SEC 17-A (2018 Annual Report)-CHI Pdf

(b) has been subject to such filing requirements for the past 90 days: Yes [x] No [ ]

13. Aggregate market value of the voting stock held by non-affiliates: P 13.738 billion (as of end-Dec. 2018)

No. of Shares % Market Value (P6.37/share) Ayala Land, Inc. (Parent Company) 1,519,106,716 70.43% P 9,676,709,780.92 Non-affiliate (Public) 637,649,915 29.57% 4,061,829,958.55 Total 2,156,756,631 100.00% P 13,738,539,739.47

APPLICABLE ONLY TO ISSUERS INVOLVED IN INSOLVENCY/SUSPENSION OF PAYMENTS PROCEEDINGS DURING THE PRECEEDING FIVE YEARS

14. Check whether the issuer has filed all documents and reports required to be filed by Section 17 of the Code subsequent to the distribution of securities under a plan confirmed by a court or the Commission.

Not applicable.

DOCUMENTS INCORPORATED BY REFERENCE

15. Briefly describe documents incorporated by reference and identify the part of the SEC Form 17-A into which the document is incorporated:

2018 Audited Consolidated Financial Statements (incorporated as reference for Item 7 of SEC Form 17-A)

TABLE OF CONTENTS

Page No.

PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business 1 Item 2. Properties 37 Item 3. Legal Proceedings 38 Item 4. Submission of Matters to a Vote of Security Holders 38

PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters 38 Item 6. Management’s Discussion and Analysis or Plan of Operation 40 Item 7. Financial Statements 52 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 52

PART III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer 52 Item 10. Executive Compensation 57 Item 11. Security Ownership of Certain Beneficial Owners and Management 58 Item 12. Certain Relationships and Related Transactions 60 Item 13. Compliance with Leading Practice on Corporate Governance 62

PART IV - EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C (a) Exhibits 62 (b) Reports on SEC Form 17-C 63

Item 14. Additional Disclosures Data 64

SIGNATURES 66

INDEX TO EXHIBITS

INDEX TO SUPPLEMENTARY SCHEDULES

PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business (Part I, Paragraph (A) of SRC Rule 12)

(A) Description of the Business (The Company)

(1) Business Development.

Cebu Holdings, Inc. is a publicly listed company engaged in real property ownership, development, marketing, and management. It was registered with the Securities and Exchange Commission on December 9, 1988. Currently, its authorized capitalization stock is P3 Billion.

It is 70.43%-owned subsidiary of ALI and 29.57% of its outstanding shares are owned by the public.

The Company's operations consist of six (6) types of activities: ∑ strategic land management ∑ mixed-use development ∑ real estate business (commercial land sales and residential subdivision/condominium sales) ∑ commercial business operations and management (retail space lease and office space lease) ∑ hotel development and operations ∑ proprietary sports club shares sales

The Company owns and manages the Cebu Business Park, a 50-hectare business and commercial subdivision in Cebu City, and, to date, the single largest operating IT economic zone in Southern Philippines. Cebu Business Park is master-planned to be the central business district in Cebu that integrates business, high-rise residential, shopping, and sports and recreational facilities. Cebu Business Park is complete with world-class utilities and is home to some of the top local and international companies.

Cebu Business Park is strategically located to co-exist with the development plans and directions of Cebu City’s urban growth. Cebu Business Park’s major streets serve as a vital part of Cebu City’s radial road network in the northern district.

Cebu Business Park was officially proclaimed as a PEZA-accredited IT Park pursuant to Presidential Proclamation 2053 (2010). According to the Special Economic Zone Act of 1995 (as amended in R.A. 7916), all investors and locators in PEZA-accredited IT Parks are now entitled to fiscal and non-fiscal incentives. Among the benefits of an IT park are improvement in international competitiveness, increase in direct investments and capital formation, employment of job creation, and an improved of quality of life.

This development allows Cebu to maximize its advantages as a preferred business and tourist destination in the country.

There are currently 40 buildings in Cebu Business Park, with 10 ongoing constructions.

This development is noteworthy not only for its scale but also because of its environment and urban development aspects. Its roadways have become integral to Cebu City’s road network, and therefore contribute to the easy flow of vehicular traffic and to daytime population distribution. The master plan allows for generous open spaces (20 percent of Cebu Business Park is devoted to open green space and greenery), and makes allowances for the growing demands of a modern urban commercial community.

Ayala Center Cebu is the shopping and lifestyle destination of the region. Nestled at the heart of the vibrant metropolis, it showcases the most sought-after retail brands as well as promising concepts clustered in specialized zones. It also hosts a collection of popular dining and hangout places for fun, bonding, and nurturing relationship activities.

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Since 1994, Ayala Center has continuously offered the most unique and rewarding shopping and dining experiences to both its local and tourist patrons. It is the preferred mall of the AB market, gated villages, and office workers with its wide selection of foreign and local brands. It is a masterpiece of retail innovation.

Strategically located at the center of Cebu Business Park, it is only 20 minutes away from the Mactan Cebu International Airport, and is just a walk away from some of Cebu’s best hotels, including Cebu City Marriott Hotel. It is also just 10 minutes away from the nearest seaports for that quick island getaway.

The Terraces at Ayala Center Cebu aims to strengthen the mall’s ambiance-driven dining component with a cohesive and comprehensive mix of established national brands like Italianni’s, Cyma, Gerry’s Grill, and TGI Friday’s and Cebu dining concepts like Casa Verde, Mooon Café, Hukad and Laguna Garden to name a few. Set at the center of The Terraces is the outdoor activity area surrounded by vibrant greeneries and soothing water features that provides a distinctive in dining and entertainment. The Terraces strengthens Ayala Center Cebu’s position as the landmark of unsurpassed shopping, dining, and entertainment in the region.

In 2011, the company embarked on the expansion project of Ayala Center Cebu to address the market gap and strengthen its landmark as the lifestyle and retail destination in Metro Cebu. Opened to the public last 2013, this expansion adds four levels of retail, dining and entertainment establishments with over 34,000 square meters of gross leasable space in a gross floor area of approximately 50,000 square meters. Rustan’s Supermarket and Rustan’s Department Store moved to an expanded area in this new wing, occupying four storeys to bring in their full line-up in product and brand offerings. This latest expansion of this mall garnered Gold in the renovations and expansions design and development category of the 2015 Asia Pacific Shopping Center Awards competition of The International Council of Shopping Centers.

CHI also developed the City Sports Club Cebu , an exclusive urban resort equipped with health and fitness facilities, as well as restaurants and function rooms for members and their guests to use. This project is in partnership with ALI. To enhance its offerings for its members, the club completed a multi-million peso renovation in 2013.

In 2010, CHI partnered with Ayala Land Premier (ALP), the high-end product category of ALI, for the development of a premier residential condominium project within the Cebu Business Park. 1016 Residences provides 109 units of country club living in Cebu’s address of choice. Located beside the City Sports Club Cebu, residents will be entitled to club usage rights.

With the success of 1016 Residences, CHI and ALP unveiled another 38-storey residential tower, the first of its kind in ALP’s residential portfolio in the region. Primed to rise on top of the mall’s newly-completed expansion wing, Park Point Residences is said to mark the beginning of sophisticatedly modern and integrated convenient living in the district since its location will offer private access to future destinations in Ayala Center Cebu.

In March of 2015, CHI and ALP launched another residential tower on top of Ayala Center Cebu, The Alcoves . The Alcoves is a 37-story luxury condominium that boasts of a number of unique amenities and residential concepts fit for a discerning market. A mixed-use tower with a retail podium and high-rise residences, The Alcoves will feature retail and dining establishments on the second and third floors, while a private access to Ayala Center Cebu provides residents with even more options.

CHI also partnered with Alveo Land for the development of Sedona Parc in 2010. This residential condominium of 114 units will offer upscale lifestyle inspired by style, design, and nature. It is set to rise in a tranquil and highly- accessible parkside location in Cebu Business Park.

The following year, CHI and Alveo Land showcased its residential innovation through Solinea —its first multi- tower Alveo project in Cebu that upholds a city-resort living experience through its overall design while reminiscent of a vacation destination.

In August 2018, Ayala Land’s homegrown hotel brand, Seda, opened its flagship property in the Visayas, the 301-room Seda Ayala Center Cebu , at the heart of Cebu Business Park. The only hotel within Cebu

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Business Park – the preferred location of multinational and international firms – Seda Ayala Center Cebu targets travelers doing business as well as guests on leisure trips.

The Cebu Business Park is also the site of the Cebu City Marriott Hotel , the first businessman's hotel managed by world- renowned Marriott International in Visayas-Mindanao.

Amara is CHI’s premier residential development in Catarman, Liloan, which carries the ALP label and follows the standards of the brand. ALP is set exclusively for the most well-appointed addresses—the likes of renowned communities such as Ayala Alabang, Forbes Park, and Dasmariñas Village in Luzon.

Amara offers a master-planned community nestled by the sea and undulating hills accentuated by the eternal warmth of a historical lighthouse. It provides a safe haven for families and a luxurious seaside living experience with first-class facilities.

Amara offers a range of facilities for lot owners and residents which include a breathtaking esplanade, the grand clubhouse with infinity pools, jacuzzi, social hall, function room, a beach bar, and view decks with spectacular views of the Mactan channel. This seaside residential community also has its own sports and recreation center, Serenity Park, picnic groves, pocket parks and a wharf for yachts and speed boats in an exclusive enclave at the Catarman headland. The latest phase of Amara opened in December of 2016.

To capitalize on the Park’s PEZA Accreditation, CHI launched its first office building in Cebu Business Park. The Ayala Center Cebu Tower is a 20 storey office building with 12 office floors, 6 podium parking, and 2 floors for retail. This will add 30,688.05 square meters of additional office space in CBP. The project was launched last January 30, 2013. It serves as the new headquarters of Cebu Holdings, Inc. and all of ALI’s Special Business Units in Visayas and Mindanao.

The BPI Cebu Corporate Center is Alveo Land’s first office condominium in the Southern Philippines, in partnership with CHI. Offering professional work spaces available for ownership, it is currently 63 percent sold and is scheduled for turnover by the third quarter of 2017.

We also completed a new office building concept, the Tech Tower , in 2017. This IT/BPO office building offers units at smaller cuts and more affordable specifications to allow start- ups and smaller companies to locate in a premium PEZA-accredited address.

One and a half kilometer away from Cebu Business Park is Cebu I.T. Park (formerly Asiatown I.T. Park).

Cebu I.T. Park is a well-planned IT economic zone and modern trading hub with global gateway. The integrated, mixed-use, masterplanned development obtained accreditation from the Philippine Economic Zone Authority (PEZA) as an IT Park in 2000. The PEZA accreditation is the first such distinction accorded a property development project in the Visayas and Mindanao.

In September 22, 2011, Asiatown I.T. Park was officially re-named Cebu I.T. Park – strengthening the emphasis the queen city of the South which has today become one of the top BPO destinations globally. In 2017, Cebu was ranked the 12 th top outsourcing destination globally by Tholons Magazine.

Home to over a hundred IT companies and related services, Cebu I.T. Park is host to over 70 percent of Cebu’s business process outsourcing (BPO) industry. It hosts a good mix of software research and development, BPOs, and contact centers, bringing in millions of pesos in investments and employing thousands of people. In fact, by end of 2015, it has provided employment to almost 53,970 – a mixture of engineers, and information and communication technology professionals.

Cebu’s thriving IT and BPO industry is most evident in the bullish build-up within Cebu I.T. Park with nine (9) buildings under construction. This will be an addition to the existing 27 buildings at the I.T. Park. eBloc Tower 1 is 12-storey mid-rise office condominium with retail provision at the ground floor. It is a project of Asian I-Office Properties, a joint venture between CPVDC and ALI. The building has redundant power and water supply, optimum telecommunications facilities, centralized sewage and a secure location within the heart of the city.

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With its first tower fully leased out, AiO launched eBloc Tower 2 , a 16-level office building with a total gross floor area of 34,762 square meters in June 2010. Like its predecessor, eBloc Tower 2 is proud manifestation of sustainable design practices. The building is fully leased out to some of the big players in the BPO/IT industry.

To accommodate the ever increasing demand for office spaces, eBloc Tower 3 and eBloc Tower 4 were launched last February 2012 and October 2013, respectively. These two 12-level office buildings add a total of 29,805 square meters of leaseable floor area.

Cebu I.T. Park’s retail center, The Walk, remains to be a strong retail magnet in the ever-busy Cebu IT Park. Heavily frequented by BPO workers, young professionals, tourists, and families it has emerged from simply being a hangout haven into popular venue for showcasing recreational activities like sports, music, photography, and even luxury vehicle collections.

To maximize land value and increases recurring income, CHI and subsidiary CPVDC broke ground for the Central Bloc at Cebu I.T. Park in March of 2015. The Central Bloc is a two-hectare central superblock which will include a regional mall, a hotel, and office towers. This new project will complement the 24/7 community in this area, as well as enhance the pedestrian experience, connecting the growing number of buildings within the park.

To provide a more vibrant and lush development for our communities, CPVDC redesigned and breathed new life into the Cebu I.T. Park landscape with the opening of the Garden Bloc in December 2015. Garden Bloc is an expansive green enclave which now features new and popular dining concepts set amid a tranquil garden setting.

In December 2018, CHI broke ground on The Flats at Cebu Business Park and Cebu I.T. Park. The Flats is Ayala Land’s new co-living concept which brings independence within reach. With affordable living arrangements, prime city locations, and a welcoming community, The Flats is a home where students and young professionals can thrive.

As CHI sees brisk build-up within its properties, it continues to explore opportunities for expansion within Cebu.

Gatewalk Central , a 15-hectare city center project located in Subangdaku, Mandaue City was launched in June of 2016. This project, a partnership with parent company, ALI, and Aboitizland will provide a highly energized lifestyle experience with master-planned residential and commercial spaces. It will feature the city’s unique avor with a dynamic lifestyle row and innovative work spaces and facilities.

In November of 2017, CHI, in partnership with Taft Property Venture and Development Corporation launched Seagrove , a 14-hectare property at Punta Engaño in Lapu-Lapu City. The estate is envisioned to be the country’s next world-class leisure estate with diverse product offerings. The development will be a coastal leisure hub, highlighting the natural features of the location and providing a unique eco-fun experience for locals and tourists to enjoy. The natural ecosystem will be maintained and enhanced by the sustainable brand of development Ayala Land is known for.

The magnitude and significance of its projects make CHI the leading real estate company in Cebu. Brining the Ayala brand of development to the Visayas and Mindanao, it is the premier multi-lined real estate organization which continues to create landmarks, set standards, and build lasting relationships with its customers. In over 30 years, CHI has definitely changed the physical landscape of Cebu, bringing with it a distinctive lifestyle for a market that aspires “world class”.

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SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE % Ownership Nature of Projects

CBP Theater Management, Inc. 100% Theater management (Pre-operating) Cebu Leisure Company, Inc. 100% Entertainment facilities management Cebu Property Ventures and Devt. Corp. - Mixed-use development Asian I-Office Properties, Inc. 100% Mixed-use development Taft Punta Engaño Property, Inc. 55% Mixed-use development Cebu Insular Hotel Company, Inc. 37% Hotel development/operations Solinea, Inc. 35% Mixed-use development Amaia Southern Properties, Inc. 35% Mixed-use development Southportal Properties, Inc. 35% Mixed-use development Central Block Developers, Inc. 55% Mixed-use development Cebu District Property Enterprise, Inc.-(JV)15% Mixed-use development

(2) Business of the Issuer (Operations).

(A) Description of Registrant (i) CHI’s operations consist of six types of activities:

∑ strategic land management ∑ mixed-use development ∑ real estate business (commercial land sales and residential subdivision/condominium sales) ∑ commercial business operations and management (retail space lease and office space lease) ∑ hotel development and operations via an affiliate Cebu Insular Hotel Co. Inc. ∑ proprietary Sports Club shares sales

(ii) The following spells out CHI’s operating (real estate) revenues by category of activity for the periods indicated:

For the years ended 31 December 20 18 20 17 20 16 P Mn % P Mn % P Mn %

Commercial land sales 442.8 12 - 0 - 0 Residential lot (Amara) 269.3 7 199.5 6 30.6 1 Residential Condo (1016, 88.0 2 148.2 5 265.9 10 Sedona Parc & Park Point Residences ) City Sport Club shares 0.7 0 - 0 1.2 0 Rental Income Ayala Center Cebu 1,296.3 35 1,352.7 44 1,290.3 48 Cebu Leisure Co., Inc. 71.6 2 71.3 2 67.6 2 AITP Retail (The Walk) 26. 2 1 26.5 1 25.7 1 Central Bloc 8.8 0 - 0 - 0 ACC Tower 151.0 4 104.4 3 - 0 Tech Tower 49.7 1 - - - - eBloc Towers 581.9 16 559.3 18 449.0 16 Land Leased 5.8 0 30.2 1 16.3 1 Theater income 120.5 3 129.6 4 132.1 5 Equity in net earnings of 106.0 3 14.7 1 161.3 6 an associate Interest and other income 503.2 14 455.8 15 274.5 10 3,721.8 100 3,092.2 100 2,714.5 100

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Commercial Land Sales

Cebu Business Park and Cebu IT Park

Cebu Business Park (50 hectares) and Cebu IT Park (27 hectares) are both large-scale, master- planned, mixed-use, integrated economic zones. Each one is a complete destination comprising a dynamic whole, being collectively known as Cebu Park District.

The respective strengths of each development of Cebu Business Park and Cebu IT Park are highlighted as a representation of shared growth. The Cebu Park District’s identity will serve to magnify each park’s best-in-class positioning and value proposition of being the premier district for business, leisure and living.

Cebu Business Park and Cebu I.T. Park are 1.5 kilometers apart and are strategically located relative to the economic drivers of Cebu. Both parks enjoy a critical mass of locators in the spheres of business, banking, finance, IT and tourism services among others.

These developments have been considered as benchmarks of urban developments south of Luzon, having provided the Cebu and the Vismin markets the opportunity to experience the convenience of integrated living concept and standards that Ayala Land has championed in the tradition of developments such as Makati, Bonifacio Global City and Nuvali.

Being high quality urban environments, both developments have vibrant mix of uses: office, residential, retail, recreational, cultural and institutional.

Business. The Cebu Park District is where many of the region’s corporate headquarters are located. Both parks and the adjoining areas enjoy a critical mass of locators in the spheres of business, banking, finance, IT and tourism services, among others. As the preferred business district, these two parks are home to some of the biggest local and international companies. Taken together, all these compose the largest concentration of developments in Southern Philippines.

Leisure. The district offers opportunities for better and healthier lifestyle through the retail developments such as Ayala Center Cebu and the Walk and Cebu’s urban resort, the City Sport Club Cebu. The development and urban design will highlight the district’s distinctive character -- its natural environment, the green and open spaces. To sustain the dynamism and vibrancy in the district, all these shared spaces are enhanced and expanded for people to come together in events, particularly entertainment, leisure, health and wellness activities.

Living. Both parks have a growing residential component, allowing people to live near their workplaces in a vibrant and diverse urban environment. Ayala Land introduced its three residential brands to bring a wide range of options for Cebuanos. Ayala Land Premier ushers in an exclusive and distinct living experience with 1016 Residences and Park Point Residences. Alveo Land brings innovative projects attuned to the needs of a dynamic, urban lifestyle with Sedona Parc and Solinea. While affordable homes with the Ayala brand of development is made available with Avida Land’s first foray outside of Luzon with Avida Towers Cebu and Avida Riala. A new addition to the residential developments is Amaia Steps located in Mandaue.

Cebu Business Park . It is strategically located to co-exist with the development plans and directions of Cebu City’s urban growth. Cebu Business Park’s major streets serve as a vital part of Cebu City’s radial road network in the northern district. Situated at the center of Cebu City, the CBP is bounded by Archbishop Reyes Avenue in the west, Juan Luna Avenue to the north, M.J. Cuenco Avenue to the east and Gorordo Avenue to the South. The Park is located approximately three (3) kilometers from residential subdivisions in the north, and fifteen (15) kilometers from the Mactan International Airport.

Lot owners at CBP include various prestigious companies such as A. Soriano Corporation, Asian Bank Corporation, Phinma Properties & Holding Co., Philippine National Bank, Insular Life Insurance Co., China

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Bank, Metropolitan Bank & Trust Co., Bank of the Philippine Islands, Bigfoot Properties Phils., Inc., Adelaida Ghassemi, Alveo Land, Corp., Repro Optima Center for Reproductive Health, Inc., Ms. Lina Danaque Ong, Ahava Realty & Development Corporation, Contempo Property Holdings, Inc. and Harry John Viloria.

A number of vertical construction project started since the Company initiated the construction of Cebu Holdings Center in 1992. Other CHI-owned projects include Ayala Center Cebu, Park Tower One and Park Tower Two, Ayala Life FGU Center (jointly with Ayala Life Assurance, Inc. and FGU Insurance Corp.), Seda Ayala Center Cebu (formerly Cebu City Marriott Hotel) (the 303-room businessman’s hotel jointly with Ayala Hotels, Inc.), Ayala Center Phase 2b, 1016 Residences, Park Point Residences, Ayala Center Cebu Tower & The Alcoves (jointly with Ayala Land Premier), Sedona Parc, Solinea Towers & BPI Corporate Center (jointly with Alveo Corp.) and CBP Tech Tower (BPO 400). Other lot owners who count among the early builders are Keppel Center, First Abacus Financial Tower (owned by the Prosperity Properties and Management Corporation) and the HDMF / WTI Tower owned by Pag-ibig Fund and WTI, Metro Bank, Union Bank and Taft Financial Center, Security Bank, Pioneer House, 8990 Housing and Development Building, Cebu IT Tower, Lexmark Building 1, 2&3, China Bank, Insular Building, Pagoda Realty Corp., Avalon Residences, AppleOne Property, Creativo 2 building, China Bank expansion building and Calyx Residences. In 2016, 2- Quad, MSY Holdings Corp. Center, FLB Corporate Center, Skyrise Beta, Loreta Tower 2, RCBC, Skyrise Alpha, Zenith Central building, PhilAm Life Center Cebu, Buildcomm Center and Mandaue Foam building was completed. The Grand BPO building, Latitude Corporate Center, Hope Inn building and Johndorf building were still under construction during the period. Others are expected to begin construction within the next five years, thus hastening the pace of full development in the area.

Apart from the office/residential condominium projects and the City Sports Club Cebu, CBP also has a luxury hotel. This is in accordance with the plan of making CBP a world class mixed-use commercial property designed to meet the demands of the 21 st century.

A CHI subsidiary, Cebu Property Ventures and Development Corporation, has also developed a 24-hectare property not far from the CBP. This project is called Cebu I.T. Park (formerly Asiatown I.T. Park).

Cebu I.T. Park is a well-planned IT economic zone and modern trading hub with global gateway. The 24- hectare integrated mixed-use I.T. Park obtained accreditation from the Philippine Economic Zone Authority (PEZA) as an IT Park in 2000. The PEZA accreditation is the first such distinction accorded a property development project in the Visayas and Mindanao.

Residential Lot Sales

Amara Amara is a high-end seaside residential community in Cebu Island, with a century-old lighthouse standing on one of its rolling hills. Bounded by the Camotes Sea coastline on the northern and eastern sides, Amara is situated on the jutting east portion of Cebu Island and sits adjacent to the Bagacay Lighthouse on the eastern coastline. It is a 20-minute drive away from Cebu’s city proper through the newly opened Cansaga bridge. From Cebu City, Amara can also be accessed through the northern coastal highway.

Amara is an exclusive seaside residential community located in Catarman, Liloan, Cebu. The property is envisioned to be a community of seaside neighborhoods within a master-planned residential haven. It will offer superior values in product features, amenities and value appreciation with the Ayala trademark.

It has launched its newest phase dubbed The Parks at Amara. This phase is surrounded by seamlessly connected landscaped parks with a central park as the gem. The Parks boasts of amenities that allow its future residents to have an active lifestyle, joyful outdoor celebrations and a quiet respite.

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Chapel at Amara To provide a holistic living experience at the premier seaside residential subdivision, Amara, we broke ground for its chapel in August of 2013. The chapel's design is made by budding and award- winning architect, Jason Buensalido. The design purposely maximizes natural light and ventilation sources, drawing inspiration from clean geometric lines, visually illustrating a rising bridge, and linking nature, man and God.

Amara Phase 1 has an esplanade and the grand clubhouse with infinity pools, jacuzzi, social hall, function room, a beach bar, and view decks with spectacular views of the Mactan channel. Amenities in Phase 2 include a Serenity Park with floating gazebos and a Sports and Recreation Center with covered basketball and badminton courts and a fitness gym that overlooks the sea. Picnic Groves will be located in Phase 3 of the sprawling Amara development.

City Sports Club Shares The urban recreational and sports resort located at the heart of the metropolis offers a diverse range of amenities for leisure, dining, health and fitness. Stepping up to modernize its facilities, the club underwent a multi-million peso renovation which started in 2013 to further enhance its multitude of services to offer to club users.

City Sports Club Cebu, a joint project of Ayala Land, Inc. and Cebu Holdings, Inc., was developed to be an exclusive urban resort destination within the heart of Cebu City’s premier business district, Cebu Business Park. Its location provides easy access to shopping, entertainment, leisure, banking, offices, schools and other business establishments. It also offers proprietary club membership which gives its members the exclusivity to enjoy the various facilities and amenities offered by the Club. It is a perfect venue for business and social gatherings with colleagues, family and friends.

In 2004, CSCC signed reciprocity agreements with American Club in Singapore and United Services Recreation Club in Hongkong.

To enhance its offering for its members, the City Sports Club Cebu completed a multi-million peso renovation in 2013.

Residential Condominium Sales (Cebu Business Park)

1016 Residences 1016 Residences is a high-end residential condominium project co-developed by Ayala Land, Inc. and Cebu Holdings, Inc. Carrying the Ayala Land Premier brand, the development promises to deliver an exclusive and distinctive living experience. 1016 Residences is located centrally at Cebu Business Park. It is a short walk from the city’s premier retail and entertainment hub, the Ayala Center Cebu, and is directly connected to the exclusive City Sports Club Cebu – giving residents an endless array of facilities and amenities for shopping, recreation and business. Its convenient location is balanced with space and luxury through carefully planned and designed spaces which take advantage of scenic views of the sea and the mountains and open up opportunities for open spaces even on the upper floors. This 27-storey building holds 109 prime corner units.

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Park Point Residences The 38-storey residential tower is the first of its kind in ALP’s residential portfolio in the region, as it is the first living space that will rise on top of the mall’s new wing.

This is city living as never before seen in Cebu. A vantage point that gives you immediate private access to the remarkable, thrilling, and sublime. At Park Point Residences, premier lifestyle destination Ayala Land Center Cebu is your front door. Ayala Land Premier welcomes you to Park Point Residences. An intimate community of only 255 residences, aloft at the heart of Cebu Park District’s urban renaissance. Seamlessly converging escapades and escape, with private access to the city’s premier dining, shopping, and entertainment destinations. This address of distinction redefines Cebu City’s skyline with an elegance that is subtle, undeniable. At Park Point Residences, live at the height of refinement. It is seamlessly connected to city's premier dining, shopping, and entertainment destination, Ayala Center Cebu.

Sedona Parc A joint project between Cebu Holdings, Inc. and Alveo Land, Sedona Parc is located within the Cebu Business Park, providing future residents amenities that are designed to complement their existing lifestyle while maintaining the convenience of being at the heart of a progressive district.

Sedona Parc is a 24-storey residential condominium with 114 units that will offer upscale lifestyle inspired by style, design and nature. Especially designed to address the needs of Cebu’s Urban Achiever’s, Sedona Parc will be a stylish residential condominium that will offer an upscale lifestyle inspired by thought and design, all set to rise in a tranquil and highly-accessible parkside location.

Adding value to its prime location is its proximity to Ayala Center Cebu, which provides choice experiences for retail and leisure. Ayala Center Cebu has close to 500 retail establishments that will cater to the different tastes and needs of Sedona Parc’s future residents.

Solinea Towers The City’s Most Exclusive

Welcome to Solinea. Alveo’s first master planned, multi-tower residential development in Cebu City presents you with a brilliant living experience: the mellow glow of a home that is exactly the size you need, balanced with the invigorating vibrancy of everything under the sun.

Strategically located in Cebu Park District, Solinea is within Cebu Business Park, a 50-hectare master planned development designed as the business and lifestyle mecca of Cebu and Southern Philippines.

Situated right across Ayala Center Cebu, and just a short drive from Cebu IT Park, it will rise in a 2.6-hectare property bounded by two major access roads—Luzon Avenue on the north and Cardinal Rosales Avenue on the east. Having access to these major thoroughfares definitely makes navigating the city a breeze. As from the ground floor open-air retail row to Solinea’s activity core, amenities will choreograph a variety of experiences and events to flow seamlessly into each other.

The Alcoves In March of 2015, CHI and ALP launched another residential tower on top of Ayala Center Cebu, The Alcoves. The Alcoves is a 37-story luxury condominium that boasts of a number of unique amenities and residential concepts fit for a discerning market. A mixed-use tower with a retail podium and high-rise residences, The Alcoves will feature retail and dining establishments on the second and third floors.

Rising atop Ayala Center Cebu, a gathering of life’s finest details abounds with select opportunities for leisure, dining and retail – defining sensibilities, expressing lifestyles. At the heart of Cebu City, an address of distinction to complement your lifestyle. Framed within Cebu Business Park, The Alcoves primes the canvas for urban living, drawing together the most sought-after destinations for business, leisure, and living. Alighting directly into Ayala Center Cebu through a direct elevator link into a private lobby at the ground level, convenience nurtures the flow of life. With everything within reach, your every gesture makes a mark-an assemblage of different shapes and textures. Light and shadow, color, experience, memory, a portrait of your home emerges.

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Aloft and abounding in six levels across the façade, the distinctive 41 sqm. Alcove gardens provide green spaces that soothe and inspire. Each deck features a green wall that rises three storeys and restful seating for breathing in the sights, a natural respite framing stunning views of Cebu City and beyond.

Rental of Retail Space

Ayala Center Cebu Since its inception in 1994, Ayala Center Cebu has become the preferred lifestyle destination in Cebu for its growing market. It is an agora for new products, a venue for community interaction and the trendsetter for new attitudes and lifestyle.

Strategically located at the center of Cebu’s vibrant business district, it is only 20 minutes away from the Mactan Cebu International Airport and is just a walk away from some of Cebu’s best hotels including Cebu City Marriott Hotel among others. It is also just 10 minutes away from the nearest seaports for that quick island getaway.

Ayala Center Cebu Expansion Ayala Center Cebu opened its biggest ever expansion on December 11, 2013. This new section of the mall provides space for over 200 store options for mall patrons. The four levels of the expansion is seamlessly connected to the existing building and completes the full-circle retail master plan of Ayala Center Cebu while adding 36,500 square meters of gross leasable area. The expansion of Ayala Center Cebu brings in a merchandise mix of premium foreign brands, mid-priced to high-end fashion boutiques, specialty stores for IT, home and kids selections. Its top level is a destination of its own, with carefully selected outlets, a new high-fidelity audio-visual cinema and a chapel.

In 2011, the company embarked on the expansion project of Ayala Center Cebu to address the market gap and strengthen its landmark as the lifestyle and retail destination in Metro Cebu. Opened to the public last 2013, this expansion adds four levels of retail, dining and entertainment establishments with over 34,000 square meters of gross leasable space in a gross floor area of approximately 50,000 square meters. Rustan’s Supermarket and Rustan’s Department Store moved to an expanded area in this new wing, occupying four storeys to bring in their full line-up in product and brand offerings. This latest expansion of this mall recently garnered Gold in the renovations and expansions design and development category of the 2015 Asia Pacific Shopping Center Awards competition of The International Council of Shopping Centers.

The Walk The Walk, the retail component of subsidiary Cebu Property Ventures and Development Corporation’s Cebu I.T. Park, positions itself as one of the best convergence hub where friends and families connect with their loves ones and live out their passions. This retail facility combines with a strong mix of affordable dining options and convenient services, making it the favorite hangout at Cebu I.T. Park. Since it opened, The Walk retained its freshness and attraction to its market with a total gross leasable area of 2,100sqm.

Cebu I.T. Park’s retail center, The Walk , remains to be a strong retail magnet in the ever-busy Cebu IT Park. Heavily frequented by BPO workers, young professionals, tourists, families, and sports enthusiasts, it has emerged from simply being a hangout haven into popular venue for showcasing recreational activities like sports, music, photography, and even luxury vehicle collections.

Garden Bloc Garden Bloc—an expansive garden enclave which serves as a relaxing and re-energizing space for busy office workers. Since it first opened in December 2015, the Garden Bloc has become the newest outdoor lifestyle destination where Cebuanos converge.

The Garden Bloc hosts exciting dining concepts all under an outdoor garden setting. With newly lined pathways, this area can also provide quiet respite for those who want to enjoy a leisurely walk, jog, or run. This unique breathable space in the middle of a bustling metropolis that encourages the members of the community to walk and converge outdoors.

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At the center of the Garden Bloc is a 5,000-square meter central events area which will host a variety of garden, outdoor, and wellness events. Since the Garden Bloc is at the heart of Cebu I.T. Park, a mixed-use development, its proximity and accessibility to work and residential buildings makes it easily walkable— promoting an active lifestyle and helping reduce carbon footprint from the use vehicles.

Rental of Office Space

Ayala Center Cebu Tower To capitalize on the Park’s PEZA Accreditation, CHI launched its first office building in Cebu Business Park. The project is a 20 storey office building with 12 office floors, 6 podium parking, and 2 floors for retail. This will add 30,688.05 square meters of additional office space in CBP. The project was launched last January 30, 2013. Ayala Center Cebu Tower will be completed on November of this year. It will also serve as the new headquarters of Cebu Holdings, Inc. and all of Ayala Land Inc.’s Special Business Units in Visayas and Mindanao.

Tech Tower Tech Tower, a 12-storey mid-rise BPO building, is an innovative work environment designed to promote distinct workspaces which encourage creativity and interaction. It is envisioned to attract progressive BPO, IT, and ITES business locators.

In 2017, a new office building concept. This IT/BPO office building offers units at smaller cuts and more affordable specifications to allow start- ups and smaller companies to locate in a premium PEZA-accredited address. eBloc Towers 1 and 2 Retail The eBloc Towers retail outlets at the ground floor of the buildings provide more choices for dining at the Cebu I.T. Park. The current mix of outlets add to the dynamic 24/7 environment at the park. These include coffee shops, popular food outlets and restaurants and convenience stores which complement the lifestyle of the park's growing population. eBloc Towers eBloc Tower 1 A 12-storey mid-rise office building, the eBloc Tower was completed in 2009 and is now host to two of the biggest global BPO or IT companies. The first among many projects to be pushed for Cebu’s twin-win industries – Information and Communication Technology (ICT) and tourism – the eBloc Tower is also a project of the Asian i-Office Properties Inc. (AiO). Located along Jose Ma. Del Mar Avenue of Cebu I.T. Park, the eBloc Tower sits on a 4,432-square meter lot. eBloc Tower 2 eBloc Tower 2, a project of Asian i-Office Properties, is a 16-level office building with a total gross floor area of 34,762 square meters located in Phase 2 of Cebu I.T. Park. Launched in June 2010, eBloc Tower 2 is a proud manifestation of sustainable design practices. It addresses the increasing demand for office space in Metro Cebu. eBloc Tower 3 The third of the series of eBloc Towers broke ground in early 2012 and was completed last August 2014. Like its predecessors, eBloc Tower 3 is a state-of-the-art, 12-floor office building which will bring in more than 15,700 square meters of leasable space. Retail spaces will also be available at the ground floor to cater to the needs of the BPO community. eBloc Tower 4 Coming from the highly successful eBloc Tower series, eBloc Tower 4 is an innovative addition to the growing IT/BPO industry in Cebu. It broke ground last October 2013 and is set to finish by 1st Quarter of

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2016. eBloc 4 houses a large retail provision and easily accessed landscaped storefronts at the ground level to cater to the needs of the BPO workers 24/7. eBloc Tower 3 and eBloc Tower 4 are designed to have support retail provision with landscaped storefront at the ground floor to cater the needs of the BPO worker 24/7. An open air podium, which will accommodate ample parking slots, will provide for both retail and office needs.

The buildings are a proud manifestation of environmentally sustainable design practices through energy-efficient electrical, air-conditioning and its water-efficient plumbing systems. Lights, pumps and motors will be energy-rated and will save electricity. The plumbing system will use a dual-pipe system to collect grey water and will facilitate rainwater collection. It will also employ waterless urinals and other water-saving toilet fixtures.

Cebu I.T. Park Projects

Avida Towers Cebu-(Residential Condominium Sales) Avida Towers Cebu is a joint venture project of Avida Land and Asian i-Office (AiO). AiO is an associate of Cebu Property Ventures and Development Corporation.

When it was first launched in June 2010, Avida Towers Cebu sold over 90 percent units Tower 1 in less than four months. This fast-tracked the launch of the second tower, which also sold in record breaking speed.

Avida Towers Cebu redefines city living with exciting options for its future residents to enjoy the benefits of home, work and play inside the most vibrant address in town for young professionals and families.

Central Bloc To maximize land value and increases recurring income, CHI and subsidiary CPVDC broke ground for the Central Bloc project at Cebu I.T. Park in March of 2015. The Central Bloc is a two-hectare central superblock which will include a regional mall, a hotel, and office towers. This new project will complement the 24/7 community in this area, as well as enhance the pedestrian experience, connecting the growing number of buildings within the park. The development includes two BPO towers, an Ayala branded hotel, and a 5-storey mall.

Ayala Mall Central Bloc A 500-store mall is envisioned to be a refreshing and hip hangout within Central Bloc. It will help make Cebu IT Park the hub of convergence for a younger and more active market segment.

Mactan Project

Seagrove Ayala Land, Inc. (ALI) and Cebu Holdings, Inc. (CHI) in partnership with one of the most established Cebu real estate developers, Taft Properties, Inc. joined forces to break ground for its 14-hectare leisure development in Punta Engaño, Lapu-Lapu City—Seagrove, an integrated resort development unlike Cebu has seen before.

Fronting a 40-hectare mangrove forest, Seagrove offers a wealth of natural attractions providing new adventures to tourists and locals who frequent the island.

In the tradition of Ayala Land’s integrated, mixed-use developments, Seagrove is envisioned to be the country’s next world-class leisure estate featuring diverse product offerings. It will have a mix of hotels with Holiday Inn Resort as its main anchor together with waterside retail, entertainment and outdoor recreation components.

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It features a coastal boardwalk retail strip with a view of an expansive mangrove forest, a network of lagoons, as well as a nature-inspired pedestrian corridor. Seagrove will carry the first of its kind resort and retail features, fresh dining concepts, and a full range of services for travelers and locals.

Seagrove is Ayala Land’s 24 th estate to date, adding to its roster of sustainable communities nationwide. In Cebu, it established Cebu Business Park in 1988 and Cebu IT Park in 1995 which are pioneer projects that have evolved into successful business districts.

“Our faith in the Cebu market is reflected in the breadth of our products and the pipeline of projects we are committed to build in the province. Seagrove underscores this commitment. We are very excited to develop this beautiful coastal project in one of the most progressive districts of Cebu and a prime leisure corridor of the Philippines,” shared Meean Dy, Ayala Land SVP, Group Head of Strategic Land Bank Management and President of the joint venture company Taft Punta Engaño Properties, Inc. (TPEPI).

The initial phase of the project, which consists of the boardwalk, support restaurants and shops, a portion of the lagoon, an events ground, and the pedestrian corridor, is targeted for completion in 2020.

A significant attraction in Seagrove is the entry of global hotel chain, Holiday Inn, which will operate their very first resort hotel in the country under its Holiday Inn Resort brand. With nearly 1,200 hotels worldwide today, the Holiday Inn brand is the largest and most recognized hotel brand in the world.

“We believe in introducing pioneering concepts and that is why we are very excited for Seagrove. We are introducing something the market has not seen before and it will complement the various existing facilities in Mactan, enriching the experiencing there and affirming Cebu as one of the main leisure centers of the country” shared Edward Gaisano, Chairman and President of VICSAL Development Corp and Director of Taft Punta Engaño Properties, Inc.

Located within the resort area of Punta Engaño Road, Lapu-Lapu City, Seagrove is minutes away from the Mactan-Cebu International airport. Those from Metro Cebu can access Seagrove through the Osmena bridge or Marcelo Fernan bridge. The total investment for the project is estimated at P35 billion, of which P4 billion will be allocated for its first phase. Seagrove is also expected to generate 13,000 jobs throughout its development cycle.

In November of 2017, CHI, in partnership with Taft Property Venture and Development Corporation launched Seagrove project.

Mandaue Project Gatewalk Central – The Dynamic Center of Mandaue

Ayala Land, Inc (ALI) in partnership with one of the most trusted Cebu real estate developers, AboitizLand, continues on its strategic thrust towards nation building as it broke ground for Gatewalk Central, its newest integrated mixeduse development in Mandaue City.

With Gatewalk Central, Ayala Land reinforces its commitment of developing, masterplanned estates such as the Makati Central Business District, Bonifacio Global City, and Cebu Business Park, while AboitizLand fortifies its purpose towards nurturing local communities through strong and pioneering concepts. “This has been a very strategic partnership for us as we share a lot of common values in building sustainable communities” shared Andoni Aboitiz, President and CEO of AboitzLand.

Located in Subangdaku, Mandaue City, Gatewalk Central is envisioned to be the dynamic center of the city. It is easily accessible via three national roads—Lopez Jaena St., M. Logarta St., and Ouano Avenue. The 17.5-hectare estate will feature office buildings, a range of residential options, family-friendly parks, refreshing retail selections, and an Ayala Mall. These components will be seamlessly anchored along the development’s main feature—a 30-meter wide pedestrian only street which runs through the entire estate. This treelined street takes visitors through various districts within Gatewalk Central, each having its own distinct character and experience from intimate leisure areas to a grand plaza.

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“We are very excited about this development. Once complete, its character and features is something the local market has not seen before,” said Bobby Dy, Ayala Land President and CEO. Dy also emphasized that this multi-billion peso investment shows Ayala Land’s confidence in Mandaue City as one of the emerging growth cities in the region. After the estate launch, Avida will be the first development at Gatewalk Central. Its residential development is targeted for young professionals and families and will launch later this year. The Ayala Mall, which will feature Landmark department store as its anchor, will open in 2019. Apart from Landmark, the mall will have a wide mix of popular global and local brands, affordable options, local flavors, family dining and entertainment concepts. The BPO office building will be built on top of the mall and will open by the end of 2019. While under construction, the development is estimated to generate about 1,300 jobs. This will rise to 9,000 jobs once the mall and office are operational. The groundbreaking ceremony was attended by officials from the Provincial government of Cebu led by Gov. Hilario Davide III; officials of the Mandaue City government led by Mayor Jonas Cortes; and the management teams of Ayala Land and AboitizLand led by their president and CEOs Bobby Dy and Andoni Aboitiz, respectively. The project was launched in June of 2016.

The company and its subsidiaries had no material reclassification or purchase of a significant amount of assets during the last three years.

Mergers, Consolidations, Acquisitions and Similar Matters

The Board of Directors of the Company and of CPVDC, at their respective meetings held on February 26, 2018, approved the Merger of CPVDC with and into the Company. The Company is the surviving entity. The Merger was likewise approved by the stockholders of both CHI and CPVDC during its Annual Stockholders Meetings held last April 10, 2018.

On November 6, 2018, the Securities and Exchange Commission approved the merger of Cebu Property Ventures and Development Corporation with the Company. The Company is the surviving entity. a. Nature of Business of the Absorbed Entity

CPVDC is 76% owned by the Company. It was registered with the Securities and Exchange Commission (SEC) on August 2, 1990. It started commercial operation on September 1, 1996 as a joint venture corporation between the Province of Cebu and Ayala Land, Inc. It is currently engaged in real property ownership, marketing, management and development. Its operations consist of three (3) types of activities:

• Strategic land management (acquisition and estate development) • Real estate business (commercial land sales and residential condominium sales) • Commercial business operations and management (retail space lease and office space lease)

A total 940,350,000 common shares of CPVDC, divided into 564,210,000 Class A shares (CPV) and 376,140,000 Class B shares (CPVB) are listed with the Philippine Stock Exchange.

The principal office address and contact number of CPVDC are as follows:

20 th Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City (032) 888-3700 b. Summary of the material features of the Merger

With the Merger, the Company’s portfolio will be consolidated under one listed entity, creating a unified platform for the Company’s investments and is expected to result in operational synergies, efficient funds management and simplified reporting to government agencies.

Once approved by the SEC and other regulatory bodies, CHI will issue 1.06 common shares to each stockholder of CPVDC holding one (1) share of CPV or CPVB as of the record date of the Merger. - 14 -

These new common shares that the Company will issue due to the Merger will have the rights and features similar to the existing CHI shares. c. Dividends in arrears or defaults in principal or interest in respect of any security

There are no dividends in arrears or defaults in principal or interest in respect of any security of the Company or of CPVDC. d. Comparative Financial Information

The following table shows the comparative financial information of the Company and of CPVDC for the last two (2) fiscal years:

CHI CPVDC 2017 2016 2017 2016 (in PhP) (in PhP) (in PhP) (in PhP) Net Sales or Operating 3,092,234 2,714,473 802,938 694,984 Revenues (in ‘000) Income (loss) From Continuing 813,004 731,771 246,975 213,593 Operations (in ‘000) Long-term Obligations (in ‘000) 6,453,576 6,148,311 1,480,215 1,181,781 Redeemable Preferred Stock - - - -

Book Value Per Share 4.14 3.40 2.28 2.02 Cash Dividends Declared per 0.15 0.12 - - share Income (loss) Per Share from 0.39 0.35 - - Continuing operations e. Approval of regulatory agencies

After obtaining SEC’s approval of the Merger, the Company and CPVDC will also comply with the merger-related requirements of the PSE, the Philippine Economic Zone Authority and the Bureau of Internal Revenue.

The Company engaged Isla Lipana & Co. for the issuance of independent fairness opinion and valuation reports on the Merger. Isla Lipana & Co. has provided professional services in the Philippines for ninety- five (95) years and is acknowledged to stick to the highest quality standards in delivering audit and assurance, tax and advisory services within and outside the Philippines.

The Company, its subsidiaries and affiliates have no material relationship with Isla Lipana & Co. within the past two years other than the current engagement on the Merger. g. Material Contracts

There was no past, present or proposed material contract, arrangement, understanding, relationship, negotiation or transaction during the past two (2) fiscal years between CPVDC or its affiliates, and CHI or its affiliates. h. Market Prices of the Shares of Company and the Absorbed Entity

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The following are the stock market prices of CHI, CPV and CPVB shares as of February 23, 2018:

Share type Hi gh Low Close CHI 6.14 5.95 6.10 CPV 6.03 6.00 6.00 CPVB (as of 1/25/2018) 5.86 5.84 5.86

The Plan of Merger 1, which sets out the terms and conditions of the proposed Merger, is attached hereof as Annex “D”. All other relevant information on the absorbed entity, CPVDC, is set forth in the attached Annex “E”.

The company and its subsidiaries have not filed any bankruptcy, receivership or similar proceedings during the last three years.

Business Development of CHI’s subsidiaries/affiliate:

Cebu Property Ventures & Development Corp. (76% owned subsidiary before the CHI & CPVDC Merger)

The Company was registered with the Securities and Exchange Commission (SEC) on August 2, 1990. It started commercial operation on September 1, 1996 as a joint venture corporation between the Province of Cebu and Ayala Land, Inc. CPVDC is now 76 percent owned by Cebu Holdings, Inc. (CHI) after a successful tender offering undertaken in 1995.

CPVDC is a publicly-listed company engaged in real property ownership, marketing, management and development. The Company's operations consist of various types of activities:

• Strategic land bank management (acquisition and estate development) • Real estate business (commercial land sales residential condominium sales) • Commercial business operations and management (retail space lease and office space lease)

CPVDC is the developer of the 27-hectare called Cebu I.T. Park (formerly Asiatown I.T. Park), only 1.5 kilometers away from CHI’s Cebu Business Park.

In September 22, 2011, Asiatown I.T. Park was officially re-named Cebu I.T. Park – strengthening the emphasis the queen city of the South which has today become one of the top BPO destinations globally. In 2014, Cebu retained its ranking at the 8 th top outsourcing destination globally by Tholons Magazine.

Competition: The Company has no known competitor in the area of commercial land sales. With respect to residential subdivision sales CPVDC competes for purchasers primarily on the basis of reputation, price, availability of attractive in-house financing terms, reliability, and the quality and location of the community in which the relevant site is located.

CPVDC’s THREE YEAR RESULTS OF OPERATIONS 2017 vs. 2016 Results of Operations

1 The Annexes in the Plan of Merger showing the lists of stockholders before and after the proposed merger have been omitted for purposes of complying with Republic Act No. 10173 or the Data Privacy Act. Stockholders may contact the Office of the Corporate Secretary for any questions. - 16 -

Cebu Property Ventures and Development Corporation (CPVDC) generated consolidated revenues ofP802.9 million in 2017, a 16% increase versus the previous year’s P695.0 million resulting primarily from higher office leasing income in eBloc Towers. Other contributors to the company’s revenues were leasing income from the Walk & Garden Bloc (land lease) and interest and other income.

Revenues reached P=802.9 million a 16% growth versus last year’s P=695.0 million.

• eBloc Towers total rental revenue reached P559.3 million in 2017 a 25% increase versus last year’s level of P449.0 million driven mainly by higher lease occupancy from eBloc Tower 4. As of end 2017 all towers were full leased out.

• The Walk contributed a total revenue of P26.5 million, 3% higher compared to the P25.7 million of last year. As of end December 2017, lease occupancy was at 95.9%.

• Garden Bloc (Land Lease) reported P30.2 million in revenues, showing a significant growth of 85% versus the P= 16.3 million of last year.

• Interest and other income amounted to P186.9 million, reflecting an 8% decrease vis-à-vis the previous year’s P203.4 million specifically due to booking of one-time service income in 2016.

Cost and Expenses grossed P529.1 million, exceeding the previous year’s P460.0 million by 15% particularly due to additional office space leased out at eBloc Tower 4. Cost and expenses for the period consist mostly of depreciation of leasing assets, real property tax, repairs and maintenance, management fee, security and janitorial expenses, dues and fees, and interest expense.

Earnings before Interest and Taxes (EBIT) showed a significant difference from P119.7 million in 2016 to P=179.8 million in 2017.

Net Income during the period totaled P247.0 million, 16% higher versus last year’s level of P213.6 million on account of higher revenues.

Stock price for CPV increased from a closing of P=5.99 per share in 2016 to P=6.20 per share in 2017. While, CPVB stock price decreased from a closing of P=6.33 per share in 2016 to P=6.20 per share in 2017.

Financial Condition

The Company’s Balance Sheet remains strong with total assets amounting to P=5.7 billion as of December 31, 2017, P=43.6 million of which is cash. It has a current ratio of 0.50: 1 compared to 0.30: 1 in December 2016. Total liabilities as of the period stood at P=3.6 billion, P=1.8 billion of which is current. Debt-to-equity ratio stood at 1.69: 1 compared to the December 2016 level of 1.90: 1. Bank Debt to equity ratio registered at 0.69: 1 compared to the December 2016 level of 0.62: 1.

Key Performance Indicators

The table below sets forth the comparative key performance indicators of the Company: Indicators 2017 2016 Current Ratio 1 0.50: 1 0.30: 1 Total Debt to Equity Ratio 2 1.69: 1 1.90: 1 Bank Debt to Equity Ratio 3 0:69: 1 0:62: 1 Net Debt /(Cash) to Equity Ratio 4 0.67: 1 0.61: 1 Return on Assets (ROA) 5 4.39% 4.02% Return on Equity (ROE) 6 12.23% 11.94% 1Current Asserts / Current Liabilities 2Total Liabilities / Stockholders’ Equity 3Total Bank Debt / Stockholders’ Equity

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4Total Bank Debt less Cash & Cash Equivalents / Stockholders’ Equity 5Net Income / Average Total Assets (Assets beginning of the year plus Assets end of the year divide by two) 6Net Income / Average Stockholders’ Equity (Stockholders’ Equity beginning of the year plus Stockholders’ Equity end of the year divide by two)

Causes for Material Changes from Period to Period of Financial Statements

Cash and Cash Equivalents stood at P40.0 million as of end December 2017 a 71% increase compared to the P23.3 million in December 2016. The improvement was primarily due to collection of receivables and rental income for the period.

Short-term Cash Investments indicated a P2.5 million increase.

Financial Assets at Fair Value through Profit or Loss was reported at P.059 million indicating a decline compared to the December 2016’s level of P1.2 million. This is driven by withdrawal of UITF placements during the period.

Receivables stood at P634.5 million, 24% higher compared to the P512.4 million of December 2016 on account of collectibles from eBloc Tower locators, due from affiliates and accrued receivables.

Other Current Assets exceeded the year-end level of P219.8 million by 8% as it reached P236.4 million comprising of the booking of additional VAT input, prepaid taxes and security deposits.

Noncurrent portion of Receivables posted P293.1 million, a 17% reduction vis-à-vis the December2016’s P352.0 million due to collection made from Avida Land Corporation.

Property and Equipment registered at P2.2 million, exceeding the P1.9 million as of December 2016 by 16% specifically due to the purchase of additional office and IT equipment.

Investment Properties was reported to have reached P3.5 billion. In comparison to the P3.7 billion year-end level, it posted a 6% decrease primarily resulting from depreciation of eBloc buildings.

Investment in an Associate and a Joint Venture registered a 93% increase vis-à-vis the December 2016’s level of P= 412.3 million as it reached P796.5 million. The growth was due to the additional equity infusion to Central Block Developers, Inc. for the period.

Deferred Tax Assets-net amounted to P=3.9 million, 79% lower than the year-end level of P=18.2 million particularly due to booking of AiO’s NOLCO during the period.

Accounts and Other Payables reflected a 12% decline compared to the P2.0 billion of December 2016 as it stood at P1.7 billion. This was mainly on account of settlement of advances & intercompany loan, and payables to contractors & suppliers.

Current Portion of Long-term Debt grossed P59.9 million, showing 86% reduction vis-a-vis the December 2016 level of P442.3 million resulting from full payment of AiO’s previous bank loans.

Income Tax Payable totaled P5.9 million, 19% lower vis-à-vis the December 2016 level of P7.4 million mostly driven by lower taxable income and payments made during the period.

Deposits and Other Current Liabilities indicated a year on year decline of 65% (P=101.6m) versus the December 2016 level of P=155.3 million primarily brought about by reclassification from current accounts particularly of the security deposits from the eBloc locators to non-current accounts.

Long-term Debt-net of current portion totaled P=1.420 billion exceeding the December 2016 level of P=.739 billion by 92%. The increase was due to additional loan availed by Asian i Office for the period.

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Deferred Tax Liabilities-net reduced by 22% or P26.3 million as compared to the December 2016’s level of P120.8 million due to settlement of deferred tax of the collection made from Avida Land Corporation. Deposits and Other Noncurrent Liabilities was 46% (P75.9m) higher compared to the P166.4 million as of end of 2016 mainly due to reclassification from current accounts particularly of the security deposits from the eBloc locators to non-current accounts.

Retained Earnings showed 26% or P=247.0 million increase as a result of the 2017 Net Income.

• Due to the Company’s sound financial condition, there is no foreseeable trend or event which may have material impact on its short-term or long-term liquidity.

• Funding will be sourced from internally-generated funds.

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

• There is no known trend, event or uncertainty that have had or that are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations.

• There is no significant element of income arising from continuing operations.

• There is no material change from period to period in one or more line items of the financial statements.

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

• There were no known events and uncertainties that will trigger direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation.

• There were no material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationship of the company with unconsolidated entities or other persons created during the reporting period.

2016 vs. 2015 Results of Operations

Cebu Property Ventures and Development Corporation (CPVDC) generated consolidated revenues of P= .70 billion as of end of 2016, reflecting a 45% decline versus the previous year’s P=1.26 billion primarily on account of one time sale of commercial lot at Cebu IT Park in 2015. Revenues for the period were attributed to the leasing income in eBloc Towers & the Walk and interest and other income.

Earnings before Interest and Taxes (EBIT) showed a decline from P=606.1 million in 2015 to P=119.7 million in 2016.

Stock price for CPV slightly dropped from a closing of P=6.00 per share in 2015 to P=5.99 per share in 2016. While, CPVB stock price rose from a closing of P=6.10 per share in 2015 to P=6.33 per share in 2016.

Revenues reached P=.70 billion, 45% short of last year’s P=1.26 billion.

• eBloc Towers yielded a double-digit rental revenue growth of 17% as it amounted to P=449.0 million vis-à-vis last year’s level of P=384.8 million. This was largely due to the high lease occupancy of eBloc Tower 3. As of December 2016, average lease occupancy for eBloc 1 was at 99.3%, eBloc 2 at 99.7%, eBloc 3 at 99.8% and eBloc 4 at 3.5%.

• The Walk registered a total revenue of P=25.7 million, 4% lower versus the P=26.8 million of last year mainly on account of lower lease occupancy at 90.8%.

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• CITP Land Lease contributed P=16.3 million in revenues. It registered a year on year growth of 52 percent relative to the preceding year’s level of P=10.7 million.

• Interest and other income totaled P=203.4 million, slightly lower compared to the previous year’s P= 205.9 million.

Cost and Expenses reached P=460.0 million, 23% lower compared to the previous year’s P=597.4 million primarily brought about by costs related to the sale of commercial lot in 2015. Cost and expenses for the period comprised primarily of depreciation of leasing assets, real property tax, repairs and maintenance, ad and promo, management fee, security and janitorial expenses, dues and fees, and interest expense.

Net Income stood at P=213.6 million, 57% lower than the previous year’s P=497.2 million on account of lower revenues.

2016 Net Income is 33% higher than last year’s P=160.7 million NIAT if we factored out the one-time sale of commercial lot in 2015.

Financial Condition

The Company’s Balance Sheet remains strong with total assets amounting to P=5.5 billion as of December 31, 2016, P=24.5 million of which is cash. It has a current ratio of 0.30: 1 compared to 0.54: 1 in December 2015. Total liabilities as of the period stood at P=3.6 billion, P=2.6 billion of which is current. Debt-to-equity ratio stood at 1.90: 1 compared to the December 2015 level of 2.05: 1. Bank Debt to equity ratio registered at 0.62: 1 compared to the December 2015 level of 0.76: 1.

Key Performance Indicators

The table below sets forth the comparative key performance indicators of the Company:

Indicators 2016 2015 Current Ratio 1 0.30: 1 0.54: 1 Total Debt to Equity Ratio 2 1.90: 1 2.05: 1 Bank Debt to Equity Ratio 3 0:62: 1 0:76: 1 Net Debt /(Cash) to Equity Ratio 4 0.61: 1 0.71: 1 Return on Assets (ROA) 5 4.02% 10.66% Return on Equity (ROE) 6 11.94% 33.37%

1Current Asserts / Current Liabilities 2Total Liabilities / Stockholders’ Equity 3Total Bank Debt / Stockholders’ Equity 4Total Bank Debt less Cash & Cash Equivalents / Stockholders’ Equity 5Net Income / Average Total Assets (Assets beginning of the year plus Assets end of the year divide by two) 6Net Income / Average Stockholders’ Equity (Stockholders’ Equity beginning of the year plus Stockholders’ Equity end of the year divide by two)

Causes for Material Changes from Period to Period of Financial Statements

Cash and Cash Equivalents amounted to P=23.3 million, 30% decline versus the P=33.3 million in December 2015. The reduction was mainly due to payment to contractors & suppliers and settlement of accounts payables during the period.

Short-term Investments decreased by P=10.4 million.

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Financial Assets at Fair Value through Profit or Loss reflected a 96% decline compared to the December 2015 level of P=28.1 million. This was brought about by the withdrawal of UITF placements for the period. Inventories (Subdivided Land for Sale and Condominium Units for Sale) reached P=17.4 million, 94% lower than the P=278.8 million in December 2015 mainly due to the reclassification of subdivided land for sale to investment properties during the period.

Other Current Assets exceeded the December 2015 level of P=196.4 million by 12% as reached P=219.8 million on account of additional VAT input for the period.

Noncurrent Portion of Receivables stood at P=352.0 million, 14% lower vis-à-vis the December 2015’s P= 409.7 million due to collection on the sale of commercial lot to Avida Land Corp. on installment basis.

Land and Improvements totaled P=266.8 million resulting from the acquisition of land parcel adjacent to the Cebu IT Park for future development.

Property and Equipment stood at P=1.88 million, indicating a 327% improvement vis-à-vis the P=0.44 million as of December 2015 due to purchase of additional office equipment.

Investment Properties amounted to P=3.7 billion, 8% higher vis-à-vis the P=3.4 billion reported in December 2015 mainly brought about by booking of eBloc Tower 4 and reclassification of subdivided land for sale to investment properties.

Investment in an Associate and a Joint Venture posted 74% improvement vis-à-vis the December 2015 level of P=236.5 million as it reached P=412.3 million. The increase was primarily driven by equity infusion to Central Block Developers, Inc. during the period.

Deferred Tax Assets-net amounted to P=18.2 million, higher compared to the previous year’s level.

Other Noncurrent Assets amounted to P=1.2 million indicating a decline of 88% versus last year’s level of P= 10.2 million primarily due to settlement of various suspense accounts.

Accounts and Other Payables increased by 11% compared to the P=1.8 billion of December 2015 as it registered P=2.0 billion. This was primarily due to the booking of advances and intercompany loan, retention payable, interest payable and accrued operating expenses during the period.

Current Portion of Long-term Debt reached P=442.3 million growing by 310% versus the December 2015 level of P=107.9 million. The increase resulted from reclassification of long-term debt to current portion of long term debt during the period.

Income Tax Payable posted a 74% decline compared to the P=27.9 million as of December 2015 mainly due to lower taxable income.

Deposits and Other Current Liabilities registered a year on year rise of 175% (P=98.7m) versus the December 2015 level of P=56.5 million mainly brought about by advances in rental deposits made by new locators at eBloc Towers 3&4 and booking of construction bond.

Long-term Debt-net of current portion reached P=.74 billion declining by 37% compared to the December 2015 level of P=1.16 billion. The reduction was mainly due to reclassification of long-term debt to current portion of long term debt.

Deferred Tax Liabilities-net rose by P=22.5 million versus the December 2015’s level of P=98.3 million. The increase was primarily brought about by additional deferred tax.

Deposits & Other Noncurrent Liabilities reduced by 19% (P=38.9m) compared against the P=205.3 million as of end of 2015 mainly due to reclassification of non-current to current deposits of eBloc Tower 2 locators.

Retained Earnings showed 28% or P=213.6 million increase as a result of the 2016 Net Income.

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• Due to the Company’s sound financial condition, there is no foreseeable trend or event which may have material impact on its short-term or long-term liquidity.

• Funding will be sourced from internally-generated funds.

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

• There is no known trend, event or uncertainty that have had or that are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations.

• There is no significant element of income arising from continuing operations.

• There is no material change from period to period in one or more line items of the financial statements.

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

• There were no known events and uncertainties that will trigger direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation.

2015 vs. 2014 Results of Operations

Cebu Property Ventures and Development Corporation’s consolidated net income reached P=497.2 million, an all time high NIAT.

The company generated total revenue of P=1.26 billion, 129% higher versus last year’s level of P=.55 billion mainly due to sale of commercial lot at Cebu IT Park and higher leasing income from eBloc Towers. Revenues for the period were derived from the sale of commercial lot, rental in eBloc Towers & The Walk, sale of condominium units (Avida Towers Cebu) and interest and other income.

Earnings before Interest and Taxes (EBIT) showed a significant increase from P=49.7 million in 2014 to P= 606.1 million in 2015.

Stock price for CPVa increased from a closing of P=5.41 per share in 2014 to P=6.00 per share in 2015. While, CPVB stock price decreased from a closing of P=6.30 per share in 2014 to P=6.10 per share in 2015.

As of December 2015, CPVDC declared cash dividend from the unappropriated retained earnings of the company as of December 31, 2014, of P=0.12 per share to all shareholders as of record date December 16, 2015 and paid on December 23, 2015.

Revenues amounted to P=1.26 billion, 129% higher than last year’s P=.55 billion.

• Revenue from commercial lot stood at P=633.6 million derived from the sale of commercial lot at Cebu IT Park.

• eBloc Towers contributed P=384.8 million in revenues, 27% higher than last year’s level of P=302.0 million. As of December 2015 average lease occupancy for eBloc 1 was at 97.8%, eBloc 2 was at 99.7% and eBloc 3 was at 61.6 percent.

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• The Walk registered total rental revenue of P=26.8 million, 2% increase compared to last year’s level of P=26.2 million mainly on account of higher lease occupancy which was at 95.8 percent.

• CITP Land Lease contributed P=10.7 million in revenues during the period.

• Avida Towers Cebu’s total revenue reached P=1.9 million from current year sale of condo units from Tower 2. Compared to the previous year’s P=9.4 million, it posted a decline. As of end of 2015, both towers were already 100% completed.

• Well placed interest and other income (note 19) reached P=205.9 million, 8% higher than last year’s level of P=191.5 million. The increase was mainly due to accretion of receivables.

Cost and Expenses reached P=597.4 million, 56% higher versus the previous year’s P=381.9 million due to costs related to the sale of commercial lot and leasing of office space which resulted to the increase in revenues and AiO’s interest expense. Cost and expenses for the period comprised primarily of cost of commercial lot, depreciation of leasing assets, real property tax, repairs and maintenance, ad and promo, management fee, security and janitorial expenses, dues and fees, and interest expense.

Net Income reached P=497.2 million, 231% higher than the previous year’s P=150.2 million due to higher revenues.

Financial Condition The company’s Balance Sheet remains strong with total assets amounting to P=5.132 billion as of December 31, 2015, P=71.8 million of which is cash. It has a current ratio of 0.54: 1 compared to 0.60: 1 in December 2014. Total liabilities as of the period stood at P=3.450 billion, P=1.981 billion of which is current. Debt-to-equity ratio stood at 2.05: 1 compared to the December 2014 level of 2.23: 1. Bank Debt to equity ratio registered at 0.76: 1 compared to the December 2014 level of 1.36: 1.

Key Performance Indicators

The table below sets forth the comparative key performance indicators of the Company:

Indicators 2015 2014 Current Ratio 1 0.54: 1 0.60: 1 Total Debt to Equity Ratio 2 2.05: 1 2.23: 1 Bank Debt to Equity Ratio 3 0:76: 1 1:36: 1 Net Debt /(Cash) to Equity Ratio 4 0.71: 1 1.26: 1 Return on Assets (ROA) 5 10.66% 3.75% Return on Equity (ROE) 6 33.37% 11.74% 1Current Asserts / Current Liabilities 2Total Liabilities / Stockholders’ Equity 3Total Bank Debt / Stockholders’ Equity 4Total Bank Debt less Cash & Cash Equivalents / Stockholders’ Equity 5Net Income / Average Total Assets (Assets beginning of the year plus Assets end of the year divide by two) 6Net Income / Average Stockholders’ Equity (Stockholders’ Equity beginning of the year plus Stockholders’ Equity end of the year divide by two)

Causes for Material Changes from Period to Period of Financial Statements

Cash and Cash Equivalents totaled P=33.3 million, 58% lower than the P=79.8 million in December 2014. The decrease was mainly due to payment of contractors & suppliers and settlement of intercompany advances for the period.

Short-term Cash Investments registered at P=10.4 million.

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Financial Assets at Fair Value through Profit or Loss amounted to P=28.1 million, 46% lower than the December 2014’s level of P=52.4 million on account of reclassification of Financial Assets at Fair Value through Profit or Loss to Cash and Cash Equivalents.

Accounts Receivable registered P=529.3 million, 60% higher than the P=331.3 million of December 2014. The increase was mainly due from affiliate (Avida Land Corporation) for the purchase of commercial lot at Cebu IT Park during the period.

Inventories (Subdivided Land for Sale and Condominium Units for Sale) stood at P=278.8 million, 7% lower than the P=299.4 million in December 2014 mainly due to the close out of all Avida Riala Tower 1 units.

Other Current Assets stood at P=196.4 million, 64% higher than the previous year’s level of P=119.5 million due to the additional VAT input, prepaid taxes, and other various charges for the period.

Investment in an Associate and a Joint Venture amounted to P=236.5 million, 59% higher versus the P= 149.2 million as of December 2014. The increase was primarily due to investment in Central Bloc Developers, Inc.

Investments Properties was 10% higher compared to December 2014’s P=3.08 billion due to the ongoing construction of eBloc Tower 4.

Property & Equipment-net decreased by 22% vis-à-vis the P=565 thousand as of December 2014 due to depreciation of equipment during the period.

Deferred Tax Assets posted a decrease of P=15.7 million compared to the previous year’s level mainly on account of AiO’s deferred tax asset knocked off against CPVDC-parent deferred tax liability.

Non-current Accounts Receivable was P=375.4 million higher compared to December 2014’s P=34.3 million due to sale of commercial lot to Avida Land Corp. on installment basis during the period.

Other Non-current Assets registered P=10.2 million, 66% lower than the year-end level of P=29.7 million. The decrease was mainly due to settlement of advances to contractors and various suspense accounts.

Accounts & Other Payables totaled P=1.79 billion, 97% higher vis-à-vis the P=.91 billion reported in December 2014. The increase was primarily due to advances and intercompany loan, payable to various contractors & suppliers, taxes payable and accrued operating expenses during the period.

Deposits & Other Current Liabilities posted an increase of 13% or P=6.7 million due to various rental deposits from eBloc Tower 3 locators.

Income Tax Payable reached P=27.9 million, 212% higher vis-à-vis the December 2014 level of P=8.9 million due to provision for income tax for the period.

Current Portion of Long-term Debt amounted to P=107.9 million, 78% lower versus the December 2014 level of P=492.6 million due to partial payment of AiO’s bank loan during the period.

Deferred Tax Liabilities increased by 100% or P=98.3 million due to additional provision of deferred tax from the sale of commercial lot on installment basis to Avida Land Corp.

Deposits & Other Non-current Liabilities increased by 24% or P=39.8 million, this is mainly on account of various rental deposits from eBloc Tower 3 locators.

Long-term Debt-net of current portion registered P=1.2 billion, 8% lower than the year-end level of P=1.3 billion. The decrease was mainly due to reclassification of long-term debt to current portion of long term debt. CPVDC-parent has zero bank debt during the period.

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Retained Earnings showed 105% or P=384.4 million increase as a result of the 2015 Net Income net of cash dividend paid in December 23, 2015 amounted to P=112.8 million.

• Due to the Company’s sound financial condition, there is no foreseeable trend or event which may have material impact on its short-term or long-term liquidity.

• Funding will be sourced from internally-generated funds.

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

• There is no known trend, event or uncertainty that have had or that are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations.

• There is no significant element of income arising from continuing operations.

• There is no material change from period to period in one or more line items of the financial statements.

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

• There were no known events and uncertainties that will trigger direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation.

Cebu Insular Hotel Company, Inc. (37% owned affiliate)

Seda Ayala Center Cebu (formerly Cebu City Marriott Hotel)

Ayala Land Inc.’s (ALI) hotel brand Seda is set to open its biggest property in the Visayas in the third quarter of 2018. In the heart of Cebu City’s financial district, Seda Ayala Center Cebu will offer 301 guest rooms along with world-class amenities and service that draws from genuine Filipino hospitality.

The exceptional performance of the wholly-Filipino owned brand in the past five years prompted Ayala Land to appoint Seda to run its property at the Cebu Business Park, according to Seda senior group general manager Andrea Mastellone.

Seda Ayala Center Cebu will be the ninth property of the homegrown chain. It is present in 7 destinations around the country, namely: Bacolod, Cagayan de Oro, Davao, Iloilo, Laguna, Quezon City and Taguig, with a resort hotel set to open mid-year in Palawan.

Mastellone explains that the Cebu Business Park hotel is being refurbished to align with Seda’s timeless look consisting of simple, contemporary lines matched with earth tones. It will also offer quick and easy access to the myriad dining, retail and lifestyle options of Ayala Center Cebu.

He explained: “Warm contemporary surroundings in a strategic location matched with an exceptional customer experience have propelled the Seda brand in the last five years. We will make our mark in Cebu drawing from these successful brand values.”

Interior design consultant Conrad Onglao disclosed that the property’s strong features such as the high ceiling in the lobby, the volume and flow of spaces which have worked well in the past, have been retained. “Seda Ayala Center Cebu will feel familiar and at the same time new” to Cebu denizens, he says.

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The guest rooms will experience a dramatic makeover and offer a new layout in soothing earth colors with modern conveniences. Function and meeting rooms, expected to remain a highly popular social and business hub, will be updated to offer a brighter and lighter look, supplemented by modern finishes and lighting fixtures. Lobby seating will likewise be expanded, covering the area of the former lounge, to reflect the open space layout of other Seda hotels where the reception area flows seamlessly into the e-lounge and main dining facility.

Like all Seda hotels, Seda Ayala Center Cebu will also feature art pieces by Filipino artists beginning with industrialist-photographer Jaime Zobel de Ayala and sculptress Ann Pamintuan.

Says Mastellone: “Seda is proud of its Filipino DNA and highlights this in its art pieces, furniture and more importantly, its service culture. To ensure memorable guest experiences, we carefully select associates who are empathetic, caring and are naturally hospitable. They then undergo consistent training and development so they strive to understand our guests’ needs and outdo their expectations.”

Seda’s top executive remarks: “Ultimately, it is the customer experience that will differentiate any excellent service brand.” It is also what will make them return again and again to Seda properties like the soon-to-open Seda Ayala Center Cebu, a destination that embodies the look and feel of the ever-evolving hotel brand.

The company generated total revenue of P85.2 million, P568.9 million and P513.7 million, for the years 2018, 2017 and 2016, respectively. Furthermore, during the same periods, the company posted a net income/(loss) of (P15.9 million), P53.5 million and P13.0 million, respectively. The Cebu City Marriott Hotel was closed on December 31, 2017.

Cebu City Marriott Hotel Cebu City Marriott Hotel is the premier business lifestyle hotel is conveniently located in upscale financial and leisure district Cebu Business Park, offering its guests the best address when staying in Cebu. The first truly international business hotel to set foot in Cebu.

A project of Cebu Insular Hotels, Inc., a joint venture project of Cebu Holdings, Inc. (37%) and AyalaLand Hotels and Resorts Corp. (formerly Ayala Hotels, Inc.) (63%), Land area: 6,234 square meters 301 rooms with modern convention facilities Executive floors with exclusive dining and access to work station formally opened in February 1998.

The company was incorporated in April 6, 1995 with the primary purpose of hotel development and management. It is situated within the superblock of CBP and a walking distance from Ayala Center Cebu and the nearby business establishments.

In January 1997, CHI and AHRC announced the appointment of Marriott International as manager and operator of the hotel. Marriott International is one of the world’s largest hotel chains with over 2,900 establishments in its portfolio including properties in the United States and in 67 other countries. Even in its infancy, the hotel acquired a market niche with its own distinctive brand of service. It is fast becoming a preferred destination of transient businessmen and the favorite venue for conferences, parties and banquets. After a year of operation, the Cebu City Marriott Hotel ranked first in guest satisfaction surveys among Marriott hotels in Asia Pacific, and second worldwide. In 1999, Cebu City Marriott Hotel was cited as number one in market share among city hotels in Cebu and highest in revenue per available room, twice as much compared to its nearest competitors.

Cebu Leisure Company, Inc. Cebu Leisure Company, Inc. was formed in 1994, engaged in business of ownership, management and leasing entertainment facilities. It was a joint venture company between Fun Corporation and Cebu Holdings Incorporated. The first venture was Glico’s Imaginature. It was registered with the Securities and Exchange Commission on January 31, 1994, with an authorized capital of P100 Million and a subscribed & paid up capital of P70 Million.

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In its first year of operations as “Glicos Imaginature”, the business was not doing well. Fun Corporation sold its shares to Cebu Holdings Incorporated thus the latter gaining control over the company. Cebu Leisure Company, Inc. is a wholly owned subsidiary of Cebu Holdings Incorporated.

Cebu Leisure Company, Inc changed the concept of Glico’s Imaginature into an Entertainment Center. The first mall to have an entertainment (including cinema) and food center within its premises. The new Ayala Food & Entertainment Center was launched in August 18, 2001. It has definitely captured the market being the top destination for entertainment in Cebu. It redefined the lifestyle of the Cebuanos and made Ayala Center Cebu as the trail blazer not only in shopping but also in dining & entertainment.

For the period ended 31 December 2018, sales/sqm of Active Zone is 12% higher compared with last year while Food Choices is lower by 3%. Ayala Cinemas occupancy rate performance of 15.6% is lower by 1%pt. compared with same period of last year.

Total revenue of P192.1 million was 4% lower than same period of last year while net operating income stood at P64.0 million.

In Active Zone, different fitness and sporting activities were held such as Zumba classes, a boxing event with ALA Gym and the UAAP live stream which inspired the community to cheer for their basketball team bets.

The cinemas also accommodated CSR activity – Cancer Chat last October. Moreover, the cinemas were the venue for special ballet performances from Cebu School for Dance and Ballet Center Cebu.

CBP Theater Management, Inc ., founded on February 1, 1994 is still in the pre-operating stage.

Taft Punta Engaño Property, Inc. (TPEPI) (55% owned subsidiary) Seagrove project, as we expand our business to new geographies, we entered into a joint venture with Taft Punta Engaño Property, Inc. to develop a 12-hectare property in Mactan, Cebu. Currently in its design and conceptualization stage, the project is envisioned to become an integrated, mixed-use development with retail, residential and hotel/condotel components.

Central Block Developers, Inc. (CBDI) (55% owned subsidiary) 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 development includes two BPO towers, an Ayala branded hotel, and a 5- storey mall.

(iii) Distribution Method;

The Marketing and Sales Department Ayala Land Sales, Inc. (ALSI), and its accredited real estate brokers handle the selling/distribution of the Company’s product under CHI-ALSI partnership.

(iv) Status of Any Publicly-Announced Product;

The company has no new products other than the above mentioned Cebu Business Park (CBP) and Cebu I.T. Park office lots, Sports Club Shares, Amara residential lots, 1016 Residences, Sedona Parc, Park Point Residences, Solinea Towers (Residential Condo), Ayala Center Cebu Tower (BPO Office Building), BPI Corporate Center (Office Building), Seagrove (Mactan Project-mixed-used development), Amaia Steps (Mandaue Project-Residential Condo), The Walk (CITP Retail), Garden Bloc (CITP Land Leased), eBloc Towers (BPO Office Building), Central Bloc (mixed-used development), The Alcoves (Residential Condo), Tech Tower (BPO Office Building), and Gatewalk Central (mixed-used development).

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(v) Competitive Business Condition;

CHI’s Position in Cebu Real Estate Market 2018

Market Assessment

The Regional Economy continues to grow as shown by the following historic GDRP growth rates. Growth is driven by strong industries such as tourism, real estate, BPO-IT, and manufacturing which in total makes up roughly 7% of the nation’s GDP. GRDP Region VII in '000 pesos 2012 2013 2014 2015 2016 2017 10% 13% 4% 11% 7% CENTRAL VISAYAS VII 672,240,010 738,081,295 831,833,275 867162727 964876064 1,032,638,985

% vs Total PH 18% 17% 18% 7% 7% 7%

Tourism arrivals remained strong at 4.1M as of latest DOT reading, this is +10% vs. same period year ago, with Korean, Japanese and Chinese nationals leading the foreign arrivals. Banking on the new airport, influx of MICE is expected to be a major economic contributor in the coming year with Cebu hosting big ticket events such as the Pacific Asia Travel Association (Pata) Annual Summit 2019, Routes Asia 2019, and Capa LCC Summit 2019—all of which are opportunities to highlight Cebu’s potential in the global travel and tourism map.

Aside from the modernized and expanded airport, a number of infrastructure projects which should open new opportunities to other areas in Cebu. The completion of these projects should spur demand for more hotels and serviced apartments outside the Metro Cebu (which comprises Cebu City, Lapu-Lapu, and Mandaue) corridor.

In terms of major infra structure the 3 rd Mactan bridge known as the Cebu-Cordova Link Expressway (CCLEX) broke ground in 2018 and is expected to be completed in 2021. Alongside this, plans of improved other inter-Visayan Connectivity projects are underway which is expected to also boost Cebu’s growth longer term.

CEBU RESIDENTIAL MARKET

Looking at the Vertical Residential Market, condo sales reached a take-up volume of 4,616u in 2018. This is 1,358u less (or -23% less) than the previous year. In terms on value the market achieved P24.5B in sales and we see a smaller rate decline of 7% or 1.7B vs the previous year. Sales was driven by the strong take- up of Mandani Bay Quay which performed well at P 4.9B in sales, followed by ALI-CHI with 4.6B in sales, and Rockwell with P 3B in sales.

For the horizontal market where we have a very small presence, our findings show that the market has grown with a take-up of 2,841 units in 2018. This is 24% higher from the 2,293 units sold in 2018.

Principal Compeitors, Estimated Size and Financial Strength The top competitors in the vertical market are estimated to have the following take-up sales volume and value as of YE 2018:

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Volume Take-Up Value Take-Up 2018 Developer 2018 (Units) (Php) Taft Property 926 4,837.7 M Cebu Landmasters 565 2,568.0 M Worldwide Central Properties 240 1,380.4 M Apple One Properties 118 1,174.3 M MEG 170 957.8 M SunKai Land 213 787.5 M RLC 160 741.7 M Federal Land 90 603.1 M Cebu Green Peaks 50 516.2 M Rockwell 150 478.1 M Grand Land 163 475.1 M Goldland - Oikonomos Int'l 37 377.6 M Filinvest 81 288.7 M Blossoms88 Dev't Inc 202 277.7 M Camella 96 250.6 M Tytans Prop. 38 197.8 M Fuente Triangle 49 174.9 M Priland 70 144.9 M Saekyung Realty Corporation 58 141.7 M RFK Holdings Inc. 72 128.0 M

CEBU COMMERCIAL (BPO/IT)

Total Cebu Office Stock increased by 106k sqm in 2018 and is at 961k sqm as of year end 2018. This is a 12% growth versus the previous year and is at a 5 year CAGR of 8.5%. Majority of the new leasable spaces in the market are coming from Cebu City as outlined in the chart below.

Building Name Location City Grade Gross (GFA) Sellable (NSA) Useable (NUA) Developer Pacific World Tower Mactan Newtown Mactan A 13,654 11,873 10,686 Megaworld Mabuhay Tower 1 Cebu IT Park Cebu B 10,217 9,929 8,359 Enrison Land Tech Tower Cebu Business Park Cebu A 17,362 15,097 13,587 Cebu Holdings, Inc. Filinvest Cebu Cyberzone CITPTower Fringe 2 Cebu B 31,710 27,574 24,817 Cyberzone Properties, Inc. Skyrise 4b Cebu IT Park Cebu B 27,888 24,250 21,825 Sky Rise Realty & Development Corporation HM Tower Cebu IT Park Cebu B 19,853 18,048 16,243 Premier Diamond Developers and Management Inc.

CEBU MALL LEASING

Cebu's retail stock is now at 1.06 million sqm; more than double the 2010 level. Its retail market remains interesting and competitive since both local and national players are active. Despite the development of super-regional malls in established and emerging hubs and the entry of foreign retailers, the downtown area which houses some of the oldest retail outlets remains bustling.

Colliers International Philippines said that homegrown retailers need to cope with the constantly evolving preferences of consumers and must recalibrate their offerings if they are to stay in the game. The difficulty of filling vacant space persists especially in certain regional malls. Colliers believes that operators should be more discerning in selecting retailers and aspire for a more interesting tenant mix that would sustain visitor traffic. They think that the property firms should consider the heavy traffic along the city's main roads as an opportunity to develop smaller retail outlets in alternative locations. Colliers also believes that the improvement of Cebu's infrastructure network should result in more transit and resort-oriented retail projects.

Ayala Center Cebu | 2018 Performance

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Ayala Center Cebu remains as the region’s premier lifestyle destination after garnering recognition for its strong line-up of leisure activities in 2018 tailored fit to meet a variety of special interests and community needs.

The mall expanded its roster of shops and restaurants with new additions such as Tavolata and Sole Academy.

It now houses the largest Athlete’s Foot store in Southeast Asia after the specialty store’s expansion last year. It also welcomed popular Japanese clothing brand Uniqlo with the opening of its biggest store in the Visayas.

The Walk | 2018 Performance The Walk, the retail component of Cebu Property Ventures and Development Corporation’s Cebu I.T. Park, positions itself as one of the best convergence hub where friends and families connect with their loves ones and live out their passions. This retail facility combines with a strong mix of affordable dining options and convenient services, making it the favorite hangout at Cebu I.T. Park. Since it opened, The Walk retained its freshness and attraction to its market with a total gross leasable area of 2,100sqm. In 2018, it ended the year with a one hundred percent (100%) lease occupancy.

(vi) Sources and Availability of Raw Materials and the Names of Principal Suppliers;

The Company engaged the services of the following contractors for the development of its on-going projects. * Makati Development Corp. - Solinea Towers 3&4, The Alcoves, Central Bloc, Amaia Steps South Tower, Gatewalk Central and Seagrove.

(vii) Dependence on One or Few Major Customers and Identify Any Such Major Customers;

The Company is not dependent on one particular segment or group of customers in the real estate market.

(viii) Dependence on One or Few Materials and the Names of Principal Suppliers;

The Company is not dependent on one or few suppliers/contractors. There are a number of eligible and reliable contractors in the country today which can serve the Company’s requirements.

(ix) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty, Agreements, or Labor Contracts;

The Company has engaged the services of various contractors or agencies for the maintenance of its projects. Among these are the security and janitorial services, with terms of one year for each contractor or agency.

(x) Need for Any Government Approval of Principal Products or Services.

The Company secures various government approvals such as the ECC, development permits, license to sell, etc. as part of the normal course of its business. CHI/MDC has obtained the following government approvals for the development of its projects:

1. Provisional Approval and Locational Clearance (PALC) - Office of the Mayor 2. Development Permit - Office of the Mayor 3. Environmental Compliance Certificate - DENR 4. License to Sell - HLURB

(xi) Effects of Existing or Probable Government regulations on the Business;

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The Company operates a material part of its business in a highly regulated environment. The introduction of inconsistent or unpredictable application of, or changes in, regulations may from time to time materially affect the Company’s operations.

(xii) Research and Development;

The Company has not allocated any amount for research and development for the last three (3) fiscal years.

(xiii) Cost and Effect of Compliance with Environmental Laws

The Company’s projects (CBP & Cebu I.T. Park) are designed to be environment-friendly commercial communities with amenities such as the Sewage Treatment Plant (STP), tree-lined avenues and parks. It is a standard operating procedure of any CHI project to comply with environmental laws, the cost of which is already incorporated in the total development cost of the project.

(xiv) Number of Employees;

The company has a total of forty-five (45) employees as of year-end, four (4) of which are Ayala Land, Inc. employees seconded to Cebu Holdings, Inc. • Senior Personnel-(ALI seconded to CHI) 4 • Senior Personnel-CHI 18 • Supervisors 15 • Non Senior Personnel – Technical 8 • Non Senior Personnel – Clerical -

There is no union nor CBA in the Company and its subsidiaries. Employees receive above industry compensation and benefits (ie. hospitalization, medical allowance, clothing, commodities check, 13 th and 14 th month and other government mandated benefits) plus performance bonus. Annual salary increases are also given. There have been no strike in the past three years nor threat to strike as there are no dispute between management and employees.

ENTERPRISE-WIDE RISK MANAGEMENT (EWRM)

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 CORPORATE CULTURE Our Enterprise-wide Risk Management (ERM) program adopts a top-driven, bottom- focused approach. Risk awareness is embedded in our corporate culture with management taking on an active role in managing risks. The identification, management and monitoring of key risks are done on all levels of the company and are part of daily operations.

GUIDED BY A FRAMEWORK Our ERM framework details the process of identifying risks for the company and its subsidiaries. This is supported by a comprehensive risk identification, review, monitoring and reporting process at all levels in the company.

Our framework focuses on four main categories: strategic , operational , financial and environmental risks.

CHARACTERISTICS OF THE RISK MANAGEMENT PROCESSES » Board-level understanding and commitment to Risk Management as an integral aspect in decision making and driving value » Transparency of risk communication » A risk culture that encourages accountability at all levels

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» A Chief Risk Officer and team who drives key management processes » Identification of existing and emerging risks » Use of both operational and financial risk information in decision-making processes » Formal collection and incorporation of operational and financial risk information in decision-making and governance processes » Moving beyond risk avoidance and mitigation to finding value- creating opportunities in risk management

PROTECTED BY LINES OF DEFENSE We have identified the company’s three main risks: Competitor Risk, Project Execution and Delivery Risk, and Changing Market Risk. Please see succeeding section for definitions of our key risks. To manage these risks, we apply three lines of defense in ERM and internal controls:

RISK MANAGEMENT AND ACCOUNTABILITY AT SOURCE Risk Owners/Business Group Level » Risk management embedded within critical processes » Risk owners take active role in identifying, assessing, and treating risks in daily operations » Processes, procedures, control instituted at business group level

RISK GOVERNANCE ERM Team » Chief Risk Officer leads the ERM Team to ensure risks are effectively managed and relevant risks are addressed » Periodic review and monitoring of key risks and indicators » Periodic reporting of key risks and mitigation plans to Risk Oversight Committee

RISK OVERSIGHT Board Committees/Audit (Internal and External) » Risk Oversight Committee provides oversight on risk management activities, approves ERM policy, reviews status of top corporate risks and effectiveness of the ERM process » Audit Committee provides oversight functions on financial reporting, internal control, internal audit, external audit, and compliance » Internal audit periodically reviews processes and controls and recommends areas for improvement through its assurance and consulting activities » External audit conducts periodic independent assessment of financial controls and processes in conjunction with the preparation of the financial statements

CHIEF RISK OFFICER (CRO) The Chief Risk Officer and his team are responsible for creating a culture that actively recognizes and addresses risks to our operations. Together with management, the company takes charge of building its capacity to formulate strategies and execute decisions that will make our business sustainable and relevant. Specifically, the CRO has the following tasks: » Establish the risk culture in the company and create the vision and purpose of the risk function » Oversee risk identification and mitigation activities » Implement continuous improvement of risk management policies and processes » Set acceptable levels of risk appetite » Set an effective control environment

The CRO reports on a quarterly basis to the Risk Oversight Committee on the status of key risks, performance indicators, and mitigation plans to manage those risks. This report presents insights on: » Established risk management policies » Set risk management activities that monitor the Company’s key risks

MANAGING KEY RISKS RISK DESCRIPTION ROOT CAUSES IMPLICATIONS FOR MITIGATING ACTIONS

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VALUE CREATION AND OPPORTUNITIES 1. COMPETITOR RISK Actions of competitors • Aggressive marketing • Eroded market share • Regular monitoring of or new entrants to the and sales efforts of market indicators to be market may affect our competitors used as basis for company’s competitive • Customer informed decisions and advantage and pose expectations not being possible opportunities difficulties in achieving met by our company • Analysis of current business objectives. • Better value and future situations proposition of 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 partnership beyond parent company 2. PROJECT EXECUTION AND DELIVERY RISK Market driven-factors, • Failure to meet project • Project delays • Regular monitoring of fortuitous events or schedule (timeliness) • Costly products status of projects to natural environment • Project exceeding • Product not meeting ensure customer conditions may affect cost customer expectations needs and sales our company’s ability to • Inconsistent quality targets are met deliver projects within and safety standards • Close partnering with agreed timelines, applied across all construction arm MDC customer expectations projects • Integrity program for and agreed costs. • Natural environment vendors conditions hampering • Proper selection and quality, cost and evaluation of vendors delivery of projects through an extensive accreditation 3. CHANGING MARKET NEEDS RISK Changes to the market • Changes in macro- • Marginalization of • Diversification of may affect our economic, social, competitors product lines company’s ability to political and consumer • Partnering with strong respond to conditions local developers opportunities in the • Monitoring of key marketplace, anticipate economic, social, and respond to the political and consumer demands of our indicators consumers, and maintain or increase revenue and profitability in the specific business environment where the business is operating. 4. PRODUCT/SERVICE QUALITY AND SAFETY RISK Inability to meet or • Poor performance of • Low quality of product • Conduct of Customer exceed customer vendors and service Satisfaction Surveys expectations in terms of • Delayed &/or • Unresolved • Regular coordination relevance and quality of unresolved complaints complaints meetings at the

- 33 - products and/or from customers, operational level to services resulting to reduction in ensure issues and customer satisfaction concerns are ratings addressed & resolved • Weak safety protocols within target timelines implemented at • Regular monitoring of properties 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 CHI’s growth and • Employee turnover/ • High attrition rate, low • Employee strategic objectives attrition organizational climate developmental plans being impeded by • Lack of capturing and ratings and activities targeted weaknesses in its sharing learnings • Lack of knowledge for both technical and human • Decline in management behavioral skills resources, processes, organization climate • Succession planning systems and ratings • Employee performance metrics engagement activities • Conduct of organizational climate surveys • Cross-posting, workteams 6. POLITICAL RISK CHI’s growth and • Failure to comply with • Exposure to fines, • Maintaining good strategic objectives legal and penalties, and other relationship and open being impacted by regulatory requirements charges communication with governmental or • Failure to secure regulatory authorities political factors which necessary permits and and LGUs may be brought about licenses • Regular monitoring by updates or changes • Failure to establish status of permits and of government policies, healthy relationship timelines for laws and regulations with Local Government renewal thereof to that are unfavorable to Units (LGUs) ensure that these are the company and secured within target inefficient dealings or timelines relationships with • Review of the permit authorities and LGUs. process to determine gaps in the process The profitability of our and recommend company may be process improvements significantly impacted by political events and conditions. 7. FINANCIAL RISK Risks associated with • Changes in market • Inaccuracy of financial • Careful management authorization, interest rates reports and disclosures of cash and money completeness, and • High inflation rate • Adequate funding for market placements. accuracy of financial • Fluctuations in foreign projects, including • Established transactions processed, currency exchange borrowing of funds from counterparty bank limits summarized and rates various sources (e.g., for cash and investible reported in our • Rising interest rates debt funding, financial funds

- 34 - company’s financial • Non-compliance to covenants) • Dealing with application system. financial reporting counterparties with standards highest credit standing • Proper timing in obtaining debt funding at best possible terms and conditions • Maintaining financial covenants 8. MAJOR SECURITY, HEALTH AND SAFETY INCIDENTS Threats to the safety of • Demonstrations • Loss of lives • Incident Management the people within and • Major Security Crime • Damage to property Team outside of the Incidents • Conduct of regular organization such as • Terrorism emergency theft, robbery and • Property related preparedness drills terrorist attack to the hazards • Security protocols properties brought • Bad publicity for our • Close partnering with about by inefficient company and its and monitoring of security protocols products security provider • Failure to immediately • Emergency response or accurately respond teams to crisis situations • Health & Safety • Robbery: Loss lives Committees and damage to property • Disaster Recovery • Travel risks (training, Plan (DRP) in place visitation of various • Business Continuity properties) Plan (BCP) in place • Other manmade types • Regulatory of emergency e.g. fire, requirement bodies strike, etc. 9. ENVIRONMENTAL RISKS Threat of adverse • Natural disasters • Environmental • Technical due effects of the • Climate change damage diligence and geo- organization’s activities • Typhoons and • Loss of lives hazard studies to the environment and flooding brought about • Damage to property • Environmental impact living organisms by extreme weather • Work stoppage assessment conditions • Project delays • Environmental • Waste (solid & water), compliance effluents, emissions, • Integration of natural resource depletion spaces and native trees into the design • Stormwater management at source • Provision of spaces for refuge and rainwater absorption • Resource conservation and waste management programs 10. IT RISK – CYBERSECURITY RISK Threat of cyber attacks • Unauthorized access • Vulnerability of critical • Regular conduct of to critical systems to critical systems systems and networks vulnerability/penetration • System downtime due to cyber attacks testing to critical systems • Unauthorized access • System security brought about by to personal data and protocols in place. viruses, malware, other critical/ sensitive • Cascading of IT- ransomware & socially - information related policies to the

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engineered attacks • Denial of service, organization malicious code, • Compliance to Data unauthorized access, Privacy Act and inappropriate storage appointment of group- wide DPO and company COPs

A DRIVER OF KEY STRATEGIC ACTIONS Through our ERM program, CHI directed the following key strategic actions in 2018:

PROTECTING THE BALANCE SHEET THROUGH FINANCIAL RISK MANAGEMENT We continue to take advantage of the current low but slowly increasing interest rates by maximizing its leverage and converting our short-term to long-term debt at favorable rates to fund the construction of our leasing projects. This allows us to better balance our debt capacity and maturity with a steady recurring income.

MONITORING OF MAJOR MARKET INDICATORS We rely on close monitoring of major market indicators for guidance in project investments. Forecasts, industry, and sales reports are regularly monitored and reported to the project teams and senior management to provide them a clearer perspective of prevailing market conditions and issues on the ground for a more informed decision-making process.

CLOSE MONITORING OF ONGOING PROJECTS The early identification and management of delivery risk allows us to move our projects on the right track, meet our customers’ requirements, and achieve our sales and turnover targets.

EXPANDED PARTNERSHIPS BEYOND PARENT COMPANY Strong synergies diversify risk and create the opportunity for us to increase our reach and depth in the Cebu market.

In 2018, our continued partnership with strong local developers, Taft Punta Engaño Property, Inc. with Gaisano Group in Mactan, Cebu District Property Enterprise, Inc. with Ayala Land and Aboitizland in Mandaue, allowed us to maintain a strong market presence and expand our portfolio through solid synergies, advanced master-planning, stronger combined branding, and deeper market knowledge. These partnerships benefit from the combined financial strength, technical expertise, and real estate experience of the companies.

DIVERSIFICATION OF PRODUCT LINES We continue to build on our expertise and extend our market reach. Since 2013, we have been diversifying our portfolio with the introduction of the Amaia brand for affordable housing, and office condominiums for sale.

ACTIVE MANAGEMENT OF ENVIRONMENTAL RISKS Our operations have a major impact on the environment and social conditions in the areas where we operate.

Together with parent company Ayala Land, we outlined our sustainability focus areas where we can affect positive change through our developments.

These include: (1) site resilience, (2) eco-efficiency, (3) pedestrian mobility and transit connectivity, and (4) local economic development. Programs have been implemented in 2018 for these focus areas.

We also continue to adapt measures to reinforce our Business Continuity Plan. Our Incident Management Team ensures continuous operations, or at least minimal disruption, during calamities and unforeseen events. Improvements on our services and facilities have also been implemented to ensure the safety of our stakeholders and enhance our readiness in times of emergencies and calamities. These allow us to protect our assets, especially our employees, customers, and locators in our facilities.

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Item 2. Properties (Part I, Paragraph (B) of SRC Rule 12)

a. Cebu Business Park , a 50-hectare property strategically located at the center of Cebu City. The CBP is bounded by Archbishop Reyes Avenue in the west, Juan Luna Avenue to the north, M. J. Cuenco Avenue to the east and Gorordo Avenue to the south. The business park is located approximately three (3) kilometers from residential subdivisions in the north, fifteen (15) kilometers from the Mactan International Airport, a kilometer from Fuente Osmeña, and is two (2) kilometers from the downtown commercial area. Because of its strategic location, Cebu Business Park’s major streets now serve as a vital part of City’s road network. The property is free from any lien and encumbrances. CBP was officially proclaimed as a PEZA-accredited IT Park pursuant to Presidential Proclamation 2053 (2010). According to the Special Economic Zone Act of 1995 (as amended in R.A. 7916), all investors and locators in PEZA-accredited IT Parks are now entitled to fiscal and non-fiscal incentives. Among the benefits of an IT Park are improvement in international competitiveness, increase in direct investments and capital formation, employment of job creation and an improved of quality of life.

b. Ayala Center Cebu (ACC) a shopping complex built on a nine-hectare property located at the heart of CBP and serves as the centerpiece of one of the largest and fully integrated business and commercial areas in Cebu City. This property sits on a lot with total area of 88,412 square meters which is subject to mortgage trust indenture. The carrying value (lodged under “Land and Improvements” and Investments in Real Properties” accounts in the consolidated balance sheets) amounted to P3.906 billion in 2018 and P3.774 billion in 2017.

c. The Company also developed the City Sports Club Cebu (CSCC) , an exclusive urban resort equipped with state-of-the-art health and fitness equipment. This project is in partnership with ALI. In 2004, CSCC signed reciprocity agreements with American Club in Singapore and United Services Recreation Club in Hongkong.

d. Cebu I.T. Park - a 24-hectare mixed-use community that will host office and residential buildings, a hotel, as well as retail and recreational facilities. The property was proclaimed as a special economic zone by virtue of Proclamation No. 12 singed on 27 February 2001 by the President of the Republic. The property is situated at Salinas Drive, Lahug, Cebu City. Phase 1 covering 18 hectares was completed in 1999. Horizontal development on the remaining phase is ongoing. The property is free from any lien and encumbrances. The property is owned by Cebu Property Ventures Development Corporation (CPVDC).

e. The Walk. The Walk steadily remains to be a strong retail magnet in the ever-busy Cebu IT Park. Heavily frequented by BPO workers, young professionals, tourists, families, and sports enthusiasts, it has emerged from simply being a hangout haven into popular venue for showcasing recreational activities like sports, music, photography, and even luxury vehicle collections.

f. Ayala Center Cebu Tower Ayala Center Cebu Tower is a 20 storey office tower situated within Cebu Business Park, a 50 hectare mixed-used development with residential, business and commercial spaces.

g. Tech Tower Tech Tower, a 12-storey mid-rise BPO building, is an innovative work environment designed to promote distinct workspaces which encourage creativity and interaction. It is envisioned to attract progressive BPO, IT, and ITES business locators.

As of end of 2018, CHI was no longer leasing an office space, it’s newly-owned corporate office is located at 20 th Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City.

The company has no plan to acquire or plan to lease any property in the next 12 months.

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Item 3. Legal Proceedings (Part I, Paragraph (C) of SRC Rule 12)

As of end-2018, the Company (as successor of CPVDC) is currently a respondent in a Petition for Declaration of Nullity of Contract before the Regional Trial Court. A locator at Cebu I.T. Park violated its Deed of Restrictions. To avoid the consequence of nullification of the sale, the locator entered into a Memorandum of Agreement with CPVDC to pay fines, pending the rectification of the cited violation. Two years after the MOA was executed and honored by both parties, the locator sought its nullification. The case is currently pending.

Item 4. Submission of Matter to a Vote of Security Holders

Except for the matters taken up during the Annual Meeting of Stockholders, there was no other matter submitted to a vote of security holders during the period covered by this report.

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters (Part II, Paragraph (A) (1) through (4) of SRC Rule 12)

(1) Market Information

Price Information of CHI Shares

The issued and outstanding shares of stock of the Company have been listed on the Makati Stock Exchange and the Manila Stock Exchange, predecessors of the Philippine Stock Exchange.

The following table shows the closing prices (in PHP) of Cebu Holdings, Inc.’s shares in the Philippine Stock Exchange for the year 2018 and 2017:

201 8 High Low Close 1st Quarter 5.96 5.90 5.96 2nd Quarter 5.90 5.60 5.90 3rd Quarter 5.37 5.35 5.37 4th Quarter 6.37 6.37 6.37

201 7 High Low Close 1st Quarter 5.14 5.10 5.14 2nd Quarter 5.27 5.27 5.27 3rd Quarter 5.33 5.30 5.30 4th Quarter 5.75 5.70 5.75

The market capitalization of the Company as of end-2018 based on the closing price of P6.37/share was approximately P13.74 billion.

The price information as of the close of the latest practicable trading date, March 14, 2019, is P6.75 per share.

(2) Holders

There are approximately 4,424 registered holders of common equity security of the Company as of January 31, 2019. The following are the top 20 registered holders of the common equity securities of the Company:

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Stockholder Name No. of Shares Percentage 1. Ayala Land, Inc. 1,519,106,716 70.43% 2. PCD Nominee Corp. (Non-Filipino) 301,859,862 14.00% 3. PCD Nominee Corp. (Filipino ) 164,963,495 7.65% 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. 877,118 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%

(3) Dividend

(A) Dividend History Stock Dividend (per share) Percent Record Date Payment Date 50% August 5, 1994 August 31, 1994 25% October 2, 1997 November 12, 1997

Cash Dividend (per share) Peso Amount Declaration Date Record Date Payment Date P0.05 20 September 2006 13 October 2006 27 October 2006 0.05 19 November 2007 04 December 2007 18 December 2007 0.07 08 October 2008 06 November 2008 28 November 2008 0.07 16 November 2009 01 December 2009 22 December 2009 0.07 27 October 2010 25 November 2010 17 December 2010 0.07 20 October 2011 18 November 2011 14 December 2011 0.10 22 November 2012 07 December 2012 21 December 2012 0.11 09 October 2013 05 November 2013 29 November 2013 0.12 November 11, 2014 November 25, 2014 December 9, 2014 0.12 December 01, 2015 December 16, 2015 December 23, 2015 0.12 November 17 , 201 6 December 02 , 201 6 December 12 , 201 6 0.1 5 December 06 , 201 7 December 20 , 201 7 December 27 , 201 7 0.15 November 22, 2018 December 13, 2018 December 20, 2018

(B) Dividend Restrictions/Policy

There are no restrictions that limit the ability to pay dividends except those provided under Section 43 of the Corporation Code and other existing laws. To the extent feasible, it is the policy of the Company to declare periodically a portion of its unrestricted retained earnings as dividends to shareholders, either in the form of stock or cash, or both. The payment of dividends in the future will depend on the Company’s earnings, cash flow, investment program, and other factors. Management

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aims to declare dividends at a minimum of 40% of prior year’s net income subject to board approval every dividend declaration.

(4) Recent Sales of Unregistered Securities

The company has no unregistered securities nor has engaged in any sale of unregistered securities for the period covered in this report.

Item 6. Management’s Discussion and Analysis or Plan of Operation. (Part III, Paragraph (A) of SRC Rule 12)

2018 vs. 2017 Results of Operations

Cebu Holdings, Inc. reported all-time high net income of P857.1 million with 14% growth as of end of 2018. It maintained a favorable growth of 20% in consolidated revenues as it reached P3.7 billion. The bulk of the increase in revenues was primarily contributed by sale of commercial lots at Seagrove Estate, higher leasing income from office buildings, higher interest & other income and equity in net earnings from affiliates. The company’s other revenue contributors include leasing income from the mall, sale of residential lots at Amara, and sale of condominium units & club shares.

Business Segments

Rental Income

Commercial Business

AYALA CENTER CEBU (ACC) as the ultimate lifestyle icon in Cebu .

ACC ended the quarter with an occupancy of 96% and a lease out rate of 98%.

As of December 31, 2018, total revenue of P1.30 billion was 4% lower versus same period last year with a net operating income of P 571.0 million. On the other hand, overall gross sales performance of P 7.6 billion for the period was 32% lower than same period of last year. The mall closed for twelve days due to the fire incident at Metro Gaisano last January 05, 2018 which resulted to the decrease in sales.

ACC started the fourth quarter with a CSR campaign for breast cancer awareness month. The mall also partnered with Cartoon Network for a themed-Halloween celebration, and with Disney Philippines for Festival of Lights at The Terraces. Ayala Center Cebu also hosted major shows featuring music icons Jose Mari Chan for the mall’s Christmas launch and Gary Valenciano for Awit at Laro an Ayala Malls roadshow concert. The Christmas season also saw mall-wide sale events in November and December.

Cebu Leisure Company, Inc.

Total revenue of P192.1 million was 4% lower than same period of last year while net operating income stood at P64.0 million.

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The cinemas also accommodated CSR activity – Cancer Chat last October. Moreover, the cinemas were the venue for special ballet performances from Cebu School for Dance and Ballet Center Cebu.

The Walk generated P26.2 million revenues, slightly lower than the previous year’s level of P26.5 million. Lease occupancy was at 95.0% as of end of 2018.

Ayala Center Cebu Tower reported a total rental revenue of P151.0 million, showing a significant increase of 45% versus last year’s level of P104.4 million due to higher occupancy. As of December 2018, the lease occupancy was at 99%.

Tech Tower , the new addition of CHI’s leasing portfolio contributed a total rental revenue of P49.7 million. As of end-2018, the lease occupancy was at 87%. eBloc Towers posted total rental revenue of P581.9 million, exceeding the previous year’s level of P559.3 million by 4%. As of end of 2018, all towers were already fully leased out.

Garden Bloc (Land Lease) registered P5.7 million in revenues.

Central Bloc posted P8.7 million in revenues. This is the project of Central Block Developers, Inc. located at Cebu IT Park.

Real Estate Income

Revenue from commercial lots grossed P=442.8 million derived from the sale of commercial lots at Seagrove Estate, a 14-hectare leisure development in Punta Engaño, Lapu-Lapu City. The project is in partnership with Taft Properties, Inc. and was launched in November 10, 2017. Percentage of completion as of end of December 2018 was at 70.64%.

Amara indicated total revenue of P269.3 million, significant increase versus last year’s level of P 199.5 million. Revenue was obtained from sale of residential lots from Phase 3B, a new phase in Amara and the remaining lots from the previous phase (Amara The Parks). Construction of The Parks is fully completed and turnover to buyers is ongoing while percentage of completion for the new phase (Amara Phase 3B) as of end of December 2018 was at 100%.

1016 Residences generated total revenues of P53.4 million from the sale of two (2) condo units.

Sedona Parc reported P34.6 million in revenues for the period. Revenue resulted from the sale of four (4) of the remaining condo units.

City Sports Club posted P0.7 million in revenues.

The company also initiated interest and other income mainly from well-placed short-term investments, and other income from claims, fees & recovery charges reaching P503.2 million. It shows a 10% improvement versus preceding year’s figure of P455.8 million mainly due to sale from the development rights in Cebu Business Park and higher recoveries & fees.

Equity in net earnings of affiliates amounted to P106.0 million, which surpassed previous year’s P14.7 million by 621% primarily due to favorable performance of affiliates, Solinea, Inc. and Southportal Properties, Inc.

Earnings before Interest and Taxes (EBIT) revealed an increase from the P.972 billion in 2017 to P 1.038 billion in 2018.

The company showed a commendable performance as Net Income stood at P857.1 million, indicating a year on year growth of 14% versus the P753.4 million in 2018.

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CHI declared cash dividend of P0.15 per share to all shareholders as of record date on December 13, 2018 and paid on December 20, 2018.

Stock price increased from a closing of P5.75 per share in 2017 to P6.37 per share in 2018. Financial Condition

As of December 31, 2018 vs. December 31, 2017

CHI’s Balance Sheet remains strong with total assets amounting to P26.3 billion as of December 31, 2018, P260.1 million of which is cash. It has a current ratio of 0.38: 1 compared to 0.59: 1 in December 2017. Total liabilities as of the period stood at P16.3 billion, P9.5 billion of which is current. Bank Debt-to-equity ratio registered at 0.79: 1 compared to 0.92: 1 in December 2017.

Key Performance Indicators

The table below shows the comparative key performance indicators of the Company:

Indicators 2018 2017 Current Ratio 1 0.38: 1 0.59: 1 Total Debt to Equity Ratio 2 2.02: 1 1.81: 1 Bank Debt to Equity Ratio 3 0.79: 1 0.92: 1 Net Debt /(Cash) to Equity Ratio 4 0.76: 1 0.90: 1 Return on Assets (ROA) 5 3.65% 3.75% Return on Equity (ROE) 6 11.39% 11.15% 1Current Asserts / Current Liabilities 2Total Liabilities / Stockholders’ Equity 3Total Bank Debt / Stockholders’ Equity 4Total Bank Debt less Cash & Cash Equivalents / Stockholders’ Equity 5Net Income / Average Total Assets (Assets beginning of the year plus Assets end of the year divide by two) 6Net Income / Average Stockholders’ Equity (Stockholders’ Equity beginning of the year plus Stockholders’ Equity end of the year divide by two)

Causes for Material Changes (5% or more) from Period to Period of the Financial Statements

Cash and Cash Equivalents amounted to P224.5 million, improving by 27% vis-à-vis the P= 176.8 million as of December 2017 mainly due to sale of commercial lots at Seagrove Estate, collection of receivables and sales and rental income for the period.

Short-term Investments reached P25.2 million, indicating an increase of 893% versus the December 2017’s level of P2.5 million. The increase was an outcome of additional money market placements with longer maturity.

Receivables posted an 11% (P.206b) increase relative to the P1.880 billion as of December 2017. The increase was concomitant to collectibles from commercial lot buyers at Seagrove Estate and BPO/Office locators, due from affiliates, and receivable from insurance company.

Contract Assets indicated a P205.1 million increase.

Inventories (Subdivided Land for Sale and Development and Condominium Units for Sale) amounted to P812.3 million, increasing by 8% compared to the P751.1 million in December 2017 primarily due to the booking of Seagrove commercial lots during the period.

Other Current Assets exhibited a 56% (P297.5m) reduction due to settlement of VAT Input over output, creditable withholding tax, prepaid expenses and others.

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Receivables-net of current portion showed a 55% decline compared to the December 2017’s level of P497.0 million brought about by the adjustment of amortization of noncurrent receivables accounts and reclassification of portion of noncurrent receivables account to contract assets for the period.

Contract Assets-net of current portion reported a P137.8 million increase.

Financial Assets at Fair Value through Other Comprehensive Income (OCI) stood at P342.6 million versus the December 2017 figure of P304.3 million this pertains to fair value of City Sports Club shares. This account was reclassified from Available-for-sale Investments based on PFRS 9.

Investments in Associates and a Joint Venture reflected a downtrend of 2% or P1.1 billion versus 2017’s level of P2.6 billion. The decrease was mainly due to merger adjustment during consolidation of Central Block Developers, Inc. (CBDI) being CHI’s new subsidiary after the CHI & CPVDC Merger.

Investment Properties revealed a 42% (P5.7b) improvement versus the December 2017 level of P13.5 billion primarily due to construction of Central Bloc building of CBDI, Tech Tower and purchase of land for the period.

Deferred Tax Assets-net reflected an increase of P20.9 million versus the December 2017 level of P4.6 million specifically due to tax impact and unrealized gain on the sale of commercial lots at Seagrove Estate and booking of deferred tax assets from CBDI.

Other Noncurrent Assets showed a 1,822% (P1.0b) improvement vis-à-vis the December 2017’s level of P55.0 million brought about by booking of VAT and advances to contractors from CBDI during the period.

Accounts & Other Payables reached P8.4 billion, marking a 79% increase compared to the P4.7 billion in December 2017. The increase was specifically due to payables to contractors & suppliers, accrued operating expenses, taxes payable and interest payable and booking of intercompany loan & advances and management fees & systems cost for the period.

Contract Liabilities posted a P65.5 million increase.

Income Tax Payable totaled P13.4 million, exhibiting a 73% reduction compared to the December 2017 level of P= 50.4 million on account of payment of income taxes this year.

Deposits and Other Current Liabilities exceeded the December 2017 level of P821.0 million by 9% as it reached P897.7 million due to advance rental deposits made by new office locators at ACC Tower and residential lot buyers at Amara Ph3b and construction bond.

Deferred Tax Liabilities-net generated an increase amounting to P14.4 million versus the December 2017’s level of P261.3 million. The growth resulted from additional provision of deferred tax during the period.

Deposits and Other Noncurrent Liabilities decreased by 44% (P138.9m) vis-à-vis the P316.5 million as of end of 2017 basically due to reclassification of various rental deposits from noncurrent account to current account for the period.

Capital Stock increased by 996.8 million shares inclusive of Treasury shares of 760.1 million shares with respect to the additional issued shares after the CHI and CPVDC Merger.

Retained Earnings reflected a growth of P559.2 million propelled by the 2018 Net Income net of P323.5 million cash dividend in December 20, 2018.

Non-controlling Interests totaled P1.997 billion showing a notable increase of 108% vis-à-vis the P.958 billion as of December 2017 due to consolidation of CBDI for the additional minority shares after the CHI & CPVDC Merger.

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• Due to the Company’s sound financial condition, there is no foreseeable trend or event which may have material impact on its short-term or long-term liquidity.

• Funding will be sourced from internally-generated funds and bank loans.

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

• There is no known trend, event or uncertainty that have had or that are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations.

• There is no significant element of income arising from continuing operations.

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

• There were no known events and uncertainties that will trigger direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation.

2017 vs. 2016 Results of Operations

CHI registered consolidated revenues of P3.1 billion for the period ended December 31, 2017, surpassing last year’s level of P2.7 billion. The growth in revenues was driven by the outstanding performance of its leasing business coupled with its residential projects. The company’s revenues were primarily derived from the leasing income from Ayala Center Cebu and BPO/Office buildings coupled with residential projects and interest and other income.

Rental Income

Commercial Business

Ayala Center Cebu was in a festive mood all throughout the season with events catering to all members of the family. The last quarter saw events such as; Manara cultural exhibit, Galactic Halloween, Fashion Homecoming Runway Show, TienDA sa Ayala, a ballet production entitled I Got Stung featuring Piolo Pascual, and a magic show by Joe Conrad the illusionist.

New concepts & popular brands were introduced to expand the offerings of the mall such as Owndays, Anello, Renegade Folk and Yoyoso. International ice cream brand Cold Stone and home grown concept Tavolata will soon open at the fourth level of the mall.

Overall gross sales performance of the mall for the period ended December 31, 2017 grew by 4% vis-a-vis same period of last year. Aside from the events above mentioned, The Terraces and Phase 2B’s performance in the past quarter has also improved.

In terms of revenue, the mall ended the quarter with a favorable performance at P1.35 billion which was 5% higher than same period of last year while net operating income of P575.0 million exhibited 10% year-on- year growth.

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Cebu Leisure Company, Inc. (CLCI-a wholly owned subsidiary)

For the period ended December 31, 2017, sales/sqm of Active Zone is 8% higher compared with 2016 level while Food Choices sales increased by 3%. Ayala Cinemas occupancy rate performance is at par compared with same period of last year. Total revenue of P200.9 million showed a slight increase versus same period of last year while net operating income of P75.0 million grew by 19% on account of higher revenues and implementation of cost reduction initiatives for Active Zone, Food Choices and Cinemas. In the fourth quarter, Active Zone housed the Think Pink fund raising Zumba for breast cancer of the iCanserve Foundation and runner’s registration for the first Cebu leg of Heroes Run in partnership with the Armed Forces of the Philippines.

Ayala Cinemas, together with Press Play, invited select media personalities and social media influencers in an exclusive 3D preview of Marvel’s Thor: Ragnarok which garnered positive reviews. Star Wars: The Last Jedi was also a hit with several cosplayers gracing the premiere of the movie.

The Walk generated a total revenue of P26.5 million, exceeding the P25.7 million of last year by 3%. As of end December 2017, lease occupancy was at 95.9%.

Ayala Center Cebu Tower , the new addition of CHI’s leasing portfolio generated a total rental revenue of P104.4 million. As of end of December 2017, average lease occupancy was at 46.21 percent. eBloc Towers total rental revenue reached P559.3 million a 25% growth versus last year’s level of P449.0 million derived mainly from higher lease occupancy from eBloc Tower 4. As of end of December 2017 all towers were fully leased out.

Land Lease at CITP attained P30.2 million in revenues, reflecting a significant growth of 85% versus the P16.3 million of last year.

Real Estate Income

Amara contributed total revenue of P199.5 million from the sale of residential lots, significantly higher than last year’s level of P30.6 million. Construction of the previous phases of the project is already finished and turnover to buyers is ongoing. A new phase in Amara was launched early this year which registered sale of nineteen (19) lots and four (4) lots from the previous phase (Amara The Parks). As of end of December 2017, percentage of completion was at 60.63% for the new phase (Amara Phase 3b).

1016 Residences posted total revenues of P85.2 million from the sale of four (4) of the remaining condo units, surpassing previous year’s level of P12.3 million. Turnover of units to buyers is ongoing.

Park Point Residences revenue stood at P56.4 million derived from the sale of three (3) units. As of end of December 2017, the project is already completed and turnover to buyers has been initiated.

Sedona Parc revenues reached P6.7 million resulting from the sale of one (1) of the remaining condo units for the period.

The company also contributed interest and other income primarily from well placed short-term investments, income from the sale of development rights, and other income from fees & recovery charges amounting to P455.8 million. Compared to prior year’s figure of P274.5 million, it posted a 66% improvement.

Equity in net earnings of affiliates totaled P14.7 million, reflecting a decline versus the previous year. The bulk of the decrease was largely brought about by unmet sales target and cost adjustment of a residential project from Solinea, Inc.

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Earnings before Interest and Taxes (EBIT) registered an improvement from the P783.8 million in 2016 to P972.1 million in 2017.

Net Income totaled to P753.4 million, exceeding the P679.7 million of the previous year by 11 percent. CHI declared cash dividend of P0.15 per share to all shareholders as of record date on December 20, 2017 and paid on December 27, 2017.

Stock price increased from a closing of P4.90 per share in 2016 to P5.75 per share in 2017.

Financial Condition

CHI’s Balance Sheet remains strong with total assets amounting to P20.6 billion as of December 31, 2017, P189.5 million of which is cash. It has a current ratio of 0.60: 1 compared to 0.59: 1 in December 2016. Total liabilities as of the period stood at P12.6 billion, P5.6 billion of which is current. Debt-to-equity ratio stood at 1.81: 1 compared to the December 2016 level of 1.87: 1. Bank Debt to equity ratio registered at 0.92: 1 compared to 0.94: 1 in December 2016.

Key Performance Indicators

The table below shows the comparative key performance indicators of the Company:

Indicators 2017 2016 Curr ent Ratio 1 0.60: 1 0.59: 1 Total Debt to Equity Ratio 2 1.81: 1 1.87: 1 Bank Debt to Equity Ratio 3 0.92: 1 0.94: 1 Net Debt /(Cash) to Equity Ratio 4 0.90: 1 0.92: 1 Return on Assets (ROA) 5 3.75% 3.45% Return on Equity (ROE) 6 11.15% 10.79% 1Current Asserts / Current Liabilities 2Total Liabilities / Stockholders’ Equity 3Total Bank Debt / Stockholders’ Equity 4Total Bank Debt less Cash & Cash Equivalents / Stockholders’ Equity 5Net Income / Average Total Assets (Assets beginning of the year plus Assets end of the year divide by two) 6Net Income / Average Stockholders’ Equity (Stockholders’ Equity beginning of the year plus Stockholders’ Equity end of the year divide by two)

Cause for Material Changes from Period to Period of the Financial Statements

Cash and Cash Equivalents amounted to P176.8 million showing a favorable growth of 86% vis-à-vis the P94.9 million as of December 2016 particularly due to sale of development rights, collection of receivables and sales & rental income for the period.

Financial Assets at Fair Value through Profit or Loss a 54% reduction compared to the December 2016’s level of P21.9 million, mainly contributed by withdrawal of Unit Investment Trust Fund (UITF) placements during the period.

Short-term Cash Investments reported a P2.5 million increase.

Other Current Assets showed a 18% (P93.3m) drop due to settlement of VAT Input over output, creditable withholding tax and others.

Noncurrent Portion of Receivables increased by 9% in comparison to the December 2016’s level of P434.8 million brought about by the adjustment of amortization of noncurrent receivables accounts for the period.

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Property and Equipment totaled P289.8 million showing a considerable increase of 264% vis-à-vis the P79.6 million as of December 2016 due to office improvements and purchase of additional office & IT equipment.

Investments in Associates and a Joint Venture grew by 38% versus the December 2016’s level of P1.8 billion as it grossed P2.6 billion. The improvement resulted primarily from additional equity infusion to Central Block Developers, Inc. this year.

Deferred Tax Assets-net reported a decline of P14.3 million versus the December 2016 level of P18.8 million largely due to the booking of AiO’s NOLCO.

Other Noncurrent Assets exhibited 254% year on year growth compared to December 2016’s level of P15.5 million mainly due to sale of development rights this year.

Accounts and Other Payables totaled P4.7 billion, 8% higher vis-à-vis the P4.4 billion reported in December 2016. The increase was primarily due to payables to contractors & suppliers, accrued operating expenses and due to affiliates (booking of management fees & systems cost and AiO’s intercompany).

Current Portion of Long-term Debt indicated a drop of 86% (P382.3m) versus the December 2016’s level of P442.3 million specifically due to another full payment of one of AiO’s previous bank loans for the period.

Income Tax Payable amounted to P50.4 million, exhibiting a 396% increase compared to the December 2016 level of P10.1 million influenced by the provision of income tax as of this year.

Long-term Debt-net of current portion grossed P6.4 billion, 12% higher compared to the December 2016 level of P5.7 billion. The increase was primarily attributed to additional loan availed by Asian i Office for the period.

Deferred Tax Liabilities-net posted a growth of P25.1 million versus the December 2016’s level of P236.2 million. The increase resulted from additional provision of deferred tax during the period.

Deposits and Other Noncurrent Liabilities indicated a 46% (P274.9m) decreased compared to the P591.4 million as of end of 2016 specifically due to reclassification from non-current accounts particularly of the security deposits from BPO/Office locators & Mall merchants to current accounts.

Retained Earnings revealed a growth of P465.4 million driven by the 2017 Net Income net of P288.0 million cash dividend in December 27, 2017.

• Due to the Company’s sound financial condition, there is no foreseeable trend or event which may have material impact on its short-term or long-term liquidity.

• Funding will be sourced from internally-generated funds and bank loans.

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

• There is no known trend, event or uncertainty that have had or that are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations.

• There is no significant element of income arising from continuing operations.

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

• There were no known events and uncertainties that will trigger direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation.

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2016 vs. 2015 Results of Operations

The company generated consolidated revenues of P2.7 billion in 2016, registering a 27% decline compared to the P3.7 billion reported in the same period last year mainly due to the one-time sale of commercial lot sale in 2015 amounting to P759.3 million. This year’s revenues were derived from the leasing income at Ayala Center Cebu, eBloc Towers, and sale of residential lots in Amara, sale of condominium units & sale of City Sports Club shares, interest & other income and equity in net earnings of affiliates.

Earnings before Interest and Taxes (EBIT) posted a decrease from P1.117 billion in 2015 to P.784 billion in 2016.

CHI declared cash dividend of P0.12 per share to all shareholders as of record date on December 02, 2016 and paid on December 12, 2016.

Stock price decreased from a closing of P5.18 per share in 2015 to P4.90 per share in 2016.

Rental Income

Commercial Business

To bring in foot traffic to augment the sales of merchants, the marketing group initiated mall-wide events like the Pink Celebrations, Crossfit, BPI Automadness, Kasalang Pilipino, Pre-Holiday Sale, Symphony of Lights, Superfans Day and Pre-New Year Party for the 4 th quarter.

Leasing group introduced new concepts and popular brands to expand the offerings of the mall and provide what the market needs. The recently-opened stores include NBA Store, Pandora, Etta’s and Golden Cowrie.

Overall gross sales performance of the mall for the period ended December 31, 2016 was 1% higher versus same period of last year. Aside from the events above mentioned, new expansion’s sales provided a significant contribution for the overall growth.

In terms of revenue, the mall registered a favorable performance of P1.29 billion, which is 11% higher than the same period of last year while net operating income was at 6% better than 2015.

Cebu Leisure Company, Inc. (CLCI-a wholly owned subsidiary)

For the period ended December 31, 2016, CLCI posted a total revenue of P199.7 million – P46.0 million of which comes from Active Zone; P21.6 million from Food Choices and P132.1 million from Cinema operations.

As we continue to build up our recurring business, CLCI generated a NIAT of P62.8 million.

In 2016, Active Zone hosted various sporting events such as trail trekking talks, fun run registration booths to Cebu’s biggest running events, biking activities, and a running clinic.

The Active Zone also welcomed the opening of new stores such as Oakley, Blade, Apple Service Center, and Café Caw.

Moreover, Ayala Cinemas remain to be at the forefront of cinema culture having successfully hosted the first Cinemalaya Film Festival Screening held outside of Luzon, and continuing its partnerships with the different embassies for the Japan Film Festival “Eiga Sai”, French Film Festival and CineEuropa.

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Food Choices closed the year 2016 with 100% occupancy, maintaining its position among the near-by office workers as the preference for value dining experience.

The Walk reported a total revenue of P25.7 million, reflecting a 4% reduction versus the P26.8 million of last year mainly on account of lower lease occupancy which was at 90.8%. eBloc Towers yielded a double-digit rental revenue growth of 17% as it reached P449.0 million vis-à-vis last year’s level of P384.8 million. This was largely due to the high lease occupancy of eBloc Tower 3. As of December 2016, average lease occupancy for eBloc 1 was at 99.3%, eBloc 2 at 99.7%, eBloc 3 at 99.8% and eBloc 4 at 3.5%.

CITP Land Lease contributed P16.3 million in revenues. It registered a year on year growth of 52% relative to the preceding year’s level of P10.7 million.

Real Estate Income

Amara registered total revenue of P30.6 million from the sale of residential lots. It posted an 11% increase versus preceding year’s level of P27.6 million mainly due to higher number of lots sold. The project is already complete and ready for turnover to buyers.

1016 Residences generated total revenues of P12.3 million from sale of a condominium unit. The project is already complete and turnover to buyers is ongoing.

Park Point Residences revenue reached P254.5 million from the current sale of several condominium units and prior year’s sale computed based on percentage of completion. It is slightly higher compared to the previous year’s level of P250.9 million. As of end 2016, percentage of completion was at 100%.

City Sports Club Shares posted P= 1.2 million in revenues.

The company also derived income from interest and other income primarily from well placed short-term investments and other income from fees and recovery charges amounting to P274.5 million. Compared to prior year’s figure of P499.7 million, it posted a decline of 45%.

Equity in net earnings of affiliates (Cebu Insular Hotel Co., Inc., Solinea, Inc., Amaia Southern Properties, Inc., Cebu District Property Enterprise, Inc., Southportal Properties, Inc. and Central Block Developers, Inc.) amounted to P161.3 million, exceeding the previous year’s level of P106.3 million by 52%. The improvement was mainly due to higher income from Solinea, Inc. and Amaia Southern Properties, Inc. in 2016.

Net Income amounting to P679.7 million is 18% lower compared to the same period last year of P827.2 million mainly due to lower revenues during the period.

2016 Net Income is 13% higher than the previous year’s P600.3 million if CPVDC sale of commercial lot in 2015 is factored out.

Financial Condition

CHI’s Balance Sheet remains strong with total assets amounting to P19.6 billion as of December 31, 2016, P116.8 million of which is cash. It has a current ratio of 0.59: 1 compared to 0.89: 1 in December 2015. Total liabilities as of the period stood at P12.2 billion, P5.6 billion of which is current. Debt-to-equity ratio stood at 1.87: 1 compared to the December 2015 level of 2.11: 1. Bank Debt to equity ratio registered at 0.94: 1 compared to 1.03: 1 in December 2015.

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Key Performance Indicators

The table below shows the comparative key performance indicators of the Company:

Indicators 2016 2015 Current Ratio 1 0.59: 1 0.89: 1 Total Debt to Equity Ratio 2 1.87: 1 2.11: 1 Bank Debt to Equity Ratio 3 0.94: 1 1.03: 1 Net Debt /(Cash) to Equity Ratio 4 0.92: 1 0.99: 1 Return on Assets (ROA) 5 3.45% 4.58% Return on Equity (ROE) 6 10.79% 14.35% 1Current Asserts / Current Liabilities 2Total Liabilities / Stockholders’ Equity 3Total Bank Debt / Stockholders’ Equity 4Total Bank Debt less Cash & Cash Equivalents / Stockholders’ Equity 5Net Income / Average Total Assets (Assets beginning of the year plus Assets end of the year divide by two) 6Net Income / Average Stockholders’ Equity (Stockholders’ Equity beginning of the year plus Stockholders’ Equity end of the year divide by two)

Cause for Material Changes from Period to Period of the Financial Statements

Cash and Cash Equivalents stood at P94.9 million declining by 18% vis-à-vis the P115.5 million as of December 2015. The decrease was primarily brought about by settlement of the company’s various obligations to contractors and suppliers and capital expenditures.

Short-term Investments registered at P45.3 million, lower compared to the previous year’s level due to renewal of investment for a shorter term.

Financial Assets at Fair Value through Profit or Loss posted a 70% decrease compared to the December 2015’s level of P73.6 million as it reached P21.9 million, mainly on account of withdrawal of Unit Investment Trust Fund placements during the period.

Receivables showed a 37% (P1.1 billion) reduction versus the P3.1 billion as of December 2015. The decline was mainly due to collection of receivables from leasing & residential projects, settlement of due from affiliates and advances to contractors.

Inventories (Subdivided Land for Sale and Condominium Units for Sale) grossed P.72 billion causing a 32% downtrend versus the December 2015’s level of P1.06 billion particularly due to the reclassification of subdivided land for sale at Cebu IT Park to investment properties account and sale of residential projects (Condo units from Park Point Residences & Amara lots) for the period.

Other Current Assets reached P524.1 million, 7% lower than December 2015’s level of P561.6 million due to settlement of Prepaid Taxes and other prepaid expenses.

Property and Equipment grossed P79.6 million showing an improvement of 9% vis-à-vis the P73.3 million as of December 2015 due to purchase of additional office equipments.

Investments in Associates and a Joint Venture improved by 36% versus the December 2015’s level of P= 1.4 billion as it reached P1.8 billion. The increase was primarily brought about by equity infusion to Central Block Developers, Inc. and higher equity net earnings from Solinea, Inc. & Amaia Southern Properties, Inc. during the period.

Investment Properties registered a 7% increase versus the December 2015 level of P10.3 billion primarily due to booking of eBloc Tower 4, assets under construction and reclassification of subdivided land for sale at CITP to investment properties.

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Land and Improvements was 14% (P326 million) higher versus the December 2015 of P2.2 billion. The improvement was due to payment of South Road Property (SRP) lot on installment basis for the period.

Deferred Tax Assets-net posted an increase of P18.18 million versus the December 2015 level of P.65 million driven by AiO’s NOLCO for the period.

Other Noncurrent Assets exhibited 64% decline compared to December 2015’s level of P43.4 million mainly due to reclassification of suspense account and deferred VAT Input.

Accounts and Other Payables totaled P4.4 billion, 7% lower versus the P4.7 billion reported in December 2015 primarily due to settlement of payables to contractors & suppliers, advances & intercompany loan, dividends payable, interest payable and accrued operating expenses.

Current Portion of Long-term Debt grew by 310% (P334.4 million) versus the December 2015’s level of P107.9 million mainly due to reclassification of AiO’s long-term debt to current portion of long term debt for the period.

Income Tax Payable registered at P10.1 million, 83% lower compared to the December 2015 level of P61.2 million on account of payment of income taxes in 2015, creditable withholding tax and lower taxable income in 2016.

Deposits and Other Current Liabilities was 23% higher than the December 2015 level of P650.8 million as it stood at P799.3 million mainly due to advance rental deposits made by new mall merchants & office locators at eBloc Towers 3&4.

Long-term Debt-net of current portion stood at P5.7 billion declining by 7% compared to the December 2015 level of P6.1 billion. The reduction was mainly due to reclassification of long-term debt to current portion of long term debt.

Pension Liabilities totaled P32.2 million indicating a 43% reduction versus the December 2015 level of P56.0 million mainly due to additional contribution on retirement fund.

Deferred Tax Liabilities-net posted a growth of P67.1 million versus the December 2015’s level of P169.1 million. The increase was primarily brought about by additional provision of deferred tax for the period.

Deposits and Other Noncurrent Liabilities decreased by 38% or P362.0 million mainly on account of reclassification of non-current to current portion of financial liability during the period.

Retained Earnings showed a growth of P449.3 million as a result of the 2016 Net Income net of P230.4 million cash dividend in December 12, 2016.

• Due to the Company’s sound financial condition, there is no foreseeable trend or event which may have material impact on its short-term or long-term liquidity.

• Funding will be sourced from internally-generated funds and bank loans.

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

• There is no known trend, event or uncertainty that have had or that are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations.

• There is no significant element of income arising from continuing operations.

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

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• There were no known events and uncertainties that will trigger direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation.

Item 7. Financial Statements (see annex audited financial statements and supplementary schedules)

The consolidated financial statements and schedules listed in the accompanying Index to Financial Statements and Supplementary Schedules are filed as part of this Form 17-A.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure (Part III, Paragraph (B) of SRC Rule 12)

There are no changes in and disagreements with accountants on accounting and financial disclosures.

PART III - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Corporate Officers of the Registrant (Part IV, Paragraph (A) of SRC Rule 12)

(1) (A-E) Directors and Corporate Officers

Board of Directors ANNA MA. MARGARITA B. DY EMILIO LOLITO J. TUMBOCON ANICETO V. BISNAR, JR. FR. RODERICK C. SALAZAR JR.* BERNARD VINCENT O. DY ENRIQUE L. BENEDICTO* JOSE EMMANUEL H. JALANDONI PAMPIO A. ABARINTOS* AUGUSTO D. BENGZON *Independent Directors

BOARD OF DIRECTORS The members of the Board of Directors are elected at the general meeting of stockholders, who shall hold office for the term of one (1) year or until their successors shall have been elected and qualified. The following are the directors’ and officers’ brief description of their business experiences during the past five years.

Anna Ma. Margarita B. Dy , Filipino, 49, has served as a director of CHI since August 17, 2016 and Chairman of the Board of Directors starting last April 24, 2017. She is a Senior Vice President and member of the Management Committee of ALI. She is the Head of the Strategic Landbank Management Group (SLMG) of ALI. Her other significant positions include: Chairman of Next Urban Alliance Development Corp., Ayalaland Estates, Inc., Buendia Landholdings, Inc., Crimson Field Enterprises, Inc., Amorsedia Development Corporation, Red Creek Properties, Incorporated, Lagdigan Land Corporation and Bonifacio Estate Services Corporation; Chairman and President of Capital Consortium, Inc., Bonifacio Global City Estate Assocation, Inc. and Taft Punta Engaño Proeprty, Inc.; Director and Executive Vice President of Fort Bonifacio Development Corporation and Bonifacio Land Corporation; Director and President of Nuevocentro, Inc., Bonifacio Water Corporation, Fort Bonifacio Development Foundation, Inc., ALI Eton Property Development Corporation and Alviera Country Club, Inc.; and Director of Anvaya Cove Beach and Nature Club, Inc., Aurora Properties, Inc., Vesta Properties Holdings, Inc., CECI Realty, Inc., Accendo Commercial Corp., Alveo Land Corp., Ayala Greenfield Development Corporation, Berkshires Holdings, Inc., Cagayan de Oro Gateway Corp., Crans Montana Property Holdings Corporation, Emerging City Holdings, Inc., HLC Development Corporation, Soltea Commercial Corp. and Tower One and Exchange Plaza Condominium Corporation. Prior to joining ALI, she was a Vice President of Benpres Holdings Corporation. She graduated magna cum laude from Ateneo De Manila University with BS of Arts Degree in Economics Honors Program

- 52 - in 1990. She earned her Master’s degree in economics from London School of Economics and Political Science UK in 1991 and MBA at Harvard Graduate School of Business Administration in Boston, U.S.A. in 1996.

Aniceto V. Bisnar Jr., Filipino, 54, has been the Director and President of CHI since January 1, 2015. Concurrently, he is also a Vice President of ALI and the Chief Operating Officer of its Visayas-Mindanao Group. His other significant positions are: Chairman of Adauge Commercial Corporation, Central Block Developers, Inc., Cebu Leisure Company, Inc. and Amaia Southern Properties, Inc.; Chairman and President of North Point Estate Association, Inc., Asian I-Office Properties, Inc., Cebu Business Park Association, Inc. and Asiatown I.T. Park Association, Inc.; Director and President of Aviana Development Corporation and Lagdigan Land Corporation; and the Vice President of Solinea, Inc. He is a director of Accendo Commercial Corporation, Cebu District Property Enterprise, Inc., Westview Commercial Ventures Corp., Cagayan de Oro Gateway Corp., Avencosouth Corp., Taft Punta Engaño Property, Inc., Bonifacio Estate Services Corporation, Aurora Properties Incorporated, Ceci Realty, Inc., and Vesta Property Holdings, Inc., ; and a member of the Board of Trustees of the Hero Foundation, Incorporated. He completed his Master in Business Management (MBM) degree in 1989 from the Asian Institute of Management (AIM) in Makati City and graduated in the top 5% of his class at the Philippine Military Academy in Baguio City in 1985. He also took up Master Planning and Mixed-Use Development Program at Harvard University School of Urban Design.

Bernard Vincent O. Dy , Filipino, 55, has been a Director of CHI since August 2014 and served as its Chairman of the Board from August 2014 to April 2017. He also holds the following positions in other publicly listed Companies: President and Chief Executive Officer of Ayala Land, Inc., and Director of Prime Orion Philippines, Inc. and MCT Bhd of Malaysia. His other significant positions include: Chairman of Alveo Land Corp., Ayala Property Management Corporation, Makati Development Corporation, Amaia Land Corporation, Avencosouth Corp., AyalaLand Commercial Reit, Inc., Bellavita Land Corporation, Ayagold Retailers, Inc., Station Square East Commercial Corporation, Aviana Development Corp., Cagayan De Oro Gateway Corp., BGSouth Properties, Inc., BGNorth Properties, Inc., BGWest Properties, Inc., Nuevocentro, Inc., Portico Land Corp. and Philippine Integrated Energy Solutions, Inc.; Vice Chairman of Ayala Greenfield Development Corporation and Alviera Country Club, Inc.; Director and President of Bonifacio Land Corporation, Emerging City Holdings, Inc., Columbus Holdings, Inc., Berkshires Holdings, Inc., Fort Bonifacio Development Corporation, Aurora Properties Incorporated, Vesta Property Holdings, Inc., Ceci Realty Inc., Alabang Commercial Corporation and Accendo Commercial Corp.; President of the Hero Foundation Incorporated and Bonifacio Art Foundation, Inc.; Director of Avida Land Corp., Amicassa Process Solutions, Inc., Whiteknight Holdings, Inc., AyalaLand Medical Facilities Leasing, Inc., Serendra, Inc., Alveo-Federal Land Communities, Inc., ALI Eton Property Development Corporation and AKL Properties, Inc..; Member of Ayala Foundation, Inc. and Ayala Group Club, Inc. In 2015, he was inducted as member of the Advisory Council of the National Advisory Group for the Police Transformation Development of the Philippine National Police. He earned a degree of B.B.A Accountancy from the University of Notre Dame in 1985, He also received his Master’s Degree in Business Administration in 1989 and in International Relations in 1995, both at the University of Chicago.

Jose Emmanuel H. Jalandoni , Filipino, 51, has served as director of CHI since August 17, 2016. He is also a Director of Prime Orion Philippines, Inc., a publicly listed company. He is a Senior Vice President and a member of the Management Committee of ALI. He is the Group Head of commercial businesses in ALI including malls, offices, hotels, resorts and ALI Capital. His other significant positions are: Chairman of the Board of ALI Commercial Center, Inc., ALI Makati Hotel and Residences, Inc., ALI Makati Hotel Property, Inc., ALI Triangle Hotel Ventures, Inc., Arca South Integrated Terminal, Inc., Arca South Hotel Ventures, Inc., Ayala Hotels, Inc., AyalaLand Hotels and Resorts Corporation, AyalaLand Medical Facilities Leasing, Inc., AyalaLand Offices, Inc., Bay Area Hotel Ventures, Inc., Bonifacio Hotel Ventures, Inc., Capitol Central Hotel Ventures, Inc., Cebu Insular Hotel Company, Inc., Circuit Makati Hotel Ventures, Inc., Direct Power Services, Inc., Econorth Resort Ventures, Inc., EcoSouth Hotel Ventures, Inc., Ecozone Power Management, Inc., Enjay Hotels, Inc., Greenhaven Property Ventures, Inc., Integrated Eco-Resort Inc., Laguna Technopark, Inc., Makati North Hotel Ventures, Inc., North Triangle Hotel Ventures., Inc., Northgate Hotel Ventures, Inc., One Makati Hotel Ventures, Inc., Orion Land, Inc., Sentera Hotel Ventures, Inc., Sicogon Island Tourism Estate Corporation, Soltea Commercial Corporation, Southcrest Hotel Ventures, Inc., Tutuban Properties, Inc., Whiteknight Holdings, Inc., One Dela Rosa Property Development, Inc., One Makati Residential Ventures, Inc., He is also Chairman and President of ALINET.Com. Inc., He is also

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Director of the following companies: Accendo Commercial Corporation, Alabang Commercial Corporation ALI Eton Property Development Corporation, Ayagold Retailers, Inc., Ayala Property Management Corporation, AyalaLand Commercial Reit, Inc., Bacuit Bay Development Corporation, Berkshires Holdings, Inc., Bonifacio Land Corporation Cagayan de Oro Gateway Corporation, Chirica Resorts Corporation, Columbus Holdings, Inc., Ecoholdings Company Inc., Emerging City Holdings, Inc., Fort Bonifacio Development Corporation, Lio Resort Ventures, Inc., Lio Tourism Estate Management Corporation, Makati Cornerstone Leasing Corporation, Makati Development Corporation, North Eastern Commercial Corporation (formerly Asterion), North Liberty Resort Ventures, Inc., Pangulasian Island Resort Corporation, Paragua Eco-Resort Ventures, Inc., Philippine FamilyMart CVS, Inc., Philippine Integrated Energy Solutions, Inc., Regent Horizons Conservation Company, Inc., Sicogon Town Hotel, Inc., Station Square East Commercial Corporation, Ten Knots Development Corporation, Ten Knots Philippines, Inc. He joined ALI in 1996 and held various positions in the company. He graduated with a degree of Bachelor of Science in Legal Management from Ateneo de Manila University in 1989. He earned his Master’s Degree in Business Administration from Asian Institute of Management in 1992. He is a Chartered Financial Analyst.

Augusto D. Bengzon , Filipino, 55, has served as director of CHI since August 15, 2017. He joined ALI in December 2004 and currently serves as its Senior Vice President, Chief Finance Officer, Chief Information Officer, Chief Compliance Officer & Treasurer. He is a Director of Prime Orion Philippines Inc. another publicly listed company. . His other significant positions include: Chairman of Aprisa Business Process Solutions Inc.; Vice Chairman of CMPI Holdings Inc.; Director, Treasurer & Compliance Officer of Anvaya Cove Golf and Sports Club Inc.; Director & President of CMPI Land Inc.; Director & Assistant Treasurer of Ayala Greenfield Development Corporation; Director and Treasurer of ALI Eton Property Development Corporation, Amaia Land Corp., Aurora Properties Inc., Avida Land Corp., Ayala Property Management Corporation, Bellavita Land Corp., BGNorth Properties Inc., BGSouth Properties Inc., BGWest Properties Inc., Ceci Realty Inc., Next Urban Alliance Development Corp., Philippine Integrated Energy Solutions Inc., Serendra, Inc. and Vesta Property Holdings Inc.; Director of AG Counselors Corporation, Alabang Commercial Corporation, ALINet.Com, Inc., Alviera Country Club, Inc., Alveo Land Corp., Ayalaland Commercial Reit, Inc., Ecozone Power Management Inc., Laguna Technopark Inc., Makati Development Corporation, Nuevocentro Inc., Northgate Hotel Ventures, Inc. Portico Land Corp., Station Square East Commercial Corp., and Southcrest Hotel Ventures, Inc.; Treasurer of AKL Properties, Inc., and Hero Foundation Incorporated; Assistant Treasurer of Ayala Greenfield Golf and Leisure Club. Prior to joining ALI, he was Vice President and Credit Officer at Citibank N.A. where he spent sixteen years in various line management roles covering Treasury, Corporate Finance and Relationship Management. He received his Bachelor of Science degree in Business Management from the Ateneo de Manila University and is a graduate of the Philippine Trust Institute. He was granted the Andres K. Roxas scholarship at the Asian Institute of Management where he received his Master’s in Business Management degree.

Emilio Lolito J. Tumbocon , Filipino, 62, has served as director of CHI since April 29, 2008. He is presently a Commissioner of the Construction Industry Arbitration Commission; Managing Director of Datem, Inc.; Director of Keyland Corporation; Trustee of Project Management Institute, Philippines Chapter; President of Philippine Constructor’s Association Foundation, Inc. and Chairman of UP Engineering Research & Development Foundation, Inc. He was the Group Head of ALI Vismin Group, Human Resources & Public Affairs Group and Construction Management Group; and a member of the Management Committee of ALI. He was also the President of Makati Development Corporation and Ayala Property Management Corporation. He was a Senior Vice President of ALI and served as a director of various companies under the ALI Group. He graduated at the University of the Philippines with a degree of B.S. in Civil Engineering in 1979 and finished his Master’s in Business Administration (MBA) in the same university in 1985. He also took the Construction Executive Program (CEPS ’87) at Stanford University, California, U.S.A., the Senior Business Executive Program (SBEP’91) at the University of Asia & the Pacific, and The Executive Program (TEP’97) at the Darden Graduate School of Business Administration, University of Virginia, U.S.A. He has 39 years of extensive work experience in the construction and real estate industry.

Pampio A. Abarintos , Filipino, 75, has served as an independent director of CHI since April 8, 2014. He retired as Executive Justice of the Court of Appeals, Visayas Station from 2004 to 2013. Awarded as Presiding Justice with the Presidential Award for speedy case disposal by the Court of Appeals, Manila in 2005. He retired with ZERO backlog of cases in 2013. After practicing as a lawyer for 17 years, he was appointed as Presiding Judge of the Regional Trial Court in Negros Oriental and in Cebu City from 1987 to 2013 and Executive Judge of the Regional Trial Court Cebu Province from 2012 to 2014. He was an

- 54 - awardee for the Judicial Excellence as the Most Outstanding Judge of the Philippines in 2003. He was former Officer of the Integrated Bar of the Philippines, Cebu City Chapter and President of the Rotary Club of Cebu University District. Presently he is a member of the Regional Advisory Council of the Philippine National Police (PNP) Region 7; Director of Alta Vista Golf and Country Club, Cebu City; Member of the Management Committee (MANCOM) and Chairman of the Committee on Discipline and Arbitrator of Alta Vista Golf and Country Club, Cebu City and he also served as a Director of South Hills Residents’ Association (SHRA), Cebu City. He graduated as cum laude in Bachelor of Arts from the University of San Jose-Recoletos, Cebu City in 1965. In 1969, he also graduated Bachelor of Laws from the University of the Visayas, Cebu City. He has Master’s Degree units in Business Administration (MBA), (lacking thesis) from the Southwestern University, Cebu City in 1981.

Enrique L. Benedicto , Filipino, 77, has served as an independent director of CHI since April 25, 2003. His other current regular directorships include: Chairman of Mabuhay Filcement, Inc., Enrison Land, Inc., Enrison Holdings, Inc. and Benedict Ventures, Inc.; and Vice-Chairman of Bernardo Benedicto Foundation, Inc. He also serves as an Independent Director of KEPCO-SPC Power Corp., a publicly listed company. He has served as an Honorary Consul, ad honorem of the Kingdom of Belgium for more than 30 years, and received the following awards: ‘Officer in the Order of Leopold II’ by his Majesty Baudowin King of the Belgians, ‘Officer in the Order of Leopold ll’ by His Majesty King Albert II of the Kingdom of Belgium, the highest award that can be given to civilians, Belgian or non-Belgian, Garbo sa Sugbu Awardee given by the Province of Cebu for his outstanding achievement in International Relations as Honorary Consul of Belgium, Most Outstanding Cebuano Citizen per Cebu City Council Resolution dated February 18, 1991, Great Cebuano Award conferred by the Province of Cebu, Sugbuanong Kumintaristang Nagpakabana (SUKNA), Kapisanan ng mga Brodkaster ng Pilipinas (KBP) and Mandaue Chamber of Commerce and Industry, Inc., Awardee of Asia Pacific Enterprise Awards 2017 Philippines, Entrepreneur of the Year Award conferred by the Cebu Chamber of Commerce & Industry in celebration of its Centennial +10 Anniversary, ‘Most Outstanding Alumnus’ award given by the University of San Jose-Recoletos. He earned his degree in BS Commerce at the University of San Jose-Recoletos in 1964.

Fr. Roderick C. Salazar Jr. SVD , Filipino, 71, has served as an independent director of CHI since April 29, 2005. For more than 15 years, until June 2014, he was Chairman of the Board of Trustees of St. Jude Catholic School in Manila. He has returned to the same Board as a member. He is currently the Chairman of the Board of Trustees of St. Agnes Academy in Legazpi City and of the Center for Educational Measurement (CEM). He is the Regional Secretary for Asia, and the Vice-President for Asia of the Office Internationale de l’Enseignement Catholique (OIEC) [International Office of Catholic Education]. He is a Director in three Boards of First Metro Asset Management, Inc. (FAMI). He is a member of the Board of Trustees of Immaculate Conception Academy of Manila. He worked in various academic and administrative positions at the University of San Carlos for 34 years (1975-2009) since his ordination to the priesthood on June 21, 1974. He was USC president for twelve years (four 3-year terms: 1987-1990; 1990-1993; 2002-2005; 2005- 2008). For sixteen years, from 1992 to 2008, he was also President of the Catholic Educational Association of the Philippines (CEAP). He was member of various groups like FILIPINO, Inc. (Filipino Institute for the Promotion of Integrity and Nobility); San Carlos Community Development Foundation, Divine Word Educational Association (DWEA); Philippine Accrediting Association of Schools, Colleges, and Universities (PAASCU); Private Educational Advisory Council (PEAC); and Word Broadcasting Corporation. As past CEAP president, he served three terms as Chair of the Coordinating Council of Private Educational Associations (COCOPEA). He had also been Chair of the Board of Trustees of St. Scholastica’s College, Westgrove; Scholastica’s Academy in Tabunok, Talisay City, Cebu; Divine Word University (now Liceo del Verbo Divino) in Tacloban City; and Divine Word College of Tagbilaran (now Holy Name University). He was a member of the Board of Trustees of St. Paul University in Tuguegarao, and at different times of the St. Paul Colleges in Pasig, Iloilo, Dumaguete, and Surigao, as well as of the Visayas Cluster of the Daughters of Charity (DC) Schools. For eight years, he was the Executive Secretary of the Office of Education and Faith Formation of the Federation of Asian Bishops Conferences (FABC-OEFF). He was a member of the Board of Directors of People’s Television Network (PTV4). On December 31, 2018, he ended his term as the Mission Director of SVD Mission Philippines. He has two Master’s Degree, one in Philosophy from Divine Word Seminary, Tagaytay City in 1976, and another in Mass Communications from the University of Leicester, England (October 1982 to September 1983), degree conferred on July 1984. He has two honorary Doctorates in the Humanities, the first given in March 2010 by St Paul University, Tuguegarao City; the second, awarded by Aquinas University, Legazpi City on April 8, 2011. On August 14, 2010, in the

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Archdiocese of Cebu, he received the Papal Award Croce Pro Ecclesia et Pontifice for his years of service in Catholic Education.

Nominees to the Board of Directors for election at the stockholders’ meeting

All nominees to the Board of Directors are incumbent directors.

Corporate Officers

Anna Ma. Margarita B. Dy* Chairman of the Board Aniceto V. Bisnar Jr.* President Augusto D. Bengzon* Treasurer Ma. Luisa D. Chiong Chief Finance Officer and Compliance Officer June Vee D. Monteclaro -Navarro Corporate Secretary Nimfa Ambrosia L. Perez-Paras Assistant Corporate Secretary * Members of the Board of Directors

Ma. Luisa D. Chiong , Filipino, 46, is the Chief Finance Officer and Compliance Officer of CHI since August 15, 2017. She is the Chief Finance Officer of Ayala Land, Inc.’s Vismin Group and Strategic Landbank Management Group. Her other significant positions include: Director of ALI Capital Corp., Central Block Developers, Inc. and Cebu Leisure Company, Inc; Director and Treasurer of Adauge Commercial Corporation, Amorsedia Development Corporation, Buendia Landholdings, Inc., Crans Montana Property Holdings Corporation, Crimsonfield Enterprises, Inc., Red Creek Properties, Inc., Ayalaland Estates, Inc., HLC Development Corporation, Next Urban Alliance Development Corp., Integrated Eco-resort Inc., Altaraza Prime Realty Corporation and Asian i-Office Properties, Inc.; Treasurer and a member of the Board of Trustees of Altaraza Town Center Estate Association, Inc., Vertis North Estate Association, Inc., Arca South Estate Association Inc., Lakeside Evozone Association Inc. and North Point Estate Association, Inc.; Treasurer and Chief Finance Officer of Taft Punta Engano Property, Inc., Accendo Commercial Corp., Lagdigan Land Corporation and Cagayan de Oro Gateway Corp.; Director and Chief Finance Officer of Alinet.com, Inc.; Comptroller and Chief Finance Officer of Alviera Country Club, Inc.; Chief Finance Officer of Aviana Development Corp., Aurora Properties Incorporated, CECI Realty, Inc. and Vesta Property Holdings, Inc.; and the Comptroller of Nuevocentro, Inc. She completed the academic requirements for a Master in Business Administration degree from De La Salle University in 1998 and obtained her Bachelor of Science in Commerce Major in Accounting degree from the same university in 1991. She is a Certified Public Accountant, garnering 5th place in the May 1992 CPA Board Examinations and is a member of the Philippine Institute of Certified Public Accountants (PICPA).

June Vee D. Monteclaro-Navarro, Filipino, 47, has served as the Corporate Secretary of CHI since February 2014. She is the General Counsel and Assistant Corporate Secretary of ALI. She is the Corporate Secretary of Prime Orion Philippines, Inc., a publicly listed company. She is a Director (management position) and Corporate Secretary of AG Counselors Corporation. Currently, she also holds the position of Director of AyalaLand Commercial Reit, Inc.; Corporate Secretary of Alveo Land Corp., Avida Land Corp., AKL Properties, Inc., ALI Eton Property Development Corporation and Orion Land, Inc.; and the Assistant Corporate Secretary of Alinet.com, Inc. Prior to joining ALI in 2007, she was a Senior Associate at SyCip Salazar Hernandez & Gatmaitan. She graduated from the University of St. La Salle in Bacolod with a Bachelor of Arts with a Major in Economics and a Bachelor of Commerce with a Major in Data Processing in 1993. She earned a Bachelor of Laws degree from the University of the Philippines in 1997.

Nimfa Ambrosia L. Perez-Paras, Filipino, 53, has served as the Assistant Corporate Secretary of CHI since February 2014. She is a Senior Counsel 2 of Ayala Group Legal. She is the Assistant Corporate Secretary of listed companies namely: ALI, and Prime Orion Philippines, Inc. She handles various corporate secretarial functions for affiliates of CHI and for a number of companies within the Ayala Group. She was the Assistant Corporate Secretary of Integrated Micro-Electronics, Inc. from April 2014 to April 2015. Prior to joining Ayala Group Legal in February 2014, she was a State Counsel at the Department of Justice. She also worked at the Regional Trial Courts of Makati and Quezon City. In the private sector, she worked as Legal Counsel for Coca-Cola Bottlers Philippines, Inc., RFM Corporation, and Roasters Philippines, Inc. She graduated with a Bachelors of Law degree from Manuel L. Quezon School of Law in 1990.

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(2) Significant Employees

The Corporation considers its entire work force as significant employees. Everyone is expected to work together as a team to achieve the Corporation’s goals and objectives.

(3) Family Relationship

None of the Directors or Executive Officers is related to another by affinity or consanguinity.

(4) Legal Proceedings

None of the Directors or Executive Officers is involved in any material pending legal proceeding in any court or administrative agency of the Government in the last five years.

Item 10. Executive Compensation (of Directors & Officers) (Part V, Paragraph (b) of RSA 3-3)

Directors. Article IV Section 10 of the Company’s Amended By-Laws provides:

“Section 10 - The Chairman and members of the Board shall receive such remuneration as may be fixed by the Board of Directors each year.”

Officers Annual Compensation

The total annual compensation paid to the top four (4) Officers of the Corporation, including the President for the year 2018 amounted to P15.4 million. During the previous year, the total compensation paid of the Corporation amounted to P19.6 million. For the current year, it is projected that the total annual compensation will total P16.2 million.

Name and Principal Position Year Salary Other Variable Pay Aniceto V. Bisnar Jr. President Ma. Luisa D. Chiong Chief Finance Officer and Compliance Officer Ma. Clavel G. Tongco Vice President and Head, Retail 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 Actual 2017 P18.74M P0.82M group Actual 2018 P14.16M P1.27M Projected 2019 P14.87M P1.33M All other officers* as a group Actual 2017 P20.52M P1.39M unnamed Actual 2018 P21.51M P1.45M Projected 2019 P22.59M P1.52M * Senior Personnel with pay class of SP-C.

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The total annual compensation was all paid in cash. The total annual compensation included the basic salary and other variable pay (performance bonus).

The executive officers are composed of regular employees of the Company and four (4) are seconded personnel from ALI. 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.

Compensation of Directors

The members of the Board of Directors are entitled to receive a reasonable per diem for attendance at each meeting of the Board of Directors. Other than such per diem, there is no other arrangement pursuant to which any amount or compensation is due to the directors for services rendered as such.

The current remuneration of non-executive directors is as follows:

Board meeting fee per meeting attended P 40,000.00 Committee meeting fee per meeting attended P 20,000. 00

Employment Contracts, Termination of Employment and Change-in-Control Arrangements

An employment contract between the Registrant and a named executive officer will normally include a compensation package, duties and responsibilities and term of employment. The Registrant has not entered into any compensatory plan or arrangement with any named executive officer which would entitle such named executive officer to receive any amount under such plan or arrangement as a result of, or which will result from, the resignation, retirement or any other termination of such executive officer’s employment with the Registrant and its subsidiaries or from a change in control of the Registrant or a change in the executive officer’s responsibilities following a change in control of the Registrant.

Warrants and Options Outstanding

Other than options to purchase shares of the authorized capital stock of the Registrant in their capacity as stockholders of the Registrant pursuant to their pre-emptive right granted by the Articles of Incorporation, there are no outstanding warrants or options held by the chief executive officer, named executive officers and other officers or directors of the Registrant.

Item 11. Security Ownership of Certain Beneficial Owners and Management (Part IV, Paragraph (C) of SRC Rule 12)

1. Security Ownership of Certain Record and Beneficial Owners (of more than 5%) of Common Shares as of January 31, 2019.

Title of Name, address of Name of Beneficial Citizenship No. of Shares Percent Class Record Owner and Owner and Held Relationship with Relationship with Issuer Record Owner Common Ayala Land, Inc. 2 Ayala Land, Inc. 3 Filipino 1,519,106,716 70.43% 31/F Tower One & Exchange Plaza Ayala Triangle, Ayala

2 Ayala Land, Inc. (ALI) is a major shareholder of CHI. 3 Pursuant to the By-Laws of ALI and the Revised Corporation Code, the Board of Directors of ALI has the power to decide how ALI’s shares in CHI are to be voted. Anna Ma. Margarita B. Dy has been named and appointed to exercise the voting power. - 58 -

Ave. Makati City Common PCD Nominee Corp. Aggregate of Standard British 272,144,900 12.62% (Non-Filipino) 4 Life Aberdeen plc G/F MSE Bldg. affiliated investment Ayala Ave., Makati City management entities on behalf of multiple managed portfolios (the “Standard Life Aberdeen plc”) 5 Common PCD Nominee Corp. PCD Nominee Corp. Filipino 164,963,495 7.65% (Filipino) 5 (Filipino) 6 G/F MSE Bldg. Ayala Ave., Makati City

2. Security Ownership of Directors and Management (Corporate Officers) as of January 31, 2019.

Title of Name of Beneficial Owner Amount and Citizenship Percent of Class Nature of Class Beneficial Ownership Directors Common Anna Ma. Margarita B. Dy 1 (direct) Filipino 0.0000% Common Aniceto V. Bisnar Jr. 1 (direct) Filipino 0.0000% Common Bernard Vincent O. Dy 1 (direct) Filipino 0.0000% Common Jose Emmanuel H. Jalandoni 1 (direct) Filipino 0.0000% Common Emilio Lolito J. Tumbocon 112,500 (direct) Filipino 0.0052% Common Enrique L. Benedicto 1 (direct) Filipino 0.0000% Common Fr. Roderick C. Salazar Jr. 1 (direct) Filipino 0.0000% Common Pampio A. Abarintos 1,000 (direct) Filipino 0.0000% Common Augusto D. Bengzon 1 (direct) Filipino 0.0000% President and Highly Compensated Officers Common Aniceto V. Bisnar, Jr. 1 (direct) Filipino 0.0000% Common Ma. Luisa D. Chiong 0 Filipino n/a Common Ma. Clavel G. Tongco 6,250 (direct) Filipino 0.0003% Common Nerissa N. Josef-Mediano 1,875 (direct) Filipino 0.0001% Common Ma. Cecilia Crispina T. Urbina 0 Filipino n/a Other Corporate Officers Common June Vee D. Monteclaro- 0 Filipino n/a Navarro Common Nimfa Ambrosia L. Perez- 0 Filipino n/a Paras All Directors and Officers as a group 121,632 0.0056%

None of the members of the Company’s directors and management owns 2.0% or more of the outstanding capital stock of the Company.

No change of control in the Corporation has occurred since the beginning of its last fiscal year.

4 The PCD is not related to the Company. 5 The Standard Life Aberdeen plc, as stated in its Report by Owners of More Than Five Percent (SEC Form 18-A) filed on August 22, 2017, has the power to decide how the shares it holds for its clients are to be voted. 6 The Company has no record relating to the power to decide how the shares held by PCD are to be voted.

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(3) Voting Trust Holders of 2% or More

No Director, Executive Officer, or stockholder holds more than 2% of a class under a voting trust or similar agreement.

(4) Changes in Control

As of the date hereof, there is no agreement or arrangement which may result in a change in control of the Company.

Item 12. Certain Relationships and Related Transactions (Part IV, Paragraph (D) of SRC Rule 12)

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 2018 2017 2018 2017 (In Thousands) Subsidiaries of ALI P=904,234 P=884,719 P=5,491,224 P=1,383,870 Associates: Solinea, Inc. 251,406 251,367 − − Southportal Properties, Inc. 178,092 267,082 − − Central Block Developers, Inc. (“CBDI”) − 52,044 − − Parent Company - ALI 36,762 30,946 805,530 1,023,008 Joint venture – Cebu District Property Enterprise, Inc. 1,951 1,604 − − Others 37,785 − − − P=1,410,230 P=1,487,762 P=6,296,754 P=2,406,878

Revenue Costs/Expenses

2018 2017 2016 2018 2017 2016 (In Thousands) (In Thousands)

Subsidiaries of ALI P=52,956 P=26,570 P=8,876 P=443,326 P=184,665 P=30,755 Parent Company - ALI 3,077 14,945 5,635 346,317 69,989 168,636 P=56,033 P=41,515 P=14,511 P=789,643 P=254,654 P=199,391

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Receivables from/payables to Solinea, Inc., Avida Land Corp. and Alveo Land Corp. 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 Direct Power Services, Inc., Makati Development Corporation (“MDC”) and Serendra, Inc. bear interest ranging from 2.3% to 2.5% and are due and demandable as of December 31, 2018 and 2017. The nature and amounts of material transactions with related parties as of December 31, 2018 and 2017 are as follows:

• Advances from subsidiaries of ALI in 2018 include advances from CBDI as a result of the merger amounting to P=3.7 billion.

• In December 2015, the Group sold land to Avida Land Corp. 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=759.3 million and P=342.9 million as of December 31, 2018 and 2017, respectively. Advances to MDC, which are included under advances to contractors in “Accounts receivable” (see Note 8) amounted to P=2.2 million and P=47.0 million as of December 31, 2018 and 2017, respectively.

• Expenses to ALI pertain to management fees, professional fees and systems costs. ° Management and service fees charged by ALI amounted to P=132.6 million, P=162.3 million and P= 125.0 million in 2018, 2017 and 2016, respectively. ° Professional fees charged by ALI amounted to P=20.7 million in 2016. ° Systems costs which were included in the Group’s manpower costs amounted to P=19.0 million, P=15.9 million and P=27.6 million in 2018, 2017 and 2016, respectively.

• As of December 31, 2018, and 2017, the Group has entered into transactions with Bank of the Philippine Islands, an affiliate, consisting of cash and cash equivalents, financial assets at FVPL, fair value of plan assets and long-term debt with carrying amounts as follows:

2018 2017 (In Thousands) Cash and cash equivalents (Note 5) P=155,744 P=145,908 Financial assets at FVPL (Note 7) 10,379 10,129 Long-term debt (Note 18) 1,420,273 1,480,215 Fair value of plan assets (Note 24) 39,054 37,104

• In December 2017, the CHI 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:

2018 2017 2016 (In Thousands) Short-term employee benefits P=14,165 P=18,740 P=24,073 Post-employment pension and other benefits 1,273 817 924 P=15,438 P=19,557 P=24,997

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Item 13. Compliance with Leading Practice on Corporate Governance

Compliance with leading practice on Corporate Governance

a. The evaluation system which was established to measure or determine the level of compliance of the Board of Directors and top level management with its Revised Manual of Corporate Governance consists of a Customer Satisfaction Survey form that is filled out by the various functional groups indicating the compliance rating of certain institutional units and their activities. The evaluation process also includes a Board Performance Assessment that is accomplished by the Board of Directors indicating the compliance ratings. The aforementioned forms are submitted to the Compliance Officer who issues the required certificate of compliance with the Company’s Revised Manual of Corporate Governance to the Securities and Exchange Commission.

b. To ensure good governance, the Board establishes the vision, strategic objectives, key policies, and procedures for the management of the Company, as well as the mechanism for monitoring and evaluating Management’s performance. The Board also ensures the presence and adequacy of internal control mechanisms for good governance.

c. There was no deviation committed by any of the Company’s directors and officers on the Revised Manual of Corporate Governance during the period covered in this report. The Company adopted the Revised Manual of Corporate Governance, and full compliance with the same has been made since the adoption of the Revised Manual.

d. The Company is taking further steps to enhance adherence to principles and practices of good corporate governance. Below are some of the initiatives being undertaken by the Company to ensure adherence to corporate governance. o Adoption of Risks Management System o Adherence to Organizational and Procedural Controls o Independent Audit Mechanism o Regular Reporting to Audit Committee o Creation of Board Committees o Financial and Operational Reporting o Compliance to government regulatory and reportorial requirements o Disclosure and Transparency to the Public

There was no deviation committed by any of the Company’s directors’ and officers on the Manual of Corporate Governance during the period covered in this report.

List of all parents of the registrant showing the basis of control and as to each parent, the percentage of voting securities owned or the basis of control by its immediate parent, if any.

* Ayala Land, Inc. (ALI) 70.43% owner (1,519,106,716 shares) ALI is majority owned by Ayala Corporation.

PART IV EXIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C

(a) Exhibits - See accompanying Index to Exhibits The following exhibit is incorporated by reference in this report:

2018 Consolidated Financial Statements

The other exhibits, as indicated in the Index to Exhibits are either not applicable to the Company or require no answer.

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(b) Reports on Sec Form 17-C

The following current reports have been reported by Cebu Holdings, Inc. during the year 2018 through official disclosure letters dated:

January 03, 2018 Cebu Holdings, Inc. certified the attendance of the Board of Directors in all meetings of the corporation’s Board of Directors in 2017 in compliance w/ the SEC Memorandum Circular No. 1, Series of 2014.

February 26, 2018 CHI announced the Results of Board of Directors Meeting: 1. The merger of the Company and its listed subsidiary, Cebu Property Ventures and Development Corporation (CPVDC), with CHI as the surviving entity. The plan of merger will be submitted for the approval of the Company’s stockholders during their annual meeting. 2. The resetting of the annual stockholders’ meeting of the Company to April 10, 2018 since a number of the Company’s directors have advised the Office of the Corporate Secretary of their unavailability on April 4, 2018, the original schedule of the annual stockholders’ meeting. 3. The Charter of the Board of Directors and the creation of the Committee of Inspectors of Proxies and Ballots with the appointment of the following as members (June Vee D. Monteclaro-Navarro- Chairman, Ma. Luisa D. Chiong & Jennifer G. Sia-Members).

March 6, 2018 Cebu Holdings, Inc. submitted the copy of the PSE Disclosure Form LR-1 Comprehensive Corporate Disclosure on Issuance of Shares (Merger of Cebu Property Ventures and Development Corporation (CPVDC) with Cebu Holdings, Inc. (CHI)).

April 10, 2018 CHI announced the Results of the Annual Stockholders’ Meeting and Organizational Board of Directors’ Meeting (Approval of the merger of the Company and Cebu Property Ventures & Development Corporation).

May 30, 2018 Cebu Holdings, Inc. submitted the Integrated Annual Corporate Governance Report (I-ACGR) for the year 2017.

June 4, 2018 Cebu Holdings, Inc. submitted the copy of the SEC Form 23-B of Ayala Land, Inc. – 74.40% ownership dated May 29, 2018.

July 5, 2018 Cebu Holdings, Inc. submitted the copy of the SEC Form 23-B of Ayala Land, Inc. – 75.07% ownership dated June 5, 2018.

November 6, 2018 Cebu Holdings, Inc. submitted the copy of the PSE Disclosure Form 4-23 on the approval by the Securities and Exchange Commission of the merger of Cebu Property Ventures and Development Corporation with our Company.

November 15, 2018 Cebu Holdings, Inc. submitted the copy of the PSE Disclosure Form 4-11 on the change in the number of issued and outstanding shares of our Company.

November 22, 2018 CHI announced the Results of Board of Directors Meeting: 1. The declaration and payment of cash dividend of P0.15 per share to all stockholders of record as of December 13, 2018, payable on December 20, 2018. 2. The setting of the 2019 Annual Stockholders’ Meeting on April 15, 2019.

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December 7, 2018 Cebu Holdings, Inc. submitted the copy of the SEC Form 23-B of Ayala Land, Inc. – 70.43% ownership dated November 6, 2018.

Item 14. Additional Disclosures Data:

a. External Audit Fees: Independent Public Accountants

Audit and Audit-Related Fees

The Company paid its external auditor the following fees in the past two years:

Audit & Audit -related Fees Tax Fees Other Fees 2018 P 703.5k* None P 25.2k 201 7 P 670.0 k* None P 25 k * Exclusive of value-added tax and out of pocket expenses

SGV & Co. was engaged by the Company to audit its annual financial statements.

b. Tax Fees

No tax fees or other consultancy services were secured from external auditors, specifically SGV & Co.

c. The audit committee’s approval policies and procedures for the above services:

As indicated in the Audit Committee Charter, the Committee is responsible for the recommendation on the appointment of the external auditors and the fixing of their remuneration to the full Board. The Audit Committee reviews and approves the appointment &/or renewal of external auditors (SGV & Co.) for the fiscal year. A presentation of the scope of services to be rendered by external auditors and its corresponding professional fees are presented to the Committee for its approval during the 1 st Quarter regular Audit Committee meeting. The Committee, through its Chairman, recommends to the board en banc the approval of the external auditor appointment.

d. Financial Ratios (SRC Rule 68, Amended) – Pls. refer to Index to the 2018 Audited Financial Statements and Supplementary Schedules – (Schedule L).

e. Schedule – Use of Proceeds from Bonds

Schedule – Use of Proceeds from Bonds P5.0 Billion Fixed Rate Bonds due 2021

ESTIMATED ACTUAL PER PROSPECTUS Issue Amount 5,000,000,000.00 5,000,000,000.00 Expenses Documentary Stamp Tax 25,000,000.00 25,000,000.00 SEC Registration 1,812,500.00 1,812,500.00 Legal Research Fee 18,125.00 18,125.00 Upfront Fees - - Underwriting Fee 18,750,000.00 18,750,000.00 Professional Expenses and Agency Fees 3,828,500.00 4,051,801.20

Out of Pocket Expenses (publication, printing etc.) 2,500,000.00 275,128.39 Total Expenses 52.051.125.00 49,907,554.59 Net Proceeds 4,947,978,875.00 4,950,092,445.41

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Balance of Proceeds as of 12.31.2018 (P.075M)

Cebu Holdings, Inc. raised from the Bonds gross proceeds of P5.0 billion. After issue-related expenses, actual net proceeds amounted to approximately P4.95 billion. Net proceeds were used to fund various projects like Ayala Center Cebu Tower, Amara, 1016 Residences, Park Point Residences, Sedona Parc, CITP Redevelopment, Land acquisitions and Equity Infusion.

Cebu Holdings, Inc. Breakdown - Use of Proceeds from Bonds As of December 31, 2018

Projects Gross Amount Expenses Net Amount Ongoing: 1016 Residences 130,000,000 117,952,835 12,047,165 Park Point Residences 519,000,000 403,517,077 115,482,923 Amara the Parks & Phase 3b/Cebu Business Park 422,000,000 233,971,459 188,028,541 Sedona Parc 29,000,000 3,533,107 25,466,893 Ayala Center Cebu Tower 1,094,000,000 854,024,282 239,975,718 Under Construction: BPO400 - 354,518,552 (354,518,552) CT3 Retail - 73,703,261 (73,703,261) Land Acquisition (SRP & Lumarda Lot) 1,175,500,000 1,383,592,423 (208,092,423) Investment to CITP Redevelopment/Equity Infusion 1,580,500,000 939,933,910 640,566,090 Others (Interest Expense & Maintenance Fees) - 585,328,233 (585,328,233) Total 4,950,000,000 4,950,075,138 (75,138)

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C O V E R S H E E T for AUDITED FINANCIAL STATEMENTS

SEC Registration Number 1 5 7 9 1 2

C O M P A N Y N A M E C E B U HOLD I NGS , I N C . AND SUBS I D

I AR I ES

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province ) 2 0 t h Fl oo r , Aya l a Cen t e r Cebu

Towe r , Boho l S t r ee t , Cebu Bus–

i ne s s Pa r k , Cebu C i t y

Form Type Department requiring the report Secondary License Type, If Applicable AAFS CRMD N/ A

C O M P A N Y I N F O R M A T I O N Company’s Email Address Company’s Telephone Number Mobile Number www.cebuholdings.com (032) 888-3700 N/A

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day) 4,433 April December 31

CONTACT PERSON INFORMATION The designated contact person MUST be an Officer of the Corporation Name of Contact Person Email Address Telephone Number/s Mobile Number Ma. Luisa D. Chiong [email protected] N/A N/A m.ph

CONTACT PERSON’s ADDRESS 31/F Ayala Tower I & Exchange Plaza, Makati City NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated. 2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with the Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies.

*SGVFS033004* SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 October 4, 2018, valid until August 24, 2021 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-5 (Group A), Philippines November 6, 2018, valid until November 5, 2021

INDEPENDENT AUDITOR’S 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, 2018 and 2017, 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, 2018, 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, 2018 and 2017, and their consolidated financial performance and their cash flows for each of the three years in the period ended December 31, 2018 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.

*SGVFS033004*

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

Provisions and Contingencies

As disclosed in Note 33 to the consolidated financial statements, the Group is currently involved in a legal proceeding. This matter is significant to our audit because the recognition and measurement of provision related to this legal proceeding require significant judgment by management.

Audit response

We discussed the status of the legal proceeding with the management and the Group’s external legal counsel for the status of the legal proceeding 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 any provision based on the status of the case and considering relevant local rules and regulations.

Adoption of PFRS 15, Revenue from Contracts with Customers

Effective January 1, 2018, the Group adopted the new revenue recognition standard, PFRS 15, Revenue from Contracts with Customers, under modified retrospective approach. The adoption of PFRS 15 resulted in changes in the Group’s revenue process, policies and procedures and revenue recognition accounting policy. The following matters are significant to our audit because these involve application of significant judgment and estimation: (1) identification of the contract for sale of real estate property that would meet the requirements of PFRS 15; (2) assessment of the probability that the entity will collect the consideration from the buyer; (3) determination of the transaction price; (4) application of the output/input method as the measure of progress in determining real estate revenue; (5) determination of the actual costs incurred as cost of sales; and (6) recognition of cost to obtain a contract.

The Group identifies the contract that meets all the criteria required under PFRS 15 for a valid revenue contract. In the absence of a signed contract to sell, the Group identifies alternative documentation that are enforceable and that contains each party’s rights regarding the real estate property to be transferred, the payment terms and the contract’s commercial substance.

In evaluating whether collectability of the amount of consideration is probable, the Group considers the significance of the buyer’s initial payments in relation to the total contract price (or buyer’s equity). Collectability is also assessed by considering factors such as past history with the buyer, age and pricing of the property. Management regularly evaluates the historical sales cancellations and back-outs if it would still support its current threshold of buyers’ equity before commencing revenue recognition.

In determining the transaction price, the Group considers the selling price of the real estate property and other fees and charges collected from the buyers that are not held on behalf of other parties.

In measuring the progress of its performance obligation over time, the Group uses the output method. This method measures progress based on physical proportion of work done on the real estate project which requires technical determination by the Group’s specialists (project engineers).

In determining the actual costs incurred to be recognized as cost of sales, the Group estimates costs incurred on materials, labor and overhead which have not yet been billed by the contractor.

The Group identifies sales commission after contract inception as the cost of obtaining the contract. For contracts which qualified for revenue recognition, the Group capitalizes the total sales commission due to sales agent as cost to obtain contract and recognizes the related commission payable. The Group uses percentage of completion method in amortizing sales commission consistent with the Group’s revenue recognition policy.

*SGVFS033004*

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

Provisions and Contingencies

Audit response

Adoption of PFRS 15, Revenue from Contracts with Customers

In determining the actual costs incurred to be recognized as cost of sales, the Group estimates costs incurred on materials, labor and overhead which have not yet been billed by the contractor.

*SGVFS033004*

A member firm of Ernst & Young Global Limited - 3 -

The disclosures related to the adoption of PFRS 15, including available practical expedients applied by the Group, are included in Note 2 to the consolidated financial statements.

Audit Response

We obtained an understanding of the Group’s revenue recognition process, including the process of implementing the new revenue recognition standard. We reviewed the PFRS 15 assessment and accounting policies prepared by management, including revenue streams identification and scoping, and contract analysis.

For the identification of the alternative documentation for sale of real estate property (in the absence of a signed contract to sell) that would meet the requirements of PFRS 15, our audit procedures include, among others, involvement of our internal specialist in reviewing the Group’s legal basis regarding the enforceability of the alternative documentation against previous court decisions, buyers’ behavior and industry practices.

For the buyers’ equity, we evaluated management’s basis of the buyer’s equity by comparing this to the historical analysis of sales collections from buyers with accumulated payments above the collection threshold. We traced the analysis to supporting documents.

For the determination of the transaction price, we obtained an understanding of the nature of other fees charged to the buyers. For selected contracts, we agreed the amounts excluded from the transaction price against the expected amounts required to be remitted to the government based on existing tax rules and regulations (e.g., documentary stamp taxes, transfer taxes and real property taxes).

For the application of the output method, in determining real estate revenue, we obtained an understanding of the Group’s processes for determining the POC, and performed tests of the relevant controls. We obtained the certified POC reports prepared by the project engineers and assessed their competence and objectivity by reference to their qualifications, experience and reporting responsibilities. For selected projects, we conducted ocular inspections, made relevant inquiries and obtained the supporting details of POC reports showing the completion of the major activities of the project construction.

For the cost of sales, we obtained an understanding of the Group’s cost accumulation process and performed tests of the relevant controls. For selected projects, we traced costs accumulated, including those incurred but not yet billed costs, to supporting documents.

For the recognition of cost to obtain a contract, we obtained an understanding of the sales commission process. For selected contracts, we agreed the basis for calculating the sales commission capitalized and portion recognized in profit or loss, particularly (a) the percentage of commission due against contracts with sales agents, (b) the total commissionable amount (e.g., net contract price) against the related contract to sell, and, (c) the POC against the POC used in recognizing the related revenue from real estate sales.

We evaluated the disclosures made in the consolidated financial statements on the adoption of PFRS 15.

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, 2018, 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

*SGVFS033004*

A member firm of Ernst & Young Global Limited - 4 - and Annual Report for the year ended December 31, 2018 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.

*SGVFS033004*

A member firm of Ernst & Young Global Limited - 5 -

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. 7332588, January 3, 2019, Makati City

February 26, 2019

*SGVFS033004*

A member firm of Ernst & Young Global Limited CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts in Thousands)

December 31 2018 2017 ASSETS Current Assets Cash and cash equivalents (Notes 5 and 27) P=224,523 P=176,788 Short-term investments (Note 6) 25,244 2,543 Financial assets at fair value through profit or loss (Notes 7, 22 and 27) 10,379 10,129 Receivables (Notes 8, 20, 22 and 27) 2,086,232 1,880,140 Contract assets (Notes 15 and 27) 205,087 − Inventories (Note 9) 812,292 751,084 Other current assets (Note 10) 234,287 531,752 Total Current Assets 3,598,044 3,352,436 Noncurrent Assets Receivables - net of current portion (Notes 8 and 27) 224,968 496,958 Contract assets - net of current portion (Notes 15 and 27) 137,845 − Financial assets at fair value through other comprehensive income (OCI) (Notes 2 and 11) 342,650 − Available-for-sale investments (Note 11) − 304,333 Property and equipment (Note 12) 280,648 289,795 Investments in associates and a joint venture (Note 13) 1,487,335 2,567,710 Investment properties (Note 14) 19,186,946 13,517,337 Deferred tax assets - net (Note 25) 25,488 4,557 Other noncurrent assets (Notes 16 and 27) 1,057,904 55,034 Total Noncurrent Assets 22,743,784 17,235,724 P=26,341,828 P=20,588,160

LIABILITIES AND EQUITY Current Liabilities Accounts and other payables (Notes 17, 20, 27 and 28) P=8,418,721 P=4,705,560 Contract liabilities (Note 15) 65,541 − Current portion of long-term debt (Notes 18 and 27) 59,956 59,942 Income tax payable 13,417 50,381 Deposits and other current liabilities (Notes 19 and 27) 897,661 820,956 Total Current Liabilities 9,455,296 5,636,839 Noncurrent Liabilities Long-term debt - net of current portion (Notes 18 and 27) 6,341,019 6,393,634 Pension liabilities (Note 24) 32,703 32,269 Deferred tax liabilities - net (Note 25) 275,753 261,306 Deposits and other noncurrent liabilities (Notes 19 and 27) 177,608 316,479 Total Noncurrent Liabilities 6,827,083 7,003,688 Total Liabilities 16,282,379 12,640,527 Equity (Note 28) Equity attributable to equity holders of Cebu Holdings, Inc. Capital stock 2,916,845 1,920,074 Treasury shares (760,088) − Additional paid-in capital 856,684 856,684 Retained earnings 4,809,452 4,250,293 Equity reserves 264,560 (9,474) Remeasurement loss on defined benefit plan (Note 24) (27,404) (28,444) Net unrealized gain on equity instruments at FVOCI 2,361 − 8,062,410 6,989,133 Non-controlling interests (Note 4) 1,997,039 958,500 Total Equity 10,059,449 7,947,633 P=26,341,828 P=20,588,160

See accompanying Notes to Consolidated Financial Statements. *SGVFS033004* CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, except Earnings Per Share Figures)

Years Ended December 31 2018 2017 2016 REVENUE Real estate (Notes 14, 21 and 30) P=3,112,558 2,621,733 2,278,689 Equity in net earnings of associates and a joint venture (Note 13) 106,039 14,713 161,310 Interest income (Notes 5, 6, 8 and 22) 67,047 41,533 35,915 Other income (Note 22) 436,196 414,255 238,559 3,721,840 3,092,234 2,714,473 COSTS AND EXPENSES Real estate (Note 23) 1,875,263 1,437,580 1,295,847 Interest expense (Note 18) 336,332 345,214 247,716 General and administrative expenses (Note 23) 199,051 212,083 199,021 Other charges (Note 23) 68,435 22,916 64,886 2,479,081 2,017,793 1,807,470 INCOME BEFORE INCOME TAX 1,242,759 1,074,441 907,003 PROVISION FOR (BENEFIT FROM) INCOME TAX (Note 25) Current 274,643 251,143 132,071 Deferred (1,914) 10,294 43,161 272,729 261,437 175,232 NET INCOME P=970,030 P=813,004 P=731,771 Net Income Attributable to: Equity holders of Cebu Holdings, Inc. P=857,111 P=753,447 P=679,663 Non-controlling interests (Note 4) 112,919 59,557 52,108 P=970,030 P=813,004 P=731,771 Basic/Diluted Earnings Per Share (Note 26) P=0.44 P=0.39 P=0.35

See accompanying Notes to Consolidated Financial Statements.

*SGVFS033004* CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in Thousands)

Years Ended December 31 2018 2017 2016 Net income P=970,030 P=813,004 P=731,771 Other comprehensive income Other comprehensive income not to be reclassified to profit or loss in subsequent years: Unrealized gain on financial asset through OCI 38,877 − − Remeasurement gain (loss) on defined benefit plan (Note 24) 1,485 (5,993) 19,095 Tax effect relating to components of other comprehensive gain (loss) (445) 1,798 (5,729) Total other comprehensive income (loss) 39,917 (4,195) 13,366 Total comprehensive income P=1,009,947 P=808,809 P=745,137 Total comprehensive income attributable to: Equity holders of Cebu Holdings, Inc. P=897,028 P=749,252 P=693,029 Non-controlling interests 112,919 59,557 52,108 P=1,009,947 P=808,809 P=745,137

See accompanying Notes to Consolidated Financial Statements. .

*SGVFS033004* CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in Thousands)

Attributable to Parent Unrealized Remeasurement Total Equity Additional Gain on Gain (Loss) on Attributable to Non- Paid-in Treasury Equity Financial Asset Defined Benefit Equity Holders controlling Capital Stock Capital Shares Reserve Retained Earnings (Note 28) at Fair Value Obligation of Parent Interest (Note 28) (Note 28) (Note 2) (Note 2) Appropriated Unappropriated Total through OCI (Note 24) Company (Note 4) Total

For the Year Ended December 31, 2018 Balance as of January 1, 2018 P=1,920,074 P=856,684 − (P=9,474) P=1,300,000 P=2,950,293 P=4,250,293 P=− (P=28,444) P=6,989,133 P=958,500 P=7,947,633 PFRS 9 transition adjustment (Note 2) − − − − − 25,561 25,561 (36,516) − (10,955) − (10,955) January 1, 2018 as restated 1,920,074 856,684 − (9,474) 1,300,000 2,975,854 4,275,854 (36,516) (28,444) 6,978,178 958,500 7,936,678 Comprehensive income: Net Income − − − − − 857,111 857,111 − − 857,111 112,919 970,030 Other comprehensive income − − − − − − − 38,877 1,040 39,917 − 39,917 Total Comprehensive income − − − − − 857,111 857,111 38,877 1,040 897,028 112,919 1,009,947 Additional shares issued 996,771 − − − − − − − − 996,771 − 996,771 Treasury shares − − (760,088) − − − − − − (760,088) − (760,088) CBDI non-controlling interests − − − − − − − − − − 1,495,012 1,495,012 Effect of merger with a subsidiary − − − 274,034 − − − − − 274,034 (569,392) (295,358) Dividends declared (Note 28) − − − − − (323,513) (323,513) − − (323,513) − (323,513) Balance as of December 31, 2018 P=2,916,845 P=856,684 (P=760,088) P=264,560 P=1,300,000 P=3,509,452 P=4,809,452 P=2,361 (P=27,404) P=8,062,410 P=1,997,039 P=10,059,449

For the Year Ended December 31, 2017 Balance as of January 1, 2017 P=1,920,074 P=856,684 P=− (P=9,474) P=1,300,000 P=2,484,856 P=3,784,856 P=− (P=24,249) P=6,527,891 P=898,943 P=7,426,834 Comprehensive income Net Income − − − − − 753,447 753,447 − − 753,447 59,557 813,004 Other comprehensive income − − − − − − − − (4,195) (4,195) − (4,195) Total Comprehensive income − − − − − 753,447 753,447 − (4,195) 749,252 59,557 808,809 Dividends declared (Note 28) − − − − − (288,010) (288,010) − − (288,010) − (288,010) Balance as of December 31, 2017 P=1,920,074 P=856,684 P=− (P=9,474) P=1,300,000 P=2,950,293 P=4,250,293 P=− (P=28,444) P=6,989,133 P=958,500 P=7,947,633

For the Year Ended December 31, 2016 Balance as of January 1, 2016 P=1,920,074 P=856,684 P=− (P=9,474) P=1,300,000 P=2,035,602 P=3,335,602 P=− (P=37,615) P=6,065,271 P=846,835 P=6,912,106 Comprehensive income: Net Income − − − − − 679,663 679,663 − − 679,663 52,108 731,771 Other comprehensive income − − − − − − − − 13,366 13,366 − 13,366 Total Comprehensive income: − − − − − 679,663 679,663 − 13,366 693,029 52,108 745,137 Dividends declared (Note 28) − − − − − (230,409) (230,409) − − (230,409) − (230,409) Balance as of December 31, 2016 P=1,920,074 P=856,684 P=− (P=9,474) P=1,300,000 P=2,484,856 P=3,784,856 P=− (P=24,249) P=6,527,891 P=898,943 P=7,426,834 See accompanying Notes to Consolidated Financial Statements.

*SGVFS033004* CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands)

Years Ended December 31 2018 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=1,242,759 P=1,074,441 P=907,003 Adjustments for: Depreciation and amortization (Notes 12, 14 and 23) 549,685 495,610 402,070 Interest expense (Note 18) 336,332 345,214 247,716 Equity in net earnings of associates and a joint venture (Note 13) (106,039) (14,713) (161,310) Interest income (Note 22) (67,047) (41,533) (35,915) Pension expense (contribution) - net (Notes 23 and 24) 1,920 (5,923) (4,738) Unrealized foreign exchange gain (579) (105) (68) Unrealized loss (gain) on financial assets at fair value through profit or loss (250) (93) 438 Loss on disposal of property and equipment − − 13 Operating income before working capital changes 1,956,781 1,852,898 1,355,209 Decrease (increase) in: Receivables (327,925) (76,749) 1,146,215 Contract assets (342,932) − − Inventories 232,894 (12,992) (5,664) Financial assets at fair value through profit or loss 562 11,872 51,219 Other current assets (62,030) 93,338 37,528 Increase (decrease) in: Accounts and other payables 4,791,386 738,530 (899,799) Contract liabilities 65,541 − − Deposits and other liabilities (64,324) (256,981) 135,476 Net cash generated from operations 6,249,953 2,349,916 1,820,184 Interest paid (310,453) (386,099) (285,480) Interest received 33,497 12,955 24,214 Income taxes paid (311,607) (179,987) (183,131) Net cash provided by operating activities 5,661,390 1,796,785 1,375,787 CASH FLOWS FROM INVESTING ACTIVITIES Additions to: Investment properties (Notes 14 and 32) (4,179,762) (560,035) (109,435) Property and equipment (Notes 12 and 32) (25,813) (15,764) (26,455) Short-term investment (22,701) (3,015) − Associates and a joint venture (Note 13) − (698,303) (325,000) Land and improvements (Notes 15 and 32) − (56,027) (325,964) Decrease (increase) in other noncurrent assets (1,003,176) (39,487) 27,893 Proceeds from sale/redemption of: Property and equipment − − 300 Short-term investments − − 45,318 Investment properties − − 3,558 Net cash used in investing activities (5,231,452) (1,372,631) (709,785)

(Forward)

*SGVFS033004* - 2 -

Years Ended December 31 2018 2017 2016 CASH FLOWS FROM FINANCING ACTIVITIES Payments: Dividends paid (P=321,782) (P=288,010) (P=242,329) Long-term debt (61,000) (459,000) (470,875) Purchased land − (351,569) (351,569) Availments of long-term debt − 756,200 378,100 Net cash used in financing activities (382,782) (342,379) (686,673) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 579 105 68 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 47,735 81,880 (20,603) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 5) 176,788 94,908 115,511 CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 5) P=224,523 P=176,788 P=94,908

See accompanying Notes to Consolidated Financial Statements.

*SGVFS033004* CEBU HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Group Information and Legal Merger

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 70.43%-owned subsidiary of Ayala Land, Inc. (ALI), a publicly listed company. ALI is a subsidiary of Ayala Corporation (AC), a publicly listed company which is 47.04%-owned by Mermac, Inc. and the rest by public.

The Parent Company registered office address is at 20th Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City. The Parent Company is engaged in real estate development, sale of subdivided land, residential and office condominium units, sports club shares, and lease of commercial spaces.

The Parent Company’s shares of stock are publicly traded in the Philippine Stock Exchange (PSE).

Details on the Parent Company’s subsidiaries are as follows:

∂ 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 Business Park, Cebu City.

∂ 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. CBP Theatre has not yet started its operations as of December 31, 2018.

∂ Prior to the legal merger in 2018, Cebu Property Ventures and Development Corporation (CPVDC), a partially-owned 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 Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City. On November 6, 2018, Securities and Exchange Commission (SEC) approved the merger between CPVDC and the Parent Company.

∂ Asian I-Office Properties, Inc. (AiO), a wholly owned subsidiary, is engaged in all aspects of real estate development and in leasing of corporate spaces. The registered office address of AiO is at 20th Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City.

∂ Taft Punta Engaño Property Inc. (TPEPI), a partially-owned subsidiary, is engaged in real estate development of mixed-use commercial and residential district within a 12-hectare property in Lapu-Lapu City. The registered office address of TPEPI is at Vicsal Bldg., cor. C.D. Seno & W.O. Seno Sts., San Miguel Extension, Barangay Guizo, North Reclamation Area, Mandaue City.

∂ 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 development includes two BPO towers, an Ayala branded hotel, and a 5-storey mall. The Company’s registered address and principal place of business is at 28th Floor, Tower One and Exchange Plaza, Ayala Triangle, Ayala Avenue, Makati City.

The consolidated financial statements of Cebu Holdings Inc. and its subsidiaries (the Group) as of December 31, 2018 and 2017 and for each of the three years ended December 31, 2018 were endorsed for approval by the Audit and Risk Committee on February 12, 2019 and were approved and authorized for issue by the Board of Directors (BOD) on February 26, 2019.

*SGVFS033004* - 2 -

Legal Merger On February 26, 2018, the Parent Company and its subsidiary, CPVDC, entered into a plan merger with the Parent Company as the surviving entity.

On November 6, 2018, SEC has approved the merger and issued the Certificate of Filing of the Articles and Plan of Merger of CHI and CPVDC (Plan of Merger).

Under the Plan of Merger, the Parent Company will issue 996,771,000 outstanding shares, with P=1 par value to CPVDC’s shareholders including the Parent Company from its unissued shares through a share swap with a swap ratio of 1.06.

The merger resulted in a streamlined operations within the Group and the transactions are conducted in a more efficient manner.

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=18,584 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.

*SGVFS033004* - 3 -

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 increased its ownership interest 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 has the control over CBDI and has the power to direct relevant activities as it has the majority of BOD seats which 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.

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=588

*SGVFS033004* - 4 -

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 2018 2017 2016 CLCI 100 100 100 CBP Theatre 100 100 100 CPVDC – 76 76 AiO 100 76* 76* CBDI 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.

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 *SGVFS033004* - 5 - 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.

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, 2018:

∂ Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based Payment Transactions

The amendments to PFRS 2 address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share- based payment transaction with net settlement features for withholding tax obligations; and the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled. Entities are required to apply the amendments to: (1) share-based payment transactions that are unvested or vested but unexercised as of January 1, 2018, (2) share-based payment transactions granted on or after January 1, 2018 and to (3) modifications of share-based payments that occurred on or after January 1, 2018. Retrospective application is permitted if elected for all three amendments and if it is possible to do so without hindsight.

These amendments do not have any impact on the Group’s consolidated financial statements since the Group does not have share-based payment transactions.

∂ PFRS 9, Financial Instruments

PFRS 9 Financial Instruments replaces PAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after January 1, 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The Group applied PFRS 9 using modified retrospective approach, and chose not to restate comparative figures as permitted by the transitional provisions of PFRS 9, thereby resulting in the following impact:

∂ The classification and measurement requirements previously applied in accordance with PAS 39 and disclosures requirements in PFRS 7 are retained for the comparative period. Accordingly, the information presented for the comparative period does not reflect the requirements of PFRS 9.

∂ The Group discloses the accounting policies for both the current and the comparative periods, one applying PFRS 9 beginning January 1, 2018 and one applying PAS 39 as at December 31, 2017.

*SGVFS033004* - 6 -

∂ The difference between the previous carrying amount and the carrying amount at the beginning of the annual reporting period that includes the date of initial application is recognized in the opening retained earnings or other component of equity, as appropriate.

∂ As comparative information is not restated, the Group is not required to provide a third statement of financial information at the beginning of the earliest comparative period in accordance with Philippine Accounting Standard (PAS) 1, Presentation of Financial Statements.

As at January 1, 2018, the Group has reviewed and assessed all its existing financial assets.

The assessment of the Group’s business model was also made as at the date of the initial application. The assessment of whether contractual cash flows on financial instruments are solely comprised of principal and interest was made based on the facts and circumstances as at the initial recognition of the financial instruments.

The table below illustrates the classification and measurement of financial assets and financial liabilities under PFRS 9 and PAS 39. The accounting policies adopted by the Group in its evaluation of the classification and measurement categories under PFRS 9 are discussed in the significant accounting policies section.

(a) Classification and measurement

The measurement category and the reconciliation of carrying amounts of financial assets under PAS 39 and PFRS 9 are as follows:

As at January 1, 2018 Carrying Carrying Amount under Amount under PAS 39 as at PFRS 9 as at PAS 39/PFRS 9 Measurement Category December 31, 2017 Remeasurement January 1, 2018 Loans and receivables under PAS 39/Financial assets at amortized cost under PFRS 9: Cash and cash equivalents P=176,788 P=− P=176,788 Short-term investments 2,543 − 2,543 Receivables and contract assets: Receivables and contract assets 813,079 − 813,079 Due from related parties 1,487,762 − 1,487,762 Other nontrade receivables 76,118 − 76,118 Other current/noncurrent assets: Refundable deposits 23,746 − 23,746 Financial assets at FVPL under PAS 39 and PFRS 9 10,129 − 10,129 Available-for-sale under PAS 9/Financial assets at FVOCI under PFRS 9 304,333 − 304,333 Total P=2,894,498 P=− P=2,894,498

The following are the changes in the classification of the Group’s financial assets:

∂ Cash and cash equivalents, trade receivables, short-term investments and other current and noncurrent financial assets (i.e., refundable deposits) previously classified as Loans and receivables are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These are now classified and measured as Financial assets at amortized cost.

*SGVFS033004* - 7 -

∂ Equity investments in non-listed companies previously classified as AFS financial assets are now classified and measured as AFS investments at FVOCI. The Group elected to classify irrevocably its non-listed equity investments under this category as it intends to hold these investments for the foreseeable future.

As a result of the change in classification of the Group’s non-listed equity investments, the impairment losses of P=36.5 million recognized in profit or loss in prior periods were reclassified to other comprehensive income as at January 1, 2018 (see Note 11).

As at December 31, 2018

Carrying Carrying Amount under Amount under PAS 39 as at PFRS 9 as at PAS 39/PFRS 9 Measurement Category December 31, 2018 Remeasurement December 31, 2018 Loans and receivables under PAS 39/Financial assets at amortized cost under PFRS 9: Cash and cash equivalents P=224,523 P=− P=224,523 Short-term investments 25,244 − 25,244 Receivables and contract assets: Trade receivables and contract assets 691,867 − 691,867 Due from related parties 1,410,230 − 1,410,230 Other nontrade receivables 553,264 − 553,264 Other current/noncurrent assets: Refundable deposits 29,376 − 29,376 Financial assets at FVPL under PAS 39 and PFRS 9 10,379 − 10,379 AFS financial asset under PAS 39/Equity instruments at FVOCI under PFRS 9 303,771 38,879 342,650 Total P=3,248,654 P=38,879 P=3,287,533

There were no changes to the classification and measurement of financial liabilities. As at December 31, 2018 and 2017, the Group does not hold financial liabilities designated at FVPL.

The Group does not have financial assets and financial liabilities which had previously been designated at FVPL to reduce an accounting mismatch in accordance with PAS 39 which had been reclassified to amortized cost or FVOCI upon transition to PFRS 9.

(b) Impairment

The adoption of PFRS 9 has fundamentally changed the Group’s accounting for impairment losses for financial assets by replacing PAS 39’s incurred loss approach with a forward- looking expected credit loss (ECL) approach. PFRS 9 requires the Group to record an allowance for impairment losses for loans and other debt financial assets not held at FVPL and contract assets.

For trade receivables and contract assets, the Group has applied the standard’s simplified approach and has calculated ECLs based on lifetime expected credit losses. 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. Further, since the implementation of PFRS 9, all financial assets except those measured at FVPL and equity instruments at FVOCI are assessed for at least 12-month ECL and the population of financial assets to which the lifetime ECL applies is larger than the population for which there is objective evidence of impairment in accordance with PAS 39. *SGVFS033004* - 8 -

For other financial assets such as receivables from related parties and others, 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 cash and cash equivalents, the Group applies the low credit risk simplification. The probability of default and loss given defaults are publicly available and are considered to be low credit risk investments. It is the Group’s policy to measure ECL on such instruments on a 12-month basis. However, when there has been a significant increase in credit risk since origination, the allowance will be based on a lifetime ECL.

There were no significant changes on the impairment allowances of the Group upon transition to PFRS 9 on January 1, 2018.

In addition to the adjustments described above, upon adoption of PFRS 9, other items of the primary financial statements such as deferred taxes, and retained earnings were adjusted as necessary.

∂ Amendments to PFRS 4, Applying PFRS 9 Financial Instruments with PFRS 4, Insurance Contracts

The amendments address concerns arising from implementing PFRS 9, the new financial instruments standard before implementing the new insurance contracts standard. The amendments introduce two options for entities issuing insurance contracts: a temporary exemption from applying PFRS 9 and an overlay approach. The temporary exemption is first applied for reporting periods beginning on or after January 1, 2018. An entity may elect the overlay approach when it first applies PFRS 9 and apply that approach retrospectively to financial assets designated on transition to PFRS 9. The entity restates comparative information reflecting the overlay approach if, and only if, the entity restates comparative information when applying PFRS 9.

The amendments are not applicable to the Group since none of the entities within the Group have activities that are predominantly connected with insurance or issue insurance contracts.

∂ PFRS 15, Revenue from Contracts with Customers PFRS 15 supersedes PAS 11, Construction Contracts, PAS 18, Revenue, and the related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with its customers. PFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognized at an amount that reflects the consideration. The five-step model is as follows:

∂ Identify the contract with a customer; ∂ Identify the performance obligations in the contract; ∂ Determine the transaction price; ∂ Allocate the transaction price to the performance obligations in the contract; and ∂ Recognize revenue as the entity satisfies a performance obligation.

PFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, PFRS 15 requires extensive disclosures.

*SGVFS033004* - 9 -

On February 14, 2018, the Philippines Interpretation Committee (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 contract assets and interest expense for contract liabilities 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 not considered for revenue recognition purposes.

Availment of the Deferral of the Accounting for Common Usage Service Area (CUSA) Charges The Group is acting as a principal for the provision of air-conditioning services, common use service services and administration and handling services.

The Group opted to avail of the relief for the deferral of the accounting for CUSA charges upon the date of initial application on January 1, 2018. If the Group had adopted the accounting for CUSA charges, this would have resulted to the gross presentation of the related revenue and the related expenses and cost. Currently, the related revenue is presented net of costs and expenses. These would not result to any adjustment in the retained earnings as of January 1, 2018 and net income.

*SGVFS033004* - 10 -

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 to repossess if this would have been opted). This would have increased retained earnings as at January 1, 2018 and gain from repossession in 2018. Currently, the Group records the repossessed inventory at historical cost.

The Group adopted PFRS 15 using the modified retrospective method of adoption with the date of initial application at January 1, 2018. Under this method, the standard can be applied either to all contracts at the date of initial application or only to contracts that are not completed at this date. The Group elected to apply the method to those contracts not completed as at January 1, 2018.

The cumulative effect of initially applying PFRS 15 is recognized at the date of initial application as an adjustment to the opening balance of retained earnings. Therefore, the comparative information was not restated and continues to be reported under PAS 11, PAS 18 and related Interpretations.

Consolidated Statement of Financial Position

Increase As of (Decrease) December 31, due to PFRS 15 A restated 2017 Adjustments January 1, 2018 Assets Receivables (Note 8) P=2,002,141 (P=176,866) P=1,825,275 Contract assets (Note 15) – 176,866 176,866 Total Assets P=2,002,141 P=– P=2,002,141 Liabilities Deposits and other liabilities (Note 19) P=4,705,560 (P=92,179) P=4,613,381 Contract liabilities (Note 15) – 92,179 92,179 Total Liabilities P=4,705,560 P=– P=4,705,560

The impact to each financial statement line item of the consolidated statement of income and consolidated statement of financial position as at and for the year ended December 31, 2018 as a result of the adoption of PFRS 15 is as follows:

Consolidated Statement of Comprehensive Income No impact in the Group’s comprehensive income as a result of the adoption of PFRS 15.

Consolidated Statement of Financial Position

Amounts prepared under Increase/ PFRS 15 Previous PFRS (Decrease) Assets Receivables (Note 8) P=2,201,476 P=2,544,408 (P=342,932) Contract assets (Note 15) 342,932 – 342,932 Total Assets P=2,544,408 P=2,544,408 P=– Liabilities Deposits and other liabilities (Note 19) P=9,061,178 P=9,126,719 (P=65,541) Contract liabilities (Note 15) 65,541 – 65,541 Total Liabilities P=9,126,719 P=9,126,719 P=–

The adoption of PFRS 15 did not have a material impact on other comprehensive income or the Group’s operating, investing and financing cash flows. *SGVFS033004* - 11 -

The nature of the adjustments as at January 1, 2018 and the reasons for the significant changes in the consolidated statement of financial position as at December 31, 2018 and the consolidated statement of income for the year ended December 31, 2018 are described below:

Amounts billed for work performed/amount billed in advance for construction work PFRS 15 requires to present separately the contract asset (right to consideration in exchange for goods or services that has transferred), contract liability (obligation to transfer goods or services to a customer for which the entity has received consideration) and receivable (right to consideration is unconditional).

In the case of contracts in which the recognized real estate sales determined based on POC exceed the amount billed, the difference is presented as “Contract assets”, separate from “Receivables”, in the consolidated statement of financial position. Whereas, in contracts in which the recognized real estate sales determined based on POC are lower than the amount billed, the difference is presented as “Contract liabilities” under current liabilities in the consolidated statement of financial position.

PIC Q&A 2018-11, Classification of Land Held by Real Estate Developer

The Group has adopted PIC Q&A 2018-11 starting January 1, 2018 which requires that land approved by the BOD of a real estate developer to be held in the ordinary course of business to be classified as inventory in accordance with PAS 2, Inventories. Otherwise, the land should be classified as investment property in accordance with PAS 40, Investment Property.

The impact of adoption is applied retrospectively which resulted to the reclassification of land and improvements from “Land and Improvements” to “Investment Properties” in the consolidated statement of financial position. Prior to the adoption of PIC Q&A 2018-11, the classification was based on the Group’s timing to start the development of the property (e.g. project launching).

PIC Q&A on Advances to Contractors and PIC Q&A on Land Classification The Group adopted PIC Q&A 2018-11, Classification of Land by Real Estate Developer and PIC Q&A 2018-15, PAS 1- Classification of Advances to Contractors in the Nature of Prepayments: Current vs. Non-current starting January 1, 2018. The impact of adoption is applied retrospectively which resulted to the following reclassifications in the consolidated statement of financial position:

December 31, 2017

Amounts prepared under PIC Q&A Increase Land held for future use (Note 14) Previous PFRS 2018-11 (Decrease) Land and Improvement P=2,636,277 P= − (P=2,636,277) Investment Properties − 2,636,277 2,636,277 P=2,636,277 P=2,636,277 P= −

PIC Q&A Increase Advances to contractors Previous PFRS 2018-15 (Decrease) Current P=62,542 P=41,557 (P=20,985) Non-current − 20,985 20,985 P=62,542 P=62,542 P= − a) Land held for future use, previously presented as non-current asset includes land which the BOD has previously approved to be developed into residential development for sale. Before the adoption of PIC Q&A 2018-11, the classification was based on the Group’s timing to start the development of the property. This was reclassified under inventories in the consolidated statement of financial position. *SGVFS033004* - 12 -

b) Advances to contractors and suppliers previously presented under current assets, representing prepayments for the construction of investment property was reclassified to noncurrent asset. Before the adoption of PIC Q&A 2018-15, the classification of the Group is based the timing of application of these advances against billings and timing of delivery of goods and services. This interpretation aims to classify the prepayment based on the actual realization of such advances based on the determined usage/realization of the asset to which it is intended for (e.g. inventory, investment property, property plant and equipment).

∂ Amendments to PAS 28, Investments in Associates and Joint Ventures, Measuring an Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle)

The amendments clarify that an entity that is a venture capital organization, or other qualifying entity, may elect, at initial recognition on an investment-by-investment basis, to measure its investments in associates and joint ventures at fair value through profit or loss. They also clarify that if an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries. This election is made separately for each investment entity associate or joint venture, at the later of the date on which (a) the investment entity associate or joint venture is initially recognized; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a parent. Retrospective application is required.

The Group has assessed that the adoption of these amendments does not have any impact in the 2018 consolidated financial statements.

∂ Amendments to PAS 40, Investment Property, Transfers of Investment Property

The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use. Retrospective application of the amendments is not required and is only permitted if this is possible without the use of hindsight.

The Group’s current practice is in line with the clarifications issued and does not have any effect on its consolidated financial statements.

Standards and interpretation issued but not yet effective Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the Group does not expect that the 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.

Effective beginning on or after January 1, 2019

∂ 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 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. The amendments should be applied retrospectively with earlier application permitted. *SGVFS033004* - 13 -

These amendments have no impact on the consolidated financial statements of the Group.

∂ 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-statement of financial position 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 (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). 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 (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). 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 Group is currently assessing the impact of adopting PFRS 16.

∂ 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.

*SGVFS033004* - 14 -

The amendments apply to plan amendments, curtailments, or settlements occurring on or after the beginning of the first annual reporting period that begins on or after January 1, 2019, with early application permitted. These amendments will apply only to any future plan amendments, curtailments, or settlements of the Group.

∂ Amendments to PAS 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, Investments in Associates and Joint Ventures.

The amendments should be applied retrospectively and are effective from January 1, 2019, with early application permitted. Since the Group does not have such long-term interests in its associate and joint venture, the amendments will not have an impact on its consolidated financial statements.

∂ 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.

This interpretation is not relevant to the Group because there is no uncertainty involved in the tax treatments made by management in connection with the calculation of current and deferred taxes as of December 31, 2018 and 2017.

∂ 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. *SGVFS033004* - 15 -

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 are currently not applicable to the Group but may apply to future transactions.

∂ Amendments to PAS 12, Income Tax Consequences of Payments on Financial Instruments Classified as Equity

The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognizes the 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.

An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early application is permitted. These amendments are not relevant to the Group because dividends declared by the Group do not give rise to tax obligations under the current tax laws.

∂ Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early application permitted.

Since the Group’s current practice is in line with these amendments, the Group does not expect any effect on its consolidated financial statements upon adoption.

Effective beginning on or after January 1, 2020

∂ Amendments to PFRS 3, Definition of a Business

The amendments to PFRS 3 clarify the minimum requirements to be a business, remove the assessment of a market participant’s ability to replace missing elements, and narrow the definition of outputs. The amendments also add guidance to assess whether an acquired process is substantive and add illustrative examples. An optional fair value concentration test is introduced which permits a simplified assessment of whether an acquired set of activities and assets is not a business.

An entity applies those amendments prospectively for annual reporting periods beginning on or after January 1, 2020, with earlier application permitted.

These amendments will apply on future business combinations of the Group.

*SGVFS033004* - 16 -

∂ Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, Definition of Material

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 significantly impact an entity’s materiality judgements.

An entity applies those amendments prospectively for annual reporting periods beginning on or after January 1, 2020, with earlier application permitted.

Effective beginning on or after January 1, 2021

∂ PFRS 17, Insurance Contracts

PFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, PFRS 17 will replace PFRS 4, Insurance Contracts. This new standard on insurance contracts applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply.

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 (IASB) 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.

Current and Noncurrent Classification The Group presents assets and liabilities in the consolidated statement of financial position based on current/noncurrent classification. An asset is current when it is: ∂ Expected to be realized or intended to be sold or consumed in the normal operating cycle; ∂ Held primarily for the purpose of trading; *SGVFS033004* - 17 -

∂ Expected to be realized within twelve months after the reporting period; or, ∂ Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as noncurrent.

A liability is current when: ∂ It is expected to be settled in the normal operating cycle; ∂ It is held primarily for the purpose of trading; ∂ 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 classifies all other liabilities as noncurrent.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities, respectively.

Fair Value Measurement The Group measures financial instruments such as financial assets at FVPL and FVOCI at fair value and discloses the fair value of its other financial instruments as well as investment properties at each reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between 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: ∂ In the principal market for the asset or liability, or ∂ In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group.

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.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic 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 uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

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 re- assessing 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. *SGVFS033004* - 18 -

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 Instruments - initial recognition and subsequent measurement prior to January 1, 2018

Date of recognition The Group recognizes a financial asset or a financial liability in the consolidated statement of financial position when it becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the settlement date.

Initial recognition Financial assets and financial liabilities are initially recognized at fair value. The initial measurement of all financial assets includes transaction costs except for financial instruments measured at FVPL.

The Group classifies its financial assets within the scope of PAS 39 in the following categories: financial assets at FVPL, loans and receivables, held-to-maturity financial assets, or AFS financial assets. Financial liabilities are classified into financial liabilities at FVPL or other financial liabilities. The classification depends on the purpose for which the financial assets were acquired or financial liabilities were incurred and whether they are quoted in an active market. Management determines the classification of its financial instruments at initial recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date.

As of December 31, 2018, the Group’s financial assets are of the nature of loans and receivables, financial assets at FVPL and AFS financial assets.

“Day 1” difference Where the transaction price in a non-active market is different to the fair value from other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Group recognizes the difference between the transaction price and fair value (a “Day 1” difference) in the consolidated statement of income under “Interest income” and “Other charges” accounts unless it qualifies for recognition as some other type *SGVFS033004* - 19 - of asset. In cases where variables used are made of data which is not observable, the difference between the transaction price and model value is only recognized in the consolidated statement of income when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate method of recognizing the “Day 1” difference amount.

Financial assets and financial liabilities at FVPL Financial assets and financial liabilities at FVPL include financial assets and financial liabilities held for trading and financial assets and financial liabilities designated upon initial recognition as at FVPL.

Financial assets and financial liabilities are classified as held for trading if they are acquired for the purpose of selling and repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments or a financial guarantee contract.

Fair value gains or losses on investments held for trading, net of interest income accrued on these assets, are recognized in the consolidated statement of income under “Other income” or “Other charges”.

Financial assets may be designated at initial recognition as FVPL if any of the following criteria are met: ∂ the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis; or ∂ the assets are part of a group of financial assets which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or ∂ the financial instrument contains an embedded derivative that would need to be separately recorded.

As of December 31, 2018, the Group holds an investment in Unit Investment Trust Fund (UITF) held for trading and classified these as financial assets at FVPL.

Available-for-sale financial assets AFS financial assets pertain to equity investments that are neither classified as held for trading nor designated at FVPL.

After initial measurement, AFS financial assets are subsequently measured at fair value with unrealized gains or losses recognized in OCI and credited to unrealized gain (loss) on AFS financial assets account until the investment is derecognized, at which time the cumulative gain or loss is recognized in other income, or the investment is determined to be impaired, when the cumulative loss is reclassified from unrealized gain (loss) on AFS financial assets account to the consolidated statement of comprehensive income. Dividend earned whilst holding AFS financial assets is reported as dividend income.

The Group evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, the Group may elect to reclassify these financial assets if the management has the ability and intention to hold the assets for the foreseeable future or until maturity.

Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. They are not entered into with the intention of immediate or short- term resale and are not designated as AFS financial assets or financial assets at FVPL.

*SGVFS033004* - 20 -

After initial measurement, the loans and receivables are subsequently measured at amortized cost using the effective interest method, less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate (EIR). The amortization is included in “Interest income” account in the consolidated statement of income. The losses arising from impairment of such loans and receivables are recognized under “General and administrative expenses” account in the consolidated statement of income.

Loans and receivables are included in current assets if maturity is within twelve months from the reporting date. Otherwise, these are classified as noncurrent assets.

As of December 31, 2018, the Group’s loans and receivables include cash and cash equivalents, short-term investments and receivables (except advances to contractors).

Impairment of financial assets The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in economic conditions that correlate with defaults.

AFS financial assets. The Group treats AFS financial assets as impaired when there has been a significant or prolonged decline in fair value below its cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires judgment. The Group treats “significant” generally as 20% or more and ‘prolonged’ as greater than 12 months for unquoted securities. In addition, the Group evaluates other factors, including normal volatility in secondary price for unquoted equities.

Loans and receivables. For loans and receivables carried at amortized cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is charged to the consolidated statement of income under the “Costs and expenses” account. Interest income continues to be recognized based on the EIR of the asset. Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognized in the consolidated statement of income, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.

*SGVFS033004* - 21 -

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as customer type, credit history, past-due status and term.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.

The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience.

Other financial liabilities Other financial liabilities are financial liabilities not designated as at FVPL where the substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or other financial asset for a fixed number of own equity shares. The components of issued financial instrument that contain both liability and equity element are accounted for separately, with the equity component being assigned the residual amount after deducting from the instrument as a whole the amount separately determined as fair value of the liability component on the date of issue.

After initial measurement, other financial liabilities are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an integral part of the EIR. The amortization is included in the “Other charges” account in the consolidated statement of income.

As of December 31, 2017, the Group’s other financial liabilities include accounts and other payables, long-term debt, deposits and other liabilities, and excluding statutory liabilities and other obligations that meet the above definition (other than liabilities covered by other accounting standards such as income tax payable).

Deposits and other liabilities Deposits and other liabilities which include tenants’ deposits are measured initially at fair value. The difference between the cash received and the fair value of tenants’ deposits is recognized in “Tenants deposits” under “Deposits and other liabilities” in the consolidated statement of financial position and amortized using the straight-line method under the “Real estate revenue” account in the consolidated statement of income. After initial recognition, tenants’ deposits are subsequently measured at amortized cost using effective interest method. Accretion of discount is recognized under “Other financing charges” in the consolidated statement of income.

Derecognition of financial assets and financial liabilities

Financial asset. A financial asset (or, where applicable, a part of a group of financial assets) is derecognized when: a. the right to receive cash flows from the assets has expired; b. the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third-party under a “pass-through” arrangement; or c. the Group has transferred its right to receive cash flows from the asset and either: (i) has transferred substantially all the risks and rewards of the asset; or (ii) has neither transferred nor retained the risks and rewards of the asset but has transferred control of the asset.

When the Group has transferred its right to receive cash flows from an asset or has entered into a “pass-through” arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a

*SGVFS033004* - 22 - 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 liability. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated statement of income.

Financial Instruments - initial recognition and subsequent measurement effective January 1, 2018

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.

Subsequent measurement For purposes of subsequent measurement, financial assets are classified in four categories: ∂ Financial assets at amortized cost (debt instruments) ∂ Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments) ∂ Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) ∂ Financial assets at FVPL

Financial assets at amortized cost (debt instruments). A financial asset is measured at amortized cost if (a) it is held within a business model for which the objective is to hold financial assets in order to collect contractual cash flows and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These financial assets are initially recognized at fair value plus directly attributable transaction costs and subsequently measured at amortized cost using the EIR method, less any impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortization is included in “Interest income” in the statement of income and is calculated by applying the EIR to the gross carrying amount of the financial asset, except for (a) purchased or originated credit-impaired financial assets and (b) financial *SGVFS033004* - 23 - 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 bad debts” in the statement of income.

For trade receivables and contract assets, these are measured at the transaction price determined under PFRS 15. Refer to the accounting policies in Revenue from contracts with customers.

As at December 31, 2018, the Group’s financial assets at amortized cost include cash and cash equivalents, short-terms investments, trade receivables, contract assets, due from related parties, other nontrade receivables and refundable deposits (under “Other current” and “Other noncurrent” assets).

Financial assets designated at FVOCI (equity instruments). Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under PAS 32, Financial Instruments: Presentation, and are not held for trading. The classification is determined on an instrument-by- instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognized as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a 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.

The Group elected to classify irrevocably its investments in unquoted club shares under this category. 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 measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading 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. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognized in the statement of profit or loss.

This category includes derivative instruments and listed equity investments which the Group had not irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are also recognized as other income in the statement of profit or loss when the right of payment has been established.

As at December 31, 2018, the Group’s financial assets at FVPL include short-term money market placements.

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.

*SGVFS033004* - 24 -

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 and contract assets, 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.

*SGVFS033004* - 25 -

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.

As at December 31, 2018, the Group’s financial liabilities include accounts and other payables, long- term debt, deposits and other liabilities, and excluding statutory liabilities and other obligations that meet the above definition (other than liabilities covered by other accounting standards such as income tax payable).

Subsequent measurement The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at FVPL. Financial liabilities at FVPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVPL.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by PFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in the statement of profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in PFRS 9 are satisfied. The Group has not designated any financial liability as at FVPL.

Loans and borrowings. This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit or loss.

This category generally applies to interest-bearing loans and borrowings.

Reclassifications of financial instruments The Group reclassifies its financial assets when, and only when, there is a change in the business model for managing the financial assets.

Reclassifications shall be applied prospectively by the Group and any previously recognized gains, losses or interest shall not be restated. The Group does not reclassify its financial liabilities.

The Group does not reclassify its financial assets when:

∂ A financial asset that was previously a designated and effective hedging instrument in a cash flow hedge or net investment hedge no longer qualifies as such; ∂ A financial asset becomes a designated and effective hedging instrument in a cash flow hedge or net investment hedge; and, ∂ There is a change in measurement on credit exposures measured at fair value through profit or loss.

*SGVFS033004* - 26 -

Derecognition of financial instruments

Financial assets. A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is derecognized when:

∂ the contractual rights to the cash flows from the financial asset expire; or, ∂ the Group transfers the contractual rights to receive the cash flows of the financial asset in a transaction in which it either (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.

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 retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

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.

*SGVFS033004* - 27 -

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 expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as additional cost of the related property and equipment.

Depreciation and amortization commences once the property and equipment are available for their intended use and are computed on a straight-line basis over the estimated useful lives as follows:

Years Buildings and improvements 40 Furniture, fixtures and equipment 3−10 Transportation equipment 3−5

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 equipment.

When property and equipment are retired or otherwise disposed of, the cost of the related accumulated depreciation and amortization, and accumulated provision for impairment losses, if any,

*SGVFS033004* - 28 - are removed from the accounts and any resulting gain or loss is credited or charged against current operations.

Fully depreciated property and equipment are retained in the accounts while still in use although no further depreciation is credited or charged to current operations.

Intangible Assets The Group’s development rights included under “Other noncurrent assets” pertain to the unsold cost of development rights purchased by the Group allocated based on the revised gross floor area of a structure in a particular lot.

These are measured on initial recognition at cost. After initial recognition, these are carried at cost less any accumulated impairment losses. The development rights are capitalized as additional cost of the structure once the development commences.

Investments in Associates and a Joint Venture 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 or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.

The Group’s investments in associates and a joint venture is accounted for using the equity method.

Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of the associate or joint venture since the acquisition date.

Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually.

The consolidated statement of comprehensive income reflects the Group’s share of the results of operations of the associate or 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 change recognized directly in the equity of the associate or joint venture, the Group recognizes its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.

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 *SGVFS033004* - 29 - 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 redevelopment 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 and 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 *SGVFS033004* - 30 - 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 valuation model is used. Impairment losses of continuing operations are recognized in the consolidated statement of income in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation and amortization, had no impairment loss been recognized for the asset in prior years.

Such reversal is recognized in the consolidated statement of income unless the asset is carried at revalued amount, in which case, the reversal is treated as a revaluation increase. After such reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

For investments in associates and a joint venture, after application of the equity method, the Group determines whether it is necessary to recognize any additional impairment loss with respect to the Group’s net investment in the investee companies. 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 recoverable amount of the investee companies and the carrying value, and recognizes the amount in the consolidated statement of income.

Equity

Capital stock and additional paid-in capital 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 are chargeable to “Additional paid-in capital” account. If additional paid-in capital is not sufficient, the excess is charged against retained earnings. When the Group issues more than one class of stock, a separate account is maintained for each class of stock and the number of shares issued.

Retained earnings Retained earnings represent net accumulated earnings (losses) of the Group less dividends declared and any adjustments arising from the application of new accounting standards or policies applied retrospectively. The individual accumulated earnings of the subsidiaries are available for dividends only after declared by their respective BOD.

Unappropriated retained earnings Unappropriated retained earnings represent the portion of retained earnings that is free and can be declared as dividends to stockholders.

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

Dividend distributions 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 date. *SGVFS033004* - 31 -

Equity reserves Equity reserves pertain to the difference between the consideration transferred and the equity acquired in a common control business combination.

Revenue from Contract with Customers

Revenue Recognition prior to January 1, 2018 Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be measured reliably, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as a principal or an agent. In arrangements where the Group is acting as a principal to its customers, revenue is recognized on a gross basis.

The following specific recognition criteria must also be met before revenue is recognized:

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.

Real estate sales For real estate sales, the Group assesses whether it is probable that the economic benefits will flow to the Group when the sales prices are collectible. Collectability of the sales price is demonstrated by the buyer’s commitment to pay, which in turn is supported by substantial initial and continuing investments that give the buyer a stake in the property sufficient that the risk of loss through default motivates the buyer to honor its obligation to the seller. Collectability is also assessed by considering factors such as the credit standing of the buyer, age and location of the property.

Revenue from sales of completed real estate projects is accounted for using the full accrual method. In accordance with PIC No. Q&A 2006-01, the percentage-of-completion method is used to recognize income from sales of projects where the Group has material obligations under the sales contract to complete the project after the property is sold, the equitable interest has been transferred to the buyer, construction is beyond preliminary stage (i.e., engineering, design work, construction contracts execution, site clearance and preparation, excavation and the building foundation are finished), and the costs incurred or to be incurred can be measured reliably. Under this method, revenue is recognized as the related obligations are fulfilled, measured principally on the basis of the estimated completion of a physical proportion of the contract work.

Any excess of collections over the recognized receivables are included in the “Deposits and other current liabilities” account in the consolidated statement of financial position.

If any of the criteria under the full accrual or percentage-of-completion method is not met, the deposit method is applied until all the conditions for recording a sale are met. Pending recognition of sale, cash received from buyers are presented under the “Deposits and other current liabilities” account in the consolidated statement of financial position.

Cost of real estate sales is recognized consistent with the revenue recognition method applied. Cost of residential and commercial lots and units sold before the completion of the development is determined on the basis of the acquisition cost of the land plus its full development costs, which include estimated costs for future development works, as determined by the Group’s in-house technical staff.

*SGVFS033004* - 32 -

Revenue Recognition effective January 1, 2018

Revenue from contract with customers 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. The Group has generally concluded that it is the principal in its revenue arrangements, except for the provisioning of water and electricity in its mall retail spaces and office leasing activities, wherein it is acting as agent.

The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from contracts with customers are provided in Note 3.

Real estate sales The Group derives its real estate revenue from sale of lots, house and lot 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.

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 progress of work over the right to an amount of consideration that is unconditional, recognized as installment contract receivables, under trade receivables, is included in the “contract asset” account in the statement of financial position.

Any excess of collections over the total of recognized installment contract receivables is included in the “contract liabilities” account in the statement of financial position.

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.

*SGVFS033004* - 33 -

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

Receivables A 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 assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized for the earned consideration that is conditional.

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 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.

Insurance claim Insurance claim is recognized when the realization of income is virtually certain.

Interest income Interest income is recognized as it accrues using the effective interest method.

Other income Recoveries are recognized as they accrue.

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.

*SGVFS033004* - 34 -

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.

Group as lessee 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.

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 *SGVFS033004* - 35 - 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.

Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on government bonds to 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.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized immediately in other comprehensive income in the period in which they arise. Remeasurements are not reclassified to profit or loss in subsequent periods.

The liability recognized in the consolidated statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the reporting date less fair value of the plan assets. The present value of the defined benefit obligation is determined by using risk- free interest rates of long-term government bonds that have terms to maturity approximating the terms of the related pension liabilities or applying a single weighted average discount rate that reflects the estimated timing and amount of benefit payments.

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

Deferred tax Deferred tax is provided, using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and its carrying amounts for financial reporting purposes. *SGVFS033004* - 36 -

Deferred tax liabilities are recognized for all taxable temporary differences with certain exceptions. Deferred tax assets are 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 temporary differences and carryforward benefits of unused MCIT and NOLCO can be utilized.

Deferred tax liabilities are not provided on nontaxable temporary differences associated with investments in associates and a joint venture.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer 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 probable that future taxable income will allow the deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted as of reporting date. Movements in the deferred income tax assets and liabilities arising from changes in tax rates are charged against or credited to income for the period.

Deferred tax relating to items recognized outside profit or loss is recognized in OCI. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Foreign-Currency-Denominated Transactions The consolidated financial statements are presented in Philippine Peso, which is the Parent Company’s functional currency. 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 at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are restated using the closing exchange rate prevailing at reporting dates. Exchange gains or losses arising from foreign exchange transactions are credited to or charged against operations for the year.

Earnings Per Share (EPS) 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 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 *SGVFS033004* - 37 -

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:

Distinction between investment properties and inventories The Group determines whether a property is classified as investment property or inventory as follows: ∂ Investment properties comprises land and buildings (principally offices, commercial and retail property) which are not occupied substantially for use by, or in the operations of the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation. ∂ Inventory comprises property that is held for sale in the ordinary course of business. Principally, this is a residential or industrial property that the Group develops and intends to sell before or on completion of construction.

In making this judgment, the Group considers whether the property will be sold in the normal operating cycle (Inventories) or whether it will be retained as part of the Group’s leasing activities or for future development or sale which are yet to be finalized by the Group (Investment properties).

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.

*SGVFS033004* - 38 -

As of December 31, 2018 and 2017, 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 and 14).

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.

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; (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 *SGVFS033004* - 39 - 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).

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 2018 and 2017. 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. *SGVFS033004* - 40 -

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 NCI % 2018 2017 2018 2017 2016 (In Thousands) (In Thousands) CBDI 45% P=1,498,319 P=− P=3,307 P=− P=− TPEPI 45% 498,720 446,881 51,839 925 1,401 CPVDC 24% − 511,619 57,773 58,632 50,707 P=1,997,039 P=958,500 P=112,919 P=59,557 P=52,108

The summarized financial information of CBDI and TPEPI is provided below. This information is based on amounts before intercompany eliminations.

2018 2017 CBDI TPEPI CPVDC CPVDC TPEPI Before (In Thousands) Merger (In Thousands) Statements of financial position Current assets P=47,187 P=747,872 − P=931,899 P=149,438 Noncurrent assets 7,066,274 611,037 − 4,823,022 860,309 Current liabilities 3,775,653 224,477 − 1,854,893 16,677 Noncurrent liabilities 7,621 26,165 − 1,757,032 −

Statements of comprehensive income Revenue P=9,493 P=462,753 P=688,070 P=802,938 P=3,962 Net income(loss)/Total comprehensive income (loss) attributable to: Equity of holders of the parent company 4,042 63,359 170,257 188,343 1,131 Non-controlling interests 3,307 51,839 57,773 58,632 925 Statements of cash flows Cash provided by (used in): Operating activities P=2,646,068 P=7,080 P=702,495 P=107,410 P=74,277 Investing activities (3,956,847) − (609,728) (390,506) (83,839) Financing activities 1,265,122 − (102,795) 299,766 − Net increase (decrease) in cash and cash equivalents (P=45,657) P=7,080 (P=10,028) P=16,670 (P=9,562)

5. Cash and Cash Equivalents

2018 2017 (In Thousands) Cash on hand and in banks P=169,081 P=144,471 Cash equivalents 55,442 32,317 P=224,523 P=176,788

Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are short-term, highly liquid investments that are made for varying periods of up to three (3) months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term rates.

*SGVFS033004* - 41 -

Total interest income earned from cash and cash equivalents amounted to P=2.0 million, P=1.0 million and P=0.8 million in 2018, 2017 and 2016, respectively (see Note 22).

6. Short-term Investments

Short-term investments consist of money market placements with maturity date of more than 90 days and up to one (1) year and earn at the respective short-term investment rates.

In 2018 and 2017, the Group entered into a short-term investment with BPI to be used for short-term cash requirements. These investments earn an annual interest of 2.96% and 1.25% in 2018 and 2017, respectively.

As of December 31, 2018 and 2017, the Group’s short term investments amounted to P=25.2 million and P=2.5 million, respectively.

Interest income earned from short-term investments amounted to P=0.2 million in 2018 and 2017 and P=0.5 million in 2016 (see Note 22).

7. Financial Assets at Fair Value through Profit or Loss

This account pertains to investments in BPI Short Term Fund (the Fund), a money market unit investment trust fund (UITF) which the Group holds for trading and is a portfolio of funds invested and managed by professional managers. The Fund aims to generate liquidity and stable income by investing in a diversified portfolio of primarily short-term fixed income instruments. 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”.

As of December 31, 2018 and 2017, the Group’s financial assets at FVPL amounted to P=10.4 million and P=10.1 million, respectively.

Realized and unrealized gains recognized from changes in fair value through profit or loss amounted to P=0.4 million, P=0.2 million and P=0.3 million in 2018, 2017 and 2016, respectively (see Note 22).

8. Receivables

2018 2017 (In Thousands) Receivables from related parties (Note 20) P=1,410,230 P=1,487,762 Trade: Commercial development (Notes 16 and 22) 130,540 136,819 Corporate business (Note 27) 112,190 69,088 Shopping centers (Note 27) 106,205 113,348 Residential development (Note 27) 29,486 201,354 Accrued receivable 411,424 309,297 Receivable from insurance 54,634 − Receivables from employees 14,249 16,741 Others 72,957 59,372 P=2,341,915 P=2,393,781 Less allowance for impairment losses 30,715 16,683 2,311,200 2,377,098 Less noncurrent portion 224,968 496,958 P=2,086,232 P=1,880,140

*SGVFS033004* - 42 -

The nature of trade receivables of the Group are as follows:

∂ 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. ∂ Shopping center pertains to receivables arising from the lease of retail space and land therein, movie theaters, food courts, entertainment facilities and carparks. ∂ Residential development pertains to receivables arising from the sale of residential lots and condominium units. ∂ Receivables from insurance pertains to claim from insurer for damage brought about by the fire that occurred in January of 2018. The claim 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=29.5 million and P=201.4 million as of December 31, 2018 and 2017, respectively. “Receivables from the sale of development rights” under commercial development trade receivables were initially recorded at fair value as of December 31, 2018 and 2017. The fair value of the receivables was obtained by discounting future cash flows using the applicable rates of similar types of instruments.

Movements in the unamortized discount on trade receivables in 2018 and 2017 are as follows:

2018 Residential Commercial development development Total (In Thousands) At January 1 P=47,498 P=7,420 P=54,918 Additions 14,203 − 14,203 Accretion (Note 22) (31,795) (1,459) (33,254) At December 31 P=29,906 P=5,961 P=35,867

*SGVFS033004* - 43 -

2017 Residential Commercial development development Total (In Thousands) At January 1 P=50,524 P=− P=50,524 Additions 22,597 7,420 30,017 Accretion (Note 22) (25,623) − (25,623) At December 31 P=47,498 P=7,420 P=54,918

Allowance for impairment Set out below is the movement in allowance for expected credit losses of trade receivables (in thousands):

At December 31, 2016 and 2017 P=16,683 Provision for the year (Note 23) 14,032 At December 31, 2018 P=30,715

The impairment losses above pertain to individually impaired accounts. No impairment losses resulted from performing collective impairment test.

9. Inventories

2018 2017 (In Thousands) Subdivision lots for sale and development P=668,400 P=554,627 Condominium units for sale 143,892 196,457 P=812,292 P=751,084

The subdivision lot and condominium units are carried at cost.

A summary of the movements in inventories is set out below: 2018 Subdivision lot for Condominium sale and units under development development Total (In Thousands) At January 1 P=554,627 P=196,457 P=751,084 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=143,892 P=812,292

2017 Subdivision lot for sale and Condominium units development under development Total (In Thousands) At January 1 P=441,764 P=282,087 P=723,851 Transfers from investment properties (Note 14) 72,963 – 72,963 Disposals (recognized as cost of real estate sales) (Note 23) (119,797) (85,630) (205,427) Construction/development costs incurred 159,995 – 159,995 Other adjustments (298) – (298) At December 31 P=554,627 P=196,457 P=751,084 *SGVFS033004* - 44 -

The amount of inventories recognized as cost of real estate sales in the consolidated statements of income amounted to P=523.0 million, P=205.4 million and P=179.3 million in 2018, 2017 and 2016, respectively (see Note 23).

There are no inventories as of December 31, 2018 and 2017 that are pledged as securities to liabilities.

10. Other Current Assets

2018 2017 (In Thousands) Advances to contractors (Note 20) P=103,948 P=101,016 Prepaid expenses 60,719 51,740 Input VAT 29,457 344,938 CWT 12,152 28,335 Cost to obtain a contract (see Note 21) 2,062 − Others 25,949 5,723 P=234,287 P=531,752

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, rentals, advertising and promotions, commissions, energy supply paid to a local utility provider and other expenses.

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 as of date.

CWTs are applied against income tax payable and are expected to be applied within the next twelve months.

11. Available-for-sale (AFS) Investments and Financial Assets at Fair Value through OCI

AFS Investments AFS financial assets consist of investments in unquoted club shares of City Sports Club Cebu (CSCC) amounting to P=304.3 million, net of allowance for impairment losses of P=36.5 million as of December 31, 2017.

Financial Assets at Fair Value through OCI On January 1, 2018, the Group reclassified its AFS investments amounting to P=340.8 million to financial assets at fair value through OCI. These investments were irrevocably designated at fair value through OCI as the Group intends to hold these investments for the foreseeable future. The related provision for impairment losses in the Group’s consolidated statement of financial position which amounted to P=36.5 million and the related deferred tax assets of P=10.9 million were adjusted to the opening balance of retained earnings and other comprehensive income (see Note 2).

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As of December 31, 2018, the carrying value of the financial assets at fair value through OCI is as follows:

2018 (In Thousands) Financial assets at fair value through OCI P=303,771 Unrealized gain on fair value changes (see Note 27) 38,879 P=342,650

Fair value hierarchy disclosures for the Company’s AFS investments, financial assets at fair value through OCI, and financial assets at FVPL provided in Note 27.

12. Property and Equipment

2018 Buildings Furniture, and Fixtures and Transportation Improvements Equipment Equipment Total (In Thousands) Cost At January 1 P=349,851 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=8,630 P=280,648

2017 Buildings Furniture, and Fixtures and Transportation Improvements Equipment Equipment Total (In Thousands) Cost At January 1 P=121,785 P=138,147 P=30,863 P=290,795 Transfers from investment properties (Note 14) 222,691 − − 222,691 Additions 5,375 8,330 2,324 16,029 Retirement − (1,336) (556) (1,892) At December 31 349,851 145,141 32,631 527,623 Accumulated Depreciation At January 1 91,556 100,943 18,736 211,235 Depreciation and amortization (Note 23) 9,296 14,735 4,189 28,220 Retirement − (1,042) (306) (1,348) Adjustments − (279) − (279) At December 31 100,852 114,357 22,619 237,828 Net Book Value P=248,999 P=30,784 P=10,012 P=289,795

The Group transferred P=222.7 million from investment properties to property and equipment in 2017 which pertains to portion of building being used as office space of the Parent Company (see Note 14). Fully depreciated assets that are still in use amounted to P=189.3 million and P=142.7 million as of December 31, 2018 and 2017, respectively. As at December 31, 2018 and 2017, there are no property and equipment items that are pledged as security to liabilities.

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13. Investments in Associates and a Joint Venture

The movements in investments in associates and a joint venture accounted for under equity method follow:

2018 2017 (In Thousands) Cost At January 1 P=2,194,729 P=1,496,426 Additional capital infusion 641,430 698,303 Effect of merger - business combination (1,827,232) – At December 31 1,008,927 2,194,729 Accumulated equity in net income At January 1 374,059 359,346 Equity in net income for the year 106,039 14,713 Effect of merger (612) – At December 31 479,486 374,059 Accumulated equity in other comprehensive loss At January 1 and December 31 (1,078) (1,078) P=1,487,335 P=2,567,710

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 2018 2017 2018 2017 (In Thousands) Associates: Solinea, Inc. (Solinea) 35% 35% P=470,980 P=414,529 Cebu Insular Hotels Company, Inc. (CIHCI) 37 37 259,778 267,068 Central Block Developers, Inc. (CBDI)* – 48 – 1,189,744 Amaia Southern Properties, Inc. (ASPI) 35 35 127,622 129,101 Southportal Properties, Inc. (SPI) 35 35 189,718 124,453 Joint Venture: CDPEI 15 14 439,237 442,815 P=1,487,335 P=2,567,710 *Direct ownership and indirect ownership of the Parent Company is 25% and 47.9%, as of December 31, 2017.

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.

2017 CHI and CPVDC made additional capital infusion to CBDI amounting to P=314.0 million and P=384.3 million, respectively, in relation to the latter’s additional equity call to fund its ongoing project.

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However, the Group waived its pre-emptive rights to the additional equity call in favor of ALI, the intermediate parent company, which resulted in a 5% reduction for both the Parent Company and CPVDC’s ownership interest in CBDI as of December 31, 2017.

As of December 31, 2018 and 2017, the statements of financial position of these investments in associates and a joint venture are as follows:

2018 CIHCI Solinea CDPEI (In Thousands) Current assets P=115,918 P=3,140,083 P=303,877 Noncurrent assets 787,787 679,424 4,560,500 Total assets P=903,705 P=3,819,507 P=4,864,377 Current liabilities P=202,355 P=2,556,223 P=94,644 Noncurrent liabilities 208 256,405 1,841,484 Equity 701,142 1,006,879 2,928,249 Total liabilities and equity P=903,705 P=3,819,507 P=4,864,377

2017 CBDI CIHCI Solinea CDPEI (In Thousands) Current assets P=875,000 P=285,161 P=2,568,093 P=254,760 Noncurrent assets 2,310,738 549,043 1,503,223 3,840,363 Total assets P=3,185,738 P=834,204 P=4,071,316 P=4,095,123

Current liabilities P=1,116,228 P=97,766 P=3,020,162 P=451,035 Noncurrent liabilities 5,751 16,104 205,248 691,983 Equity 2,063,759 720,334 845,906 2,952,105 Total liabilities and equity P=3,185,738 P=834,204 P=4,071,316 P=4,095,123

The statements of comprehensive income of these investments for the years ended December 31, 2018, 2017 and 2016 are as follows:

CIHCI Solinea CDPEI (In Thousands) For the year ended December 31, 2018 Revenue P=85,237 P=1,303,247 P=2,802 Costs and expenses 101,126 1,145,977 26,658 Net income (loss) (15,889) 157,270 (23,856) Other comprehensive loss − − − Total comprehensive income (loss) (P=15,889) P=157,270 (P=23,856)

CBDI CIHCI Solinea CDPEI For the year ended December 31, 2017 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)

*SGVFS033004* - 48 -

For the year ended December 31, 2016 Revenue P=3,744 P=513,662 P=2,150,599 P=690 Costs and expenses 702 500,613 1,816,469 7,155 Net income (loss) 3,042 13,049 334,130 (6,465) Other comprehensive loss − − − − Total comprehensive income (loss) P=3,042 P=13,049 P=334,130 (P=6,465)

The difference between the carrying amount of the Group’s investment in Solinea as of December 31, 2018 and 2017 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=106.0 million, P=14.7 million and P=161.3 million in 2018, 2017 and 2016, respectively.

The aggregate financial information of associates on which the Group has immaterial interests as of and for the years ended December 31 follows:

2018 2017 2016 (In Thousands) Carrying amount P=296,564 P=232,780 P=250,753 Share in net income/total comprehensive income 63,785 2,802 38,521

14. Investment Properties

2018 Land Buildings and Construction-in- Land Improvements Improvements Progress Total (In Thousands) Cost At January 1 P=5,009,305 P=14,385 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 (Note 9) (294,102) − − − (294,102) 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=4,720,735 P=6,573 P=9,894,849 P=4,564,789 P=19,186,946

2017 (As Restated) Land Buildings and Construction-in- Land Improvements Improvements Progress Total (In Thousands) Cost At January 1 P=4,928,555 P=14,059 P=9,506,002 P=1,756,645 P=16,205,261 Additions 153,713 326 1,315,308 (780,380) 688,967 Transfers to: Property and equipment (Note 12) − − − (222,691) (222,691) Inventories (Note 9) (72,963) − − − (72,963) At December 31 5,009,305 14,385 10,821,310 753,574 16,598,574 Accumulated Depreciation At January 1 − 2,343 2,611,562 − 2,613,905 Depreciation and amortization (Note 23) − 2,812 464,578 − 467,390 Adjustments − − (58) − (58) At December 31 − 5,155 3,076,082 − 3,081,237 Net Book Value P=5,009,305 P=9,230 P=7,745,228 P=753,574 P=13,517,337

*SGVFS033004* - 49 -

The Group’s investment properties consist of land and building held for commercial leasing to earn rentals.

In 2018, the Group transferred P=294.1 million worth of land from investment properties to inventories for TPEPI’s Mactan Seagrove project (see Note 9).

In 2017, the Group transferred P=222.7 million from investment properties to property and equipment (see Note 12).

PIC Q&A 2018-11 requires that land with undetermined future use will be classified as investment property. The impact of adoption was applied retrospectively resulting in the reclassification of land and improvements to investment properties in the comparative consolidated statement of financial position amounting to P=2,636.3 million in 2017.

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=2,191.2 million, P=2,144.4 million and P=1,849.0 million in 2018, 2017 and 2016, respectively (see Note 21). Total direct operating expenses related to investment properties that generated rental income amounted to P=1,507.5 million, P=906.2 million and P=915.5 million in 2018, 2017 and 2016, respectively.

As of December 31, 2018 and 2017, 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=61,707.5 million and P=38,121.7 million as of December 31, 2018 and 2017, 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).

The fair values of the investment properties were determined by independent professionally qualified appraisers. The fair values of the land and buildings were arrived at using the sales comparison approach and cost 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.

Cost approach is a comparative approach to the value of property or another asset that considers as a substitute for the purchase of a given property, the possibility of constructing another property that is a replica of, or equivalent to, the original or one that could furnish equal utility with no undue cost resulting from delay. It is based on the reproduction/replacement cost (new) of the subject property or asset, less total (accrued) depreciation, plus the value of the land to which an estimate of entrepreneurial incentive or developer’s profit/loss is commonly added.

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Description of valuation techniques used and key inputs to valuation on land and buildings included under investment properties as of December 31, 2018 and 2017 follows:

Significant Property Valuation technique unobservable inputs Range 2018 2017 Land Sales comparison Price per square meter P=14,000−P=235,000 P=13,000−P=250,000 approach Buildings Cost approach Reproduction cost Current cost of constructing a replica of the existing structures, employing the same design and similar building materials. The current cost of an identical new item

Replacement cost Cost of replacing an asset with an equally satisfactorily substitute asset. Normally derived from the current acquisition cost of a similar asset, new or used, or of an equivalent productive capacity or service potential.

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 Assets and Liabilities

2018 (In Thousands) Contract assets (Note 2) P=342,932 Contract liabilities 65,541

Contract assets are initially recognized for revenue earned from real estate sales computed using the Percentage of Completion method as receipt of consideration is based on the agreed schedule of payment with the customers. Upon due dates of the scheduled payments, the amounts recognized as contract assets are reclassified to trade receivables.

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.

Amount of revenue recognized from amounts included in contract liabilities at the beginning of the year amounted to P=92.2 million.

16. Other Noncurrent Assets

2018 2017 (In Thousands) Input VAT P=725,296 P=23,927 Advances to contractors 272,132 − Development rights 49,157 29,395 Prepaid commission 9,954 − Deposits 1,365 1,199 Others − 513 P=1,057,904 P=55,034

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. *SGVFS033004* - 51 -

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.

Deposits include advance payments made by the Group for future land and building developments.

17. Accounts and Other Payables

2018 2017 (In Thousands) Payable to related parties (Note 20) P=6,296,754 P=2,406,878 Accrued expenses 811,157 722,952 Accrued project costs (Note 20) 759,322 695,441 Retentions payable 224,164 212,768 Taxes payable 211,745 211,949 Interest payable 30,266 4,386 Dividends payable (Note 28) 1,731 1,751 Liability for purchased land (Note 19) – 351,569 Others 83,582 97,866 P=8,418,721 P=4,705,560

Accrued expenses consist mainly of utilities, marketing and management fees, professional fees and repairs and maintenance. These are noninterest-bearing and are normally settled within a year.

Accrued project costs arise from progress billings or unbilled completed work on the development of residential and commercial projects.

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.

Taxes payable includes amusement taxes, expanded withholding taxes and deferred output VAT on uncollected receivables. These are settled on a monthly basis.

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.

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18. Long-term Debt

2018 2017 (In Thousands) Bonds - due 2021 P=5,000,000 P=5,000,000 Bank Loans: BSP overnight reverse repurchase agreement rate plus 0.25% per annum, inclusive of gross receipts tax 383,250 404,250 Fixed rate corporate notes with interest rate of 4.75% per annum 357,000 378,000 BSP Overnight Reverse repurchase Repurchase Agreement Rate plus 0.25% per annum, inclusive of gross receipts tax 344,875 363,875 At 0.70% per annum spread over the 90-day DST-R2 340,000 340,000 6,425,125 6,486,125 Less unamortized debt issue cost 24,150 32,549 6,400,975 6,453,576 Less current portion 59,956 59,942 P=6,341,019 P=6,393,634

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:

2018 2017 (In Thousands) At January 1 P=32,549 P=36,814 Additions – 3,800 Amortization (Note 23) (8,399) (8,065) At December 31 P=24,150 P=32,549

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=383.2 million and P=404.3 million as of December 31, 2018 and 2017, 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=357.0 million and P=378.0 million as of December 31, 2018 and 2017, respectively. *SGVFS033004* - 53 -

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=344.9 million and P=363.9 million as of December 31, 2018 and 2017, 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, 2018 and 2017.

f. In October 2010, the Group obtained various loans with a total principal amount of P=680.0 million which are due in 2017. In respect with the fixed rate portion of these loans, fixed interest is the weighted average yield of the 7-year treasury bonds based on PDST-R2 plus a spread of 50 basis points per annum.

In respect of the floating interest portion, floating interest rate is based on the weighted average yield for the 91-day treasury bills based on PDST-R2 plus a spread of 65 basis points per annum. Outstanding balance amounted to nil as of December 31, 2018 and 2017. The interest is payable every quarter.

On October 6, 2017, the Group’s loans with floating interest and fixed rate portion matured and fully paid the said loans amounting to P= 408.0 million.

Interest on long-term debt recognized in the consolidated statements of income amounted to P=336.3 million, P=345.2 million and P=247.7 million in 2018, 2017 and 2016, respectively.

For the years ended December 31, 2018 and 2017, 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, 2018 and 2017, the Group is in compliance with these restrictions and requirements.

19. Deposits and Other Liabilities

2018 2017 (In Thousands) Tenants’ deposits P=843,074 P=793,870 Customers’ deposits 147,739 258,204 Construction bond 84,456 85,361 1,075,269 1,137,435 Less noncurrent portion 177,608 316,479 P=897,661 P=820,956

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The rollforward analysis of deferred credits under tenants’ deposits follows:

2018 2017 At January 1 P=19,628 P=15,750 Additions 11,088 7,629 Amortization (Note 23) (7,909) (3,751) At December 31 P=22,807 P=19,628

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.

Customers’ deposits include customers’ down payments related to real estate sales and excess of collections over the recognized receivables based on percentage-of-completion. The Group requires buyers of condominium units to pay a minimum percentage of the total selling price before the two parties enter into a sale transaction. In relation to this, the customers’ deposits represent payment from buyers which have not reached the minimum required percentage. When the level of required payment is reached by the buyer, a sale is recognized and these deposits and down payments are considered as payments to the total contract price.

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.

20. Related Party Transactions

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 2018 2017 2018 2017 (In Thousands) Subsidiaries of ALI P=904,234 P=884,719 P=5,491,224 P=1,383,870 Associates: Solinea 251,406 251,367 − − SPI 178,092 267,082 − − CBDI − 52,044 − − Parent Company - ALI 36,762 30,946 805,530 1,023,008 Joint venture - CDPEI 1,951 1,604 − − Others 37,785 − − − P=1,410,230 P=1,487,762 P=6,296,754 P=2,406,878

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Revenue Costs/Expenses 2018 2017 2016 2018 2017 2016 (In Thousands) (In Thousands) Subsidiaries of ALI P=52,956 P=26,570 P=8,876 P= 443,326 P=184,665 P=30,755 Parent Company - ALI 3,077 14,945 5,635 346,317 69,989 168,636 P=56,033 P=41,515 P=14,511 P=789,643 P=254,654 P=199,391

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 2.3% to 2.5% and are due and demandable as of December 31, 2018 and 2017.

The nature and amounts of material transactions with related parties as of December 31, 2018 and 2017 are as follows:

∂ Advances from subsidiaries of ALI in 2018 include advances from CBDI as a result of the merger amounting to P=3.7 billion.

∂ 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=759.3 million and P=342.9 million as of December 31, 2018 and 2017, respectively. Advances to MDC, which are included under advances to contractors in “Accounts receivable” (see Note 8) amounted to P=2.2 million and P=47.0 million as of December 31, 2018 and 2017, respectively.

∂ Expenses to ALI pertain to management fees, professional fees and systems costs. ƒ Management and service fees charged by ALI amounted to P=132.6 million, P=162.3 million and P=125.0 million in 2018, 2017 and 2016, respectively. ƒ Professional fees charged by ALI amounted to P=20.7 million in 2016. ƒ Systems costs which were included in the Group’s manpower costs amounted to P=19.0 million, P=15.9 million and P=27.6 million in 2018, 2017 and 2016, respectively.

∂ As of December 31, 2018 and 2017, the Group has entered into transactions with BPI, an affiliate, consisting of cash and cash equivalents, financial assets at FVPL, fair value of plan assets and long-term debt with carrying amounts as follows:

∂ 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.

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Compensation of key management personnel by benefit type follows:

2018 2017 2016 (In Thousands) Short-term employee benefits P=14,165 P=18,740 P=24,073 Post-employment pension and other benefits 1,273 817 924 P=15,438 P=19,557 P=24,997

21. Revenues

Rental and Theater Income/Real Estate

2018 2017 2016 (In Thousands) Rental income (Notes 14 and 30) P=2,191,231 P=2,144,414 P=1,848,997 Revenue from contracts with customers 800,852 – – Theater income 120,475 129,607 132,082 Real estate sales – 347,712 297,610 P=3,112,558 P=2,621,733 P=2,278,689

The Group derives revenue from the transfer of goods and services over time and at a point in time, in different product types. The Group’s source of revenue from contracts with customers are solely from sale of lot only.

Performance Obligation Information about the Group’s performance obligations are summarized below:

Real estate sales The Group derives its real estate revenue from sale of condominium units, house and lot, and developed lots. In accordance with Philippines Interpretation Committee Q&A 2016-04, the Group recognizes revenue from the sale of these residential properties under pre-completed contract over the course of the construction of the real estate project.

Payment commences upon signing of the contract to sell and the consideration is payable in installment for a period ranging from two (2) to five (5) years.

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) as at December 31 are, as follows:

2018 (In Thousands) Within one year P=184,055 More than one year – P=184,055

The remaining performance obligations expected to be recognized within one year relate to the continuous development of the Group’s real estate projects. The Group’s land developments are estimated to be completed within one year from start of development works. *SGVFS033004* - 57 -

Costs to Obtain a Contract The balances below pertain to the cost to obtain contracts included in the other current assets (see Note 10):

2018 (In Thousands) Balance at the beginning of the year P=4,948 Additions 21,026 Amortization (23,912) P=2,062

22. Interest and Other Income

Interest income consists of:

2018 2017 2016 (In Thousands) Interest income derived from: Accretion of receivables (Note 8) P=33,254 P=25,623 P=10,482 Intercompany loans 28,876 10,734 22,903 Cash and cash equivalents (Note 5) 2,020 1,047 841 Short-term investments (Note 6) 236 200 472 Others 2,661 3,929 1,217 P=67,047 P=41,533 P=35,915

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:

2018 2017 2016 (In Thousands) Recoveries - net P=221,969 P=206,193 P=175,379 Gain on sale of development rights (Notes 8 and 16) 151,495 168,195 − Insurance claim 27,503 – − Service income 13,823 18,847 5,082 Beverage 2,841 5,825 4,112 Realized and unrealized gain on financial assets at FVPL (Note 7) 444 244 316 Others 18,121 14,951 53,670 P=436,196 P=414,255 P=238,559

Recoveries pertain to the excess collection 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).

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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).

Service income pertains to the various management fees charged by the Group to various parties.

In 2016, others include annexation and service fees wherein, on July 31, 2015, a third party owning a land adjacent to Cebu IT Park, paid for annexation fee amounting to P=29.5 million to gain an access on roads and IT Park Association membership. The land was subsequently sold to another third party on August 26, 2016 which requires service fee to the Group amounting to P=27.1 million for processing of titles as well as application with Philippine Economic Zone Authority (PEZA) and Housing and Land Use Regulatory Board.

23. Costs and Expenses

Real estate, rental and theater expenses consist of:

2018 2017 2016 (In Thousands) Cost of real estate sales (Note 9) P=522,956 P=205,427 P=179,335 Depreciation and amortization (Note 14) 517,096 467,390 382,172 Marketing and management fees (Note 20) 272,801 230,838 199,567 Producers’ film share 67,501 72,830 74,051 Manpower cost (Note 20) 32,125 23,020 22,838 Rental 1,798 1,956 2,540 Direct operating expenses: Security and janitorial 163,693 137,063 101,935 Repairs and maintenance 119,192 109,037 100,160 Taxes and licenses 106,922 81,510 79,208 Commission 24,705 54,445 17,579 Dues and fees 8,855 12,172 11,320 Insurance 6,268 8,321 6,188 Professional fees 4,599 6,487 6,689 Transportation and travel 232 647 588 Representation 146 177 399 Light and water − 14,649 86,454 Others 26,374 11,611 24,824 P=1,875,263 P=1,437,580 P=1,295,847

General and administrative expenses consist of:

2018 2017 2016 (In Thousands) Manpower cost (Notes 20 and 24) P=91,647 P=105,576 P=120,623 Depreciation and amortization (Note 12) 32,589 28,220 19,898 Provision for impairment loss (Note 8) 14,032 − − Professional fees 10,010 10,330 7,956 Stockholders' meeting 7,188 13,399 11,171 Repairs and maintenance 7,170 9,850 6,542 Utilities 5,159 4,028 3,568

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2018 2017 2016 (In Thousands) Transportation and travel P=4,834 P=5,363 P=5,072 Postal and communication 3,935 4,190 3,625 Trainings 3,364 4,336 3,336 Supplies 2,738 2,805 2,844 Security and janitorial 2,556 3,101 2,899 Advertising 2,510 2,615 2,601 Representation 1,211 3,165 1,561 Dues and fees 1,106 4,121 1,082 Taxes and licenses 635 746 892 Insurance 590 726 510 Rental 24 436 2,487 Others 7,753 9,076 2,354 P=199,051 P=212,083 P=199,021

Other charges consist of:

2018 2017 2016 (In Thousands) Financing charges and other expenses P=52,127 P=11,100 P=50,746 Amortization of discount on long-term debt (Note 18) 8,399 8,065 8,546 Amortization of deferred credits (Note 19) 7,909 3,751 5,594 P=68,435 P=22,916 P=64,886

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. The retirement plan is intended to provide for benefit payments to employees equivalent to the higher of the retirement fund credit or 150% of plan salary for every year of credited services. Benefits are paid in lump sum payable immediately.

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.

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Changes in net defined liability in 2018 and 2017 are as follows:

2018 Net benefit cost in consolidated statements of comprehensive income Remeasurement in other comprehensive income

Actuarial changes arising from Benefits Benefits paid Curtailment changes January 1, Current Past paid from directly by and Return on in financial Experience December 31, 2018 service cost service cost Net interest Subtotal plan assets the Group Settlement plan assets assumptions adjustments Subtotal 2018 Present value of defined benefit obligation P=69,373 P=4,306 P=– P=3,468 P=7,774 (P=1,817) P=– P=– P=– (P=547) (P=3,026) (P=3,573) P=71,757 Fair value of plan assets (37,104) – – (1,855) (1,855) P=1,817 (4,000) – 2,088 – – 2,088 (39,054) Net defined benefit liability (asset) P=32,269 P=4,306 P=– P=1,613 P=5,919 P=– (P=4,000) P=– P=2,088 (P=547) (P=3,026) (P=1,485) P=32,703

2017 Net benefit cost in consolidated statements of comprehensive income Remeasurement in other comprehensive income Actuarial changes arising from Benefits Benefits paid Curtailment changes January 1, Current Past paid from directly by and Return on in financial Experience December 31, 2017 service cost service cost Net interest Subtotal plan assets the Group Settlement plan assets assumptions adjustments Subtotal 2017 Present value of defined benefit obligation P=78,698 P=5,176 P=− P=3,627 P=8,803 (P=6,263) (P=93) (P=15,915) P=− P=1,632 P=2,511 P=4,143 P=69,373 Fair value of plan assets (46,499) − − (2,507) (2,507) 6,263 (4,000) 7,789 1,850 − − 1,850 (37,104) Net defined benefit liability (asset) P=32,199 P=5,176 P=− P=1,120 P=6,296 P=− (P=4,093) (P=8,126) P=1,850 P=1,632 P=2,511 P=5,993 P=32,269

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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=14.1 million to its retirement fund in 2019.

The major categories of the Group’s plan asset follows:

2018 2017 Government securities 86.48% 93.95% Unit investments trust fund 8.36 5.20 Cash and cash equivalents 5.16 0.85 Mutual fund 0.00 0.00 100.00% 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:

2018 2017 2016 Discount rate 7.94% 5.00% 5.25% Salary increase rate 7.00 5.00 5.00

The sensitivity analysis 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 2018 2017 Discount rate 1.0% increase (0.13%) (8.92%) Discount rate 1.0% decrease 0.79% 10.23% Rate of salary increase 1.0% increase 0.75% 10.23% Rate of salary increase 1.0% decrease (0.13%) (9.00%)

The weighted average duration of the defined benefit obligation at the end of the reporting period is 17 years and 11 years as of December 31, 2018 and 2017, respectively.

The following table shows the maturity profile of the Group’s defined benefit obligation based on undiscounted benefit payments:

2018 2017 (In Thousands) Within 1 year P=6,882 P=1,844 More than 1 year to 5 years 10,150 23,032 More than 5 years to 10 years 37,057 25,933 More than 10 years 396,650 − P=450,739 P=50,809

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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=274.6 million, P=251.1 million and P=132.1 million in 2018, 2017 and 2016, respectively.

Reconciliation between the statutory income tax rate and the effective income tax rate follows:

2018 2017 2016 Statutory income tax rate 30.00% 30.00% 30.00% Tax effects of: Income subjected to lower income tax rates (6.87) (6.22) (13.27) Equity in net earnings of associates and a joint venture (2.57) (0.41) (7.28) Interest income and capital gains taxed at lower rates (0.02) (0.02) (0.03) Expired NOLCO and MCIT 1.18 0.97 3.54 Unrecognized deferred income tax assets on MCIT and NOLCO 0.61 − − Unrecognized deferred income tax assets on allowance for impairment losses 0.30 − − Others (0.69) 0.01 6.36 Effective income tax rate 21.94% 24.33% 19.32%

The components of net deferred tax assets as of December 31 are as follows:

2018 2017 (In Thousands) Deferred tax assets on: Difference between tax and book basis of accounting for real estate transactions P=26,180 P=− Accrued expenses 1,457 − Allowance for impairment losses 642 642 Unamortized discount on customers’ deposits 60 1,763 Unapplied NOLCO − 21,668 Advance rent − 13,530 Unamortized discount on intercompany payable − 5,873 MCIT − 3,543 Others − 3,065 28,339 50,084 Deferred tax liabilities on: Unamortized capitalized interest 2,791 17,079 Accrued rental income 60 20,685 Difference between tax and book basis of accounting for real estate transactions − 2,322 Others − 5,441 2,851 45,527 P=25,488 P=4,557

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The components of net deferred tax liabilities as of December 31 are as follows:

2018 2017 (In Thousands) Deferred tax assets on: Accrued expenses P=24,805 P=33,755 Advance rent 15,817 667 Allowance for impairment losses on receivables and other losses 8,573 16,095 Unapplied NOLCO 7,680 − Retirement benefits 4,525 3,737 Unamortized discount on sale of land 4,416 6,599 Unamortized discount on customers’ deposits 1,922 32 MCIT 1,247 − Unrealized foreign exchange loss 717 717 Others 7,844 786 77,546 62,388

Deferred tax liabilities on: Unamortized capitalized interest 102,781 90,024 Unrealized gross profit on lot sale 96,523 114,907 Difference between tax and book basis of accounting for real estate transactions 53,574 58,665 Accrued rental income 38,503 − Others 61,918 60,098 353,299 323,694 P=275,753 P=261,306

The Group’s adoption of PFRS 9 resulted to a change in the financial asset previously classified as AFS financial asset to FVOCI. Previous impairment losses amounting to P=36.5 million and the related deferred tax asset of P=10.9 million was derecognized and reclassified to other comprehensive income and retained earnings, respectively, as at January 1, 2018 (see Note 2).

As of December 31, 2018, deferred tax assets arising from NOLCO, MCIT and allowance for impairment losses amounting to P=6.9 million, P=4.8 million, and P=3.7 million, respectively, and as of December 31, 2017, deferred tax assets arising from NOLCO and MCIT amounting to P=0.6 million and P=2.3 million, respectively, have not been recognized since management believes that no sufficient taxable income will be available in the year these are expected to be reversed, settled or realized.

The Group has deductible temporary differences, NOLCO and MCIT, that are available for offset against future income tax liabilities for which deferred tax assets have not been recognized. These deductible temporary differences, NOLCO and MCIT, as of December 31, 2018 and 2017 follow:

NOLCO

Year Expiry At December 31, At December 31, Incurred Date 2017 Additions Applied Expired 2018 2018 2021 P=– P=22,927,266 P=– P=– P=22,927,266 2017 2020 25,599,407 – – – 25,599,407 2015 2018 48,495,209 – (8,616,352) (39,878,857) – P=74,094,616 P=22,927,266 (P=8,616,352) (P=39,878,857) P=48,526,673

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MCIT

Year Expiry At December 31, At December 31, Incurred Date 2017 Additions Applied Expired 2018 2018 2021 P=– P=2,492,990 P=– P=– P=2,492,990 2017 2020 1,324,094 – – – 1,324,094 2016 2019 2,192,808 – – – 2,192,808 2015 2018 194,886 – – (194,886) – P=3,711,788 P=2,492,990 P=– (P=194,886) P=6,009,892

Tax Reform for Acceleration and Inclusion Act (TRAIN) Law R.A. No. 10963 or TRAIN was signed into law on December 19, 2017 and took effect January 1, 2018, making the new tax law enacted as of the reporting date. Although the TRAIN changes the existing tax laws and includes several provisions that have generally affect businesses on a prospective basis, management assessed that the same did not have any significant impact on the financial statement balances as of the reporting date.

26. Basic/Diluted Earnings Per Share

The following table presents information necessary to compute EPS:

2018 2017 2016 (In Thousands, except EPS) a. Net income attributable to the equity holders of the Parent Company P=857,111 P=753,447 P=679,663 b. Weighted average number of outstanding shares 1,959,521 1,920,074 1,920,074 c. Basic/Diluted Earnings per share (a/b) P=0.44 P=0.39 P=0.35

There were no potential dilutive shares in 2018, 2017 and 2016.

27. Financial Information and Financial Instruments

Fair Value Information The carrying amount of cash and cash equivalents, short-term investments, financial assets at FVPL, receivables (except trade residential development and certain receivables from related parties), accounts and other payables (excluding statutory liabilities) and deposits and other liabilities (except tenants’ deposits) are approximately equal to their fair value due to the short-term nature of the transaction.

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, 2018 and 2017. ∂ AFS financial assets: The fair value of AFS financial assets is determined based on the available quoted price in the market. *SGVFS033004* - 65 -

∂ 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, 2018 and 2017.

The following tables set forth the carrying values and estimated fair values of the Group’s financial assets and liabilities carried at fair values and those which fair value are disclosed:

December 31, 2018 December 31, 2017 Carrying Carrying Value Fair Value Value Fair Value (In Thousands) Loans and Receivables Trade residential development P=29,486 P=110,448 P=201,354 P=289,793 Receivable from related parties 1,410,230 1,410,230 1,487,762 590,904 Other Financial Liabilities Long-term debt P=6,400,975 P=6,060,596 P=6,486,125 P=6,453,576 Tenants’ deposits under deposits and other liabilities 843,074 843,074 820,956 790,726

Fair Value Hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments 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 financial instruments as of December 31 follow:

2018 Fair value measurements using Quoted prices in active Significant markets for offer Significant identical observable unobservable Carrying assets inputs inputs Date of valuation Values Total (Level 1) (Level 2) (Level 3) Assets measured at fair value Financial assets at FVOCI December 31, 2018 P=342,650 P=342,650 P=342,650 P=– P=– FVPL December 31, 2018 10,379 10,379 – 10,379 – Assets for which fair values are disclosed Trade residential development December 31, 2018 29,486 110,448 – – 110,448 Receivable from related parties December 31, 2018 1,410,230 1,410,230 – – 1,410,230 Investment properties December 31, 2018 19,186,946 61,707,470 – – 61,707,470 Liabilities for which fair values are disclosed Long-term debt December 31, 2018 6,400,975 6,060,596 – – 6,060,596 Tenants’ deposits under deposits and other liabilities December 31, 2018 843,074 843,074 – – 843,074

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2017 Fair value measurements using Quoted prices in active Significant markets for offer Significant identical observable unobservable Carrying assets inputs inputs Date of valuation Values Total (Level 1) (Level 2) (Level 3) Assets measured at fair value AFS December 31, 2017 P=304,333 P=304,333 P=− P=– P=304,333 FVPL December 31, 2017 10,129 10,129 – 10,129 – Assets for which fair values are disclosed Trade residential development December 31, 2017 201,354 289,793 – – 289,793 Receivable from related parties December 31, 2017 1,487,762 590,904 – – 590,904 Investment properties December 31, 2017 10,881,060 38,121,748 − − 38,121,748 Liabilities for which fair values are disclosed Long-term debt December 31, 2017 6,486,125 6,453,576 – – 6,453,576 Tenants’ deposits under deposits and other liabilities December 31, 2017 820,956 790,726 – – 790,726

The Group categorized the fair value of long-term debt and deposits and other noncurrent liabilities under Level 3 as of December 31, 2018 and 2017. The fair value of these financial instruments was determined by discounting future cash 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.

For land, significant increases (decreases) in the price per square meter, in isolation, would result in a significantly higher (lower) fair value of the properties.

For buildings, significant increases (decreases) in the replacement and reproduction costs, in isolation, would result in a significantly higher (lower) fair value of the properties.

The Group categorized the fair value of AFS financial assets under Level 2 as of December 31, 2018. The fair value of these instruments was determined based on quoted 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, AFS financial assets 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.

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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, financial assets and FVPL 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, short- term investments, financial assets at FVPL and AFS financial assets. 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.

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:

ƒ the asset is in past due for over 90 days, or is already an item-for-forfeit ƒ 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, 2018 and 2017.

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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, 2018 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=29,486 P=110,448 P=– P=29,486 Commercial development 130,540 – 130,540 – Shopping centers 106,205 740,553 – 106,205 Corporate business 112,190 238,946 – 112,190 P=378,421 P=1,089,947 P=130,540 P=247,881

December 31, 2017 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=201,354 P=289,793 P=− P=201,354 Shopping centers 136,819 − 136,819 − Corporate business 113,348 774,242 − 113,348 Commercial development 69,088 179,583 − 69,088 P=520,609 P=1,243,618 P=136,819 P=383,790

Applicable for the year ended December 31, 2018

The following are the details of the Group’s assessment of credit quality and the related ECLs as at December 31, 2018:

General approach ƒ Cash and cash equivalents and short-term investments - As of December 31, 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.

ƒ 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.

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Simplified approach ƒ Trade receivables (i.e., residential, corporate business, shopping centers, lease receivables, accrued receivables) and contract assets - The Group applied the simplified approach under PFRS 9, using a ‘provision matrix’. As of December 31, 2018, the allowance for impairment losses pertain only to individually impaired accounts. No impairment losses resulted from 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 future collections of properties upon foreclosure 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=2.9 billion as at December 31, 2018.

2018 Stage 1 Stage 2 Stage 3 Lifetime ECL 12-month Lifetime Lifetime Simplified ECL ECL ECL Approach Total Gross carrying 1,931,977 − − P=1,002,237 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, 2018, the aging analysis of receivables presented per class, is as follow:

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=29,486 P=− P=− P=− P=− P=− P=− P=29,486 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 Claims receivable 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=1,475,447 P=11,738 P=18,293 P=11,962 P=939 P=792,821 P=30,715 P=2,341,915

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Applicable for the year ended December 31, 2017 and prior years

The table below shows the credit quality by class of the Group’s financial assets (gross of allowance for impairment losses): December 31, 2017 Neither Past Due nor Impaired High Medium Low Grade Grade Grade Default Total (In Thousands) Cash and cash equivalents (excluding cash on hand) P=176,493 P=− P=− P=− P=176,493 Short-term investments 2,543 − − − 2,543 Trade receivables: Residential development 201,354 − − − 201,354 Shopping centers 136,819 − − − 136,819 Corporate business 64,729 2,243 − 46,376 113,348 Commercial development 27,859 − − 41,229 69,088 Receivable from related parties 1,469,300 − − 18,462 1,487,762 Receivables from employees 16,741 − − − 16,741 Accrued receivable 309,297 − − − 309,297 Others 59,372 − − − 59,372 AFS financial assets − − 304,333 − 304,333 P=2,464,507 P=2,243 P=304,333 P=106,067 P=2,877,150

Others includes non-trade receivables from sewer and management fees, receivable from SSS and accrued interest receivable from money market placements.

The credit quality of the financial assets was determined as follows:

ƒ Cash and cash equivalents and financial assets at FVPL - based on the nature of the counterparty and the Group’s rating procedure. These are held by counterparty banks with minimal risk of bankruptcy and are therefore classified as high grade.

ƒ Receivables - high grade pertains to receivables with no default in payment; medium grade pertains to receivables with up to 3 defaults in payment; and low grade pertains to receivables with more than 3 defaults in payment. As of December 31, 2018 and 2017, 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.

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The maximum exposure to credit risk, net of allowance for impairment, amounted to P=2.9 billion as at December 31, 2017.

High grade P=2,464,407 Medium grade 2,243 Low grade 304,333 Default 106,067 Gross carrying amount 2,877,050 Loss allowance (16,683) Carrying amount P=2,860,367

As of December 31, 2017, the aging analysis of receivables presented per class, is as follow:

December 31, 2017 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 P=201,354 P=− P=− P=− P=− P=− P=− P=201,354 development Shopping centers 66,972 5,969 4,744 5,226 7,009 6,745 16,683 113,348 Commercial development 136,819 − − − − − − 136,819 Corporate business 27,859 − 6,516 14,560 8,221 11,932 − 69,088 Receivable from related 1,469,300 − 365 14,269 2,463 1,365 − 1,487,762 parties Receivable from 16,741 − − − − − − 16,741 employees Accrued receivable 309,297 − − − − − − 309,297 Others 59,372 − − − − − − 59,372 P=2,287,714 P=5,969 P=11,625 P=34,055 P=17,693 P=20,042 P=16,683 P=2,393,781

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, 2018 and 2017, current ratio is 0.38:1 and 0.60:1, respectively, with cash and cash equivalents, short-term investments and financial assets at FVPL of P=260.1 million and P=189.5 million, respectively, accounting for 7.2% and 5.6% of the total current assets, respectively, and resulting in a negative net working capital of P=5,857.3 million and P=2,263.4 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.

The table below summarizes the maturity profile of the Group’s financial assets, contract assets and financial liabilities as of December 31 based on the contractual undiscounted payments.

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December 31, 2018

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total Financial assets: (In Thousands) Cash and cash equivalents P=224,523 P=− P=− P=− P=224,523 Financial assets at fair value through profit or loss 10,379 − − − 10,379 Short-term investments 25,244 − − − 25,244 Receivable 2,222,538 119,280 − − 2,341,818 Contract assets 205,087 − 137,845 − 342,932 Total financial and contract assets `2,687,771 119,280 137,845 − 2,944,896 Financial liabilities: Accounts and other payables 8,278,514 − − − 8,278,514 Long-term debt 79,219 78,000 5,371,999 914,125 6,443,343 Interest payable - long-term debt 343,090 322,776 174,319 98,061 938,246 Deposits and other liabilities 906,381 99,989 36,995 31,903 1,075,268 Total financial liabilities 9,607,204 500,765 5,583,313 1,044,089 16,735,371 Net financial liabilities (P=6,919,433) (P=381,485) (P=5,445,468) (P=1,044,089) (P=13,790,475)

December 31, 2017

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total (In Thousands) Financial assets: Cash and cash equivalents P=176,788 P=− P=− P=− P=176,788 Financial assets at fair value through profit or loss 10,129 − − − 10,129 Short-term investments 2,543 − − − 2,543 Receivable 1,901,125 113,049 202,434 177,173 2,393,781 Total financial assets 2,090,585 113,049 202,434 177,173 2,583,241 Other financial liabilities: Accounts and other payables 4,493,611 − − − 4,493,611 Long-term debt 59,942 59,956 76,963 6,256,715 6,453,576 Interest payable - long-term debt 277,624 355,479 330,236 170,644 1,133,983 Deposits and other liabilities 820,956 − − 316,479 1,137,435 Total other financial liabilities 5,652,133 415,435 407,199 6,743,838 13,218,605 Net financial liabilities (P=3,561,548) (P=302,386) (P=204,765) (P=6,566,665) (P=10,635,364)

Cash and cash equivalents, financial assets at FVPL, accounts receivable and contract assets 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.

The following table shows the Group’s consolidated foreign-currency-denominated monetary assets and their Peso equivalents as of December 31:

2018 2017 Php Php US Dollar Equivalent US Dollar Equivalent (In Thousands) Cash and cash equivalents $1,500 P=78,883 $520 P=26,265

In translating the foreign-currency-denominated monetary assets into Peso amounts, the exchange rates used were P=52.58 to US$1.00 and P=50.51 to US$1.00, the Philippine Peso-US Dollar exchange rates as of December 31, 2018 and 2017, respectively.

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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, 2018 P=1.00 P=1,500 (1.00) (1,500) December 31, 2017 1.00 520 (1.00) (520)

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The terms and maturity profile of the interest-bearing financial assets and liabilities, together with its corresponding nominal amounts and carrying values (in thousands) are shown in the following table:

December 31, 2018 Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value Group Cash and cash equivalents Fixed at the date of investment Various P=224,223 P=224,223 P=− P=224,223 Accounts receivable Fixed at the date of sale Date of Sale 2,341,915 2,197,691 144,224 2,341,915 P=2,566,138 P=2,421,914 P=144,224 P=2,566,138 Parent Company Long-term debt Fixed Peso Fixed rate of average 5-year treasury bond + 0.60% spread Maturity date P=5,000,000 P=− P=4,980,702 P=4,980,702 Peso Fixed at 4.5% starting 2018 Maturity date 383,250 20,681 361,060 381,741 Peso Fixed rate corporate notes with interest of 4.75% per annum Maturity date 357,000 20,713 335,649 356,362 Peso Fixed at 4.5% starting 2018 Maturity date 344,875 18,749 324,940 343,689 Floating Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Quarterly 340,000 (187) 338,668 338,481 P=6,425,125 P=59,956 P=6,341,019 P=6,400,975

December 31, 2017 Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value Group Cash and cash equivalents Fixed at the date of investment Various P=144,176 P=144,176 P=− P=144,176 Accounts receivable Fixed at the date of sale Date of sale 2,393,781 1,901,125 492,656 2,393,781 P=2,537,957 P=2,045,301 P=492,656 P=2,537,957 Parent Company Long-term debt Fixed Peso Fixed rate of average 5-year treasury bond5+ 0.60% spread Maturity date P=5,000,000 P=− P= 4,973,361 P=4,973,361 Peso Fixed rate corporate notes with interest of 4.75% per annum Maturity date 378,000 20,708 356,362 377,070 Floating Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 404,250 20,672 381,741 402,413 Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 363,875 18,742 343,689 362,431 Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 340,000 (180) 338,481 338,301 P=6,486,125 P=59,942 P=6,393,634 P=6,453,576

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The maturities of long-term debt at nominal values are as follow:

2018 2017 (In Thousands) Due in: 2018 P= − P= 61,000 2019 61,000 61,000 2020 78,000 78,000 2021 5,372,000 5,372,000 2022 57,000 57,000 2023 585,125 585,125 2024 17,000 17,000 2025 17,000 17,000 2026 17,000 17,000 2027 221,000 221,000 P=6,425,125 P=6,486,125

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 installment 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 (see Note 18).

In March 2017, the Group availed the second drawdown from the P=800.0 million credit facility amounting to P=420.00 million which will mature in 2023. The related outstanding balance amounted to P=383.3 million as of December 31, 2018 (see Note 18).

In March 2016, the Group obtained a credit facility amounting to P=800.0 million. As of December 31, 2018 and 2017, the undrawn amount amounted to P=380.0 million (see Note 18).

In June 2014, the Group acquired a P=5.0 billion bonds to partially finance its capital expenditure requirements. As of December 31, 2018 and 2017, the Group’s outstanding liability is P=5.0 billion, which is due for payment in 2021 (see Note 18).

Equity price risk Financial assets at FVPL are acquired at a certain price in the market. Such investment securities are subject to price risk due to 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 economic performance, political stability, domestic inflation rates, these prices change, reflecting how market participants view the developments.

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 0.12 year and 0.09 year for 2018 and 2017, respectively, a 1.0% change in NAVPU will increase/decrease net income and equity by P=0.01 million and P=0.01 million for the years ended December 31, 2018 and 2017, respectively.

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28. Equity

Capital Stock The details of the Parent Company’s common shares as of December 31, 2018 and 2017 follow:

2018 2017 Authorized shares 3,000,000,000 3,000,000,000 Par value per share P=1.0 P=1.0 Shares issued and outstanding 2,156,756,631 1,920,073,623

In November 6, 2018, SEC certified the Plan of Merger between the Parent Company and CPVDC. As a result, the Parent Company issued shares to CPVDC shareholders, including the Parent Company, from its unissued shares with a share swap ratio of 1.06 resulting to an issuance of a total 996,771,000 shares.

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 shares and classified as treasury shares.

Equity Reserves The equity reserves resulted from the merger between the Parent Company and CPVDC. Under the accounting for legal merger, the Group recognized the difference between the net assets acquired and the total cost of the investments in CPVDC under equity reserve in the consolidated statement of changes in equity amounting to P=274.0 million.

Unappropriated retained earnings The retained earnings available for dividend distribution of the Parent Company amounted to P=1,583.4 million and P=1,868.6 million as of December 31, 2018 and 2017, respectively.

Retained earnings include undistributed net earnings of subsidiaries and associates amounting P=823.0 million and P=1,198.6 million as of December 31, 2018 and 2017, respectively. These amounts are not available for dividend declaration until declared by the subsidiaries and affiliates.

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 to P=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.

On November 17, 2016, the Parent Company’s BOD declared P=0.12 per share cash dividends totaling to P=230.4 million from unappropriated retained earnings to all its issued and outstanding shares as of record date December 2, 2016, and paid on December 12, 2016.

Appropriated retained earnings 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.

On August 13, 2018, the Parent Company’s BOD approved the expansion projects within Cebu IT Park and Cebu Business Park with a total project cost of P2.04 billion which are expected to be completed in 2021.

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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:

2018 2017 (In Thousands) Long-term debt P=6,400,975 P=6,453,576 Less: Cash and cash equivalents 224,523 176,788 Short-term investments 25,244 2,543 Financial assets at fair value through profit or loss 10,379 10,129 Net debt P=6,140,829 P=6,264,116 Equity attributable to equity holders of Cebu Holdings, Inc. P=8,062,410 P=6,989,133 Debt to equity 79.39% 92.34% Net debt to equity 76.17% 89.63%

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.

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Business Segments The following tables regarding business segments present assets and liabilities as of December 31, 2018, 2017 and 2016 revenue and expense information for the three- year year ended December 31, 2018. 2018 Eliminations Commercial Residential Shopping Corporate and Development Development Centers Business Others Adjustments Total (In Thousands) Revenue Sales to external customers P=99,672 P=819,256 P=1,466,830 P=758,146 P=– (P=31,346) P=3,112,558 Equity in net earnings of associates and a joint venture – – – – – 106,039 106,039 Total revenue 99,672 819,256 1,466,830 758,146 – 74,693 3,218,597 Operating expenses (6,273) (674,631) (867,030) (557,418) (308) 31,346 (2,074,314) Operating profit (loss) 93,399 144,625 599,800 200,728 (308) 106,039 1,144,283 Interest income 9,303 26,551 6,424 10,615 16,648 (2,494) 67,047 Other income 151,905 7,179 89,603 169,653 376,465 (358,609) 436,196 Interest and other financing charges – – – – (407,261) 2,494 (404,767) Provision for (benefit from) income tax (15,980) (54,175) (172,856) (7,537) (22,181) – (272,729) Net income (loss) P=238,627 P=124,180 P=522,971 P=373,459 P= (36,637) (P=252,570) P=970,030 Net income (loss) attributable to: Equity holders of Cebu Holdings, Inc. P=235,047 P=94,755 P=470,287 P=346,229 (P=36,637) (P=252,570) P=857,111 Non-controlling interests 3,580 29,425 52,684 27,230 – – 112,919 P=238,627 P=124,180 P=522,971 P=373,459 (P=36,637) (P=252,570) P=970,030 Other Information Segment assets P=3,312,693 P=2,628,019 P=16,196,161 P=5,794,675 P=9,354 (P=3,111,897) P=24,829,005 Investments in associates and a joint venture – – – – 4,078,909 (2,591,574) 1,487,335 Deferred tax assets – – – – 25,488 – 25,488 Total assets P=3,312,693 P=2,628,019 P=16,196,161 P=5,794,675 P=4,113,751 (P=5,703,471) P=26,341,828 Segment liabilities P=309,451 P=7,294,708 P=6,948,522 P=1,432,424 P=1,275,712 (P=1,254,191) P=16,006,626 Deferred tax liabilities – – – – 260,386 15,367 275,753 Total liabilities P=309,451 P=7,294,708 P=6,948,522 P=1,432,424 P=1,536,098 (P=1,238,824) P=16,282,379 Segment additions to property and equipment and P=411,575 P=1,768 P=2,222,686 P=1,569,546 P=– P=– P=4,205,575 investment properties Depreciation and amortization P=487 P=24,949 P=222,347 P=301,902 P=– P=– P=549,685

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2017

Eliminations Commercial Residential Shopping Corporate and Development Development Centers Business Others Adjustments Total (In Thousands) Revenue Sales to external customers P=− P=347,712 P=1,351,061 P=644,398 P=30,219 P=248,343 P=2,621,733 Equity in net earnings of associates and a joint venture − − − − 278,938 (264,225) 14,713 Total revenue − 347,712 1,351,061 644,398 309,157 (15,882) 2,636,446 Operating expenses (20,335) (292,072) (675,914) (499,274) (180,826) 18,758 (1,649,663) Operating profit (loss) (20,335) 55,640 675,147 145,124 128,331 2,876 986,783 Interest income 1,945 12,134 5,693 4,105 20,271 (2,615) 41,533 Other income 160,679 − 67,200 155,036 41,165 (9,825) 414,255 Interest and other financing charges − − − − (368,130) − (368,130) Provision for (benefit from) income tax (43,166) (20,510) (207,446) 1,712 7,973 − (261,437) Net income (loss) P=99,123 P=47,264 P=540,594 P=305,977 (P=170,390) (P=9,564) P=813,004 Net income (loss) attributable to: Equity holders of Cebu Holdings, Inc. P=99,123 P=38,488 P=506,725 P=289,823 (P=171,148) (P=9,564) P=753,447 Non-controlling interests − 8,776 33,869 16,154 758 − 59,557 P=99,123 P=47,264 P=540,594 P=305,977 (P=170,390) (P=9,564) P=813,004 Other Information Segment assets P=1,057,939 P=1,097,367 P=9,694,284 P=6,803,056 P=3,327,539 (P=3,932,837) P=18,047,348 Investments in associates and a joint venture − − − − 2,567,710 − 2,567,710 Deferred tax assets − − − − 4,557 − 4,557 Total assets P=1,057,939 P=1,097,367 P=9,694,284 P=6,803,056 P=5,899,806 (P=3,932,837) P=20,619,615 Segment liabilities P=842,816 P=181,572 P=2,461,979 P=2,103,550 P=7,265,317 (P=444,558) P=12,410,676 Deferred tax liabilities − − − − 245,938 15,368 261,306 Total liabilities P=842,816 P=181,572 P=2,461,979 P=2,103,550 P=7,511,255 (P=429,190) P=12,671,982 Segment additions to property and equipment and investment properties P=411,575 P=− P=10,125 P=290,086 P=14,173 P=− P=725,959 Depreciation and amortization P=− P=− P=226,653 P=247,068 P=21,889 P=− P=495,610

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2016

Eliminations Commercial Residential Shopping Corporate and Development Development Centers Business Others Adjustments Total (In Thousands) Revenue Sales to external customers P=578 P=296,437 P=1,560,935 P=431,229 P=17,520 (P=28,010) P=2,278,689 Equity in net earnings of associates and a joint venture − − − − 388,741 (227,431) 161,310 Total revenue 578 296,437 1,560,935 431,229 406,261 (255,441) 2,439,999 Operating expenses (10,640) (260,910) (737,742) (491,934) (37,369) 43,727 (1,494,868) Operating profit (loss) (10,062) 35,527 823,193 (60,705) 368,892 (211,714) 945,131 Interest income 2,418 2,051 4,181 37,727 407 (10,869) 35,915 Other income − 732 54,964 180,201 18,379 (15,717) 238,559 Interest expense − − − (31,895) (226,690) 10,869 (247,716) Other charges − − − − (64,886) − (64,886) Provision for (benefit from) income tax 1,060 (6,609) (144,658) 14,433 (39,458) − (175,232) Net income (loss) (P=6,584) P=31,701 P=737,680 P=139,761 P=56,644 (P=227,431) P=731,771 Net income (loss) attributable to: Equity holders of Cebu Holdings, Inc. (P=6,597) P=25,004 P=702,419 P=130,020 P=56,248 (P=227,431) P=679,663 Non-controlling interests 13 6,697 35,261 9,741 396 − 52,108 (P=6,584) P=31,701 P=737,680 P=139,761 P=56,644 (P=227,431) P=731,771 Other Information Segment assets P=1,449,883 P=1,690,695 P=7,091,013 P=4,869,829 P=2,550,362 P=90,311 P=17,742,093 Investments in associates and a joint venture − − − − 4,291,683 (2,436,989) 1,854,694 Deferred tax assets − − − − 18,836 − 18,836 Total assets P=1,449,883 P=1,690,695 P=7,091,013 P=4,869,829 P=6,860,881 (P=2,346,678) P=19,615,623 Segment liabilities P=285,906 P=73,172 P=2,486,215 P=7,996,516 P=1,223,904 (P=113,089) P=11,952,624 Deferred tax liabilities − − − − 249,946 (13,781) 236,165 Total liabilities P=285,906 P=73,172 P=2,486,215 P=7,996,516 P=1,473,850 (P=126,870) P=12,188,789 Segment additions to property and equipment and investment properties P=652,572 P=19,474 P=51,089 P=157,138 P=214 P=− P=880,487 Depreciation and amortization P=1,713 P=17 P=212,897 P=178,939 P=8,504 P=− P=402,070

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30. Leases Operating Leases - Group as Lessor The Group enters into lease agreements with third parties covering rentals of commercial and office spaces and land therein: (a) fixed monthly rent, or (b) minimum rent payment or fixed rent plus percentage of gross sales, whichever is higher. All leases include a clause to enable upward revision on its rental charge on annual basis based on prevailing market conditions. Future minimum rentals receivable under noncancellable operating leases of the Group are as follows:

December 31 2018 2017 (In Thousands) Within one year P=860,263 P=599,699 After one year but not more than five years 2,199,713 1,746,529 More than five years 764,353 997,482 P=3,824,329 P=3,343,710

The total rent income amounted to P=2,191.2 million, P=2,144.4 million and P=1,849.0 million in 2018, 2017 and 2016, respectively (see Note 21). Contingent rent recognized in 2018, 2017, and 2016 amounted to P=114.4 million, P=111.2 million, P=102.9 million, respectively. Operating Leases - Group as Lessee The Group entered into short-term operating lease of parking space for a period of one (1) year starting January 1, 2018 to December 31, 2018, renewable every year thereafter under new terms and conditions. The total rent expense amounted to P=1.3 million, P=2.4 million and P=2.5 million in 2018, 2017 and 2016, respectively.

31. Philippine Economic Zone Authority (PEZA) Registration

CPVDC was registered with PEZA on April 6, 2000 as an Information Technology (IT) Park developer or operator and was granted approval by PEZA on October 10, 2001. The PEZA registration entitled CPVDC to a four-year tax holiday from the start of approval of registered activities. At the expiration of its four-year tax holiday, CPVDC pays income tax at the special rate of 5% on its gross income earned from sources within the PEZA economic zone in lieu of paying all national and local income taxes.

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, administer, manage and operate a 12-storey building and 17-storey building located at Asia Town IT Park, in accordance with the terms and conditions of the Registration Agreement with PEZA. The Group shall pay income tax at the special tax rate of 5% on its gross income earned from sources within the PEZA economic zone in lieu of paying all national and local income 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. Income generated from sources outside of the PEZA economic zone shall be subject to regular internal revenue taxes. It is certified by the Bureau of Internal Revenue under Section 4.106-6 and 4 108-6 of Revenue Regulation No. 16-2005 that the enterprise is conducted for purposes of its VAT zero-rating transactions with its local suppliers of goods, properties and services.

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32. Supplemental Cash Flow Information

Changes in liabilities arising from financing activities follow:

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 59,956 term debt (Note 18) Long-term debt - net of 6,393,634 − 7,281 60 6,400,975 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=718,210 P=6,492,927

2017 Non-cash changes January 1, Amortization of December 31, 2017 Cash Flows 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:

∂ Transfers from investment properties to inventories amounting to P=294.1 million in 2018; 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.

INDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY SCHEDULES

The Stockholders and Board of Directors Cebu Holdings, Inc. and Subsidiaries 20th Floor, Ayala Center Cebu Tower, Bohol Street Cebu Business Park, Cebu City

We have audited in accordance with Philippine Standards on Auditing, the consolidated financial statements of Cebu Holdings, Inc. and its subsidiaries (the Group) as at December 31, 2018 and 2017 and for each of the three years in the period ended December 31, 2018, included in this Form 17-A, and have issued our report thereon dated February 26, 2019. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The schedules listed in the Index to the Consolidated Financial Statements and Supplementary Schedules are the responsibility of the Group’s management. These schedules are presented for purposes of complying with Securities Regulation Code Rule 68, As Amended (2011) and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state, in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

February 26, 2019

*SGVFS033004*

A member firm of Ernst & Young Global Limited INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES

Schedule Contents

A Financial Assets

B Amounts Receivable from Directors, Officers, Employees, Related Parties, and Principal Stockholders (Other than Related parties)

C Amounts Receivable from Related Parties which are Eliminated during the Consolidation of Financial Statements

D Intangible Assets - Other Assets

E Long-Term Debt

F Indebtedness to Related Parties

G Guarantees of Securities of Other Issuers

H Capital Stock

I Reconciliation of Retained Earnings Available for Dividend Declaration

J Map Showing the Relationships Between and Among the Companies in the Group, its Ultimate Parent Company and Co-subsidiaries

K Schedule of All Effective Standards and Interpretations Under Philippine Financial Reporting Standards

L Financial Ratios SCHEDULE A

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF FINANCIAL ASSETS DECEMBER 31, 2018

Number of Amount shares or shown in the principal consolidated Income Name of Issuing entity and association of amount of bonds statement of received or each issue and notes financial position accrued Cash and Cash Equivalents Bank of the Philippine Islands P=155,744,315 P=155,744,315 P=624,219 Deutsche Bank 8,502,426 8,502,426 − Rizal Commercial Banking Corporation 101,170 101,170 − DBP 4,333,276 4,333,276 − Security Bank 46,950,336 46,950,336 794,917 China Trust (Phils) Commercial Bank 8,491,183 8,491,183 600,480 Short-Term Investments Security Bank 16,260,271 16,260,271 61,023 China Trust (Phils) Commercial Bank 8,983,712 8,983,712 62,449 Bank of the Philippine Islands − − 112,673 Accounts Receivable Trade 378,421,937 378,421,937 33,254,297 Receivable from related parties 1,410,230,084 1,410,230,084 28,875,970 Claims Receivable 54,633,622 54,633,622 − Receivable from employees 14,248,986 14,248,986 402,729 Accrued receivable 411,423,517 411,423,517 − Others 72,956,885 72,956,885 2,257,775 Financial Assets at FVPL Bank of the Philippine Islands 10,378,797 10,378,797 444,330 P=2,601,660,517 P=2,601,660,517 P=67,490,862 SCHEDULE B

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES, RELATED PARTIES, AND PRINCIPAL STOCKHOLDERS (OTHER THAN RELATED PARTIES) DECEMBER 31, 2018

Balance at Balance at Name and Designation of beginning Additions Amounts the end of debtor of period (Write off) collected Current Not Current the period ALAGON, IZABELLE P=202,996 P=− P=86,999 P=86,999 P=28,998 P=115,997 ALAJID, ROMULO M 2,974,648 − 253,269 253,269 2,468,110 2,721,379 ALICAYA, NOEL F 88,158 100,000 32,351 28,344 127,463 155,807 BOHOLST, JUDILYNE L 197,743 − 21,295 73,013 103,435 176,448 CALERO, JASMIN R. 159,164 20,000 10,625 10,625 157,914 168,539 CLIMACO, MARIE ANNE KATHERINE 289,995 50,000 50,911 53,125 235,959 289,084 DEE, JOSEPH FRANCISCO A. 55,567 396,429 22,992 40,195 388,809 429,004 GO, SUZETTE T 1,331,380 − 170,129 201,542 959,709 1,161,251 JAPZON, JEANETTE A 4,078,110 − 86,913 299,642 3,691,555 3,991,197 LAYESE, EDWIN F. 134,304 − 134,303 − 1 1 MANANQUIL, RAUL S 1,602,052 − 331,117 379,366 891,569 1,270,935 QUIJADA, FRAULEIN 177,864 375,000 50,749 92,798 409,317 502,115 SIA, JENNIFER 404,929 − 130,270 86,771 187,888 274,659 SUAN, JONAS 456,017 − 136,297 98,598 221,122 319,720 URBINA, MA. CECILIA T 58,241 80,000 57,630 23,307 57,304 80,611 P=12,211,168 P=1,021,429 P=1,575,850 P=1,727,594 P=9,929,153 P=11,656,747 SCHEDULE C

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF AMOUNTS RECEIVABLE FROM RELATED PARTIES WHICH ARE ELIMINATED DURING THE CONSOLIDATION OF FINANCIAL STATEMENTS DECEMBER 31, 2018

Receivable Payable Balance per Balance per Current CHI Parent CHI Subsidiaries Portion AIOPI P=392,651,578 P=392,651,578 P=392,651,578 CLCI 56,378,106 56,378,106 56,378,106 CBDI 21,349,226 21,349,226 21,349,226 TPEPI 190,070 190,070 190,070 Total Eliminated Receivables P=470,568,980 P=470,568,980 P=470,568,980 SCHEDULE D

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF INTANGIBLE ASSETS - OTHER ASSETS DECEMBER 31, 2018

Intangible Assets - Other Assets Other Charged to Charged to changes Beginning Additions at cost and other additions Ending Description Balance cost expenses accounts (deductions) Balance Development rights (included under “Other noncurrent assets” in the consolidated statements of financial position) P=29,395,200 P=60,000,000 (P=40,238,400) P=− P=− P=49,156,800 SCHEDULE E

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF LONG-TERM DEBT DECEMBER 31, 2018

Long-term Debt Amount shown Amount shown under caption under the caption "current portion “long-term debt - net of long-term debt” in of current portion” the related in the related Amount consolidated consolidated authorized by statement of statement of Title of Issue and type of obligation indenture financial position financial position Bank Loan (BPI) P=420,000,000 P= 20,713,128 P=335,648,613 Bank Loan (BPI) 380,000,000 18,749,057 324,940,441 Bank Loan (BPI) 420,000,000 20,680,755 361,059,832 Bank Loan (BPI) 340,000,000 (186,953) 338,668,627 Bonds (PDTC) 5,000,000,000 − 4,980,701,818 P=6,560,000,000 P=59,955,987 P=6,341,019,331 SCHEDULE F

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF INDEBTEDNESS TO RELATED PARTIES (LONG-TERM LOANS FROM RELATED COMPANIES) DECEMBER 31, 2018

Indebtedness to related parties (Long-term loans from Related Companies) Name of related party Balance at beginning of period Balance at end of period BPI P=1,480,215,141 P=1,420,273,500 SCHEDULE G

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF GUARANTEES OF SECURITIES OF OTHER ISSUERS DECEMBER 31, 2018

Guarantees of Securities of Other Issuers Name of issuing entity of securities Title of issue of guaranteed by the each class of Total amount Amount owned by company for which securities guaranteed and person for which this statement is filed guaranteed outstanding statement is file Nature of guarantee

Not Applicable The Group does not have any guarantees of securities of other issuing entities by the issuer for which the statement is filed. SCHEDULE H

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF CAPITAL STOCK DECEMBER 31, 2018

Capital Stock Number of Number of shares issued shares and reserved for outstanding options as shown warrants, Number of Number of under related conversion shares held Directors, shares balance sheet and other by related officers and Title of Issue authorized caption rights parties employees Others Capital Stock 3,000,000,000 2,156,756,631 − 1,519,106,716 165,231 637,649,915 SCHEDULE I

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATION DECEMBER 31, 2018

Items Amount

Unappropriated Retained Earnings, Beginning P=1,850,417,313

Adjustments:

Accumulated fair value adjustment (M2M gains), net of tax (65,784) Unrealized gain - available-for-sale securities accounted for under the PFRS 25,562,394 Unappropriated Retained Earnings, as Adjusted, Beginning 1,875,913,923

Net Income Based on the Face of AFS 778,200,900

Less: Non-actual/Unrealized Income Net of Tax Unrealized actuarial gain 154,803 Fair value adjustment (M2M gains) 890,059 Deferred income tax assets that reduced the amount of provision for income tax 7,990,224

Add: Non-actual Losses Deferred income tax liabilities that increased the amount of provision for income tax 21,956,991 Net Income Actual/Realized 791,122,805

Less: Dividend declarations during the period 323,513,495 Treasury shares 760,087,890

TOTAL RETAINED EARNINGS, END AVAILABLE FOR DIVIDEND DECLARATION P=1,583,435,343 SCHEDULE J

CEBU HOLDINGS INC. AND SUBSIDIARIES MAP SHOWING THE RELATIONSHIPS BETWEEN AND AMONG THE COMPANIES IN THE GROUP, ITS ULTIMATE PARENT COMPANY AND CO-SUBSIDIARIES DECEMBER 31, 2018

MERMAC, Inc.

47.04%

PDC Nominee Corporation 28.46% 24.5% (Non-Filipino) Ayala Corporation Public

46.77%

53.23% Ayala Land, Inc. Public CEBU HOLDINGS INC. AND SUBSIDIARIES MAP SHOWING THE RELATIONSHIPS BETWEEN AND AMONG THE COMPANIES IN THE GROUP, ITS ULTIMATE PARENT COMPANY AND CO-SUBSIDIARIES DECEMBER 31, 2018

Ayala Land, Inc. (70.43%)

PCD Nominee Corp. Public (3.95%) (Filipino) (7.67%)

Cebu Holdings, Inc.

Province of Cebu Makati Supermarket (3.83%) Corp (0.14%)

PCD Nominee Corp (Non-Filipino) (13.98%) - 2 - AYALA LAND, INC.

Cagayan de Oro Gateway Corp. (70%) Adauge Commercial Corporation (60%) Alabang Commercial Corporation (50%) Ayala Property Management Corp. (100%)

Soltea Commercial Corp. (60%) Southgateway Development Corp. (100%) Makati Development Corporation (100%) Ayala Theatres Management, Inc. & S. (100%)

CMPI Holdings, Inc. (60%) Ayalaland MetroNorth, Inc. (100%) Ayala Hotels, Inc. (50%) DirectPower Services, Inc. (100%)

ALI-CII Development Corporation (50%) North Triangle Depot Commercial Corp. (73%) AyalaLand Hotels and Resorts Corp. (100%) Phil. Integrated Energy Solutions, Inc. (100%)

Roxas Land Corporation (50%) BGWest Properties, Inc. (50%) Lagdigan Land Corp. (60%) Five Star Cinema, Inc. (100%)

Ten Knots Phils, Inc. (60%) Ten Knots Development, Corp. (60%) Southportal Properties Inc. (65%) Leisure and Allied Industries Philippines, Inc. (50%)

ALInet.com, Inc. (100%) First Longfield Investments Limited (100%) Aprisa Business Process Solutions, Inc. (100%) AyalaLand Club Management, Inc. (100%)

Varejo Corp. (100%) Ayala Land Malls, Inc. (100%) Verde Golf Development Corporation (100%) Whiteknight Holdings, Inc. (100%)

ALI Commercial Center Inc. (100%) Cebu Holdings Inc. (50%) AYALA LAND, INC.

Alveo Land Corporation (100%) Crimson Field Enterprises, Inc. (100%) Primavera Towncentre, Inc. (100%) Cavite Commercial Town Center, Inc. (100%)

Serendra, Inc. (28%) Ecoholdings Company, Inc. (100%) Summerhill E-Office Corporation (100%) AyalaLand offices, Inc. (100%)

Amorsedia Development Corporation (100%) NorthBeacon Commercial Corporation (100%) Sunnyfield E-Office Corporation (100%) Laguna Technopark, Inc. (75%)

Avida Land Corporation (100%) Red Creek Properties, Inc. (100%) Subic Bay Town Centre, Inc. (100%) Aurora Properties Incorporated (80%)

Amaia Land Co. (100%) Regent Time International, Limited (100%) Regent Wise Investments Limited (100%) Vesta Property Holdings, Inc. (70%)

Ayala Land International Sales, Inc. (100%) Asterion Technopod, Incorporated (100%) AyalaLand Commercial REIT, Inc. (100%) Station Square East Commercial Corporation (69%)

Ayala Land Sales, Inc. (100%) Westview Commercial Ventures Corp. (100%) Arvo Commercial Corporation (100%) Ceci Realty, Inc. (60%)

Buendia Landholdings, Inc. (100%) North Ventures Commercial Corp. (100%) BellaVita Land Corporation (100%) Accendo Commercial Corp. (67%)

Crans Montana Holdings, Inc. (100%) Hillsford Property Corporation (100%) Nuevo Centro, Inc. (55%) Aviana Development Corporation (50%) CEBU HOLDINGS, INC.

Taft Punta CBP Theatre Asian I- Office Cebu Leisure Engaño Management Properties, Inc. Company, Inc. Property, Inc. Company, Inc. 100.00% 100.00% 55.00 % 100.00%

Cebu Insular Amaia Hotel, Central Block Solinea, Inc. Southern Company, Inc. Developer’s Inc. 35.00% Properties, 37.06% CHI 55% Inc. 35.00%

Cebu District Property Enterprise Inc. CHI 15.00% SCHEDULE K

CEBU HOLDINGS, INC. AND SUBSIDIARIES SCHEDULE OF ALL EFFECTIVE STANDARDS AND INTERPRETATIONS UNDER PHILIPPINE FINANCIAL REPORTING STANDARDS DECEMBER 31, 2018

Philippine Securities and Exchange Commission (SEC) issued the amended Securities Regulation Code Rule (SRC) Rule 68 and 68.1 which consolidates the two separate rules and labeled in the amendment as “Part I” and “Part II”, respectively. It also prescribed the additional schedule requirements for large entities showing a list of all effective standards and interpretations under Philippine Financial Reporting Standards (PFRS).

Below is the list of all effective PFRS, Philippine Accounting Standards (PAS) and Philippine Interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as of December 31, 2018:

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2018 Framework for the Preparation and Presentation of Financial Statements Conceptual Framework Phase A: Objectives and qualitative characteristics  PFRSs Practice Statement Management Commentary  Philippine Financial Reporting Standards PFRS 1 First-time Adoption of Philippine Financial (Revised) Reporting Standards  Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate  Amendments to PFRS 1: Additional Exemptions for First-time Adopters  Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First-time Adopters  Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for First-time Adopters  Amendments to PFRS 1: Government Loans  Amendments to PFRS 1: Borrowing costs  Amendments to PFRS 1: Meaning of ‘Effective PFRSs Not early adopted PFRS 2 Share-based Payment  Amendments to PFRS 2: Vesting Conditions and Cancellations  Amendments to PFRS 2: Group Cash-settled  - 2 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2018 Share-based Payment Transactions Amendments to PFRS 2: Definition of Vesting Condition*  Amendments to PFRS 2: Classification and Measurement of Share-based Payment Transactions  PFRS 3 Business Combinations  (Revised) Amendment to PFRS 3: Accounting for Contingent Consideration in a Business Combination*  Amendment to PFRS 3: Scope Exceptions for Joint Arrangements*  PFRS 4 Insurance Contracts  Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts  Applying PFRS 9, Financial Instruments with PFRS 4, Insurance Contracts  Amendments to PFRS 4: Applying PFRS 9, Financial Instruments, with PFRS 4, Insurance  PFRS 5 Non-current Assets Held for Sale and Discontinued Operations  Amendments to PFRS 5: Changes in Methods of Disposal Not early adopted PFRS 6 Exploration for and Evaluation of Mineral Resources  PFRS 7 Financial Instruments: Disclosures  Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets  Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date and Transition  Amendments to PFRS 7: Improving Disclosures about Financial Instruments  Amendments to PFRS 7: Disclosures - Transfers of Financial Assets  Amendments to PFRS 7: Disclosures - Offsetting Financial Assets and Financial Liabilities  Amendments to PFRS 7: Mandatory Effective  Date of PFRS 9 and Transition Disclosures Amendments to PFRS 7: Disclosures - Servicing  Contracts Applicability of the Amendments to PFRS 7 to  - 3 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2018 Condensed Interim Financial Statements PFRS 8 Operating Segments  Amendments to PFRS 8: Aggregation of Operating Segments and Reconciliation of the Total of the Reportable Segments’ Assets to the Entity’s Assets  PFRS 9 Financial Instruments: Classification and Movement (2010 version) 

Financial Instruments - Hedge Accounting and amendments to PFRS 9, PFRS 7 and PAS 39 (2013 version)  Financial Instruments (2014 or final version)  Amendments to PFRS 9: Mandatory Effective  Date of PFRS 9 and Transition Disclosures Amendments to PFRS 9: Prepayment Features with Negative Compensation  PFRS 10 Consolidated Financial Statements  Amendments to PFRS 10: Investment Entities  Amendments to PFRS 10: Sale or Contribution of Assets between an Investor and its Associate Not early adopted or Joint Venture Amendments to PFRS 10: Investment Entities: Applying the Consolidation Exception  PFRS 11 Joint Arrangements  Amendments to PFRS 11: Accounting for  Acquisitions of Interests in Joint Operations PFRS 12 Disclosure of Interests in Other Entities  Amendments to PFRS 12: Investment Entities  Amendment to PFRS 12: Clarification of the Scope of the Standard (Part of Annual Improvements to PFRSs 2014-2016 Cycle)  PFRS 13 Fair Value Measurement  Amendments to PFRS 13: Short-term receivable and payables  Amendments to PFRS 13: Portfolio Exception  PFRS 14 Regulatory Deferral Accounts  PFRS 15 Revenue from Contracts with Customers  PFRS 16 Leases Not early adopted - 4 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2018 Philippine Accounting Standards PAS 1 Presentation of Financial Statements  (Revised) Amendment to PAS 1: Capital Disclosures  Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation  Amendments to PAS 1: Presentation of Items of  Other Comprehensive Income Amendments to PAS 1: Clarification of the  requirements for comparative information Amendments to PAS 1: Disclosure Initiative  PAS 2 Inventories  PAS 7 Statement of Cash Flows  Disclosure Initiative  PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors  PAS 10 Events after the Reporting Date  PAS 12 Income Taxes  Amendment to PAS 12-Deferred Tax: Recovery of Underlying Assets  Amendments to PAS 12: Recognition of Deferred Tax Assets for Unrealized Losses  PAS 16 Property, Plant and Equipment  Amendment to PAS 16: Classification of servicing equipment  Amendment to PAS 16: Revaluation Method - Proportionate Restatement of Accumulated Depreciation  Amendment to PAS 16 and PAS 38: Clarification of Acceptable Methods of Depreciation and Amortization  Amendment to PAS 16: Bearer Plants  PAS 17 Leases  PAS 19 Employee Benefits  Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures  PAS 19 Employee Benefits  (Amended) Amendments to PAS 19: Defined Benefit Plans:  Employee Contributions - 5 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2018 Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures  Amendments to PAS 19: Regional Market Issue regarding Discount Rate  PAS 20 Accounting for Government Grants and Disclosure of Government Assistance  PAS 21 The Effects of Changes in Foreign Exchange Rates  Amendment: Net Investment in a Foreign Operation  PAS 23 Borrowing Costs (Revised)  PAS 24 Related Party Disclosures  (Revised) Amendments to PAS 24: Key Management Personnel  PAS 26 Accounting and Reporting by Retirement Benefit Plans  PAS 27 Consolidated and Separate Financial Statements  PAS 27 Separate Financial Statements  (Amended) Amendments to PAS 27: Investment Entities  Amendments to PAS 27: Equity Method in  Separate Financial Statements PAS 28 Investment in Associate and Joint Venture  Amendments to PAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture  Amendments to PAS 28: Investment Entities: Applying the Consolidation Exception  Amendments to PAS 28: Long-term Interests in Associates and Joint Ventures Not early adopted Amendment to PAS 28: Measuring an Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014-2016 Cycle) Not early adopted PAS 29 Financial Reporting in Hyperinflationary Economies  PAS 31 Interests in Joint Ventures  PAS 32 Financial Instruments: Disclosure and Presentation  Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation  - 6 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2018 Amendment to PAS 32: Classification of Rights Issues  Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities  PAS 33 Earnings per Share  PAS 34 Interim Financial Reporting  Amendments to PAS 34: Interim financial reporting and segment information for total assets and liabilities  Amendments to PAS 34: - Disclosure of information ‘elsewhere in the interim financial report  PAS 36 Impairment of Assets  Amendments to PAS 36: Recoverable Amount Disclosures for Non-Financial Assets  PAS 37 Provisions, Contingent Liabilities and Contingent Assets  PAS 38 Intangible Assets  Amendments to PAS 38: Revaluation Method - Proportionate Restatement of Accumulated Amortization  Amendments to PAS 16 and PAS 38: Clarification of Acceptable Methods of Depreciation and Amortization  PAS 40 Investment Property  Amendment to PAS 40: Interrelationship between PFRS 3 and PAS 40  Transfer of Investment Property  PAS 40 Investment Property (Amended)  PAS 41 Agriculture  Amendment to PAS 41: Bearer Plants  Philippine Interpretations IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities  IFRIC 2 Members’ Share in Co-operative Entities and Similar Instruments  IFRIC 4 Determining Whether an Arrangement Contains a Lease  - 7 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2018 IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds  IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment  IFRIC 7 Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies  IFRIC 8 Scope of PFRS 2  IFRIC 9 Reassessment of Embedded Derivatives  Amendments to Philippine Interpretation IFRIC–9 and PAS 39: Embedded Derivatives  IFRIC 10 Interim Financial Reporting and Impairment  IFRIC 11 PFRS 2 - Group and Treasury Share Transactions  IFRIC 12 Service Concession Arrangements  IFRIC 13 Customer Loyalty Programmes  IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction  Amendments to Philippine Interpretations IFRIC - 14, Prepayments of a Minimum Funding Requirement  IFRIC 15 Agreements for the Construction of Real Estate*** Not early adopted IFRIC 16 Hedges of a Net Investment in a Foreign Operation  IFRIC 17 Distributions of Non-cash Assets to Owners  IFRIC 18 Transfers of Assets from Customers  IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments  IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine  IFRIC 22 Foreign Currency Transactions and Advance Consideration  IFRIC 23 Uncertainty over Income Tax Treatments  SIC-7 Introduction of the Euro  SIC-10 Government Assistance - No Specific Relation to Operating Activities  SIC-12 Consolidation - Special Purpose Entities  Amendment to SIC - 12: Scope of SIC 12  - 8 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as of December 31, 2018 SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers  SIC-15 Operating Leases - Incentives  SIC-25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders  SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease  SIC-29 Service Concession Arrangements: Disclosures  SIC-31 Revenue - Barter Transactions Involving Advertising Services  SIC-32 Intangible Assets - Web Site Costs  * Effectivity has been deferred by the Securities and Exchange Commission.

Standards tagged as “Not Applicable” have been adopted by the Group but have no significant covered transactions for the year ended December 31, 2018.

Standards tagged as “Not adopted” are standards issued but not yet effective as of December 31, 2018. The Group will adopt the Standards and Interpretations when these become effective. SCHEDULE L

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF FINANCIAL RATIOS December 31, 2018

December 31 2018 2017

CURRENT / LIQUIDITY RATIOS Current assets P=3,598,044 P=3,352,436 Current liabilities 9,455,296 5,636,839 Current Ratios 0.38 0.59

Current assets P= 3,598,044 P= 3,352,436 Less: Receivables 2,086,232 1,880,140 Contract assets 205,087 – Inventories 812,292 751,084 Other current assets 234,287 531,752 Quick assets 260,146 189,460 Current liabilities 9,455,296 5,636,839 Quick Ratios 0.03 0.03

December 31 2018 2017 SOLVENCY / DEBT-TO-EQUITY RATIOS Current portion of long-term debt P=59,956 P=59,942 Long-term debt - net of current portion 6,341,019 6,393,634 Debt P=6,400,975 P=6,453,576 Equity 10,059,449 7,947,633 Less: Non-controlling interests 1,997,039 958,500 Equity attributable to parent 8,062,410 6,989,133 Add: Unrealized gain - FVPL and foreign exchange 229,905 93,977 Less: Unrealized foreign exchange loss – 127,074 Equity, Net of Unrealized Gain (Loss) 8,292,315 6,956,036 Debt to Equity Ratio 0.77 0.93

Debt P=6,400,975 P=6,453,576 Less: Cash and cash equivalents 224,523 176,788 Short-term investments 25,244 2,543 Financial assets at fair value through profit or loss 10,379 10,129 Net Debt 6,140,829 6,264,116 Equity, Net of Unrealized Gain (Loss) 8,292,315 6,956,036 Net Debt to Equity Ratio 0.74 0.90 - 2 -

December 31 2018 2017 ASSET TO EQUITY RATIOS Total assets P=26,341,828 P=20,588,160 Total equity attributable to equity holders of CHI 8,062,410 6,989,133 Asset to Equity Ratios 3.27 2.95

December 31 2018 2017

INTEREST RATE COVERAGE RATIO NET INCOME P=970,030 P=813,004 Add: Provision for income tax 272,729 261,437 Interest and other financing charges 404,767 368,130 1,647,526 1,442,571 Less interest income 67,047 41,533 EBIT 1,580,479 1,401,038 Depreciation and amortization 549,685 495,610 EBITDA 2,130,164 1,896,648 Interest and other financing charges 404,767 368,130 Interest expense coverage ratio 5.26 5.15

December 31 2018 2017 PROFITABILITY RATIOS Net income attributable to parent P=857,111 P=753,447 Revenue 3,721,840 3,092,234 Net Income Margin 23.03% 24.37%

Net Income P=970,030 P=813,004 Total assets CY 26,341,828 20,588,160 Total assets PY 20,588,160 19,615,623 Average Total Assets 23,464,994 20,101,892 Return on Total Assets 4.13% 4.04%

Net Income P=970,030 P=813,004 Total equity CY 10,059,449 7,947,633 Total equity PY 7,947,633 7,426,834 Average Total Equity 9,003,541 7,687,234 Return on Equity 10.77% 10.58%