (R1.6) behavior and ethical conduct of everyone in the Company—including that of subsidiaries. She ensures strict adherence to the Code It is implemented in conjunction with the of Corporate Governance and to the rules Company’s Human Resources Manual of and regulations of regulatory agencies. Personnel Policies, and includes the Code of Conduct on acceptable office behavior She is also responsible for reporting any for the orderly operation of the Company violations to the Board. and the protection of the rights, safety and benefit of the entire workforce. To ensure stricter monitoring and timely compliance with regulations, we have Company employees are required to also identified all regulatory requirements annually disclose any business and family- of our business operations and put in related transactions to the Company by place an electronic monitoring system submitting a Conflict of Interest Disclosure for compliance. The system covers all our Statement to the Human Resources and units, including our business partners or Admin Division. (R7.2-2; SR15.2) contractors. Our Company’s Code of Ethics and Conflict of Interest Policy may be accessed through our website link: http://www.cebuholdings. com/governance_list/12/.
91 CEBU HOLDINGS, INC. 2019 Integrated Report Corporate Governance Practices
BOARD OF DIRECTORS
ANNA MA. ANICETO BERNARD MARGARITA B. DY V. BISNAR, JR. VINCENT O. DY Chairman President Board Member
92 A space to take your dreams further AUGUSTO JOSE EMMANUEL EMILIO LOLITO D. BENGZON H. JALANDONI J. TUMBOCON Board Member Board Member Board Member
PAMPIO FR. RODERICK C. ENRIQUE A. ABARINTOS SALAZAR, JR., SVD L. BENEDICTO Independent Board Member Independent Board Member Independent Board Member
93 CEBU HOLDINGS, INC. 2019 Integrated Report MANAGEMENT COMMITTEE
In addition to the various Board-level committees, the Company has established a management committee to guide critical decision-making and key governance processes in overseeing individual business units, projects, and support functions.
ANICETO MA. LUISA D. MA. CECILIA V. BISNAR, JR. CHIONG CRISPINA T. URBINA President CFO AVP - Corporate Services Group
Filipino, 55, has been the President of Filipino, 47, is Chief Finance Officer Filipino, 50, Filipino, Assistant Vice CHI since January 1, 2015. Concurrently, (CFO) and Compliance Officer of CHI. President of Corporate Services Group he is Vice President and Chief Operating She assumed the position in August 15, and Head of Human Resources and Officer of the Visayas-Mindanao Group of 2017. She is also currently the CFO of the Admin Division. She is the Chairperson of Ayala Land, Inc. Ayala Land Vismin Group and Strategic the Health and Safety Committee of CHI. Landbank Management Group. She is Assistant Vice President in Ayala Land, Inc.
MARIA CLAVEL G. NERISSA N. JOSEF- TONGCO MEDIANO VP - Retail Business Group VP - Business Development Group
Filipino, 53, is the Vice President and Filipino, 48, is the Vice President and Head of the Retail Business Group of Head of the Business Development Group CHI. Concurrently, she is Assistant Vice of CHI. Concurrently, she is Assistant Vice President of Ayala Land, Inc. President of Ayala Land, Inc.
94 A space to take your dreams further MANAGEMENT TEAM
BUSINESS DEVELOPMENT (L-R) Marie Anne Katherine C. Climaco (Marketing); Grant Norihide B. Saito (Project Development), Fraulein T. Quijada (Land Acquisition), Romulo M. Alajid (Project Development), Celeste Bernardine K. Dy (General Manager, Ayala Center Cebu), Jonas R. Suan (Innovation and Design), Catrina S. Martinez (Marketing)
SUPPORT GROUP (L-R) Maria Jeanette A. Japzon (Corporate Communications, Media Relations and Legal Affairs), Ma. Cecilia Crispina T. Urbina (Human Resources and Admin), Vera R. Alejandria (Corporate Sustainability Officer/Community Relations), Joseph Francisco A. Dee (Network and Systems Admin), Suzette T. Go (Information Systems)
FINANCE GROUP (L-R) Izabelle A. Alagon (Accounting), Judilyne L. Boholst (Accounting), Noel F. Alicaya (Finance and Control Officer / Chief Risk Officer), Jennifer G. Sia (Audit), Archie T. Obeso (Control and Analysis), Jasmin R. Calero (Funds Management)
95 CEBU HOLDINGS, INC. 2019 Integrated Report ENTERPRISE-WIDE
RISK MANAGEMENT 102-30,
At CHI, effective risk management is integral to our business’ sustainability and the preparedness and resiliency of our operations, facilities and project sites. We take strategic approaches in managing current and perceived risks to an acceptable level—both holistically and individually—at all levels of the Company.
EMBEDDED IN OUR GUIDED BY A FRAMEWORK CORPORATE CULTURE Our ERM framework details the process of identifying risks Our Enterprise-wide Risk for the company and its subsidiaries. This is supported by Management (ERM) program a comprehensive risk identification, review, monitoring and adopts a top-driven, bottom- reporting process at all levels in the company. focused approach. Risk Our framework focuses on four main categories: strategic, awareness is embedded in operational, financial and environmental risks. our corporate culture with management taking on an active role in managing risks. The identification, management and EN monitoring of key risks are done S VI SK RO RI N on all levels of the company and L M A E N N are part of daily operations. O T I ISK A T R AN L A Y A R F L R TI Y I E N Z S P E K E O D R S I I S K
COMMUNICATION CONSULTATION REPORTING M
O N I T O S R T R K R I S A S I S T K R K E T S G EA I R R IC T L R IA I C SK N S NA FI
96 A space to take your dreams further CHARACTERISTICS OF THE RISK MANAGEMENT PROCESSES CHIEF RISK »» Board-level understanding »» Use of both operational and and commitment to Risk financial risk information in to OFFICER Management as an integral decision making processes (CRO) aspect in decision making and »» Formal collection and driving value incorporation of operational The Chief Risk Officer and » Transparency of risk » his team are responsible for communication and financial risk information creating a culture that actively into decision-making and »» A risk culture that encourages recognizes and addresses risks accountability at all levels governance processes to our operations. Together with »» A Chief Risk Officer and team »» Moving beyond risk avoidance management, the Company takes charge of building its who drives key management and mitigation to finding value- capacity to formulate strategies processes creating opportunities in risk and execute decisions that will management »» Identification of existing and make our business sustainable emerging risks and relevant.
PROTECTED BY LINES OF DEFENSE Specifically, the CRO has the following tasks:
We have identified the company’s three main risks: Competitor Risk, Project »» Establish the risk culture Execution and Delivery Risk, and Changing Market Risk. Please see table on in the company and pages 98 to 99 for definitions of our key risks. To manage these risks, we create the vision and apply three lines of defense in ERM and internal controls: purpose of the risk function RISK MANAGEMENT AND RISK OVERSIGHT »» Oversee risk- identification and ACCOUNTABILITY AT SOURCE Board Committees/Audit mitigation activities (Internal and External) Risk Owners/Business Group »» Implement continuous Level improvement of risk »» Risk Oversight Committee management policies and »» Risk management embedded provides oversight on risk processes within critical processes management activities, approves »» Set acceptable levels of »» Risk owners take active role ERM policy, reviews status of top risk appetite in identifying, assessing, corporate risks and effectiveness and treating risks in daily of the ERM process »» Set an effective control operations environment »» Audit Committee provides »» Processes, procedures, oversight functions on financial control instituted at business The CRO reports on a quarterly group level reporting, internal control, basis to the Risk Oversight internal audit, external audit, and Committee on the status of key RISK GOVERNANCE compliance risks, performance indicators, and mitigation plans to manage ERM Team »» Internal audit periodically those risks. This report presents »» Chief Risk Officer leads the reviews processes and controls insights on: ERM Team to ensure risks and recommends areas for are effectively managed and improvement through its relevant risks are addressed »» Established risk »» Periodic review and assurance and consulting management policies monitoring of key risks and activities »» Set risk management indicators activities that monitor the »» External audit conducts periodic »» Periodic reporting of key risks Company’s key risks and mitigation plans to Risk independent assessment Oversight Committee of financial controls and processes in conjunction with the preparation of the financial statements
97 CEBU HOLDINGS, INC. 2019 Integrated Report MANAGING KEY RISKS 102-11, 102-15
RISK DESCRIPTION ROOT CAUSES IMPLICATIONS MITIGATING ACTIONS AND FOR VALUE OPPORTUNITIES CREATION 1) COMPETITOR RISK • Aggressive marketing and sales • Eroded market share • Regular monitoring of market Actions of competitors or new efforts of competitors indicators to be used as basis for entrants to the market may affect our • Customer expectations not being met informed decisions and possible Company’s competitive advantage and by our Company opportunities • Analysis of current and future pose difficulties in achieving business • Better value proposition of objectives. situations and develop plans competitors • Use of integrated mixed-use model. Diverse product offerings to various segments of the market (market differentiation) • Focus on key growth centers • Focus on recurring income • Expanded partnerships beyond parent company 2) PROJECT EXECUTION AND • Failure to meet project schedule • Project delays • Regular monitoring of status of DELIVERY RISKS (timeliness) • costly products projects to ensure customer needs Market driven-factors, fortuitous events • Project exceeding cost • product not and sales targets are met or natural environment conditions • Inconsistent quality and safety meeting customer • Close partnering with construction may affect our Company’s ability to standards applied across all projects expectations arm MDC deliver projects within agreed timelines, • Natural environment conditions • Integrity program for vendors customer expectations and agreed costs. hampering quality, cost and delivery • Proper selection and evaluation of projects of vendors through an extensive accreditation 3) CHANGING MARKET NEEDS • Changes in macro-economic, social, • Marginalization of • Diversification of product lines RISK political and consumer conditions competitors • Partnering with strong local Changes to the market may affect developers our Company’s ability to respond to • Monitoring of key economic, opportunities in the marketplace, social, political and consumer anticipate and respond to the demands of indicators our consumers, and maintain or increase revenue and profitability in the specific business environment where the business is operating. 4) PRODUCT/ SERVICE QUALITY • Poor performance of vendors • Low quality of • Conduct of Customer AND SAFETY RISK • Delayed &/or unresolved complaints product and service Satisfaction Surveys Inability to meet or exceed from customers, resulting to reduction • unresolved • Regular coordination meetings in customer satisfaction ratings complaints customer expectations in terms of at the operational level to • Weak safety protocols implemented ensure issues and concerns are relevance and quality of products at properties and/or services addressed & resolved within target timelines • Regular monitoring of vendor performance • Vendor integrity program • Close partnering with MDC, ALMI and APMC to ensure quality and safety standards are in place and implemented 5) ORGANIZATIONAL RISK • Employee turnover/ attrition • High attrition rate, • Employee developmental plans CHI’s growth and strategic objectives • Lack of capturing and sharing low organizational and activities targeted for both being impeded by weaknesses in its learnings climate ratings technical and behavioral skills human resources, processes, systems • Decline in organization climate ratings • lack of knowledge • Succession planning and performance metrics. management • Employee engagement activities • Conduct of organizational climate surveys • Cross-posting, workteams
98 A space to take your dreams further RISK DESCRIPTION ROOT CAUSES IMPLICATIONS MITIGATING ACTIONS AND FOR VALUE OPPORTUNITIES CREATION 6) POLITICAL RISK • Failure to comply with legal and • Exposure to fines, • Maintaining good relationship CHI’s growth and strategic objectives regulatory requirements penalties and other and open communication with being impacted by governmental • Failure to secure necessary permits charges regulatory authorities and LGUs or political factors which may be and licenses • Regular monitoring status of brought about by updates or changes • Failure to establish healthy permits and timelines for renewal of government policies, laws and relationship with Local Government thereof to ensure that these are regulations that are unfavorable to the Units (LGUs) secured within target timelines Company and inefficient dealings or • Review of the permit process to relationships with authorities and LGUs. determine gaps in the process The profitability of our Company may be and recommend process significantly impacted by political events improvements and conditions.
7) FINANCIAL RISK • Changes in market interest rates • Inaccuracy of • Careful management of cash and Risks associated with authorization, • High inflation rate financial reports and money market placements. completeness, and accuracy of financial • Fluctuations in foreign currency disclosures • Established counterparty bank transactions processed, summarized exchange rates • Adequate funding for limits for cash and investible funds and reported in our Company’s financial • Rising interest rates projects, including • Dealing with counterparties with application system. . • Non-compliance to financial reporting borrowing of funds highest credit standing standards from various sources • Proper timing in obtaining debt (e.g., debt funding, funding at best possible terms and financial covenants) conditions • Maintaining financial covenants
8) MAJOR SECURITY, HEALTH & • Demonstrations • Loss of lives • Incident Management Team SAFETY INCIDENTS • Major Security Crime Incidents • damage to property • Conduct of regular emergency Threats to the safety of the people within • Terrorism preparedness drills and outside of the organization such as • Property related hazards • Security protocols theft, robbery and terrorist attack to the • Bad publicity for our Company and its • Close partnering with and properties brought about by inefficient products monitoring of security provider security protocols. • Failure to immediately or accurately • Emergency response teams respond to crisis situations • Health & Safety Committees • Robbery: Loss lives and damage to • Disaster Recovery Plan (DRP) in property place • Travel risks (training, visitation of • Business Continuity Plan (BCP) various properties) in place • Other manmade types of emergency • Regulatory requirement bodies e.g. fire, strike, etc.
9) ENVIRONMENTAL RISKS • Natural disasters • Environmental • Environmental impact assessment • Environmental damage • Climate change damage • Environmental Management • Loss of lives • Typhoons and flooding brought about • Loss of lives Planning • Damage to property by extreme weather conditions • Damage to property • Resource Conservation Program • Work stoppage • Waste (solid & water), effluents, • Work stoppage • Facilities upgrade • Project delays emissions, resource depletion • Project delays • Project monitoring and measurement • Environmental Compliance 10) IT / CYBERSECURITY RISK • Unauthorized access to critical • Vulnerability of • Regular conduct of vulnerability/ Threat of cyber attacks to critical systems critical systems and penetration testing systems. • System downtime due to critical networks to cyber • System security protocols in place. systems brought about by viruses, attacks • Cascading of IT-related policies to malware, ransomware & socially- • Unauthorized access the organization engineered attacks. to personal data • Compliance to Data Privacy Act and other critical/ and appointment of group-wide sensitive information DPO and company COPs • Impact: denial of service, malicious code, unauthorized access, inappropriate storage
99 CEBU HOLDINGS, INC. 2019 Integrated Report A Driver of Key Enterprise-wide Risk Management
PROTECTING THE with Ayala Land and Aboitizland in Mandaue, BALANCE SHEET allowed us to maintain a strong market presence and expand our portfolio through THROUGH FINANCIAL RISK solid synergies, advanced master-planning, MANAGEMENT stronger combined branding, and deeper We continue to take advantage of the market knowledge. These partnerships current low but slowly increasing interest benefit from the combined financial rates by maximizing its leverage and strength, technical expertise, and real estate converting our short-term to long-term experience of the companies. debt at favorable rates to fund the construction of our leasing projects. This allows us to better balance our debt DIVERSIFICATION OF capacity and maturity with a steady PRODUCT LINES recurring income. We continue to build on our expertise and extend our market reach. Since 2013, we have been diversifying our portfolio MONITORING OF MAJOR with the introduction of the Amaia MARKET INDICATORS brand for affordable housing, and office We rely on close monitoring of major condominiums for sale. market indicators for guidance in project investments. Forecasts, industry, and sales reports are regularly monitored and ACTIVE MANAGEMENT OF reported to the project teams and senior ENVIRONMENTAL RISKS management to provide them a clearer Our operations have a major impact on the perspective of prevailing market conditions environment and social conditions in the and issues on the ground for a more areas where we operate. Together with informed decision-making process. parent company Ayala Land, we outlined our sustainability focus areas where we can affect positive change through our CLOSE MONITORING OF developments. These include: (1) site ONGOING PROJECTS resilience, (2) eco-efficiency, (3) pedestrian The early identification and management mobility and transit connectivity and (4) of delivery risk allows us to move our local economic development. Programs projects on the right track, meet our have been implemented in 2019 for these customers’ requirements, and achieve our focus areas [See Sustainability Section for sales and turnover targets. details.
We also continue to adapt measures EXPANDED PARTNERSHIPS to reinforce our Business Continuity BEYOND PARENT COMPANY Plan. Our Incident Management Team Strong synergies diversify risk and create ensures continuous operations, or at least the opportunity for us to increase our reach minimal disruption, during calamities and and depth in the Cebu market. unforeseen events. Improvements on our services and facilities have also been In 2019, our continued partnership with implemented to ensure the safety of our strong local developers, Taft Punta Engaño stakeholders and enhance our readiness in Property, Inc. with Gaisano Group in times of emergencies and calamities. Mactan, Cebu District Property Enterprise
100 A space to take your dreams further ASSESSING OUR RISK MATURITY
Aon PLC, the leading global provider of risk »» Predetermined or developing set of management, insurance and reinsurance loss and tolerance guidelines brokerage, and human resources solutions »» Explicit consideration of risk and and outsourcing services, designed the risk management information in key Aon Risk Maturity Index—an innovative decisions tool to assess an organization’s risk »» Consistent application of management practices through a Risk analysis with incorporation of Maturity Rating. both qualitative and quantitative techniques This assessment tool focuses on the 10 characteristics of risk maturity, as follows: Aon’s recommendations to further develop »» Board Understanding and risk management capabilities were as Commitment to Risk Management follows: »» Risk Management Stewardship »» Incorporate risk management »» Risk Communication responsibilities into job descriptions »» Risk Culture Engagement and and performance evaluations Accountability »» Formalize risk tolerances, including »» Risk Identification metrics and reporting requirements »» Risk Management Strategy »» Identify opportunities for efficiency, Development consistency and collaboration »» Risk information and Decision among risk-based functions and Making Processes processes »» Risk Information and Human »» Incorporate risk correlation Capital Processes within existing risk quantification approaches »» Risk Analysis and Quantification »» Conduct a robust assessment »» Risk Management Focus and of emerging risks with key Strategy stakeholders (internal and external) »» Confirm and enhance risk reporting Using this tool to self-assess our existing frameworks at management, risk management approach, findings executive and Board levels showed that the company is at an Operational Level of Risk Maturity. »» Implement a risk management technology solution There is a clear understanding of the »» Expand understanding of the impact organization’s key risks and also a of employee life cycle and employee consistent execution of activities to engagement, and address these risks. Some functional areas »» Confirm that risk management employ more sophisticated techniques practices add value and support whenever necessary. identification of opportunities as well as risk avoidance and mitigation
101 CEBU HOLDINGS, INC. 2019 Integrated Report 102 A space to take your dreams further Appendices & Indices
BOARD PROFILE MATERIAL ASPECTS AND THEIR BOUNDARIES ENVIRONMENTAL IMPACTS AND RESOURCE CONSERVATION MECHANISMS FOR ENFORCEMENT AND COMPLIANCE GRI CONTENT INDEX ASEAN CORPORATE GOVERNANCE INDEX
Cebu IT Park PARKING SPACES
103 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 1. ANICETO V. BISNAR, JR. BERNARD VINCENT O. DIRECTORS’ PROFILE FILIPINO, 55 DY PRESIDENT OF CEBU HOLDINGS INC. (CHI) FILIPINO, 56 B.2, D.2, E.2, E.4 ANNA MA. MARGARITA B. SINCE JANUARY 1, 2015 DIRECTOR OF CEBU HOLDINGS INC. (CHI) DY SINCE AUGUST 2014 AND CHAIRMAN OF THE EDUCATION BOARD OF DIRECTORS FROM AUGUST 2014 FILIPINO, 50 Philippine Military Academy, Bachelor of TO APRIL 2017. DIRECTOR OF CEBU HOLDINGS INC. (CHI) Science (PMA BS ’85, top 5% of class), SINCE AUGUST 17, 2016 AND CHAIRMAN OF Baguio City, Philippines EDUCATION THE BOARD OF DIRECTORS STARTING APRIL Master in Business Management (MBM B.B.A Accountancy (BBAA ‘85), 24, 2017. ‘89), Asian Institute of Management University of Notre Dame, U.S.A (AIM), Makati City, Philippines Master’s Degree in Business EDUCATION Master Planning and Mixed-Use Administration (MBA ’89), University of BS of Arts, Degree in Economics Honors Development Program, Harvard Chicago, U.S.A Program, Magna Cum Laude, Ateneo De University School of Urban Design Master’s Degree in International Manila University, Philippines 1990 Relations (MIR ’95), University of Master’s Degree in Economics, London Chicago, U.S.A School of Economics and Political DIRECTORSHIP/OTHER POSITIONS Science, UK 1991 IN LISTED COMPANIES DIRECTORSHIP/OTHER POSITIONS Masters in Business Administration, IN LISTED COMPANIES Harvard Graduate School of Business DIRECTOR AND PRESIDENT Administration in Boston, U.S.A 1996 Cebu Holdings, Inc. PRESIDENT AND CHIEF EXECUTIVE OFFICER DIRECTORSHIP / OTHER POSITIONS VICE PRESIDENT Ayala Land, Inc. IN LISTED COMPANIES Ayala Land, Inc. DIRECTOR CHAIRMAN OF THE BOARD OF CHIEF OPERATING OFFICER Cebu Holdings, Inc. DIRECTORS Ayala Land, Inc.-Visayas-Mindanao AyalaLand Logistics Holdings Corp. Cebu Holdings, Inc. Group MCT Bhd of Malaysia SENIOR VICE PRESIDENT OTHER DIRECTORSHIPS/POSITIONS OTHER DIRECTORSHIPS/POSITIONS Ayala Land, Inc. CHAIRMAN Adauge Commercial Corporation CHAIRMAN MEMBER, MANAGEMENT COMMITTEE Central Block Developers, Inc. Alveo Land Corporation (MANCOM) Amaia Southern Properties, Inc. Ayala Property Management Corporation Ayala Land, Inc. VICE CHAIRMAN Makati Development Corporation Amaia Land Corporation HEAD, STRATEGIC LANDBANK Avenco South Corporation Avenco South Corporation MANAGEMENT GROUP (SLMG) AyalaLand Commercial Reit, Inc. Ayala Land, Inc. CHAIRMAN AND PRESIDENT North Point Estate Association, Inc. Bellavita Land Corporation Ayagold Retailers, Inc. OTHER DIRECTORSHIPS/POSITIONS Asian I-Office Properties, Inc. Station Square East Commercial DIRECTOR AND PRESIDENT Cebu Leisure Company, Inc. Corporation Nuevocentro, Inc. Aviana Development Corporation Alviera Country Club, Inc. DIRECTOR AND PRESIDENT Aviana Development Corporation Cagayan De Oro Gateway Corp. BGSouth Properties, Inc. DIRECTOR AND EXECUTIVE VICE Lagdigan Land Corporation BGNorth Properties, Inc. PRESIDENT BGWest Properties, Inc. Fort Bonifacio Development Corporation DIRECTOR Nuevocentro, Inc. Accendo Commercial Corporation Portico Land Corp. DIRECTOR Cebu District Property Enterprise, Inc. Philippine Integrated Energy Solutions, AyalaLand Estates, Inc. Cagayan de Oro Gateway Corporation Inc. Aurora Properties, Inc. Taft Punta Engano Property, Inc. Vesta Properties Holdings, Inc. VICE CHAIRMAN CECI Realty, Inc. VICE PRESIDENT Ayala Greenfield Development AyalaLand Medical Facilities Leasing, Solinea, Inc. Corporation Inc. Alviera Country Club, Inc. Anvaya Cove Beach and Nature Club, AFFILIATIONS Inc. Cebu Business Park Association, Inc., DIRECTOR AND PRESIDENT Next Urban Alliance Development Corp. Chairman and President (January 1, 2015) Bonifacio Land Corporation Emerging City Holdings, Inc. PAST VICE PRESIDENT Asiatown I.T. Park Association, Inc., Columbus Holdings, Inc. Benpres Holdings Corporation Chairman and President (January 1, 2015) Berkshires Holdings, Inc. Hero Foundation, Inc., Board of Trustee Fort Bonifacio Development Corporation Aurora Properties Incorporated Vesta Property Holdings, Inc. Ceci Realty Inc. Alabang Commercial Corporation Accendo Commercial Corporation
104 A space to take your dreams further PRESIDENT AyalaLand Medical Facilities Leasing, Ten Knots Development Corporation Hero Foundation, Inc. Inc. Ten Knots Philippines, Inc. Bonifacio Art Foundation, Inc. AyalaLand Offices, Inc. Bay Area Hotel Ventures, Inc. DIRECTOR, PRESIDENTIAL AND DIRECTOR Bonifacio Hotel Ventures, Inc. CHIEF EXECUTIVE OFFICER Avida Land Corporation Capitol Central Hotel Ventures, Inc. AREIT, Inc. Amicassa Process Solutions, Inc. Cebu Insular Hotel Company, Inc. Whiteknight Holdings, Inc. Central Bloc Hotel Ventures, Inc. VARIOUS POSITIONS SINCE 1996 AyalaLand Medical Facilities Leasing, Circuit Makati Hotel Ventures, Inc. Ayala Land, Inc. Inc. Direct Power Services, Inc. Serendra, Inc. EcoNorth Resort Ventures, Inc. Alveo-Federal Land Communities, Inc. EcoSouth Hotel Ventures, Inc. AUGUSTO D. BENGZON ALI Eton Property Development Corp. Enjay Hotels, Inc. FILIPINO, 56 AKL Properties, Inc. Greenhaven Property Ventures, Inc. DIRECTOR OF CEBU HOLDINGS INC. (CHI) Makati North Hotel Ventures, Inc. SINCE AUGUST 15, 2017 BOARD MEMBER North Triangle Hotel Ventures, Inc. Ayala Foundation, Inc. Northgate Hotel Ventures, Inc. EDUCATION Ayala Group Club, Inc. One Makati Hotel Ventures, Inc. Bachelor of Science Degree in Orion Land, Inc. Business Management, Ateneo de PAST MEMBER Sentera Hotel Ventures, Inc. Manila University, and he is graduate Advisory Council of the National Sicogon Island Tourism Estate of the Philippine Trust Institute Advisory Group for the Police Corporation Master’s Degree in Business Transformation Development of the Soltea Commercial Corporation Management and he was granted the Philippine National Police in 2015 Southcrest Hotel Ventures, Inc. Andres K. Roxas scholarship, Asian Tutuban Properties, Inc. Institute of Management (AIM), Makati Whiteknight Holdings, Inc. City, Philippines JOSE EMMANUEL H. JALANDONI One Makati Residential Ventures, Inc. FILIPINO, 52 DIRECTORSHIP/OTHER POSITIONS DIRECTOR OF CEBU HOLDINGS INC. (CHI) CHAIRMAN AND PRESIDENT IN LISTED COMPANIES SINCE AUGUST 17, 2016 ALINET.Com, Inc. DIRECTOR AND TREASURER EDUCATION CHAIRMAN Cebu Holdings, Inc. B.S. in Legal Management (BSLM ’89), ALI Capital Corporation Ateneo de Manila University, Philippines DIRECTOR Master’s Degree in Business DIRECTOR AyalaLand Logistics Holdings Corp. Administration (MBA ‘92), Asian Accendo Commercial Corporation Institute of Management, Makati City, Alabang Commercial Corporation SENIOR VICE PRESIDENT Philippines ALI Eton Property Development Ayala Land, Inc. Chartered Financial Analyst Corporation Arca South Integrated Terminal, Inc. CHIEF FINANCE OFFICER DIRECTORSHIP/OTHER POSITIONS Ayagold Retailers, Inc. Ayala Land, Inc. IN LISTED COMPANIES Ayala Property Management Corporation AyalaLand Commercial Reit, Inc. CHIEF COMPLIANCE OFFICER DIRECTOR Bacuit Bay Development Corporation Ayala Land, Inc. Cebu Holdings, Inc. Berkshires Holdings, Inc. AyalaLand Logistics Holdings Corp. Bonifacio Land Corporation TREASURER Cagayan de Oro Gateway Corporation Ayala Land, Inc. SENIOR VICE PRESIDENT Chirica Resorts Corporation Ayala Land, Inc. Columbus Holdings, Inc. VARIOUS POSITIONS SINCE 2004 Ecoholdings Company, Inc. Ayala Land, Inc. MEMBER, MANAGEMENT COMMITTEE Emerging City Holdings, Inc. Ayala Land, Inc. Fort Bonifacio Development Corporation OTHER DIRECTORSHIPS/POSITIONS Integrated Eco-Resort, Inc. CHAIRMAN GROUP HEAD, COMMERCIAL Lio Resort Ventures, Inc. Aprisa Business Process Solutions, BUSINESSES (MALLS, OFFICES, Lio Tourism Estate Management Inc. HOTELS AND RESORTS) Corporation Ayala Land, Inc. Makati Cornerstone Leasing Corporation DIRECTOR, TREASURER AND Makati Development Corporation COMPLIANCE OFFICER OTHER DIRECTORSHIPS/POSITIONS North Eastern Commercial Corporation Anvaya Cove Golf and Sports Club, Inc. CHAIRMAN OF THE BOARD OF (formerly Asterion) DIRECTORS North Liberty Resort Ventures, Inc. DIRECTOR AND TREASURER ALI Commercial Center, Inc. Pangulasian Island Resort Corporation ALI Eton Property Development ALI Makati Hotel and Residences, Inc. Paragua Eco-Resort Ventures, Inc. Corporation ALI Makati Hotel Property, Inc. Philippine Integrated Energy Solutions, Amaia Land Corporation ALI Triangle Hotel Ventures, Inc. Inc. Aurora Properties, Inc. Arca South Hotel Ventures, Inc. Regent Horizons Conservation Company, Avida Land Corporation Ayala Hotels, Inc. Inc. Ayala Property Management AyalaLand Hotels and Resorts Sicogon Town Hotel, Inc. Corporation Corporation Station Square East Commercial AREIT, Inc. Corporation Bellavita Land Corporation
105 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
BGNorth Properties, Inc. DIRECTORSHIP IN LISTED COMPANY PAST PRESIDENT BGSouth Properties, Inc. Makati Development Corporation BGWest Properties, Inc. DIRECTOR Ayala Property Management Corporation Ceci Realty, Inc. Cebu Holdings, Inc. Philippine Integrated Energy Solutions, FR. RODERICK C. SALAZAR, JR., Inc. OTHER DIRECTORSHIPS/ POSITIONS SVD, Serendra, Inc. COMMISSIONER FILIPINO, 72 Vesta Property Holdings, Inc. Construction Industry Arbitration INDEPENDENT DIRECTOR OF CEBU HOLDINGS Commission INC. (CHI) SINCE APRIL 29, 2005 DIRECTOR AND ASSISTANT TREASURER MANAGING DIRECTOR AND EDUCATION Ayala Greenfield Development TREASURER Divine Word Seminary, Master of Corporation Datem, Inc. Philosophy (M.Phil.), Tagaytay City, Philippines 1976 DIRECTOR DIRECTOR MA/MS Mass Communications, AG Counselors Corporation Keyland Corporation University of Leicester, England (October Alabang Commercial Corporation 1982 to September 1983), degree Alviera Country Club, Inc. PRESIDENT conferred on July 1984 Alveo Land Corporation Makati Parking Authority (MAPA) Honorary Doctorate in the Humanities Ecozone Power Management, Inc. Project Management Institute, (Hon. D. Hum, ’10), St. Paul University, Makati Development Corporation Philippines Chapter Tuguegarao City, Philippines Nuevocentro, Inc. Philippine Events, Exhibition & Honorary Doctorate in the Humanities Northgate Hotel Ventures, Inc. Convention Corp. (PEECC) (Hon. D. Hum, ‘11), Aquinas University, Portico Land Corporation Legazpi City, Philippines Station Square East Commercial VICE PRESIDENT Corporation Makati Commercial Estate Association DIRECTORSHIP IN LISTED COMPANY Southcrest Hotel Ventures, Inc. (MACEA) INDEPENDENT DIRECTOR BOARD OF TRUSTEE PAST GROUP HEAD OF ALI VISMIN Cebu Holdings, Inc. Fe Del Mundo Medical Center GROUP, HUMAN RESOURCES & Philippines, Inc. PUBLIC AFFAIRS GROUP AND OTHER DIRECTORSHIPS/POSITIONS Philippine National Police Foundation, CONSTRUCTION MANAGEMENT Inc. GROUP DIRECTOR Ayala Land, Inc. First Metro Asset Management, Inc. TREASURER (FAMI) (three Boards) AKL Properties, Inc. PAST MEMBER, MANAGEMENT SVD Mission Philippines Hero Foundation, Inc. COMMITTEE, Ayala Land, Inc. CHAIRMAN, BOARD OF TRUSTEES ASSISTANT TREASURER St. Agnes Academy, Legazpi City Ayala Greenfield Golf and Leisure Club, PAST SENIOR VICE PRESIDENT Center for Educational Measurement Inc. Ayala Land, Inc. (CEM)
PAST DIRECTOR MEMBER, BOARD OF TRUSTEES EMILIO LOLITO J. TUMBOCON Cebu Insular Hotel Co., Inc. Immaculate Conception Academy, FILIPINO, 63 Cebu District Property Enterprise, Inc. Manila DIRECTOR OF CEBU HOLDINGS INC. (CHI) Accendo Commercial Corporation St. Jude Catholic School, Manila SINCE APRIL 29, 2008 Cagayan de Oro Gateway Corporation Taft Punta Engano Property, Inc. REGIONAL SECRETARY AND VICE- EDUCATION Alveo Land Corporation PRESIDENT for Asia B.S. in Civil Engineering (BSCE ’79), Amaia Land Corporation Office Internationale de l’Enseignement University of the Philippines Makati Development Corp. Catholique (OIEC) Master’s in Business Administration MDC Buildplus, Inc. (MBA ‘85), University of the Philippines MDC Equipment Solutions, Inc. PAST CHAIRMAN, BOARD OF Construction Executive Program (CEPS MDC Subic, Inc. TRUSTEES ’87), Stanford University, California, Ecozone Power Management St. Jude Catholic School, Manila U.S.A Laguna Technopark, Inc. St. Scholastica’s College, Westgrove Senior Business Executive Program Anvaya Cove Golf & Sports Club, Inc. St. Scholastica’s Academy in Tabunok, (SBEP ’91), University of Asia & the Northgate Hotel Ventures, Inc. Talisay City, Cebu Pacific ALI Makati Hotel Property, Inc. Divine Word University (now Liceo del The Executive Program (TEP’97), ALI Makati Hotel and Residences, Inc. Verbo Divino), Tacloban City Darden Graduate School of Business Aviana Development Corp. Divine Word College of Tagbilaran (now Administration, University of Virginia, AyalaLand Hotels and Resorts Corp. Holy Name University) U.S.A. Cebu Leisure Company, Inc. Coordinating Council of Private Certified Project Management Lagdigan Land Corp. Educational Associations (COCOPEA) Professional (PMP), Project Southcrest Hotel Ventures, Inc. (three terms) Management Institute 2006 Westview Commercial Ventures Corp. Avencosouth Corp. PAST MEMBER, BOARD OF Whiteknight Holdings, Inc. DIRECTORS Asian i-Office Properties, Inc. People’s Television Network (PTV4) Adauge Commercial Corp.
106 A space to take your dreams further PAST PRESIDENT CURRENT VICE-CHAIRMAN PRIOR GOVERNMENT POSITIONS University of San Carlos (four 3-year Bernardo Benedicto Foundation, Inc. HELD terms: 1987-1990; 1990-1993; 2002- Executive Justice, Court of Appeals, 2005; 2005-2008) RECOGNITIONS Visayas Station (2004-2013) Catholic Educational Association of the Officer in the Order of Leopold II’ by his Presiding Judge, Regional Trail Court in Philippines (CEAP) (1992-2008) Majesty Baudowin King of the Belgians Negros Oriental and Cebu City (1987- Officer in the Order of Leopold II’ by his 2013) PAST MEMBER Majesty King Albert II of the Kingdom Executive Judge, RTC Cebu Province FILIPINO, Inc. (Filipino Institute for the of Belgium, this is the highest award (2012-2014) Promotion of Integrity and Nobility) that can be given to civilians, Belgian or San Carlos Community Development non-Belgian RECOGNITIONS Foundation Garbo sa Sugbu Awardee given by Presiding Justice Award, Court of Divine Word Educational Association the Province of Cebu for outstanding Appeals, given in Manila in 2005 for (DWEA) achievement in International Relations speedy case disposal Philippine Accrediting Association of as Honorary Consul of Belgium Judicial Excellence Award, Most Schools, Colleges, and Universities Cebu City Council Resolution, Most Outstanding Judge of the Philippines (PAASCU) Outstanding Cebuano Citizen, February (2003) Private Educational Advisory Council 18, 1991 Recognition on Retirement with Zero (PEAC) Great Cebuano Award (conferred by) Backlog of Cases (2013) Word Broadcasting Corporation The Province of Cebu, Sugbuanong Kumintaristang Nagpakabana (SUKNA), AFFILIATIONS PAST MEMBER, BOARD OF TRUSTEES Kapisanan Ng Mga Brodkaster Ng Past Officer, Integrated Bar of the St. Paul University, Tuguegarao Pilipinas (KBP) and Mandaue Chamber Philippines, Cebu City Chapter St. Paul College, Pasig of Commerce and Industry, Inc. Past President, Rotary Club of Cebu, St. Paul College, Iloilo Awardee of the Asia Pacific Enterprise University District St. Paul College, Dumaguete Awards in 2017 St. Paul College, Surigao Entrepreneur of the Year Award, Cebu Visayas Cluster, Daughters of Charity Chamber of Commerce and Industry on (DC) Schools its Centennial +10 Anniversary Most Outstanding Alumnus’ Award, PAST EXECUTIVE SECRETARY University of San Jose-Recoletos Office of Education and Faith Formation of the Federation of Asian Bishops Conferences (FABC-OEFF) PAMPIO A. ABARINTOS, FILIPINO, 76 RECOGNITION INDEPENDENT DIRECTOR OF CEBU HOLDINGS Croce Pro Ecclesia et Pontifice, Papal INC. (CHI) SINCE APRIL 08, 2014 award for his years of service to Catholic Education conferred August 14, 2010, in EDUCATION the Archdiocese of Cebu Bachelor of Arts, (BA ’65) Cum Laude, University of San Jose-Recoletos Bachelor of Laws, (Class ’69), University ENRIQUE L. BENEDICTO, of the Visayas FILIPINO, 78 Master’s Degree Units in Business INDEPENDENT DIRECTOR OF CEBU HOLDINGS Administration (MBA ’81), Southwestern INC. (CHI) SINCE APRIL 25, 2003 University
EDUCATION DIRECTORSHIP IN LISTED COMPANY BS Commerce (BSC ‘64), University of San Jose-Recoletos INDEPENDENT DIRECTOR Cebu Holdings, Inc. DIRECTORSHIP IN LISTED COMPANIES OTHER DIRECTORSHIPS/POSITIONS Current Member, Regional Advisory INDEPENDENT DIRECTOR Council of the Philippine National Police Cebu Holdings, Inc. (PNP) Region 7 KEPCO-SPC Power Corporation Current Director, Alta Vista Golf and Country Club, Cebu City OTHER DIRECTORSHIPS/POSITIONS Current Member, Management Current Honorary Consul (ad honorem), Committee (MANCOM) and Belgium Current Chairman, Committee on Discipline and Arbitrator, Alta Vista Golf CURRENT CHAIRMAN and Country Club, Cebu City Mabuhay Filcement, Inc. Current Director, South Hills Residents’ Enrison Land, Inc. Association (SHRA), Cebu City Enrison Holdings, Inc. Benedict Ventures, Inc.
107 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 2. NIMFA AMBROSIA L. PEREZ- CORPORATE OFFICERS’ TREASURER AND MEMBER OF THE PARAS, BOARD OF TRUSTEES FILIPINO, 54 PROFILE Alagang Ayala Land Foundation, Inc. ASSISTANT CORPORATE SECRETARY OF CEBU Altaraza Town Center Estate HOLDINGS, INC. (CHI) SINCE FEBRUARY 27, Association, Inc. 2014 MA. LUISA D. CHIONG Vertis North Estate Association, Inc. FILIPINO, 47 Arca South Estate Association, Inc. EDUCATION Circuit Makati Estate Association, Inc. Bachelor of Law (‘90), Manuel L. Quezon EDUCATION Lakeside Evozone Association, Inc. School of Law, Philippines Bachelor of Science in Commerce Major North Point Estate Association, Inc. in Accounting (BSC ’91), De La Salle CURRENT ASSISTANT CORPORATE University AFFILIATIONS SECRETARY Completed the academic requirements Member of the Philippine Institute of AG Counselors Corporation for a Master in Business Administration Certified Public Accountants (PICPA) AKL Properties, Inc. degree (MBA ’98), De La Salle University Member of the Lectors and Alveo Land Corporation Certified Public Accountant (CPA), Commentators Guild of Malate Catholic Anvaya Cove Golf and Sports Club, Inc. 5th Place May 1992 CPA Board Church Avida Land Corporation Examinations Ayagold Retailers, Inc. Ayala Greenfield Development CURRENT POSITIONS HELD JUNE VEE D. MONTECLARO- Corporation Chief Finance Officer, Compliance NAVARRO, Ayala Greenfield Golf & Leisure Club, Officer, and Member, Management FILIPINO, 48 Inc. Committee effective August 15, 2017, CORPORATE SECRETARY OF CEBU HOLDINGS Ayala Property Management Corporation Cebu Holdings, Inc., publicly-listed INC. (CHI) SINCE FEBRUARY 27, 2014 Ayala Land, Inc. (Publicly-Listed company Company) EDUCATION AyalaLand Commercial Reit, Inc. DIRECTOR Bachelor of Arts with a major in AyalaLand Logistics Holdings, Corp. ALI Capital Corporation Economics (’93), University of St. La (Publicly-Listed Company) Central Block Developers, Inc. Salle, Bacolod City AYC Finance, Ltd. Cebu Leisure Company, Inc. Bachelor of Commerce with a major in AYC Holdings, Ltd. Data Processing (’93), University of St. Bacuit Bay Development Corporation DIRECTOR AND TREASURER La Salle, Bacolod City BGNorth Properties, Inc. Adauge Commercial Corporation Bachelor of Laws (L.L.B. ’97), University BGSouth Properties, Inc. Amorsedia Development Corporation of the Philippines BGWest Properties, Inc. Buendia Landholdings, Inc. Bonifacio Arts Foundation, Inc. Crans Montana Property Holdings CURRENT CORPORATE SECRETARY BYMCW, Inc. Corporation Cebu Holdings, Inc. (Publicly-Listed Cebu District Property Enterprise, Inc. Crimsonfield Enterprises, Inc. Company) Cebu Holdings, Inc. (Publicly-Listed Red Creek Properties, Inc. AyalaLand Logistics Holdings Corp. Company) Ayalaland Estates, Inc. (Publicly-Listed Company) Chirica Resorts Corporation HLC Development Corporation Alveo Land Corp. Darong Agricultural Dev. Corp. Altaraza Prime Realty Corporation Avida Land Corp. Dinginin Power GP Corp. Asian i-Office Properties, Inc. AKL Properties, Inc. Ecoholdings Company, Inc. ALI Eton Property Development Fort Bonifacio Development Corp. DIRECTOR AND CHIEF FINANCE Corporation HRMall, Inc. OFFICER Orion Land, Inc. Isuzu Benguet Corporation Alinet.com, Inc. Kuswagan Power GP Corp. CURRENT DIRECTOR* AND Lio Resort Ventures Inc. COMPTROLLER CORPORATE SECRETARY Makati Development Corporation Nuevocentro, Inc. AG Counselors Corporation MDBI Construction Corp. *a management position of AG Michigan Holdings, Inc. COMPTROLLER AND CHIEF FINANCE Counselors Corporation Monte Solar Energy Inc. OFFICER MWC Foundation, Inc. Alviera Country Club, Inc. CURRENT GENERAL COUNSEL AND North Liberty Resort Ventures, Inc. ASSISTANT CORPORATE SECRETARY Orion Land, Inc. TREASURER AND CHIEF FINANCE Ayala Land, Inc. (Publicly-Listed Pameka Holdings, Inc. OFFICER Company) Pangulasian Island Resort Corp. Taft Punta Engano Property, Inc. Paragua EcoResort Ventures Inc. Accendo Commercial Corporation CURRENT ASSISTANT CORPORATE PFIL Ltd. Lagdigan Land Corporation SECRETARY PPI Prime Venture, Inc. Cagayan De Oro Gateway Corporation Alinet.com, Inc. PSI Technologies, Inc. AREIT, Inc. Regent Horizon Conservation Company, CHIEF FINANCE OFFICER Inc. Ayala Land, Inc.-Visayas-Mindanao PAST SENIOR ASSOCIATE Sicogon Island Tourism Estate Corp. Group SyCip Salazar Hernandez & Gatmaitan Sicogon Town Hotel, Inc. Strategic Landbank Management Group Technopark Land, Inc. Aviana Development Corporation Ten Knots Development Corporation Aurora Properties Incorporated Ten Knots Philippines, Inc. Ceci Realty, Inc. Vesta Property Holdings, Inc.
108 A space to take your dreams further CURRENT CORPORATE SECRETARY Ceci Realty, Inc. Roundleaf Holdings Corp. Abreeza Central Estate Association, Inc. Central Block Developers, Inc. Roxas Land Corporation Accendo Commercial Corporation Circuit Makati Hotel Ventures, Inc. San Rafael Estate Association Adauge Commercial Corporation CMPI Land, Inc. Sentera Hotel Ventures, Inc. Alabang Commercial Corporation Collines Du Capitole Clubholdings, Inc. Serendra, Inc. ALI Capital Corp. Columbus Holdings, Inc. Solinea, Inc. ALI Commercial Center, Inc. Crans Montana Property Holdings Corp. Soltea Commercial Corp. Ali Makati Hotel & Residences, Inc. Crescent West Development South Innovative Theater Management, Ali Makati Hotel Property, Inc. Corporation Inc. ALI Triangle Hotel Ventures, Inc. Crimson Field Enterprises, Inc. Southcrest Hotel Ventures, Inc. ALO Prime Realty Corporation Directpower Services, Inc. Southgateway Development Corporation Altaraza Prime Realty Corporation Econorth Resort Ventures, Inc. SouthPortal Properties, Inc. Alveo Federal Land Communities, Inc. Ecosouth Hotel Ventures, Inc. Station Square East Commercial Alviera Country Club, Inc. Ecozone Power Management, Inc. Corporation Amaia Land Corp. Emerging City Holdings, Inc. Subic Bay Town Center, Inc. Amaia Southern Properties, Inc. Enjay Hotels, Inc. Summerhill Commercial Ventures Corp. Amicassa Process Solutions, Inc. Esta Galleria, Inc Sunnyfield EOffice, Inc. Amorsedia Development Corporation First Gateway Real Estate Corporation Sunshine Plaza Mall Association Amsi Prime Concepts, Inc. Five Star Cinema, Inc. (SPMAI), Inc. Anvaya Environmental Foundation, Inc. FLT Prime Insurance Corp. Taft Punta Engano Property, Inc. Aprisa Business Process Solutions, Inc. Glensworth Development, Inc. Tower One Condo Corp. Arca South Commercial Ventures Corp, Greenhaven Property Ventures, Inc. TPI Holdings Corporation Arca South Integrated Terminal, Inc. Hero Foundation, Inc. Tutuban Properties, Inc. Arcasouth Hotel Ventures, Inc. Hillsford Property Corp. UP North Property Holdings, Inc. Arvo Commercial Corporation HLC Development Corporation Verde Golf Development Corporation Asian I-Office Properties, Inc. Integrated EcoResort, Inc. Vesta Property Holdings, Inc. Asterion Technopod Incorporated Lagdigan Land Corporation Westview Commercial Ventures Corp. Aurora Properties, Inc. Laguna Technopark, Inc. White Knight Holdings, Inc. Avencosouth Corp. LCI Commercial Ventures, Inc. ZHI Holdings, Inc. Aviana Development Corporation Leisure and Allied Industries Phils., Inc. Avida Sales Corp. Lepanto Ceramics, Inc. CURRENT SENIOR COUNSEL II Ayala Hotels, Inc. Luck Hock Venture Holdings Inc. Ayala Group Legal Ayala Land International Sales, Inc. Makati Cornerstone Leasing Corp. Ayala Land Sales, Inc. Makati Hotel and Residences Condo. PAST ASSISTANT CORPORATE Ayala Theaters Management, Inc. Corp. SECRETARY AyalaLand Club Management, Inc. Makati North Hotel Ventures, Inc. Integrated Micro-Electronics, Inc. AyalaLand Estates, Inc. MDC Buildplus, Inc. AyalaLand Hotels and Resorts Corp. MDC Conqrete, Inc. PRIOR GOVERNMENT POSITION HELD AyalaLand Malls NorthEast, Inc. MDC Equipment Solutions, Inc. State Counsel, Department of Justice AyalaLand Malls Synergies, Inc. MDC Subic, Inc. Legal Counsel at the Regional Trial AyalaLand Malls VisMin, Inc. MG Construction Ventures Holdings, Inc. Courts of Makati and Quezon City AyalaLand Malls, Inc. Next Urban Alliance Development Corp. AyalaLand Medical Facilities Leasing, North Beacon Commercial Corporation PAST LEGAL COUNSEL Inc. North Eastern Commercial Corp. Coca-Cola Bottlers Philippines, Inc. AyalaLand Metro North Inc. North Point Estate Association, Inc. RFM Corporation AyalaLand Offices, Inc. North Triangle Depot Commercial Roasters Philippines, Inc. AyalaLand Premiere, Inc. Corporation Bay Area Hotel Ventures, Inc. North Triangle Hotel Ventures, Inc. . Bay City Commercial Ventures North Ventures Commercial Corp. Corporation Northgate Hotel Ventures, Inc. Bellavita Land Corp. Nuevocentro, Inc. Berkshires Holdings, Inc. OE Holdings, Inc. Bonifacio Estate Services Corporation OLC Development Corporation Bonifacio Global City Estate Association, One Dela Rosa Property Development, Inc. Inc. Bonifacio Hotel Ventures, Inc. One Makati Hotel Ventures, Inc. Bonifacio Land Corporation One Makati Residential Ventures, Inc. Bonifacio Transport Corporation Orion Beverage Inc. Bonifacio Water Corporation Orion I Holdings Philippines, Inc. Buendia Landholdings, Inc. Orion Maxis Inc. (For dissolution) Buklod Bahayan Realty and Orion Property Development, Inc. Development Corp. Orion Solutions, Inc. (For dissolution) Cagayan De Oro Gateway Corp. Park Terraces Condominium Corporation Capital Consostium, Inc. Philippine Family Mart CVS, Inc. Capitol Central Commercial Ventures Philippine Integrated Energy Solutions, Corp. Inc. Capitol Central Hotel Ventures, Inc. Portico Land Corp. Cavite Commercial Towncenter, Inc. Primavera Town Center, Inc. Cebu Insular Hotel Company, Inc. Prime Support Services, Inc. Cebu Leisure Company, Inc. Red Creek Properties, Inc.
109 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 3. BOARD COMPOSITION1 E.4, G4-38, Goal 5, Goal 16 No. of Directors per Articles of Incorporation: 9 Actual No. of Directors for the year: 9
NOMINATOR NO. OF YEARS PRINCIPAL FOR DATE FIRST DATE LAST DIRECTOR TYPE IN THE LAST ELECTED WHEN SERVED AS NOMINATION ELECTED ELECTED ELECTION DIRECTOR Nomination August 17, Annual Stockholders’ 2 years and 9 ANNA MA. MARGARITA B. DY NED Ayala Land, Inc. April 2019 Committee 2016 Meeting months Nomination January 1, Annual Stockholders’ 4 years and 4 ANICETO V. BISNAR, JR. ED Ayala Land, Inc. April 2019 Committee 2015 Meeting months Nomination August 15, Annual Stockholders’ 4 years and 9 BERNARD VINCENT O. DY NED Ayala Land, Inc. April 2019 Committee 2014 Meeting months Nomination Annual Stockholders’ EMILIO LOLITO J. TUMBOCON NED N.A. April 2008 April 2019 11 years Committee Meeting JOSE EMMANUEL H. Nomination August 17, Annual Stockholders’ 2 years and 9 NED Ayala Land, Inc. April 2019 JALANDONI Committee 2016 Meeting months Nomination August 15, Annual Stockholders’ 1 year and 9 AUGUSTO D. BENGZON ED Ayala Land, Inc. April 2019 Committee 2017 Meeting months FR. RODERICK C. SALAZAR, Nomination Annual Stockholders’ ID N.A. April 2005 April 2019 14 years JR., SVD Committee Meeting Nomination Annual Stockholders’ ENRIQUE L. BENEDICTO ID N.A. April 2003 April 2019 16 years Committee Meeting Nomination Annual Stockholders’ PAMPIO A. ABARINTOS ID N.A. April 2014 April 2019 5 years Committee Meeting
APPENDIX 4. BOARD OF DIRECTORS’ ATTENDANCE E.2.14, E.2.20, E.2.28, E.3.2, E.3.3, 102-33
COMMITTEE BOARD BOARD DIRECTOR RELATED PARTY CORPORATE MEETINGS RISK EXECUTIVE AUDIT TRANSACTION GOVERNANCE & OVERSIGHT REVIEW NOMINATION
Chairman ANNA MA. MARGARITA B. DY 4/4 2/2 Member BERNARD VINCENT O. DY 4/4 2/2 4/4 Member ANICETO V. BISNAR, JR. 4/4 2/2 4/4
Member EMILIO LOLITO J. TUMBOCON 3/4
Member JOSE EMMANUEL H. JALANDONI 4/4 Member AUGUSTO D. BENGZON 3/4 2/2
Independent FR. RODERICK C. SALAZAR, JR., SVD 4/4 4/4 4/4 4/4
Independent ENRIQUE L. BENEDICTO 4/4 4/4 4/4 4/4
Independent PAMPIO A. ABARINTOS 4/4 2/2 4/4 4/4 4/4 4/4
1 As of end December 31, 2019
2 These nominees were formally nominated to the Nomination Committee by a shareholder of the Company, Ms. Judilyne L. Boholst. Messrs. Abarintos, Benedicto and Salazar, all incumbent directors, were nominated as independent directors. Ms. Boholst is not related to any of the nominees for independent directors.
3 The Board of Directors’ meetings are scheduled at the beginning of the year. Scheduling is coordinated through the office of the Corporate Secretary of the company. Information provided is as of end December 31, 2019
110 A space to take your dreams further APPENDIX 5. DIRECTOR TRAINING AND CONTINUING EDUCATION PROGRAM D.2, E.5.1, E.5.2
NAME OF TRAINING DIRECTOR / OFFICER DATE OF TRAINING PROGRAM INSTITUTION
The Institute of Corporate ANNA MA. MARGARITA B. DY August 9, 2019 Ayala Corporate Governance and Risk Management Summit Directors (ICD) The Institute of Corporate BERNARD VINCENT O. DY August 9, 2019 Ayala Corporate Governance and Risk Management Summit Directors (ICD) The Institute of Corporate ANICETO V. BISNAR, JR. August 9, 2019 Ayala Corporate Governance and Risk Management Summit Directors (ICD) The Institute of Corporate JOSE EMMANUEL H. JALANDONI August 9, 2019 Ayala Corporate Governance and Risk Management Summit Directors (ICD) The Institute of Corporate EMILIO LOLITO J. TUMBOCON November 19, 2019 Corporate Governance Orientation Program Directors (ICD) The Institute of Corporate AUGUSTO D. BENGZON August 9, 2019 Ayala Corporate Governance and Risk Management Summit Directors (ICD) The Institute of Corporate FR. RODERICK C. SALAZAR, JR., SVD August 9, 2019 Ayala Corporate Governance and Risk Management Summit Directors (ICD) The Institute of Corporate ENRIQUE L. BENEDICTO August 9, 2019 Ayala Corporate Governance and Risk Management Summit Directors (ICD) The Institute of Corporate PAMPIO A. ABARINTOS August 9, 2019 Ayala Corporate Governance and Risk Management Summit Directors (ICD)
MA. LUISA D. CHIONG The Institute of Corporate August 9, 2019 Ayala Corporate Governance and Risk Management Summit Chief Finance Officer/Compliance Officer Directors (ICD)
JUNE VEE D. MONTECLARO-NAVARRO The Institute of Corporate August 9, 2019 Ayala Corporate Governance and Risk Management Summit Corporate Secretary Directors (ICD) NIMFA AMBROSIA L. PEREZ-PARAS The Institute of Corporate August 9, 2019 Ayala Corporate Governance and Risk Management Summit Assistant Corporate Secretary Directors (ICD) NOEL F. ALICAYA The Institute of Corporate Finance & Control Officer/Chief Risk August 9, 2019 Ayala Corporate Governance and Risk Management Summit Directors (ICD) Officer
APPENDIX 6. OWNERSHIP STRUCTURE D.1 Security Ownership of Record and Beneficial Owners (of more than 5%) as of December 31, 2019
NAME, ADDRESS OF RECORD TITLE OF NAME OF BENEFICIAL OWNER AND NO. OF SHARES OWNER AND RELATIONSHIP CITIZENSHIP PERCENT CLASS RELATIONSHIP WITH RECORD OWNER HELD WITH ISSUER Ayala Land, Inc. 31/F Tower One & Exchange Common Plaza Ayala Land, Inc. Filipino 1,534,019,916 71.13% Ayala Triangle, Ayala Ave. Makati City PCD Nominee Corp. Aggregate of Standard Life Aberdeen plc (Non-Filipino) affiliated investment management entities Common British 272,144,900 12.62% G/F MSE Bldg. on behalf of multiple managed portfolios (the Ayala Ave., Makati City “Standard Life Aberdeen plc”)
PCD Nominee Corp. Common (Filipino)5 PCD Nominee Corp. (Filipino) Filipino 165,400,421 7.67% G/F MSE Bldg. Ayala Ave., Makati City
111 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 7. OWNERSHIP STRUCTURE LIST OF TOP 20 STOCKHOLDERS Figures are as of December 31, 2019
SHAREHOLDING COMPANY / SHAREHOLDER NO. OF SHARES % OF CAPITAL STOCK 1. Ayala Land, Inc. 1,534,019,916 71.13% 2. PCD Nominee Corp. (Non-Filipino) 287,123,292 13.31% 3. PCD Nominee Corp. (Filipino) 165,400,421 7.67% 4. The Province of Cebu 82,537,333 3.83% 5. Ronald S. Po 7,514,128 0.35% 6. Makati Supermarket Corporation 3,013,265 0.14% 7. Laguna Properties Holdings, Inc. 1,875,000 0.09% 8. Alfonso Lao 1,750,000 0.08% 9. Robert Coyiuto, Jr. 1,544,992 0.07% 10. Mark C. Tan 1,053,640 0.05% 11. Jose C. Lee 1,000,000 0.05% 12. Aurora E. Panlilio 937,500 0.04% 13. Vicente Jayme Jr. 767,500 0.04% 14. Socorro C. Ramos or Cecilia R. Licauco 764,847 0.04% 15. Luis Moro. Jr. 752,600 0.03% 16. Fermin P. Angcao 670,000 0.03% 17. Victor G. Sy 625,000 0.03% 18. Jose E. Suarez 618,750 0.03% 19. Jimmy T. Sy 535,300 0.02% 20. Douglas Luym 530,000 0.02%
APPENDIX 8. REMUNERATION MATTERS D.2.11
Non-execuctive and Independent Directors In 2019, the non-executive directors and independent directors of the Company received renumeration, net of tax, as follows:
DIRECTOR TOTAL (IN PHP) ANNA MA. MARGARITA B. DY* 240,000.00 BERNARD VINCENT O. DY* 320,000.00 JOSE EMMANUEL H. JALANDONI* 200,000.00 EMILIO LOLITO J. TUMBOCON 120,000.00 ENRIQUE L. BENEDICTO 440,000.00 FR. RODERICK C. SALAZAR, JR., SVD 440,000.00 PAMPIO A. ABARINTOS 560,000.00
TOTAL 2,320,000.00
*Paid to Ayala Land, Inc.
112 A space to take your dreams further APPENDIX 9. REMUNERATION MATTERS D.2.11
Executive Officers
The company has no other arrangement with regard to the remuneration of its existing directors and officers aside from the compensation received as herein stated
OTHER VARIABLE NAME AND PRINCIPAL POSITION YEAR SALARY PAY ANICETO V. BISNAR, JR. President MA. LUISA D. CHIONG Chief Finance Officer / Compliance Officer
MA. CLAVEL G. TONGCO Vice President and Head, Commercial Business Group NERISSA N. JOSEF-MEDIANO Vice President and Head, Business Development and Office Leasing Group MA. CECILIA CRISPINA T. URBINA Assistant Vice President and Head, Corporate Services Group and Human Resources and Administration ALL ABOVE-NAMED OFFICERS AS A GROUP Actual 2018 P14.16 million P1.27 million
Actual 2019 P19.10 million P1.81 million
Projected 2020 P20.05 million P1.90 million ALL OTHER OFFICERS5 AS A GROUP Actual 2018 P21.51 million P1.45 million UNNAMED Actual 2019 P20.87 million P1.68 million Projected 2020 P21.91 million P1.76 million
APPENDIX 10. APPENDIX 11. MEMBERSHIP IN ASSOCIATIONS SHARES OF DIRECTORS IN THE COMPANY Figures are as of December 31, 2019 Business and Management • American Chamber of Commerce of the Philippines, Inc. NO. OF • Ayala Business Club - Cebu Chapter NO. OF % OF INDIRECT DIRECTOR DIRECT CAPITAL • Cebu Business Park Association, Inc. SHARES / SHARES STOCK • Cebu Chamber of Commerce and Industry THROUGH • Chamber of Real Estate and Builders’ Association, Inc. ANNA MA. MARGARITA B. DY 1 - 0.000% • European Chamber of Commerce of the Philippines • Financial Executives Institute of Cebu, Inc. BERNARD VINCENT O. DY 1 - 0.000% • International Council of Shopping Centers ANICETO V. BISNAR, JR. 1 - 0.000% • Management Association of the Philippines JOSE EMMANUEL H. JALANDONI 1 - 0.000% • Mandaue Chamber of Commerce and Industry, Inc. • National Real Estate Association, Inc. AUGUSTO D. BENGZON 1 - 0.000% • Philippine Retailers Association EMILIO LOLITO J. TUMBOCON 112,500 - 0.005% • Philippine Chamber of Commerce and Industry ENRIQUE L. BENEDICTO 1 - 0.000% Environmental and Ecosystems Conservation FR. RODERICK C. SALAZAR, JR., SVD 1 - 0.000% • Business for Sustainable Development PAMPIO A. ABARINTOS 1,000 - 0.000% • Cebu Uniting for Sustainable Water Foundation • Soil and Water Conservation Foundation TOTAL 113,507 - 0.005%
113 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 12. ENGAGEMENT PROCESS 102-40, 102-42, 102-43, 102-44
CHANNELS OF STAKEHOLDER EXPRESSED NEEDS INTEREST AREAS HOW WE RESPOND ENGAGEMENT
CUSTOMERS Integrated marketing, • Time completion of building • Minimizing heavy traffic • Discounts, promotional offers, customer surveys construction • Extended market services for C, D, and various payment terms and complaints • One-day resolution of complaints and E sectors • Customer satisfaction surveys, handling, and conduct • Immediate or time-bound help • Sustaining market interest for end- complaints handling process of stakeholder response consumers • Farmers’ Market engagement sessions • Safety in all areas • Venue for family activities • External customer feedback • Building and site resilience • Customer involvement in waste and system • Ontime turnover of residential recycling efforts • Training for emergency response units • Emergency preparedness personnel • Reliable maintenance of utilities • Partnerships and collaboration forn • Dedicated assembly areas for (i.e. water and electricity) sustainability emergency evacuations • More space for events • Impacts to environment and waste • Conduct of emergency drills • More green spaces • Parking spaces in all our developments and • Senior citizen- and PWD-friendliness construction sites of businesses in the estate • Regular coordination and continuing engagement • Conduct of sustainability learning sessions GOVERNMENT Payment of taxes, Communication of sustainability • Health, safety, employment, • Prompt payment of taxes and business permits performance through this environment, and local traffic submission of reports and licenses, report and through stakeholder conditions • Regular reviews of compliance partnerships/ engagement sessions • Venue for civic interaction with regulatory requirements cosponsored • Availability of new and efficient • Provision and maintenance of events, and regular technology that minimizes good road networks reviews; neighboring environmental impacts • Practice transparency and communities as • Job and partnership opportunities full disclosure including the partners and/or for local farmers, businessmen, and provision of this report beneficiaries to the employees • Sharing of best sustainability Company’s • Partnerships and collaboration practices development programs, for sustainability (urbanizing and • Attendance to seminars, and conduct of greening the city) conferences, and meetings stakeholder • Regular coordination and engagement sessions continuing engagement • Conduct of sustainability learning sessions INDIVIDUAL / Sale of shares of stocks, • Improving shareholder value • Dividends • Analysts and investor briefings INSTITUTIONAL shareholder inquiries • Increased investment • Monetizing sustainability (quantifying • Declaration of dividends SHAREHOLDERS and updates; report of opportunities it as an indicator of shareholder and • Communication of sustainability Company performance company value) performance and initiatives through stockholders’ • CHI as a green investment through this report and through meetings and annual • Environmental sustainability stakeholder engagement reports, and conduct sessions of stakeholder engagement sessions REGULATORS Submission of reports, Compliance to existing rules, Beyond compliance on • Transparency and full disclosure disclosures and other regulations, and environmental economic, social, and including the provision of this requirements; laws. environmental regulations. report involvement in SEC/ • Prompt submission of ICD programs and requirements initiatives; transparency • Review of reports prior to and adequacy of submission disclosure LOCAL Implementation • Local employment • Stringent selection process/ • Partnerships with LGU or the COMMUNITIES of development • Livelihood assistance implementation of policy for local communities for Solid programs on education, • Environmental program subcontractors Waste Management (SWM) employment, • Scholarship program • Traffic congestion programs environment, peace • Encouraging small entrepreneurs • Sidewalk vendors and fragmented • Implementation of programs and order, livelihood, by supporting their products access roads aligned to the needs of the and alliance • Increase in barangay income • Suspected illegal drug use by BPO community strengthening through barangay permits from employees • Local employment prioritization initiatives, and mall merchants and locators • High fuel consumption used in waste • Conduct of sustainability conduct of stakeholder • Inclusive growth collection learning sessions engagement • Child-friendly Cebu • Reporting of the number of employees • Endemic tree-growing activities sessions • Alternative livelihood trainings per barangay • Supporting local environmental • Environmental education and • Drainage systems repairs advocacy programs engagement activities • Solid waste management • Environmental valuation to • Water sourcing calculate CHI’s impact to • Representation of CHI in PAMB for communities watershed management • Transparency in implementation of CHI projects • More avenues to support local small-scale entrepreneurs
114 A space to take your dreams further CHANNELS OF STAKEHOLDER EXPRESSED NEEDS INTEREST AREAS HOW WE RESPOND ENGAGEMENT
EMPLOYEES Townhall meetings, • Proper training • Wellness and work-life balance • Benefits upgrade; merit climate survey, • Adequate compensation and • General contractor: Data Management increases volunteer programs, benefits System • Wellness program (CHI P.L.U.S.) and conduct • Health and safety • Property Management: Uniformity in • Competency development of stakeholder • Employee development data gathering, monitoring, reporting, programs engagement session and presentation • Health and safety programs • Conduct of sustainability learning sessions EXTERNAL Accreditation, bidding, • Continuing employment, with • Equal opportunities for local • Establishment of and compliance payment conformity benefits contractors to PCT standards with Process Cycle • Training and development • Identify and develop sustainable • Implement programs to educate Time (PCT) standards, • Work tools to enable effective work water sources (finite ground water and orient contractors and programs to educate • Health and safety resource) • Suppliers on QEHS best practices and orient contractors • Traffic lights for IT Park estate • Solid Waste Management Program and benefits and suppliers on QEHS • More security personnel • Traffic improvement • Conduct of sustainability best practices and • Better ventilation in parking areas • Supplier-specific events in malls learning and work sessions benefits, and conduct of • Improve drainage system • Improvement in entry pass system stakeholder • Proper waste disposal • Familiarity with emergency engagement sessions. • Maintained pedestrian crosswalks procedures • Indicator lights for parking spaces • More CCTV equipment MEDIA Conduct of press • Truthfulness and usefulness of • Publicity • Media briefings PARTNERS conferences, information shared • Issues-handling • Regular fellowships fellowships, and • High courtesy/reliability rating of • Media relations • Regular updates on new placement of paid media relations personnel or any developments advertisements company representative • Provide sufficient information about the Company’s projects and understanding of its brands • Open communication lines
APPENDIX 13. MECHANISMS FOR ENFORCEMENT AND COMPLIANCE
AREA PRACTICE PERFORMANCE Labor practices HR-Admin Department ensures the full implementation of all policies and procedures No cases filed against CHI 102-41, 406-1, 408- related to employee hiring, development, and retention for discrimination and 1, 409-1 non-observance of labor In lieu of a formal employee union, an HR Committee is organized among employee standards and employment representatives from all levels. The group acts as an alternative vehicle for employee contract clauses participation in management Human rights HR Officer orients all employees on policies, processes and procedures related to None to report 412-3, 411-1 human rights provisions
Compliance is extended to general contractors, suppliers, and service providers
A stringent supplier accreditation process is in place to ensure all investment agreements and contracts do not violate human rights
Environmental Business Development Group coordinates closely with APMC and MDC to ensure No reported incident of 307-1 compliance to pertinent environmental laws violation CHI leverages on the comprehensive monitoring system of both companies to identify and record incidents of violation Pollution Control Officers submit a quarterly Self-Monitoring Report to the Environmental Management Bureau of the Department of Environment and Natural Resources. Consolidated results are submitted to the management committee at least twice a year Product Retail Business Group champions customer programs for merchants and shoppers No reported incidents of responsibility violation to marketing, The Information Systems Department manages our existing customer complaints 417-2, 417-3, 418- information and labeling, handling system APMC directly handles concerns from unit owners and office building 1, 419-1 and other products and occupants services regulations including customers privacy Community The Community Relations/Sustainability Department, through the employee volunteer None to report Engagement program, executes the Company’s community development programs 419-1
115 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 14. ACTIVITIES OF THE BOARD COMMITTEES AND MEMBERS RESPONSIBILITIES ACCOMPLISHMENTS Executive Committee Chairman: • Exercises the power and attributes of the Board • Developed resolutions on the strategic and tactical objectives of the Anna Ma. Margarita B. Dy of Directors during the intervening period Company. President and CEO: between the Board’s meetings, and shall report Aniceto V. Bisnar, Jr. all resolutions adopted by it to the Board of Members: Directors at the first meeting that the latter may Bernard Vincent O. Dy subsequently hold. Pampio A. Abarintos (Independent) Augusto D. Bengzon Audit Committee Chairman: • Provides checks and balances; reviews financial • Discussed and approved the overall scope and the respective audit Fr. Roderick C. Salazar, Jr., SVD statements and related disclosures; ensures plans of the Company’s Internal Auditors and SGV & Co. (Independent) transparency in the Company’s financial • Discussed the results of their audits and their assessment of the Members: management system; and elevates the Company’s Company’s internal controls and the overall quality of the financial Enrique L. Benedicto (Independent) accounting and auditing process reporting process Pampio A. Abarintos (Independent) • Oversees the efficient implementation of internal • Reviewed the reports of the Internal Auditors, ensuring that control mechanisms and processes management is taking appropriate corrective actions in a timely • Ensures efficiency of the Company’s overall manner, including addressing internal controls and compliance issues internal audit system • Recommended to the Board of Directors the re-appointment of SGV & • Recommends the appointment of external Co., as independent external auditors for 2019, based on the review auditors, their remuneration, and performance of of their performance and qualifications, including consideration of functions management’s recommendation • Ensures that the Company complies with rules • Reviewed and approved all audit services provided by SGV & Co. to and regulations, monitors compliance, and acts on CHI and related fees for such services non-compliance Risk Oversight Committee
Chairman: • Ensures that a comprehensive set of risk • Ensured that an overall set of risk management policies and Enrique L. Benedicto (Independent) management policies and procedures is in place, procedures exist for the Corporation. Member: and monitors its effectiveness • Reviewed the results of the annual assessment done by the Chief Risk Pampio A. Abarintos (Independent) • Evaluates risk assessment reports, mitigation Officer (CRO), including the risks identified, their impact or potential Fr. Roderick C. Salazar, Jr., SVD strategies, and action plans impact on the Corporation’s business, and the corresponding (Independent) measures to address such risks. • Evaluated the CRO’s periodic risk assessment reports that may cover existing and emerging risks faced by the Corporation and/or its subsidiaries as well as the risk mitigation strategies and action plans adopted by Management. • Monitored the risk management activities of the Corporation and evaluated the effectiveness of the risk mitigation strategies and action plans, with the assistance of the internal auditors. • Met periodically with Management to discuss the Committee’s observations and evaluation on its risk management activities. Corporate Governance and Nomination Committee
Chairman: • Enforces the required qualifications and • Considered and approved the final list of nominees for directors for Pampio A. Abarintos (Independent) recommends policies for considering nominees for the year 2019 to 2020 Members: positions requiring Board approval Bernard Vincent O. Dy • Encourages the selection of a mix of competent Aniceto V. Bisnar, Jr. directors, and ensures adequate representation of women in the Board • Reviews and discloses succession plans for members of the Board and key officers Personnel and Compensation Committee
Chairman: • Designates remuneration packages and Considered and approved the: Pampio A. Abarintos (Independent) provides oversight over remuneration of senior • 2019 performance evaluation and promotion of associates, managers Members: management and other key personnel and executives; Bernard Vincent O. Dy • Establishes a transparent procedure for • 2019 performance bonus of associates, managers and executives; Aniceto V. Bisnar, Jr. developing remuneration packages and • Reviews and recommends changes to the • Salary adjustments for qualified managers and executives for 2019. Personnel Handbook Related Party Transaction Review Committee
Chairman: • The formulation, revision and approval of policies • Approved a transaction with a related party within the Group Pampio A. Abarintos (Independent) on RPT, and • Discussed RPT transactions (pre-approved RPTs) reported in the Members: • Conduct of any investigation required to fulfill its Financial Statements covering YTD 2019. The discussions were Enrique L. Benedicto (Independent) responsibilities on RPTs. undertaken in the context that management has the primary Fr. Roderick C. Salazar, Jr., SVD responsibility for the financial statements and the reporting process, (Independent) including the system of internal control. Sustainability Committee
Chairman: • Provides oversight, identifies and assesses • Published the Company’s second Integrated Report (CHI
116 A space to take your dreams further APPENDIX 15. MATERIAL ASPECTS AND THEIR BOUNDARIES GRI 102-46, 102-47, 102-49
MATERIAL TOPICS RELEVANCE AFFECTED ENTITIES Economic
Economic Value Generated Delivering returns for our Business operations shareholders and remunerating our Economic Value Distributed other key stakeholders is our top Stockholders Economic Value Retained responsibility. Significant Indirect Economic Impacts Impacts of use of products or services Impact on poverty and/or vulnerable group We rely on two keys to a thriving Suppliers Products for BOP/low income segment business: creating shared value and the practice of inclusive growth Local communities Impact in supply chain by helping enable local economic Jobs supported in supply chain development. Customers Shift to local sourcing Stimulating foreign direct investment Total Foreign direct investments enabled We practice due diligence in Financial Impact to Climate Change Business operations making sure that our sites are resilient against climate change Customers Demand of products and services impacts and other hazards. Social Employee Management We invest in our people and Attrition rate (new hires vs. turn-over) create a healthy and safe working Business operations environment for them. We believe Training & Development that high per- forming employees Employees Diversity, Equal Opportunity & Anti-Discrimination bring success to the business. Labor Management Relations Business operations Workplace Conditions & Compliance to Labor Standards, including suppliers We adhere to labor laws and hold the health and safety of our Organizational Health and Safety Employees workers as paramount. We do not tolerate child and forced labor in Suppliers Child/Forced Labor our operations and suppliers.
Relationship with Commmunity We uphold a healthy relationship Business operations with our communities and promote Human Rights Assessment local economic development with Communities Security Practices them in mind. Customer Management Business operations Health and Safety Our customers are very important to us and their welfare is a priority. Marketing and Labelling Communities Privacy Environmental Resource Management Resources, such as energy (fuel Business operations Energy and electricity), water, and materials are natural capital that Customers Water we need to construct and run our products. Materials Ecosystems & Biodiversity As a real estate company, especially with some products Business operations Watersheds hinged on tourism, we are dependent on ecosystem Marine ecosystems Environment services that provide natural capital and aesthetic value to our IUCN/KBA developments. Environmental Impact We recognize that we have GHG Emissions impacts to the environment in every stage of our value chain Business operations NO , SO , Particulate Matter x x – from construction all the way Effluents to the operations of our estates, Environment buildings, malls and residential Solid Wastes projects. Hazardous Wastes
117 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 16.201-1 APPENDIX 19. ECONOMIC VALUE GENERATION AND EMPLOYEE STATISTICS DISTRIBUTION TOTAL EMPLOYEES 2017 2018 2019 GRI 102-48 By gender ECONOMIC VALUES 2017 2018* 2019 (in million pesos) Male 16 16 16 Economic value 3,092 3,722 4,797 generated Female 29 25 25 Economic value 2,599 3,098 4,427 Total 45 41 41 distributed Payments to By age 1,756 1,974 3,213 suppliers Below 30 Years Old 11 6 4 Payments to 129 124 107 employees 30 - 50 Years Old 29 28 30 Payments to 288 324 355 Over 50 Years Old 5 7 7 providers of capital Payments to Total 45 41 41 394 652 732 government By employee category Payments to 32 24 20 communities Managers 19 18 19 Economic value 493 624 371 retained Associate managers 19 15 16 * Revised figures from 2018 IR Staff 7 8 6 APPENDIX 17. Total 45 41 41 COMMUNITY INVESTMENTS PAYMENTS TO APPENDIX 20. COMMUNITIES (IN 2017 2018 2019 THOUSAND PESOS) NEW HIRES
Education 1,542 2,007 1,715 2017 2018 2019
Entrepreneurship 20,315 6,043 1,485 By gender
Environment 1,419 640 1,043 Male 1 1 1
Tourism, Arts, Female 2 0 1 Culture, and 2,127 4,660 4,136 Religion Total 3 1 2 Health and 1,630 7,968 7,809 By age Wellness Stakeholder Below 30 Years Old 1 0 1 engagement/ 1,263 2,138 1,647 Market Shaping 30 - 50 Years Old 2 1 1
Relief Operations 309 0.889 0 Over 50 Years Old 0 0 0 Advocacy for 3,622 902 1,768 Total 3 1 2 Children
TOTAL 32,227 24,359 19,603 APPENDIX 21. EMPLOYEE TURNOVER APPENDIX 18. WORKFORCE SUPPORTED 2017 2018 2019 WORKFORCE By gender 2017 2018 2019 HEADCOUNT Male 3 1 1 BPO / IT / Telecom 60,874 63,752 68,790 Female 2 4 0 Retail / Hotel / 10,935 9,554 8,208 Sports club Total 5 5 1 Construction 10,605 8,813 6,430 By age Traditional offices/ 8,642 10,695 14,562 Banks Below 30 Years Old 10 1 1
Residential 749 1,294 2,168 30 - 50 Years Old 20 4 0
TOTAL 91,805 94,108 100,158 Over 50 Years Old 1 0 0
Total 31 5 1
118 A space to take your dreams further APPENDIX 22. APPENDIX 24. EMPLOYEE TRAINING HOURS EMPLOYEES ELIGIBLE TO RETIRE IN THE NEXT 5 OR 10 YEARS 2017 2018 2019 2017 2018 2019 Overall Managers 4 3 Total training hours provided to 2,134 1,627 914 Supervisors/Officers 2 2 employees Total number of Staff 1 1 45 41 41 employees
Average 47 40 22
By gender APPENDIX 25. DIRECT ENERGY CONSUMPTION Total training hours GRI 102-48 provided to male 757 611 322 employees IN GIGAJOULES (GJ) 2017 2018* 2019 Total number of 16 16 16 male employees Estates
Average 47 38 20 Cebu Business Park - 298.76 373.97
Total training hours Cebu I.T. Park - 242.71 78.20 provided to female 1,377 1,016 592 employees Retail Total number of 29 25 25 Ayala Center Cebu 748.81 - 66.76 female employees
Average 47 41 24 The Walk 38.75 - 47.49
By employee Garden Row 189.29 457.55 24.92 category Garden Bloc - - 6.65 Total training hours provided to senior 736 673 438 Offices management Total number of eBloc Tower 1 - 185.27 512.51 probationary/regular management 19 18 19 eBloc Tower 2 - 515.81 1,079.88 team members employees eBloc Tower 3 - 249.29 499.04
Average 39 37 23 eBloc Tower 4 - 332.85 273.90
Total training hours Ayala Center Cebu - 977.93 572.87 provided to middle 1,036 589 351 Tower management Tech Tower 322.85 485.59 255.39 Total number of 19 15 16 supervisors Under construction Average 55 39 22 Gatewalk Central 64.4 71.73 4,880.93 Total training hours provided to rank- 363 365 125 The Alcoves 144.62 71.52 51.39 and-file Solinea Tower 3 97.64 Total number of 7 8 6 associates Solinea Tower 4 105.84 225.93 Average 52 46 21 Riala Tower 3 - 91.71 0.00
Riala Tower 4 - 212.91 APPENDIX 23. Seagrove - - 563.41 REPORTED CASES OF WORK ILLNESSES. Central Bloc - 157.24 46.53 2017 2018 2019 Corporate Center 1 Central Bloc Fever 10 13 22 - 189.81 82.71 Corporate Center 2 Flu 11 20 0 Seda Central Bloc - 62.24 122.46 Cebu Headache 11 2 6 The Flats CITP - - 352.30 Stomach ache 7 21 11 The Flats CBP - - 1,222.21 Migraine 6 7 1 AyalaMalls - - 46.45 Muscle pain 6 6 1 Central Bloc
*Revised figures from 2018 IR
119 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 26. APPENDIX 27. INDIRECT ENERGY CONSUMPTION INDIRECT ENERGY INTENSITY GRI 102-48 GRI 102-48
IN GIGAJOULES (GJ) 2017 2018* 2019** IN GIGAJOULES PER SQUARE METER 2017 2018* 2019 Estates (GJ/SQM)
Cebu Business Park 1,197 1,096 1,003 (-8.45%) Estates
Cebu I.T. Park 403 473 814 (72.01%) Cebu Business Park 0.006 0.006 0.006
Retail Cebu I.T. Park 0.003 0.004 0.007
Ayala Center Cebu 26,911 23,677 24,592 (3.87%) Retail
The Walk 844 662 129 (-80.55%) Ayala Center Cebu 0.518 0.431 0.448
Garden Row 4,012 18,025 113 (-99.37%) The Walk 0.280 0.220 0.061
Garden Bloc 24 8 266 (3163.12%) Garden Row 0.088 5.918 0.076
Offices Garden Bloc 0.000 0.000 0.025
eBloc Tower 1 2,796 3,181 2,947 (-7.35%) Offices
eBloc Tower 2 4,057 4,318 3,780 (-12.26%) eBloc Tower 1 0.559 0.636 0.589
eBloc Tower 3 4,591 4,198 3,904 (-7.00%) eBloc Tower 2 0.582 0.620 0.544
eBloc Tower 4 1332 1,454 1,970 (35.44%) eBloc Tower 3 0.753 0.688 0.687
Ayala Center Cebu 5,784 9,881 10,808 (9.39%) eBloc Tower 4 0.134 0.290 0.327 Tower Ayala Center Cebu 0.474 0.809 0.885 Tech Tower 41 1,108 2,535 (128.82%) Tower
Under construction Tech Tower 0.003 0.254 0.633
Gatewalk Central 233 242 2,044 Under construction
The Alcoves 1,113 2,697 2,199 Gatewalk Central 0.002 0.002 0.033
Solinea Tower 3 452 The Alcoves 0.074 0.066 0.004
Solinea Tower 4 1,403 Solinea Tower 3 0.009
Riala Tower 3 1,724 274 Solinea Tower 4 0.024
Riala Tower 4 1,937 Riala Tower 3 0.049 0.008
Seagrove 0 Riala Tower 4 0.054
Central Bloc 1,241 818 Seagrove 0.000 Corporate Center 1 Central Bloc Corporate Central Bloc 0.043 0.019 1,888 560 Center 1 Corporate Center 2 Central Bloc Corporate Seda Central Bloc 0.055 0.009 490 849 Center 2 Cebu Seda Central Bloc Cebu 0.040 0.053 The Flats CITP 0 The Flats CITP 0.000 The Flats CBP 0 The Flats CBP 0.000 AyalaMalls 3,602 831 Central Bloc AyalaMalls Central Bloc 0.012 *Revised figures from 2018 IR **Increases due to increased occupancy *Revised figures from 2018 IR
120 A space to take your dreams further APPENDIX 28. APPENDIX 29. DIRECT GHG EMISSIONS INDIRECT GHG EMISSIONS GRI 102-48
IN TONNES OF CO e 2017 2018* 2019 IN TONNES OF CO2e 2017 2018 2019 2
Estates Estates
Cebu Business Park 20 26 Cebu Business Park 201 217 229
Cebu I.T. Park 17 5 Cebu I.T. Park 68 94 145
Retail Retail
Ayala Center Cebu 53 5 Ayala Center Cebu 4,509 4,509 4,865
The Walk 3 3 The Walk 141 131 25
Garden Row 7 2 Garden Row 34 3,566 22
Garden Bloc 0 Garden Bloc 4 2 53
Offices Offices eBloc Tower 1 13 36 eBloc Tower 1 469 629 583 eBloc Tower 2 37 76 eBloc Tower 2 680 854 750 eBloc Tower 3 18 35 eBloc Tower 3 770 831 772 eBloc Tower 4 24 19 eBloc Tower 4 223 288 390
Ayala Center Cebu Ayala Center Cebu 69 40 969 1,955 2,138 Tower Tower
Tech Tower 13 34 18 Tech Tower 7 219 502
Under construction Under construction
Gatewalk Central 5 5 342 Gatewalk Central 39 48 404
The Alcoves 10 5 4 The Alcoves 187 534 435
Solinea Tower 3 7 7 Solinea Tower 3 89
Solinea Tower 4 16 Solinea Tower 4 277
Riala Tower 3 6 Riala Tower 3 341 54
Riala Tower 4 15 Riala Tower 4 383
Seagrove 4 40 Seagrove 0
Central Bloc Central Bloc 11 3 245 162 Corporate Center 1 Corporate Center 1 Central Bloc Central Bloc 13 6 374 111 Corporate Center 2 Corporate Center 2 Seda Central Bloc Seda Central Bloc 4 9 97 168 Cebu Cebu
The Flats CITP 25 The Flats CITP 0
The Flats CBP 86 The Flats CBP 0
AyalaMalls AyalaMalls 32 3 713 164 Central Bloc Central Bloc
*Revised figures from 2018 IR
121 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 30. APPENDIX 31. GHG EMISSION INTENSITY (SCOPES 1 & 2) WATER CONSUMPTION
IN TONNES OF CO2 e 2017 2018 2019 IN CUBIC METERS 2017 2018 2019* PER SQUARE METER
Estates Estates
Cebu Business Park 0.001 0.001 0.001 Cebu Business Park 1,922 2,131 4,132 (93.90%)
Cebu I.T. Park 0.001 0.001 0.001 Cebu I.T. Park 1,537 2,382 2,447 (2.73%)
Retail Retail
Ayala Center Cebu 0.088 0.087 Ayala Center Cebu 192,546 272,281 293,088 (7.64%)
The Walk 0.048 0.014 The Walk 7,471 13,011 26,787 (105.88%)
Garden Row 0.015 0.017 Garden Row 12,974 18,025 10,644 (-40.95%)
Garden Bloc 0.048 0.005 Garden Bloc 318 295 91 (-69.15%)
Offices Offices
eBloc Tower 1 0.094 0.126 0.124 eBloc Tower 1 6,836 6,600 6,398 (-3.04%)
eBloc Tower 2 0.098 0.123 0.118 eBloc Tower 2 14,914 12,054 8,847 (-26.61%)
eBloc Tower 3 0.126 0.136 0.142 eBloc Tower 3 8,399 14,059 12,811 (-8.88%)
eBloc Tower 4 0.360 0.057 0.068 eBloc Tower 4 2,058 3,151 3,139 (-0.40%)
Ayala Center Cebu Ayala Center Cebu 0.079 0.160 0.178 6,639 11,908 8,685 (-27.06%) Tower Tower
Tech Tower 0.002 0.130 Tech Tower 3,809 5,789 18,651 (222.18%)
Under construction Under construction
Gatewalk Central 0.000 0.000 0.112 Gatewalk Central 445 1,779 6,557
The Alcoves 0.013 0.013 0.004 The Alcoves 7,296 14,577 5,270
Solinea Tower 3 0.000 0.011 Solinea Tower 3 612
Solinea Tower 4 0.028 Solinea Tower 4 2,533
Riala Tower 3 0.010 0.008 Riala Tower 3 8,815 863
Riala Tower 4 0.060 Riala Tower 4 6,949
Seagrove 0.000 0.003 Seagrove 96
Central Bloc Central Bloc 0.009 0.020 4,034 7,379 Corporate Center 1 Corporate Center 1 Central Bloc Central Bloc 0.011 0.010 6,138 4,746 Corporate Center 2 Corporate Center 2 Seda Central Bloc Seda Central Bloc 0.008 0.061 1,592 8,454 Cebu Cebu
The Flats CITP 0.018 The Flats CITP 0
The Flats CBP 1.721 The Flats CBP 208
AyalaMalls AyalaMalls 0.000 0.013 11,708 15,324 Central Bloc Central Bloc
*Increases due to increased occupancy
122 A space to take your dreams further APPENDIX 32. APPENDIX 33. WATER INTENSITY WASTEWATER TREATED IN CUBIC METER IN CUBIC METERS 2017 2018 2019 2017 2018 2019 PER SQUARE METER Cebu Business Park 876,653 963,445 cu m Estates Cebu I.T. Park 662,543 598,829 cu m Cebu Business Park 0.010 0.010 0.022
Cebu I.T. Park 0.012 0.013 0.019 APPENDIX 34. Retail SOLID WASTE GENERATED FROM Ayala Center Cebu 3.710 5.240 5.300 CONSTRUCTION SITES
The Walk 2.480 4.320 12.700 IN CUBIC METERS 2017 2018 2019 Gatewalk Central (Land 374,785 Garden Row 0.286 5.920 7.100 Development and Retail)
Garden Bloc 0.015 0.010 0.009 Avida Riala Tower 3 4,850 11
Offices Avida Riala Tower 4 29,476 568 6,834 eBloc Tower 1 1.370 1.320 1.280 Solinea Tower 3 4,169 29,030 kg eBloc Tower 2 2.140 1.730 1.270 eBloc Tower 3 1.380 2.310 2.250 Solinea Tower 4 288 13,531 41,772 eBloc Tower 4 0.332 0.630 0.520 The Alcoves 12,074 kg 1,109 Ayala Center Cebu 0.544 0.980 0.710 Tower Seagrove 19 Tech Tower 0.265 1.450 4.660 Central Bloc Corporate 1,007 Under construction Center 1 Central Bloc Corporate 4,857 Gatewalk Central 0.004 0.013 0.106 Center 2
The Alcoves 0.486 0.356 0.009 Seda Central Bloc Cebu 1,458 Solinea Tower 3 0.013 The Flats CITP 11,398 Solinea Tower 4 0.043 The Flats CBP 9,644 Riala Tower 3 0.252 0.025
Riala Tower 4 0.193 AyalaMalls Central Bloc 1,724
Seagrove 0.001
Central Bloc 0.141 0.170 APPENDIX 35. Corporate Center 1 TOTAL WASTE GENERATED AND RECYCLED Central Bloc 0.180 0.074 Corporate Center 2 FROM CONSTRUCTION SITES (PER TYPE OF WASTE) Seda Central Bloc 0.131 0.526 Cebu WASTE (IN CUBIC METERS) GENERATED RECYCLED
The Flats CITP 0.000 Concrete 326 45
The Flats CBP 0.293 Wood 2,945 838 AyalaMalls 0.228 Central Bloc Mixed Waste (cu.m.) 8,641 158
Demolition Waste 1,414 0
Soil 6,923 3,495
Masonry 576 33
Papers 1 1
Metal (rebars) - kgs 76 15
Metal 9,488 0
123 CEBU HOLDINGS, INC. 2019 Integrated Report APPENDIX
APPENDIX 36. SOLID WASTE GENERATED FROM OPERATIONAL PROPERTIES
IN TONNES RECYCLABLES NON-RECYCLABLES TOTAL
2018 2019 2018 2019 2018 2019
Estates
Cebu Business Park 23 26 13 10 36 36
Cebu I.T. Park 24 33 5 21 29 54
Retail
Ayala Center Cebu 849 1,145 2,784 5,252 3,633 6,397
The Walk 1 69 187 114 187 183
Garden Bloc 35.74 20.64 321.63 185.73 357.37 206.37
Offices
eBloc Tower 1 7 7 138 148 145 155
eBloc Tower 2 5 6 143 179 149 185
eBloc Tower 3 3 1 53 2 57 36
eBloc Tower 4 6 9 75 10 80 44
Ayala Center Cebu 38 73 21 37 59 110 Tower
Tech Tower 18 13 4 99 22 112
APPENDIX 37. MATERIALS USED BY WEIGHT OR VOLUME Rebars Sand Gravel Cement (in kg) (in cu m) (in cu m) (in bags) Gatewalk 8,536,773.91 20,138.11 25,898.34 816,893.00 The Alcoves - 800.00 - 25,513.00 Avida Riala 4 2,225,370.01 993.00 250.00 12,044.00 Seagrove 46,785.32 1,255.50 2,511.00 22,599.00 Central Bloc Corporate Center 1 - 700.00 210.00 5,750.00 Central Bloc Corporate Center 2 739,666.47 350.00 100.00 1,500.00 The Flats CITP 790,180.79 - - 17,698.00 The Flats CBP 620,194.00 70.86 93.10 100.00 AyalaMalls Central Bloc no data 1,135.00 500.00 18,500.00
124 A space to take your dreams further APPENDIX 38. SUSTAINABILITY ACCOUNTING STANDARDS BOARD METRICS
SASB STANDARD Disclosure Direct Answer Code
Ayala Center Cebu - 133,857.13 Ayala Center Cebu Tower - 28,623.00 eBloc Tower 1 - 20,945.00 eBloc Tower 2 - 27,795.00 eBloc Tower 3 - 15,758.00 Leasable floor area, by property subsector (sqm) IF0402-B eBloc Tower 4 - 15,668.00 Garden Bloc - 5,000.00 Garden Row- 1,557.00 Tech Tower - 16,053.00 The Walk - 2,259.00 Ayala Center Cebu - 93% Activity Metrics Ayala Center Cebu Tower - 100% eBloc Tower 1 - 99% eBloc Tower 2 - 95% eBloc Tower 3 - 100% Average occupancy rate, by property subsector IF0402-D eBloc Tower 4 - 100% Garden Bloc - 100% Garden Row- 72% Tech Tower - 93% The Walk - 100% Number of active projects 9 IF-EN-000.A
Number of commissioned projects 4 IF-EN-000.B Ayala Center Cebu - 29.11% Ayala Center Cebu Tower - 29.90% Cebu Business Park - 9.48% Cebu I.T. Park - 60.80% eBloc Tower 1 - 19.28% Energy consumption data coverage as a Energy Management eBloc Tower 2 - 20.04% percentage of total floor area, by property IF0402-01 eBloc Tower 3 - 26.52% subsector eBloc Tower 4 - 27.75% Garden Bloc - 34.72% Garden Row- 95.64% Tech Tower - 19.97% The Walk - 65.16% Total energy consumed by percentage renewable, 91.74% (Ayala Center Cebu) IF0402-02 by property subsector Like-for-like change in energy consumption of Refer to Appendix 26. Indirect Energy portfolio area with data coverage, by property IF0402-03 Consumption subsector Ayala Center Cebu - 29.11% Ayala Center Cebu Tower - 29.90% Cebu Business Park - 9.48% Cebu I.T. Park - 60.80% Water withdrawal data coverage as a percentage eBloc Tower 1 - 19.28% of total floor area and percentage in regions with eBloc Tower 2 - 20.04% IF0402-06 High or Extremely High Baseline Water Stress, eBloc Tower 3 - 26.52% Water Management each by property subsector eBloc Tower 4 - 27.75% Garden Bloc - 34.72% Garden Row- 95.64% Tech Tower - 19.97% The Walk - 65.16% Like-for-like change in water withdrawn for Refer to Appendix 31. Water portfolio area with data coverage, by property IF0402-08 Consumption subsector Amount of defect and safety-related rework ₱6,927,446.52 IF-EN-250a.1 Structural Integrity & expenses Safety Total amount of monetary losses as a result of legal proceedings associated with defect- and ₱94,710.74 IF-EN-250a.2 safety-related incidents*
Workforce Health & Total recordable injury rate (TRIR) 1.32% Safety IF-EN-320a.1 Fatality rate for (a) direct employees and (b) 0.00% contract employees Number of (1) commissioned projects certified Lifecycle Impacts to a third-party multi-attribute sustainability 0 commissioned projects of Buildings & IF-EN-410a.1 standard and (2) active projects seeking such 1 active project Infrastructure certification
*Result of negotiation
125 CEBU HOLDINGS, INC. 2019 Integrated Report INDEX
GRI Content Index
This report has been prepared in accordance with GRI Sustainability Reporting Standards: Core Option. The GRI Content Index below indicates the reported disclosures and the location of information in this report. We did not seek external assurance in the preparation of this report.
For the Materiality Disclosures Service, GRI Services reviewed that the GRI content index is clearly presented and the references for Disclosures 102-40 to 102-49 align with appropriate sections in the body of the report.
GRI STANDARD DISCLOSURE PAGE NUMBER OR DIRECT ANSWERS
GRI 101: FOUNDATION 2016
GENERAL DISCLOSURES GRI 102: Organizational Profile General Disclosures 102-1 Name of the organization 16 2016 102-2 Activities, brands, products, and services 16-19 102-3 Location of headquarters 16 102-4 Location of operations Within the PH only 102-5 Ownership and legal form 17-18, 67 102-6 Markets served 19 102-7 Scale of the organization 14, 19, 118 102-8 Information on employees and other workers 24, 118 102-9 Supply chain 2015 CHI Annual and Sustainability Report pages 9, 138, 160 102-10 Significant changes to the organization and its supply chain No significant changes during the reporting period 102-11 Precautionary Principle or approach 98-99 102-12 External initiatives 2 102-13 Membership of associations 113 Strategy 102-14 Statement from senior decision-maker 4 102-15 Key impacts, risks, and opportunities 98 - 99 Ethics and integrity 102-16 Values, principles, standards, and norms of behavior 17 102-17 Mechanisms for advice and concerns about ethics 73-74 Governance 102-18 Governance structure 68 102-19 Delegating authority https://www.cebuholdings.com/ governance_list/9/#sustainability 102-20 Executive-level responsibility for economic, environmental, and social topics https://www.cebuholdings.com/ governance_list/9/#sustainability 102-21 Consulting stakeholders on economic, environmental, and social topics 71 102-22 Composition of the highest governance body and its committees 110 102-23 Chair of the highest governance body 90, 110 102-24 Nominating and selecting the highest governance body 85 102-25 Conflicts of interest 86 102-26 Role of highest governance body in setting purpose, values, and strategy 88
126 A space to take your dreams further GRI STANDARD DISCLOSURE PAGE NUMBER OR DIRECT ANSWERS 102-29 Identifying and managing economic, environmental, and social impacts https://www.cebuholdings.com/ governance_list/9/#sustainability 102-30 Effectiveness of risk management processes 96-101 102-31 Review of economic, environmental, and social topics 24 102-32 Highest governance body’s role in sustainability reporting 90 102-33 Communicating critical concerns 74 102-34 Nature and total number of critical concerns 74 102-35 Remuneration policies 71 102-36 Process for determining remuneration 71 102-37 Stakeholders’ involvement in remuneration 71 Stakeholder Engagement 102-40 List of stakeholder groups 56, 73, 114 102-41 Collective bargaining agreements 115 102-42 Identifying and selecting stakeholders 56, 73, 114 102-43 Approach to stakeholder engagement 73, 114 102-44 Key topics and concerns raised 73, 114 Reporting Practice 102-45 Entities included in the consolidated financial statements 2; In the financial statements, entities included are Cebu Holdings, subsidiaries and affiliates. 102-46 Defining report content and topic Boundaries 117 102-47 List of material topics 117 102-48 Restatements of information 118-121 102-49 Changes in reporting 117 102-50 Reporting period 2 102-51 Date of most recent report April 2019 102-52 Reporting cycle 2 102-53 Contact point for questions regarding the report 2 102-54 Claims of reporting in accordance with the GRI Standards 2; This report has been prepared in accordance with the GRI Sttandards: Core Option 102-55 GRI content index 126-133 102-56 External assurance No external assurance was conducted for this report.
127 CEBU HOLDINGS, INC. 2019 Integrated Report INDEX
MATERIAL TOPICS
PAGE NUMBER OR DIRECT GRI STANDARD DISCLOSURE ANSWERS
GRI 200 ECONOMIC STANDARD SERIES
ECONOMIC PERFORMANCE GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 10 - 15 103-3 Evaluation of the management approach 10 - 15 GRI 201: Economic 201-1 Direct economic value generated and distributed 118 Performance 2016 201-2 Financial implications and other risks and opportunities due to climate 24 change
INDIRECT ECONOMIC IMPACTS
GRI 103: Management 103-1 Explanation of the material topic and its Boundary 115 Approach 2016 103-2 The management approach and its components 28 - 55 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 203: Indirect 203-1 Infrastructure investments and services supported 24 Economic Impacts 2016 203-2 Significant indirect economic impacts 24
PROCUREMENT PRACTICES
GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 2018 Integrated Report page 76
103-3 Evaluation of the management approach No evaluation conducted yet GRI 204: Procurement 204-1 Proportion of spending on local suppliers 118 Practices 2016
ANTI-CORRUPTION
GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 73, 115 103-3 Evaluation of the management approach Management approach has been successful as there are no reported incidents GRI 205: Anti-corruption 205-3 Confirmed incidents of corruption and actions taken 73 2016
ANTI-COMPETITIVE BEHAVIOR
GRI 103: Management 103-1 Explanation of the material topic and its Boundar 117 Approach 2016 103-2 The management approach and its components 73, 115 103-3 Evaluation of the management approach Management approach has been successful as there are no reported incidents GRI 206: Anti-competitive 206-1 Legal actions for anti-competitive behavior, anti-trust, and monopoly 73 Behavior 2016 practices
GRI 300 ENVIRONMENTAL STANDARD SERIES
MATERIALS
GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 24 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 301: Materials 2016 301-1 Materials used by weight or volume 123 - 124 301-2 Recycled input materials used 123
128 A space to take your dreams further PAGE NUMBER OR DIRECT GRI STANDARD DISCLOSURE ANSWERS
ENERGY
GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 98 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 302: Energy 2016 302-1 Energy consumption within the organization 119 302-2 Energy consumption outside of the organization 120 302-3 Energy intensity 120 GRI CRE Sector Disclosure CRE1 Building Energy Intensity 120
WATER
GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 98 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 303: Water and 303-1 Interactions with water as a shared resource 2014 Annual and Sustainability Effluents 2018 Report pages 143-144 and 2015 Annual and Sustainability Report pages 150-151 303-2 Management of water discharge-related impacts 2017 CHI Integrated Report page 51 303-3 Water withdrawal 122 GRI CRE Sector Disclosure CRE2 Building Water Intensity 123
BIODIVERSITY GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 98 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 304: Biodiversity 304-1 Operational sites owned, leased, managed in, or adjacent to, protected 50-53 2016 areas and areas of high biodiversity value outside protected areas 304-3 Habitats protected or restored 64-65
EMISSIONS GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 98 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions 121 305-2 Energy indirect (Scope 2) GHG emissions 121 305-4 GHG emissions intensity 122 GRI CRE Sector Disclosure CRE3 Greenhouse gas emissions intensity from buildings 122
EFFLUENTS AND WASTE GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 98 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 306: Effluents and 306-2 Waste by type and disposal method 123-124 Waste 2016
129 CEBU HOLDINGS, INC. 2019 Integrated Report INDEX
MATERIAL TOPICS
PAGE NUMBER OR DIRECT GRI STANDARD DISCLOSURE ANSWERS
SUPPLIER ENVIRONMENTAL ASSESSMENT GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 98 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 308: Supplier 307-1 Non-compliance with environmental laws and regulations 73 - 115 Environmental Assessment 2016
GRI 400 SOCIAL STANDARD SERIES
EMPLOYMENT
GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 73, 115 103-3 Evaluation of the management approach 63 GRI 401: Employment 401-1 New employee hires and empoyee turnover 118 2016 GRI CRE Sector Disclosure EU15 Percent of employees eligible to retire in the next 5 and 10 years broken 119 down by job category and by region
LABOR/MANAGEMENT RELATIONS GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 115 103-3 Evaluation of the management approach Management approach is successful as no cases were filed against CHI for discrimination and non-observance of labor standards and employment contract clauses. GRI 402: Labor/ 402-1 Minimum notice periods regarding operational changes We observe notice period of Management Relations at least 30 days. 2016
OCCUPATIONAL HEALTH AND SAFETY GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 62, 73, 115 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 403: Occupational 403-1 Occupational health and safety management system 58 Health and Safety 2018 403-2 Hazard identification, risk assessment, and incident investigation 115 403-3 Occupational health services 58 403-4 Worker participation, consultation, and communication on occupational 58 health and safety 403-5 Worker training on occupational health and safety 58 403-6 Promotion of worker health 58 403-7 Prevention and mitigation of occupational health and safety impacts directly 58 linked by business relationships 403-8 Workers covered by an occupational health and safety management system 58 403-10 Work-related ill health 119
TRAINING AND EDUCATION GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 60 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability
130 A space to take your dreams further PAGE NUMBER OR DIRECT GRI STANDARD DISCLOSURE ANSWERS GRI 404: Training and 404-1 Average hours of training per year per employee 119 Education 2016 404-2 Programs for upgrading employee skills and transition assistance programs 64
DIVERSITY AND EQUAL OPPORTUNITY
GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 60
103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 405: Diversity and 405-1 Diversity of governance bodies and employees 118 Equal Opportunity 2016
NON-DISCRIMINATION
GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 73, 115 103-3 Evaluation of the management approach Management approach is successful as no cases filed were filed against CHI for discrimination and non- observance of discrimination in the workplace. GRI 406: Non- 406-1 Incidents of discrimination and corrective actions taken 115 discrimination 2016
CHILD LABOR GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 73, 115
103-3 Evaluation of the management approach Management approach has been successful as there are no reported risks and incidents of child labor. GRI 408: Child Labor 2016 408-1 Operations and suppliers at significant risk for incidents of child labor 115
FORCED OR COMPULSORY LABOR GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 73, 115
103-3 Evaluation of the management approach Management approach has been successful as there are no reported risks and incidents of forced labor.
GRI 409: Forced or 409-1 Operations and suppliers at significant risk for incidents of forced or 115 Compulsory Labor 2016 compulsory labor
131 CEBU HOLDINGS, INC. 2019 Integrated Report INDEX
MATERIAL TOPICS
PAGE NUMBER OR DIRECT GRI STANDARD DISCLOSURE ANSWERS
HUMAN RIGHTS ASSESSMENT GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components HR Officer orients all employees on policies, processes and procedures related to human rights provisions. Compliance is extended to general contractors, suppliers, and service providers. A stringent supplier accreditation process is in place to ensure all investment agreements and contracts do not violate human rights 103-3 Evaluation of the management approach Management approach is successful as there are no reported violations on human rights. GRI 412: Human Rights 412-3 Significant investment agreement and contracts that include human rights 115 Assessment 2016 clauses or that underwent human rights screening
LOCAL COMMUNITIES GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 62-63, 73 103-3 Evaluation of the management approach 62-63 GRI 413: Local 413-1 Operations with local community engagement, impact assessments, and The company has a dedicated Communities 2016 development programs Sustainability and Community Relations Department which is responsible for implementing various local community programs and monitor its progress as well as impacts.
CUSTOMER HEALTH AND SAFETY GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 73, 115 103-3 Evaluation of the management approach Management approach is successful as there are no incidents of non-compliance on customer health and safety. GRI 416: Customer Health 416-2 Incidents of non-compliance concerning the health and safety impacts of None to report and Safety 2016 products and services
MARKETING AND LABELLING GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 73, 115 103-3 Evaluation of the management approach Management approach is successful as there are no incidents of non-compliance on marketing and labelling GRI 417: Marketing and 417-2 Incidents of non-compliance concerning product and service information 115 Labeling 2016 and labelling 417-3 Incidents of non-compliance concerning marketing communications 115
132 A space to take your dreams further PAGE NUMBER OR DIRECT GRI STANDARD DISCLOSURE ANSWERS
GRI 400 SOCIAL STANDARD SERIES
CUSTOMER PRIVACY GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 73, 115 103-3 Evaluation of the management approach Management approach is successful as there are no complaints on customer privacy. GRI 418: Customer 418-1 Substantiated complaints concerning breaches of customer privacy and 115 Privacy 2016 losses of customer data
SOCIOECONOMIC COMPLIANCE GRI 103: Management 103-1 Explanation of the material topic and its Boundary 117 Approach 2016 103-2 The management approach and its components 73, 115 103-3 Evaluation of the management approach https://www.cebuholdings. com/governance_ list/9/#sustainability GRI 419: Socio- 419-1 Non-compliance with environmental laws and regulations in the social and 73, 115 economic Compliance economic area 2016
133 CEBU HOLDINGS, INC. 2019 Integrated Report INDEX
ASEAN Corporate Governance Index
Description Page/Link/Direct Description Page/Link/Direct Answer Answer A. Rights of Shareholders C.2 Where stakeholder interests are 74 protected by law, stakeholders A.1 Basic shareholder rights 71 should have the opportunity to obtain A.2 Right to participate in decisions 71 effective redress for violation of their concerning fundamental corporate rights changes C.2.1 Contact details via the company’s 75 A.3 Right to participate effectively in and 71 website or Annual Report which vote in general shareholder meetings stakeholders can use to voice their and should be informed of the rules, concerns and/or complaints for including voting procedures that possible violation of their rights govern general shareholder meetings C.3 Performance-enhancing mechanisms 73 A.3.1 Shareholders as having the 71 for employee participation should be opportunity, evidenced by an agenda permitted to develop item, to approve remuneration or any C.4 Stakeholders including individual 73-74 increases in remuneration for non- employees and their representative executive directors/commissioners bodies, should be able to freely A.3.2 Whether the company provides 71 communicate their concerns about non-controlling shareholders a right illegal or unethical practices to the to nominate candidates for board of board and their rights should not be directors/commissioners compromised for doing this A.3.3 Whether the company allow 71 D. Disclosure and Transparency shareholders to elect directors/ D.1 Transparent ownership structure 76 commissioners individually D.2 Quality of annual report 90 A.3.18 Whether the company provides at 72 least 21 days’ notice for all resolutions D.2.5 Dividend policy 71 D.2.6 Details of whistle-blowing policy 74 A.3.19 Whether the company provides 72 the rationale and explanation for D.2.8 Training and/or continuing education 89 each agenda item which require programme attended by each director/ shareholders’ approval in the commissioner notice of AGM/circulars and/or the Details of remuneration of each 87, 108-109 accompanying statement D.2.11 member of the board of directors/ A.5 The exercise of ownership rights by all 71 commissioners shareholders, including institutional Statement of full compliance with the 70 investors, should be facilitated D.2.12 Code of Corporate Governance Whether the company publicly A.5.1 71 Disclosure of related party 72 disclose its policy/practice to D.3 transactions encourage shareholders including institutional shareholders to attend D.4 Directors and commissioners dealings 72 the general meetings or engagement in shares of the company with the company D.5 External auditor and auditor report 77 B. Equitable Treatment of Shareholders D.6 Medium of communications 75 B.1 Shares and voting rights 73 D.6.1 Quarterly reporting 75 B.1.1 Whether the company’s ordinary or 74 common shares have one vote for one D.6.2 Company website 75 share D.6.3 Analyst's briefing 78 Notice of AGM B.2 75 D.6.4 Media briefing/press conferences 78 Whether the profiles of directors/ B.2.3 73 D.7 Timely filing/release of annual/ 75 commissioners in seeking election/ financial reports re-election are included in the notice of AGM D.8 Company website 79 B.2.4 Whether the auditors seeking 73-74 D.9 Investor Relations 79 appointment/re-appointment are clearly identified in the notice of AGM D.9.1 Contact details of the officer/office 75 responsible for investor relations B.3 Policy on insider trading and abusive 72 self-dealing B.4 Related party transactions by directors 72 E. Responsibilities of the Board and key executives E.1 Clearly-defined board responsibilities 80-81 B.5 Protecting minority shareholders from 72 and corporate governance policy abusive actions E.2.1 Details of the Code of Ethics 82, 86, 91 C. Role of Stakeholders E.2.2 Compliance of directors, senior 91 C.1 The rights of stakeholders that are 73 management, and employees to the established by law or through mutual Code agreements are to be respected E.2 Code of Ethics or Conduct 91 E.2.3 Compliance monitoring mechanism 91
134 A space to take your dreams further Description Page/Link/Direct Description Page/Link/Direct Answer Answer E.2.4 Composition of the Board of Directors 82 E.3.7 Whether the company secretary 85 plays a significant role in supporting E.2.5 Definition of independent directors 82 the board in discharging its E.2.6 Term limit for independent directors 82 responsibilities Whether the company secretary 85 Board seat limit for independent 82 E.3.8 E.2.7 is trained in legal, accountancy or directors company secretarial practices Details of the Company's Nomination https://www.cebuholdings. E.2.9 Criteria in selecting new directors 85 Committee com/governance_list/9/ E.3.9 E.2.10 Composition of the Nomination https://www.cebuholdings. E.3.10 Process in appointing new directors 85 Committee com/governance_list/9/ E.3.11 Re-election 85 Pampio A. Abarintos E.2.11 Chairman of the Nomination E.3.12 The company’s remuneration policy/ 87 Committee practices for its executive directors E.2.12 Nomination Committee Charter https://www.cebuholdings. and CEO com/governance_list/9/ E.3.13 Fee structure for non-executive 87 E.2.13 Nomination Committee Meetings https://www.cebuholdings. directors/commissioners com/governance_list/9/ E.3.14 Shareholders or the Board 87 E.2.14 Attendance details of Nomination https://www.cebuholdings. of Directors’ approval of the Committee Meetings com/governance_list/9/ remuneration for executive directors and/or the senior executives E.2.15 Details of the company's https://www.cebuholdings. Compensation Committee com/governance_list/9/ E.3.15 Whether independent non-executive 87 directors/commissioners receive Composition of the Compensation https://www.cebuholdings. E.2.16 options, performance shares or Committee com/governance_list/9/ bonuses Chairman of the Compensation Pampio A. Abarintos E.2.17 E.3.19 Internal control procedures and risk Risk oversight committee Committee management systems https://www.cebuholdings. E.2.18 Compensation Committee Charter https://www.cebuholdings. com/governance_list/9/ com/governance_list/9/ E.3.20 Board review of the company's Risk oversight committee E.2.19 Compensation Committee Meetings https://www.cebuholdings. material controls and risk https://www.cebuholdings. com/governance_list/9/ management systems com/governance_list/9/ E.2.20 Attendance details of Compensation https://www.cebuholdings. E.3.21 Risk management Risk oversight committee Committee Meetings com/governance_list/9/ https://www.cebuholdings. , 106 com/governance_list/9/ E.2.21 Details of the company's Audit https://www.cebuholdings. E.3.22 Statement from the Board or Audit Risk oversight committee Committee com/governance_list/9/ Committee on the adequacy of the https://www.cebuholdings. company's internal controls com/governance_list/9/ E.2.22 Composition of the Audit Committee https://www.cebuholdings. com/governance_list/9/ E.4 People on the Board 90 E.2.23 Chairman of the Audit Committee Fr. Roderick C. Salazar, E.4.5 Whether at least one non-executive 88 Jr., SVD director/commissioner have prior (Independent) working experience in the major sector E.2.24 Audit Committee Charter https://www.cebuholdings. that the company is operating in com/governance_list/9/ E.4.6 Company’s disclosure of board of 88 E.2.25 Audit Committee Members Enrique L. Benedicto directors/commissioners diversity (Independent) policy Pampio A. Abarintos (Independent) E.5 Board Performance 89 E.2.26 Expertise of Audit Committee https://www.cebuholdings. E.5.1 Orientation programs for new 111 Members com/governance_list/9/ directors/commissioners E.2.27 Audit Committee Meetings https://www.cebuholdings. E.5.2 Company policy that encourages 89 com/governance_list/9/ directors/commissioners to attend on-going or continuous professional E.2.28 Attendance details of Audit Committee 110 education programmes Meetings E.5.5 Annual performance assessment 89 E.2.29 Responsibilities of the Audit https://www.cebuholdings. conducted by the board of directors/ Committee com/governance_list/9/ commissioners E.3 Corporate vision/mission 17 E.5.6 Process followed in conducting the 89 board assessment E.3.1 Scheduling of Board Meeting 84 E.3.2 Details of the Meetings of the Board 84 E.5.7 Criteria used in the board assessment 89 E.3.3 Attendance details of Board Meetings 84 E.5.8 Annual performance assessment 89 conducted of individual director/ Board quorum requirement 84 E.3.4 commissioner Meeting details of non-executive 84, 110 E.3.5 E.5.9 Process followed in conducting the 89 directors director/commissioner assessment E.5.10 Criteria used in the director/ 89 commissioner assessment
135 CEBU HOLDINGS, INC. 2019 Integrated Report 136 A space to take your dreams further Financial Report
FROM: AVB - BISNAR TO: A. DELA CRUZ RE: GOOD JOB!
137 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements CEBU HOLDINGS, INC AND SUBSIDIARIES STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
138 A space to take your dreams further CEBU HOLDINGS, INC. AND SUBSIDIARIES REPORT OF THE AUDIT COMMITTEE TO THE BOARD OF DIRECTORS
As Audit Committee members, our roles and responsibilities are defined in the Audit Committee Charter approved by the Board of Directors. We assist the Board of Directors in fulfilling its oversight responsibility to the shareholders relating to: • the integrity of Cebu Holdings Inc.’s (the “Company”) financial statements and the financial reporting process; • the appointment, re-appointment, remuneration, qualifications, independence and performance of the independent auditors and the integrity of the audit process as a whole; • the effectiveness of the systems of internal control and the risk management process; • the performance and leadership of the internal audit function; • the Company’s compliance with applicable legal and regulatory requirements; and • the preparation of a year-end report of the Committee for approval of the Board and to be included in the annual report.
In compliance with the Audit Committee Charter, we confirm that: • An independent director chairs the Audit Committee. All members of the Committee are independent directors.
• We had four (4) meetings in 2019, with the following attendance rate: Committee Member No. of Meetings Percent Present Attended/Held Fr.Roderick C. Salazar, Jr., SVD (Chairman) 4/4 100% Enrique L. Benedicto 4/4 100% Pampio A. Abarintos 4/4 100%
• We recommended to the Board of Directors the re-appointment of SGV & Co., as independent external auditors for 2020, based on the review of their performance and qualifications, including consideration of management’s recommendation. The Committee delegates to management the negotiation and finalization of fees;
• We reviewed and discussed the quarterly unaudited consolidated financial statements and the annual audited consolidated financial statements of Cebu Holdings, Inc. and subsidiaries, including Management’s Discussion Analysis of Financial Condition and Results of Operations as of and for the year ended December 31, 2019, with the Company’s management and SGV & Co. these activities were performed in the following context: - That management has the primary responsibility for the financial statements and the reporting process - That SGV & Co. is responsible for expressing an opinion on the conformity of the Company’s consolidated audited financial statements with Philippine Reporting Standards.
• We discussed and approved the overall scope and the respective audit plans of the Company’s Internal Auditors and SGV & Co. We have also discussed the results of their audits and their assessment of the Company’s internal controls and the overall quality of the financial reporting process;
139 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
• We also reviewed the reports of the Internal Auditors, ensuring that management is taking appropriate corrective actions in a timely manner, including addressing internal controls and compliance issues. All the activities conducted by Internal Audit were conducted in conformance with the International Standards for the Professional Practice of Internal Auditing. Based on the assurance provided by Internal Audit as well as SGV & Co., as a result of their activities, the Committee assessed that the Company’s systems of internal controls, risk management and governance processes are adequate.
• We reviewed and approved all audit services provided by SGV & Co. to Cebu Holdings, Inc. and related fees for such services.
Based on the reviews and discussions undertaken, and subject to the limitations on our roles and responsibilities referred to above, the Audit Committee recommended to the Board of Directors the inclusion of the Company’s consolidated financial statements as of and for the year ended December 31, 2019 in the Company’s Annual Report to the Stockholders and for filing with the Securities and Exchange Commission.
February 7, 2020
FR. RODERICK C. SALAZAR, JR., SVD Committee Chairman
CONSUL ENRIQUE L. BENEDICTO JUSTICE PAMPIO A. ABARINTOS (RET) Committee Member Committee Member
140 A space to take your dreams further CEBU HOLDINGS, INC. AND SUBSIDIARIES REPORT OF THE RISK OVERSIGHT COMMITTEE TO THE BOARD OF DIRECTORS
As Risk Committee members, our roles and responsibilities are defined in the Board Risk Oversight Committee Charter approved by the Board of Directors. We assist the Board in the performance of its oversight functions of the Company’s risk management activities through continuous input, evaluation and feedback on the effectiveness of the Company’s risk management process.
In compliance with the Risk Oversight Committee Charter, we confirm that: • An independent director chairs the Risk Oversight Committee. All members of the Committee are independent directors. • We had four (4) meetings in 2019, with the following attendance rate: Committee Member No. of Meetings Attended/Held Percent Present Enrique L. Benedicto (Chairman) 4/4 100% Fr.Roderick C. Salazar, Jr., SVD 4/4 100% Pampio A. Abarintos 4/4 100%
• We reviewed and discussed the adequacy of the Company’s Enterprise-wide Risk Management (ERM) Process, including the major risk exposures, the related risk mitigation efforts and initiatives, and the status of risk mitigation plans. The review was undertaken in the context that management is primarily responsible for the risk management process.
Based on the reviews and discussions undertaken, and subject to the limitations on our roles and responsibilities referred to above, the Risk Oversight Committee has been assured that activities are undertaken by the Company to monitor its key risks and to ensure that management is taking appropriate actions to mitigate the impact of these key risks.
February 7, 2020
CONSUL ENRIQUE L. BENEDICTO Committee Chairman
FR. RODERICK C. SALAZAR, JR., SVD JUSTICE PAMPIO A. ABARINTOS (RET.) Committee Member Committee Member
141 CEBU HOLDINGS, INC. 2019 Integrated Report
Financial Statements
CEBU HOLDINGS, INC. AND SUBSIDIARIES
REPORT OF THE RELATED PARTY TRANSACTION COMMITTEE
TO THE BOARDReport OF of DIRECTORS the Related Party Transaction Review Committee to the Board of Directors For the Year Ended December 31, 2019
As Related Party Transaction Review Committee members, our roles and responsibilities are defined in the CommitteeAs Related’s Charter Party appr Transactionoved by theReview Board Committee of Directors. membe Wers, assistour roles the andBoard responsibilities in the performance are defined of its in the oversightCommittee’s functions related Charter to approved the review by of the all BoardRelated of Party Direct Transactionsors. We assist (RPT), the except Board for in thethe performancepre-approved of its RPTs, oversightthe formulation, functions revision related and to theapproval review of of policies all Related on RPT,Party andTransactions conduct of (RPT), any investigation except for the required pre-approved to fulfil itsRPTs, responsibilities the formulation, on RPTs. revision and approval of policies on RPT, and conduct of any investigation required to fulfil its responsibilities on RPTs. In compliance with the Committee’s Charter, we confirm that: In compliance with the Committee’s Charter, we confirm that: • An independent director chairs the Related Party Transaction Review Committee. All members of •the AnCommittee independent are independent director chairs directors. the Related Party Transaction Review Committee. All members of the Committee are independent directors. • We had two (4) meetings in 2019, with the following attendance rate: • We had two (4) meetings in 2019, with the following attendance rate: Committee Member No. of Meetings Attended/Held Percent Present Committee Member No. of Meetings Attended/Held Percent Present Pampio A. Abarintos (Chairman) 4/4 100% Pampio A. Abarintos (Chairman) 4/4 100% Enrique L. Benedicto 4/4 100% Enrique L. Benedicto 4/4 100% Fr.Roderick C. Salazar, Jr., SVD 4/4 50% Fr.Roderick C. Salazar, Jr., SVD 4/4 50%
• We approved a transaction with a related party within the Group before its commencement. • We approved the sale of CHI lot to Avida, a related Party within the Group. • We discussed RPT transactions (pre-approved RPTs) reported in the Financial Statements • We discussed RPT transactions (pre-approved RPTs) reported in the Financial Statements covering YTD 2019. The discussions were undertaken in the context that management has the covering YTD 2019. The discussions were undertaken in the context that management has the primary responsibility for the financial statements and the reporting process, including the system primary responsibility for the financial statements and the reporting process, including the system of internal control. of internal control.
Based on the reviews and discussions undertaken, and subject to the limitations on our roles and Based on the reviews and discussions undertaken, and subject to the limitations on our roles and responsibilities referred to above, the Related Party Transaction Review Committee has been assured that responsibilities referred to above, the Related Party Transaction Review Committee has been assured that systems are in place and activities are undertaken by the Company to ensure that RPTs are made on an systems are in place and activities are undertaken by the Company to ensure that RPTs are made on an arm’s length basis and in accordance with the approved RPT Policy and Financial Reporting Standards. arm’s length basis and in accordance with the approved RPT Policy and Financial Reporting Standards.
February 7, 2020 February 7, 2020
CONSUL ENRIQUE L. BENEDICTO Committee Chairman
FR. RODERICK C. SALAZAR, JR., SVD JUSTICE PAMPIO A. ABARINTOS (RET.) Committee Member Committee Member
142 A space to take your dreams further CEBU HOLDINGS, INC. AND SUBSIDIARIES INTERNAL CONTROL AND COMPLIANCE SYSTEM ATTESTATION
Cebu Holdings, Inc.’s corporate governance system includes a combination of internal and external mechanisms such as the structure of the board of directors and our committees, oversight of management, and sound policies and controls.
• Board of Directors is responsible in providing governance and overseeing the implementation of adequate internal control mechanisms and risk management process; • Management has the primary responsibility to design and implement an adequate and effective system of internal controls and risk management processes to ensure compliance with law, rules and regulations; • Management is responsible to develop a system to monitor and manage risks; • SGV & Co., the Corporation’s external auditor, is responsible for assessing and expressing an opinion on the conformity of the audited financial statements with Philippine Financial Reporting Standards and the overall quality of the financial reporting process; • Internal Audit adopts a risk-based audit approach in developing an annual work plan and conducts reviews to assess the adequacy of the Corporation’s internal controls; • The Chief Audit Executive reports functionally to the Audit Committee to ensure independence and objectivity allowing Internal Audit to fulfill its responsibilities; and • Internal Audit activities conform with the International Standards for the Professional Practice of Internal Auditing and are continuously evaluated through an independent Quality Assessment Review conducted every five years.
Based on the above assurance provided by the internal auditors as well as the external auditors as a result of their reviews, we attest that Cebu Holdings, Inc.’s system of internal controls, risk management, compliance and governance processes are adequate.
Aniceto V. Bisnar, Jr. President and Chief Executive Officer
Ma. Luisa D. Chiong Jennifer G. Sia Compliance Officer Chief Audit Executive
143 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
CEBU HOLDINGS, INC. AND SUBSIDIARIES INDEPENDENT AUDITORS REPORT
The Stockholders and Board of Directors Cebu Holdings, Inc. and Subsidiaries 20th Floor, Ayala Center Cebu Tower, Bohol Street Cebu Business Park, Cebu City
Opinion
We have audited the consolidated financial statements of Cebu Holdings, Inc. (the “Parent Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statements of financial position as at December 31, 2019 and 2018, and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the three years in the period ended December 31, 2019, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and their consolidated financial performance and their cash flows for each of the three years in the period ended December 31, 2019 in accordance with Philippine Financial Reporting Standards (PFRSs).
Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report, including in relation to these matters. Accordingly, our audits included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
Provisions and Contingencies
The Group is currently involved in a legal proceeding. This matter is significant to our audit because the determination of whether any provision should be recognized and estimation of the potential liability resulting from this assessment requires significant judgment by management. The inherent uncertainty over the outcome of this matter is brought about by the differences in the interpretation and implementation of the relevant laws and regulations.
The Group’s disclosure about provisions and contingencies are included in Note 33 to the consolidated financial statements.
Audit response
We discussed the status of the legal proceeding with the management and the Group’s external legal counsel and obtained opinion of their external legal counsel. We reviewed management’s assessment on the possible outcome of the legal proceeding and the need to recognize and estimate the provision based on the status of the case and considering relevant local rules and regulations.
Accounting for lease rental income
Rental income represents 61% of the Group’s consolidated revenue for the year ended December 31, 2019. The Group generally recognized lease payments as rental income on a straight-line basis over the lease term. Also, there are several lease arrangements where recognition of rental income is based on certain percentages of sales of the lessees. We considered this as a key audit matter because the Group has high volume of lease agreements and the recorded rental income is material to the consolidated financial statements.
The disclosures related to rental income are included in Note 21 to the consolidated financial statements.
144 A space to take your dreams further
Audit Response
We tested the population of lease agreements in the calculations of rental income prepared by management by comparing against the lease contract database. On a test basis, we inspected the lease agreements, identified their contractual terms and conditions, including the subsequent changes or updates to the contracts, and traced these to the lease calculations prepared by management. For selected lease contracts, we performed recalculation of the rental income, including the application of the straight line method.
Other Information
Management is responsible for the other information. The other information comprises the information included in the SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report for the year ended December 31, 2019, but does not include the consolidated financial statements and our auditor’s report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report for the year ended December 31, 2019 are expected to be made available to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits, or otherwise appears to be materially misstated.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with PFRSs, 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.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with PSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit 145 evidence obtained, whether a material uncertainty exists related to events or conditionsCEBU HOLDINGS, that may castINC. significant 2019 Integrated doubt onReport the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Audit Response
We tested the population of lease agreements in the calculations of rental income prepared by management by comparing against the lease contract database. On a test basis, we inspected the lease agreements, identified their contractual terms and conditions, including the subsequent changes or updates to the contracts, and traced these to the lease calculations prepared by management. For selected lease contracts, we performed recalculation of the rental income, including the application of the straight line method.
Other Information
Management is responsible for the other information. The other information comprises the information included in the SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report for the year ended December 31, 2019, but does not include the consolidated financial statements and our auditor’s report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report for the year ended December 31, 2019 are expected to be made available to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits, or otherwise appears to be materially misstated.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with PFRSs, 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.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with PSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to Financialprovide Statements a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Dolmar C. Montañez.
SYCIP GORRES VELAYO & CO.
Dolmar C. Montañez Partner CPA Certificate No. 112004 SEC Accreditation No. 1561-AR-1 (Group A), January 31, 2019 valid until January 30, 2022 Tax Identification No. 925-713-249 BIR Accreditation No. 08-001998-119-2019, January 28, 2019, valid until January 27, 2022 PTR No. 8125272, January 7, 2020, Makati City
February 26, 2020
146 A space to take your dreams further CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts in Thousands)
December 31 2019 2018 ASSETS Current Assets Cash and cash equivalents (Notes 5 and 27) P=313,148 P=224,523 Short-term investments (Notes 6 and 27) 26,380 25,244 Financial assets at fair value through profit or loss (Notes 7 and 27) 9,688 10,379 Receivables (Notes 8, 20 and 27) 3,017,755 2,291,319 Inventories (Note 9) 576,189 812,292 Other current assets (Note 10) 339,260 234,287 Total Current Assets 4,282,420 3,598,044 Noncurrent Assets Receivables - net of current portion (Notes 8 and 27) 254,609 362,813 Financial assets at fair value through other comprehensive income (OCI) (Note 11) 349,806 342,650 Property and equipment (Note 12) 261,056 280,648 Investments in associates and a joint venture (Note 13) 1,721,426 1,487,335 Investment properties (Note 14) 21,066,414 19,186,946 Deferred tax assets - net (Note 25) 12,315 25,488 Other noncurrent assets (Notes 16 and 27) 1,294,484 1,057,904 Total Noncurrent Assets 24,960,110 22,743,784 P=29,242,530 P=26,341,828
LIABILITIES AND EQUITY Current Liabilities Accounts and other payables (Notes 17, 20, 27 and 28) P=8,946,476 P=8,418,721 Contract liabilities (Note 15) − 65,541 Current portion of long-term debt (Notes 18 and 27) 76,966 59,956 Income tax payable 261,802 13,417 Deposits and other current liabilities (Notes 19 and 27) 954,749 897,661 Total Current Liabilities 10,239,993 9,455,296 Noncurrent Liabilities Long-term debt - net of current portion (Notes 18 and 27) 6,271,682 6,341,019 Pension liabilities (Note 24) 35,619 32,703 Deferred tax liabilities - net (Note 25) 232,687 275,753 Deposits and other noncurrent liabilities (Notes 19 and 27) 337,688 177,608 Total Noncurrent Liabilities 6,877,676 6,827,083 Total Liabilities 17,117,669 16,282,379 Equity (Note 28) Equity attributable to equity holders of Cebu Holdings, Inc. Capital stock 2,916,845 2,916,845 Treasury shares (760,088) (760,088) Additional paid-in capital 856,684 856,684 Retained earnings 6,143,508 4,809,452 Equity reserves 264,560 264,560 Remeasurement loss on defined benefit plan (Note 24) (29,294) (27,404) Net unrealized gain on equity instruments at fair value through OCI 9,517 2,361 9,401,732 8,062,410 Non-controlling interests (Note 4) 2,723,129 1,997,039 Total Equity 12,124,861 10,059,449 P=29,242,530 P=26,341,828
See accompanying Notes to Consolidated Financial Statements.
147 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, except Earnings Per Share Figures)
Years Ended December 31 2019 2018 2017 REVENUE Real estate (Notes 14, 21 and 30) P=4,033,266 P=3,112,558 2,621,733 Equity in net earnings of associates and a joint venture (Note 13) 234,864 106,039 14,713 4,268,130 3,218,597 2,636,446 Interest income (Notes 5, 6, 8 and 22) 84,186 67,047 41,533 Other income (Note 22) 444,737 436,196 414,255 528,923 503,243 455,788 4,797,053 3,721,840 3,092,234 COSTS AND EXPENSES Real estate (Note 23) 1,900,536 1,875,263 1,437,580 Interest expense (Note 18) 439,174 388,459 345,214 General and administrative expenses (Note 23) 266,738 199,051 212,083 Other charges (Note 23) 25,512 16,308 22,916 2,631,960 2,479,081 2,017,793 INCOME BEFORE INCOME TAX 2,165,093 1,242,759 1,074,441 PROVISION FOR INCOME TAX (Note 25) Current 524,695 274,643 251,143 Deferred (29,083) (1,914) 10,294 495,612 272,729 261,437 NET INCOME P=1,669,481 P=970,030 P=813,004
Net Income Attributable to: Equity holders of Cebu Holdings, Inc. P=1,657,569 P= 8 5 7 , 1 1 1 P= 7 5 3 , 4 4 7 Non-controlling interests (Note 4) 11,912 112,919 59,557 P=1,669,481 P=970,030 P=813,004
Basic/Diluted Earnings Per Share (Note 26) P=0.77 P= 0 . 4 4 P= 0 . 3 9
See accompanying Notes to Consolidated Financial Statements.
148 A space to take your dreams further CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in Thousands)
Years Ended December 31 2019 2018 2017 Net income P=1,669,481 P=970,030 P=813,004 Other comprehensive income Other comprehensive income not to be reclassified to profit or loss in subsequent years: Unrealized gain on financial asset at fair value through OCI 7,156 38,877 − Remeasurement gain (loss) on defined benefit plan (Note 24) (2,700) 1,485 (5,993) Tax effect relating to components of other comprehensive gain (loss) 810 (445) 1,798 Total other comprehensive income (loss) 5,266 39,917 (4,195) Total comprehensive income P=1,674,747 P=1,009,947 P=808,809
Total comprehensive income attributable to: Equity holders of Cebu Holdings, Inc. P=1,662,835 P=897,028 P=749,252 Non-controlling interests 11,912 112,919 59,557 P=1,674,747 P=1,009,947 P=808,809
See accompanying Notes to Consolidated Financial Statements.
149 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
4 − 30 Total 5,266 (4,195) 39,917 996,771 970,0 813,00 808,809 808,809 714,178 (323,513) (295,358) (323,513) (760,088) (288,010) 1,669,481 1,669,481
− − − − − − − − − 919 1,009,947 Non- 59,557 59,557 59,557 11,912 1,674,747 11,912 (Note 4) 112,919 112, 714,178 Interest Interest (569,392) P=958,500 P=958,500 P=7,936,678
− − 1,495,012 1,495,012 − e to 6,771 5,266 (4,195) 39,917 857,111 753,447 753,447 99 274,034 274,034 749,252 897,028 (323,513) (323,513) (760,088) (288,010) Company Company 1,662,835 P=6,978,178 P=6,527,891 P=6,527,891 P=898,943 P=7,426,834 P=6,989,133 P=6,989,133 P=958,500 P=7,947,633 P=8,062,410 P=8,062,410 P=1,997,039 P=10,059,449 P=9,401,732 P=9,401,732 P=2,723,129 P=12,124,861 P=8,062,410 P=8,062,410 P=1,997,039 P=10,059,449
− − − − − − − − − − 1,657,569 − − 40 1,040 1,0 (4,195) (4,195) (1,890) (1,890) Benefit Benefit Holders Equity controlling (Note 24) (P=27,404) (P=24,249) (P=28,444) (P=28,444) (P=27,404)
− − − − − − − − − − − − − − 61 17 (P=29,294) 61 P=− P=− P=− 7,156 7,156 38,877 38,877 38,877 P=2,3 P=9,5 P=2,3 Gain on on Gain on (Loss) Gain Attributabl (P=36,516) at Fair Value Value Fair at Obligation Parent of
Asset Financial Defined Unrealized Remeasurement Equity Total − − − − − − − − − Total through OCI 857,111 857,111 753,447 753,447 753,447 753,447 (323,513) (323,513) (288,010) P=4,275,854 For the Year Ended December 31, 2017 2017 31, December Ended Year the For For the Year Ended December 31, 2018 2018 31, December Ended Year the For For the Year Ended December 31, 2019
− − − − − − − − (Note 28) 857,111 857,111 753,447 753,447 753,447 753,447 (323,513) ngs (323,513) (288,010) Attributable toParentAttributable P=2,975,854
− − − − − − − − 1,657,569 1,657,569 − − − − 1,657,569 1,657,569 − − − − − Retained Earni Retained P=1,300,000 P=1,300,000 P=2,484,856 P=3,784,856 P=1,300,000 P=2,950,293 P=4,250,293 Appropriated Unappropriated
− − − − − − − − − − − 2,500,000 (2,500,000) − − − − − − − Equity Equity (Note 2) ( P= 9 , 4 7 4 ) ( P= 9 , 4 7 4 ) 274,034 274,034 (P=9,474) Reserve Reserve P=264,560 P=264,560 P=1,300,000 P=3,509,452 P=4,809,452 P=264,560 P=264,560 P=1,300,000 P=3,509,452 P=264,560 P=4,809,452 P=3,800,000 P=2,343,508 P=6,143,508
− − − − − − − − − − − − − − − − − − P= − P= − P= − Shares Shares (Note 2) (760,088) Treasury Treasury
− − − − − − − − − − − − − − − − − − − Capital Capital Paid-in Paid-in (Note 28) P= 8 5 6 , 6 8 4 P= 8 5 6 , 6 8 4 P=856,684
Additional − − − − − − − − − − − − − − − − − − 996,771 996,771 (Note 28) P=1,920,074 P=1,920,074 P=1,920,074 P=2,916,845 P=2,916,845 P=856,684 (P=760,088) P=2,916,845 P=2,916,845 P=856,684 (P=760,088) P=2,916,845 P=856,684 (P=760,088) Capital Stock Stock Capital atements.
Other comprehensive income income Othercomprehensive Other comprehensive income income comprehensive Other Net Income Net Income income comprehensive Other Net Income 28) (Note declared Dividends CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY IN CHANGES OF STATEMENTS CONSOLIDATED CEBU HOLDINGS, INC. AND SUBSIDIARIES INC. CEBU HOLDINGS, in Thousands) (Amounts Dividends declared (Note 28) 28) Dividends (Note declared Total Comprehensive income Comprehensive Total of 2019 January 1, as Balance income: Comprehensive income Comprehensive Total Appropriation Additional (Note of 4) NCI infusion capital of December as 2019 31, Balance January 1, 2018 income: Comprehensive issued shares Additional shares Treasury 4) (Note interests non-controlling CBDI subsidiary with a of merger Effect 28) (Note declared Dividends of December as 2018 31, Balance of 2017 January 1, as Balance income Comprehensive income Comprehensive Total of December as 2017 31, Balance See accompanying Notes to ConsolidatedFinancial St
150 A space to take your dreams further
4 − 30 CEBU HOLDINGS, INC. AND SUBSIDIARIES Total 5,266 (4,195) 39,917 996,771 970,0 813,00 808,809 808,809 714,178 (323,513) (295,358) (323,513) (760,088) (288,010)
1,669,481 1,669,481 CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands)
− − − − − − − − − 919 1,009,947 Non- 59,557 59,557 59,557 11,912 1,674,747 11,912 (Note 4) 112,919 112, 714,178 Interest Interest (569,392) Years Ended December 31 P=958,500 P=958,500 P=7,936,678 2019 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES − − − 1,495,012 1,495,012
e to Income before income tax P=2,165,093 P=1,242,759 P=1,074,441 6,771 5,266 (4,195) 39,917 857,111 753,447 753,447 99 274,034 274,034 749,252 897,028 (323,513) (323,513) (760,088) (288,010) Adjustments for: Company Company 1,662,835 P=6,978,178 P=6,527,891 P=6,527,891 P=898,943 P=7,426,834 P=6,989,133 P=6,989,133 P=958,500 P=7,947,633 P=8,062,410 P=8,062,410 P=1,997,039 P=10,059,449 P=9,401,732 P=9,401,732 P=2,723,129 P=12,124,861 P=8,062,410 P=8,062,410 P=1,997,039 P=10,059,449 Depreciation and amortization (Notes 12, 14 and 23) 604,523 549,685 495,610 Interest expense (Note 18) 439,174 388,459 345,214
− − − − − − − − − 1,657,569 − − − Equity in net earnings of associates 40 1,0 1,040 (4,195) (4,195) and a joint venture (Note 13) (234,864) (106,039) (14,713) (1,890) (1,890) Benefit Benefit Holders Equity controlling (Note 24) (P=27,404) (P=24,249) (P=28,444) (P=28,444) (P=27,404) Interest income (Note 22) (84,186) (67,047) (41,533) Unrealized loss (gain) on financial assets at fair value through profit or loss 691 (250) (93)
− − − − − − − − − − − − − − 61 17 (P=29,294) 61 P=− P=− P=− Pension expense (contribution) – net 216 1,920 (5,923) 7,156 7,156 38,877 38,877 38,877 P=2,3 P=9,5 P=2,3 Unrealized foreign exchange gain (207) (579) (105) Gain on on Gain on (Loss) Gain Attributabl (P=36,516) Loss on disposal of property and equipment 4 − − at Fair Value Value Fair at Obligation Parent of Operating income before working capital changes 2,890,444 2,008,908 1,852,898
Unrealized Remeasurement Equity Total Asset Financial Defined Decrease (increase) in: − − − − − − − − − Receivables (617,996) (670,857) (76,749) Total through OCI 857,111 857,111 753,447 753,447 753,447 753,447 (323,513) (323,513) (288,010) Inventories 123,430 232,894 (12,992) P=4,275,854 Financial assets at fair value through profit or loss − 562 11,872 For the Year Ended December 31, 2017 2017 31, December Ended Year the For For the Year Ended December 31, 2018 2018 31, December Ended Year the For
For the Year Ended December 31, 2019 Other current assets (104,970) (62,030) 93,338
− − − − − − − − Increase (decrease) in: (Note 28) Accounts and other payables 544,967 4,739,259 738,530 857,111 857,111 753,447 753,447 753,447 753,447 (323,513) ngs (323,513) (288,010) Attributable toParentAttributable
P=2,975,854 Contract liabilities (65,541) 65,541 − Deposits and other liabilities 208,588 (64,324) (256,981) Net cash generated from operations 2,978,922 6,249,953 2,349,916
− − − − − − − − − 1,657,569 1,657,569 − − 1,657,569 1,657,569 − − − − − − Retained Earni Retained Interest paid (438,363) (310,453) (386,099) Income taxes paid (276,310) (311,607) (179,987)
P=1,300,000 P=1,300,000 P=2,484,856 P=3,784,856 P=1,300,000 P=2,950,293 P=4,250,293 Interest received 83,950 33,497 12,955 Appropriated Unappropriated Net cash provided by operating activities 2,348,199 5,661,390 1,796,785
− − − − − − − − − − − − − − − − − 2,500,000 (2,500,000) − CASH FLOWS FROM INVESTING ACTIVITIES Equity Equity (Note 2) ( P= 9 , 4 7 4 ) ( P= 9 , 4 7 4 ) 274,034 274,034
(P=9,474) Additions to: Reserve Reserve P=264,560 P=264,560 P=1,300,000 P=3,509,452 P=4,809,452 P=264,560 P=264,560 P=1,300,000 P=3,509,452 P=264,560 P=4,809,452 P=3,800,000 P=2,343,508 P=6,143,508 Investment properties (Notes 14 and 32) (2,341,789) (4,179,762) (616,062) Property and equipment (Notes 12 and 32) (10,173) (25,813) (15,764)
Short-term investment (1,136) (22,701) (3,015) − − − − − − − − − − − − − − − − − − P= − P= − P= − Associates and a joint venture − − (698,303) Shares Shares (Note 2) (760,088) Treasury Treasury Increase in other noncurrent assets (236,580) (1,003,176) (39,487) Proceeds from sale property and equipment 232 − − Net cash used in investing activities (2,589,446) (5,231,452) (1,372,631)
− − − − − − − − − − − − − − − − − − − CASH FLOWS FROM FINANCING ACTIVITIES Capital Capital Paid-in Paid-in (Note 28) P= 8 5 6 , 6 8 4 P= 8 5 6 , 6 8 4 P=856,684 Additional capital infusion of NCI P=714,178 P= − P= − Payments: Dividends paid (323,513) (321,782) (288,010)
Additional
− − − − − − − − − − − − − − − − − − Long-term debt (61,000) (61,000) (459,000) Purchased land − − (351,569) 996,771 996,771 (Note 28) P=1,920,074 P=1,920,074 P=1,920,074 Availments of long-term debt − − 756,200 P=2,916,845 P=2,916,845 P=856,684 (P=760,088) P=2,916,845 P=2,916,845 P=856,684 (P=760,088) P=2,916,845 P=2,916,845 P=856,684 (P=760,088) Capital Stock Stock Capital Net cash provided by (used in) financing activities 329,665 (382,782) (342,379) atements. EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 207 579 105
NET INCREASE IN CASH AND CASH EQUIVALENTS 88,625 47,735 81,880
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR (Note 5) 224,523 176,788 94,908 CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 5) P=313,148 P=224,523 P=176,788 Net Income Other comprehensive income income comprehensive Other Dividends declared (Note 28) 28) (Note declared Dividends Net Income Other comprehensive income income Othercomprehensive Net Income Other comprehensive income income comprehensive Other Dividends declared (Note 28) 28) Dividends (Note declared Additional capital infusion of NCI (Note 4) Additional (Note of 4) NCI infusion capital of December as 2019 31, Balance 4) (Note interests non-controlling CBDI 28) (Note declared Dividends of December as 2018 31, Balance income Comprehensive Total of December as 2017 31, Balance
Comprehensive income: Comprehensive Total Comprehensive income income Comprehensive Total Comprehensive income: income: Comprehensive January 1, 2018 Balance as of 2017 January 1, as Balance
See accompanying Notes to ConsolidatedFinancial St
Comprehensive income Comprehensive Additional shares issued issued shares Additional
Balance as of 2019 January 1, as Balance Appropriation Appropriation
Effect of merger with a subsidiary subsidiary with a of merger Effect Total Comprehensive income Comprehensive Total Treasury shares shares Treasury See accompanying Notes to Consolidated Financial Statements.
151 CEBU HOLDINGS, INC. 2019 Integrated Report
Financial Statements
CEBU HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Group Information and Legal Merger The carrying amount of the identifiable assets and liabilities of CPVDC follow: Cebu Holdings, Inc. (the Parent Company) is domiciled and was incorporated on December 9, 1988 in the Republic of the Philippines. The Parent Company is a 71.13%-owned subsidiary of Ayala Land, Inc. (ALI), a publicly listed company. ALI is a As of November 6, 2018 subsidiary of Ayala Corporation (AC), a publicly listed company which is 47.33%-owned by Mermac, Inc. and the rest by public. (In Thousands) ASSETS th The Parent Company registered office address is at 20 Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park, Current Assets Cebu City. The Parent Company is engaged in real estate development, sale of subdivided land, residential and office Cash and cash equivalents P= 1 8 , 5 8 4 condominium units, sports club shares, and lease of commercial spaces. Short-term investments 2,582 Financial assets at fair value through The Parent Company’s shares of stock are publicly traded in the Philippine Stock Exchange (PSE). profit or loss 1,117 Receivables 573,369 Details on the Parent Company’s subsidiaries are as follows: Other current assets 20,259 Total Current Assets 615,911 • Cebu Leisure Company, Inc. (CLCI), a wholly owned subsidiary, is engaged in subleasing of commercial spaces, food courts and entertainment facilities. The registered office address of CLCI is at Admin Office, Level 4, Ayala Center Cebu, Cebu Noncurrent Assets Business Park, Cebu City. Noncurrent portion of receivables 144,045 Investment in a subsidiary, an associate and a joint venture 1,689,420 Investment properties 838,755 • CBP Theatre Management Company, Inc. (CBP Theatre), a wholly owned subsidiary, is engaged in all aspects of the theatrical and cinematographic entertainment business, including theatre management and other related undertakings. Property and equipment 1,438 CBP Theatre has not yet started its operations as of December 31, 2019. Other noncurrent assets 4,469 Total Noncurrent Assets 2,678,127 • Prior to the legal merger in 2018, Cebu Property Ventures and Development Corporation (CPVDC), a partially-owned P=3,294,038 subsidiary, is engaged in real estate development and sale of subdivision land and residential units. The shares of stocks of CPVDC are also traded in the PSE before the merger. The registered office address of CPVDC is at 20th Floor, Ayala LIABILITIES Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City. On November 6, 2018, Securities and Exchange Current Liabilities Commission (SEC) approved the merger between CPVDC and the Parent Company. Accounts and other payables P=1,439,977 Income tax payable 1,383 • Asian I-Office Properties, Inc. (AiO), a wholly owned subsidiary, is engaged in all aspects of real estate development and in Total Current Liabilities 1,441,360 leasing of corporate spaces. The registered office address of AiO is at 20th Floor, Ayala Center Cebu Tower, Bohol Street, Noncurrent Liabilities Cebu Business Park, Cebu City. Deposits and other noncurrent liabilities 24,197
Deferred tax liabilities - net 78,485 • Taft Punta Engaño Property Inc. (TPEPI), a partially-owned subsidiary, is engaged in real estate development of mixed- Total Noncurrent Liabilities 102,682 use commercial and residential district within a 12-hectare property in Lapu-Lapu City. The registered office address of Total Liabilities P=1,544,042 TPEPI is at Vicsal Bldg., cor. C.D. Seno & W.O. Seno Sts., San Miguel Extension, Barangay Guizo, North Reclamation Area, Mandaue City. Total Identifiable Net Assets at Book Value P=1,749,996 Retained earnings P=809,647 • Central Block Developers, Inc. (CBDI), a partially-owned subsidiary, is engaged in all aspects of real estate development
and in leasing of corporate spaces. The project of CBDI is called Central Bloc and is located at the core of Cebu IT Park. The Parent Company previously owned 717,064,047 shares of CPVDC. This was replaced by 760,087,890 new shares of the The development includes two BPO towers, an Ayala branded hotel, and a 5-storey mall. The Company’s registered Parent Company that is currently classified as treasury shares. The remaining 236,683,110 shares was issued to other CPVDC address and principal place of business is at 28th Floor, Tower One and Exchange Plaza, Ayala Triangle, Ayala Avenue, shareholders or minority shareholders. Makati City.
The excess of the net assets of CPVDC over the investment and additional issuance of shares of the Parent Company The consolidated financial statements of Cebu Holdings Inc. and its subsidiaries (the Group) as of December 31, 2019 and 2018 amounting to P=274.0 million was charged to “Equity reserves” account. and for each of the three years in the period ended December 31, 2019 were endorsed for approval by the Audit and Risk
Committee on February 7, 2020 and were approved and authorized for issue by the Board of Directors (BOD) on February 26, As a result of merger, the Parent Company possessed all the right, privileges and immunities of CPVDC. All property and 2020. receivables due to CPVDC shall be taken and deemed to be transferred to and vested in the Parent Company without further
act or deed. Legal Merger
On February 26, 2018, the Parent Company and its subsidiary, CPVDC, entered into a plan merger with the Parent Company as In addition, the Parent Company’s ownership interest increased to 55% over CBDI after the merger and, following the current the surviving entity. composition of CBDI’s BOD seats (i.e., 3 out of 5) and its voting rights based on its By-Laws, the Parent Company obtained
control over CBDI and has the power to direct relevant activities as it has the majority of BOD seats which is required for an act On November 6, 2018, SEC has approved the merger and issued the Certificate of Filing of the Articles and Plan of Merger of to be approved. CHI and CPVDC (Plan of Merger).
The Group’s consolidated financial statements after the merger reflected the balances of CBDI’s assets and liabilities at Under the Plan of Merger, the Parent Company will issue 996,771,000 outstanding shares, with P=1 par value to CPVDC’s carrying amounts since the event is a common control transaction which is essentially a transfer of the assets and liabilities of shareholders including the Parent Company from its unissued shares through a share swap with a swap ratio of 1.06. CBDI from the consolidated financial statements of ALI to the consolidated financial statements of CHI. Difference between
the net assets of CBDI and investment in CBDI as of the date of the merger are accounted for as an equity transaction. The merger resulted in a streamlined operations within the Group and the transactions are conducted in a more efficient
manner.
152 A space to take your dreams further
The carrying amount of the identifiable assets and liabilities of CPVDC follow:
As of November 6, 2018 (In Thousands) ASSETS Current Assets Cash and cash equivalents P= 1 8 , 5 8 4 Short-term investments 2,582 Financial assets at fair value through profit or loss 1,117 Receivables 573,369 Other current assets 20,259 Total Current Assets 615,911 Noncurrent Assets Noncurrent portion of receivables 144,045 Investment in a subsidiary, an associate and a joint venture 1,689,420 Investment properties 838,755 Property and equipment 1,438 Other noncurrent assets 4,469 Total Noncurrent Assets 2,678,127 P=3,294,038
LIABILITIES Current Liabilities Accounts and other payables P=1,439,977 Income tax payable 1,383 Total Current Liabilities 1,441,360 Noncurrent Liabilities Deposits and other noncurrent liabilities 24,197 Deferred tax liabilities - net 78,485 Total Noncurrent Liabilities 102,682 Total Liabilities P=1,544,042 Total Identifiable Net Assets at Book Value P=1,749,996 Retained earnings P=809,647
The Parent Company previously owned 717,064,047 shares of CPVDC. This was replaced by 760,087,890 new shares of the Parent Company that is currently classified as treasury shares. The remaining 236,683,110 shares was issued to other CPVDC shareholders or minority shareholders.
The excess of the net assets of CPVDC over the investment and additional issuance of shares of the Parent Company amounting to P=274.0 million was charged to “Equity reserves” account.
As a result of merger, the Parent Company possessed all the right, privileges and immunities of CPVDC. All property and receivables due to CPVDC shall be taken and deemed to be transferred to and vested in the Parent Company without further act or deed.
In addition, the Parent Company’s ownership interest increased to 55% over CBDI after the merger and, following the current composition of CBDI’s BOD seats (i.e., 3 out of 5) and its voting rights based on its By-Laws, the Parent Company obtained control over CBDI and has the power to direct relevant activities as it has the majority of BOD seats which is required for an act to be approved.
The Group’s consolidated financial statements after the merger reflected the balances of CBDI’s assets and liabilities at carrying amounts since the event is a common control transaction which is essentially a transfer of the assets and liabilities of CBDI from the consolidated financial statements of ALI to the consolidated financial statements of CHI. Difference between the net assets of CBDI and investment in CBDI as of the date of the merger are accounted for as an equity transaction.
153 CEBU HOLDINGS, INC. 2019 Integrated Report
Financial Statements
The carrying amount of the identifiable assets and liabilities of CBDI follow:
As of November 6, 2018 (In Thousands) ASSETS Current Assets Cash P=12,382 Receivables 341,651 Other current assets 475,530 Total Current Assets 829,563 Noncurrent Assets Investment properties 4,401,770 Deferred tax asset 61 Other noncurrent assets 306 Total Noncurrent Assets 4,402,137 P=5,231,700
LIABILITIES Current Liabilities Accounts and other payables P=2,248,966 Deposits and other current liabilities 5,055 Total Current Liabilities 2,254,021 Noncurrent Liabilities Deposits and other noncurrent liabilities 1,321 Total Liabilities P=2,255,342 Total Identifiable Net Assets at Book Value P=2,976,358 Retained earnings P= 5 8 8
2. Basis of Preparation, Statement of Compliance and Summary of Significant Accounting Policies
Basis of Preparation The consolidated financial statements of the Group have been prepared using the historical cost basis, except for financial assets at fair value through profit or loss (FVPL) and for financial assets at fair value through other comprehensive income (FVOCI) which have been measured at fair value. The consolidated financial statements are presented in Philippine Peso (P=), which is also the functional currency of the Parent Company. All values are rounded to the nearest thousand (P=000) except when otherwise indicated.
Statement of Compliance The consolidated financial statements of the Group have been prepared in compliance with Philippine Financial Reporting Standards (PFRSs), which include the availment of the relief granted by the SEC under Memorandum Circular Nos. 14-2018 and 3-2019 as discussed in the “Changes in accounting policies” section.
Basis of Consolidation The consolidated financial statements comprise the financial statements of the Parent Company and the following subsidiaries as of December 31: Percentage of ownership 2019 2018 2017 CLCI 100 100 100 CBP Theatre 100 100 100 CPVDC – – 76 AiO 100 100 76* CBDI 55 55 – TPEPI 55 55 55 * wholly owned by CPVDC prior to merger
The Parent Company and all its subsidiaries are incorporated and operating in the Philippines.
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Specifically, the Group controls an investee, if and only, if the Group has: • Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); • Exposure, or rights, to variable returns from its involvement with the investee; and • The ability to use its power over the investee to affect its returns.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies.
All intra-group balances and transactions, including income, expenses and dividends relating to transactions between members of the Group, are eliminated in full on consolidation.
Non-controlling interests (NCI) represent the portion of profit or loss and net assets in subsidiaries not wholly owned by the Parent Company and are presented separately in the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and within equity in the consolidated statement of financial position, separately from the equity attributable to the Parent Company.
Total comprehensive income within a subsidiary is attributed to the NCI 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 Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.
Reclassifications On September 27, 2019, the Philippine Interpretations Committee (PIC) issued a letter to the various organization in the real estate industry to clarify certain issues in relation to the Implementation Issues of PFRS 15, Revenue from Contracts with Customers and other accounting issues affecting real estate industry. The letter includes the clarification on the conclusion of PIC Q&A 2018-12D Step 3 on the recording of contract asset for the difference between the consideration received from the customer and the transferred goods or services to a customer. In the letter, the PIC would allow for the meantime, the recording of the difference between the consideration received from the customer and the transferred goods or services to a customer as either a contract asset or unbilled receivable. If presented as contract asset, the disclosures required under PFRS 15 should be complied with. Otherwise, the disclosures required under PFRS 9, Financial Instruments should be followed.
As a result, the Group opted to record the difference between the consideration received from the customer and the transferred goods or services to a customer as installment contracts receivable. In 2018, the difference is recognized as contract asset. Accordingly, the affected accounts as of December 31, 2018 have been reclassified to conform with the 2019 presentation of accounts. Details as follow:
As previously reported As adjusted (In thousand pesos) December 31, 2018 Reclassification December 31, 2018 Current assets Receivables P=2,086,232 205,087 2,291,319 Contract assets 205,087 (205,087) − Noncurrent assets Receivables 224,968 137,845 362,813 Contract assets 137,845 (137,845) − P=2,654,132 P=− P=2,654,132
Management believes that the presentation of the consolidated statements of financial position as at beginning of the earliest period presented is not necessary as the restatements have no significant impact on the Group’s total assets, total liabilities and total equity as of January 1, 2018.
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Financial Statements
The reclassification did not impact the consolidated statement of cash flows as of December 31, 2018.
Changes in Accounting Policies The accounting policies adopted are consistent with those of the previous financial year, except that the Group has adopted the following new accounting pronouncements starting January 1, 2019:
• PFRS 16, Leases
PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under PAS 17, Leases. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets and short- term leases. At the commencement date of a lease, a lessee will recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.
Lessees will be also required to remeasure the lease liability upon the occurrence of certain events. The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.
Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under PAS 17. Lessors will continue to classify all leases using the same classification principle as in PAS 17 and distinguish between two types of leases: operating and finance leases.
PFRS 16 also requires lessees and lessors to make more extensive disclosures than under PAS 17.
A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs.
The adoption of PFRS 16 did not have significant impact to the consolidated statements of financial position, financial performance and cash flows of the Group since the lease payments to the lessors under its existing lease contracts are purely variable which are linked to the future performance or use of the underlying assets while other lease contracts are short-term. Accordingly, the Group did not recognize a right-of-use asset and lease liability.
• Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments
The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of PAS 12, Income Taxes, and does not apply to taxes or levies outside the scope of PAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.
The interpretation specifically addresses the following:
• Whether an entity considers uncertain tax treatments separately • The assumptions an entity makes about the examination of tax treatments by taxation authorities • How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates • How an entity considers changes in facts and circumstances
An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed.
Upon adoption of the Interpretation, the Group has assessed whether it has any uncertain tax position. The Group applies significant judgement in identifying uncertainties over its income tax treatments. The Group determined, based on its assessment, that it is probable that its income tax treatments will be accepted by the taxation authorities. Accordingly, the interpretation does not have an impact on the consolidated financial statements of the Group.
• Amendments to PFRS 9, Prepayment Features with Negative Compensation
Under PFRS 9, a debt instrument can be measured at amortized cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to PFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance
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that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract.
These amendments had no impact on the consolidated financial statements of the Group.
• Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or Settlement
The amendments to PAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to:
• Determine current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event.
• Determine net interest for the remainder of the period after the plan amendment, curtailment or settlement using: the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event; and the discount rate used to remeasure that net defined benefit liability (asset).
The amendments also clarify that an entity first determines any past service cost, or a gain or loss on settlement, without considering the effect of the asset ceiling. This amount is recognized in profit or loss. An entity then determines the effect of the asset ceiling after the plan amendment, curtailment or settlement. Any change in that effect, excluding amounts included in the net interest, is recognized in other comprehensive income.
The amendments had no impact on the consolidated financial statements of the Group as it did not have any plan amendments, curtailments, or settlements during the period.
• Amendments to Philippine Accounting Standards 28, Long-term Interests in Associates and Joint Ventures
The amendments clarify that an entity applies PFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long- term interests). This clarification is relevant because it implies that the expected credit loss model in PFRS 9 applies to such long-term interests.
The amendments also clarified that, in applying PFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognized as adjustments to the net investment in the associate or joint venture that arise from applying PAS 28.
These amendments had no impact on the consolidated financial statements as the Group does not have long-term interests in its associates and joint venture.
• Annual Improvements to PFRSs 2015–2017 Cycle
• Amendments to PFRS 3, Business Combinations, and PFRS 11, Joint Arrangements, Previously Held Interest in a Joint Operation
The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation.
A party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in PFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured.
An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2019 and to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early application permitted. These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where joint control is obtained.
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• Amendments to PAS 12, Income Tax Consequences of Payments on Financial Instruments Classified as Equity The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are largely based on grandfathering previous The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions local accounting policies, PFRS 17 provides a comprehensive model for insurance contracts, covering all relevant or events that generated distributable profits than to distributions to owners. Therefore, an entity recognizes the accounting aspects. The core of PFRS 17 is the general model, supplemented by: income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. • A specific adaptation for contracts with direct participation features (the variable fee approach) • A simplified approach (the premium allocation approach) mainly for short-duration contracts An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early application is permitted. These amendments had no impact on the consolidated financial statements of the Group PFRS 17 is effective for reporting periods beginning on or after January 1, 2021, with comparative figures required. Early because dividends declared by the Group do not give rise to tax obligations under the current tax laws. application is permitted. • Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization Deferred effectivity The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop • Amendments to PFRS 10, Consolidated Financial Statements, and PAS 28, Sale or Contribution of Assets between an a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale Investor and its Associate or Joint Venture are complete. The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of control of a subsidiary that An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting is sold or contributed to an associate or joint venture. The amendments clarify that a full gain or loss is recognized when a period in which the entity first applies those amendments. An entity applies those amendments for annual reporting transfer to an associate or joint venture involves a business as defined in PFRS 3. Any gain or loss resulting from the sale periods beginning on or after January 1, 2019, with early application permitted. or contribution of assets that does not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture. Since the Group’s current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group. On January 13, 2016, the Financial Reporting Standards Council deferred the original effective date of January 1, 2016 of the said amendments until the International Accounting Standards Board completes its broader review of the research Standards and interpretation issued but not yet effective project on equity accounting that may result in the simplification of accounting for such transactions and of other aspects Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the Group does not expect that the of accounting for associates and joint ventures. future adoption of the said pronouncements will have a significant impact on its consolidated financial statements. The Group intends to adopt the following pronouncements when they become effective. Deferral of PIC Q&A 2018-12 on Revenue from Contracts with Customers On February 14, 2018, the PIC issued PIC Q&A 2018-12 (PIC Q&A) which provides guidance on some implementation issues of PFRS 15 affecting real estate industry. On October 25, 2018, the Philippine Securities and Exchange Commission (SEC) issued Effective beginning on or after January 1, 2020 SEC Memorandum Circular No. 14 Series of 2018, providing relief to the real estate industry by deferring the application of the • Amendments to PFRS 3, Definition of a Business following provisions of the above PIC Q&A for a period of three (3) years:
The amendments to PFRS 3 clarify the minimum requirements to be a business, remove the assessment of a market a. Exclusion of land and uninstalled materials in the determination of percentage of completion (POC) discussed in PIC Q&A participant’s ability to replace missing elements, and narrow the definition of outputs. The amendments also add No. 2018-12-E; guidance to assess whether an acquired process is substantive and add illustrative examples. An optional fair value b. Accounting for significant financing component discussed in PIC Q&A No. 2018-12-D; concentration test is introduced which permits a simplified assessment of whether an acquired set of activities and assets c. Accounting to common usage service area (CUSA) Charges discussed in PIC Q&A No. 2018-12-H; and is not a business. d. Accounting for cancellation of real estate sales discussed in PIC Q&A No. 2018-14.
An entity applies those amendments prospectively for annual reporting periods beginning on or after January 1, 2020, Except for the CUSA charges discussed under PIC Q&A No. 2018-12-H which applies to leasing transactions, the above deferral with earlier application permitted. will only be applicable for real estate sales transactions.
These amendments will apply on future business combinations of the Group. Effective January 1, 2021, real estate companies will adopt PIC Q&A No. 2018-12 and PIC Q&A No. 2018-14 and any subsequent amendments thereof retrospectively or as the SEC will later prescribe. • Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, Definition of Material The Group availed of the deferral of adoption of the above specific provisions of PIC Q&A. Had these provisions been adopted, it would have the following impact in the financial statements: The amendments refine the definition of material in PAS 1 and align the definitions used across PFRSs and other pronouncements. They are intended to improve the understanding of the existing requirements rather than to Availment of the Deferral of the Exclusion of Land and Uninstalled Materials in the Determination of POC significantly impact an entity’s materiality judgements. The exclusion of land and uninstalled materials in the determination of POC would reduce the percentage of completion of real estate projects resulting in a decrease in the revenue from real estate sales in 2018. This would also result to the land portion of An entity applies those amendments prospectively for annual reporting periods beginning on or after January 1, 2020, sold to be treated as contract fulfillment asset with earlier application permitted. Availment of the Deferral of the Accounting for Significant Financing Component Effective beginning on or after January 1, 2021 The mismatch between the POC of the real estate projects and right to an amount of consideration based on the schedule of
• PFRS 17, Insurance Contracts payments explicit in the contract to sell would constitute a significant financing component.
PFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, The Group opted to avail of the relief for the deferral of the accounting for the significant financing component in recognizing presentation and disclosure. Once effective, PFRS 17 will replace PFRS 4, Insurance Contracts. This new standard on revenue from its real estate sales upon the date of initial application on January 1, 2018. If the Group had adopted the insurance contracts applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), application guideline of the PIC Q&A No. 2018-12 on the significant financing component effective January 1, 2018, the Group’s regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with interest income would have been recognized for installment contract receivable and interest expense for contract liabilities discretionary participation features. A few scope exceptions will apply.
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The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are largely based on grandfathering previous local accounting policies, PFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of PFRS 17 is the general model, supplemented by:
• A specific adaptation for contracts with direct participation features (the variable fee approach) • A simplified approach (the premium allocation approach) mainly for short-duration contracts
PFRS 17 is effective for reporting periods beginning on or after January 1, 2021, with comparative figures required. Early application is permitted.
Deferred effectivity • Amendments to PFRS 10, Consolidated Financial Statements, and PAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint venture involves a business as defined in PFRS 3. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture.
On January 13, 2016, the Financial Reporting Standards Council deferred the original effective date of January 1, 2016 of the said amendments until the International Accounting Standards Board completes its broader review of the research project on equity accounting that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures.
Deferral of PIC Q&A 2018-12 on Revenue from Contracts with Customers On February 14, 2018, the PIC issued PIC Q&A 2018-12 (PIC Q&A) which provides guidance on some implementation issues of PFRS 15 affecting real estate industry. On October 25, 2018, the Philippine Securities and Exchange Commission (SEC) issued SEC Memorandum Circular No. 14 Series of 2018, providing relief to the real estate industry by deferring the application of the following provisions of the above PIC Q&A for a period of three (3) years: a. Exclusion of land and uninstalled materials in the determination of percentage of completion (POC) discussed in PIC Q&A No. 2018-12-E; b. Accounting for significant financing component discussed in PIC Q&A No. 2018-12-D; c. Accounting to common usage service area (CUSA) Charges discussed in PIC Q&A No. 2018-12-H; and d. Accounting for cancellation of real estate sales discussed in PIC Q&A No. 2018-14.
Except for the CUSA charges discussed under PIC Q&A No. 2018-12-H which applies to leasing transactions, the above deferral will only be applicable for real estate sales transactions.
Effective January 1, 2021, real estate companies will adopt PIC Q&A No. 2018-12 and PIC Q&A No. 2018-14 and any subsequent amendments thereof retrospectively or as the SEC will later prescribe.
The Group availed of the deferral of adoption of the above specific provisions of PIC Q&A. Had these provisions been adopted, it would have the following impact in the financial statements:
Availment of the Deferral of the Exclusion of Land and Uninstalled Materials in the Determination of POC The exclusion of land and uninstalled materials in the determination of POC would reduce the percentage of completion of real estate projects resulting in a decrease in the revenue from real estate sales in 2018. This would also result to the land portion of sold to be treated as contract fulfillment asset
Availment of the Deferral of the Accounting for Significant Financing Component The mismatch between the POC of the real estate projects and right to an amount of consideration based on the schedule of payments explicit in the contract to sell would constitute a significant financing component.
The Group opted to avail of the relief for the deferral of the accounting for the significant financing component in recognizing revenue from its real estate sales upon the date of initial application on January 1, 2018. If the Group had adopted the application guideline of the PIC Q&A No. 2018-12 on the significant financing component effective January 1, 2018, the Group’s interest income would have been recognized for installment contract receivable and interest expense for contract liabilities
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using effective interest rate method and this would have impacted retained earnings as at January 1, 2018 and the revenue from real estate sales in 2018. Currently, any significant financing component arising from the mismatch discussed above is All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized not considered for revenue recognition purposes. within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole. Availment of the Deferral of the Accounting for Common Usage Service Area (CUSA) Charges The Group opted to avail of the relief for the deferral of the accounting for CUSA charges upon the date of initial application on • Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities January 1, 2018. If the Group had adopted the accounting for CUSA charges, this would have resulted to the gross presentation • Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly of the related revenue and the related expenses and cost. Currently, the related revenue is presented net of costs and or indirectly observable expenses. These would not result to any adjustment in the retained earnings as of January 1, 2018 and net income. • Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable Availment of the Deferral of the Accounting for Cancellation of Real Estate Sales Upon sales cancellation, the repossessed inventory would be recorded at fair value plus cost to repossess (or fair value less cost For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group to repossess if this would have been opted). This would have increased retained earnings as at January 1, 2018 and gain from determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the repossession in 2018. Currently, the Group records the repossessed inventory at historical cost. lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Current and Noncurrent Classification The Group’s management determines the policies and procedures for recurring fair value measurement of financial assets at The Group presents assets and liabilities in the consolidated statement of financial position based on current/noncurrent FVPL and FVOCI and investment properties. classification. An asset is current when it is: • Expected to be realized or intended to be sold or consumed in the normal operating cycle; External valuers are involved for the valuation of significant assets, such as investment properties. Involvement of external • Held primarily for the purpose of trading; valuers is decided upon annually by management after discussion with and approval by the Group’s audit committee. • Expected to be realized within twelve months after the reporting period; or, Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. • Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months The management decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for after the reporting period. each case.
All other assets are classified as noncurrent. At each reporting date, the Group analyzes the movements in the values of assets and liabilities which are required to be re- measured or re-assessed as per the Group’s accounting policies. A liability is current when: • It is expected to be settled in the normal operating cycle; For this analysis, the Group verifies the major inputs applied in the latest valuation by agreeing the information in the valuation • It is held primarily for the purpose of trading; computation to contracts and other relevant documents. • It is due to be settled within twelve months after the reporting period; or, • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group, in conjunction with its external valuers, also compares each of the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. The Group classifies all other liabilities as noncurrent. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, Deferred tax assets and liabilities are classified as noncurrent assets and liabilities, respectively. characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
Fair Value Measurement Financial Assets and Financial Liabilities The Group measures financial instruments such as financial assets at FVPL and FVOCI at fair value and discloses the fair value A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity of its other financial instruments as well as investment properties at each reporting date. instrument of another entity.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between Financial assets market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: Initial recognition and measurement • In the principal market for the asset or liability, or Financial assets are classified, at initial recognition and subsequently measured at amortized cost, FVOCI, and FVPL. • In the absence of a principal market, in the most advantageous market for the asset or liability. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. The Group initially measures a financial asset at its fair value plus, in the The principal or the most advantageous market must be accessible to the Group. case of a financial asset not at FVPL, transaction costs. Trade receivables are measured at the transaction price determined under PFRS 15. Refer to the accounting policies in section Revenue from contracts with customers. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. In order for a financial asset to be classified and measured at amortized cost or FVOCI, it needs to give rise to cash flows that are SPPI on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an A fair value measurement of a nonfinancial asset takes into account a market participant’s ability to generate economic instrument level. benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to financial assets, or both. measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
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All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities • Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable • Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Group’s management determines the policies and procedures for recurring fair value measurement of financial assets at FVPL and FVOCI and investment properties.
External valuers are involved for the valuation of significant assets, such as investment properties. Involvement of external valuers is decided upon annually by management after discussion with and approval by the Group’s audit committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The management decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the Group analyzes the movements in the values of assets and liabilities which are required to be re- measured or re-assessed as per the Group’s accounting policies.
For this analysis, the Group verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
The Group, in conjunction with its external valuers, also compares each of the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
Financial Assets and Financial Liabilities A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement Financial assets are classified, at initial recognition and subsequently measured at amortized cost, FVOCI, and FVPL. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. The Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at FVPL, transaction costs. Trade receivables are measured at the transaction price determined under PFRS 15. Refer to the accounting policies in section Revenue from contracts with customers.
In order for a financial asset to be classified and measured at amortized cost or FVOCI, it needs to give rise to cash flows that are SPPI on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
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Subsequent measurement Impairment of Financial Assets For purposes of subsequent measurement, financial assets are classified in four categories: • Financial assets at amortized cost (debt instruments) The Group recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through • Financial assets at FVOCI with recycling of cumulative gains and losses (debt instruments) profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all • Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The (equity instruments) expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the • Financial assets at FVPL contractual terms.
Financial assets at amortized cost (debt instruments). A financial asset is measured at amortized cost if (a) it is held within a ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since business model for which the objective is to hold financial assets in order to collect contractual cash flows and (b) the initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12- contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial interest on the principal amount outstanding. recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). These financial assets are initially recognized at fair value plus directly attributable transaction costs and subsequently measured at amortized cost using the effective interest rate (EIR) method, less any impairment in value. Amortized cost is For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has EIR. The amortization is included in “Interest income” in the consolidated statement of income and is calculated by applying established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific the EIR to the gross carrying amount of the financial asset, except for (a) purchased or originated credit-impaired financial to the debtors and the economic environment. assets and (b) financial assets that have subsequently become credit-impaired, where, in both cases, the EIR is applied to the amortized cost of the financial asset. Losses arising from impairment are recognized in “Provision for impairment loss” in the For debt instruments at FVOCI, the Group applies the low credit risk simplification. Loss allowances are recognized based on consolidated statement of income. 12-month ECL for debt instrument that are assessed to have low credit risk at the reporting date. A financial asset is considered to have low credit risk if: For trade receivables, these are measured at the transaction price determined under PFRS 15. Refer to the accounting policies in Revenue from contracts with customers. • the financial instrument has a low risk of default; • the borrower has a strong capacity to meet its contractual cash flow obligations in the near term; or, The Group’s financial assets at amortized cost include cash and cash equivalents, short-terms investments, trade receivables, receivables from related parties, other nontrade receivables and refundable deposits (under “Other current” and “Other • adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of noncurrent” assets). the borrower to fulfil its contractual cash flow obligations.
Financial assets designated at FVOCI (equity instruments). Upon initial recognition, the Group can elect to classify irrevocably its The Group considers a debt instrument to have low credit risk when its credit risk rating is equivalent to the globally equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under understood definition of “investment grade”, or when the exposure is less than 30 days past due. PAS 32, Financial Instruments: Presentation, and are not held for trading. The classification is determined on an instrument-by- instrument basis. At every reporting date, the Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognized as other income in the reassesses the internal credit rating of the debt instrument. In addition, the Group considers that there has been a significant profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a increase in credit risk when contractual payments are more than 90 days past due. recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment. At each reporting date, the Group assesses whether there has been a significant increase in credit risk for financial assets since initial recognition by comparing the risk of default occurring over the expected life between the reporting date and the date of The Group elected to classify irrevocably its investments in unquoted club shares under this category. initial recognition. The Group considers reasonable and supportable information that is relevant and available without undue cost or effort for this purpose. This includes quantitative and qualitative information and forward-looking analysis. Financial assets at FVPL. Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or improves and also reverses any previously assessed significant increase in credit risk since origination, then the loss allowance repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading measurement reverts from lifetime ECL to 12-month ECL. unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, Notwithstanding the criteria for debt instruments to be classified at amortized cost or at fair value through OCI, as described the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the significantly reduces, an accounting mismatch. Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Financial assets at fair value through profit or loss are carried in the consolidated statement of financial position at fair value Financial liabilities with net changes in fair value recognized in the profit or loss. Initial recognition and measurement This category includes derivative instruments and listed equity investments which the Group had not irrevocably elected to Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. classify at fair value through OCI. Dividends on listed equity investments are also recognized as other income in the profit or
loss when the right of payment has been established. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly
attributable transaction costs. The Group’s financial assets at FVPL include short-term money market placements.
The Group’s financial liabilities include accounts and other payables, long-term debt, deposits and other liabilities, and
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Impairment of Financial Assets
The Group recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12- months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
For debt instruments at FVOCI, the Group applies the low credit risk simplification. Loss allowances are recognized based on 12-month ECL for debt instrument that are assessed to have low credit risk at the reporting date. A financial asset is considered to have low credit risk if:
• the financial instrument has a low risk of default; • the borrower has a strong capacity to meet its contractual cash flow obligations in the near term; or, • adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.
The Group considers a debt instrument to have low credit risk when its credit risk rating is equivalent to the globally understood definition of “investment grade”, or when the exposure is less than 30 days past due.
At every reporting date, the Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group reassesses the internal credit rating of the debt instrument. In addition, the Group considers that there has been a significant increase in credit risk when contractual payments are more than 90 days past due.
At each reporting date, the Group assesses whether there has been a significant increase in credit risk for financial assets since initial recognition by comparing the risk of default occurring over the expected life between the reporting date and the date of initial recognition. The Group considers reasonable and supportable information that is relevant and available without undue cost or effort for this purpose. This includes quantitative and qualitative information and forward-looking analysis.
An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the loss allowance measurement reverts from lifetime ECL to 12-month ECL.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Financial liabilities
Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group’s financial liabilities include accounts and other payables, long-term debt, deposits and other liabilities, and
163 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
excluding statutory liabilities and other obligations that meet the above definition (other than liabilities covered by other Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original accounting standards such as income tax payable). carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Subsequent measurement Financial liabilities. A financial liability is derecognized when the obligation under the liability is discharged, cancelled or has The measurement of financial liabilities depends on their classification, as described below: expired.
Financial liabilities at FVPL. Financial liabilities at FVPL include financial liabilities held for trading and financial liabilities Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms designated upon initial recognition as at FVPL. of an existing liability or a part of it are substantially modified, such an exchange or modification is treated as a derecognition of the original financial liability and the recognition of a new financial liability, and the difference in the respective carrying Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This amounts is recognized in the statement of income. The terms are substantially different if the discounted present value of the category also includes derivative financial instruments entered into by the Group that are not designated as hedging cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective instruments in hedge relationships as defined by PFRS 9. Separated embedded derivatives are also classified as held for interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial trading unless they are designated as effective hedging instruments. liability. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognized as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for Gains or losses on liabilities held for trading are recognized in the profit or loss. Financial liabilities designated upon initial as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortized over the recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in PFRS 9 remaining term of the modified liability. are satisfied. The Group has not designated any financial liability as at FVPL. Offsetting Financial Instruments Loans and borrowings. This is the category most relevant to the Group. After initial recognition, interest-bearing loans and Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to loss when the liabilities are derecognized as well as through the EIR amortization process. settle on a net basis, or to realize the asset and settle the liability simultaneously.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an The Group assesses that it has a currently enforceable right to offset if the right is not contingent on a future event, and is integral part of the EIR. The EIR amortization is included as finance costs in the of profit or loss. legally enforceable in the normal course of business, event of default, and event of insolvency or bankruptcy of the Group.
This category generally applies to interest-bearing loans and borrowings. Inventories Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital Reclassifications of financial instruments appreciation, is held as inventory and is carried at the lower of cost or net realizable value (NRV). NRV is the estimated selling The Group reclassifies its financial assets when, and only when, there is a change in the business model for managing the price in the ordinary course of business, less estimated costs to complete and sell. financial assets. Cost includes: Reclassifications shall be applied prospectively by the Group and any previously recognized gains, losses or interest shall not be • Land cost restated. The Group does not reclassify its financial liabilities. • Land improvement cost • Amount paid to contractors for construction and development of the properties (i.e. planning and design costs, cost of The Group does not reclassify its financial assets when: site preparation, professional fees, property transfer taxes, construction overheads and other related costs)
• A financial asset that was previously a designated and effective hedging instrument in a cash flow hedge or net The cost of inventory recognized in the consolidated statement of income as disposal is determined with reference to the investment hedge no longer qualifies as such; specific costs incurred on the property sold and is allocated to saleable area based on relative size. • A financial asset becomes a designated and effective hedging instrument in a cash flow hedge or net investment hedge; and, Other Assets Other assets include input value-added tax (VAT), creditable withholding tax (CWT) and prepaid expenses. There is a change in measurement on credit exposures measured at fair value through profit or loss. •
Input VAT represents taxes due or paid on purchases of goods and services subjected to VAT that the Group can claim against Derecognition of financial instruments any future liability to the Bureau of Internal Revenue (BIR) for output VAT received from sale of goods and services subjected to VAT. The input VAT can also be recovered as tax credit against future income tax liability of the Group upon approval of the Financial assets. A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is BIR. A valuation allowance is provided for any portion of the input tax that cannot be claimed against output tax or recovered derecognized when: as tax credit against future income tax liability.
• the contractual rights to the cash flows from the financial asset expire; or, CWT represents the amount withheld by the payee. These are recognized upon collection of the related sales and are utilized • the Group transfers the contractual rights to receive the cash flows of the financial asset in a transaction in which it either as tax credits against income tax due. (a) transfers substantially all the risks and rewards of ownership of the financial asset, or (b) it neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset and the Group has not retained control. Prepaid expenses are carried at cost less the amortized portion. These typically comprise prepayments for commissions, marketing fees, advertising and promotion, taxes and licenses, rentals and insurance. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor Property and Equipment retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to Property and equipment are carried at cost less accumulated depreciation and amortization and any impairment in value. The recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an initial cost of property and equipment comprises its construction cost or purchase price and any directly attributable costs of associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and bringing the asset to its working condition and location for its intended use, including borrowing costs. obligations that the Group has retained. Expenditures incurred after the fixed assets have been put into operations, such as repairs and maintenance are normally charged to expenses in the period in which the costs are incurred. In situations where it can be clearly demonstrated that the
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Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Financial liabilities. A financial liability is derecognized when the obligation under the liability is discharged, 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 or a part of it are substantially modified, such an exchange or modification is treated as a derecognition of the original financial liability and the recognition of a new financial liability, and the difference in the respective carrying amounts is recognized in the statement of income. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognized as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortized over the remaining term of the modified liability.
Offsetting Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position 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.
The Group assesses that it has a currently enforceable right to offset if the right is not contingent on a future event, and is legally enforceable in the normal course of business, event of default, and event of insolvency or bankruptcy of the Group.
Inventories Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital appreciation, is held as inventory and is carried at the lower of cost or net realizable value (NRV). NRV is the estimated selling price in the ordinary course of business, less estimated costs to complete and sell.
Cost includes: • Land cost • Land improvement cost • Amount paid to contractors for construction and development of the properties (i.e. planning and design costs, cost of site preparation, professional fees, property transfer taxes, construction overheads and other related costs)
The cost of inventory recognized in the consolidated statement of income as disposal is determined with reference to the specific costs incurred on the property sold and is allocated to saleable area based on relative size.
Other Assets Other assets include input value-added tax (VAT), creditable withholding tax (CWT) and prepaid expenses.
Input VAT represents taxes due or paid on purchases of goods and services subjected to VAT that the Group can claim against any future liability to the Bureau of Internal Revenue (BIR) for output VAT received from sale of goods and services subjected to VAT. The input VAT can also be recovered as tax credit against future income tax liability of the Group upon approval of the BIR. A valuation allowance is provided for any portion of the input tax that cannot be claimed against output tax or recovered as tax credit against future income tax liability.
CWT represents the amount withheld by the payee. These are recognized upon collection of the related sales and are utilized as tax credits against income tax due.
Prepaid expenses are carried at cost less the amortized portion. These typically comprise prepayments for commissions, marketing fees, advertising and promotion, taxes and licenses, rentals and insurance.
Property and Equipment Property and equipment are carried at cost less accumulated depreciation and amortization and any impairment in value. The initial cost of property and equipment comprises its construction cost or purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use, including borrowing costs.
Expenditures incurred after the fixed assets have been put into operations, such as repairs and maintenance are normally charged to expenses in the period in which the costs are incurred. In situations where it can be clearly demonstrated that the
165 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the consolidated property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as additional statement of income and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or cost of the related property and equipment. joint venture.
Depreciation and amortization commences once the property and equipment are available for their intended use and are The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When computed on a straight-line basis over the estimated useful lives as follows: necessary, adjustments are made to bring the accounting policies in line with those of the Group.
Years After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its Buildings and improvements 40 investment in an associate or joint venture. At each reporting date, the Group determines whether there is objective evidence Furniture, fixtures and equipment 3−10 that the investment in associates and a joint venture is impaired. If there is such evidence, the Group calculates the amount of Transportation equipment 3−5 impairment as the difference between the recoverable amount of the associate and its carrying value, then recognizes the loss as “Equity in net earnings of associates and a joint venture” in the consolidated statement of comprehensive income. The useful lives and depreciation and amortization methods are reviewed periodically to ensure that the period and method of depreciation and amortization are consistent with the expected pattern of economic benefits from items of property and Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes equipment. any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is When property and equipment are retired or otherwise disposed of, the cost of the related accumulated depreciation and recognized in the consolidated statement of income. amortization, and accumulated provision for impairment losses, if any, are removed from the accounts and any resulting gain or loss is credited or charged against current operations. Investment Properties Investment properties consist of completed properties and properties under construction or re-development that are held to Fully depreciated property and equipment are retained in the accounts while still in use although no further depreciation is earn rentals and for capital appreciation or both and are not occupied by the companies in the Group. The Group uses the cost credited or charged to current operations. model in measuring investment properties since this represents the historical value of the properties subsequent to initial recognition. Investment properties, except for land, are carried at cost less accumulated depreciation and amortization and Intangible Assets any impairment in value. Land is carried at cost less any impairment in value. The initial cost of investment properties consists The Group’s development rights included under “Other noncurrent assets” pertain to the unsold cost of development rights of any directly attributable costs of bringing the investment properties to their intended location and working condition, purchased by the Group allocated based on the revised gross floor area of a structure in a particular lot. including borrowing costs.
These are measured on initial recognition at cost. After initial recognition, these are carried at cost less any accumulated Investment properties are depreciated using the straight-line method over their estimated useful lives as follows: impairment losses. The development rights are capitalized as additional cost of the structure once the development commences. Years Land improvements Up to 25 Investments in Associates and a Joint Venture Buildings and improvements Up to 40 An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control Expenditure incurred after the investment property has been put in operation, such as repairs and maintenance costs, are or joint control over those policies. normally charged against income in the period in which the costs are incurred.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the Construction-in-progress is stated at cost. This includes cost of construction and other direct costs. Construction-in-progress net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only is not depreciated until such time that the relevant assets are available for their intended use. when decisions about the relevant activities require unanimous consent of the parties sharing control. Investment properties are derecognized when either they have been disposed of or when they are permanently withdrawn The considerations made in determining significant influence or joint control are similar to those necessary to determine from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an control over subsidiaries. investment property are recognized in the consolidated statement of income in the year of retirement or disposal.
The Group’s investments in associates and a joint venture is accounted for using the equity method. Transfers are made to investment properties when, and only when, there is a change in use, evidenced by ending of owner- occupation and commencement of an operating lease to another party. Transfers are made from investment properties when, Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount and only when, there is a change in use, evidenced by commencement of owner-occupation or commencement of of the investment is adjusted to recognize changes in the Group’s share of net assets of the associate or joint venture since the development with a view to sale. Transfers between investment properties, owner-occupied properties and inventories do not acquisition date. change the carrying amount of the property transferred and they do not change the cost of that property for measurement or disclosure purposes. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually. Impairment of Nonfinancial Assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication The consolidated statement of comprehensive income reflects the Group’s share of the results of operations of the associate or exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a 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 change recognized directly in the equity of the associate or joint venture, the Group recognizes its share of any changes, when value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely applicable, in the consolidated statement of changes in equity. Unrealized gains and losses resulting from transactions independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the venture. 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. In determining fair value less costs of disposal, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate
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The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the consolidated statement of income and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.
The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in an associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in associates and a joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, then recognizes the loss as “Equity in net earnings of associates and a joint venture” in the consolidated statement of comprehensive income.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognized in the consolidated statement of income.
Investment Properties Investment properties consist of completed properties and properties under construction or re-development that are held to earn rentals and for capital appreciation or both and are not occupied by the companies in the Group. The Group uses the cost model in measuring investment properties since this represents the historical value of the properties subsequent to initial recognition. Investment properties, except for land, are carried at cost less accumulated depreciation and amortization and any impairment in value. Land is carried at cost less any impairment in value. The initial cost of investment properties consists of any directly attributable costs of bringing the investment properties to their intended location and working condition, including borrowing costs.
Investment properties are depreciated using the straight-line method over their estimated useful lives as follows:
Years Land improvements Up to 25 Buildings and improvements Up to 40
Expenditure incurred after the investment property has been put in operation, such as repairs and maintenance costs, are normally charged against income in the period in which the costs are incurred.
Construction-in-progress is stated at cost. This includes cost of construction and other direct costs. Construction-in-progress is not depreciated until such time that the relevant assets are available for their intended use.
Investment properties are derecognized when either they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in the consolidated statement of income 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 ending of owner- occupation and 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 sale. Transfers between investment properties, owner-occupied properties 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.
Impairment of Nonfinancial Assets The Group assesses at each reporting date whether there is an indication that an asset 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 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. In determining fair value less costs of disposal, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate
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valuation model is used. Impairment losses of continuing operations are recognized in the consolidated statement of income The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from contracts with in those expense categories consistent with the function of the impaired asset. customers are provided in Note 3.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment Revenue from contracts with customers includes revenue from real estate sales. The Group derives its real estate revenue losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously from sale of lots and condominium units. Revenue from the sale of these real estate projects under pre-completion stage are recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recognized over time during the construction period (or percentage of completion) since based on the terms and conditions of recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is its contract with the buyers, the Group’s performance does not create an asset with an alternative use and the Group has an increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been enforceable right to payment for performance completed to date. Revenue from sale of lot is recognized at point in time upon determined, net of depreciation and amortization, had no impairment loss been recognized for the asset in prior years. execution of deed of absolute sale which typically evidence the transfer of control of the lot together with other evidences.
Such reversal is recognized in the consolidated statement of income unless the asset is carried at revalued amount, in which In measuring the progress of its performance obligation over time, the Group uses output method. The Group recognizes case, the reversal is treated as a revaluation increase. After such reversal, the depreciation charge is adjusted in future periods revenue on the basis of direct measurements of the value to customers of the goods or services transferred to date, relative to to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. the remaining goods or services promised under the contract. Progress is measured using survey of performance completed to date. This is based on the monthly project accomplishment report prepared by the third party surveyor as approved by the For investments in associates and a joint venture, after application of the equity method, the Group determines whether it is construction manager which integrates the surveys of performance to date of the construction activities for both sub- necessary to recognize any additional impairment loss with respect to the Group’s net investment in the investee companies. contracted and those that are fulfilled by the developer itself. The Group determines at each reporting date whether there is any objective evidence that the investment in associates or joint venture is impaired. If this is the case, the Group calculates the amount of impairment as being the difference between the Estimated development costs of the real estate project include costs of land, land development, building costs, professional recoverable amount of the investee companies and the carrying value and recognizes the amount in the consolidated fees, depreciation of equipment directly used in the construction, payments for permits and licenses. Revisions in estimated statement of income. development costs brought about by increases in projected costs in excess of the original budgeted amounts, form part of total project costs on a prospective basis. Equity Any excess of collections over the total of recognized installment contract receivables is included in the “contract liabilities” Capital stock, additional paid-in capital and treasury shares account in the consolidated statements of financial position. Capital stock is measured at par value for all shares issued. When the shares are sold at a premium, the difference between the proceeds and the par value is credited to “Additional paid-in capital” account. Direct costs incurred related to equity issuance Rental income are chargeable to “Additional paid-in capital” account. If additional paid-in capital is not sufficient, the excess is charged Rental income from noncancellable and cancellable leases is recognized in the consolidated statement of income on a straight- against retained earnings. When the Group issues more than one class of stock, a separate account is maintained for each class line basis over the lease term or based on a certain percentage of the gross revenue of the tenants, as provided for under the of stock and the number of shares issued. Treasury share is the Parent Company’s own equity instruments that is not terms of the lease contract. recognized as a financial asset regardless of the reason for which it is reacquired. When the Parent Company reacquires its own equity instruments, the cost of the treasury stock is deducted from total equity. Contingent rents are recognized as revenue in the period in which they are earned.
Retained earnings Cost recognition Retained earnings represent net accumulated earnings (losses) of the Group less dividends declared and any adjustments The Group recognizes costs relating to satisfied performance obligations as these are incurred taking into consideration the arising from the application of new accounting standards or policies applied retrospectively. The individual accumulated contract fulfillment assets such as land and connection fees. These include costs of land, land development costs, building earnings of the subsidiaries are available for dividends only after declared by their respective BOD. costs, professional fees, depreciation, permits and licenses and capitalized borrowing costs. These costs are allocated to the saleable area, with the portion allocable to the sold area being recognized as costs of sales while the portion allocable to the Unappropriated retained earnings unsold area being recognized as part of real estate inventories. Unappropriated retained earnings represent the portion of retained earnings that is free and can be declared as dividends to stockholders. In addition, the Group recognizes as an asset only costs that give rise to resources that will be used in satisfying performance obligations in the future and that are expected to be recovered. Appropriated retained earnings Appropriated retained earnings represent the portion of retained earnings which has been restricted and therefore is not Contract Balances available for dividend declaration. Installment contract receivables Installment contract receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the Dividend distributions passage of time is required before payment of the consideration is due). Dividends on common shares are recognized as a liability and deducted from equity when approved by the BOD of the Group. Dividends for the year that are approved after the reporting date are dealt with as a non-adjusting event after the reporting Contract liabilities date. A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration or an amount of consideration is due from the customer. If a customer pays consideration before the Group transfers goods or Equity reserves services to the customer, a contract liability is recognized when the payment is made or the payment is due, whichever is Equity reserves pertain to the difference between the consideration transferred and the equity acquired in a common control earlier. Contract liabilities are recognized as revenue when the Group performs under the contract. business combination. The contract liabilities also include payments received by the Group from the customers for which revenue recognition has not Revenue from contract with customers yet commenced. Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Costs to obtain contract The Group has generally concluded that it is the principal in its revenue arrangements, except for the provisioning of water and The incremental costs of obtaining a contract with a customer are recognized as an asset if the Group expects to recover them. electricity in its mall retail spaces and office leasing activities, wherein it is acting as agent. The Group has determined that commissions paid to brokers and marketing agents on the sale of pre-completed real estate units are deferred when recovery is reasonably expected and are charged to expense in the period in which the related revenue
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The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from contracts with customers are provided in Note 3.
Revenue from contracts with customers includes revenue from real estate sales. The Group derives its real estate revenue from sale of lots and condominium units. Revenue from the sale of these real estate projects under pre-completion stage are recognized over time during the construction period (or percentage of completion) since based on the terms and conditions of its contract with the buyers, the Group’s performance does not create an asset with an alternative use and the Group has an enforceable right to payment for performance completed to date. Revenue from sale of lot is recognized at point in time upon execution of deed of absolute sale which typically evidence the transfer of control of the lot together with other evidences.
In measuring the progress of its performance obligation over time, the Group uses output method. The Group recognizes revenue on the basis of direct measurements of the value to customers of the goods or services transferred to date, relative to the remaining goods or services promised under the contract. Progress is measured using survey of performance completed to date. This is based on the monthly project accomplishment report prepared by the third party surveyor as approved by the construction manager which integrates the surveys of performance to date of the construction activities for both sub- contracted and those that are fulfilled by the developer itself.
Estimated development costs of the real estate project include costs of land, land development, building costs, professional fees, depreciation of equipment directly used in the construction, payments for permits and licenses. Revisions in estimated development costs brought about by increases in projected costs in excess of the original budgeted amounts, form part of total project costs on a prospective basis.
Any excess of collections over the total of recognized installment contract receivables is included in the “contract liabilities” account in the consolidated statements of financial position.
Rental income Rental income from noncancellable and cancellable leases is recognized in the consolidated statement of income on a straight- line basis over the lease term or based on a certain percentage of the gross revenue of the tenants, as provided for under the terms of the lease contract.
Contingent rents are recognized as revenue in the period in which they are earned.
Cost recognition The Group recognizes costs relating to satisfied performance obligations as these are incurred taking into consideration the contract fulfillment assets such as land and connection fees. These include costs of land, land development costs, building costs, professional fees, depreciation, permits and licenses and capitalized borrowing costs. These costs are allocated to the saleable area, with the portion allocable to the sold area being recognized as costs of sales while the portion allocable to the unsold area being recognized as part of real estate inventories.
In addition, the Group recognizes as an asset only costs that give rise to resources that will be used in satisfying performance obligations in the future and that are expected to be recovered.
Contract Balances Installment contract receivables Installment contract receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Contract liabilities A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration or an amount of consideration is due from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due, whichever is earlier. Contract liabilities are recognized as revenue when the Group performs under the contract.
The contract liabilities also include payments received by the Group from the customers for which revenue recognition has not yet commenced.
Costs to obtain contract The incremental costs of obtaining a contract with a customer are recognized as an asset if the Group expects to recover them. The Group has determined that commissions paid to brokers and marketing agents on the sale of pre-completed real estate units are deferred when recovery is reasonably expected and are charged to expense in the period in which the related revenue
169 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
is recognized as earned. Commission expense is included in the “Real estate costs and expenses” account in the consolidated statement of income.
Costs incurred prior to obtaining contract with customer are not capitalized but are expensed as incurred.
Theater income Theater income is recognized when earned.
Interest income Interest income is recognized as it accrues using the effective interest method.
Other income Dues are recognized as they accrue.
Insurance claim is recognized when the realization of income is virtually certain.
Net gain or loss from the sale of development rights is recognized when risk and reward are transferred to the buyer.
Others are recognized when earned.
Borrowing Costs Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets (included in “Investment properties” account in the consolidated statement of financial position). All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
The interest capitalized is calculated using the Group’s weighted average cost of borrowings after adjusting for borrowings associated with specific developments. Where borrowings are associated with specific developments, the amounts capitalized is the gross interest incurred on those borrowings less any investment income arising on their temporary investment. Interest is capitalized from the commencement of the development work until the date of practical completion. The capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded.
The borrowing costs capitalized as part of “Investment properties” are depreciated using straight-line method over the estimated useful life of the assets.
Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date 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, even if that right is not explicitly specified in an arrangement. 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 gave rise to the reassessment for scenarios (a), (c), or (d) and at the date of renewal or extension period for scenario (b).
Group as lessor Leases where the Group retains substantially all the risk and benefits of ownership of the assets are classified as operating leases. Lease payments received are recognized as an income in the consolidated statement of income on a straight-line basis over the lease term.
Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as the rental income. Contingent rents are recognized as revenue in the period in which they are earned.
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Group as lessee prior to January 1, 2019 Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Fixed lease payments are recognized as an expense in the consolidated statement of income on a straight-line basis, while the variable rent is recognized as an expense based on terms of the lease contract.
Group as lessee subsequent to January 1, 2019
Right-of-use assets The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.
Lease liabilities At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event 0r condition that triggers the payment occurs.
Pension Cost The Group maintains a defined contribution (DC) plan that covers all regular full-time employees. Under its DC plan, the Group pays fixed contributions based on the employees’ monthly salaries. The Group, however, is covered under Republic Act (RA) No. 7641, The Philippine Retirement Law, which provides for its qualified employees a defined benefit (DB) minimum guarantee. The DB minimum guarantee is equivalent to a certain percentage of the monthly salary payable to an employee at normal retirement age with the required credited years of service based on the provisions of RA No. 7641.
In accordance with PIC Q&A No. 2013-03, the obligation for post-employment benefits of an entity that provides a DC plan as its only post-employment benefit plan, is not limited to the amount it agrees to contribute to the fund, if any. In this case, therefore, the Group’s retirement plan shall be accounted for as a defined benefit plan. Accordingly, the Group accounts for its retirement obligation under the higher of the DB obligation relating to the minimum guarantee and the obligation arising from the DC plan.
The DC liability is measured at the fair value of the DC assets upon which the DC benefits depend, with an adjustment for margin on asset returns, if any, where this is reflected in the DC benefits.
For the DB minimum guarantee plan, the liability is determined based on the present value of the excess of the projected DB obligation over the projected DC obligation at the end of the reporting period. The DB obligation is calculated annually by a qualified independent actuary using the projected unit credit method.
Pension costs comprise: • Service cost; • Net interest on the net defined benefit liability or asset; and, • Remeasurements of net defined benefit liability or asset.
Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in the consolidated statement of income. Past service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated periodically by independent qualified actuaries.
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Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or Parent Company by the weighted average number of common shares issued and outstanding during the year after giving asset that arises from the passage of time which is determined by applying the discount rate based on government bonds to effect to assumed conversion of potential common shares, if any. the net defined benefit liability or asset. Net interest on the net defined benefit liability or asset is recognized as an expense or income in the consolidated statement of income. Segment Reporting The Group’s operating businesses are organized and managed separately according to the nature of the products and services Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling provided, with each segment representing a strategic business unit that offers different products and serves different markets. (excluding net interest on defined benefit liability) are recognized immediately in other comprehensive income in the period in Financial information on business segments is presented in Note 29 of the consolidated financial statements. which they arise. Remeasurements are not reclassified to profit or loss in subsequent periods. Provisions The liability recognized in the consolidated statement of financial position in respect of defined benefit pension plans is the Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is present value of the defined benefit obligation at the reporting date less fair value of the plan assets. The present value of the probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable defined benefit obligation is determined by using risk-free interest rates of long-term government bonds that have terms to estimate can be made of the amount of the obligation. Where the Group expects some or all of the provision to be reimbursed, maturity approximating the terms of the related pension liabilities or applying a single weighted average discount rate that the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense reflects the estimated timing and amount of benefit payments. relating to a provision is presented in the consolidated statement of income, net of any reimbursement. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimates. Income Tax Current tax Contingencies Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from Contingent liabilities are not recognized in the consolidated financial statements. These are disclosed unless the possibility of or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the consolidated substantively enacted at the reporting date. financial statements but disclosed when an inflow of economic benefits is probable.
Deferred tax Events after the Reporting Date Deferred tax is provided, using the liability method, on temporary differences at the reporting date between the tax bases of Post year-end events up to the date of the consolidated financial statements were authorized for issue that provide additional assets and liabilities and its carrying amounts for financial reporting purposes. information about the Group’s position at the reporting date (adjusting events) 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 Deferred tax liabilities are recognized for all taxable temporary differences with certain exceptions. Deferred tax assets are statements when material. recognized for all deductible temporary differences with certain exceptions, and carryforward benefits of unused tax credits from excess of 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 taxable income will be available against which the deductible 3. Significant Accounting Judgments, Estimates and Assumptions temporary differences and carryforward benefits of unused MCIT and NOLCO can be utilized. The preparation of the consolidated financial statements of the Group in conformity with PFRSs requires management to Deferred tax liabilities are not provided on nontaxable temporary differences associated with investments in associates and a make judgments and estimates that affect the amounts reported in the consolidated financial statements and accompanying joint venture. notes. The judgments and estimates used in the consolidated financial statements are based upon management’s evaluation of relevant facts and circumstances as of the date of the consolidated financial statements. Actual results could differ from The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer such estimates. probable that sufficient taxable income will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become Management believes the following represent a summary of these significant judgments, estimates and assumptions: probable that future taxable income will allow the deferred tax asset to be utilized. Judgments Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted as of involving estimations, which have the most significant effect on the amounts recognized in the consolidated financial reporting date. Movements in the deferred income tax assets and liabilities arising from changes in tax rates are charged statements: against or credited to income for the period. Evaluating impairment of nonfinancial assets Deferred tax relating to items recognized outside profit or loss is recognized in OCI. Deferred tax items are recognized in The Group reviews its investment properties and investments in associates and a joint venture for impairment of value. This correlation to the underlying transaction either in OCI or directly in equity. Deferred tax assets and liabilities are offset, if a includes considering certain indications of impairment such as significant changes in asset usage, obsolescence or physical legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the damage of an asset, significant underperformance relative to expected historical or projected future operating results of the same taxable entity and the same taxation authority. investees and significant negative industry or economic trends.
Foreign-currency-denominated Transactions As of December 31, 2019 and 2018, the Group assessed that there are no indicators of impairment, thus, the Group did not The consolidated financial statements are presented in Philippine Peso, which is the Parent Company’s functional currency. recognize any impairment loss on its nonfinancial assets (see Notes 13, 14 and 16). Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded using the exchange rate Assessment of joint control of an arrangement and the type of arrangement at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are restated using the closing Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the exchange rate prevailing at reporting dates. Exchange gains or losses arising from foreign exchange transactions are credited relevant activities require the unanimous consent of the parties sharing control. Management assessed that the Group has to or charged against operations for the year. joint control over Cebu District Property Enterprise, Inc. (CDPEI) by virtue of a contractual agreement with other shareholders.
Earnings Per Share (EPS) The Group applies judgment when assessing whether a joint arrangement is a joint operation or a joint venture. Basic EPS is computed by dividing net income for the year attributable to common stockholders of the Parent Company by the weighted average number of common shares issued and outstanding during the year adjusted for any subsequent stock dividends declared. Diluted EPS is computed by dividing net income for the year attributable to common stockholders of the
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Parent Company by the weighted average number of common shares issued and outstanding during the year after giving effect to assumed conversion of potential common shares, if any.
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 business segments is presented in Note 29 of the consolidated financial statements.
Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of the provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the consolidated statement of income, net of any reimbursement. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimates.
Contingencies Contingent liabilities are not recognized in the consolidated financial statements. These 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 disclosed when an inflow of economic benefits is probable.
Events after the Reporting Date Post year-end events up to the date of the consolidated financial statements were authorized for issue that provide additional information about the Group’s position at the reporting date (adjusting events) 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.
3. Significant Accounting Judgments, Estimates and Assumptions
The preparation of the consolidated financial statements of the Group in conformity with PFRSs requires management to make judgments and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. The judgments and estimates used in the consolidated financial statements are based upon management’s evaluation of relevant facts and circumstances as of the date of the consolidated financial statements. Actual results could differ from such estimates.
Management believes the following represent a summary of these significant judgments, estimates and assumptions:
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 the amounts recognized in the consolidated financial statements:
Evaluating impairment of nonfinancial assets The Group reviews its investment properties and investments in associates and a joint venture for impairment of value. This includes considering certain indications of impairment such as significant changes in asset usage, obsolescence or physical damage of an asset, significant underperformance relative to expected historical or projected future operating results of the investees and significant negative industry or economic trends.
As of December 31, 2019 and 2018, the Group assessed that there are no indicators of impairment, thus, the Group did not recognize any impairment loss on its nonfinancial assets (see Notes 13, 14 and 16).
Assessment of joint control of an arrangement and the type of arrangement Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Management assessed that the Group has joint control over Cebu District Property Enterprise, Inc. (CDPEI) by virtue of a contractual agreement with other shareholders.
The Group applies judgment when assessing whether a joint arrangement is a joint operation or a joint venture.
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In making this judgment, the Group determines the type of joint arrangement in which it is involved by considering its rights and obligations arising from the arrangement. The Group assesses its rights and obligations by considering the structure and legal form of the arrangement, the terms agreed by the parties in the contractual arrangement and, when relevant, other facts and circumstances. Management assessed that CDPEI is a joint venture arrangement as it is a separate legal entity and its stockholders have rights to its net assets.
Real estate revenue recognition
Existence of a contract The Group’s primary document for a contract with a customer is a signed contract to sell. It has determined however, that in cases wherein contract to sell are not signed by both parties, the combination of its other signed documentation such as reservation agreement, official receipts, quotation sheets and other documents contain all the criteria to qualify as contract with the customer under PFRS 15.
In addition, part of the assessment process of the Group before revenue recognition is to assess the probability that the Group will collect the consideration to which it will be entitled in exchange for the real estate property that will be transferred to the customer. In evaluating whether collectability of an amount of consideration is probable, an entity considers the significance of the customer’s initial payments in relation to the total contract price. Collectability is also assessed by considering factors such as past history customer, age and pricing of the property. Management regularly evaluates the historical cancellations and back-outs if it would still support its current threshold of customers’ equity before commencing revenue recognition.
Revenue recognition method and measure of progress The Group concluded that revenue for real estate sales is to be recognized over time because (a) the Group’s performance does not create an asset with an alternative use and; (b) the Group has an enforceable right for performance completed to date. The promised property is specifically identified in the contract and the contractual restriction on the Group’s ability to direct the promised property for another use is substantive. This is because the property promised to the customer is not interchangeable with other properties without breaching the contract and without incurring significant costs that otherwise would not have been incurred in relation to that contract. In addition, under the current legal framework, the customer is contractually obliged to make payments to the developer up to the performance completed to date.
The Group has determined that output method is used in measuring the progress of the performance obligation faithfully depicts the Group’s performance in transferring control of real estate development to the customers.
Identifying performance obligation The Group has various contracts to sell covering (a) serviced lot; and, (b) condominium unit. The Group concluded that there is one performance obligation in each of these contracts because, for serviced lot, the developer integrates the plots it sells with the associated infrastructure to be able to transfer the serviced land promised in the contract. For the contract covering condominium unit, the developer has the obligation to deliver the house or condominium unit duly constructed in a specific lot and fully integrated into the serviced land in accordance with the approved plan. Included also in this performance obligation is the Group’s service is to transfer the title of the real estate unit to the customer.
Collectability of the sales price Revenue and cost recognition on real estate sales and selecting an appropriate revenue recognition method for a particular real estate sale transaction requires certain judgment based on, among others:
• Buyer’s commitment on the sale which may be ascertained through the significance of the buyer’s initial investment; and • Stage of completion of the project.
The Group has set a certain percentage (%) of collection over the total selling price in determining buyer’s commitment on the sale. It is when the buyer’s investment is considered adequate to meet the probability criteria that economic benefits will flow to the Group.
Provisions and contingencies The Group is involved in a legal proceeding and contingently liable for various claims. The estimate of the probable costs for the resolution of these legal proceeding and claims has been developed in consultation with the legal counsels and based upon an analysis of potential results. The Group currently does not believe these proceedings will have a material adverse effect on the Group’s financial position (see Note 33).
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Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation and uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are as follows:
Estimating the NRV of inventories Inventories are valued at the lower of cost or NRV. To determine the NRV, the Group is required to make an estimate of the inventories’ estimated selling price in the ordinary course of business, costs of completion and costs necessary to make a sale. NRV for completed real estate inventories is assessed with reference to market conditions and prices existing at the reporting date and is determined by the Group in light of recent market transactions. NRV, in respect of real estate inventories under construction, is assessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction and less estimated costs to sell. In the event that NRV is lower than the cost, the decline is recognized as an expense. The amount and timing of recorded expenses for any period would differ if different judgments were made or different estimates were utilized.
No provision for inventory obsolescence was recognized in 2019 and 2018. The Group’s inventories carried at cost are disclosed in Note 9.
Fair value of financial instruments PFRS requires certain financial assets and liabilities to be carried at fair value or have the fair values disclosed in the notes, which requires the use of extensive accounting estimates and judgments.
While significant components of fair value measurement were determined using verifiable objective evidence (i.e., foreign exchange rates and interest rates), the amount of changes in fair value would differ if the Group utilized a different valuation methodology. Any changes in fair value of these financial assets and liabilities would affect directly the consolidated statement of income and consolidated statement of changes in equity.
Certain financial assets and liabilities of the Group were initially recorded at its fair value by using the discounted cash flow methodology. See Note 27 for the related balances.
4. Non-controlling Interests
The Group has two subsidiaries with material NCI. Additional information regarding the subsidiaries is as follows:
Accumulated balances Share of NCI in net income (loss) NCI % 2019 2018 2019 2018 2017 (In Thousands) (In Thousands) CBDI 45% P=2,200,795 P=1,498,319 (P=11,701) P= 3 , 3 0 7 P= − TPEPI 45% 522,334 498,720 23,613 51,839 925 CPVDC* 24% − − − 57,773 58,632 P=2,723,129 P=1,997,039 P=11,912 P=112,919 P=59,557 *Merged to the Parent Company effective November 6, 2018
The summarized financial information of CBDI and TPEPI is provided below. This information is based on amounts before intercompany eliminations. 2019 2018 CBDI TPEPI CBDI TPEPI CPVDC (In Thousands) (In Thousands) Statements of financial position Current assets P=365,601 P=835,462 P=47,187 P=747,872 P=− Noncurrent assets 8,942,582 594,563 7,066,274 611,037 −
Current liabilities 4,249,701 240,193 3,775,653 224,477 − Noncurrent liabilities 167,237 29,091 7,621 26,165 −
Statements of comprehensive income Revenue P=43,409 P=217,128 P=9,493 P=462,753 P=688,070
(Forward)
175 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
Net income(loss)/Total Realized gain from redemption and unrealized gains recognized from changes in fair value through profit or loss amounted to comprehensive income (loss) P=0.6 million, P=0.4 million and P=0.2 million in 2019, 2018 and 2017, respectively (see Note 22). attributable to: Equity of holders of the parent company 28,861 (14,031) 4,042 63,359 170,257 8. Receivables Non-controlling interests 23,613 (11,701) 3,307 51,839 57,773 2019 2018 Statements of cash flows (In Thousands) Cash provided by (used in): Receivables from related parties (Note 20) P=2,103,364 P=1,410,230 Operating activities (P=2,036,708) P= 1 , 4 6 9 P=2,646,068 P=7,080 P=702,495 Trade (Note 27): Investing activities (460,280) (3,948) (3,956,847) − (609,728) Residential development 270,023 372,418 Financing activities 2,592,614 − 1,265,122 − (102,795) Shopping centers 162,437 106,205 Net increase (decrease) in cash and Commercial development 123,789 130,540 cash equivalents P=95,626 (P=2,479) (P=45,657) P=7,080 (P=10,028) Corporate business 76,230 112,190 Accrued receivable 472,958 411,424 Additional Capital Infusion Receivable from insurance 21,267 54,634 In 2019, ALI invested additional capital infusion to CBDI amounting to P=714.2 million. Receivables from employees 19,887 14,249 Others 57,897 72,957 3,307,852 2,684,847 Less allowance for impairment losses 35,488 30,715 5. Cash and Cash Equivalents 3,272,364 2,654,132
Less noncurrent portion 254,609 362,813 2019 2018 P=3,017,755 P=2,291,319 (In Thousands) Cash on hand and in banks P=259,429 P=169,081 Cash equivalents 53,719 55,442 The nature of trade receivables of the Group follows: P=313,148 P=224,523
• Residential development pertains to receivables arising from the sale of residential lots and condominium units.
Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are short-term, highly liquid investments • Shopping center pertains to receivables arising from the lease of retail space and land therein, movie theaters, food that are made for varying periods of up to three (3) months depending on the immediate cash requirements of the Group and courts, entertainment facilities and carparks.
earn interest at the respective short-term rates. • Commercial development pertains to receivables arising from the sale of commercial lots and development rights. • Corporate business pertains to receivables arising from the lease of office buildings and accrued rent receivable.
Total interest income earned from cash and cash equivalents amounted to P=2.7 million, P=2.0 million and P=1.0 million in 2019, • Receivables from insurance pertains to claim from insurer which encompasses business interruption and material damage. 2018 and 2017, respectively (see Note 22). • Other receivables pertain to receivable related to interests.
Terms and conditions of receivables are as follows: 6. Short-term Investments
• Sales contract receivables, included under residential development, are noninterest-bearing and are collectible in monthly Short-term investments consist of money market placements with maturity date of more than 90 days and up to one (1) year installments over a period of one (1) to two (2) years. Titles to real estate properties are transferred to the buyers once full and earn at the respective short-term investment rates. In 2019 and 2018, the Group entered into a short-term investment payment has been made.
with BPI to be used for short-term cash requirements. These investments earn an annual interest ranging from 2.62%, 2.96% • Leases of retail space and land therein, included under shopping centers, are noninterest-bearing and are collectible and 1.25% in 2019, 2018 and 2017, respectively. monthly based on the terms of the lease contracts. These are unpaid billed receivables as of reporting date. • Leases of office spaces, included under corporate business, are noninterest-bearing and are collectible monthly based on As of December 31, 2019 and 2018, the Group’s short term investments amounted to P=26.4 million and P=25.2 million, the terms of the lease contracts. These are unpaid billed receivables as of reporting date. respectively. • Receivables from the sale of commercial lots and development rights, included under commercial development are noninterest-bearing and are collectible in monthly or quarterly installments over a period ranging from two (2) to four (4) Interest income earned from short-term investments amounted to P=0.2 million in 2019, 2018 and 2017 (see Note 22). years. Titles to real estate properties and development rights are not transferred to buyers until full payment has been made. • Receivables from related parties are both interest and noninterest-bearing, and are due for collection within one year.
7. Financial Assets at Fair Value through Profit or Loss • Receivables from employees are composed of both interest and noninterest-bearing advances and are collectible over a period of one year through salary deduction. This account pertains to investments in BPI Short Term Fund (the Fund), a money market unit investment trust fund (UITF) • Accrued receivable consists of receivables from rental income arising from operating lease on investment properties which the Group holds for trading and is a portfolio of funds invested and managed by professional managers. The Fund aims which is accounted for on a straight-line basis over the lease term and accrual of interest income. to generate liquidity and stable income by investing in a diversified portfolio of primarily short-term fixed income instruments. • Other receivables are due and demandable. This is measured at fair value with gains or losses arising from changes in fair value recognized in the consolidated statements of income under “Other income”. “Sales contract receivables” under residential development trade receivables has a nominal amount of P=270.0 million and P=372.4 million as of December 31, 2019 and 2018, respectively. “Receivables from the sale of development rights” under As of December 31, 2019 and 2018, the Group’s financial assets at FVPL amounted to P=9.7 million and P=10.4 million, commercial development trade receivables were initially recorded at fair value. The fair value of the receivables was obtained respectively. by discounting future cash flows using the applicable rates of similar types of instruments.
176 A space to take your dreams further
Realized gain from redemption and unrealized gains recognized from changes in fair value through profit or loss amounted to P=0.6 million, P=0.4 million and P=0.2 million in 2019, 2018 and 2017, respectively (see Note 22).
8. Receivables
2019 2018 (In Thousands) Receivables from related parties (Note 20) P=2,103,364 P=1,410,230 Trade (Note 27): Residential development 270,023 372,418 Shopping centers 162,437 106,205 Commercial development 123,789 130,540 Corporate business 76,230 112,190 Accrued receivable 472,958 411,424 Receivable from insurance 21,267 54,634 Receivables from employees 19,887 14,249 Others 57,897 72,957 3,307,852 2,684,847 Less allowance for impairment losses 35,488 30,715 3,272,364 2,654,132 Less noncurrent portion 254,609 362,813 P=3,017,755 P=2,291,319
The nature of trade receivables of the Group follows:
• Residential development pertains to receivables arising from the sale of residential lots and condominium units. • Shopping center pertains to receivables arising from the lease of retail space and land therein, movie theaters, food courts, entertainment facilities and carparks. • Commercial development pertains to receivables arising from the sale of commercial lots and development rights. • Corporate business pertains to receivables arising from the lease of office buildings and accrued rent receivable. • Receivables from insurance pertains to claim from insurer which encompasses business interruption and material damage. • Other receivables pertain to receivable related to interests.
Terms and conditions of receivables are as follows:
• Sales contract receivables, included under residential development, are noninterest-bearing and are collectible in monthly installments over a period of one (1) to two (2) years. Titles to real estate properties are transferred to the buyers once full payment has been made. • Leases of retail space and land therein, included under shopping centers, are noninterest-bearing and are collectible monthly based on the terms of the lease contracts. These are unpaid billed receivables as of reporting date. • Leases of office spaces, included under corporate business, are noninterest-bearing and are collectible monthly based on the terms of the lease contracts. These are unpaid billed receivables as of reporting date. • Receivables from the sale of commercial lots and development rights, included under commercial development are noninterest-bearing and are collectible in monthly or quarterly installments over a period ranging from two (2) to four (4) years. Titles to real estate properties and development rights are not transferred to buyers until full payment has been made. • Receivables from related parties are both interest and noninterest-bearing, and are due for collection within one year. • Receivables from employees are composed of both interest and noninterest-bearing advances and are collectible over a period of one year through salary deduction. • Accrued receivable consists of receivables from rental income arising from operating lease on investment properties which is accounted for on a straight-line basis over the lease term and accrual of interest income. • Other receivables are due and demandable.
“Sales contract receivables” under residential development trade receivables has a nominal amount of P=270.0 million and P=372.4 million as of December 31, 2019 and 2018, respectively. “Receivables from the sale of development rights” under commercial development trade receivables were initially recorded at fair value. The fair value of the receivables was obtained by discounting future cash flows using the applicable rates of similar types of instruments.
177 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
Movements in the unamortized discount on trade receivables in 2019 and 2018 are as follows:
2019 Residential Commercial development development Total (In Thousands) At January 1 P=29,906 P= 5 , 9 6 1 P= 3 5 , 8 6 7 Additions 11,954 7,127 19,081 Accretion (Note 22) (21,475) (12,699) (34,174) At December 31 P=20,385 P= 3 8 9 P=20,774
2018 Residential Commercial development development Total (In Thousands) At January 1 P=47,498 P= 7 , 4 2 0 P= 5 4 , 9 1 8 Additions 14,203 − 14,203 Accretion (Note 22) (31,795) (1,459) (33,254) At December 31 P=29,906 P=5,961 P= 3 5 , 8 6 7
Allowance for impairment Set out below is the movement in allowance for expected credit losses of trade receivables (in thousands):
2019 2018 (In Thousands) At January 1 P=30,715 P=16,683 Provision for the year (Note 23) 4,773 14,032 At December 31 P= 3 5 , 4 8 8 P= 3 0 , 7 1 5
The impairment losses above pertain to individually impaired accounts. No impairment losses resulted from performing collective impairment test.
9. Inventories
2019 2018 (In Thousands) Subdivision lots for sale and development P=534,487 P=668,400 Condominium units for sale 41,702 143,892 P=576,189 P=812,292
The subdivision lot and condominium units are carried at cost.
A summary of the movements in inventories is set out below:
2019 Subdivision lot for Condominium sale and units under development development Total (In Thousands) At January 1 P=668,400 P=143,892 P=812,292 Transfers from investment properties (Note 14) 95,882 – 95,882 Transfers to investment properties (Note 14) (175,064) (33,491) (208,555) Disposals (recognized as cost of real estate sales) (Note 23) (337,692) (68,699) (406,391) Construction/development costs incurred 282,961 – 282,961 At December 31 P=534,487 P=41,702 P=576,189
178 A space to take your dreams further
2018 Subdivision lot for Condominium sale and units under development development Total (In Thousands) At January 1 P=554,627 P=196,457 P= 7 5 1 , 0 8 4 Transfers from investment properties (Note 14) 294,102 – 294,102 Disposals (recognized as cost of real estate sales) (Note 23) (470,391) (52,565) (522,956) Construction/development costs incurred 290,062 – 290,062 At December 31 P=668,400 P= 1 4 3 , 8 9 2 P=812,292
The amount of inventories recognized as cost of real estate sales in the consolidated statements of income amounted to P=406.4 million, P=523.0 million and P=205.4 million in 2019, 2018 and 2017, respectively (see Note 23).
There are no inventories as of December 31, 2019 and 2018 that are pledged as securities to liabilities.
10. Other Current Assets
2019 2018 (In Thousands) Input VAT P=196,598 P=29,457 Advances to contractors 54,368 103,948 Prepaid expenses 48,294 60,719 CWT 17,554 12,152 Cost to obtain a contract (Note 21) – 2,062 Others 22,446 25,949 P=339,260 P=234,287
Input VAT is applied against output VAT. The remaining balance is expected to be applied within the next twelve months. This also includes input VAT deferred pertaining to unpaid services which are incurred and billings which had been received but not yet paid as of date.
Advances to contractors are recouped every progress billing payment depending on the percentage of accomplishment.
Prepaid expenses consist of advance payments for project management fees, business taxes, office supplies, commissions, energy supply paid to a local utility provider and other expenses.
CWTs are applied against income tax payable and are expected to be applied within the next twelve months.
Others pertains to deposits for a utility company.
11. Financial Assets at Fair Value through OCI
As of December 31, 2019, the carrying value of the financial assets at fair value through OCI is as follows:
2019 2018 (In Thousands) Financial assets at fair value through OCI P=342,650 P=303,771 Unrealized gain on fair value changes (Note 27) 7,156 38,879 P=349,806 P=342,650
Fair value hierarchy disclosures for the Group’s financial assets at fair value through OCI are provided in Note 27.
179 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
12. Property and Equipment
2019 Buildings Furniture, and Fixtures and Transportation Improvements Equipment Equipment Total (In Thousands) Cost At January 1 P=368,366 P=148,440 P=36,415 P=553,221 Additions 4,503 2,370 3,300 10,173 Retirement − (4,165) (325) (4,490) At December 31 372,869 146,645 39,390 558,904 Accumulated Depreciation At January 1 116,358 128,430 27,785 272,573 Depreciation and amortization (Note 23) 14,946 10,458 4,125 29,529 Retirement − (3,929) (325) (4,254) At December 31 131,304 134,959 31,585 297,848 Net Book Value P=241,565 P=11,686 P=7,805 P= 2 6 1 , 0 5 6
2018 Buildings Furniture, and Fixtures and Transportation Improvements Equipment Equipment Total (In Thousands) Cost At January 1 P= 3 4 9 , 8 5 1 P=145,141 P=32,631 P=527,623 Additions 18,515 3,514 3,784 25,813 Retirement − (215) − (215) At December 31 368,366 148,440 36,415 553,221 Accumulated Depreciation At January 1 100,852 114,357 22,619 237,828 Depreciation and amortization (Note 23) 15,506 11,917 5,166 32,589 Effect of merger − 2,371 − 2,371 Retirement − (215) − (215) At December 31 116,358 128,430 27,785 272,573 Net Book Value P=252,008 P=20,010 P= 8 , 6 3 0 P=280,648
As at December 31, 2019 and 2018, there are no property and equipment items that are pledged as security to liabilities.
As at December 31, 2019 and 2018, there are no contractual purchase commitments for property and equipment.
13. Investments in Associates and a Joint Venture
The movements in investments in associates and a joint venture accounted for under equity method follow:
2019 2018 (In Thousands) Cost At January 1 P=1,008,927 P=2,194,729 Effect of merger - business combination (Note 2) − (1,185,802) Others (773) − At December 31 1,008,154 1,008,927 Accumulated equity in net income At January 1 479,486 374,059 Equity in net income for the year 234,864 106,039 Effect of merger - business combination (Note 2) − (612)
(Forward)
180 A space to take your dreams further
At December 31 714,350 479,486 Accumulated equity in other comprehensive loss At January 1 and December 31 (1,078) (1,078) P=1,721,426 P=1,487,335
The details of the Group’s investment in associates and a joint venture and the related percentages of ownership are shown below: Percentages of Ownership Carrying Amounts December 31 December 31 2019 2018 2019 2018 (In Thousands) Associates: Solinea, Inc. (Solinea) 35% 35% P=511,262 P= 4 7 0 , 9 8 0 Cebu Insular Hotels Company, Inc. (CIHCI) 37 37 296,447 259,778 Amaia Southern Properties, Inc. (ASPI) 35 35 149,324 127,622 Southportal Properties, Inc. (SPI) 35 35 331,426 189,718 Joint Venture: Cebu District Property Enterprise, Inc. (CDPEI) 15 15 432,967 439,237 P=1,721,426 P=1,487,335
The significant transactions affecting the Group’s investments in associates and a joint venture are as follows:
2018 Prior to the merger, the Parent Company and CPVDC made additional capital infusion to CBDI amounting to P=395.5 million and P=245.9 million, respectively.
As a result of the legal merger between the Parent Company and CPVDC on November 6, 2018, the Parent Company increased its direct and effective ownership to 55% and obtained control over CBDI.
As of December 31, 2019 and 2018, the statements of financial position of these investments in associates and a joint venture are as follows:
2019 SPI CIHCI Solinea CDPEI (In Thousands) Current assets P=2,386,091 P= 1 2 6 , 5 9 3 P=2,273,928 P=270,626 Noncurrent assets 477,897 791,844 984,309 6,406,935 Total assets P=2,863,988 P=918,437 P=3,258,237 P=6,677,561
Current liabilities P=1,632,743 P=118,249 P=1,806,700 P=311,601 Noncurrent liabilities 371,517 1,149 327,357 3,479,541 Equity 859,728 799,039 1,124,180 2,886,419 Total liabilities and equity P=2,863,988 P=918,437 P=3,258,237 P=6,677,561
2018 SPI CIHCI Solinea CDPEI (In Thousands) Current assets P=1,496,006 P=115,918 P=3,140,083 P=303,877 Noncurrent assets 790,796 787,787 679,424 4,560,500 Total assets P=2,286,802 P=903,705 P=3,819,507 P=4,864,377
Current liabilities P=1,130,686 P=202,355 P=2,556,223 P=94,644 Noncurrent liabilities 624,810 208 256,405 1,841,484 Equity 531,306 701,142 1,006,879 2,928,249 Total liabilities and equity P=2,286,802 P=903,705 P=3,819,507 P=4,864,377
181 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
The statements of comprehensive income of these investments for the years ended December 31, 2019, 2018 and 2017 are as follows:
For the year ended December 31, 2019 SPI CIHCI Solinea CDPEI (In Thousands) Revenue P=2,566,466 P=448,699 P=756,389 P= 2 , 7 5 9 Costs and expenses 2,238,044 349,755 654,322 45,761 Other income − − 15,233 1,200 Net income (loss) 328,422 98,944 117,300 (41,802) Other comprehensive loss − − − − Total comprehensive income (loss) P=328,422 P=98,944 P=117,300 (P=41,802)
For the year ended December 31, 2018 SPI CIHCI Solinea CDPEI (In Thousands) Revenue P=1,801,616 P=85,237 P=1,303,247 P=2,802 Costs and expenses 1,611,450 101,126 1,145,977 26,658 Net income (loss) 190,166 (15,889) 157,270 (23,856) Other comprehensive loss − − − − Total comprehensive income (loss) P=190,166 (P=15,889) P=157,270 (P=23,856)
For the year ended December 31, 2017 CBDI CIHCI Solinea CDPEI Revenue P=4,983 P=568,924 P=2,270,614 P=4,538 Costs and expenses 1,287 515,430 2,289,407 26,992 Net income (loss) 3,696 53,494 (18,793) (22,454) Other comprehensive loss − − − − Total comprehensive income (loss) P=3,696 P=53,494 (P=18,793) (P=22,454)
The difference between the carrying amount of the Group’s investment in Solinea as of December 31, 2019 and 2018 and its share in the total equity of Solinea is attributable to implied goodwill.
The Group’s total equity in net earnings of associates and a joint venture amounted to P=234.9 million, P=106.0 million and P=14.7 million in 2019, 2018 and 2017, respectively.
The aggregate financial information of associates on which the Group has immaterial interests as of and for the years ended December 31 follows: 2019 2018 2017 (In Thousands) Carrying amount P=149,324 P=127,622 P=232,780 Share in net income/total comprehensive income (loss) 21,702 (1,479) 2,802
182 A space to take your dreams further
14. Investment Properties
2019 Land Buildings and Construction- Land Improvements Improvements in-Progress Total (In Thousands) Cost At January 1 P=4,720,734 P=14,401 P=13,494,987 P=4,564,790 P=22,794,912 Additions 81,014 − 92,613 2,168,162 2,341,789 Transfers from inventories 175,064 − 33,491 − 208,555 (Note 9) Transfers to inventories (95,882) − − − (95,882) (Note 9) Reclassification − − 308,089 (308,089) − At December 31 4,880,930 14,401 13,929,180 6,424,863 25,249,374 Accumulated Depreciation At January 1 − 7,828 3,600,138 − 3,607,966 Depreciation and amortization (Note 23) − 2,921 572,073 − 574,994 At December 31 − 10,749 4,172,211 − 4,182,960 Net Book Value P=4,880,930 P= 3 , 6 5 2 P=9,756,969 P=6,424,863 P=21,066,414
2018 Land Buildings and Construction-in- Land Improvements Improvements Progress Total (In Thousands) Cost At January 1 P=5,009,305 P= 1 4 , 3 8 5 P=10,821,310 P=753,574 P=16,598,574 Additions 5,531 16 1,357,624 2,816,591 4,179,762 Transfers to inventories (294,102) − − − (294,102) (Note 9) Reclassification − − 649,107 (649,107) − Effect of merger (Note 1) − − 666,946 1,643,732 2,310,678 At December 31 4,720,734 14,401 13,494,987 4,564,790 22,794,912 Accumulated Depreciation At January 1 − 5,155 3,076,082 − 3,081,237 Depreciation and amortization (Note 23) − 243 516,853 − 517,096 Effect of merger − 2,430 7,203 − 9,633 At December 31 − 7,828 3,600,138 − 3,607,966 Net Book Value P=4,720,734 P= 6 , 5 7 3 P=9,894,849 P=4,564,790 P=19,186,946
The Group’s investment properties consist of land and building held for commercial leasing to earn rentals.
In 2019 and 2018, the Group transferred P=95.9 million and P=294.1 million worth of land from investment properties to inventories for lot intended for sale and TPEPI’s Mactan Seagrove project, respectively (see Note 9).
As a result of the merger effective November 6, 2018 (see Note 1), the investment properties of the Group increased by P=2,310.6 million, attributable to the investment properties of CBDI.
Total rental income from investment properties amounted to P=2,446.2 million, P=2,191.2 million and P=2,144.4 million in 2019, 2018 and 2017, respectively (see Note 21). Total direct operating expenses related to investment properties that generated rental income amounted to P=1,090.0 million, P=979.9 million and P=906.2 million in 2019, 2018 and 2017, respectively.
As of December 31, 2019 and 2018, there are no investment properties that are pledged as security to liabilities.
The aggregate fair value of the Group’s investment properties amounted to P=74,077.0 million and P=73,639.0 million as of December 31, 2019 and 2018, respectively, which is based on the latest appraisal report. The fair values were classified under Level 3 of the fair value hierarchy (see Note 27).
183 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
The fair values of the investment properties were determined by independent professionally qualified SEC accredited appraisers. The fair values of the land and buildings were arrived at using the sales comparison approach and income approach, respectively.
Sales comparison approach is a comparative approach to value that considers the sales of similar or substitute properties and related market data and establishes a value estimate by processes involving comparison. Listings and offerings may also be considered.
Income approach is a method in which the appraiser derives an indication of value for income producing property by converting anticipated future benefits into current property value.
Description of valuation techniques used and key inputs to valuation on land and buildings included under investment properties as of December 31, 2019 and 2018 follows:
Valuation Significant Property technique unobservable inputs Range 2019 2018 Land Sales comparison Price per square meter P=14,400−P=237,000 P=14,000−P=235,000 approach Buildings Income approach Income produced by Prospective economic benefits of property ownership into the future and these benefits are capitalized into an indication of value
The Group has no restrictions on the realizability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements.
15. Contract Liabilities
Contract liabilities consist of collections from real estate customers which have not reached the 10% threshold to qualify for revenue recognition and excess of collections over the recognized receivables based on percentage of completion amounting to nil and P=65.5 million as of December 31, 2019 and 2018, respectively,
Amount of revenue recognized from amounts included in contract liabilities at the beginning of the year amounted to P=65.5 million and P=92.2 million in 2019 and 2018, respectively.
16. Other Noncurrent Assets
2019 2018 (In Thousands) Input VAT P= 8 9 6 , 3 1 8 P=725,296 Advances to contractors 325,435 272,132 Development rights 63,314 49,157 Prepaid commission 8,052 9,954 Deposits 1,365 1,365 P=1,294,484 P=1,057,904
Input VAT arises from the purchase of goods and services but are expected to be applied against output VAT in future periods. This includes deferred input VAT which arises from the purchase of capital goods and is amortized over five (5) years or the assets’ useful life, whichever is lower, and is applied against output VAT.
Advances to contractors pertain to advances made for the construction of investment properties.
Development rights pertain to the unsold cost of development rights acquired by the Parent Company allocated based on the revised gross floor area of a structure in a particular lot.
Prepaid commission pertains to costs to obtain a contract from its leasing operation and amortized over the lease term.
184 A space to take your dreams further
Deposits include advance payments made by the Group for future land and building developments.
17. Accounts and Other Payables
2019 2018 (In Thousands) Payable to related parties (Note 20) P=6,431,049 P=6,296,754 Accrued expenses Utilities 191,220 121,249 Repairs and maintenance 111,856 115,065 Marketing and management fees 101,112 95,981 Advertising 79,272 30,018 Others 413,058 448,844 Accrued project costs (Note 20) 845,449 759,322 Taxes payable 363,744 211,745 Retentions payable 189,389 224,164 Interest payable 31,076 30,266 Dividends payable (Note 28) 1,731 1,731 Others 187,520 83,582 P=8,946,476 P=8,418,721
Accrued expenses others consist mainly of professional fees, commissions and salaries. These are noninterest-bearing and are normally settled within a year.
Accrued project costs arise from unbilled completed work on the development of residential and commercial projects.
Taxes payable includes amusement taxes, expanded withholding taxes and deferred output VAT on uncollected receivables. These are settled on a monthly basis.
Retentions payable pertains to the portion of the progress billings of constructions retained by the Group which will be released after the completion of the contractor’s projects. The retention serves as a security from the contractor in case of defects in the project.
Interest payable pertains to unpaid interest expense on long-term debt as of reporting date.
Other payables are noninterest-bearing and are normally settled within one year.
18. Long-term Debt
2019 2018 (In Thousands) Bonds - due 2021 P=5,000,000 P=5,000,000 Bank Loans with corresponding interest rate: BSP overnight reverse repurchase agreement rate plus 0.25% per annum, inclusive of gross receipts tax 362,250 383,250 Fixed rate corporate notes with interest rate of 4.75% per annum 336,000 357,000 BSP overnight reverse repurchase Repurchase agreement rate plus 0.25% per annum, inclusive of gross receipts tax 325,875 344,875 At 0.70% per annum spread over the 90-day DST-R2 340,000 340,000 6,364,125 6,425,125 Less unamortized debt issue cost 15,477 24,150 6,348,648 6,400,975 Less current portion 76,966 59,956 P=6,271,682 P=6,341,019
185 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
The Group’s long-term debt are all unsecured. Debt issue costs are deferred and amortized using effective interest method over the term of the loans.
The rollforward analysis of the unamortized debt issue cost follow:
2019 2018 (In Thousands) At January 1 P= 2 4 , 1 5 0 P=32,549 Amortization (Note 23) (8,673) (8,399) At December 31 P=15,477 P= 2 4 , 1 5 0
a. On June 6, 2014, the Parent Company issued P=5.0 billion fixed rate bonds. These bonds have a term of 7 years, payable in 2021, with a fixed rate of 5.32% per annum. The proceeds were used to fund the Group’s projects in the pipeline, including on-going projects within the Cebu Business Park and Cebu I.T. Park and land banking initiatives.
b. In March 2017, the Group availed the second drawdown from the P=800.0 million credit facility amounting to P=420.0 million which will mature in 2023.
The loan bears a floating interest rate based on the average yield for the 91-day treasury bills on PDST-R2 plus a spread of 70 basis points per annum or 95% of the BSP Overnight Reverse Repurchase Agreement rate, inclusive of gross receipts tax, whichever is higher. Starting 2018, the interest rate has been fixed at 4.5%. The related outstanding balance amounted to P=362.3 million and P=383.3 million as of December 31, 2019 and 2018, respectively.
c. In December 2013, the Group obtained a loan with a principal amount of P=420.0 million which are due in 2021. The loan is subject to a fixed interest rate of 4.75% per annum. This loan was used to finance the construction of eBloc 3 and eBloc 4 commercial buildings which were completed in 2016 included under “Investment properties” (see Note 14).
The related outstanding balance amounted to P=336.0 million and P=357.0 million as of December 31, 2019 and 2018, respectively.
d. In March 2016, the Group obtained a credit facility amounting to P=800.0 million. In 2016, the Group made the first drawdown amounting to P=380.0 million which will mature in 2023 and was used to finance the construction of eBloc 3. The loan bears a floating interest rate based on the average yield for the 91-day treasury bills on PDST-R2 plus a spread of 70 basis points per annum or 95% of the BSP Overnight Reverse Repurchase Agreement rate, inclusive of gross receipts tax, whichever is higher. Starting 2018, the interest rate has been fixed at 4.5%. The related outstanding balance amounted to P=325.9 million and P=344.9 million as of December 31, 2019 and 2018, respectively.
e. In September 2017, the Group obtained a credit facility amounting to P=375.0 million. In October 2017, the Group made the first drawdown amounting to P=340.0 million which is due in installments until 2027. Proceeds were used to refinance existing loans and for general corporate purposes. The loan is subject to floating interest rate of 90-day PDST-R2 plus 0.70% per annum spread, or a floor rate of equivalent to the average of the BSP Overnight Deposit Facility Rate and Term Deposit Facility Rate of the tenor nearest to the interest period. The related outstanding balance amounted to P=340.0 million as of December 31, 2019 and 2018. As of December 31, 2019 and 2018, the undrawn amount amounted to P=35.0 million.
Interest on long-term debt recognized in the consolidated statements of income amounted to P=439.2 million, P= 388.5 million and P=345.2 million in 2019, 2018 and 2017, respectively.
For the years ended December 31, 2019 and 2018, the Group has not capitalized any interest from borrowed funds because all of the Group’s projects funded by these specific borrowings were completed in 2016 (see Note 14).
Debt covenant The loan agreements provide for certain restrictions and requirements with respect to, among others, major disposal of property, pledge of assets, liquidation, merger or consolidation and maintenance of ratio between debt and the tangible net worth not to exceed 3:1. As of December 31, 2019 and 2018, the Group is in compliance with these restrictions and requirements.
186 A space to take your dreams further
19. Deposits and Other Liabilities
2019 2018 (In Thousands) Tenants’ deposits P=1,071,573 P= 8 4 3 , 0 7 4 Construction bond 122,075 84,456 Advance rent 97,725 146,135 Contract liabilities 1,064 1,604 1,292,437 1,075,269 Less noncurrent portion 337,688 177,608 P=954,749 P=897,661
The rollforward analysis of deferred credits under tenants’ deposits follows:
2019 2018 At January 1 P=22,807 P=19,628 Additions 8,373 11,088 Amortization (Note 23) (8,580) (7,909) At December 31 P=22,600 P=22,807
Tenants’ deposits consist of rental security deposits to be refunded by the Group at the end of the lease contracts. These are initially recorded at fair value, which was obtained by discounting its future cash flows using the applicable rates for similar types of instruments.
Construction bond pertains to deposits made by tenants as security for the construction and design of the leased premises, to be refunded upon completion, which usually takes less than a year.
Advance rentals from lessees represents cash received in advance representing three (3) months rent which will be applied to the last three (3) months rental on the related lease contract.
20. Related Party Transactions
Parties are considered to be related if, among others, 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 the party is an associate or a joint venture.
Terms and Conditions of Transactions with Related Parties Except as otherwise indicated, the outstanding accounts with related parties shall be settled in cash. The transactions are made at terms and prices agreed upon by the parties.
There have been no guarantees provided or received for any related party receivables or payables and are generally unsecured. Furthermore, these accounts are noninterest-bearing except for intercompany loans.
The following tables provide the total amount of transactions that have been entered into with related parties for the relevant financial year:
Amounts owed by Amounts owed to related parties related parties 2019 2018 2019 2018 (In Thousands) Subsidiaries of ALI P=1,489,429 P=904,234 P=5,392,103 P=5,491,224 Associates: Solinea 252,579 251,406 7,258 − SPI 92,651 178,092 39,028 − CIHCI − − 5,099 − Parent Company - ALI 263,608 36,762 987,561 805,530
(Forward)
187 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
Joint venture - CDPEI 2,005 1,951 − − Others 3,092 37,785 − − P=2,103,364 P=1,410,230 P=6,431,049 P=6,296,754
Revenue Costs/Expenses 2019 2018 2017 2019 2018 2017 (In Thousands) (In Thousands) Subsidiaries of ALI P=1,189,877 P=52,956 P=26,570 P=637,823 P=443,326 P=184,665 Parent Company - ALI 14,193 3,077 14,945 161,728 346,317 69,989 P=1,204,070 P= 5 6 , 0 3 3 P= 4 1 , 5 1 5 P=799,551 P=789,643 P=254,654
Receivables from/payables to Solinea, Avida and Alveo pertain mostly to advances for and reimbursements of operating expenses, development costs and land acquisitions. Other related party receivables and payables pertain to advances and reimbursements arising from the Group’s ordinary course of business.
These are generally trade-related, unsecured with no impairment, noninterest-bearing and payable within one year. The loans from DPSI, MDC and Serendra, Inc. bear interest ranging from 4.13% to 6.25% and are due and demandable as of December 31, 2019 and 2018.
The nature and amounts of material transactions with related parties as of December 31, 2019 and 2018 are as follows:
• Advances from subsidiaries of ALI in 2018 include advances of CBDI as a result of the merger amounting to P=3.7 billion.
• In December 2019, the Group sold land to ALC amounting to P=1,110.6 million which is payable in three tranches until December 2020. In December 2015, the Group sold land to ALC amounting to P=633.6 million which is payable in installment basis for twenty (20) years starting 2015. The related receivable is interest-bearing.
• Included under the accrued project costs in “Accounts and other payables” are construction costs payable to MDC amounting to P=845.4 million and P=759.3 million as of December 31, 2019 and 2018, respectively. Advances to MDC amounted to P=2.6 million and P=2.2 million as of December 31, 2019 and 2018, respectively.
• Expenses to ALI pertain to management fees, professional fees and systems costs. . Management and service fees charged by ALI amounted to P=161.8 million P=132.6 million and P=162.3 million in 2019, 2018 and 2017, respectively. . Systems costs which were included in the Group’s manpower costs amounted to P=17.1 million, P=19.0 million and P=15.9 million in 2019, 2018 and 2017, respectively.
• As of December 31, 2019 and 2018, the Group has entered into transactions with BPI, an affiliate, consisting of cash and cash equivalents, financial assets at FVPL, plan assets and long-term debt with carrying amounts as follows:
2019 2018 (In Thousands) Cash and cash equivalents (Note 5) P=98,386 P=155,744 Financial assets at FVPL (Note 7) 9,688 10,379 Long-term debt (Note 18) 1,364,125 1,425,125 Plan assets (Note 24) 35,889 39,054
• In December 2017, the Parent Company purchased commercial units with a floor area of 11,478.52 sq. m. from SPI’s The Alcoves project amounting to P=125.9 million, which is noninterest-bearing and subsequently paid in 2018.
Compensation of key management personnel by benefit type follows:
2019 2018 2017 (In Thousands) Short-term employee benefits P=19,097 P=14,165 P=18,740 Post-employment pension and other benefits 1,810 1,273 817 P=20,907 P=15,438 P=19,557
188 A space to take your dreams further
21. Revenues
2019 2018 2017 (In Thousands) Rental income (Notes 14 and 30) P=2,446,176 P=2,191,231 P=2,144,414 Revenue from contracts with customers 1,453,084 800,852 – Theater income 134,006 120,475 129,607 Real estate sales – – 347,712 P=4,033,266 P=3,112,558 P=2,621,733
Revenue from contracts with customers The Group derives revenue from the transfer of goods and services over time and at a point in time, in different product types of its real estate sales. The Group’s disaggregation of revenue from contracts with customers are presented below:
2019 2018 (In Thousands) Lot only P=1,344,345 P=712,144 Condominium 108,739 88,708 P=1,453,084 P=800,852
Performance Obligation The Group entered into contracts to sell with one identified performance obligation which is the sale of the real estate unit together with the services to transfer the title to the buyer upon full payment of contract price. The amount of consideration indicated in the contract to sell is fixed and has no variable consideration.
The sale of real estate unit may cover the contract for either the (i) serviced lot and (ii) condominium unit and the Group concluded that there is one performance obligation in each of these contracts. In accordance with Philippines Interpretation Committee Q&A 2016-04, the Group recognizes revenue from the sale of these real estate projects under pre-completed contract over time during the course of the construction. Sale of lot is recognized at point in time upon execution of deed of absolute sale which typically evidence the transfer of control of the lot together with other evidences.
Payment commences upon signing of the contract to sell and the consideration is payable in cash or under various financing schemes entered with the customer. The financing scheme would include payment of 10% of the contract price spread over a certain period (e.g., one to three years) at a fixed monthly payment with the remaining balance payable in full at the end of the period.
After the delivery of the completed real estate unit, the Group provides one year warranty to repair minor defects on the delivered real estate unit. This is assessed by the Group as a quality assurance warranty and not treated as a separate performance obligation.
The transaction price allocated to the remaining performance obligations (unsatisfied or partially satisfied) amounted to nil and P=184.1 million as at December 31, 2019 and 2018, respectively.
Costs to Obtain a Contract The balances below pertain to the cost to obtain contracts included in the other current assets (see Note 10):
2019 2018 (In Thousands) Balance at the beginning of the year P= 2 , 0 6 2 P=4,948 Additions – 21,026 Amortization (2,062) (23,912) P= – P=2,062
189 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
22. Interest and Other Income
Interest income consists of:
2019 2018 2017 (In Thousands) Interest income derived from: Intercompany loans P=44,220 P= 2 8 , 8 7 6 P= 1 0 , 7 3 4 Accretion of receivables (Note 8) 34,174 33,254 25,623 Cash and cash equivalents (Note 5) 2,683 2,020 1,047 Short-term investments (Note 6) 159 236 200 Others 2,950 2,661 3,929 P=84,186 P= 6 7 , 0 4 7 P= 4 1 , 5 3 3
Accretion of receivables includes interest accretion from the sale of land and condominium units.
Others includes interest earned from intercompany and employee loans and interest and penalty charges on real estate sales.
Other income consists of:
2019 2018 2017 (In Thousands) Dues P=223,013 P=221,969 P=206,193 Net gain on sale of development rights (Notes 8 and 16) 179,330 151,495 168,195 Service income 14,334 13,823 18,847 Beverage 5,643 2,841 5,825 Realized and unrealized gain on financial assets at FVPL (Note 7) 638 444 244 Insurance claim − 27,503 – Others 21,779 18,121 14,951 P=444,737 P=436,196 P=414,255
Dues pertain to net recoveries from sewer, light and power and water charges from its rental operations. These are recognized when earned.
Gain on sale of development rights pertains to the net gain earned by the Parent Company from selling the development rights, which represents a portion of the gross floor area of a structure in a particular lot that is allowed to be developed by the buyers in the future (see Notes 8 and 16).
Service income pertains to the various management fees charged by the Group to various parties.
Insurance claim pertains to claim against insurer for damage brought about by the fire that occurred in 2018. The claim encompasses business interruption and material damage (see Note 8).
23. Costs and Expenses
Real estate, rental and theater expenses consist of:
2019 2018 2017 (In Thousands) Depreciation and amortization (Note 14) P=574,994 P=517,096 P=467,390 Cost of real estate sales (Note 9) 406,391 522,956 205,427 Marketing and management fees (Note 20) 285,881 272,801 230,838 Producers’ film share 75,054 67,501 72,830 Manpower cost (Note 20) 43,188 32,125 23,020
(Forward)
190 A space to take your dreams further
2019 2018 2017 (In Thousands) Rental 4,639 1,798 1,956 Direct operating expenses: Security and janitorial 219,097 163,693 137,063 Taxes and licenses 120,782 106,922 81,510 Repairs and maintenance 101,191 119,192 109,037 Commission 14,928 24,705 54,445 Professional fees 14,117 4,599 6,487 Insurance 7,274 6,268 8,321 Dues and fees 7,031 8,855 12,172 Representation 2,103 146 177 Transportation and travel 110 232 647 Light and water − − 14,649 Others 23,756 26,374 11,611 P=1,900,536 P=1,875,263 P=1,437,580
General and administrative expenses consist of:
2019 2018 2017 (In Thousands) Manpower cost (Notes 20 and 24) P=124,420 P= 9 1 , 6 4 7 P= 1 0 5 , 5 7 6 Depreciation and amortization (Note 12) 29,529 32,589 28,220 Taxes and licenses 11,312 635 746 Stockholders' meeting 8,531 7,188 13,399 Repairs and maintenance 6,542 7,170 9,850 Professional fees 5,365 10,010 10,330 Transportation and travel 4,793 4,834 5,363 Provision for impairment loss (Note 8) 4,773 14,032 − Dues and fees 4,685 1,106 4,121 Postal and communication 3,899 3,935 4,190 Utilities 2,993 5,159 4,028 Trainings 2,967 3,364 4,336 Supplies 2,545 2,738 2,805 Security and janitorial 2,181 2,556 3,101 Others 52,203 12,088 16,018 P=266,738 P=199,051 P=212,083
Others pertain to miscellaneous expenses such as advertising, representation, insurance, rental, provisions and other expenses.
Other charges consist of:
2019 2018 2017 (In Thousands) Amortization of discount on long-term debt (Note 18) P=8,673 P=8,399 8,065 Financing charges and other expenses 8,259 − 11,100 Amortization of deferred credits (Note 19) 8,580 7,909 3,751 P=25,512 P=16,308 P=22,916
24. Pension Plan
As discussed in Note 2, the Group maintains a DC plan which is accounted for as a defined benefit (DB) plan with minimum guarantee due to the requirements of RA No. 7641, The Retirement Pay Law, covering all regular and permanent employees.
191 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
The plan assets are being managed by BPI. The asset allocation of the plan is set and reviewed from time to time by the Plan Trustees taking into account the membership profile, the liquidity requirements of the Plan and the risk appetite of the Plan sponsor.
The Group contributes to the fund based on the provision of the DC Plan. The Group updates the actuarial valuation every year by hiring the services of a third party professional qualified actuary. The latest actuarial valuation report was as of reporting date.
192 A space to take your dreams further
2018 2018 2019 P=71,757 P=71,757 P=32,703 P=32,703 (35,889) P=71,508 P=71,508 P= 3 5 , 6 1 9 December 31, December 31, December
(521) P=3,221 P= 2 , 7 0 0 (P=3,573) (P=1,485) Subtotal
– – – 2,088 (39,054) (P=3,026) (P=2,361) (P=2,361) Experience Experience adjustments Subtotal adjustments
– – – ( P= 5 4 7 ) ( P= 3 , 0 2 6 ) ( P= 5 4 7 ) P=5,582 P=5,582 changes changes changes Actuarial changes Actuarial in financial in financialin arising from arising from assumptions assumptions
P= – P= – (521) Remeasurement in other comprehensive Remeasurement income (P=521) Remeasurement in other comprehensive income Return on Return Return on plan assets plan assets plan
– – 2,088 P= – P= – P= 2 , 0 8 8 P= – P= – and and
Settlement Settlement Curtailment Curtailment
P= – P= – (6,990) (P=6,990) 2018 2019 Contributions
P= – ( P= 4 , 0 0 0 ) P= – 817) 1,817 (4,000) P= 1 3 , 7 7 7 Benefits Benefits
(P=13,777) paid from paid from paid plan assets Contributions plan assets plan - 42 -
(1,855) (3,101) P= 7 , 2 0 6 P=10,307 Subtotal
– – (3,101) – (1,855) P= – P= 1 , 6 1 3 P= 5 , 9 1 9 P=– P=– P=3,468 P=7,774 (P=1, P= – P= – P= 5 , 6 9 P= 8 2 , 5 9 7 Past Past service cost Net interest Subtotal of comprehensive income service cost service interest Net of comprehensive income
re as follows: follows: as re – – – 0 6 Net benefit cost in consolidated statements Net Net benefit cost in consolidated statements P= 4 , 6 0P= 9 4 , 6 0 9 Current Current service cost service cost service
2018 2019 (37,104) (39,054) P=69,373 P=69,373 P=4,306 P=71,757 P= 3 2 , 7 0 3 January 1, January 1, January
obligation obligation Present value of benefit defined Present Fair value of plan assets Net defined benefit liability (asset) value of benefit defined Present Fair value of plan assets Net defined benefit liability (asset) P=32,269 P=4,3
Changes in net defined liability in 2019 and 2018 a 2018 and 2019 in liability defined net in Changes 193 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
The Group’s fund is in the form of a trust fund being maintained by BPI Asset Management. The primary objective of the Retirement Fund is to achieve the highest total rate of return possible, consistent with a prudent level of risk. The investment strategy articulated in the asset allocation policy has been developed in the context of long-term capital market expectations, as well as multi-year projections of actuarial liabilities. Accordingly, the investment objectives and strategies emphasize a long-term outlook, and interim performance fluctuations will be viewed with the corresponding perspective.
The Group expects to contribute P=13.4 million to its retirement fund in 2020.
The major categories of the Group’s plan asset follows:
2019 2018 Government securities 98.24% 86.48% Unit investments trust fund 1.76 8.36 Cash and cash equivalents − 5.16 100.00% 100.00%
All debt instrument held have quoted prices in an active market.
The cost of defined benefit pension plans and other post-employment medical benefits as well as the present value of the pension obligation are determined using actuarial valuations. The actuarial valuation involves making various assumptions. The principal assumptions used in determining pension and post-employment medical benefit obligations for the defined benefit plans are shown below:
2019 2018 2017 Discount rate 5.02% 7.94% 5.00% Salary increase rate 7.00 7.00 5.00
The sensitivity analyses below has been determined based on reasonable possible changes of each significant assumption on the defined benefit obligation as of the end of the reporting period, assuming all other assumptions were held constant, as of December 31:
Effect on DBO 2019 2018 Discount rate 1.0% increase (4.67%) (0.13%) Discount rate 1.0% decrease 12.59% 0.79% Rate of salary increase 1.0% increase 11.76% 0.75% Rate of salary increase 1.0% decrease (4.58%) (0.13%)
The weighted average duration of the defined benefit obligation at the end of the reporting period is 17 years as of December 31, 2019 and 2018.
The following table shows the maturity profile of the Group’s defined benefit obligation based on undiscounted benefit payments:
2019 2018 (In Thousands) Within 1 year P= − P=6,882 More than 1 year to 5 years 14,806 10,150 More than 5 years to 10 years 43,272 37,057 More than 10 years 372,569 396,650 P=430,647 P= 4 5 0 , 7 3 9
194 A space to take your dreams further
25. Income Taxes
The provision for current income tax represents 30% RCIT, 2% MCIT and 5% rate on gross income tax (GIT) amounting to P=524.7 million, P=274.6 million and P=251.1 million in 2019, 2018 and 2017, respectively.
Reconciliation between the statutory income tax rate and the effective income tax rate follows:
2019 2018 2017 Statutory income tax rate 30.00% 30.00% 30.00% Tax effects of: Income subjected to lower income tax rates (3.80) (6.87) (6.22) Equity in net earnings of associates and a joint venture (3.25) (2.57) (0.41) Expired NOLCO and MCIT 0.38 1.18 0.97 Unrecognized deferred income tax assets on MCIT and NOLCO 0.04 0.61 − Interest income and capital gains taxed at lower rates (0.01) (0.02) (0.02) Others (0.47) (0.39) 0.01 Effective income tax rate 22.89% 21.94% 24.33%
The components of net deferred tax assets as of December 31 are as follows:
2019 2018 (In Thousands) Deferred tax assets on: Accrued expenses P=10,994 P= 1 , 4 5 7 Difference between tax and book basis of accounting for real estate transactions 7,282 26,180 Advance rent 3,899 − Allowance for impairment losses 642 642 MCIT 407 − Unamortized discount on customers’ deposits 44 60 23,268 28,339 Deferred tax liabilities on: Unamortized capitalized interest 6,601 2,791 Accrued rental income 4,352 60 10,953 2,851 P=12,315 P= 2 5 , 4 8 8
The components of net deferred tax liabilities as of December 31 are as follows:
2019 2018 (In Thousands) Deferred tax assets on: Accrued expenses P=55,959 P= 2 4 , 8 0 5 Advance rent 20,604 15,817 Retirement benefits 10,686 9,811 Allowance for impairment losses on receivables and other losses 10,004 8,573 Unamortized discount on sale of land 4,416 4,416 Unamortized discount on customers’ deposits 2,641 1,922 Unapplied NOLCO − 7,680 MCIT − 1,247 Others 3,041 3,275 107,351 77,546 Deferred tax liabilities on: Unamortized capitalized interest 98,753 102,781 Accrued rental income 91,596 83,063 Unrealized gross profit on lot sale 76,672 96,523
(Forward)
195 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
2019 2018 The methods and assumptions used by the Group in estimating the fair value of the financial instruments are as follows: (In Thousands) Difference between tax and book basis of accounting for • Cash and cash equivalents and short-term investments: The fair value of cash and cash equivalents and short-term real estate transactions 54,878 53,574 investment approximate the carrying amounts at initial recognition due to the short-term maturities of these instruments. Others 18,139 17,358 • Financial assets at FVPL: The fair value estimates are based on net assets value of the reporting date. 340,038 353,299 • Receivables: The fair value of receivables due within one year approximates its carrying amounts. Noncurrent portion of P=232,687 P=275,753 receivables are discounted using the applicable discount rates for similar types of instruments. The discount rates used ranged from 3.7% to 5.0% as of December 31, 2019 and 2018.
As of December 31, 2019, deferred tax assets arising from NOLCO and MCIT amounting to P=7.0 million and P=6.9 million, • Financial assets at FVOCI: The fair value of financial assets at FVOCI is determined based on the available selling price in respectively, and as of December 31, 2018, deferred tax assets arising from NOLCO and MCIT amounting to P=21.4 million and the market for identical assets. P=5.0 million, respectively, have not been recognized since management believes that no sufficient taxable income will be • Accounts and other payables: The fair values of accounts and other payables approximate the carrying amounts due to the available in the year these are expected to be reversed, settled or realized. short-term nature of these transactions. • Long-term debt and deposits and other liabilities: Current portion of long-term debt and deposits and other liabilities The Group has NOLCO and MCIT, that are available for offset against future income tax liabilities for which deferred tax assets approximates its fair value due to its short-term maturity. The fair value of fixed rate instruments are estimated using the have not been recognized. These deductible NOLCO and MCIT, as of December 31, 2019 and 2018 follow: discounted cash flow methodology using the Group’s current incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being value. The discount rates used ranged from 1.8% to 5.5% NOLCO as of December 31, 2019 and 2018. Year Expiry At December 31, At December 31, Incurred Date 2018 Additions Applied Expired 2019 The following tables set forth the carrying values and estimated fair values of the Group’s financial assets and liabilities: 2019 2022 P=− P=541,123 P=− P=− P=541,123 2018 2021 22,927,266 − – – 22,927,266 December 31, 2019 December 31, 2018 2017 2020 25,599,407 – (25,599,407) – − Carrying Carrying 2015 2018 48,495,209 – (8,616,352) (39,878,857) – Value Fair Value Value Fair Value P=97,021,882 P=541,123 (P=34,215,759) (P=39,878,857) P=23,468,389 (In Thousands) Loans and Receivables MCIT Trade residential development P=270,023 P=278,004 P=372,418 P=453,380 Receivable from related parties 2,103,364 2,103,364 1,410,230 1,410,230 Year Expiry At December 31, At December 31, Incurred Date 2018 Additions Applied Expired 2019 Other Financial Liabilities Long-term debt P=6,348,648 P=6,487,375 P=6,400,975 P=6,060,596 2019 2020 P=− P=3,043,106 P=− P=− P=3,043,106 Tenants’ deposits under 2018 2021 2,492,990 − – – 2,492,990 deposits and other liabilities 1,071,573 1,071,573 843,074 843,074 2017 2020 1,324,094 – – – 1,324,094
2016 2019 2,192,808 – – (2,192,808) − Fair Value Hierarchy 2015 2018 194,886 – – (194,886) – The Group uses the following hierarchy for determining and disclosing the fair value of the assets and liabilities by valuation P=6,204,778 P=3,043,106 P=– (P=2,387,694) P=6,860,190 technique:
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities 26. Basic/Diluted Earnings Per Share Level 2: inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly The following table presents information necessary to compute EPS: Level 3: inputs for the asset or liability that are not based on observable market data
2019 2018 2017 The quantitative disclosures on fair value measurement hierarchy for assets and liabilities as of December 31 follow: (In Thousands, except EPS) a. Net income attributable to the equity 2019 holders of CHI P=1,657,569 P= 8 5 7 , 1 1 1 P= 7 5 3 , 4 4 7 Fair value measurements using b. Weighted average number of outstanding Quoted shares 2,156,757 1,959,521 1,920,074 prices in c. Basic/Diluted Earnings per share (a/b) P=0.77 P= 0 . 4 4 P= 0 . 3 9 active Significant markets for offer Significant There were no potential dilutive shares in 2019, 2018 and 2017. identical observable unobservable Date of Carrying assets inputs inputs valuation Values Total (Level 1) (Level 2) (Level 3) 27. Financial Information and Financial Instruments Assets measured at fair value Fair Value Information Financial assets at December 31, The carrying amount of cash and cash equivalents, short-term investments, financial assets at FVPL, receivables (except trade FVOCI 2019 P=349,806 P=349,806 P=– P=349,806 P=– residential development and certain receivables from related parties), accounts and other payables (excluding statutory Financial assets at December 31, liabilities) and deposits and other liabilities (except tenants’ deposits) are approximately equal to their fair value due to the FVPL 2019 9,688 9,688 – 9,688 – short-term nature of the transaction. (Forward)
196 A space to take your dreams further
The methods and assumptions used by the Group in estimating the fair value of the financial instruments are as follows:
• Cash and cash equivalents and short-term investments: The fair value of cash and cash equivalents and short-term investment approximate the carrying amounts at initial recognition due to the short-term maturities of these instruments. • Financial assets at FVPL: The fair value estimates are based on net assets value of the reporting date. • Receivables: The fair value of receivables due within one year approximates its carrying amounts. Noncurrent portion of receivables are discounted using the applicable discount rates for similar types of instruments. The discount rates used ranged from 3.7% to 5.0% as of December 31, 2019 and 2018. • Financial assets at FVOCI: The fair value of financial assets at FVOCI is determined based on the available selling price in the market for identical assets. • Accounts and other payables: The fair values of accounts and other payables approximate the carrying amounts due to the short-term nature of these transactions. • Long-term debt and deposits and other liabilities: Current portion of long-term debt and deposits and other liabilities approximates its fair value due to its short-term maturity. The fair value of fixed rate instruments are estimated using the discounted cash flow methodology using the Group’s current incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being value. The discount rates used ranged from 1.8% to 5.5% as of December 31, 2019 and 2018.
The following tables set forth the carrying values and estimated fair values of the Group’s financial assets and liabilities:
December 31, 2019 December 31, 2018 Carrying Carrying Value Fair Value Value Fair Value (In Thousands) Loans and Receivables Trade residential development P=270,023 P=278,004 P=372,418 P=453,380 Receivable from related parties 2,103,364 2,103,364 1,410,230 1,410,230 Other Financial Liabilities Long-term debt P=6,348,648 P=6,487,375 P=6,400,975 P=6,060,596 Tenants’ deposits under deposits and other liabilities 1,071,573 1,071,573 843,074 843,074
Fair Value Hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of the assets and liabilities by valuation technique:
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly Level 3: inputs for the asset or liability that are not based on observable market data
The quantitative disclosures on fair value measurement hierarchy for assets and liabilities as of December 31 follow:
2019 Fair value measurements using Quoted prices in active Significant markets for offer Significant identical observable unobservable Date of Carrying assets inputs inputs valuation Values Total (Level 1) (Level 2) (Level 3) Assets measured at fair value Financial assets at December 31, FVOCI 2019 P=349,806 P=349,806 P=– P=349,806 P=– Financial assets at December 31, FVPL 2019 9,688 9,688 – 9,688 –
(Forward)
197 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
Assets for which fair values are disclosed The Group categorized the fair value of financial assets at FVOCI and FVPL under Level 2 as of December 31, 2019 and 2018. Trade residential December 31, The fair value of these instruments was determined based on available selling price for identical assets. development 2019 270,023 278,004 – – 278,004 Receivable from December 31, Financial Risk Management Objectives and Policies related parties 2019 2,103,364 2,103,364 – – 2,103,364 The Group’s principal financial instruments comprise cash and cash equivalents, financial assets at FVPL and FVOCI and long- December 31, term debt. Investment properties 2019 21,066,414 74,077,000 – – 74,070,000 Liabilities for which The main purpose of the Group’s financial instruments is to fund its operations, capital expenditures and finance the projects. fair values are The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly disclosed from its operations. Long-term debt December 31, 2019 6,348,648 6,487,375 – – 6,487,375 Exposure to credit risk, liquidity risk and market risk (i.e., foreign currency risk and interest rate risk) arises in the normal course Tenants’ deposits of the Group’s business activities. The main objectives of the Group’s financial risk management are as follows: under • to identify and monitor such risks on an ongoing basis; deposits and other December 31, • to minimize and mitigate such risks; and liabilities 2019 1,071,573 1,071,573 – – 1,071,573 • to provide a degree of certainty about costs.
2018 The Group’s financing and treasury function operates as a centralized service for managing financial risks and activities as well Fair value measurements using as providing optimum investment yield and cost-efficient funding for the Group. The Group’s BOD reviews and approves Quoted policies for managing each of these risks. prices in active Significant Credit risk markets for offer Significant Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge identical observable unobservable an obligation. The Group’s credit risks are primarily attributable to financial assets such as cash and cash equivalents, short- Carrying assets inputs inputs term investments and receivables. Date of valuation Values Total (Level 1) (Level 2) (Level 3) Assets measured at To manage credit risk, the Group maintains defined credit policies and monitors its exposure to credit risks on a continuous fair value basis. Financial assets at December 31, FVOCI 2018 P=342,650 P=342,650 P=– P=342,650 P=– In respect of receivable from the sale of properties, credit risk is managed primarily through credit reviews and an analysis of Financial assets at December 31, receivables on a continuous basis. The Group also undertakes supplemental credit review procedures for certain installment FVPL 2018 10,379 10,379 – 10,379 – payment structures. The Group’s stringent customer requirements and policies in place contribute to lower customer default Assets for which fair than its competitors. Customer payments are facilitated through various collection modes including the use of postdated values are disclosed checks and auto-debit arrangements. Exposure to bad debts is not significant as title to real estate properties are not Trade residential December 31, transferred to the buyers until full payment has been made and the requirement for remedial procedures is minimal given the development 2018 29,486 110,448 – – 110,448 profile of buyers. Receivable from December 31, related parties 2018 1,410,230 1,410,230 – – 1,410,230 Credit risk arising from rental income from leasing properties is primarily managed through a tenant selection process. December 31, Prospective tenants are evaluated on the basis of payment track record and other credit information. In accordance with the Investment properties 2018 19,186,946 73,639,000 – – 73,639,000 provisions of the lease contracts, the lessees are required to deposit with the Group security deposits and advance rentals Liabilities for which which helps reduce the Group’s credit risk exposure in case of defaults by the tenants. For existing tenants, the Group has put fair values are in place a monitoring and follow-up system. Receivables are aged and analyzed on a continuous basis to minimize credit risk disclosed associated with these receivables. Regular meetings with tenants are also undertaken to provide opportunities for counseling Long-term debt December 31, and further assessment of paying capacity. 2018 6,400,975 6,060,596 – – 6,060,596 Tenants’ deposits Other financial assets are comprised of cash and cash equivalents excluding cash on hand and short-term investments. The under Group adheres to fixed limits and guidelines in its dealings with counterparty banks and its investment in financial instruments. deposits and other December 31, Bank limits are established on the basis of an internal rating system that principally covers the areas of liquidity, capital liabilities 2018 843,074 843,074 – – 843,074 adequacy and financial stability. The rating system likewise makes use of available international credit ratings. Given the high credit standing of its accredited counterparty banks, management does not expect any of these financial institutions to fail in The Group categorized the fair value of receivables, long-term debt and deposits and other noncurrent liabilities under Level 3 meeting their obligations. Nevertheless, the Group closely monitors developments over counterparty banks and adjusts its as of December 31, 2019 and 2018. The fair value of these financial instruments was determined by discounting future cash exposure accordingly while adhering to pre-set limits. flows using the applicable rates of similar types of instruments plus a certain spread. This spread is the unobservable input and the effect of changes to this is that the higher the spread, the lower the fair value. As for the receivables from related parties, receivable from employees and other receivables, the maximum exposure to credit risk from these financial assets arise from the default of the counterparty with a maximum exposure equal to their carrying For land, significant increases (decreases) in the price per square meter, in isolation, would result in a significantly higher amounts. (lower) fair value of the properties.
For buildings, significant increases (decreases) in the anticipated future benefits would result in a significantly higher (lower) fair value of the properties.
198 A space to take your dreams further
The Group categorized the fair value of financial assets at FVOCI and FVPL under Level 2 as of December 31, 2019 and 2018. The fair value of these instruments was determined based on available selling price for identical assets.
Financial Risk Management Objectives and Policies The Group’s principal financial instruments comprise cash and cash equivalents, financial assets at FVPL and FVOCI and long- term debt.
The main purpose of the Group’s financial instruments is to fund its operations, capital expenditures and finance the projects. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.
Exposure to credit risk, liquidity risk and market risk (i.e., foreign currency risk and interest rate risk) arises in the normal course of the Group’s business activities. The main objectives of the Group’s financial risk management are as follows: • to identify and monitor such risks on an ongoing basis; • to minimize and mitigate such risks; and • to provide a degree of certainty about costs.
The Group’s financing and treasury function operates as a centralized service for managing financial risks and activities as well as providing optimum investment yield and cost-efficient funding for the Group. The Group’s BOD reviews and approves policies for managing each of these risks.
Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group’s credit risks are primarily attributable to financial assets such as cash and cash equivalents, short- term investments and receivables.
To manage credit risk, the Group maintains defined credit policies and monitors its exposure to credit risks on a continuous basis.
In respect of receivable from the sale of properties, credit risk is managed primarily through credit reviews and an analysis of receivables on a continuous basis. The Group also undertakes supplemental credit review procedures for certain installment payment structures. The Group’s stringent customer requirements and policies in place contribute to lower customer default than its competitors. Customer payments are facilitated through various collection modes including the use of postdated checks and auto-debit arrangements. Exposure to bad debts is not significant as title to real estate properties are not transferred to the buyers until full payment has been made and the requirement for remedial procedures is minimal given the profile of buyers.
Credit risk arising from rental income from leasing properties is primarily managed through a tenant selection process. Prospective tenants are evaluated on the basis of payment track record and other credit information. In accordance with the provisions of the lease contracts, the lessees are required to deposit with the Group security deposits and advance rentals which helps reduce the Group’s credit risk exposure in case of defaults by the tenants. For existing tenants, the Group has put in place a monitoring and follow-up system. Receivables are aged and analyzed on a continuous basis to minimize credit risk associated with these receivables. Regular meetings with tenants are also undertaken to provide opportunities for counseling and further assessment of paying capacity.
Other financial assets are comprised of cash and cash equivalents excluding cash on hand and short-term investments. The Group adheres to fixed limits and guidelines in its dealings with counterparty banks and its investment in financial instruments. Bank limits are established on the basis of an internal rating system that principally covers the areas of liquidity, capital adequacy and financial stability. The rating system likewise makes use of available international credit ratings. Given the high credit standing of its accredited counterparty banks, management does not expect any of these financial institutions to fail in meeting their obligations. Nevertheless, the Group closely monitors developments over counterparty banks and adjusts its exposure accordingly while adhering to pre-set limits.
As for the receivables from related parties, receivable from employees and other receivables, the maximum exposure to credit risk from these financial assets arise from the default of the counterparty with a maximum exposure equal to their carrying amounts.
199 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
The Group writes-off a financial asset, in whole or in part, when the asset is considered uncollectible, it has exhausted all practical recovery efforts and has concluded that it has no reasonable expectations of recovering the financial asset in its entirety or a portion thereof. The Group writes off an account when all of the following conditions are met:
. the asset is in past due for over 90 days, or is already an item-for-forfeit . contract restructuring is no longer possible
The Group may also write-off financial assets that are still subject to enforcement activity. The Group has not written off outstanding loans and receivables that are still subject to enforcement activity as of December 31, 2019 and 2018.
An analysis of the maximum exposure to credit risk from the Group’s trade receivables and the fair values of the related collaterals are shown below:
December 31, 2019 Financial effect Maximum of collateral exposure to Fair value of or credit credit risk collaterals Net Exposure enhancement (In Thousands) Trade receivables: Residential development P=270,023 P=278,004 P=− P=270,023 Shopping centers 162,437 810,166 – 162,437 Commercial development 123,789 – 123,789 – Corporate business 76,230 261,407 – 76,230 P=632,479 P=1,349,577 P=123,789 P=508,690
December 31, 2018 Financial effect Maximum of collateral exposure to Fair value of Net or credit credit risk collaterals Exposure enhancement (In Thousands) Trade receivables: Residential development P=372,418 P=453,380 P=– P=372,418 Commercial development 130,540 – 130,540 – Corporate business 112,190 238,946 – 112,190 Shopping centers 106,205 740,553 – 106,205 P=721,353 P=1,432,879 P=130,540 P=590,813
The following are the details of the Group’s assessment of credit quality and the related ECLs as at December 31, 2019 and 2018:
General approach . Cash and cash equivalents and short-term investments - As of December 31, 2019 and 2018, the ECL relating to the cash and cash equivalents and short-term investments of the Group is minimal as these are considered with low credit risk.
. Receivables from related parties, commercial development and other receivables - The Group did not recognize any allowance relating to receivable from related parties, commercial development and other receivables in prior years. No ECL is recognized since there were no history of default payments. This assessment is undertaken each financial year through examining the financial position of the related parties and the markets in which the related parties operate.
Simplified approach . Trade receivables (i.e., residential, corporate business, shopping centers, lease receivables, accrued receivables) - The Group applied the simplified approach under PFRS 9, using a ‘provision matrix’. As of December 31, 2019 and 2018, the allowance for impairment losses pertain only to individually impaired accounts. No impairment losses resulted from
200 A space to take your dreams further
performing collective impairment test, due to the expected recoveries from security deposits (i.e., stipulated as 3 to 6 months’ worth of rental), advance payments/rentals and cash flows from sale of foreclosed properties which help reduce the Group’s credit risk exposure in case of defaults by the customers.
The maximum exposure to credit risk, net of allowance for impairment, amounted to P=3.6 billion and P=2.9 billion as at December 31, 2019 and 2018, respectively.
2019 Stage 1 Stage 2 Stage 3 Lifetime ECL 12-month Lifetime Lifetime Simplified ECL ECL ECL Approach Total Gross carrying P=2,665,732 P=− P=− P=981,648 P=3,647,380 amount Loss allowance − − − (35,488) (35,488) Carrying amount P=2,665,732 P=− P=− P=946,160 P=3,611,892
2018 Stage 1 Stage 2 Stage 3 Lifetime ECL 12-month Lifetime Lifetime Simplified ECL ECL ECL Approach Total Gross carrying P=1,931,977 P=− P=− P=1,002,237 P=2,934,214 amount Loss allowance − − − (30,715) (30,715) Carrying amount P=1,931,977 P=− P=− P=971,522 P=2,903,499
As of December 31, 2019 and 2018, the aging analysis of receivables presented per class, is as follows:
2019 Neither Past Past Due but not Impaired Due nor 30-60 60-90 90-120 Impaired <30 days days days days >120 days Impaired Total (In Thousands) Trade receivables: Residential development P=270,023 P=− P=− P=− P=− P=− P=− P=270,023 Shopping centers 75,240 − 18,229 9,123 17,888 22,914 19,043 162,437 Commercial development 123,789 − − − − − − 123,789 Corporate business 50,211 − 5,566 4,008 − − 16,445 76,230 Receivable from related parties 1,848,667 − − − − 254,697 − 2,103,364 Receivable from insurance 21,267 − − − − − − 21,267 Receivable from employees 19,887 − − − − − − 19,887 Accrued receivable 472,958 − − − − − − 472,958 Others 57,897 − − − − − − 57,897 P=2,939,939 P=− P=23,795 P=13,131 P=17,888 P=277,611 P=35,488 P=3,307,852
201 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
2018 Neither Past Past Due but not Impaired Due nor 30-60 60-90 90-120 Impaired <30 days days days days >120 days Impaired Total (In Thousands) Trade receivables: Residential development P=372,418 P= − P= − P= − P= − P= − P= − P= 3 7 2 , 4 1 8 Shopping centers 73,000 7,662 8,801 3,680 503 679 11,880 106,205 Commercial development 130,540 − − − − − − 130,540 Corporate business 68,051 4,076 8,619 8,003 149 4,457 18,835 112,190 Receivable from related parties 775,050 − 873 279 287 633,741 − 1,410,230 Receivable from insurance 54,634 54,634 Receivable from employees 14,249 − − − − − − 14,249 Accrued receivable 303,898 − − − − 107,526 − 411,424 Others 26,539 − − − − 46,418 − 72,957 P=1,818,379 P=11,738 P=18,293 P=11,962 P=939 P=792,821 P=30,715 P=2,684,847
Others includes nontrade receivables from sewer and management fees, receivable from SSS and accrued interest receivable from money market placements.
As of December 31, 2019 and 2018, the Group does not have restructured financial assets.
The Group has no significant credit risk concentrations on its receivables. Policies are in place to ensure that lease contracts and contracts to sell are made with customers with good credit history.
Given the Group’s diverse base of counterparties, it is not exposed to large concentration of credit risk. For financial assets recognized on the balance sheet, the gross exposure to credit risk equals their carrying amount.
Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from either the inability to sell financial assets quickly at their fair values; or the counterparty failing on repayment of a contractual obligation; or inability to generate cash inflows as anticipated.
The Group monitors its cash flow position, debt maturity profile and overall liquidity position in assessing its exposure to liquidity risk. The Group maintains a level of cash and cash equivalents deemed sufficient to finance operations and to mitigate the effects of fluctuation in cash flows. Accordingly, its loan maturity profile is regularly reviewed to ensure availability of funding through an adequate amount of credit facilities with financial institutions.
As of December 31, 2019 and 2018, current ratio is 0.42:1 and 0.38:1, respectively, with cash and cash equivalents, short-term investments and financial assets at FVPL of P=349.2 million and P=260.1 million, respectively, accounting for 8.2% and 7.2% of the total current assets, respectively, and resulting in a negative net working capital of P=5,957.6 million and P=5,857.3 million, respectively.
Overall, the Group’s funding arrangements are designed to keep an appropriate balance between equity and debt, to give financing flexibility while continuously enhancing the Group’s businesses.
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The table below summarizes the maturity profile of the Group’s financial assets and financial liabilities as of December 31 based on the contractual undiscounted payments.
December 31, 2019
< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total Financial assets: (In Thousands) Cash and cash equivalents P=313,148 P= − P= − P= − P=313,148 Financial assets at FVPL 9,688 − − − 9,688 Short-term investments 26,380 − − − 26,380 Receivable 3,017,755 195,460 57,568 1,581 3,272,364 Total financial assets 3,366,971 195,460 57,568 1,581 3,621,580 Financial liabilities: Accounts and other payables 8,582,732 − − − 8,582,732 Long-term debt 78,000 5,372,000 57,000 857,125 6,364,125 Interest payable - long-term debt 106,216 57,366 11,749 20,544 195,875 Deposits and other liabilities 967,395 83,772 65,648 175,622 1,292,437 Total financial liabilities 9,734,343 5,513,138 134,397 1,053,291 16,435,169 Net financial liabilities (P=6,367,372) (P=5,317,678) (P=76,829) (P=1,051,710) (P=12,813,589)
December 31, 2018
< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total (In Thousands) Financial assets: Cash and cash equivalents P=224,523 P= − P= − P= − P=224,523 Financial assets at FVPL 10,379 − − − 10,379 Short-term investments 25,244 − − − 25,244 Receivable 2,291,319 224,968 137,845 − 2,654,132 Total financial assets 2,551,465 224,968 137,845 − 2,914,278 Other financial liabilities: Accounts and other payables 8,278,514 − − − 8,278,514 Long-term debt 79,219 78,000 5,353,781 914,125 6,425,125 Interest payable - long-term debt 49,320 46,400 25,059 14,096 134,875 Deposits and other liabilities 906,381 99,989 36,995 31,904 1,075,269 Total other financial liabilities 9,313,434 224,389 5,415,835 960,125 15,913,783 Net financial liabilities (P=6,761,969) P= 5 7 9 (P=5,277,990) (P=960,125) (P=12,999,505)
Cash and cash equivalents, financial assets at FVPL and receivables are used for the Group's liquidity requirements. Please refer to the terms and maturity profile of these financial assets under the maturity profile of the interest-bearing financial assets and liabilities disclosed under interest rate risk section.
Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Majority of the Group’s transactions are denominated in Philippine Peso. There are only minimal placements in foreign currencies and the Group does not have any foreign-currency-denominated debt. As such, the Group’s foreign currency risk is minimal.
203 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
The following table shows the Group’s consolidated foreign-currency-denominated monetary assets and their Peso equivalents as of December 31:
2019 2018 Php Php US Dollar Equivalent US Dollar Equivalent (In Thousands) Cash and cash equivalents $1,645 P=83,471 $1,500 P=78,883
In translating the foreign-currency-denominated monetary assets into Peso amounts, the exchange rates used were P=50.74 to US$1.00 and P=52.58 to US$1.00, the Philippine Peso-US Dollar exchange rates as of December 31, 2019 and 2018, respectively.
The following table demonstrates the sensitivity to a reasonable possible change in the US dollar rate, with all variables held constant, of the Group’s profit before tax (due to changes in the Peso equivalent of the dollar-denominated cash and cash equivalents and short-term investments). There is no other impact on the Group’s equity other than those already affecting the profit or loss.
Increase (Decrease) Effect on Profit in exchange rate Before Tax (In Thousands)
December 31, 2019 P= 1 . 0 0 P= 1 , 6 4 5 (1.00) (1,645) December 31, 2018 1.00 1,500 (1.00) (1,500)
Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Group’s interest rate risk management policy centers on reducing the overall interest expense and exposure to changes in interest rates. Changes in market interest rates relate primarily to the Group’s interest-bearing debt obligations with floating interest rate as it can cause a change in the amount of interest payments.
The Group manages its interest rate risk by leveraging on its premier credit rating and maintaining a debt portfolio mix of both fixed and floating interest rates. The portfolio mix is a function of historical, current trend and outlook of interest rates, volatility of short-term interest rates, the steepness of the yield curve and degree of variability of cash flows. The Group’s ratio of fixed to floating rate debt stood at around 95:5 as of December 31, 2019 and 2018.
The following tables demonstrate the sensitivity of the Group’s income before tax to a reasonable possible change in interest rates on December 31, 2019 and 2018, with all variables held constant, (through the impact on floating rate borrowings):
Effect on income before income tax increase (decrease) Change in basis points + 100 basis points - 100 basis points (In Thousands)
2019 (P=3,387) P=3,387 2018 (P=3,385) P=3,385
The assumed change in the rate is based on the currently observable market environment. There is no other impact on the Group’s equity other than those already affecting profit or loss.
204 A space to take your dreams further
48 80,702 381,741 338,481 356,362 356,362 343,689 224,223 313,148 361,056 335,6 324,938 338,669 = P 2,878,355 = P 2,654,132 6,400,975 3,585,512 3,272,364 4,988,337 6,348,648 = P = P P=4,9 = P P= = P Carrying Value Carrying Value Carrying
− − 19 = P = P 335,649 338,668 361,060 144,224 144,224 324,940 340,371 314,931 321,858 109,116 109,116 306,185 = P 6,341,0 = P 6,271,682 = P 1 to 5 years 5 to 1 P=4,980,702 P=4,980,702 = 1 to 5 years 5 1 to P P=4,988,337 P=4,988,337
P=− P=− P=− P=− 681 (187) 8,753 0,685 20,713 18,749 20, 59,956 20,717 1 16,811 2 76,966 < 1 year 1 < 224,223 < 1 year = 313,148 P = P 2,734,131 = P = P 2,509,908 3,163,248 3,476,396 = P = P
344,875 357,000 383,250 224,223 340,000 340,000 325,875 313,148 362,250 340,000 336,000 = P 2,878,355 = P 2,654,132 6,425,125 3,585,512 3,272,364 6,364,125 = P = P P=5,000,000 P=5,000,000 = P = P=5,000,000 P=5,000,000 P Nominal Amount Nominal Nominal Amount
its corresponding nominal amounts in shown and are carrying thousands) (in val ues Various Quarterly Various Date of sale Quarterly Maturity date Maturity Maturity date Maturity date Maturity date Maturity Date Sale of Maturity dateMaturity Maturity date Maturity Maturity date Maturity date
Rate Fixing Period Fixing Rate Rate Fixing Period spread er annum spread spread r annum r
+ 0.70% + spread 0.70%
.)
day day treasury + rate 0.70%bill - spread
.5% starting 2018 terest terms (p.a.) In at the date of sale ing financial assets and liabilities, together with
Fixed at the Fixed date saleof Fixed at 4.5%Fixed starting 2018 at 4.5%Fixed starting 2018 Interest terms (p.a Fixed Fixed at the Fixed date investmentof Fixed at 4.5% starting 2018 Fixed at 4 Fixed at the date of the date of at Fixed investment Floating rate of of rate average 91 Floating Fixed rate rate Fixed averageof 5-year treasury + bond 0.60% Fixed rate corporate rate Fixed notes interest with 4.75%of p Fixed rate of average 5-year treasury bond + 0.60% Fixed rate corporate notes with interest of 4.75% pe 4.75% of interest with notes corporate rate Fixed Floating rate of average 91-day treasury bill rate
term debt term debt
- - Peso Peso Peso Peso Peso Peso Peso Peso Peso Peso
loating Cash and cash equivalentsand Cash receivable Accounts Long Fixed F equivalents cash and Cash Accounts receivable Long Fixed 2019December 31, Group Company Parent 31, December 2018 Group Parent Company Floating the following table: The terms and maturity profile of the interest-bear of profile maturity and terms The
205 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
The maturities of long-term debt at nominal values are as follow: Unappropriated retained earnings The retained earnings available for dividend distribution of the Parent Company amounted to P=378.8 million and P= 1,583.4 2019 2018 million as of December 31, 2019 and 2018, respectively. (In Thousands) Due in: Retained earnings include undistributed net earnings of subsidiaries, associates and a joint venture amounting P= 1,179.8 million 2019 P= − P= 61,000 and P=823.0 million as of December 31, 2019 and 2018, respectively. These amounts are not available for dividend declaration 2020 78,000 78,000 until declared by the subsidiaries and affiliates. 2021 5,372,000 5,372,000 2022 57,000 57,000 On November 27, 2019, the Parent Company’s BOD declared P=0.15 per share cash dividends totaling to P=323.5 million from 2023 585,125 585,125 unappropriated retained earnings to all its issued and outstanding shares as of record date December 11, 2019, and paid on 2024 17,000 17,000 December 23, 2019. 2025 17,000 17,000 2026 17,000 17,000 On November 22, 2018, the Parent Company’s BOD declared P=0.15 per share cash dividends totaling to P=323.5 million from 2027 221,000 221,000 unappropriated retained earnings to all its issued and outstanding shares as of record date December 13, 2018, and paid on December 20, 2018. P=6,364,125 P=6,425,125
In December 2017, the Parent Company’s BOD declared P=0.15 per share cash dividends totaling toP=288.0 million from Equity price risk unappropriated retained earnings to all its issued and outstanding shares as of record date December 20, 2017, and paid on Financial assets at FVPL are acquired at a certain price in the market. Such investment securities are subject to price risk due to December 27, 2017. changes in market values of instruments arising either from factors specific to individual instruments or their issuers or factors affecting all instruments traded in the market. Depending on several factors such as interest rate movements, country’s Appropriated retained earnings economic performance, political stability, domestic inflation rates, these prices change, reflecting how market participants On November 27, 2019, the Parent Company’s BOD approved and authorized the appropriation of retained earnings view the developments. amounting to P=2.5 billion which shall be used for future development projects within SRP, Cebu IT Park and Cebu Business
Park which are expected to be completed in 2026. The Group measures the sensitivity of its investment securities based on the average historical fluctuation of the investment
securities’ net asset value per unit (NAVPU). All other variables held constant, with a duration of 0.36 year and 0.41 year for On November 22, 2012, the Parent Company’s BOD approved and authorized the appropriation of retained earnings 2019 and 2018, respectively, a 1.0% change in NAVPU will increase/decrease net income, total comprehensive income and amounting to P=1.3 billion which shall be used for land acquisition and future development projects within Cebu Business Park. equity by P=0.01 million for the years ended December 31, 2019 and 2018. On August 13, 2018, the Parent Company’s BOD approved to continue the appropriation for the expansion projects within
Cebu IT Park and Cebu Business Park which are expected to be completed in 2021.
28. Equity Capital Management The primary objective of the Group’s capital management policy is to ensure that debt and equity capital are mobilized Capital Stock efficiently to support business objectives and maximize shareholder value. The Group establishes the appropriate capital The details of the Parent Company’s common shares as of December 31, 2019 and 2018 follow: structure for each business line that properly reflects its premier credit rating and allows it the financial flexibility, while providing it sufficient cushion to absorb cyclical industry risks. Authorized shares 3,000,000,000
Par value per share P= 1 . 0 The Parent Company is not subject to externally imposed capital requirements. No changes were made in the objectives, Shares issued and outstanding 2,156,756,631 policies and processes from the previous years.
On November 6, 2018, SEC certified the Plan of Merger between the Parent Company and CPVDC. As a result, the Parent The Group monitors its capital structure using leverage ratios on both a gross and net basis, and makes adjustments to it in Company issued shares to CPVDC shareholders, including the Parent Company, from its unissued shares with a share swap light of economic conditions. Debt consists of long-term debt. Net debt includes long-term debt less cash and cash ratio of 1.06 resulting to an issuance of a total 996,771,000 shares. equivalents and financial assets at FVPL. The Group considers as capital the equity attributable to equity holders of the Parent
Company. Treasury Shares
Prior to merger, the Parent Company owns 717,064,047 shares from CPVDC which was then re-acquired by issuing 760,087,890 As of December 31, the Group had the following ratios: shares and classified as treasury shares.
2019 2018 Equity Reserves The equity reserves resulted from the merger between the Parent Company and CPVDC. Under the accounting for legal (In Thousands) merger, the Group recognized the difference between the net assets acquired and the total cost of the investments in CPVDC Long-term debt P=6,348,648 P=6,400,975 under equity reserve in the consolidated statements of changes in equity amounting to P= 274.0 million in 2018. Less: Cash and cash equivalents 313,148 224,523 Short-term investments 26,380 25,244 Financial assets at fair value through profit or loss 9,688 10,379 Net debt P=5,999,432 P=6,140,829 Equity attributable to equity holders of Cebu Holdings, Inc. P=9,401,732 P=8,062,410 Debt to equity 67.53% 79.39% Net debt to equity 63.81% 76.17%
206 A space to take your dreams further
Unappropriated retained earnings The retained earnings available for dividend distribution of the Parent Company amounted to P=378.8 million and P= 1,583.4 million as of December 31, 2019 and 2018, respectively.
Retained earnings include undistributed net earnings of subsidiaries, associates and a joint venture amounting P= 1,179.8 million and P=823.0 million as of December 31, 2019 and 2018, respectively. These amounts are not available for dividend declaration until declared by the subsidiaries and affiliates.
On November 27, 2019, the Parent Company’s BOD declared P=0.15 per share cash dividends totaling to P=323.5 million from unappropriated retained earnings to all its issued and outstanding shares as of record date December 11, 2019, and paid on December 23, 2019.
On November 22, 2018, the Parent Company’s BOD declared P=0.15 per share cash dividends totaling to P=323.5 million from unappropriated retained earnings to all its issued and outstanding shares as of record date December 13, 2018, and paid on December 20, 2018.
In December 2017, the Parent Company’s BOD declared P=0.15 per share cash dividends totaling toP=288.0 million from unappropriated retained earnings to all its issued and outstanding shares as of record date December 20, 2017, and paid on December 27, 2017.
Appropriated retained earnings On November 27, 2019, the Parent Company’s BOD approved and authorized the appropriation of retained earnings amounting to P=2.5 billion which shall be used for future development projects within SRP, Cebu IT Park and Cebu Business Park which are expected to be completed in 2026.
On November 22, 2012, the Parent Company’s BOD approved and authorized the appropriation of retained earnings amounting to P=1.3 billion which shall be used for land acquisition and future development projects within Cebu Business Park. On August 13, 2018, the Parent Company’s BOD approved to continue the appropriation for the expansion projects within Cebu IT Park and Cebu Business Park which are expected to be completed in 2021.
Capital Management The primary objective of the Group’s capital management policy is to ensure that debt and equity capital are mobilized efficiently to support business objectives and maximize shareholder value. The Group establishes the appropriate capital structure for each business line that properly reflects its premier credit rating and allows it the financial flexibility, while providing it sufficient cushion to absorb cyclical industry risks.
The Parent Company is not subject to externally imposed capital requirements. No changes were made in the objectives, policies and processes from the previous years.
The Group monitors its capital structure using leverage ratios on both a gross and net basis, and makes adjustments to it in light of economic conditions. Debt consists of long-term debt. Net debt includes long-term debt less cash and cash equivalents and financial assets at FVPL. The Group considers as capital the equity attributable to equity holders of the Parent Company.
As of December 31, the Group had the following ratios:
2019 2018 (In Thousands) Long-term debt P=6,348,648 P=6,400,975 Less: Cash and cash equivalents 313,148 224,523 Short-term investments 26,380 25,244 Financial assets at fair value through profit or loss 9,688 10,379 Net debt P=5,999,432 P=6,140,829 Equity attributable to equity holders of Cebu Holdings, Inc. P=9,401,732 P=8,062,410 Debt to equity 67.53% 79.39% Net debt to equity 63.81% 76.17%
207 CEBU HOLDINGS, INC. 2019 Integrated Report
Financial Statements
29. Segment Information
The business segments where the Group operates are as follows:
Core business: • Commercial development - sale of commercial lots, club shares and development rights • Residential development - sale of residential lots and condominium units • Shopping centers - development of shopping centers and lease to third parties of retail space and land therein; operation of movie theaters, food courts, entertainment facilities and carparks in these shopping centers; management and operation of malls • Corporate business - development and lease of office buildings • Others - other investing activities such as investment in joint ventures and sale of non-core assets
No business segments have been aggregated to form the reportable business segments.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. The accounting and measurement policies used are consistent with the policies used in preparing general-purpose financial statements.
Sales, costs and expenses include amounts that are directly attributable to each segment. Items that are not directly identified are allocated based on the segment’s proportionate share on the total revenue.
208 A space to take your dreams further
Total 12,315 12,315 11,912 51,962 84,186 444,737 444,737 232,687 234,864 (495,612) (464,686) P= 6 0 4 , 5 2 3 1,721,426 2,100,856 4,268,130 (2,167,274) P=2,3 P=4,033,266 P=4,033,266 P=1,657,569 P=1,669,481 P=1,669,481 P=1,669,481 P=29,242,530 P=29,242,530 P=17,117,669 P=17,117,669 P=27,508,789 P=27,508,789 P=16,884,982 P=16,884,982
– – – – – – – 1) P=– P=– P= – and 52,335 53,595) 12,518 (15,367) (12,518) (413,826) ( P= (412,566) (466,16 (P=754,377) (P=731,675) (P=747,042) (P=413,826) (P=413,826) (P=413,826) (3,500,766) Eliminations Adjustments
– – – – P= – P= – 5,544 7,848 (P=4,255,143) 7,848 11,773 11,773 29,181 36,262 41,806 41,806 Others Others P= P= P=2,966 P=2,966 the three-year year ended December 31, (23,884) 647,430 647,430 393,639 (253,791) (477,204) (P=66,495) (P=66,495) (P=66,495) P=1,1 P=1,1
– – – – – – − 6,070 (4,458) 224,584 786,104 164,986 164,986 P=36,389 P=36,389 (561,520) Business Business P= 2 3 4 , 2 3 2 P=385,112 P=385,112 P=385,112 P=385,112 P=385,112 P=385,112 P= 7 8 6 , 1 0 4 Corporate P=1,591,719 P=1,591,719 P=1,585,649 P=1,585,649 P=4,498,714 P=4,498,714 P=4,498,714 P=4,498,714 (In Thousands) Thousands) (In
– – – − 9,451 11,227 11,227 80,173 80,173 (11,701) Centers Centers 896,968 (777,966) (162,997) P= 3 7 0 , 2 9 1 P=823,595 P=823,595 P=823,595 P=823,595 P=835,296 P=835,296 Shopping 1,674,934 P=7,411,902 P=7,411,902 P=7,411,902 P=7,411,902 P= 1 , 6 7 4 , 9 3 4 P=2,289,888 P=2,289,888
– – – – – − P=– P=– P= –
(5,524) (6,390) 22,594 22,208 201,687 236,440 P=32,888 P=32,888 P=32,888 P=32,888 (179,479) P=32,888 P=32,888 P= 2 0 1 , 6 8 7 5,222,192 P=8,315,761 P=8,315,761 P=13,405,507 P=6,903,535 P=6,903,535 Residential P=3,093,569 P=3,093,569 P=13,394,280 P=6,667,095 P=6,667,095 Development Development
– – – – – P= – 1,088 1,088 23,613 23,613 35,478 977,283 194,195 P=22,719 P=22,719 (446,853) (298,749) P=815,749 P=815,749 P=815,749 P=815,749 P=908,207 P=908,207 P=908,207 P=908,207 P=884,594 P=884,594 1,424,136 P=7,268,755 P=7,268,755 P= 1 , 4 2 4 , 1 3 6 P=7,269,843 P=7,269,843 Commercial Development Development esent assets and liabilities as of December 31, information for 2019 expense and ,and 2018 2017 revenue estment properties nture
Information
Equity in net earnings of associates and a joint ve joint a and associates of earnings net in Equity interests Non-controlling venture joint a and associates in Investments
Total assets assets Total Other income Deferred tax assets assets tax Deferred Interest and other financing charges charges financing other and Interest Total revenue Total liabilities Revenue expensesOperating profit (loss) Operating Interest income tax income from) (benefit for Provision (loss) income Net Net income (loss) attributable to: Inc. Holdings, Cebu of holders Equity Other Segment assets liabilities Segment Deferred tax liabilities inv and equipment and property to additions Segment Depreciation and amortization Sales to external customers
2019. Business Segments The following tables regarding business segments pr 2019
209 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
4) Total 57,111 67,047 25,488 8 275,753 112,919 970,030 970,030 106,039 436,196 549,685 (272,729) (404,767) = P = = P P 1,487,335 = 3,112,558 P 3,218,597 1,144,283 4,205,575 (2,074,31 = P 16,282,379 = P 26,341,828 24,829,005 16,006,626 = P = P = = P P
– – – – – 6) = = P P and 2,494 15,367 (2,494) 31,346 31,34 74,693 252,570) 252,570) 252,570) = P 106,039 106,039 ( (358,609) = = = P P P 3,111,897) 5,703,471) 1,254,191) 1,238,824) ( ( ( (2,591,574) = = P P = P = P ( ( ( ( Eliminations Adjustments
– – – – – – = = = P P P (308) (308) 9,354 36,637) 36,637) 36,637) = 16,648 P 25,488 Others (22,181) 376,465 = = = P P P 260,386 (407,261) ( ( (
4,113,751 1,275,712 1,536,098 4,078,909 = P = P = P
– – – – – (7,537) 10,615 27,230 373,459 373,459 758,146 758,146 169,653 301,902 200,728 346,229 (557,418) Business = = P P = P = P = P 5,794,675 5,794,675 1,432,424 1,432,424 1,569,546 Corporate = = P P = = = P P P (In Thousands) Thousands) (In
– – – – – 6,424 89,603 52,684 522,971 522,971 470,287 Centers 222,347 599,800 (172,856) (867,030) = = = P P = P P Shopping 1,466,830 1,466,830 6,948,522 6,948,522 2,222,686 16,196,161 16,196,161 = P = = P P = P = = P P
– – – – – 7,179 1,768
26,551 94,755 = P 29,425 24,949 (54,175) 124,180 124,180 = 144,625 819,256 819,256 P = P (674,631) = = P P = P 7,294,708 7,294,708 2,628,019 2,628,019 = = P P Residential = = P P Development
– – – – – 487 = P 9,303 3,580 (6,273) 93,399 99,672 99,672 (15,980) 411,575 151,905 235,047 309,451 309,451 238,627 238,627 = P = P = P = = = = P P P P 3,312,693 3,312,693 = = P P Commercial Development
stmentproperties
nture
sets tax assets taxassets
controllinginterests - Information
Equity holders of Cebu Holdings, Inc. Non 2018 2018 Revenue Salesto external customers Equityin earningsnet of associates a and joint ve Total revenue Operatingexpenses Operating profit (loss) Interestincome Other income Interestand other financing charges Provisionfor (benefit from) income tax Net income (loss) Net income (loss) attributable to: Other Segmentas Investmentsin associates and a joint venture Deferred Total assets liabilities Segment liabilities tax Deferred liabilities Total Segmentadditions to property and equipment and inve Depreciationand amortization
210 A space to take your dreams further
4,557 Total 14,713 41,533 59,557 753,447 414,255 725,959 986,783 813,004 813,004 261,306 495,610 (368,130) (261,437) = P = = = P P P = P 2,621,733 2,567,710 2,636,446 (1,649,663) = P 18,047,348 12,410,676 12,671,982 20,619,615 = = = P P P = P
− − − − − − − = = P P and ,343 2,876 9,564) 9,564) 9,564) (2,615) (9,825) 18,758 15,368 = = = P P P (15,882) ( ( ( 248 444,558) 429,190) (264,225) = P = = 3,932,837) 3,932,837) P P ( ( = = P P ( ( Eliminations Adjustments
758 889 7,973 4,557 14,173 20,271 41,165 30,219 21, Others 171,148) 128,331 309,157 = P 170,390) 170,390) 278,938 = 245,938 P = P (368,130) (180,826) = P = = P P 7,265,317 7,511,255 3,327,539 2,567,710 ( ( ( 5,899,806 = = = P P P = P
− − − − − ,550 1,712 4,105 16,154 305,977 305,977 155,036 145,124 247,068 289,823 644,398 644,398 290,086 (499,274) = = P P Business = = P = P P = 2,103 2,103,550 P 6,803,056 6,803,056 Corporate = = P P = = P P (In Thousands) Thousands) (In
− − − − − 5,693 10,125 33,869 67,200 675,147 506,725 = P 226,653 Centers 540,594 540,594 (675,914) (207,446) = P = 1,351,061 1,351,061 = = P P P 2,461,979 2,461,979 Shopping 9,694,284 9,694,284 = P = = P P = = P P
− − − − − − − − = = P P 8,776
97,367 12,134 47,264 47,264 55,640 38,488 (20,510) 347,712 347,712 181,572 181,572 = = = P P P (292,072) = P = = P P 1,0 1,097,367 = = P P Residential Development
− − − − − − − − − = = P P 1,945 99,123 99,123 99,123 (20,335) (20,335) (43,166) 411,575 160,679 = = = P P P 842,816 842,816 = P = = P P 1,057,939 1,057,939 = = P P Commercial Development
mentproperties st
nture
harges
controllinginterests - Information
Equity holders of Cebu Holdings, Inc. Non 2017 Revenue Salesto external customers Equityin earningsnet of associates a and joint ve Total revenue Operatingexpenses Operating profit (loss) Interestincome Other income Interestand other financing c Provisionfor (benefit from) income tax Net income (loss) Net income (loss) attributable to: Other Segmentassets Investmentsin associates and a joint venture Deferredtax assets Total assets liabilities Segment liabilities tax Deferred liabilities Total Segmentadditions to property and equipment and inve Depreciationand amortization
211 CEBU HOLDINGS, INC. 2019 Integrated Report Financial Statements
2018
30. Leases Non-cash
changes Operating Leases - Group as Lessor The Group enters into lease agreements with third parties covering rentals of commercial and office spaces and land therein: January 1, Amortization December 31, (a) fixed monthly rent, or (b) minimum rent payment or fixed rent plus percentage of gross sales, whichever is higher. All 2018 Cash Flows of DIC Other 2018 leases include a clause to enable upward revision on its rental charge on annual basis based on prevailing market conditions. (In Thousands) Current portion of long- P=59,942 (P=61,000) P=1,058 P=59,956 P=59,956 Future minimum rentals receivable under noncancellable operating leases of the Group are as follows: term debt (Note 18) Long-term debt - net of 6,393,634 − 7,281 (59,896) 6,341,019 December 31 current portion 2019 2018 Interest payable 4,286 (310,453) − 336,432 30,265 (In Thousands) Dividends payable 1,751 (321,782) − 321,762 1,731 Within one year P=987,661 P=860,263 Total liabilities from After one year but not more than five years 2,516,088 2,199,713 More than five years 780,415 764,353 financing activities P=6,459,613 (P=693,235) P=8,339 P=658,254 P=6,432,971 P=4,284,164 P=3,824,329 2017 Non-cash 31. Philippine Economic Zone Authority (PEZA) Registration changes January 1, Amortization December 31, CPVDC was registered with PEZA on April 6, 2000 as an Information Technology (IT) Park developer or operator and was 2017 Cash Flows of DIC Other 2017 granted approval by PEZA on October 10, 2001. The PEZA registration entitled CPVDC to a four-year tax holiday from the (In Thousands) start of approval of registered activities. At the expiration of its four-year tax holiday, CPVDC pays income tax at the special Current portion of long- P=442,279 (P=459,000) P=412 P=76,251 P=59,942 rate of 5% on its gross income earned from sources within the PEZA economic zone in lieu of paying all national and local term debt (Note 18) income taxes. Long-term debt - net of 5,706,032 756,200 7,653 (76,251) 6,393,634
current portion On December 18, 2007, PEZA approved the registration of AiO, the subsidiary, as an Economic Zone Information Technology (IT) Facility Enterprise. As a registered ecozone facilities enterprise, the subsidiary is entitled to establish, develop, construct, Interest payable 48,315 (181,373) − 137,344 4,286 administer, manage and operate a 12-storey building and 17-storey building located at Asia Town IT Park, in accordance with Dividends payable 1,751 (288,010) − 288,010 1,751 the terms and conditions of the Registration Agreement with PEZA. The Group shall pay income tax at the special tax rate of Total liabilities from 5% on its gross income earned from sources within the PEZA economic zone in lieu of paying all national and local income financing activities P=6,198,377 (172,183) P=8,065 P=425,354 P=6,459,613 taxes. Gross income earned refers to gross sales or gross revenues derived from any business activity, net of returns and allowances, less cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses. The ‘Other’ column includes the effect of reclassification of non-current portion of interest-bearing loans and borrowings and Income generated from sources outside of the PEZA economic zone shall be subject to regular internal revenue taxes. It is the effect of accrued but not yet paid interest on interest-bearing loans and borrowings. The Group classifies interest paid as certified by the Bureau of Internal Revenue under Section 4.106-6 and 4 108-6 of Revenue Regulation No. 16-2005 that the cash flows from operating activities. enterprise is conducted for purposes of its VAT zero-rating transactions with its local suppliers of goods, properties and
services. The noncash investing and financing activities of the Group pertain to:
32. Supplemental Cash Flow Information • Transfer from inventories to investment properties amounting to P=208.6 million in 2019; • Transfers from investment properties to inventories amounting to P=95.9 million and P=294.1 million in 2019 and 2018, Changes in liabilities arising from financing activities follow: respectively; and, • Transfers from investment properties to property and equipment and inventories amounting to P=222.7 million and P=73.0 2019 million, respectively, in 2017. Non-cash changes January 1, Amortization December 31, 33. Provisions and Contingencies 2019 Cash Flows of DIC Other 2019 (In Thousands) The Group is currently involved in a legal proceeding and the outcome of this legal proceeding is not presently determinable. Current portion of long- P=59,956 (P=61,000) P=1,044 P=76,966 P=76,966 term debt (Note 18) Long-term debt - net of 6,341,019 − 7,629 (76,966) 6,271,682 In the opinion of management and its legal counsel, the eventual liability under this legal proceeding, if any, will not have a current portion material effect on the Group’s financial position and results of operations. As allowed by PAS 37, no further disclosures were Interest payable 30,265 (438,363) − 439,174 31,076 provided as this might prejudice the Group’s position on this matter. Dividends payable 1,731 (323,513) − 323,513 1,731 Total liabilities from financing activities P=6,432,971 (P=822,876) P=8,673 P=762,687 P=6,381,455
212 A space to take your dreams further
2018 Non-cash changes January 1, Amortization December 31, 2018 Cash Flows of DIC Other 2018 (In Thousands) Current portion of long- P=59,942 (P=61,000) P=1,058 P=59,956 P=59,956 term debt (Note 18) Long-term debt - net of 6,393,634 − 7,281 (59,896) 6,341,019 current portion Interest payable 4,286 (310,453) − 336,432 30,265 Dividends payable 1,751 (321,782) − 321,762 1,731 Total liabilities from financing activities P=6,459,613 (P=693,235) P=8,339 P=658,254 P=6,432,971
2017 Non-cash changes January 1, Amortization December 31, 2017 Cash Flows of DIC Other 2017 (In Thousands) Current portion of long- P=442,279 (P=459,000) P=412 P=76,251 P=59,942 term debt (Note 18) Long-term debt - net of 5,706,032 756,200 7,653 (76,251) 6,393,634 current portion Interest payable 48,315 (181,373) − 137,344 4,286 Dividends payable 1,751 (288,010) − 288,010 1,751 Total liabilities from financing activities P=6,198,377 (172,183) P=8,065 P=425,354 P=6,459,613
The ‘Other’ column includes the effect of reclassification of non-current portion of interest-bearing loans and borrowings and the effect of accrued but not yet paid interest on interest-bearing loans and borrowings. The Group classifies interest paid as cash flows from operating activities.
The noncash investing and financing activities of the Group pertain to:
• Transfer from inventories to investment properties amounting to P=208.6 million in 2019; • Transfers from investment properties to inventories amounting to P=95.9 million and P=294.1 million in 2019 and 2018, respectively; and, • Transfers from investment properties to property and equipment and inventories amounting to P=222.7 million and P=73.0 million, respectively, in 2017.
33. Provisions and Contingencies
The Group is currently involved in a legal proceeding and the outcome of this legal proceeding is not presently determinable.
In the opinion of management and its legal counsel, the eventual liability under this legal proceeding, if any, will not have a material effect on the Group’s financial position and results of operations. As allowed by PAS 37, no further disclosures were provided as this might prejudice the Group’s position on this matter.
213 CEBU HOLDINGS, INC. 2019 Integrated Report PUBLICATION TEAM
ADVISER Aniceto V. Bisnar, Jr. President
EDITORIAL TEAM Ma. Cecilia Crispina T. Urbina Assistant Vice President and Head, HR and Administration Noel F. Alicaya Finance and Control Officer / Chief Risk Officer Vera R. Alejandria Sustainability Officer / Community Relations Manager Maria Jeanette A. Japzon Corporate Communications, Media Relations and Legal Affairs Manager Jennifer G. Sia Audit Manager Archie T. Obeso Control and Analysis Manager Jonjay O. Camson Control and Analysis Officer Andrea Denise H. Chua Corporate Communications Assistant
CONTRIBUTORS CHI Sustainability Council Makati Development Corporation Ayala Property Management Corporation Ayala Land Malls, Inc.
PHOTOGRAPHY Portraiture Paul Gotiong Landscape Paul Gotiong Cris Damo Events & Activities Grace Carino Maria Jeanette Japzon Andrea Denise Chua
COVER Unified Ayala Group Report Concept Publicis JimenezBasic
DESIGN AND LAYOUT KalibrePH Jonie Bernaldez
SUSTAINABILITY REPORTING CONSULTANT Business for Sustainable Development SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS 20F Ayala Center Cebu Tower Bohol St., Cebu Business Park Cebu City, Cebu 6000 Philippines Tel (6332) 888 3700
STAKEHOLDER INFORMATION For inquiries from institutional investors, analysts, the financial and business community on the financial report and feedback from our various stakeholder groups on the integrated report, please write or call:
CEBU HOLDINGS, INC. 20F Ayala Center Cebu Tower 28F, Vismin Group Bohol St., Cebu Business Park Tower One & Exchange Plaza Cebu City, Cebu 6000 Philippines Ayala Triangle, Ayala Avenue, 1226 Tel (6332) 888 3700 Makati City, Metro Manila, www.cebuholdings.com Philippines [email protected] Tel (632) 7750 6647
SHAREHOLDER SERVICES AND ASSISTANCE For inquiries regarding dividend payments, change of address and account status, lost or damaged stock certificates, please write or call:
STOCK TRANSFER SERVICE, INC. Unit D, 34/F Rufino Pacific Tower 6784 Ayala Avenue, Makati City Tel (632) 8403 2410 / (632) 8403 2412 Fax (632) 8403 2414 [email protected] [email protected] [email protected] For more than 30 years, Cebu Holdings has kept its gaze on two places, at once — in the complex present with its changing needs and challenges; and on the future, keeping our eyes on opportunities that come our way.
Cebu Holdings, Inc. 20F Ayala Center Cebu Tower, Bohol St., Cebu Business Park, Cebu City, Cebu 6000 Tel: (63 32) 888 3700 www.cebuholdings.com